API 3rd Quarter Update 2010

I have so much news to share this quarter.  Last quarter was the first time that I did not write comments in my quarterly newsletter. I was in France and stayed in a wonderful house in the countryside.   Of course, while I was in France, I had to continue to train with biking, walking and swimming for my big triathlon on July 31, 2010.   That was the day I finished my Half Ironman Triathlon. 1.2 miles swimming, 56 miles of hills on the bike and a very hot and hilly 13.1 mile run at the end. We call it 70.3 since I covered 70.3 miles by self propulsion. 

The race began in Guerneville (Sonoma) and finished in Windsor. We biked past beautiful wineries and miles of vineyards.  It was the hardest thing I have ever done in my life and I finished in just under nine hours. It was so hot and hilly, in the main heat of the day, I was so happy to see the finish line!  

Market News

The markets recovered from the June end lows and have provided good gains, year to date. My expected rate of return, good and bad years averaged, is 7% per year.  We are on track to exceed the average this year, barring a market melt-down. I am still concerned over high unemployment, foreclosures and home values, but lenders across the nation are re-working mortgages rather than proceed with foreclosures. I have heard of rewrites at 2% interest rates and the national averages on mortgage rates may soon fall again. It is still a good time to refinance a mortgage with fixed low fees.

Asset Planning hosted a Memorial Golf Tournament for Breast Cancer Month    

On September 25th, we held a golf tournament in the honor and memory of my best friend, Gail Moreno. Gail was a well known breast cancer mentor to newly diagnosed women. BMW honored her with their Drive Across America and she was involved with many other groups as well, and the entire time, she continued to battle cancer herself. She lost her fight after 11 years but she touched the lives of so many people. We had a roster of 52 golfers who had a fun time golfing the 9 hole course at Little Rec in Long Beach.  The food was incredible and catered by Olives Gourmet Grocer in Belmont Shore. Several mutual fund sponsors stepped forward with golf balls and gifts including TD Ameritrade, American Century, Ariel, Payden & Rygel. After all expenses were covered, we raised $3,000 for the Breast Cancer Angels charity. Thank you to so many clients that came out to support this tournament. Next year, it will be all scramble teams so think about putting together a team of friends.  Date will be approximately the same.

Notes from Carol:

It was amazing to see Sandy reach her Ironman goal this summer.  Her dedication is inspiring.  I celebrated my own momentous occasion in September- my 25th wedding anniversary.  Time goes by so fast!

On Saturday, October 23, I will be participating in the Orange County Financial Planning Day.  This is a free event sponsored by the Orange County Financial Planning Association.  It will be held at the Huntington Beach Central Library from 10 am – 3pm.  There will be various educational workshops on credit counseling, social security, medicare, estate planning and more.  There will also be private consultations with a planner and  I will be one of the planners providing advice one-on-one.  There is more information at www.financialplanningdays.orgIt is the first time the FPA is holding this and we expect a big turnout.


API 2nd Quarter Update 2010

Sandy is on vacation, enjoying the beauty of France and the lower Euro.  She left me with the task of writing this quarter’s commentary. 


1st Half of 2010

After 2008's sharp decline and last year's recovery in stock markets, many had hoped that 2010 would see a return to relative normalcy and stability. And certainly, the year started on a positive note, but volatility returned in May and June. Here is a partial rundown of what occurred this past quarter:

v      The intensification of the budget crisis in Greece in February and the fear it would spread to other European countries.

v      Concerns that European budget cuts would slow down economies, with spill-over effects globally; this is especially problematic in light of the need to compete with a devalued Euro

v      The sinking of a BP oil drilling rig that had exploded in the Gulf of Mexico

v      The May 6th "flash crash" in which U.S. markets plummeted in a matter of minutes without explanation

Looking at these events, it's tempting to be negative, but there were positive events that also occurred:

v      While businesses are hesitant to expand their workforce, they continue to make capital investments in equipment and software.  Business spending is leading the slow recovery.

v      Personal incomes rose for 6 out of the last 7 months, and so did personal savings

v      China announced that it will let its currency – the yuan appreciate against the dollar.  Because the yuan is currently undervalued, it unfairly affects our trade deficit.  Currently, the deficit with China is $231 billion.  If this were to be cut in ½, it could create roughly 800,000 jobs (assuming $1 billion in exports creates 7,000 jobs).


Technical Indicators

Sandy and I both subscribe to financial newsletters that concentrate on technical and fundamental indicators.  Also, this past quarter, we both attended different conferences to get an overall perspective of the economy and factors affecting the market. While we did expect a pullback – a bull market cyclical correction, we are still undecided if this will lead to a double dip recession.  This is why we are limiting new purchases in the portfolios to income producing holdings with good dividends and yields.


Let us learn to appreciate there will be times when the trees will be bare, and look forward to the time when we may pick the fruit." Peter Seller

Long-term goals demand long-term thinking
Warren Buffett has said that it only takes two things to make money—having a sound plan and sticking to it—and of those two, it's the sticking to it part that most investors struggle with.

Markets like we've seen of late create understandable stress and can lead to short-term decisions. Hard as it can be at times we've found the only approach to investing that works over time is to keep that long-term view, modifying portfolios as circumstances warrant but never losing sight of the fact that long-term goals demand long-term thinking.

New LA Times Money Makeover (a copy of the article is enclosed)

Sandy and Asset Planning were featured in a Los Angeles Times Money Makeover article on 5/16/2010. This makeover involved helping a young couple, who were quickly spending through a large inheritance, develop a budget and preserve what was left of their windfall.


Financial Reform Bill

There is nothing new to report on the health care reform, but Congress has made progress on the financial-reform overhaul.  It has not been officially voted in as of this writing, but passage seems likely.  It gives regulators a mandate to monitor the biggest financial institutions and clear authority to shut down failing institutions. It promises that the multi-trillion-dollar market in over-the-counter derivatives, will be better regulated through open exchanges. And it gives regulators the authority to impose high capital requirements, forcing banks to hold more equity and thus assume less risk.


One area where I wish Congress had stood firmer was the issue of “fiduciary duty.” The idea here was that a financial adviser or broker would have to act in your best interests—that’s what fiduciary is all about—when making investment recommendations. Right now the standard is simply one of suitability, which stops far short of requiring the broker/adviser to act in your best interests. Unfortunately, the fiduciary rule got kicked down the road in the new bill. All that is going to happen is that the SEC will study the issue. That’s a lost opportunity for Washington to really do something that protects investors.  Asset Planning Inc. is a SEC regulated investment advisor and therefore we already operate under the fiduciary duty.

It’s also frustrating that the SEC lost its ability to oversee the world of Equity Indexed Annuities. The SEC had already issued a rule—not yet enacted—that would have tagged these investments as securities, thus making them regulated by the SEC. But the new legislation undoes all of that, and like all insurance, it falls onto each state to regulate.


Client Education

We are planning to have a client education seminar in the fall.  We welcome any suggestions and input you may have on topics that you would like us to cover.


I will be going on vacation to Yellowstone National Park a few days after Sandy returns.  Last time I was there was about 17 years ago, just after the big fire.  I am excited to see how things have grown back since then.  Have a great summer!


Carol Somoano, CFP, MBA


Look for Asset Planning on Facebook!


API 1st Quarter Update 2010

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.


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!




API 4th Quarter Update 2009

Good Bye 2009

Happy New Year! I am very happy to see the end of 2009 and all of the turmoil the year held.  In January, we saw a new president sworn in with a platform of change. I do not believe anyone was prepared for the global financial melt-down that was underway. The stock market finally recorded a bottom on March 9th, 2009 amidst fear, greed, short selling, liquidations, bankruptcies and panic selling.

This past year was the most difficult time to endure in my twenty six year career of managing investments. It was extremely challenging to have the conviction that the market had reached a bottom and begin buying good stocks and investments again. Headlines in all media continued to proclaim the market could and would continue to fall.  Headlines screamed about gold, housing price declines, Bernie Madoff and other swindlers in Ponzi schemes, oil, mortgage rates, interest rates, clunker programs, bail outs, the falling dollar, foreclosures, real estate short sales and more.  So, goodbye to 2009, and I never want to see a repeat of the frenzy this year brought. Good riddance!

Ordinary riches can be stolen, real riches cannot. In your soul are infinitely precious things that cannot be taken from you.     Oscar Wilde

Hello 2010!

A new decade is here to greet us. I still see a complicated year and road ahead. Our government deficit must be addressed, we will have rising interest rates, along with inflation at some point, our dollar must be supported, gold and oil depend on many geopolitical factors and our unemployment should start to decrease. We can have a jobless recovery and I do expect solid economic growth in 2010. 

Success is getting what you want.  Happiness is wanting what you get.  It's not how much you have; it’s how much you enjoy what you have rather than what you lack.

Los Angeles Times Money Makeover

I had the privilege of doing another makeover for the LA Times in November. This was a very long makeover involving a movie producer/director that was living on credit cards beyond her monthly income. This was one of my most frustrating makeovers once I discovered the amount of insurance and annuities she had been sold, almost all inappropriate for her.


API News

I will close my comments with a happy note. Carol Somoano is now an equity partner and part owner in Asset Planning. Carol has been with us for five years and I am very happy she is a partner. Nothing else will change in terms of clients; this is a corporate change as Carol is now Vice President. I remain President and CEO. Carol P. and Diane remain owners and directors.


Notes from Carol:

Congress ended 2009 with a big tax mess.  The current law has no estate tax in 2010.  Also, the step in cost basis for heirs is reduced in 2010 and this impacts many families.  Under old law (2009), the value of the inherited property on the date of death was considered the “cost” basis for the heir.  So for example, if a parent paid $500,000 for a home, and the value of the home on the date of the parent’s death is $2,000,000, the child’s cost basis was $2,000,000. For 2010, there is a limit of $1.3 million total to the step-up in basis for all the assets combined.  Congress is expected to make retroactive fixes for these problems, but something always seems to come up that takes their attention elsewhere.


Required Minimum Distributions from IRAs and Retirement Accounts are back

This means if you are over 70 ½ you will have to take a mandatory distribution from your accounts in 2010.  We will be calculating the amounts and contacting you in the next 3 months to let you know the amount that must be distributed.  If you want your distribution before then, please contact us.


IRA and 401K:

The maximum 401K, 403B and 457 contribution stays at $16,500 and anyone born in 1960 or earlier can contribute another $5,500, for a total of $22,000.  There is no change for IRA and Roth IRAs.  The limits remain at $5,000 plus $1,000 if you are born in 1960 or earlier.


Roth IRA:

The Roth contribution limit phase out for couples is when AGI (adjusted gross income) is $166,000 to $176,000 and for singles it is $105,000 to $120,000.


Roth IRA Conversion:

You are not allowed to convert from a Traditional IRA to a Roth IRA if your income is over $100,000 but in 2010 (and only 2010) there will be no income limits.  If you convert, you will owe taxes on the entire conversion amount.  The new rule allows you to pay the entire tax due in 2010 or you can elect to pay ½ of it in 2011 and ½ of it in 2012.  Please consult us or your CPA if you are considering this.


Realized Losses and Gains for 2009

I will be mailing out the 2009 realized Capital Gains and Loss reports the last week of January.  This will have the cost basis and net proceeds for any sales.  It will also have the capital gains and dividends paid for the year.  You will need this in addition to the 1099s that you will receive from Schwab or TD Ameritrade to give to your tax preparer.


Wishing you a Happy, Healthy and Prosperous New Year!  Carol Somoano


API 3rd Quarter Update 2009

What a Difference a Year Makes!

The market had a rebound of over 50% in the S&P from the March lows to September. Has everyone jumped back into the market to capture these jaw dropping returns? I would say no. March was the depth of the market decline and fear was palpable. Would the market turn up or continue down brought on by another fear based sell-off? Very few had the conviction and courage to begin investing at that time.  I think most individual investors are still sitting on the sidelines. The inflows into bond funds so far this year prove this to be true.  The majority of inflows into all mutual funds this year went to bond funds.  80% of money flowing into open end mutual funds went this way: 60% to taxable bond funds and another 20% to municipal bond funds.

PIMCO Total Return Bond Fund is the top selling fund of the year and took in $5.5 BILLION in August alone. This one fund now accounts for 13% of the entire taxable bond fund universe to invest in.

I worry over this equity market run up because the volume has been below the normal trading volume. Is a correction still coming? It looks as though most equity investors still believe so and are showing that belief by not reinvesting in the market.  Although some investors have watched the S&P rise and are now concerned they are missing the rally, I think they still have time. It is very hard not to second guess decisions when memories are short. The market was in a complete melt down with financial stocks one year ago at this time. Merrill Lynch, Lehman Bros, AIG were daily headlines. What a difference a year makes!  I am happy to put this past year behind us.

How has the market performed year to date?  The MSCI EAFE (International) index is up 29%; the Dow is up 10.7% and the S&P 500 is up 17%.


Everything can be taken from a man but one thing; the last of the human

 freedoms - to choose one's attitude in any given set of circumstances,

to choose one's own way." Viktor Frankl


My summer racing recap


I did not comment on my racing the last 2 quarters and clients have asked what I have been doing. I did the Redondo Beach Triathlon, Long Beach Triathlon, two mile ocean swim from Balboa Pier to Newport Beach pier, two mile ocean swim from Hermosa Beach Pier to Manhattan Beach Pier, one mile ocean Corona del Mar race and the big swim in Hawaii. On Labor Day, I completed the 2.43 mile swim from Diamond Head, along the Waikiki coast line, and finished at the Hawaiian Rainbow Tower. I swam with many different beautiful fish, giant sea turtles and one six foot ray under me. We swam a half mile off the coast where the water is very deep and crystal clear (unlike our coastline) and you can clearly see the coral and fish you pass over. That was the 7th time I have completed that swim and it is on my life list of goals to complete it 10 times. One more triathlon next week!


"Our lives are not determined by what happens to us but by how we react to what happens, not by what life brings us, but by the attitude we bring to life.  A positive attitude causes a change reaction of positive thoughts, events and outcomes.  It is a catalyst, a spark that creates extraordinary results."  Anonymous 



Asset Planning is proud to announce we were once again included in the 2009 Financial Advisor Top RIA Ranking. This is a list published by Financial Advisor Magazine. We were also blessed to be named one of the Wealth Manager’s “Top Wealth Managers” in the country. This was announced in their 2009 July/August issue. I thank our clients for your continued trust in us to achieve these honors.





Notes from Carol:


This past week I attended a conference presented by WISE – Women Investing In Security and Education, a philanthropic educational organization that facilitates the financial education of women and girls.  The main speaker was Bill Gross – the bond guru for PIMCO and the fund manager for the fund Sandy mentioned above among others.  The main points that I took away were that the US will not recover to the growth it enjoyed in prior years.  The “new normal” will have GDP increasing at 1-2% for the next few years and unemployment will be around 7-8%.  The exception to this will be the emerging markets.  He sees growth in Brazil and China among others.  He sees the California housing market prices dropping another 10% because of the unavailability of jumbo mortgage loans.  The auto and housing industries are broken and will take time to recover. Consumers are starting to heal by saving more and while it hurts the economy in the short term it will benefit all of us in the long run.


Get your flu shots and stay healthy,