What a difference in your portfolio statement values from last March 2009 to this March quarter end. On March 31, 2009, the Dow closed at 7608.92 and the S&P closed at 797.83. On March 31st of this year, the Dow closed at 10,857 and the S&P 500 closed at 1169.43. The S&P 500 gained 46% over that rolling one year. The markets seem to have moved up in a linear line from that point.

Real Estate Still Worries Me

Real estate prices showed improvement, but some areas are again showing a decline in values. This seems to occur on a city by city basis. I met with many new financial planning clients that cannot make their mortgage payments, and have tried and tried to work something out with their bank or lender. They either had no response or the process goes on for months with no help from the banks. The banks will not talk to the borrower until they are in default. I know people are living in their homes without paying a mortgage payment for up to 16 months and the bank has not written them a letter, nor made a phone call or sent a foreclosure letter.  If the banks acknowledge the house as a foreclosure or a short sale, it will appear on the liability half of their balance sheet. If they do nothing, the bad loan does not appear and the lender appears to have more good assets or capital on the balance sheet. Banks are required to keep a certain ratio of capital to liabilities. Is this creative accounting for the banks or are they simply so swamped with upside down mortgage holders and properties they do not want. They are not in the business of selling properties. Maybe Bank of America should buy Century 21 to deal with all the foreclosures and short sales. That could be a better purchase than Merrill Lynch.  

New Health Care Bill

A client emailed to ask me what I thought of the health care bill. I have close friends who have been unable to obtain health insurance due to pre-existing conditions so I am very happy for them. My response to any proposed legislation is how it will affect my clients and their investments. For those taxpayers making over $200,000 as an individual or a couple making more than $250,000, a new Medicare tax of 0.9% will be added so the percentage paid to Medicare will be 2.35% of their wages. I do not have a problem with this and actually wrote about this more than a year ago. This begins in 2013.

The next part of the Medicare tax is a new 3.8% tax on investment income. Investment income is capital gains, dividends, interest, royalties, rental income and are all known as “unearned income”. This also begins in 2013 and this impacts my clients. This may mean a restructuring of portfolios for those clients that will be impacted by this new tax. With the capital gains tax already slated to increase to 20%, from the current 15%, all of these new taxes will impact the cash flow and investment returns of my clients. 

"Keep your dreams alive.

Understand to achieve anything requires faith and belief in yourself, vision, hard work, determination, and dedication. Remember all things are possible for those who believe."                 Gail Devers

My big fitness goal this year is a Half Ironman Triathlon. I put it in caps because it is a goal that I have wanted to accomplish for years. The Barb’s Half Ironman Triathlon is 70.3 miles of self propulsion in one day. It begins with a 1.2 mile swim in a river, followed by 56 miles on the bike through rolling vineyard hills and ends with a 13.1 mile run. The run portion will be a jog/walk for me.  This will be in Santa Rosa on July 31st.   I have already begun to walk or bike to and from work at least one time a week.

Sandy

Notes from Carol:

Ways to Improve Your Credit Score

Your credit score is a very important number that lenders use in order to determine whether or not to extend credit to you, and what the interest rate and terms are.  Your credit score can be broken down into five categories:

Payment History – 35%

Total Amounts Owed – 30%

Length of Credit History – 15%

New Credit – 10%

Type of Credit in Use – 10%

 

The single most important thing that you can do to improve your credit score is to make your payments on-time.  If a lender reports late payments then that negative mark can stay on your report for seven years.  The next thing you need to do is to keep your borrowing under control and to utilize your credit better.  For example, having credit cards that are maxed out or very close to their limits will negatively impact your score.  Two credit cards with a $5,000 limit and a $1,000 balance on each will look much better than a single card with a $2,500 limit and a $2,000 balance.  Many credit cards are lowering credit limits.  If you have a good credit history then I would recommend that you challenge them if they lower your limits.  Closing old accounts is ok if your credit score dings you for too many accounts, otherwise keep the accounts open.

 

 Tax Season IRA Contribution Deadlines

Tax season is almost over!  Please send all of your IRA and SEP IRA contributions by April 9th to have them posted to your accounts.  They need to be at the custodian (TD or Schwab) before the deadline.

 

Spring is here - Enjoy the extra daylight!

 

Carol