Sunday, August 26, 2007

The week in review

  • The DJIA shot up 299.79 points, 2.29% to close Friday at 13,378.87
  • Crude oil fell $0.73, 1.02% to $71.09

Wednesday, August 22, 2007

Financial Planning Question of the Week

Feel like testing your financial planning expertise? Here's a real-life question I had recently...give it a shot.

A client is buying a new vacation home and selling an existing second home. She will need about $200k for the down payment next month and should be able to pay it back in 3-4 months when her existing second home sells. She is in the 35% federal tax bracket, 9.3% state and not subject to AMT. What's the best way to raise the money?

a) A home equity line of credit on her primary residence at 8.25%
b) Liquidate investments and pay capital gain taxes of $8k-10k
c) Take a $200k margin loan at 9.125%
d) Take a swing loan at 7% on the present second home

Take your best shot!

Tuesday, August 21, 2007

Cartoon Tuesday

By Bob Englehart, The Hartford Courant

Thursday, August 16, 2007

Baby I'm amazed

I've been an investment professional for almost thirteen years and I am still amazed at the extent to which the market will overreact to information that shouldn't even be news. This morning's non-news is a great example.
WASHINGTON (AP) -- Construction of new homes fell in July to the lowest level in 10 1/2 years, and analysts said there is no end in sight to the deepening housing slump.

The Commerce Department reported Thursday that construction of new homes and apartments dropped by 6.1 percent in July from the June pace to an annual rate of 1.38 million units.
For years mortgage pimps have been lending gazillions of dollars to people with credit scores of 425. Now that it's come back to bite them in the ass in the form of defaults and foreclosures, these Einsteins have quit lending the un-creditworthy any more money. And we're supposed to be surprised that new home starts are falling?

It's even more amazinging that it actually did suprise a lot of folks as the Dow slid 340 points (intraday) on the news. What will tomorrow bring?

Saturday, August 11, 2007

Sell! Sell now!

It's definitely time to sell. No, not your stocks. Invest for the long haul.

It's time for Matt Murphy, the young New Yorker who caught Barry Bonds record-setting home run ball, to unload the thing.

While most sports memorabilia appreciates with age, we don't see any upside to hanging onto this used Spalding, only downside. Barry's image will likely become even more tarnished as the steroids scandal continues to unfold. Then there could be surprises that come out of left field. Perhaps it's revealed that Bonds has been spending the off season at Michael Vicks's little dog park. Or maybe he's been betting on basketball games with Tim Donaghy. Any revelations like those would devastate the value of the ball and Murphy's tax liability has already been sealed.

The ball is considered by the IRS as a "treasure trove" and will be taxed as ordinary income based on its value when acquired. Most estimates put the ball's value around $500,000 which throws Mr. Murphy into the top tax bracket. Tack on another 7% or so for the state of New York and the total tax bill is around $210,000. That leaves about $290,000; not a bad day's work, but I certainly wouldn't risk the ball's value falling below that tax liability by holding it too long. That's worse than striking out in the bottom of the ninth, bases loaded.

Tuesday, May 08, 2007

Cartoon Tuesday--One-sheet Sheryl

By Gary McCoy, The Suburban Journals

Tuesday, April 17, 2007

Cartoon Tuesday

By Mike Lester, Rome News-Tribune, Rome, GA

Tuesday, April 10, 2007

Cartoon Tuesday

By Larry Wright, The Detroit News

Saturday, April 07, 2007

The week in review

  • DJIA shot up 205.85 points, 1.67% and closed the week at 12,560.20.
  • S & P 500 also rose, adding 22.90 points, 1.61% to 1443.76.
  • Crude oil dropped $1.49, 2.4% to $64.28.

Tuesday, March 27, 2007

Cartoon Tuesday

By M.e. Cohen, New Jersey, Freelance

Saturday, March 24, 2007

Great season, Jayhawks!

The week in review

  • DJIA had its best week in years gaining 370.60, 3.06% to finish out the week at 12,481.01.
  • Crude spent much of the week back above $60 rising $2.70 since last Friday, 4.53% to $62.28/bbl.
Stocks had their best showing in years this week after the Fed announced (to no one's surprise) that it was leaving rates untouched. In addition they indicated that their next move would likely be to ease rates, reversing the direction of the last couple of years.

Tuesday, March 20, 2007

Cartoon Tuesday

By Henry Payne, The Detroit News

Sunday, March 18, 2007

The week in review

  • DJIA had another rocky week, falling 165.91, 1.35% to 12,110.41.
  • S & P 500 lost 15.90 points, 1.13% to 1386.95.
  • Crude oil fell back below $60, losing $2.94/bbl last week, 4.90% to $57.11.

Tuesday, March 13, 2007

Cartoon Tuesday

By R.J. Matson, The New York Observer and Roll Call

Sunday, March 11, 2007

Capitalist of the week: Ernest Gallo

"I simply judge a wine by pouring a glass and drinking it. If I feel like another glass and have a desire for it, to me it's a good wine.
Ernest Gallo, who founded the Gallo wine empire with his brother Julio, died Tuesday at the age of 97. Julio died in an auto accident in 1993.

Ernest Gallo was born on March 18, 1909, to Giuseppe Gallo, known as Joseph, and Assunta Bianco Gallo, who was called Susie, in Jackson, California. In the 1920s the couple bought a farm near Modesto and began to grow grapes. But with Prohibition and then the Great Depression the couple became saddled with an unproductive farm and heavy debt. On the morning of June 21, 1933, in the kitchen of the farmhouse, Joseph Gallo shot and killed his wife and then himself, leaving three sons, Ernest, Julio, and their younger brother, Joseph, then 12.

With a little money left by their dead parents and a loan from Ernest's mother-in-law they rented a shed in Modesto. They knew nothing about making wine and, as legend tells it, had nothing more than a pamphlet from the Modesto Public Library to explain the trade. The Gallo Winery began with just $5,900 in capital.

Business was good for the brothers but it really took off in 1957 with the introduction of Thunderbird. Gallo has been criticized for exploiting the ethnic "misery market" with this citrus-flavored, fortified wine but it's reported that the brothers sold 32 million gallons of Thunderbird in it's first year.

The Gallos, realizing they could not sustain their winery on cheap products, moved up-market and began to produce better wines. Business flourished.

From the New York Times:

And the company, entirely family controlled, was indeed large. Industry analysts estimate that Gallo produces some 80 million cases of wine a year, which is about 220,000 cases or 2.64 million bottles every day. The company reportedly owns 10,000 acres of vineyards in California and buys grapes from hundreds of independent growers.

According to Forbes magazine, Gallo had sales of about $980 million in 2005 with a net profit of $44 million. In 2006, according to Forbes, Ernest Gallo was No. 283 on its list of the 400 richest Americans, with an estimated net worth of $1.2 billion.

The week in review

  • DJIA regained 162.22 points this week, up 1.34% to 12,276.32.
  • Nasdaq Composite also made up some of the previous week's losses, up 19.55 points, 0.83% to 2387.55.
  • S & P 500 gained 15.68 points, 1.13% to 1402.85.
  • Crude oil slipped back$1.59, 2.58% to $60.05.

Wednesday, March 07, 2007

Stop saving for retirement!

In a completely irresponsible MarketWatch column yesterday, Paul B. Farrell makes the assertion that Americans are being duped by Wall Street into saving too much for retirement.
Warning, you're being hypnotized: Wall Street insiders, bankers, brokers, advisers and their buddies want you to pile up assets. Why? Not for your own good, but because the more securities you own, the more money they make in fees! Get it?
Farrell seems to think that your pension, Social Security and perhaps a part-time job are all you'll need in retirement.
Focus on income: Pensions, Social Security, IRAs, and a new career, business or some part-time work. And remember, savvy families also quietly build wealth in home equity. Pay off the mortgage, live debt-free. Downsize. Maybe cut costs moving to a cheaper region. Go for a reverse mortgage. Be creative. Add up these pieces of income and you'll see how to reach whatever you need to live comfortably in retirement.
That's all just fine Paul, as long as you neglect the fact that the defined benefit plan has gone the way of the ten-cent cup of coffee and anyone who has read a newspaper in the last decade has serious questions about Social Security's sustainability. Besides, being a greeter at Wal-Mart is not part of my retirement plan.

Who wants to take their chances on Farrell's advice? Anyone?

Note: Mr. Farrell (Dr. Farrell, actually) has a law degree and a PhD in psychology--proof that a good education doesn't necessarily make you smart.

Saturday, March 03, 2007

The week in review

  • DJIA shed 533.38 points, 4.22% and finished Friday at 12,114.10. Just a little painful.
  • S & P 500 dropped 64.12, 4.41% and stands at 1387.17.
  • Crude oil was up half a buck, .82% to $61.64.
Normal markets correct from time to time. A correction is usually defined as a decline of over 10%. This market is down less than ten percent so it has a long way to go for this little downturn to even be considered a correction. Yes, it was the worst week in over four years but ignore the media who want you to believe the sky is falling and stick to your investment plan.

Thursday, March 01, 2007

Too little too late, Alan

Two days after sending the U.S. stock market into a spiraling nosedive, today Alan Greenspan softened his remarks about a pending recession.
By the end of the year, there is the possibility, but not the probability of the U.S. moving into recession.
Gee thanks, Al. Why didn't you say that on Monday?

Tuesday, February 27, 2007

Cartoon Tuesday

By Bob Englehart, The Hartfor Courant

Saturday, February 24, 2007

The week in review

  • DJIA fell 120.09 this week, 0.94% to close Friday at 12,647.48. Not a very good week for blue chips.
  • S & P 500 dropped 4.35 points, 0.30% to close at 1451.19.
  • Crude oil rose $1.75/bbl, 2.95% to $61.14.

Tuesday, February 20, 2007

Cartoon Tuesday

By Bob Englehart, The Hartford Courant

Sunday, February 18, 2007

Estate planning lessons from Anna Nicole Smith

The financial and legal wranglings of Anna Nicole Smith are lengthy and legendary and will likely continue for years after her death.

In the mid-nineties she battled it out in courts for a claim to her late octogenarian husband's estate as well as filing for bankruptcy to avoid paying an $850,000 judgment against her for sexually assaulting her son's nanny.

Now, courts will have to decide who will receive Anna Nicole's estate. In 2001 her attorney, Howard K. Stern, drafted a will leaving her entire estate to her son Daniel. No provisions were made for future offspring and she didn't update her will after Daniel died and Danielynn was born five months ago. Since the only heir named in her will is deceased, the document is invalid and a probate court will likely award the estate to the infant Danielynn and appoint a guardian and conservator. Whoever that is will have access to millions. The legal maneuvering will be as bizarre after death as they were during her life.

There are a couple of important lessons here from an estate planning angle.

First, have a competent attorney help you draft your documents. Yes, Stern is a law school graduate and a member of the California bar but he had no experience with probate. No competent law professional would draft a will without provisions for children or grandchildren yet to be born. It should have had contingencies in the event that Daniel predeceased Anna Nicole.

Secondly, update your estate documents regularly and after significant changes, i.e., births and deaths. Not that Anna Nicole should have gone directly from the cemetery to an attorney's office, but this could have been greatly simplified if she had updated her will soon after Daniel died and Danielynn was born.

This is going to be interesting to watch.

Tuesday, February 13, 2007

Cartoon Tuesday

By Jeff Stahler, The Columbus Dispatch

Sunday, February 11, 2007

The week in review

  • DJIA lost 72.66 points this week, 0.57%% to 12,58083.
  • Nasdaq Composite dropped 16.06, 0.65%% to 2459.82 pulled down by the semiconductor slump.
  • S and P 500 dropped 10.33 points, 0.71% and closed Friday at 1438.06.
  • Crude oil was just barely under $60 on Friday after gaining $.87 for the week, 1.47% and stood at $59.89.

Monday, January 29, 2007

Cartoon Tuesday

By R.J. Matson, The New York Observer and Roll Call

Sunday, January 28, 2007

The week in review

  • DJIA lost 78.51 points this week, 0.62%% to 12,487.02.
  • S and P 500 was also in the red, it shed 8.32 points, 0.58% and closed Friday at 1422.18.
  • Crude oil regained a little of the ground it has lost in the last several weeks and was up $2.02, 3.78% to $55.42.
Every year market soothsayers fill January headlines with prognostications of every sort. Fortunately for them, no one keeps score since they are so rarely right.

But a common theme in many of this year's forecasts is more volatility for 2007 than last year and, while its still very early, those predictions so far ring true.

This week the Dow surged to its 26th record close in four months on Wednesday and abruptly turned around to dump 119 points the next day. It lost another 15.54 points Friday leaving the index little changed for the year.

What's the cause of this temperamental behavior? Simply, profits and interest rates, same as always. And while interest rates are still historically low and profits historically high, there is not as much confidence they will stay that way as there was last year. There's no clear indication which direction the Fed will move next and the momentum of corporate earnings has slowed. Throw in the housing market wild card and you have the perfect mix for a completely unpredictable market. Be prepared for more turbulence.

Tuesday, January 16, 2007

Cartoon Tuesday

Mike Lester, Rome News-Tribune, Rome, GA

Sunday, January 14, 2007

The week in review

  • DJIA gained 158.07 points this week, 1.27% to 12,556.08.
  • S and P 500 rose 1.49%, 21.02 points and closed Friday at 1430.73.
  • Crude oil got slammed another $3.32/bbl, 5.90% to $52.99. (Gas stations are a little slower to change their prices on the way down, aren't they?)
The big gainers this week included Apple (AAPL) amid all the buzz over its new products, Exxon Mobil (XOM) and Google (GOOG) which surpassed the $500 mark.

Saturday, January 06, 2007

The week in review

  • DJIA sank 65.14 points this week (-82.68 on Friday), 0.52% to 12,398.01.
  • Nasdaq Composite was a different story, up 18.96, 0.78% and closed Friday at 2434.25.
  • Crude oil dropped a whopping $4.74, 7.76% to $56.31.
The first week of the new year got off to a pretty rocky start as the broad market lost ground after a robust jobs report on Friday.

This is the part of economics that really has casual stock market observers scratching their heads--167,000 new jobs were created in December and that caused the Dow to drop 83 points? Huh? Why is such great news bad for stocks?

Remember the old rhyme, when rates are low, stocks will grow? Well, job creation that is too rapid is indicative of an economy that is growing too fast and that inflationary risks are present. To curb those risks the Fed raises interest rates. When rates are high, stocks will die.

At least the market has found something to obsess about besides oil.

Tuesday, January 02, 2007

Cartoon Tuesday

By Gary Varvel, The Indianapolis Star-News