As 2009 comes to an end, we would like to take the opportunity to wish you a Happy New Year. We look forward to seeing you in a prosperous 2010!

The Cryden Team - David & Stephen

Apprvd.BBDP

The holidays are a special time of year. From our family to yours, we wish you a very happy holiday season.

The Cryden Team - David & Stephen

Apprvd.BBDP

Beginning in 2010, investors can convert their traditional IRAs to a Roth IRAs regardless of their income.

As long as the Roth IRA has been in existence people have had to be aware of their modified adjusted gross income (MAGI) or tax filing status. These rulers made it impossible for many investors to convert their traditional IRAs to Roth IRAs as their incomes were too high.
In 2010 only, shareholders can defer any taxes due on the conversion for a year and spread the payments equally over the next two tax year - 2011 and 2012. This is because of a special rule approved by Congress for 2010 conversions only. State income tax rules may be different than the federal rules coming into play beginning in 2010.

If you convert all or part of your traditional IRA, you'll likely have to pay taxes on deductible or pre-tax contributions and earnings whether the money goes to an existing or new Roth IRA.

When calculating the tax on a conversion in 2010, the IRS will require you to include the value of all of your IRAs - including SEP and SIMPLE IRAs - as of December 31, 2010.

One other suggestion is that if you are to convert your Traditional IRA to a Roth IRA, it generally only works if you pay the taxes from savings or other holdings. If you have to withhold taxes from the money you've converted to your Roth IRA, the conversion generally doesn't make economic sense. I usually suggest people hold off until they can afford to pay the taxes from other sources or to convert less money to a Roth IRA.

Please give me a call or drop me an email if you have any questions on converting your Traditional IRA to a Roth beginning next year.

Apprvd.BBDP

Over the years the way we receive our information about our investments has changed. When I started in this industry everything was delivered in paper format and current values were obtained by dialing an automated phone line. My how times have changed for the better! Many of you know that when you call me I can have your values up in seconds with the help of internet. What you may not know is that all those paper documents you are sent can be delivered electronically as well.

Personally, I receive all of my investment correspondence from the American Funds electronically. Going paperless has a number of advantages, including, I get my statements and conformations much quicker than if they were to be delivered in the mail. Second, the documents get saved in a folder on my computer and I can access years of records in moments. Lastly, I know that eliminating the need for paper, printing and transportation helps the environment. Now imagine if everyone received their statements electronically, the impact could be profound.

American Funds makes it very easy to request electronic documents. Just visit americanfunds.com/paperless and log in to your account to make the change. Many other mutual fund companies are also offering this option; visit their websites to learn what is required to sign up. So if you are interested in reducing your clutter, receiving documents quickly and helping the environment, I encourage you to "go green" with your investments!

This Weekly Tip was written by Stephen Hiltscher, a Cryden Team member since 1998. If you have any questions about "going green" or relating to your investments, please feel free to contact Stephen.

Apprvd.BBDP

Here are a couple general rules about bonds.

1. When interest rates rise, they tend to lose principal value on the open markets.
2. Conversely, when interest rates fall, they tend to gain value on in the financial markets.

Why am I bringing this up at this point now? Well, we've experienced some of the most unusual financial times one could imagine the past couple years. With these unusual times, we've seen all kinds of economic circumstances and responses to them. One of the unusual responses to what we've seen to these times is some of the lowest interest rates on record.

These rates clearly are a response to the financial crisis of last fall. With low interest rates I find that the yields on bonds purchased over the past year or so may not be very competitive as interest rates begin to rise. In not being competitive, I think we'll see existing bonds, issued with lower rates, could very well lose value.

What do I think is going to happen in the coming year or so?

• I think we're going to see the economy continue to improve.
  
  
• I believe we'll see a rise in inflation as a result. (I think we need some inflation in the economy for its own good. It's not necessarily a bad thing to have some inflation. It beats deflation any day.)
  
  
• With the increase in economic activity and rise in inflation, I believe we'll see interest rates rise across the board. By this, I mean we'll see both short and long term rates rise.
  
  
• The end result of the rise in interest rates should be a decrease in the value of bonds.

What should you do with bonds that you own now?

• Some people own bonds for downside protection in tough markets. You may want to keep some for that purpose. It might be a good idea to reduce that exposure a little.
  
  
• Some people own bonds for income. If this is you, perhaps you'll either need or want to keep your bonds. Try to remember that it's the income you are after; the value of the bonds will fluctuate over the years. It's secondary to your primary goal of income.
  
  
• If you have bonds because you went there for safety during the market crash last year and you are a long term investor, I suggest you might consider moving some of that money to either a balanced fund with stock and bonds or common stock funds.

Companies/businesses have the ability to raise prices and their profits with them. This is especially helpful during inflationary times. A bond can't do this. Therefore bonds could/should have troubles keeping up as inflation increases and interest rates rise. In the long term this can hurt any investor keep up their purchasing power. But this is nothing new for bonds. They generally don't do a good job keeping up with inflation.

If you own bonds, it may be a good idea for us to talk.

Apprvd.BBDP

On behalf of my team, Stephen & 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®

Apprvd.BBDP

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 2009 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 2009. (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 2009 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 2010 before you file your 2009 return on that return. (Simplified Employee Pension Plans can be opened for the prior year up until you file your tax return.) With extensions, this allows you until October 15, 2010 to fund your retirement plan.

6. Make sure to get all of your charitable donations for 2009 fully-planned and completed before year end. You'll need a receipt for cash contributions made to charity. It is becoming more difficult to deduct cash contributions made to charities.

7. Do your 2009 Roth IRA conversions before year-end. (You cannot do Roth IRA conversions for 2009 after the first of the year; you can, however, make 2009 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. Tax loss and gain planning is a good tool when used with careful preparations.

9. If you own a business, you can purchase equipment and supplies for next year before the end of this year. Be sure to plan the best year to place those purchases.

10. When applicable and feasible, push any income or capital gain into 2010 in order to prevent them from ending up on your 2009 return. (Waiting approximately six weeks should put off the taxes for one year).

11. Make sure you talk to you accountant about how the Alternative Minimum Tax might affect your 2009 tax return. The government is looking at modifying it for a while now. However, it will likely still affect many people it was originally not intending to impact. I suggest you ask your accountant or tax preparer about deductions you may want to take in 2009 to see if they still make sense. This would include prepaying property taxes and state income taxes before the year is over.

Finally, a little food for thought:
"If a man has money, it is usually a sign too, that he knows how to take care of it; don't imagine his money is easy to get simply because he has plenty of it." - Edgar Watson Howe

Good tax preparation goes hand in hand with solid investing and properly cash flow planning. All of these items are ways to keep what you make; while making it work harder for you.

Apprvd.BBDP

Historically, the financial markets have had difficult Septembers and Octobers. Is there any reason for this? I suppose people could name some.

Many mutual funds have their fiscal year-end on October 31st. As a result, some mutual funds tend to sell holdings for tax purposes; locking in gains or losses. If there is enough activity in this area, it can lead to a more volatile marketplace. Last year was the perfect example of mutual funds selling all kinds of holdings for any number of reasons up until their October 31st fiscal year-ends. You may also see this type of activity in other types of investment funds; i.e. hedge funds or private investment funds.

Last year was extraordinary in so many ways. We saw volatility and indiscriminate selling in literally every assets class. We saw the collapse of the credit markets, the economy, and the financial markets. The real estate bubble had burst taking everything imaginable with it. The result of this extraordinary period was that many investments were more active than perhaps ever before.

This year is very different in many ways. Rather than seeing a collapsing financial system worldwide that is coupled with a very troubled economy, we're seeing the recovery and repair of many of the damaged parts of the economy. I believe that recovery mode we seem to be in is the primary reason for a calmer September and October this year.

While I never know what the future will bring, it's seems to me that the worst of the problems from the credit crisis of 2008 - 2009 are behind us. I believe that the economy is heading in a better direction and should continue to move that way looking forward. Will there be bumps along the way? I would be shocked if we didn't see them. Will unemployment continue to be a drag on the economy and lagging indication that we're recovering? I'd be shocked here too if it was different at all from this scenario.

My advice to you is to invest through this period of recovery. While I believe, we're past the bottom of early March; the financial markets are nowhere near their highs making now a better time to invest than I think we'll see in a year or two. If the world economy continues to recover, we should all see our investments rise in the time ahead.

As always, I have no absolute way of knowing what will happen in the financial markets and with our investments. I use my experience and judgment to make long term investment decisions and choices.

Apprvd.BBDP

Natural disasters aside, every home will sell at the right price. That price is defined as its fair market value (FMV) - the price a buyer will pay and a seller will accept for the house, given that neither buyer nor seller is under duress. Duress can come from life changes such as divorce or sudden job transfer that put either the buyers or sellers under pressure to perform quickly. If appraisers know that a sale was made under duress, they raise or lower the sale price accordingly to more accurately reflect he house's true fair market value.

Fair market value is more powerful that plain old value. As a buyer, you have an opinion of what the house is worth to you. The sellers have separate, not necessarily equal (and probably higher), opinion of their home's value. These values are opinions, not facts. You can't bank opinions.

Unlike value, fair market value is a fact. It becomes a fact when buyers and sellers agree upon a mutually acceptable price. Just as it takes two to tango, it takes a buyer and a seller to make fair market value. Facts are bankable.


This week's tip is an excerpt from "Home Buying 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

Sellers have asking prices on their houses. Buyers put offering prices in their contracts. Buyers and sellers negotiate back and forth to establish purchase prices. Today's purchase price is tomorrow's cost. Is the purchase a good value? That depends.

You'll get a bargain if you find a house owned by people who don't know property values or who must sell quickly due to an adverse life change such as divorce, job loss, or a death in the family. Folks who don't have time to sit around waiting for buyers willing to pay top dollar usually take a hit when they sell. Time is the seller's enemy and the buyer's pal.

If, however you must buy quickly to avoid paying capital gains tax on the sale of your previous house or to get your kids settled before school starts, watch out. You could overpay because you don't have enough time to search for a good deal.

Cost is the past, price is the present, and value (like beauty) is in the eyes of the beholder. What the sellers paid for their house years ago, or what they'd like to get for it today, doesn't matter. Don't squander your hard-earned money on an overpriced house to satisfy an unrealistic seller's fantasy.

This week's tip is an excerpt from "Home Buying 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

October 19th is a memorable date in history for investors. It was in 1987 that the world experienced "Black Monday" and the single largest day's decline of the world's financial markets. On that one day twenty-two years ago, the Dow Jones Industrial dropped about 22% in one day of trading.

The Financial Crisis of 2008 was an event that had investors reflecting on 1987 and drawing similarities (not me, I was six-years old in 1987). Instead of a "Black Monday", the week of October 6-10th, 2008 is known as "Black Week", where all 5 days of the market were down a cumulative of 18%.

What is important to look at is what happens to the markets following these historic declines. In the 12 months following these "Black" dates in investing, the annualized returns for the markets performed as follows:

Now I would never be one to tell you to look at one year and base your investment decisions on such a short period of time. In the twenty years following "Black Monday" here's how the markets annualized returns have faired:

Time will tell if the markets will continue their strong performance following the most recent difficult period. Those that view investing in the long-term should be rewarded. Keeping your perspective in good times and bad is what can lead to you reaching your long-term goals and in the mean time, a better piece of mind.

This week's Tip was written by Stephen Hiltscher, Cryden Team member since 1998.

Apprvd.BBDP

After yesterday's torrential October downpour, I am sure many of us knew it was time to winterize our home and financial plans. Here's my annual tip for keeping one of your largest investments in good shape; it may be one of the more basic tips I've written, but its relevant every year at this time.

Asset protection comes in many sizes, shapes, and forms. With fall here, and winter around the corner, here are a few thoughts about protecting your home:

· Clean out your drains by removing all debris from them, then check your drains for clogs by running water through them to make sure nothing is stuck somewhere in the system.

· Check your roof for leaks. I suggest doing this now before you find yourself calling for help in the middle of a downpour, only to learn that all of the roofers are busy.

· Clear debris away from the pathways where water runs through your property, so it doesn't dam up during heavy storms.

· Clear debris and branches away from your roof. In heavy weather or winds, they can clog drains or actually damage the roof by falling on it or rubbing against it.

· Have your chimney inspected for dangerous deposits that could cause blockage of smoke leaving the house or even a chimney fire.

· Make sure your heater has a safety inspection and that its air filters are clean.

· Since real estate had such an unusual cycle the past ten years, I suggest that you go over your policy with your agent to make sure it still covers the current value of your home and the costs of potential repairs or replacement; additionally, review your liability coverage with your agent. It's important to make sure you have the proper amount of insurance on your property. Some people may not have enough insurance coverage; while others may have too much. It's one of those times where not all things are equal.

Lastly, here's a money saving tip: Reduce the length of the time you water your garden; as the days shorten and the temperatures decline, you'll need to water your garden and lawn less.

Apprvd.BBDP

I was listening to Jim Cramer as he opened his Mad Money Show last night on CNBC. He noted that the stock market had recently gotten back to its pre-crash level of last fall. This is an interesting threshold to consider as we think about all we've endured the past 13 months.

Though we've got a ways to go before we can say the credit crisis, financial markets' crash, and deep recession are all history; I think it's safe to say the worst seems to be behind us.

I thought it would be fun, and interesting, to go back to my weekly tip of January 7, 2009. (We'll post it on this tip again for your review.)

So far, my predictions have not been too far off at all. I think the reflection will lend an interesting perspective on the year. I also think it's important to keep in mind that long term investing and thinking means keeping yourself out of the fray when others are trapped in it.

Weekly Tip January 7, 2009

When I look back at 2008, I'll think of it as the year that the credit markets froze, resulting in violent volatility in the stock markets worldwide and a very difficult economy.

I think we could see the following in 2009. (Clearly, I do not know what will happen, nor do I have a way to guarantee that my thinking will come to fruition.)

1. In the beginning of the year, the economy will look terrible as the numbers come out for the fourth quarter of 2008.

2. These terrible numbers likely could continue through the first quarter; I think it's possible that they could continue through the second quarter of 2009.

3. We may see a rise in the financial markets, with the arrival of Barack Obama and a new optimism among Americans and people around the world awaiting the change in administration.

4. The huge stimulus package the Federal government is expected to enact within a month or so begins to take effect as the year progresses; this engenders more confidence in consumers and businesses, alike.

5. The financial stimulus already put in place by the Federal Reserve Bank and Treasury Department continues to work its way into the economy, slowly having a positive impact.

6. The Federal Reserve Bank continues its creative approaches to stimulate the economy and credit markets.

7. The economy could begin to settle down sometime during the third or fourth quarter of 2009.

8. Unemployment continues to look bad all year; remember, unemployment is a lagging indicator that can still rise as the economy and financial markets improve. (I wrote a weekly tip about this on November 12, 2008; it's on my website's archives.)

9. The stock markets begin to rise again, based on future economic improvement, sometime in the second or third quarter of 2009. (They tend to be a forward-looking indicator of the direction of the economy.) It's not uncommon to see the financial markets begin to rebound four- to eight-months ahead of the economy itself.

10. The credit markets continue to slowly normalize throughout 2009.

11. The residential real estate markets find a bottom sometime mid-year; some areas of the real estate markets are already showing signs of improvement, as we begin the year.

12. Huge numbers of healthy homeowners refinance their home at rates below 5%. (Be ready to act.)

13. Economists begin to talk about the threats of inflation, sometime near the end of 2009.

14. The financial markets end the year higher than they were on December 31, 2008, with US markets leading the way out.

15. Money in money-market funds, Treasury notes and bills, and bank deposits begin to find their way back into riskier investments, as the year progresses. The reason for this is that investors realize they can't meet long-term needs with a zero-interest rate.

2009 should be a very interesting year. This is a good year to stay in touch and to be prepared to act on things like buying low and refinancing your home. It's also a good year to truly evaluate all aspects of your life financially, as there could be lifetime opportunities presented that you may want to try to take advantage of.

While we won't know if my thoughts, written today, will come true as the year progresses, I do think these are some of the primary issues to watch.

Here's to a progressively more successful and optimistic 2009! Please call or write if you have any questions or would like to meet.

Apprvd.BBDP

Ever lost money due to a fire, a flood, or any other type of casualty? It happens to those who least expect it. In many cases your insurance covers the majority of the loss. Ever wonder what happens with the IRS?

Here's how casualty loses are handled under the current tax laws.

If there is a casualty loss, the deductible loss has to be in excess of 10% of your adjusted gross income (AGI), plus $100. Only this amount may be used as an itemized deduction. In the event of a total loss, the casualty loss is the excess of the cost of the asset over the insurance recovery.

Example:
All your furniture and other household belongings cost $100,000. They are totally destroyed in a fire, flood, earthquake, or by theft. The insurance reimbursement is $70,000.

Therefore, your casualty loss is $30,000 (cost of $100,000, less your insurance recovery of $70,000). The $30,000 loss is further reduced by the 10% of adjusted gross income (AGI,) plus $100. In this example the taxpayers AGI is $200,000.

The deductible loss is $9,900 (AGI $200,000 X 10% plus $100 less $30,000 loss = $9,900).

As you can see, the calculations aren't complex. Yet they aren't simple either. Anyone experiencing a casualty loss should consult their tax preparer and any other financial professional who may be of help.

There is not only reimbursement due from the insurance company; but potentially from the US government via the tax benefits.

Apprvd.BBDP

The Federal Reserve Bank (The Fed) left short term interest rates alone today. They also stated that the economy continues to improve. At the same time, The Fed indicated that it would slow or temper its program of buying mortgage securities.

What does this mean to us?

1. The Fed sees the economy still needing low interest rates for a while to come. These lower interest rates make the cost of borrowing money extraordinarily cheap. This is good for business and the consumer. They will at some point begin to take this simulative rate off the table. Until then, take advantage of them.

2. At some point in the future, my guess is next year sometime, The Fed will likely begin to take some of the money out of the economy its poured in over the past 12+ months. This money has essentially been used to replace the money lost in bad real estate loans, bad securities, etc. As the economy gets back into gear, The Fed will take the money out to try to avoid too much inflation. The secret is not only to avoid inflation, but to no put us back into recession again.

3. The Fed also said they were slowing their program of purchasing mortgage securities. They have purchasing mortgage securities to keep mortgage rates down. They must be thinking that the real estate market is improving enough to handle what will at some point turn into higher mortgage rates. At the same time, it seems to me it'll be a while before mortgage rates turn much higher any time soon.

4. I think this could be an excellent time to buy a home. You have a bottoming to slightly improving real estate market. This seems to me to be the best of both worlds. You get low prices with low rate making for lower mortgage payments.

5. I also believe this could be good time to invest in the equities markets. They tend to be more inflation resistant as companies can price in increases and find improved profits. We're certainly not near the lows of last November or this past March; however, we're not near the highs of October 2007.

6. If we see more inflation, I believe bond investors should be careful. Higher interest rates have historically tough on bond values.

Things seem to be moving in right direction. We're a far cry from the chaos of last fall and winter.

If you have any questions, please write or call.

Apprvd.BBDP

Where were you three hundred sixty seven days ago? I had just arrived home from visiting my aunt in New York City. Little did I know I'd just left a different kind ground zero the day before.

Where are we one year and two days after the collapse of Lehman Bros?

The economy is much better than a year ago. It was possible that we might have tumbled into Great Depression II. (Ben Bernanke, Chairman of the Federal Reserve Bank, had said earlier this year that we could have been about a week away from it.) That's pretty scary stuff to say the least. Today, we are nowhere near that point. Thankfully, we didn't.

By nearly all accounts, the economy today seems to coming out of a very tough recession. Ben Bernanke was quoted this week saying the recession may be over. That's clearly good news.

It means we should see continued improvement in the economy. This should translate to higher corporate profits. In turn, higher corporate profits should translate into higher business and stock valuations over time.

The real estate and credit markets were the source of the financial crisis and recession we've seen the past year. Today, both are markedly improved.

The 3 month LIBOR, London Interbank Overnight Rate, got as high as 4.80% last fall. Yesterday it was .29%. This is much more in the normal range. It represents a reduction from that dramatically high 4.80% rate of 4.51%. That's a huge move towards normalcy. And, a clear sign that the credit markets are much improved and healthier. (The three month LIBOR is the rate that banks charge each other to borrow money.) At 4.80%, it was clear no bank wanted to loan another bank money. Today's normal LIBOR rates reflect a much healthier credit market. People and businesses are more freely able to borrow money again.

The real estate markets seem to have bottomed out. I recently heard where prices actually rose in some areas off their apparent bottoms. I do not expect a robust turnaround in the real estate markets. However, you have to hit bottom before you can rise again.

We do not see major banks and other financial institutions failing seemingly every day as we did last fall. There is far greater stability in the economy than one year ago. Clearly there will be more fallout from the past twelve months. Too much happened for it all to be over. It's my belief that the worst is behind us. It is my belief that we should see more good things ahead than bad as we look towards the next few years.

Where are we today? I firmly believe we are in a better place than one year ago. I think the worst is behind us. I think the economy should continue to improve. I think the financial markets should continue to heal. Remember, we are nowhere near the highs of 2007. With an improving economy, we should see better markets over time. Unemployment will likely be the last to recover. That's the nature of economic cycles. Unemployment recovers long after the recession ends. I can't think of any reason why it would be different today.

If you have money on the sidelines, this may be a good time to get some to work. Clearly, we're not at the bottom of the financial markets' cycle any more. Hopefully that was last March. But, we're nowhere near their all time highs either.

Apprvd.BBDP

In October of 2008 I wrote a Weekly Tip that referenced this Op-Ed piece written by Warren Buffett. It was in the heart of the financial crisis and spoke about maintaining long-term investment perspective in a time of fear.

As a follow up to that Weekly Tip, I would like to share with you a recent New York Times article and interview with Mr. Buffett. When read in conjunction with the Op-Ed piece from October, it provides a good look at where the markets have been the last 11 months.

Closely Watched Buffett Recalculating His Bets

Apprvd.BBDP

This Weekly Tip was originally written in 2006 and holds true today. We've seen some volatility in the markets the last few days, something that is typical of September. The greatest lesson from this Weekly Tip is to keep your perspective; the markets are cyclical and when they are healthy they fluctuate.

Historically, the month of September has been the worst month of the year for the financial markets; it is difficult to say why, it has just been that way.

The next couple of weeks are a time when some companies might pre-announce any changes in their guidance or financial expectations, so it could be a period when we see some market volatility.

In addition, some portfolio managers do what's called "window dressing" at the end of a calendar quarter. (This is where they sell holdings they don't want the public to see in their portfolios at the end of a quarter). Window dressing can also create short-term market volatility, as large blocks of a stock are bought or sold; this can impact an individual holding or an overall financial market.

Finally, people come back from their vacations after Labor Day weekend and begin to look at their portfolios with an eye toward the end of the year; this could also have an impact on the markets, as there could be pent-up emotions affecting decisions that are made in September.

My feeling is that a true investor should not consider a tough September anything more than another buying opportunity in your long-term investment plan.

Keep your focus on your long-term goals while continuing to take advantage of short-term investing opportunities. One thing to keep in mind this September is that the economy is continuing to recover. As it does, keeping perspective of what is occuring will be even more important.

Apprvd.BBDP

Yesterday, I interviewed Sandy Lubin, Chairman of the Board for the Credit Bureau of San Luis Obispo and Santa Barbara Counties. The interview was for a radio show to air on September 12th. Two of the topics Sandy and I discussed are current, and certainly interconnected; getting free credit reports and identity theft.

Identity theft is pretty nasty. It's nothing new in that it's another way to defraud people. What's new is that it's easier to get people's personal information today since technology has continued to advance. Everyone needs to pay attention to how they protect their personal information and who they give it to.

If you have your identity stolen or have problems paying bills, you're probably going to have credit problems. Having bad credit makes life difficult for almost anyone.

Here are two resources that can help you if you ever want to check your credit or want to know about identity theft law:

annualcreditreport.com - A site for a truly free credit report.

IDTheftCenter.org - A place to review or learn about the laws against identity theft.

Of course, another simple way to help avoid identity theft is to get a good shredder. They are cheap and useful.

Being careful with your identity and credit may take a little work on a regular basis, but it sure beats the alternative.

Apprvd.BBDP

Dear Clients & friends,

Our Weekly Tip has taken a vacation! Look for a great new tip next week!


Sincerely,

The Cryden Team

Apprvd.BBDP

I can't help but think we're in a new bull market.

You might ask why?

1. We are more than 20% off the bottom of the market. In fact, we're closer to 50% off the bottom of the markets.
2. The economy is improving.
3. The credit markets are improving
4. The volatility or fear index (the VIX) is back in the 20s which is a much more calm environment for markets to grow; albeit more slowly.
5. Consumer confidence is rising slowly
6. Housing continues to improve.
7. The Federal Reserve Board came out today expressing confidence in the economy.
8. The financial markets tend to be in front of the economy.
9. The markets peaked in October 2007. This means the bear market probably lasted about 17 months. This is quite a few months longer than an average bear market.

My conclusion is that it seems the economy is on the mend. The trends in many areas seem to be heading in a more positive direction. The markets are well off their bottoms; though we could see a correction at some point. Corrections are normal in a bull market cycle. So, if we see one, I don't expect it will be the end of the bull cycle.

If you have money sitting on the sidelines, you may want to consider getting it to work before the markets get away from you. As always, Stephen and I are here to answer any questions you may have.

Apprvd.BBDP

Recently I updated our website to include the last six months of Smart MoneyTalks.com radio interviews. Over that time I interviewed some of the greatest financial minds in the world. Whether it is Dr. Mark Mobius of Templeton Investments or Michael Johnston of the American Funds; they each offer a unique perspective into our markets and financial systems.

Please look at my Radio Guest Archive page. You can either listen to the interviews from the website or feel free to download them and listen on your iPod. I hope you find these interviews as informative as I have.

Apprvd.BBDP

I've written the past few months that the economy wouldn't turn in a dramatic fashion. Recessions begin and end on an accumulation of events generally. This recession began as a result of the credit crisis; which took years to come to a climax. The recession will end with an accumulation of economic activity moving the economy back into growth again.

Here is short list of some of the things I am seeing which point to a turn in the economy:

1. Home prices have stabilized in many areas and have actually turned upward in a few regions for the time in three years.
2. The three month LIBOR we've been watching since last fall when it peaked at 4.80% is now less than one-half (½) percent for the first time since the crisis began.
3. The Federal Reserve sees the economy's pace of decline slowing.
4. Corporate profits are showing improvement.
5. The headlines are more positive which is terrific for consumer confidence.
6. Improved consumer confidence should lead to more spending.
7. The emerging markets are in pretty good shape, according to Mark Mobius, President of Templeton Funds Emerging Markets Investments, in an interview with me on July 4, 2009. (Click here to listen.)
8. Inventories are low. This means companies will have to replace them with new purchases. This should trickle into many parts of the economy.
9. Obama sees the "beginning of the end of the recession."
10. The financial markets are at or near their highest levels of 2009.
11. The rate of the job losses has slowed.

Keep in mind that the economy will recover in fits and starts. Slowly, but surely, the good news should replace the bad news. Eventually, we'll see an end of the bad news. Though I would suspect we won't see complete end of bad news until the job market improves.

The recession will not end with a bell denoting its end. Rather, it will end quietly as economic growth leads the way forward.

I keep saying that I think the financial markets may have turned the corner. Generally, they move ahead of the economy; anticipating improvement or decline. Investors want their money in place before the economy turns. This may be a time to get some of that cash to work.

Apprvd.BBDP

I interviewed Michael Johnston, Senior Partner and Vice President of The American Funds Group, yesterday. Michael has been a regular guest on my radio shows since 1993. He has become a friend and confidant. Over the years, I've shared his sage views on the economy, the world, and the financial markets. (The show will air Saturday, August 8, 2009.)

His take on the economy is that it's going to surprise people as the year rolls on; particularly this quarter and the fourth quarter. He feels the work the Federal Reserve Bank has done has broken the back of the financial crisis. He particularly sited their work in setting up what's called special purpose lending facilities during the fall and winter which helped create liquidity in the financial markets and banking system. The liquidity that was created helped get capital moving again from its near frozen state.

In addition to the improvements in the financial and banking system, he said that many of companies could continue to surprise investors on the earnings side. The reason for this is economic activity is picking up. Inventories are getting low and will need to be replaced. As a result, you get pent up demand. In addition, he says many companies got much of their bad news out of the way in the last three quarters paving the way for improved earnings. Of course, Wall Street likes better earnings and generally reacts favorably to them. It's not uncommon for Wall Street to anticipate the economy and move ahead of its actions.

Another reason for optimism is that the real estate markets continue to show anecdotal evidence of improvement in many areas of the country.

All of the above reasons should bode well for the financial markets going forward. I believe the worst of the financial crisis is behind us. I agree with Michael and look for better times ahead.

I've written in the past about cash sitting on the sidelines waiting for better days. (I urge you to review my tips from June 17 & June 24 addressing this issue.)

It's never easy to invest in times when you aren't sure of yourself. As I written so many times in the past, the best times to invest seem to be when others are in doubt. If you've got long term money sitting in accounts literally making nothing, I suggest you consider the alternatives to cash. Let's talk about ideas to get your cash to work.

Apprvd.BBDP

It's interesting to look back at the cycles in the financial markets and notice things about how they work.

One thing that strikes me is that human emotion plays an important role in the financial markets in the short term. Human beings tend to let fear and greed play a role in how they make decisions when it comes to their investments. They often follow the crowd in the short term forsaking true long term investment tenants. I believe that this "herd mentality" plays a large role in why the financial markets can be so volatile or make moves that go way beyond the correct value of an investment; both on the positive side and the negative side over relatively short periods of time.

Conversely, I believe its economics that play a larger role in how you make money long term. In other words, long term investors and investments reflect the true value of the long term growth of a company or investment. The short term fluctuations tend to be removed when looking at long term results.

If a company triples its profits over a ten year period, its value may increase by threefold. However, sometimes you may find it fluctuates a great deal while its fundamentals improve over that same ten year period.

As an investment professional, I always encourage clients to pay attention to the long term as that's how they make money. Over the short term, I encourage using dips in the financial markets as opportunities to add to their portfolios.

Apprvd.BBDP

Summer vacations are upon us. Many of us rent cars while away on a trip. Did you know that rental car agencies make a pretty fair profit on the money they charge you for their insurance in case you are in an accident?

Before you go on vacation, make sure to ask your insurance agent if you would be covered by your present automobile policy, should you damage a rented vehicle. Even if you are covered by your present automobile policy, make sure you understand the limits of your policy.

If your agent says you're in good shape and don't need the rental car agency's coverage, sign the waiver - but don't sign the waiver before you know. It can be a very expensive way to save a few dollars a day, otherwise

Apprvd.BBDP

The last few days have been a whirlwind and we are finally getting settled into our new location!

We look forward to seeing you at our new address in Downtown San Luis Obispo.

Our new address is Blakeslee & Blakeslee, 1101 Marsh St, San Luis Obispo, CA 93401-2312. Our telephone number remains the same (805) 543-4366.


View Larger Map

We hope you'll join us at our open House on Friday, September 18, 2009 from 3:30 to 6:30 p.m.

Apprvd.BBDP

Last week I wrote about the huge hoards of cash sitting in various interest bearing accounts making practically nothing.

I recently read an article discussing the fact that the average money market account is returning in the area of fifteen one-hundredths of a percent or 15 basis points. This is essentially paying roughly one-sixth of one percent.

Since my writing last week, I found an article in the LA Times talking about the amount of cash on the sidelines. The amount is absolutely huge. The thesis is that a fair amount of it is going to end up getting invested somewhere.

The two sources cited in the article are iMoneyNet Inc., and the Federal Reserve. It states the there is the following cash on the sidelines:

These amounts total $9.5 trillion. They state it's twice the amount available in stock mutual funds.

We should see some of this money flowing back into the financial markets at some point in the future. Assuming there isn't some other unknown problem which occurs.

In my mind, the question long term investors need ask themselves is; when might this happen? Smart investors want to be there first.

If you'd like to talk about this or anything else, give me a call or drop me an email.

Apprvd.BBDP

Do you have money sitting in accounts making nothing? Many people have put trillions of dollars in accounts which are making virtually nothing. There are many reasons they done so the past few months. The main reason for many was a sense of comfort during the financial storm we have been weathering since September 15, 2008.

With the recent improvements we're beginning to see in the economy, it's my opinion that we have weathered the worst of the financial storm and that things should continue to improve in the months ahead. (Keep in mind that unemployment isn't likely to improve until long after the economy has turned around.) If that's the case, and history shows that the financial markets turn ahead of the economy, we may be in a period where people will begin to look to redeploy their money away from risk free savings vehicles into investments carrying more risk. These investments would include stocks and bonds.

Why would people turn away from the safety and comfort of their savings accounts, Treasury bills, and money market funds? The answer lies in the fact that you can't make any real rates of return in accounts which can barely keep up with inflation. As people begin to feel more comfortable with the financial markets and the economy, they are likely to begin to take more risk.

The real question everyone has to ask themselves is whether they can tolerate risk, which includes more bear markets in the future, in order to make a better rate of return? Each of you will have to determine if you want more risk in your portfolio and how much money you're willing to place in these investments.

Keep in mind that leaving long term money in savings accounts, Treasury bills, and money market funds runs a different type of risk. This risk involves not being able to keep up with inflation. We are certainly going to see more inflation in the future. That's inherent to the capitalist system and is much better than deflation. I think we can count on inflation in the long term. I think we need to protect ourselves from it. In saying as much, I do not think it can be done by putting your long term investment dollars in short term savings vehicles. The two don't fit long term by their very nature.

Some economists are worried that we'll see higher than normal inflation as we come out of the financial crisis and economic troubles. If that's the case, your savings vehicles won't keep up with it. You'll need investments which have pricing power that can help raise their profits. In my mind, this means common stocks. Companies can price their way through inflation. As they raise prices to keep up with inflation, their profits should rise. Higher profits should be reflected in higher stock valuations.

Bonds can be more problematic during inflationary times. As inflation increases, the interest rates being paid by your bonds may not compete with the current markets. In others words, they may not offer competitive returns and therefore lose value. Bonds tend to be better during deflationary times or periods where interest rates are dropping.

I think we are in a period where people should begin to look at their cash positions. They should consider investing before markets move even further forward. Clearly I don't know what will happen in the short term. But what I see is a period where we continue to get better news on the economy and in the credit markets. I see the recession beginning to lose some steam and the credit markets improving. Both of these things are good news for us all. We've certainly been through enough the past few months. Continued good news is more than welcome. It should bring us better times ahead as well.

If you wait too long to get back into your investments, you risk losing a part of the recovery. You risk buying higher than you might want to. As Warren Buffet wrote in October 2008, in a New York Times Op Ed, "if we wait until the Robins sing, spring has sprung." In other words, if you wait until you until you feel comfortable enough to invest; you may have lost a large part of the return the recovery rally may offer.

Investing is about anticipating the future and being there to capture it. If you'd like to talk about your portfolio or any ideas, do not hesitate to write me.

Apprvd.BBDP

Dividends have played an important role for investors over the years. They provide income and are an important part of an investor's overall return on investment. The following, from the American Funds website, gives us an up to date perspective on investing today with dividend paying stocks.

What do Dividend Reductions Mean for Mutual Fund Investors?

Apprvd.BBDP

Okay, so it's a cliché. But too often, people, work, work, work to afford a home and don't take the time to enjoy life, family, and friends (or even their home). If you buy a home that's within your financial means and you are resourceful and thrifty with your spending in the years that you live in it, your home should not dictate your finances and your need to work. You should own the home. It shouldn't own you.

No people (that we're aware of) have ever said on their deathbed that they wished that they had spent more time toiling away at work (and therefore less time with family, with friends, and for themselves) so that they could spend more money on their homes.

Taking the time to smell the roses doesn't just apply to real estate; it applies to all forms of wealth accumulation. Make sure you enjoy the finer things in life; after all, you can't take it with you.

This week's tip is an excerpt from "Home Buying 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

This week's tip is one of the first to divert from the financial crisis we've been mired in the past 8-½ months; it's simple, uncomplicated stuff that may help you with your home.

1. Fire season is literally just around the corner. Take the time to protect your home from fires, whether it be clearing dead brush from your property or making sure all your outlets are properly grounded. There are tons of good fire-related websites you can search for on how to do this; the measures to protect your home from fire can vary from area to area, depending upon the terrain.

2. Review all of your insurance with your insurance agent to make sure you are current; you should do this regularly, particularly in any up or down real estate markets.

3. If you want to do any remodeling, now seems to be the time to do it, as there are plenty of construction workers out there looking for ways to make a living. I would imagine 2009 could be the best year to get something done on your home.

This week's tip is short and sweet but, if you follow it, you could save yourself a lot of money.

Apprvd.BBDP

As I've watched investments over the years, I've come to understand that there are two phases of market recovery. Each is distinct and each is a part of the healing process.

It's not uncommon for investments to become overbought or oversold. An overbought market is one which has exceeded its real value. (Most recently this applied to the real estate markets. In 2000, it applied to technology stocks.) An oversold market is one where people sell stocks to a point where they can be well below their real values. We may be seeing this is real estate now. And, I certainly think we saw it in the financial markets in early March.

Both of these conditions are generally a result of excessive fear and/or greed. By nature, human beings are very emotional; particularly with their money. As we've discussed many times in the past, emotions make a lousy market timer.

How does this tie into market recoveries?

The first phase of recovery is to come off the bottom or off these oversold conditions. At some point in time, investors realize that the investment opportunities are just too great to leave alone. They begin to buy at these very low prices. This is what I call a bounce off the bottom. In this phase, investments tend to rise to a more fairly valued level. This bounce has been historically pretty strong; particularly after a deep sell like we saw between September 2008 and early March 2009. I believe we may be in the process of finding more fair values in this bounce off the bottom. It's tough to know, until we can look back, how much we bounce and when this phase ends.

The second phase returns the financial markets to normality. In this phase financial market results are tied to economic growth. We should see that as the economy recovers from the recession. Keep in mind that historically the financial markets get out in front of the economy as a forward looking indicator.

While I don't have crystal ball; I do think we may be in phase one of financial market recovery. As I've said the past few weeks, it may be a good time to put some money to work. Other than that, I encourage everyone to continue to be patient and not make any quick impulsive decisions that you may regret at a later date.

Investing is a long term proposition. If you keep that perspective, I believe you have the greatest chance of success.

Apprvd.BBDP

No one said a recovery was going to come easily, or even in a straight line. We had news today that retail sales in April were not so great; that's not a total surprise to me, or to many who know that a recovery from such a tough economy takes time. Retail sales numbers are backward looking, meaning that we're looking at prior months' activity…that is, prior months when we knew things weren't going so great. Investing and economic forecasting is about looking forward, not backward.

As a result of this news, the financial markets dropped some, today; however, they have done nothing but go up for over two-months without any real adjustments, so we were due for a pullback. That's a normal part of the process; they don't go up in a straight line, neither do they decline in a straight line.

As I've said before, we'll likely see the economic news go from "not good at all" to "not as bad." At some point, we will start seeing less bad news and more good news; eventually, the bad news fades away and we're left with good news and better times. There will be no bell at the end of the recession; then again, there will be no bell at the market bottom, either.

As we continue to see more signs of improvement in the economy, I urge you to consider beginning to put your cash to work, as the financial markets are far from their peaks of October 2007. Buying on pullbacks isn't a bad way to go.

Factoid for today:

The three-month LIBOR (London Inter-Bank Offered Rate, or the rate that banks charge each other for money), which is normally around 50-basis points (or 0.5%) and got as high as 480-basis points (or 4.8%) at the peak of the credit crisis last fall, is now under 90 basis points (or 0.9%). The LIBOR has been dropping at a good clip over the past few weeks, which is a good sign for the credit markets; it's almost back to normal, when compared to last fall.


Apprvd.BBDP

The green shoots or mustard seeds of improvement seem to be taking root, as we continue to see more signs that the economy is finding ways to right itself.

It was reported today that the number of people filing unemployment claims was lower than the recent estimates from a Bloomberg survey of economists, which had estimates of 645, 000 people losing their jobs in March, whereas the actual number of unemployment claims was 491,000. If employment is a lagging indicator in the economy, we surely can't be unhappy seeing a reduction in job losses. Even if today's jobs report isn't enough of a sign that the recession is ending, it is a single sign that things are moving in a better direction; it is also good news for many investors and economists, as they look for indications that the rate of slowing in the economy may be easing some. In the long term, we'll want to see that figure continue to go down before we can feel more confident of more people either getting back to work or keeping their jobs.

In testimony given in front of a Congressional Joint Economic Committee yesterday, Federal Reserve Chairman Ben Bernanke said that the economy could pull out of recession and begin growing again later this year. It was his most optimistic assessment of the economy since the financial crisis and recession took hold last year.

As of today's writing, the financial markets have raised a great deal off of their March 9th lows:

While we don't know if the March 9, 2009 lows will end up being the bottom of this Bear market, we can see how powerful recovery rallies can be when they get going from oversold conditions. Eventually, we'll know that we have passed the bottom of the market; if you've been on the sidelines waiting to be sure of this, you'll miss the rally. Have we been experiencing this now? I don't know and won't know until I can look back to see it (hind-sight is indeed 20/20).

I believe we are heading in the right direction and that we'll continue to see improvement in the economy and banking system over time. These improvements are likely to come in small doses for a while; however, we should see real momentum over time.

What does this mean for you?

1. If you are looking to buy a home, I think this period we are in now is one of the best windows we'll see in years.

2. The rates on home loans are at record lows. If you haven't looked into buying a home or doing a home refinance on your home, I think this is the time to look into it. I'm not sure how long we'll see these low rates but I am sure that we'll see mortgage rates rise, as the economy improves.

3. If you purchased a home during the housing bubble, you'll want to see if you can have your property taxes reduced. (See my Tip of the Week for January 28, 2009, in the archives.)

4. If you haven't added any money to your investments while the markets have been down, you may want to consider getting your money to work. This is especially true of any dips we see over time. Buy low and sell higher; this is a great way to make money long-term.

5. If you're sitting on cash making almost nothing, you may want to start thinking about what you will do with it long-term, as short-term rates haven't ever made for successful investments.

Keeping your perspective while all others lose theirs is how you will succeed in life.

Apprvd.BBDP

Over the past few weeks, I've written about the rays of light we are seeing in the economy. There are some indications that things may begin to slowly get better. In yet another sunbeam of hope, the Federal Reserve Bank has been saying that the recession may be easing. While the first-quarter GDP (Gross Domestic Product) was not good, it was slightly better than the fourth-quarter of 2009.

Inventory levels are dropping, which is an indication of more positive news. This means that inventories will have to be replenished; in time, this replenishment should lead to more economic activity and, as a result, we should see better numbers for the economy and businesses.

The Federal Reserve Bank did not take any additional action today to boost the economy; they also did not change interest rates or add any additional programs. This could mean that they didn't feel a need to do so and that they are saving any additional ammunition, if needed, for down the road. I view the lack of actions today by the Fed as a good sign.

Should you invest at this point? No one knows for sure where the bottom of the market is or where the economy will be, but what I do know is pretty simple: if you buy low and sell higher, you'll make money. If we keep seeing improvements in the economy, we should see the markets continue to improve, as well. As I've written before, the markets historically move ahead of the economy. We're nowhere near the top of the markets, for sure. And we're well off the recent bottoms, too.

If you have time to let your money work for you, add money when the markets are down. If you don't want to add money in lump sums, add in smaller increments until you are fully invested. Buying down generally makes us money in the long term.

Apprvd.BBDP

Over the years, I have been incredibly fortunate to interview some of the smartest financial minds in the world on my SmartMoneyTalks.com radio show.

One frequent guest, returning for this week's show, is Michael Murphy, publisher and editor of the New World Investor web site, in which Michael focuses primarily on current financial market conditions, technology and bio-technology investments.

From now through the end of this month (April), Michael is offering a free guest subscription to the New World Investor through his website. For the remainder of April, visit newworldinvestor.com and enter the following information:

Username: david (lowercase)
Password: cryden (lowercase)

You will have free access to the website without charge for roughly 8 days. You'll find his market commentary of particular interest.

I hope you find his newsletter as informative. Michael has been in the investment world for over twenty five years and he is truly considered to be an expert in his field. As an aside, earlier in his career, Michael was an analyst for the American Funds Group.

Apprvd.BBDP

As I reflect on the past year and the end of tax season, it's interesting to take stock of things. It's time to shift our thinking from tax year 2008 to 2009. It's also time to shift our investment thinking from the past seven months to the future.

A Few Simple Thoughts on Taxes

Too many people don't take time to do tax planning year round. In doing so, they can't be proactive in trying to make the most out of the tax laws. There are many things the tax laws avail us to save on taxes. Now is the time to start planning your 2009 tax year.

Will your income change?

Will your life change in a way that affects your tax return?

A move for work?

A move to being self employed?

A move from self employed to employee?

An increase or decrease in income?

A refinancing of your home?

If you aren't proactive with your taxes and take the time to work with them, you are generally the one who loses. It's not the government that loses when you end up paying more taxes - it's you!

On Investing

Today is the seven month marker for the fall of Lehman Brothers and the beginning of the heart of the financial crisis. In the past few weeks, we've had a more positive stock market. In fact, we've had five up weeks in a row in the stocks markets. I think this is based on a few things:

1. The markets by many measures were simply way oversold. There was going to be a bounce.
2. We're beginning to see signs that the economy may be in the bottoming process. Economists are now debating if the economy will get healthier in the next quarter or two. After that, the debate is when will recovery begin and how strong will it be.
3. The credit markets are continuing their long road to recovery
4. The real estate markets are seeing continued signs of bottoming in places and the refi markets are booming on low interest rates.
5. Some banks are showing profits and beating estimates.

These are but a few of the small things that continue to tell the story that the economy, while still not good, is showing more signs of life. Keep your eye on these seeds of improvement I've been speaking about. This is how the recovery should begin to take shape.

Finally, remember that investing is about the future and not the past. If we continue to see show improvement, then why not believe better times are ahead? If better times are ahead, then why not get invested before those times are here? If you wait for the flowers to bloom, spring has already sprung.


Apprvd.BBDP

The tax deadline for 2008 is fast approaching. The last date to file an individual return without an extension is Wednesday, April 15, 2008; this is also the deadline to fund your Traditional or Roth IRA for Tax Year 2008 contributions.

As a reminder, individuals who were Age 49 or under at the year-end of 2008 can contribute a maximum of $5,000; individuals who were Age 50 or over at the year-end of 2008 can contribute an extra $1,000 as a "catch-up" provision for a total contribution limit of $6,000.

The contribution amounts are the same for the 2009 tax year.

With the recent market conditions, what better way to close the 2008 tax year than to maximize your qualified contributions? While we cannot guarantee performance and don't try to time the market, we look at this period as an opportunity to invest below any recent market highs. This may be an opportune time to maximize your IRA contributions for both 2008 and 2009. (Remember the old maxim: "Buy low, sell high".)

If you have any questions about making your IRA contribution, make sure to call today and beat the deadline.

Please keep in mind that not everyone is eligible to deduct their IRA contributions. If you have any doubts about this, you may want to consult with me or your tax advisor.

Apprvd.BBDP

One of my favorite words in life is "perspective". Keeping a balanced and educated perspective helps you from making decisions that may not be in your best interest in the long-term. Investing is all about these concepts; if you keep the right perspective, you're likely not to run with the herd and make bad decisions.

Presented by the American Funds Group, today's Weekly Tip presents a simple perspective on recessions in the United States, dating back to 1931; it also provides you with some perspective on how the financial markets have done, once recessions are behind us.

The following link will take you to today's presentation:

Recessions: Keeping Your Perspective

Apprvd.BBDP

Last week I wrote about rays of hope. Well, knock on wood; we continue to see more little seeds of hope in this week's news.

The Treasury Department finally came out with the details of their plan to get the toxic assets out of the banks. As opposed to the market's reaction in early February, we saw a huge rally on Wall Street. Clearly, the financial market's initial reaction to the plan was much better.

Yesterday we continued to see some improvement in real estate with home sales numbers. First time home buyers are entering the markets again. This is generally seen as a healthy sign and the beginning of better times.

Today we saw a surprising rise in durable goods (larger items) sales. The rise of 3.4% was the first increase in seven months and the biggest since December 2007. This is another encouraging sign for the economy.

This is another encouraging sign that perhaps the economy is beginning to moderate a little bit after a brutal fourth quarter. This means that we may be seeing a slowdown in the deterioration in the economy. I would call this a hope step in the right direction.

Some commodity prices are rising again. Oil is one of them. It's back over $50 per barrel. This is generally seen as an indication of economic growth down the road.

It's tough to know if the rally we've seen the past two plus weeks is the real turn towards a new Bull market. However, it appears to me to be based on positive economic news and not just people covering their short sales. So this too, seems a move in the right direction even if it may not be the real turn to a new Bull market. Of course, we won't know when the real turn occurs until well after it's happened.

What I look for in an improving economy and markets is positive news about indicators which show upticks. Generally, these types of situations don't just end one day. The good news tends to become more prevalent and the amount and types of bad news tends to fade. One day we wake up and realize the bad times are over. I think we're in the beginning of this process. Let's hope I am right.

Apprvd.BBDP

What I look for in a tough economy is the beginning of the healing process. I look for little rays of light, or rays of hope, that tell me things may be beginning to look a little better.

I am beginning to see a few things that are positive. In saying as much, I think it's important to note that we'll continue to see bad news in the near future.

Here are a few things that look hopeful to me:

1. Real estate markets in various parts of the country are showing signs of life. This includes parts of California. I've heard anecdotal evidence that Santa Maria and Lompoc are healthier than a year ago.

2. Banks are beginning to show some signs of life. This area still has lots of work to do. But, there has been good news for some banks who say they will be profitable this year.

3. Mortgage rates matched their record lows last week. This is great to refinancing and home purchases. Don't forget to check out refi possibilities if it applies.

4. People's view of the economy, while not great, improved in a recent poll by 10%.

5. The financial markets are now well off their bottoms. They may retest them still. However, the decline that no one thought would stop has stopped with a big bounce in a very short period of time. This is why you don't want to be sitting in cash waiting for a normalization of markets. By the time you figure out things have turned, you missed the turn. (See last week's tip for more on this concept.)

6. There is the beginning of talk of reregulating the financial system again.

7. The uptick rule for short selling may very well come back. This may help with the degree of short selling we see in the future and with a reduction in extreme market volatility.

8. The Fed continues to be aggressive. Today alone, they announced the purchase of $300 billion in long term treasury bonds. This should drive down rates and raise values of government bonds. In the months ahead, we should see the benefits of their "reflating" the economy through monetary policy.

9. Retail sales came in better than expected in February.

10. There were 20% more starts in new housing than expected.

Keep your eyes on the road ahead and the long term when trying to evaluate the economy; not just the splashy headlines designed to make you overly happy or overly worried.

Remember, we're long term investors; not short term traders.

Apprvd.BBDP

I met with a client yesterday who spoke of her mistakes bailing out the markets and her investments ten years ago. Her story was one I wanted to share with you because it's not one people will admit to often. And, I think it's very relevant to today's markets.

Please take your time in reading it and reflecting upon her experiences. Perhaps it will help you as we make our way through this tough period. Her name is withheld due to confidentiality issues.
_____________________________________________________________________________

David,

I just wanted to thank you for meeting with me today and putting me at ease. I would like to share with you my personal story that I spoke of earlier today.

Back in the late 1990's we were in the middle of a bear market. I listened to my friends and family who encouraged me to take my money out of the stock market and put it into CD's, Treasury Bonds and Cash. I listened to them and not my financial planner. I was not with you at that time. Because I took my money out, I lost the opportunity to buy at record lows, lost money and was unable to time the right moment to return to buying stocks. Despite the highs that I experienced for the next 10 years I never was able to make up that "lost" money.

Now we seem to be in greater financial chaos and many of my friends and family are advocating again taking my money out of the market. I will not make that mistake again. I definitely learned from that experience. I will continue to invest knowing that the market will go up again. I also have increased my contributions in my 403(b) plan. My employer generously contributes to my plan as well. If I stopped my contributions, I would lose again.

I do hope you share my story with some of your clients.

Thank you for your understanding and support in these chaotic financial times.

Susan V

Apprvd.BBDP

At the start of 2009 I wrote a Weekly Tip called, "What Could 2009 Look Like?" In January, I spoke about what you might expect as the year progresses. Take a look for yourself, to see how the year is playing out and what I wrote. One thing you'll note is that there haven't been any huge surprises. I think we're in the belly of the beast now. I don't think a matter of if we recover; I think it's a matter of when.

Tip from January 7, 2009

I think we could see the following in 2009. (Clearly, I do not know what will happen, nor do I have a way to guarantee that my thinking will come to fruition.)

1. In the beginning of the year, the economy will look terrible as the numbers come out for the fourth quarter of 2008.

2. These terrible numbers likely could continue through the first quarter; I think it's possible that they could continue through the second quarter of 2009.

3. We may see a rise in the financial markets, with the arrival of Barack Obama and a new optimism among Americans and people around the world awaiting the change in administration.

4. The huge stimulus package the Federal government is expected to enact within a month or so begins to take effect as the year progresses; this engenders more confidence in consumers and businesses, alike.

5. The financial stimulus already put in place by the Federal Reserve Bank and Treasury Department continues to work its way into the economy, slowly having a positive impact.

6. The Federal Reserve Bank continues its creative approaches to stimulate the economy and credit markets.

7. The economy could begin to settle down sometime during the third or fourth quarter of 2009.

8. Unemployment continues to look bad all year; remember, unemployment is a lagging indicator that can still rise as the economy and financial markets improve. (I wrote a weekly tip about this on November 12, 2008; it's on my website's archives.)

9. The stock markets begin to rise again, based on future economic improvement, sometime in the second or third quarter of 2009. (They tend to be a forward-looking indicator of the direction of the economy.) It's not uncommon to see the financial markets begin to rebound four- to eight-months ahead of the economy itself.

10. The credit markets continue to slowly normalize throughout 2009.

11. The residential real estate markets find a bottom sometime mid-year; some areas of the real estate markets are already showing signs of improvement, as we begin the year.

12. Huge numbers of healthy homeowners refinance their home at rates below 5%. (Be ready to act.)

13. Economists begin to talk about the threats of inflation, sometime near the end of 2009.

14. The financial markets end the year higher than they were on December 31, 2008, with US markets leading the way out.

15. Money in money-market funds, Treasury notes and bills, and bank deposits begin to find their way back into riskier investments, as the year progresses. The reason for this is that investors realize they can't meet long-term needs with a zero-interest rate.

The hardships our markets have seen are significant and it will take time to correct. I urge you to keep your long-term perspective and look for more progress as the year goes on. As I mentioned in January, this is a good year to stay in touch and to be prepared to act on things like buying low and refinancing your home. It's also a good year to truly evaluate all aspects of your life financially, as there could be lifetime opportunities presented that you may want to try to take advantage of. Please call or write if you have any questions or would like to meet.

Apprvd.BBDP

For today's Weekly Tip, I am sending you a link to a series of interviews with Jim Rothenberg, the Chairman of Capital Research and Management Company (American Funds' research company). Jim offers insight into the current market conditions and where he sees our economy and financial markets in the future.

I strongly suggest you take a few minutes to watch these videos. Jim heads one of the strongest international research programs of any financial company in the world.

Click below to watch:

Jim Rothenberg Interview

Apprvd.BBDP

In mathematics, chaos theory describes the behavior of certain dynamical systems - that is, systems whose states evolve with time - that may exhibit dynamics that are highly sensitive to initial conditions (popularly referred to as the butterfly effect). As a result of this sensitivity, which manifests itself as an exponential growth of perturbations in the initial conditions, the behavior of chaotic systems appears to be random. This happens even though these systems are deterministic, meaning that their future dynamics are fully defined by their initial conditions, with no random elements involved. This behavior is known as deterministic chaos, or simply chaos. Chaotic behavior is also observed in natural systems, such as the weather.

Why in the world would I send a pretty esoteric definition of Chaos Theory to you in my financial Tip of the Week? The reason isn't as chaotic as you might think.

The world we've been living in the past five months seems pretty chaotic. There seems to be no rhyme or reason to the things happening in the economy or the financial market reactions we've been seeing in this very difficult period.

While I am no expert in the area of Chaos Theory, I believe one of the premises is that it implies that within the randomness of chaos there is some type of order. As that randomness becomes clearer we begin to see patterns. With the arrival of patterns, we'll begin to see answers and resolutions.

How does this relate to today's economic and financial situation?

The financial crisis and recession have seemed and continue to be pretty chaotic both in feeling and in reality.

As time has gone on, we've begun to see patterns to the problems; in other words, we've found patterns within the credit crisis and stock markets. There is also a better sense of what is happening within the recession.

As a result of the identification of the patterns or problems within the economy and financial markets, solutions are being identified. Eventually, the policies (or solutions), both fiscal and monetary, will take hold and the crisis should end. Life goes back to normal.

I believe we are in the middle of this whole process. We've found patterns within the chaos and are working solutions. Being patient is the key to success here. Keep in mind it's still only been five months since things really changed. If you're a long term investor, patience should lead you back to the success.

Apprvd.BBDP

There has been a massive amount of money and stimulus thrown into the financial system and economy.

Here are some of the actions taken by the Federal government to help resolve the financial crisis:

• Lower Interest Rates
  
  
• The Fed's Shadow Banking System
  
  
• Buying of Mortgages - more to come
  
  
• Buying of Consumer Debts
  
  
• Recapitalizing the Banks
  
  
• Federal Fiscal Stimulus - Likely to be signed into law this weekend.

We are talking about trillions of dollars. This all takes time to fully get into the economy. They say it takes as much as 13 months for each of those actions to have an effect.

The bulk of these actions, and others, weren't actually taken until after September 15, 2008. That's the day Lehman Brothers went out of business. We're almost five months into the heart of the financial crisis. I believe in the coming months, we'll begin to see some of the benefits of all the huge and aggressive actions taken.

It will take time. But time is indeed passing. Be patient and try to take advantage of these tough times by investing low for results in the years ahead.

Apprvd.BBDP

The past year or so has been difficult on everyone.

Here are some questions you may want to ask me:

What to do in 2009?

If we haven't reviewed your accounts in awhile, let's meet.

Apprvd.BBDP

If you've purchased your home, or even done a major remodel in the past few years, you may be eligible for a reduction in your property taxes.

Many people may find that their home has a lower value than what is shown on their annual property tax assessments. If that's the case, you may want to submit an application with your county assessor's office, asking for a reduction in your property taxes.

Each county assessor's office has a form that they will provide to you, which begins the process of potentially reducing your property taxes. The form will ask you to provide information and a compelling argument as to why your taxes should be lowered.

The easiest way to make your case is to ask a real estate professional to provide you with comps (comparable sales) showing where other properties like yours have sold for less money than what's shown on your current assessed value. They'll also ask you to provide a supporting statement to go along with the comps.

Each county assessor's office has a process and a schedule that you'll need to follow. If you're successful, the reduction would apply to your next property tax year, which begins with your December payment; at least, that's the beginning of the next real estate tax year, here in San Luis Obispo.)

Generally, you'll find that the process isn't too difficult and the results may be very helpful in this difficult environment.

Once the real estate markets have begun to heal, you'll find that your taxes should begin to increase again; you should ask your county assessor's office how that process would work, as well.

Apprvd.BBDP

One of the last acts that President George W. Bush signed into law was the Worker, Retiree and Employer Recovery Act of 2008, which was signed into law on December 29, 2008.

One of the great things the Worker, Retiree and Employer Recovery Act of 2008 offers is the ability for anyone who is over the age of 70-½ to skip their required minimum distribution (RMD) for this year (2009). This is a one-year suspension only and is in response to the drop in the financial markets that we've seen over the past few months.

The hope is that the suspension of these distributions for one year will allow people's portfolio(s) to recover before they are required to liquidate some of their assets. If you choose to waive your 2009 RMD, you will not be penalized in doing so. In any other year, the penalty for under withdrawing from your retirement account, if you are over 70-½ years old, is one-half (50%) of the amount you under withdrew.

If you are over 70-½ years old and want to continue to take your RMD or choose to distribute money from your retirement account, you are still free to do so without penalty; of course, you will have to pay ordinary income taxes, as you would in any other year.

There are a few exceptions to this provision, so be sure to discuss them with me or your tax preparer.

The Worker, Retiree and Employer Recovery Act of 2008 is a rare exception to an existing law, where the government is trying to help people manage this tough economic environment.

If you decide to skip your 2009 RMD, please give me or my team a call so we can help you facilitate this.

Apprvd.BBDP

Part I

In last week's tip, I wrote about what I thought we might see in 2009.

The first thing I wrote about was that we'd continue to see bad news coming from the economy; therefore, it came as no surprise to me that we saw bad news about retail sales for the end of 2008. I don't think anyone would have told you that the holiday season we just concluded was a good one. Retail sales were bad, so the market responded to the news with a negative day; that comes with the territory of bad news in the beginning of a new year.

I really don't expect the economic news to be very good for a while; the stock market expects the same. At this point, a surprise would likely be to the positive side of the news; therefore, I 'm not sure we'll see bad economic news always being accompanied by a tough day on Wall Street or other markets around the world. In fact, when the markets turn, don't be surprised if there is bad news in the air, yet the stock market is beginning to rise.

The past fifteen-months have not been fun by any means; they will end, though. In my mind, it's not a matter of "if," it's a matter of "when". Life will go on. People will buy products and pay for services. When the market turns, you want to be invested because it's not uncommon for the market turn to be strong. History shows that a fair part of a financial market recovery can occur in a relatively short period of time. (We don't know if that will happen this time, but it has occurred in many market recoveries during the past.)

As I've always said, when the market is tough, if you can invest, buy low; if you can't invest, let your dividends reinvest in lower price shares. I do not believe that selling low or timing the market is easy to do. Stay the course. When you can, buy low.

Part II

I'm attaching a link to the interview I did last week with Michael Johnston, Executive Vice President and Senior Partner of the American Funds Group. Michael has been an annual guest on my radio show for fifteen years and has been in the securities business for over 40 years. I highly value his thoughts about the economy and financial markets. I suggest you take the time to listen to our 2008 annual year-end review and 2009 prospects. He provides a terrific perspective on the current situation we're all going through.

- Click Here To Listen (help)

Apprvd.BBDP

When I look back at 2008, I'll think of it as the year that the credit markets froze, resulting in violent volatility in the stock markets worldwide and a very difficult economy.

I think we could see the following in 2009. (Clearly, I do not know what will happen, nor do I have a way to guarantee that my thinking will come to fruition.)

1. In the beginning of the year, the economy will look terrible as the numbers come out for the fourth quarter of 2008.

2. These terrible numbers likely could continue through the first quarter; I think it's possible that they could continue through the second quarter of 2009.

3. We may see a rise in the financial markets, with the arrival of Barack Obama and a new optimism among Americans and people around the world awaiting the change in administration.

4. The huge stimulus package the Federal government is expected to enact within a month or so begins to take effect as the year progresses; this engenders more confidence in consumers and businesses, alike.

5. The financial stimulus already put in place by the Federal Reserve Bank and Treasury Department continues to work its way into the economy, slowly having a positive impact.

6. The Federal Reserve Bank continues its creative approaches to stimulate the economy and credit markets.

7. The economy could begin to settle down sometime during the third or fourth quarter of 2009.

8. Unemployment continues to look bad all year; remember, unemployment is a lagging indicator that can still rise as the economy and financial markets improve. (I wrote a weekly tip about this on November 12, 2008; it's on my website's archives.)

9. The stock markets begin to rise again, based on future economic improvement, sometime in the second or third quarter of 2009. (They tend to be a forward-looking indicator of the direction of the economy.) It's not uncommon to see the financial markets begin to rebound four- to eight-months ahead of the economy itself.

10. The credit markets continue to slowly normalize throughout 2009.

11. The residential real estate markets find a bottom sometime mid-year; some areas of the real estate markets are already showing signs of improvement, as we begin the year.

12. Huge numbers of healthy homeowners refinance their home at rates below 5%. (Be ready to act.)

13. Economists begin to talk about the threats of inflation, sometime near the end of 2009.

14. The financial markets end the year higher than they were on December 31, 2008, with US markets leading the way out.

15. Money in money-market funds, Treasury notes and bills, and bank deposits begin to find their way back into riskier investments, as the year progresses. The reason for this is that investors realize they can't meet long-term needs with a zero-interest rate.

2009 should be a very interesting year. This is a good year to stay in touch and to be prepared to act on things like buying low and refinancing your home. It's also a good year to truly evaluate all aspects of your life financially, as there could be lifetime opportunities presented that you may want to try to take advantage of.

While we won't know if my thoughts, written today, will come true as the year progresses, I do think these are some of the primary issues to watch.

Here's to a progressively more successful and optimistic 2009! Please call or write if you have any questions or would like to meet.

Apprvd.BBDP