In February, I attended the annual TD Waterhouse conference where I had the opportunity to see Caspar Weinberger speak. He is 86 years young.

Caspar served as Secretary of Defense from 1980 to l987. He gave a wonderful, insightful view of the first war with Saddam Hussein and his view on why war was needed at this time. He saw the �removal of uncertainty� as being of paramount importance. �The one thing business cannot do�, he said, �is deal with uncertainties.� Removing uncertainty meant removing the present Iraqi regime, and that, he believed, would have a �salutary effect� upon business, the nation, and its economy. It was six weeks later when the first bombs began to fall on Baghdad.

No matter what the reason for this war, one thing is certain. I stand in support of our troops. I support each and every person involved with the effort on our behalf, their families and friends, and offer prayers for the safe return of our troops.

My opinion is that once we have victory in Iraq, the market will react positively. When our troops secured targets early in the march to Baghdad, the market rallied. As we secured the Baghdad airport and a palace, the market rallied. We still have unemployment and the economy to worry about, but the greatest fear has been the loss of our troops. Lives cannot be replaced. Victory in Iraq will undoubtedly trigger a rebound in confidence that could well translate into a snapback in spending. I remain cautiously optimistic.

�Even if you�re on the right track, you�ll get run over if you just sit there. � Will Rogers
Lifetime Savings Accounts (LSAs).
President Bush�s 2004 budget has several interesting proposals.
Each year, each person could contribute $7,500 to these accounts, which could be used for any purpose you like. There would be no age or income requirements, and no restrictions on when money could be withdrawn. This is not a retirement vehicle. You can put the money in and take it out without limits or penalties. How could this benefit you? Think of putting your taxable savings, such as your emergency money fund or CD�s, in this account. The earnings would now be tax deferred and be taken out tax- free.
Various kinds of tax-advantaged accounts could be converted into an LSA. These include medical savings accounts (MSAs), Coverdell education savings accounts, 529 plans, and qualified state tuition plans. Those who chose not to convert could continue to put money into the older savings vehicles.
Retirement Savings Accounts (RSAs).
Similar to an LSA, an RSA would cap non-deductible annual contributions at $7,500 per person ($15,000 for a married couple) and permit tax-free earnings and distributions. This would be intended as a retirement vehicle, and would have penalties for withdrawals made before age 58. Think of this as a Roth IRA with a higher contribution ceiling and no income-based limits on eligibility. Indeed, existing Roth IRAs would simply become RSAs. You could also make a taxable conversion of a traditional IRA to an RSA; you wouldn�t have to convert, but you couldn�t make additional contributions to IRAs. And you could contribute to both an LSA and an RSA, with a total annual ceiling of $15,000 ($30,000 for you and your spouse).

Proposal of tax-free treatment of dividends

This issue will get a lot of debate. The current proposal is for the dividends to be 100% tax-free. I do not believe this will be the final outcome, but some tax relief would be welcomed. This is intended to eliminate the double taxation of dividends at the corporate level, and then again, at the personal shareholder level.

The proposal will be fought as another benefit for the rich, but in truth, many seniors also rely on dividends. I hope that some percentage of the dividend will become tax-free.

�Yield is back in style. History tells us that a large component of the stock market�s total return comes from dividends, but it�s usually only in bear markets that anybody cares.� Haywood Kelly

The proposals are great in the form presented but I worry over the future government tax burden if these accounts allow tax deferral on growth and tax-free income. This current war with Iraq is very costly, will continue to be, and our government will need revenue to replace the income tax it forgoes. As more companies eliminate the match to their 401k plans, the burden of retirement falls directly upon the shoulders of the individual. These additional vehicles to create increased saving are beneficial in allowing individuals to put more away for retirement, and are welcomed.

AAII

On March 22, I gave a two-hour speech for the American Association of Individual Investors at the senior center in Corona de Mar. My topic was �Survival Guide-2003 Investment Changes�. I arrived early and was able to wander the rows of the community garden, admiring the patches of vegetables and flowers. I find many investors keeping their portfolios like the garden. Some have tidy rows of growth, with signs posted as to what is planted. Others have weeds, scattered plants and have lost focus on the overall plan. We will keep your garden focused and growing according to plan.

Success is not measured by what you accomplish. The opposition you encounter, and the courage with which you maintain your struggle against the odds is how it is measured.

If your risk tolerance has changed; or if there are material changes to your life, intended time frame or purpose of the portfolio, please schedule an appointment with me. I like to stay involved with your life, goals and objectives so I can see the big picture for each client. Each portfolio is designed and adjusted based upon individual parameters.


Sandra C. Field, CSA, MBA, CFP