Archive for May, 2009

The WSJ reports on the administration’s desire to write legislation to curb the conflict of interest that exists in the financial services industry: US Eyes Bank Pay Overhaul

Alberty Financial Planning Services was started with and maintains the core belief to take the product out of the plan (and the conflict of interest). We do not sell products nor do we benefit from the sale of products. Our advice is untainted by commissions and our fees are straightforward, transparent and posted in writing on our website.

Trust Alberty Financial for objective financial planning advice when you need it the most.

Barrons – Investor Sentiment Readings

When I sent out the email on March 9 entitled Negative Sentiment Signaling Market Bottom I was EXTREMELY fortunate in that the market lows (so far) actually occurred on March 9. I received several emails congratulating me on calling the bottom. Let me be really clear- I didn’t call a bottom, only observed that with negative sentiment at the highest levels in history, it may be safe to “get back into the water.” At that time over 70% over the respondents to the AAII survey said they were Bearish, 18% proclaimed themselves Bullish, and the balance-12%- were too dazed and confused to determine what they were, so they called themselves Neutral.

Click on the link above to see the recent Sentiment Readings. I have a tendency to focus more on the AAII Survey because I like their methodology. I find it fascinating that some 2 months and 2000 points on the Dow ago, 82% of the respondents were Bearish or Neutral. Today, more respondents are Bullish than Bearish (44% vs. 33%), with 56% now in the Bearish/Neutral camp. Previously, the Bearish/Neutral camp was almost 5 times larger than the Bullish- 82% vs. 18%. It’s now down to 1.27 times. With a market that’s up 31% and almost 2000 points!

So, what does that tell me? The only thing it tells me is that investors feel really lousy at market bottoms- at precisely the wrong time- and start feeling better as the market goes up- at precisely the wrong time again. My wife and I actually went out to dinner last week for the first time in MONTHS because I had just opened my statements and did not get nauseous.
Emotion is the enemy of the successful investor.

Forrest Simmons | Senior Director

In my last column, we discussed two strategies everyone should implement in an effort to be prepared for unexpected medical bills: funding an emergency savings account and a flexible spending account (FSA). These strategies should provide a sturdy foundation for defraying the costs of unexpected medical bills.

It may also be wise to consider a catastrophic policy or a high deductible health plan (HDHP). These policies typically offer reasonable premiums and a large lifetime cap on benefit payments from $1 – $5 million, but require a high deductible often ranging from $2,000 – $5,000.

If you participate in a high deductible health plan, you are also eligible to open a health savings account (HSA). Similar to the FSA, an HSA has tax favorable treatment with the added benefit that you don’t lose it at the end of the year if you haven’t used it. HSA funds can accumulate and grow, and are used to pay eligible medical expenses.

Health care is expensive and certain medical conditions can easily deplete your emergency and health care savings accounts. Unfortunately, you may find yourself needing to spend retirement savings or accessing your home equity. There are some strategies that can help you minimize your tax liability and penalties associated with a premature distribution.

If you have a ROTH IRA, distributions of principal can be made penalty and tax free. The liquidation of growth and income from a Roth IRA or a premature distribution from a Traditional IRA, will incur income taxes and a 10% penalty. However, the amount penalized can be offset by the amount of your medical expenses, which is a little known fact that is a small bright light in an otherwise bad situation.

Another alternative is to access your equity through a line of credit. This type of credit works similar to a credit card but often comes at a lower rate with the added benefit of tax favorable treatment of the interest.

Liquidating your retirement accounts and accessing your equity are not ideal strategies for unplanned medical expenses, but are a favorable alternative to high interest credit cards. More importantly, any or all of these strategies are certainly favorable to not taking advantage of medical treatments that may improve or prolong the quality of life.

Timing the Muni Market

April 2009, Bloomberg Markets

This brief blurb appeared in the AP yesterday. Gee, maybe this means we can return the TARP money that we didn’t want to “accept” anyway.

WASHINGTON (AP) – Leaked results of the government’s stress tests of 19 large banks are boosting investor confidence in the financial sector. American Express Co. (AXP) (AXP), JPMorgan Chase & Co. (JPM) and Bank of New York Mellon Corp. (BK) will not be asked to raise more capital when federal officials announce the test results Thursday afternoon, but Regions Financial Corp. (RF) will need to bolster its reserves, according to people briefed on the results. The people requested anonymity because they were not authorized to discuss the results.

Forrest Simmons | Senior Director
BNY Mellon