Why not start the year with a little practical advice
on saving money? My son was complaining to me that our
cable company router/modem wasn't any good. So I did
a little exploring to find out our options.
I learned that we were paying our cable provider $10
per month to lease their router/modem for our internet
service at home. I also learned that we could buy our
own router/modem for roughly between $75 - $300 total
cost.
Using my math skills, I saw that we'd have a payback
time of between 7.5 months to 30 months. After that
period, there would be no more costs for the router/modem.
We now own our router/modem and don't pay the cable
company a monthly lease fee.
What if we invested the $10 per month into our retirement
plan? The $10 per month becomes approximately $15 per
month invested in our retirement plan. If we earn 10%
per year on the account, we'd have an additional $3,072.68
in our retirement account after the paying back the
cost of the router/modem and investing the $15 per month
for 10 years.
See what happens when you save $10 per month. Now,
if you can make it $100 a month by cutting expenses
that much, you'd have an additional $30,726.80 in your
retirement account.
Apprvd.BBDP
As the Year Closes -
December 28, 2007
It looks like 2007 is going to work out to be the fifth
positive year in a row. A year where we get positive returns
out of the financial markets. (At least, that's the case
as of this writing.)
It's not surprising we've had so many good years in a
row. The growth of the world economy and, in particular;
the emerging markets are the underpinning to current and
future economic success. Until we have fully mature economies
all over the world, I believe we'll have above average
rates of economic growth long term. That means that nearly
five billion additional people on the planet will have
better lifestyles.
I think it will take decades for this to play out. And
until we have a fully developed world economy, we could
have above average rates of economic growth.
What do I think this means for today's investor?
I think it means that if you're invested for the next
five to thirty years or more, we'll see above average
economic growth that should lead to above average returns
on investments.
I don't think that all investments will have above average
rates of return. You'll want to have a focus on companies
that do business worldwide. I also think you'll have many
more opportunities by investing in companies that are
located all over the world. This means that global multinational
portfolios should be good long term places to invest your
money.
In saying as much, I do not believe that every year will
be an up year. I think there will be bumps and bruises
along the way. After all, we all know these things are
never perfectly executed.
In my humble opinion, we are living in exciting revolutionary
times. We've never seen the world changing in the ways
we are seeing it today. You can either sit on the sidelines
or be part of it. If you're a long term investor (five
years or more) I think you should become or stay involved
and enjoy the ride.
Of course there are risks to any kind of investing. Please
give me a call so we can discuss them and how they fit
your investment and financial needs.
I wish you and you're a very happy, healthy, and prosperous
new year!
Apprvd.BBDP
More Ways to Save on
2007 Taxes - December 21, 2007
There was a terrific article in The LA Times Business section
last Sunday. It mentioned some additional ways to save money
on your 2007 taxes that I'd like to add to last week's annual
tax savings list.
There are six different energy tax credits
available to those who made improvements to their home
during 2007. They include insulation credits, replacing
windows and skylights, a qualifying water heater or heat
pump, qualifying air conditioning, a new furnace or boiler,
and a qualifying furnace fan.
Educator credits aimed at minimizing the
costs that teachers incur while in the classroom
There's a credit for hybrid vehicles.
The Times outlines the complexity of this credit. You'll
want a good understanding when placing it on your tax
return.
There's a break for those who are over
70 ½ who wish to donate IRA assets to charity.
It will count towards your required minimum distribution.
This expires on January 1, 2008.
The deduction for higher education also
expires at year end. It's geared towards middle income
earners. You might want to consult your accountant or
tax preparer about this. Perhaps you'd want to prepay
some of your 2008 tuition this year before the deduction
expires.
You'll need a receipt for cash contributions
made to charity. It is becoming more difficult to deduct
cash contributions made to charities.
Make sure you talk to you accountant about
how the Alternative Minimum Tax might affect your 2007
tax return. The government is looking at modifying it.
However, it will likely still affect many people. I suggest
you ask your accountant or tax preparer about deductions
you may want to take in 2007 to see if they still make
sense. This would include prepaying property taxes and
state income taxes before the year is over.
There's a reason the tax code is thousands of pages long.
It's not easy to understand and it's always changing. It
takes work to stay on top of your personal tax planning
so that you can get the best results possible.
Happy holidays to you all!
Apprvd.BBDP
Up For Some 2007 Tax
Savings? - December 14, 2007
Every year at this time, I make a list of things that I need
to do before the end of December to better my upcoming tax
return. Most of this list pertains to tax planning; you may
want to review it to see what would help you and your tax
and financial planning.
Here's a short list of things you might consider doing:
1. Pay your entire property tax bill before the end of the
year, not just the first installment.
2. If you've reached your 2007 medical deductible, try to
have any medical treatments or services done before the year
end, including refilling prescriptions. (As you know, you
start with new deductibles at the first of the year).
3. Pay any California income taxes due for 2007. (California
income taxes are deductible on your Federal tax return).
4. Consult with your financial planner and accountant to
make sure there isn't anything you've missed from your 2007
tax planning which needs to be finished prior to the year
end.
5. Open your Keogh plan prior to the end of the year. This
will allow you to include any contributions you make in 2008
before you file your 2007 return on that return. (Simplified
Employee Pension Plans can be opened for the prior year up
until you file your tax return.)
6. Make sure to get all of your charitable donations for
2007 fully-planned and completed before year end.
7. Do your 2007 Roth IRA conversions before year end. (You
cannot do Roth IRA conversions for 2007 after the first of
the year; you can, however, make 2007 Roth IRA contributions
until the mid-April tax filing deadline next year).
8. Sell any stocks on which you plan to take a loss or gain,
prior to the year end.
9. If you own a business, you can purchase equipment and
supplies for next year before the end of this year.
10. When applicable and feasible, push any income or capital
gain into 2008 in order to prevent them from ending up on
your 2007 return. (Waiting one month will put off the taxes
for one year).
Apprvd.BBDP
8 Issues to Consider
Before Prepaying Your Home Loan
- December 7, 2007
These are some basic issues you would want to consider
before paying off your home loan. If you are considering doing
so, please don't hesitate to call me at (805) 544-PLAN (7526)
to discuss it - David W. Cryden, VP/CFP®
After you go to all the time, trouble, and expense of securing
a mortgage, you may have a hard time imagining that you'd
ever want to pay off your loan quicker than required. However,
years (and sometimes just months) after taking out a mortgage,
some people discover that their circumstances have changed.
Here are some things to think about before you decide to prepay
your loan:
1) Yes, you do save interest dollars; however, you miss the
opportunity to invest those
dollars
2) Taxes matter, but
3) Have you funded your Retirement Savings Plan(s)?
4) Does your mortgage plan have a Prepayment Penalty?
5) Are you an Aggressive or Conservative investor?
6) Consider the psychological and non-financial benefits
7) Are you liquid enough?
8) Does refinancing make sense?
This week's tip is an excerpt from "Mortgages for Dummies"
by Eric Tyson and Ray Brown, reprinted by kind permission
of Ray Brown. In addition to being a frequent guest and contributor
to our show, Ray has authored many books and is a syndicated
real estate columnist for the San Francisco Examiner, and
has hosted the weekly radio program, "Ray Brown on Real
Estate," on KNBR in San Francisco for many years.
Apprvd.BBDP
Americas Silver
Tsunami - November 30, 2007
On October 16th, 2007, the first Baby Boomer applied for
Social Security. Over the next twenty years, 10,000 people
per day (on average) will become eligible to receive
benefits from Social Security, Medicare and Medicaid. While
Medicare does offer valuable coverage for many Americans,
it leaves much to be desired in extent of coverage.
Fortunately, many insurance companies offer products that
fill the gaps in Medicare coverage. For a modest premium,
you can further cover hospitalization expenses, regular doctor
visits and limited long-term care expenses. There are also
specific plans that will assist in prescription drug expenses.
Many of these plans also pay the deductible for Part A &
B, as part of your coverage.
Both David & I are fully licensed and ready to assist
you in all your insurance needs. Whether you need to discuss
Long-Term Care Insurance or would like to explore the Medicare
Supplement plans mentioned, please give us a call at 544-PLAN
(7526).
This Weekly Tip was written by Stephen Hiltscher. Stephen
is a member of the Cryden Team and is a licensed Life/Health
Insurance Agent. If you have any questions about your current
policy or need any advice on a new policy, please give us
a call.
Apprvd.BBDP
Happy Thanksgiving!
- November 16, 2007
On behalf of the Cryden Team (Steve, Stephen, Yaarit &
myself), we would like to take the opportunity to wish you
and yours a very happy and safe Thanksgiving holiday.
Best wishes,
David W. Cryden, CFP®
Uncertainty Prevails
This Week - November 9, 2007
Wouldn't you know it; as soon as the financial markets start
heading up, and people begin to get comfortable, the financial
gods decide it's not yet time to give the "all-clear"
sign.
What I'm really saying is that the volatility in the financial
markets we've seen this week is part of the process and of
long-term cycles.
Right now, there are two primary elements playing on the financial
markets:
The price of oil is at an all-time high; it's nearly hit
$100 per barrel. Part of this issue relates to geopolitical
issues in the Persian Gulf; the other issue relates to the
demand on oil in the emerging markets (i.e. China, India,
etc.) as they continue to grow and to be built-out. It takes
a lot of energy to build the infrastructures of these countries.
I might add that, once they are fully built-out, we'll have
several billion more people consuming more energy than today;
in other words, the challenges are just beginning. It's
possible that we'll see lower prices for oil in the short-term;
however, I am not sure that the long-term trend is substantially
down.
The other issue is that the various financial institutions
are taking losses, as a result of the credit crunch and
bad real estate loans made over the past few years.
I believe it will take another year or two for the bad loans
in the financial system to be worked out of it; until this
is done, I think we'll see some continued volatility in the
financial and real estate markets. This morning I heard an
interesting remark on CNBC about these bad loans, which essentially
said that investors have not yet come to grips with the bad
loans in the system. We're seeing financial assets being moved
around, as a result of the fear that might be related to these
loan situations; once people come to grips with these situations,
it seems more likely that sound reason will prevail again,
as should more market stability.
Finally, try to keep perspective during these more volatile
times in the financial markets. If you want to react to something,
think in terms of buying when prices are down, as they are
generally up more often than they are down. (In fact, we've
not had a tough market in five years.) If you are not in a
position to be a buyer, then keep your long-term investment
plan in mind. The last thing anyone needs to do is react and
sell when things are down. Remember the old maxim: Buy low,
sell high.
If you have any questions about your account(s) or investments,
please feel free to give me a call. That's why we are here.
Also, I wrote another Tip of the Week on August 17, 2007,
which addressed the volatility in the financial markets that
we saw back then. You can view it by simply clicking on the
"Weekly Tip Archives" link below.
Apprvd.BBDP
Weekly Tip Vacation
- November 2, 2007
The Weekly Tip has taken a vacation until next week. Please
be sure to view our Weekly
Tip archives, encompassing over 5 years of Weekly Tips.
Apprvd.BBDP
College Planning - October
26, 2007
I am regularly asked about college planning. How do we pay
for it?
It's not an easy question for many to answer. There are issues
relating to affordability, retirement, scholarships, student
loans, paying for current expenses, and even estate planning
that can be involved.
As with so many things related to financial planning, there
generally isn't one specific answer that works best for all
of us. Finding the right solution takes time, work, and research;
even then, you may not find the perfect answer for your situation.
So, here is a resource that has a lot of information and
is free. It's on the
American Funds website. You do not need to be a client
of the American Funds Group to visit; you can review it, whether
you are a client or not. Once there, go to their college
planning area.
If you have any questions on this topic before (or after)
reviewing the resources on the American Funds website, please
give me a call or drop me an email.
Apprvd.BBDP
It Was 20 Years Ago
Today... - October 19, 2007
It seems like yesterday that I was writing about reaching
the 15-year mark since the stock market crash on October 19,
1987.
Remarkably, today marks the 20th anniversary of the crash
of 1987, which was called Black Monday. Watching
the financial markets that day was nothing short of bizarre.
The total value of the Dow Jones 30 Industrials dropped about
22% in a single trading session. My favorite remark, for that
day, was that The economy didn't lose twenty-two percent
of its growth or value in a single day why should we
think that the stock market should lose a comparable amount,
either? I thought it was a great day to buy, not to
sell.
So, where are we, as we look at the financial markets 20 years
later?
October 19, 1987
October 19, 2007
Dow Jones 30 Industrials
1,738.84
13,522.02
NASQAQ
360.20
2,725.16
S&P 500
224.84
1,500.63
Last time I wrote this article, the financial markets had
averaged about 10% per year over a 15-year period. Here's
what they have averaged per year over the past twenty years:
Dow Jones 30 Industrials
10.80%
NASQAQ
10.65%
S&P 500
9.96%
Isn't it interesting that we're seeing numbers that correspond
to the average rate of return for the financial markets over
many decades? It just shows that, if you view investing as
a long term choice, you're more likely to see good results
(rather than viewing them as short-term investments, as the
media would prefer you to do).
Long-term investors make money as a result of the growth
of the companies they own and their corresponding values;
keep that in mind, when viewing tough periods or tough days
in the market, like today.
Apprvd.BBDP
One Half A Point - Where's
the Other Half? - October 12, 2007
The Federal Reserve Bank (The Fed) lowered interest rates
by one-half of one percent a couple of weeks ago. Why?
The Fed was concerned with the mortgage and real estate problems
in the banking system and how they might impact the economy.
It seems their infusion of cash into the economy/banking system,
and lowering of the Fed Funds rate, has bolstered people's
confidence. The infusion of cash gave banks more money to
lend, providing some help with the credit crunch where people
were having a hard time getting loans. Lowering the interest
rate makes money cheaper to borrow.
People with home equity loans should now be seeing a drop
by as much as one-half of one percent in the interest rate
they are being charged. This should give some people more
confidence in spending money.
We're seeing generally decent economic reports from many companies
this week. The economy seems to be in pretty good shape with
the talk about a recession receding some. If we have a strong
economy, will the Federal Reserve Bank lower rates again at
their next meeting? The recent ½-percent change was
more aggressive then the Fed has been in a long time. I think
it's up in the air as to whether or not they will lower rates
again; it's not too common that they raise or lower interest
rates only one time, but it's possible.
Whatever the Fed does, a solid economy means companies keep
making money and growing; this should continue to translate
into higher share values over the long term, which is what
investing is all about.
Apprvd.BBDP
Do You Need Your Own
Agent? - October 5, 2007
There are three different types of relationships that home
buyers and sellers can have with real estate agents. Two are
both types of single agency, which is when the agent
only represents one of the two parties (buyer or seller) in
the transaction.
Seller's agent: In this form of single agency,
the agent works solely for the seller.
Buyer agent: In this type of single agency, the
agent works only for the buyer. A buyer's agent isn't an
agent of the seller even if the buyer's agent gets a portion
of the commission paid by the seller.
Although single agency is an improvement over the old system,
buyer's agents still suffer from all the other conflicts of
interest inherent in getting a commission that is a percentage
f the amount that a buyer spends for a property.
In rare cases, buyer's agents don't accept money from sellers.
Instead, a buyer signs a contract to work exclusively with
a buyer's agent, and the buyer pays the agent a retainer that
is applied toward the fee owed when the buyer's agent finds
the buyer a home. Depending on the contract provisions, the
retainer may or may not be returned to the buyer if the buyer's
agent fails to find the buyer a satisfactory property to purchase.
Here's a way to have the best of both worlds with a buyer's
agent. This technique removes the buyer's agent's incentive
to get you to spend more, yet it keeps you from paying a fee,
even if you don't buy a home. Offer your buyer's agent a lump-sum
commission plus a bonus if, and only if, the agent
gets you a better buy. For example, if the agent typically
receives 3 percent of a home's sale price and you expect to
buy a home for approximately $100,000, offer the agent a flat
$2,500 commission plus an additional $100 bonus for every
$1,000 below $100,000 the agent reduces the price for you,
up to a maximum $3,000 commission.
This week's Weekly Tip Newsletter is from "Home Buying
for Dummies" by Eric Tyson and Ray Brown, reprinted by
kind permission of San Francisco columnist Ray Brown, a frequent
guest on our show.
Apprvd.BBDP
If it Sounds Too Good,
Then... - September 28, 2007
This week's tip was written by a client that had an unfortunate
lending experience, read on to learn how you can protect yourself.
In early 2005, I received an offer from a well-known bank
in the mail for a home equity line of credit. The offer said
that there would be no costs to the borrower, no points, no
appraisal fees, no document fees, nothing. They offered both
fixed and variable loan rate options. The variable loan would
start at 2% and would be adjusted to prime +1% after that.
Since I only had 2-3 years left on my loan, I decided to use
this variable home equity loan to pay off my home loan. I
figured that I could save $400-$500 over the next few years,
even if rates rose a little. I had to open a checking account
and a no-annual-fee credit card account along with my new
home equity loan. The bank even offered to lower the loan
rate by one-quarter percent if I agreed to have an automatic
loan payment from my new checking account.
As time went on, rates slowly were on the rise. The Feds
kept raising rates by a quarter-percent. No problem, if rates
rose two- or even three-percent over the next three years,
the worst that could happen would be to about break even.
Then I got a note from the bank that my checking account
was short by $50. I didn't understand how that could be, because
I only used this new checking account to pay my home equity
loan. Each month, I made a special trip to the grocery store
to deposit the payment.
Turns out, there was a $25 monthly charge when the loan balance
dropped below $30,000. This wasn't disclosed anywhere that
I could find in the loan documents. I guess it was a checking
account fee, and didn't need to be in the loan documents.
I called the bank, and they offered to lower the fee to $2.50
per month until the balance reached $10,000. After that, it
would go back to $25. If I closed the account before two years,
I would be charged the appraisal fees and loan fees. That
information could be seen in the loan documents.
I kept the loan balance above $10,000, thanks to a used car
purchase, and immediately closed the account after the required
two years.
As I sat in the bank, taking care of the paperwork needed
to close this account, the loan officer even insulted me further
by saying, "There's so much discussed when loans are
opened that some people don't listen carefully." I am
sure not going to miss that special trip to the grocery store
to make my monthly house payments. I hope they listened carefully
when I told them why I would never do business with them again.
Apprvd.BBDP
Do You Really Need Earthquake
Insurance? - September 21, 2007
Many of my clients balk at having earthquake insurance: They
say it's too expensive; they say the deductible is too high,
or they claim that the risks of an earthquake doing enough
damage to engage the real benefits of the policy are too low
to make paying for the insurance worth consideration.
Here's the way I see earthquake insurance:
It's there for you, like a major medical policy: You may
not ever need it, or you may not need it for many years; it
is essentially catastrophic coverage.
If you can't afford to rebuild your home (or other property)
without an insurance companys help, you need it.
The premiums for earthquake insurance have come down a great
deal over the past few years, as there has not been a major
earthquake since the Northridge quake in 1994.
The other thing I would suggest is to prepare your home for
an earthquake: Bolt down your hot water heater; use museum
wax, putty and gel to secure things of value that you don't
want broken; secure top-heavy furniture to the walls. Making
your home safer by doing these and other things will keep
your losses at a minimum.
Apprvd.BBDP
Collectibles - What
are Yours Worth? - September 14, 2007
Many of us like to collect things; some of the collectibles
we have are very valuable and need to be handled like any
other investment. What are they worth? How will the IRS view
them?
Here's a simple list of what to do when valuing your collectibles:
1. Assemble a listing of your collectibles, including sales
receipts for each piece; this helps establish what they were
worth at a given time.
2. Hire an appraiser to value them. Use an appraiser who charges
by the hour or flat fee. Don't hire one who wants to sell
your items as well; they could have a conflict of interest.
3. Request a report of each appraised item for your records.
4. Have the appraisals updated every few years (some experts
say that it's a good idea to do this every five years or so,
as markets and values change).
If you want to sell any of your collectibles, having the
above information is helpful when placing a price on your
collectibles or when gifting a collectible to a charity (make
sure to talk to your accountant before giving to a charity,
as there are complicated rules involved when gifting to charities).
Knowing the value of your collectibles is also helpful if
you should ever have an insurance claim or when doing estate
planning. Some people have more valuable collectibles than
they may realize; this could be critical when making sure
you have proper insurance coverage or when doing estate planning.
Finally, if you sell a collectible for a profit, keep in
mind that you will be paying ordinary income tax rates - not
capital gains rates - on these gains.
Apprvd.BBDP
Understanding Health
Insurance Pricing - September 7, 2007
Have you ever wondered how the insurance companies come up
with the premium amounts they charge? Does it seem strange
that a family of four can be completely covered for exactly
$374? Where does this number come from? The simple answer
is the insurance actuaries. Who are they, you might ask? Let's
explore who they are, what they do and how it affects your
insurance premiums.
An insurance actuary specializes in risk and associating
costs with those risks. They are the individuals who design
the insurance plan, determine the premium and make corrective
changes, as risks change over time. It is their job to transfer
the risk of the individual to that of the insurance company,
while still making it affordable for you and profitable for
them. The actuary will evaluate average costs and frequency
of claims for a particular age level and apply a dollar amount
that strikes the middle ground of affordability and profit.
The reason insurance works is because the companies can spread
the risks over a large group of people. Healthy people end
up paying more in premiums than they submit in claims; the
difference helps to subsidize less healthy people who may
have more expensive claims. Healthy people accept the situation
because they usually pay lower premiums; plus, they never
know when they might become sick themselves. The actuaries
work to make sure that the premiums collected are sufficient
to pay the claims and still turn a profit in the end.
So, the next time you wonder about those seemingly arbitrary
premium amounts, know that there is reason: the actuaries
are working to make health insurance effective for everyone
involved. If you have any questions regarding health insurance
or your current coverage, please feel free to contact me.
This Weekly Tip was written by Stephen Hiltscher. Stephen
is a member of the Cryden Team and is a licensed Life/Health
Insurance Agent. If you have any questions about your current
policy or need any advice on a new policy, please give us
a call.
Apprvd.BBDP
Happy Labor Day - August
31, 2007
Wishing you and yours a happy Labor Day holiday and safe
travelling,
The Cryden Team (David Cryden, Steve Armas and Stephen
Hiltscher)
Apprvd.BBDP
Capitulation? End of
the Correction? Or .? - August 24,
2007
Last week, the worldwide financial markets were tremendously
volatile. We had (what appeared to be) a day where some investors
threw away everything but the kitchen sink, trying to get
out of common stocks. Sometimes this type of behavior, where
people simply seem to be dumping stocks to get rid of them,
is called a "market capitulation"; it's basically
where people give up, saying "Uncle!". Market capitulation
can be marked by wild volatility, high volume, and people
selling anything and everything they own.
In the past, times like this have marked the end of a bear
market or market correction. (A market correction is defined
as a ten percent drop in the financial markets; we were there
last week.) While we don't know if last week's market action
marked the end of the correction we're in or not, and we won't
for some time to come, we do know that the markets settled
down this week and the world economy seems to be on continued
good-footing.
My advice is that long-term investors should stay the course.
I believe the worst thing people can do is panic and sell
at or near the bottom. Additionally, I believe dropping markets
are a time to invest; if you've got money, it's not a bad
time to add to your portfolio (we added to our portfolio three
times last week).
If you have any questions, please give a call; I'd be happy
to discuss what's happening and the potential opportunities
that may be there for you.
I've included a Tip of the Week that I wrote five-years ago,
when the market bottomed in October 2002; it will give you
some additional food for thought.
_____________________________________________________________________________
Tip of the week from October 22, 2002:
Are We Full of Bull?
The financial markets have come roaring back from their bottoms
over the past week. Does this mean we have the beginnings
of a new bull market? Will it mean the end of down days? Are
we off to the races? The answers to these are pretty simple;
maybe, no, and probably not.
Does this mean we have the beginnings of a new bull market?
This could be the end of the two and a half year old bear
market. Only after a clear pattern of growth has re-established
itself will become clear that a new bull market has arrived.
So, interestingly enough, we won't even know the bull has
arrived until we are well in it again.
Will it mean the end of down days?
There will be down days in any market, bull or bear. Therefore,
you can't or shouldn't try to interpret too much in any short
term move, i.e., sell-offs after huge runs to the plus side
like the past week are not always indications of anything
in the bigger picture.
Are we off to the races?
Since the recession we experienced was the weakest in decades,
it's not likely the new period of economic expansion will
be a barnburner. More so, I expect we could see more moderate
sustainable growth. In my opinion, this is healthier for long
term growth. I believe this should also result in moderate
more average returns in the financial markets.
Whether we are in a new bull market now or not, keep you ears
and eyes tuned to the signs of continued economic growth.
This is what should lead the way to better days ahead. Many
economists believe we are getting very close, I agree.
Apprvd.BBDP
A Cleansing of the System
- August 17, 2007
Every now and then, the financial system gets a little out
of balance; this lack of balance can show itself in many ways.
During 1999 and 2000, we saw stratospheric imbalances in
the valuations of many technology stocks; this imbalance was
reset during the bear market of 2000 - 2002.
About twenty years ago, there was a savings and loan scandal,
which is a little similar situation to what we're seeing today,
yet there are also big differences; the savings and loan scandal
was a much bigger problem in scale and scope than the issues
with sub-prime (lower-rated) mortgages of today.
What's interesting about today's sub-prime situation is that
these mortgages are packaged and sold to investors, not only
in the United States but also to investors worldwide; this
is why you are reading about problems in Europe, rather than
just hearing about issues only here in the United States.
Even though sub-prime mortgages have been sold to investors
worldwide, they are not selling more of them than they would
have, had they only been sold in the United States. We are
in a global economy; therefore, we have investors worldwide
splitting the pie.
In my opinion, banks and lending institutions got carried
away with these risky loans. Like anything else that strays
too far from the fundamentals, we are going to see the system
cleanse itself, which is part of the mechanism that keeps
our financial markets healthy.
I think this situation should pass. It may take a while for
the troubled loans to work their way through the system. Undoubtedly,
you're going to continue to hear news from all over while
these loans work their way through the system. In the long
term, I believe these cleansing periods are healthy for our
financial markets.
In the meantime, we have not seen a correction in almost
five years; this may be the action that facilitates that correction.
As of this writing, (Tuesday, August 14, 2007), the Dow Jones
30 Industrials are off approximately 7.7% from its all-time
high. Despite the recent volatility, we are not in "official"
correction territory yet; by definition, a correction is a
drop of 10% in a financial market, which we may see before
this cycle is done. In addition, keep in mind that, if there
are "seasons" in the financial markets, the summer
and early fall historically tend to be the toughest times
of the calendar year.
Personally, I have added money to my accounts by buying during
the down markets and I will continue to do so, if we correct
more. I think we should be fine in the long-term.
Apprvd.BBDP
Opportunity? - August
10, 2007
The Chinese have an expression, "From Chaos Comes
Opportunity".
We've seen more volatility in the financial markets over
the past few weeks than we've seen in almost five years. So
what do we make of it?
Before the volatility began, we were getting stock market
returns on our portfolios with bank account volatility or
almost no volatility. Conclusion: That's not normal.
The degree of volatility we're seeing now is not normal,
either. A case can be made that it's something we might
expect for a bit, after almost five years of nothing but
up markets with almost no volatility.
Will either of these two situations continue indefinitely?
I think the answer is, no; like many other situations, this
will play itself out.
Will the volatility present us a buying opportunity? I
think we're seeing some opportunities to buy now. Keep in
mind that the Dow is only six percent (6%) off its all-time
high that it reached earlier this summer, so we're not even
in a correction, at this point. I do think it makes sense
to add money every time the financial markets drop five
percent (5%), which is something we'll see from time to
time; if we don't ever see it, we should indeed worry.
Remember: "From Chaos Comes Opportunity".
If you have any questions, please don't hesitate to give
me a call.
Apprvd.BBDP
A Mid-Year Update, Part
2:
The Economy, Real Estate and the Financial Markets - August
3, 2007
Continued from last week's tip
There are worries in the United States that the slower real
estate markets will affect the economy. Some of my reading
indicates that, while real estate is an important part of
the economy, it is not a huge part of the economy. So what
are the financial markets worried about? There are loan problems
in the real estate markets (which we've written about before):
Lenders became too easy with their loans, and these loans
were dangerous to the borrowers and the lenders (in other
words, they made risky loans that potentially could default
on them); hence, the highest foreclosure rates in years. The
second issue worrying the economy is the price of energy.
We've enjoyed low energy prices for many years. It's not at
all out of the question to think that we'll continue to see
higher energy prices, given all of the growth in China and
the rest of the world.
Personally, I think that we'll see higher energy prices for
some time to come. Between the build-out of many emerging
market economies, and the subsequent emergence of their people
as mature market consumers, we're likely to continue to see
higher demand for energy and natural resources.
Conversely, I believe that the real estate troubles are a
short- to intermediate-term lived set of problems. The loan
situation will run it course, though it may take a while for
all of the loans to be washed out of the system. The real
estate market saw a huge run for many years; it's only natural
that it would take a break. Incomes and rents were not keeping
up with real estate values; this ultimately leads to too much
of a gap between these key figures - income, rents and real
estate valuations. If a person's income doesn't go up as much
as the price of real estate, they're not going to be able
to afford more expensive homes. If rents don't go up as much
as the value of investment properties, you can't justify the
prices people are asking for them. Why buy income property
if there's a negative cash flow?
I've heard a number of times over the years that there's
a theory in real estate called, "the Greater Fool Theory,"
which says (basically) that, no matter what you pay for a
piece of property, there will be someone else who comes along
and is willing to pay more. Of course, there is no reference
made to reasonable valuations in this theory - just higher
prices no matter what. I've never subscribed to it; I don't
suggest you do, either. Someone will eventually be the last
fool, not the greater fool.
So how should we handle these various situations?
First, there hasn't been a correction in the financial markets
since 2002. That's a long time to go without some adjusting
in the markets. In general, I do not believe that the financial
markets go only one direction - up or down. They generally
trend up with the economy and improvements in the values of
individual companies over the long term. I think we are overdue
for a correction because it tends to tidy things up some.
(While this isn't economic speak, it makes a point that corrections
are a natural part of market and life cycles.) Don't be surprised
by them. I suggest we'll see many more over our investment
lifetimes.
I suggest that any market correction or bear market is a
time to buy, not a time to do panic selling. Those who have
subscribed to this concept tend to weather tough times much
better than those who try to time the markets or sell just
because they are fearful.
It's important to adjust your portfolio as you age. I don't
think a person should wake up one day and radically change
their investment strategy, simple because they are older;
you don't get older overnight, and you shouldn't totally change
your portfolio overnight, either. If you haven't been in for
a review in the past couple of years, it's time to meet. Spending
thirty- to sixty-minutes a year is a great thing to do to
keep up with what's happening with your portfolio and your
life.
Finally, if you have money to invest, buy on the dips. I
used to write that you should invest every time the market
drops five percent (5%).
If you have any questions, make sure to give me a call so
we can discuss them.
Apprvd.BBDP
A Mid-Year Update, Part
1:
The Economy, Real Estate and the Financial Markets - July
27, 2007
We've seen more volatility in the financial markets over
the past few weeks than we have in quite a long time. What
should we make of it? How should we deal with it?
First and foremost, the world economy seems to continue to
plug away. Countries all over the planet are enjoying solid
economic growth; in China alone, the world's most populous
country, they experienced economic growth in excess of 11%
in the second quarter of this year - a continuation of the
build-out of their economy, which has been on-going for several
years now.
There are worries in the United States that the slower real
estate markets will affect the economy. Some of my reading
indicates that, while real estate is an important part of
the economy, it is not a huge part of the economy. So what
are the financial markets worried about? There are loan problems
in the real estate markets (which we've written about before):
Lenders became too easy with their loans, and these loans
were dangerous to the borrowers and the lenders (in other
words, they made risky loans that potentially could default
on them); hence, the highest foreclosure rates in years. The
second issue worrying the economy is the price of energy.
We've enjoyed low energy prices for many years. It's not at
all out of the question to think that we'll continue to see
higher energy prices, given all of the growth in China and
the rest of the world.
Personally, I think that we'll see higher energy prices for
some time to come. Between the build-out of many emerging
market economies, and the subsequent emergence of their people
as mature market consumers, we're likely to continue to see
higher demand for energy and natural resources.
To be continued next Friday, August 3, 2007
Apprvd.BBDP
Trust Begins at Home
- July 20, 2007
Many of us have set up a "living trust" or a "family
trust." One of the things you did when you established
the trust was to name a trustee or trustees who are able to
act on behalf of the trust; nearly one hundred percent (100%)
of the time, you and your spouse are the trustees of your
family trust.
Eventually, there will come a day when one or both of you
are unable to act as trustee; the most common causes for a
change in trustee are either due to death or an inability
to manage your finances or trust.
If a trustee was to pass away or become unable to act, your
financial professionals will need to know who is legally able
to act on behalf of the trust as successor trustee. Your trust
document should have a provision stating who will act as successor
trustee(s).
When a change in trustee occurs, it is common for a mutual
fund company, financial planning firm, or any other financial
institution involved with your trust's assets, to require
an Assignment of Successor Trustee document and a Certification
of Trust document. You will need your attorney to provide
these documents to your successor trustee; without them, he
or she may not be able to successfully act on the trust's
behalf.
It is important to keep your intended successor trustee up-to-date
about your financial matters; they will need to know what
you have and who to go to in order to get things done.
Knowing that you will need an Assignment of Successor Trustee
document and a Certification of Trust document for the successor
trustee - and who can provide those for them - is a very important
fact.
Note: If you have non-retirement assets and have established
a trust, it is important to have those assets registered into
the name of your trust. Many companies will require that the
trust documentation be submitted along with either a Letter
of Instruction and/or a new application; please contact our
office to assist with updating your trust information on your
accounts.
As with all legal and accounting issues, make sure to consult
your accountant or attorney before acting; it is always best
to take action after getting professional advice.
This week's tip was written by Steve Armas, Senior Team
Member and Registered Representative.
Apprvd.BBDP
10 Things People Can
Find Out About You - July 13, 2007
Here's a list of ten things people can find out about you.
It's a little scary to see how easy it is to find personal
information these days.
(The following provides what can be found and the source
of the information.)
1. Your current and previous address
Source: US Postal Service and Credit Bureaus
2. Any criminal convictions
Source: Court records
3. Whether you have a professional license
Source: Licensing agencies
4. If you've been involved in a law suit as a defendant or
plaintiff
Source: Court records
5. If you have any infractions while driving a car; including
DUI or DWI convictions
Source: DMV
6. What vehicles you own
Source: DMV
7. If you've filed bankruptcy or have liens on your property
Source: Court Records
8. What you've pledged as collateral for bank loans
Source: County records or Universal Commercial Code filings
9. What pieces of real estate you own and how much you paid
for them
Source: County tax records
10. Whether there's a warrant out for your arrest
Source: Court records or police agencies
In this day and age of privacy, there sure is a lot of valuable
information at one's fingertips. The lesson here is to be
careful with your information. As sad as it is to say, identity
theft is here to stay.
One of the simple things you can do to help yourself is to
simply shred things you are going to throw away. This would
include credit card applications that come with your name
on it.
It's great to build up assets and income. It's work to keep
it.
Apprvd.BBDP
Median Prices Aren't
Fair Market Value - July 6, 2007
One of the most widely quoted housing statistics is the median
sale price, which is simply the midpoint in a range of
all house sales in an area during a specific reporting period,
such as a month or a year. Half the sales during the reporting
period are above the median, and half fall below it.
The median-priced house, in other words, is the one exactly
in the middle of the prices of all houses that sold during
the specified reporting period.
Just because the median sale price of a house in your area
went up 25 percent doesn't mean that the house you paid $150,000
for five years ago is worth $187, 500 today. Median sale price
statistics aren't any more accurate for determining your house's
value than median income statistics are for calculating your
paycheck. You need more precise information to establish the
fair market value of the house you're about to sell.
This week's Weekly Tip Newsletter is from "House Selling
for Dummies" by Eric Tyson and Ray Brown, reprinted by
kind permission of San Francisco columnist Ray Brown, a frequent
guest on our show.
Apprvd.BBDP
Reducing Estate Taxes
- June 29, 2007
Many of us have seen our net worth increase significantly
over the past few years. The reasons for this, in most cases,
are simple:
1. We've had a Bull Market in the financial markets that
will be five years old this coming October.
2. If you own real estate, the value of real estate today
is much higher than it was just a few years ago.
If you are someone who will pay an estate tax, do not forget
to be proactive to reduce or eliminate that tax. This is a
process that can often take years to be effective.
One of the simplest things you can do is to make annual gifts
to family or friends. You can give up to $12,000 per
person per year. A couple could give up to $24, 000
to an individual in a single year. If that couple makes those
gifts to ten family members, they can give up to $240,000
in a single year. That means they could give nearly $1 million
($960,000) away in just four years. The savings in estate
taxes alone could be nearly $500,000. In addition, this gifting
program, if done properly, does not require a gift tax return
to be filed.
Just like income tax planning, estate planning takes work
and can be complicated. It pays to hire a professional to
help you.
You've worked a lifetime to build your estate. I advise that
you take the time to save and preserve it.
Apprvd.BBDP
Making Long Term Care
Insurance Affordable - June 22, 2007
When planning for a long-term care insurance policy, there
are a few key features that you need to pay special attention
to. The goal of all insurance is to protect yourself and your
pocketbook. Because long-term care insurance can be very expensive,
it is important to take the appropriate planning measures
to ensure that you are getting the best policy for your circumstance.
There are ways to provide adequate coverage and still keep
the premium prices down.
Maximum Daily Benefit In California, the average
cost of a nursing home is $190 per day. If you feel you can
pay more out-of-pocket, you can get away with lowering your
Daily Benefit. Even small decreases to, say, $170 per day,
will significantly lower your premium.
Elimination Period This is the time between
which you are first deemed eligible for care and when the
benefits begin to payout. Typically, these are between 30-90
days. The longer the Elimination Period, the lower your premiums
will be.
Benefit Period This is the amount of time (in
years) that your policy will pay benefits. While one can elect
to have a lifetime benefit, the average is 2-3 years. Typically,
a stay in a nursing facility either lasts less than 2 years
or over 5 years. The longer the Benefit Period, the higher
the premiums.
Inflation Protection Protecting your policy
against a rise in inflation is incredibly important. Todays
dollar will not purchase the same care ten-years down the
road. You can choose: No, an Equal Increase or Compound Increase
inflation protection. Compounding your protection is the most
expensive but, in many cases, the best option. (See my
Weekly Tip A COLA on the Side from 5/18/07).
Purchasing a long-term care policy with all the bells and
whistles will get expensive. Finding the right combination
of options allows you to customize your policy to your specific
needs and tolerances and affords you the opportunity to keep
your premiums affordable.
This Weekly Tip was written by Stephen Hiltscher. Stephen
is a member of the Cryden Team and is a licensed Life/Health
Insurance Agent. If you have any questions about your current
policy or need any advice on a new policy, please give us
a call.
Apprvd.BBDP
Pay Off the House or
Invest? - June 15, 2007
A client called this week, wondering if he should sell investments
to pay off his home. The home has a six and three-quarter
percent (6-¾%) interest rate; by all accounts, most
people would find a 6-¾% mortgage rate to be very moderate.
My thinking is that, if your investments can make at least
what your loans are costing you, why pay off the loan early?
By keeping your money in more liquid investments, you have
access to the money in the future. If you pay off the home
loan, you would have to sell the home, arrange for a reverse
mortgage or get another loan down the road, and you would
have no idea what the interest rate would be; however, you
have an exact idea of what your interest rate
is now.
His investments have been earning much more than 6-¾%
over their lifetimes; in fact, they are all over 20 years
old (some are over thirty years old) and each investment has
come close to doubling the cost of the loan over its lifetime.
This means that not paying off the loan would
make sense economically, if the investments performed only
a little better than half as well as their lifetime
averages.
A person should pay off their loan and sell their investments
only if the interest rate on their loan is too high
to reasonably match or beat their investments (for example,
when home mortgages were over ten percent); another reason
to pay off a loan would be if you simply have to do it for
your own comfort (most people don't choose this route; however,
for a select few, it's the best choice).
Before you pay off your home loan by selling your investments,
give me a call to discuss the pros and cons of the decision
and your level of comfort.
Apprvd.BBDP
Whatever Happened On
October 15, 2002? - June 8, 2007
It's always interesting for me to re-read some of the Tips
of the Week that I wrote in prior years. When I do, I am looking
for thoughts that might still be relevant messages to convey
today as well as how I approached topics in the past.
The following is something I wrote on October 15, 2002. Please
take a couple minutes to re-read it. I'll give you a few thoughts
about it from today's perspective.
"The financial markets have come roaring back from
their bottoms over the past week. Does this mean we have
the beginnings of a new bull market? Will it mean the end
of down days? Are we off to the races? The answers to these
are pretty simple: maybe, no, and probably not.
Does this mean we have the beginnings of a new bull
market?
This could be the end of the two-and-a-half year-old bear
market. Only after a clear pattern of growth has re-established
itself will it become clear that a new bull market has arrived,
so, interestingly enough, we won't even know the bull has
arrived until we are well in it again.
Will it mean the end of down days?
There will be down days in any market, bull or bear, therefore,
you can't (or shouldn't) try to interpret too much in any
short term move; i.e., sell-offs after huge runs to the
plus side like the past week are not always indications
of anything in the bigger picture.
Are we off to the races?
Since the recession we experienced was the weakest in decades,
it's not likely that the new period of economic expansion
will be a barnburner; more so, I expect that we could see
more moderate sustainable growth. In my opinion, this is
healthier for long term growth. I believe this should also
result in moderate more average returns in the financial
markets.
Whether we are in a new bull market now or not, keep your
ears and eyes tuned to the signs of continued economic growth.
This is what should lead the way to better days ahead. Many
economists believe we are getting very close, I agree."
Here are a few thoughts, using my 2007 perspective:
1. It is interesting to note that the financial markets really
did bottom out around October 9, 2002.
2. We have experienced a four-and-one-half-year bull market
ever since.
3. There have been no real corrections during the past four-and-one-half
years. This is a very rare occurrence, given market history;
it will not last forever.
4. The real driver of this bull market has been strong worldwide
economic growth.
As a financial planner and investment counselor, it's always
nice when you get the timing of the financial markets ups
or downs right; however, I am not a market-timing
kind of advisor. I think there are too many unforeseen chances
to get things wrong, which inevitably can leave investors
vulnerable to loss.
The more important message here is that real economic growth
should provide stronger profits for companies worldwide which,
in turn, should produce higher share values. These basic investment
concepts are quite contrary to dot.com boom thinking,
which drove up market prices to levels beyond greed
in the late 1990's and early 2000; many of those stocks had
no income, profits, sales, or business model and, with nothing
to stand behind them, their prices eventually declined, some
never to be seen again.
The moral of today's story is that real economic growth is
ultimately what makes businesses grow in value. That was the
message in 2002 and the same message is still valid, five
years later, in 2007.
Apprvd.BBDP
Useful Online Tools
- June 1, 2007
A new client recently commented that they liked our website,
which has grown and improved every single week since our initial
launch over five years ago.
I thought this would be an opportune time to remind you about
some of the free tools and information available on
our website, SmartMoneyTalks.com:
David's Radio Show Archives - Free
Listen to over 120 of David's previous radio interviews
while online at our website
Download them to your computer to listen at your ease
or burn them to a CD
Download them to your iPod or other portable media player
Weekly Financial Planning and Investment Tips - Current
and Archived
Over 260 timely and topical financial planning tips
Arranged by year of publication
Website Search Function
Can't remember when a particular Good Life guest was
on or what Weekly Tip was about the Federal Reserve
Board? Use our new "Search Website" tool,
located on the left-hand side of each webpage, to search by
keyword.
Your Account
Links to mutual fund companies' websites
Email a request for account servicing to our office
Contact Us
Send a direct email to David Cryden or to any Cryden Team
member
Please let us know if you have any suggestions for improving
our website or if you have any questions about using any of
the available tools.
This week's tip was written by Steve Armas, Senior Team
Member and Registered Representative.
Apprvd.BBDP
Happy Memorial Day!
- May 25, 2007
We would like to take this opportunity to wish you and yours
a very happy Memorial Day. On this high travel weekend, we
hope that you all remain safe along your journey.
The Cryden Team - David, Steve & Stephen
Apprvd.BBDP
A COLA on the Side?
- May 18, 2007
How do you know that the money you invest today will be able
to cover your needs tomorrow? This becomes increasingly important
as you prepare for your retirement years. When it comes to
your investments, you want to stay ahead of inflation; doing
so helps keep your purchasing power current.
What can you do when you are buying a Long-Term Care (LTC)
insurance policy to help protect you against the rising costs
of health care? The simple answer is adding a COLA (Cost of
Living Adjustment) rider.
The COLA rider is designed to provide protection against
inflation and increases in the cost of in-home or convalescent
care. Anyone considering a LTC policy, especially those
under 70-years old, should review the benefits that a
COLA rider offers, simply because the longer period between
when the policy is established and when claims might be made
on it greatly increases your exposure to inflationary pressures.
Much like investment planning, when preparing for long-term
care insurance, you want to make sure you are prepared for
inflation's effect on your dollar and your purchasing power.
The COLA rider helps you with peace of mind when it comes
to ensuring the services you may need are more adequately
covered by your LTC policy.
This Weekly Tip was written by Stephen Hiltscher. Stephen
is a member of the Cryden Team and is a licensed Life/Health
Insurance Agent. If you have any questions regarding your
coverage please give us a call.
Apprvd.BBDP
Choosing the Health
Plan That's Right For You - May 11, 2007
Everyone needs some form of health insurance. Whether you
are expecting a new addition to the family or exploring the
coverage of Medicare, we should all take a little extra time
to make sure our
insurance coverage is sufficient for our needs. With more
and more employers ceasing to offer a medical plan, the task
of self insurance is falling increasingly on the individual.
How does one go about determining the best plan? Here are
a few items to help determine the best plan for you:
Income - Budgeting a portion of your income will
help you determine the amount you can afford to pay out-of-pocket
and help you decide your deductible/premium amounts.
Need - Do you want a catastrophic policy with a
high deductible? Do you need a plan that offers Doctor and
Emergency Room visits without paying the deductible?
Lifestyle - Understanding your own susceptibility
to risk will greatly narrow your coverage options.
Deductible - Active people tend to seek a plan
with a lower deductible or included Emergency Room care,
while less risky people seek a plan with a high deductible
to cover major injuries or illnesses.
Medical insurance can be very confusing, but when you begin
your search with a clear view of your needs, your lifestyle,
your preferred deductible and what you can afford, you will
quickly remove some of the guesswork; the help of a professional
will resolve any remaining questions. If you have any questions
regarding your current coverage or your options when establishing
a new health plan, please feel free to contact David or myself
to discuss your insurance needs.
This Weekly Tip was written by Stephen Hiltscher. Stephen
is a member of the Cryden Team and is a licensed Life/Health
Insurance Agent. If you have any questions regarding your
coverage please give us a call.
Apprvd.BBDP
Show Me the Money: Mutual
Fund Distributions and You - May 4, 2007
A client recently asked me about how to go about taking money
out of their mutual fund account on a regular basis. I thought
this might be a good opportunity to discuss setting up systematized
distributions that provide the specified income desired. These
systematized distributions are commonplace in retirement and
are a terrific method of generating cash flow.
Mutual funds allow you to set up regularly scheduled distributions,
either by specified dollar amount or as a percentage of the
account's value. (David usually recommends a maximum annual
withdrawal of 4% to 6% of the account value, which should
still allow for growth of the account, even while taking money
out of it.)
These systematized withdrawals can be done monthly, quarterly,
semi-annually or annually on the date you specify. They can
be sent to your home by check, to your bank account by electronic
deposit, or they can be deposited directly into your money-market
fund. There is a great deal of flexibility in how, when, and
where you take your distributions. Once established, your
choices can easily be changed over time.
Please be aware that distributions from Traditional IRA accounts
are taxable and reportable in the calendar year in which they
are taken; there may be additional penalties for taking distributions
prior to age 59-1/2. In addition, if you are taking money
out of a non-retirement account (i.e., your trust or joint
account), there will likely be taxable income or capital gains,
as well. In either instance, please make sure to consult your
tax professional or David prior to setting up systematic distributions,
in order to avoid any unpleasant tax surprises.
If you would like to discuss setting up systematized withdrawals
from your mutual fund accounts, please contact me for the
necessary paperwork; I would be happy to help.
This week's tip is from Steve Armas, Senior Team Member
and Registered Representative, Cryden Financial Planning Team.
Apprvd.BBDP
Disability Insurance:
The Unsung Necessity - April 27, 2007
Many people who work do not have disability insurance. If
you're working and you can't afford to retire on your assets,
you need disability insurance.
One of the most uninsured or underinsured areas of financial
planning is the protection of your income. If you don't protect
your lifetime income, you're potentially exposing yourself
to a huge financial hardship.
Studies I've read indicate that there may be as many people
in America without disability insurance as there are without
medical insurance. If you're working and you can't afford
to retire upon a disability, you need disability insurance.
If you have any questions about disability insurance, give
me a call; I'd be happy to discuss your insurance needs with
you.