API 4th Quarter Update 2008



Happy New Year 2009!     

     USC beats Penn State 38- 24

The Good, the Bad and the Ugly.

The Good: Once again, my Trojans were the highlight of my year. USC has played in the Rose Bowl the past four years.  Fourteen of my cousins are coming from Minnesota next year to see the Rose Parade since they sit at home in mounds of snow and see our beautiful sunny weather. The Trojans have won seven consecutive Pac 10 conference titles and played in seven consecutive BCS bowl game, winning six.

The Bad: The market closed out 2008 with the worst year since 1931, with a loss of 38.5% for the S&P.  The Dow dropped 33.8% and NASDAQ turned negative 40.5% for the year.  It is safe to say that many unprecedented events took place this calendar year that will never happen again.  There were so many panic areas: banks failing, brokerages falling to liquidation points, insurance companies at risk, airlines in bankruptcy, auto makers on the brink of disaster, commodity prices soaring and then crashing. 

The Ugly: New York finds Bernie Madoff living in his penthouse apartment, instead of jail, after he confessed to a 50 billion dollar fraud of investments from charities, foundations, pensions and investors.  It was announced this morning that he mailed over one million dollars worth of jewelry to friends and relatives over the past few days. I do not understand why he is under house arrest instead of jail.

"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

We have been a nation of spenders and we need to become savers instead. I think the economy in recession, rising unemployment and foreclosures is scaring many people to their core. More lay- offs are coming from all sectors.  The housing debacle has shaken the employment in banks, financial and mortgage, home builders, construction, home improvement, and more. It is not over yet. The next wave of the Alt A adjustable rate mortgages are due to reset their interest rates in 2009 to 2011. The move to cut interest rates to almost nothing will put pressure on mortgage rates to stay low in hope that these Alt A mortgages are refinanced, instead of foreclosed on.

Are retirement dreams deferred? Even conservative asset allocation portfolios saw losses of 20 to 30% in a matter of weeks. Panicked selling by hedge funds that were overleveraged brought the market to volatility never seen before. The market moving by over 400 points in the final trading hour of the day became the norm in October and November.

I wish president elect Barack Obama success with his new cabinet appointments and his crisis team. President Obama will take office in less than two weeks in the midst of the worst financial crisis this nation has ever faced.  My daughter will be at the inauguration to witness history in the making.

We look forward to seeing you in our new offices! Sandy

"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

Notes from Carol:

Please check out our blog on this site and sign up for email notices of each new post.  This is our way to keep in communication with you in these hectic economic times.


2009 Tax Changes - Here are some highlights of the changes:


Required Minimum Distributions from IRAs and Retirement Accounts are WAIVED for 2009

This means if you are over 70 ½ you will not have to take a mandatory distribution from your accounts.  You will not have to make this up, the Treasury is letting you skip the distribution.  This waiver also applies to Inherited IRAs.  We will be sending a letter if this applies to you.


IRA and 401K:

Working taxpayers can put more money away for retirement.  The maximum 401K, 403B and 457 contribution increases to $16,500 and anyone born in 1959 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 1959 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.


Estate Tax:

The estate tax exemption is increased to $3,500,000 with the top tax rate at 45%.  The lifetime gift tax exemption is still at $1,000,000 and the annual gift tax exclusion rises to $13,000 per donee.


Realized Losses and Gains for 2008

I will be mailing out the 2008 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 2008

Moving news!
10833 Valley View St  Cypress, CA 90630

It’s official – we’re moving! We signed a new lease and we will be moving our office two miles east on Katella Ave. Our new office will be twice as big as our current location. Construction is beginning on the build out and we hope to move into the new space in mid December. We will be on the fourth floor of the building, on the corner of Valley View and Plaza, behind the El Torito.

“May you live in interesting times”  - ancient Chinese proverb and curse.  It is thought that the phrase comes from a saying which means leaders are made in turbulent times. If that is true, I pray the new leaders will come forward and lead us out of this turmoil.

Our markets are changing at a very rapid pace. In response to that, we are working on a new web site. I will have the ability to post a blog comment on the website and you will be able to read my thoughts as often as I post them. This will give us the ability to communicate to our clients more frequently. We are living through a global liquidity crisis and it is causing a financial meltdown of the markets.  Even with the turbulent headlines, very few of you have called us. Many of you sent emails, expressing support for us and the stress we are under. One client brought us flowers to cheer us! We appreciate the support you have shown and we are doing everything we possibly can to steer a clear course through these waters.  Without a doubt, this is the hardest time I have ever had trying to predict the market. The melt down we had on Black Monday in 1986 was dramatic, but pales, compared to the market of the past few weeks.

An excellent article on the Rescue plan is on the New York Times website called Rescue the Rescue by Thomas Friedman. I think it is correct because the average taxpayer does not understand the magnitude of the liquidity crisis and how it will come to play a part in their lives. The major credit card companies are doubling the minimum monthly payment due from 2% to 4%. I think this is a good thing if some consumers pay off their debts sooner. However, an estimated 40% of cardholders carry a balance from month to month and the low minimums free up cash. Consumers tend to charge the amount that they believe they can afford, via the minimum payment due, not the total amount they can pay.  I feel more consumers will not be able to pay the new minimums and begin to be pay late. The average American with a credit file is responsible for $16,635 in debt. For every four dollars paid to a credit card, one dollar is toward a late fee.  This will hurt all of us in terms of liquidity and decreased consumer spending.

"Hillary Clinton went from top political cougar to mortally wounded kitty in just three short days, courtesy of John McCain's choice of Sarah Palin."   - Jim Woods

An excellent article from The New York Times explaining how we got into the financial crisis:


Recent headlines we have seen in the past month

Dow dives 777 points as the bailout fails to pass; up nearly 500 points the following day
Citigroup buys Wachovia Bank
Lehman Brothers, 158 year old firm, files largest bankruptcy ever
Washington Mutual fails and is bought by JP Morgan
Freddie and Fannie Mae bought by the government
AIG bailed out by purchase of the government for 85 billion
Bear Sterns failed and fell into bankruptcy
Lehman Brothers sells Neuberger Berman
Money market fund, the Reserve, falls below $1 a share
Bank of America buys Merrill Lynch

The market in changing daily; bailouts, bankruptcies, and purchases and sales are taking place on the weekends. My Sunday evening is now spent watching the markets unfold in Asia and Europe. The futures trading give an idea of how the US market will open.

Year to date shows the Dow -18.2%; NASDAQ - 21.5% and the S&P a negative 20.57%.  This past Monday (September 29) in particular, the market reacted fiercely to the current events, the Dow dropped -7%; Nasdaq – 9.1% and the S&P – 8.8%.

We have sold positions on a global basis and moved some cash to government securities. We actually had more clients call us about bank failures and where to move their money than to ask us about the stock market. Know that we are working around the clock to address the situation, evaluate, analyze, and determine an outcome for all stocks and mutual funds. If I feel it is prudent to raise cash levels, we will do so, even if it means selling in a depressed market.

October is Breast Cancer Awareness Month    

One in eight women will be diagnosed with breast cancer. Have a mammogram and encourage those that you love to do the same. Be diligent with exercise and eat healthy in these stressful times. 70% of those diagnosed do not have a family history of the disease. 87% of  women that carry the BRAC gene will develop breast cancer. Please support and donate to the Avon Walk, American Cancer Society and the Susan G. Komen Foundation to find a cure for this disease.

Enjoy the Fall Holidays!  
Sandy Field

Notes from Carol: 

As of this writing, the Senate has passed the bailout package to have the Government act as the lender of last resort and we are awaiting the House vote.  What caused the problems and how and why it happened and who should be punished is going to be argued and debated for a long time.  But right now the problem needs to be addressed.  The banking system is frozen.  And if banks refuse to lend money to you, the people, who make the economy run, then the consequence will most likely be a massive recession.  The United States makes up 4% of the world population, but its stock market capitalization represents more than a third of the world’s wealth.

Congress is taking its cue from you.  I emailed my congresswoman and it took me over half hour to get it through because of everyone that was on the system at the same time.

In regards to our office move, the plan is for our phone number and email addresses to stay the same.  The new website should be up Mid-October.  We will do our best to keep you informed.

Stay healthy and Don’t forget to Vote!
Carol Somoano


API 4th Quarter Update 2005

  I wanted a close game, but not quite that close. My Trojans played in the Rose Bowl on January 5th but did not win to capture the National Championship. Vince Young of Texas is an amazing athlete and our defense could not contain him. The Trojans did, however, have a 12-0 season and played great all year long. They won 34 games in a row, thanks to Bush, White and Leinart.

Disaster Preparedness
Since I tell my clients to be prepared for any emergency, you should know Asset Planning has a written plan in case of emergency. I have backups of computer records, account information, and client contact information stored off site. If our building was damaged, I have systems in place and the staff is directed to report to my home to work. The computer systems and records are able to be accessed and are in place. We have call forwarding from our office phones to my home location so we are able to contact clients and manage our client��s accounts.

Medicare Part D and Medigap Insurance
Medicare Part D, or prescription plan coverage, became effective January, 2006.

Medigap plans were systemized many years ago into ten different plans, labeled A to J. Plan A is the basic plan. Plan B to J offer the same basic plan, with benefits added as you go up the alphabet. Two new Medigap policies, plans K and L, will arrive the same time as the Medicare Part D. Current Medigap plans H, I and J (the three plans that include prescription-drug coverage) will be phased out. If you have one of these plans, you can keep it but the drug coverage is inferior to what you would get with Part D. However, the premium for these plans will drop to offset the coverage afforded with Medicare. The best plan of action is to sign up for Part D and switch to plan A. B, C or F. If you make the switch within 63 days of the effective date of your Part D coverage, you will have guaranteed coverage and there is no waiting period for preexisting conditions.

The new plans K and L will have higher deductibles plans with lower premiums. These are more in line for those willing to self insure, since the coverage is less. If you have an old plan, you probably want to keep it and not buy a Part D plan.

You may receive marketing materials from companies trying to persuade you to switch plans. Most retirees should probably stick with their existing plans but first need to check the new plans against their existing coverage to see if the price and coverage warrant a change. UnitedHealthcare/AARP and United American Insurance intend to market one stop shopping for Medigap and Medicare drug coverage.

The Center for Medicare Advocacy is offering information via www.fairmedicare.org and they have ��Medicare Minutes�� you can listen to. This is very informative and they post a new message each month. December��s recording is on Part D. You can also try www.medicare.org for a complete listing of plans. You can list up to 25 drugs you are taking and compare three plans to see how the plans would cover the drugs you are taking.

Asset Planning, Inc Seminar
If you have an interest in attending an educational seminar on Medicare Part D, Medigap plans or on the nuts and bolts of Social Security changes, let us know. If enough of our clients have an interest, we will book a speaker and hold an educational seminar. We never allow anyone to try to sell products to our clients and will never disclose our client��s names or personal information.

How the equity and bond markets fared for 2005
The market was flat to choppy much of the year, again gaining ground in November and December. The S&P gained 3.1% for 2005, Nasdaq up 1.4% and the Dow Jones down 0.6. Gold and energy sectors gained much more. The S&P and Nasdaq hit four-and-a-half year highs on Dec 13, but lost ground by the end of the month. Bond funds struggled to eke out gains, as the intermediate bond category was up 1.75% for the year. International and Mid Cap funds did very well and value beat growth in large caps. Growth funds are showing signs of life, if rising interest rates do not hinder our economic growth, this may indicate a shift in leadership for the market.

Key numbers rise in 2006
The 401k, 457 and 403b limits rose to $15,000 with the catch up provision of $5,000, totaling $20,000. IRA contributions of $4,000 can be made in 2006, with an additional $1,000 for catch up for those over age 50. You have until April 15, 2007 to make a contribution for 2006.

The Social Security wage base is $94,200 for 2006, an increase of $4,200. That will be $260 more in tax for those highly paid workers. An increase in Social Security benefits to retirees rose 4.1% and the Medicare Part B premium is $88.50 per month, up $10.30.

IRA and SEP contributions need to be made by April 14, 2006. If you mail the contributions to us, it must be in our hands by April 10, 2006 to allow us to forward the check and post it to the account. I will be on vacation April 14th to 21st for Easter vacation and celebrating that tax season is over.
Fed Funds rate on the rise again

At the meeting on December 13, the Fed raised rates for the 13th straight time, to 4.25%. The next Fed Funds rate increase is expected to occur at the end of January.

We are currently showing an inverted yield curve, where short term rates are above long term rates. On December 27, the yield curve briefly inverted, based on the two and ten year treasuries. This is an important signal to watch as an inverted yield curve is indicative of an economic slowdown or recession. While this has produced a recession in the past, Greenspan argues that it needn't do so this time because of the reason for the inversion. Short rates are above long rates, not just because the Fed is tightening, he says, but also because lots of foreign money is being invested in long Treasuries. (I wrote about this last quarter)

My feeling is that one or two more rate increases may come by the end by March. Alan Greenspan's successor, Ben Bernanke, will be closely watched and analyzed.

Getting things done is not always what is most important. There is value in allowing others to learn, even if the task is not accomplished as quickly, efficiently or effectively. --- RD Clyde

Write your goals for both 2006 and 2007 and outline the steps you will take to achieve them. Take small steps and make progress monthly. Live for today but look toward tomorrow. Dream Big!

Sandra Field, CFP, MBA, CSA

API 2nd Quarter Update 2007

Live as if you were to die tomorrow. Learn as if you were to live forever.
-Mahatma Gandhi

The market continues to shake off worries of a possible economic turn down. Inflation has increased and the possibility of a fed funds rate cut has been postponed until spring, 2008. I would not rule out a quarter point increase in the fed funds rate before year end. Preferred stocks and bond prices, especially longer term bonds, have fallen recently and mortgages have increased. The rate for a 30 year mortgage was 6.74% last week.

Home prices continue to fall as the supply of home for sale continues to grow. Homes are now being listed for sale for months, without one offer. I forecast continued softness in the housing market for another nine months to one year. Energy prices continue to rise, always in time for our summer driving months. Initial claims for unemployment insurance recently hit their highest level since April.

35 mile bike ride to raise funds for Diabetes Research.

Summer is officially underway! I am on vacation while you are reading this and Carol, Diane, Carol P, Joanne and Erin are holding down the fort while I am gone.

My daughter and I raced in the Women�s Las Vegas Triathlon in April, a very hilly and hot course for her. We also rode 35 miles in May for the American Diabetes Association, did the Danskin Triathlon and the Redondo Beach Triathlon. Nikki took 2nd place in Redondo Beach and earned her first time on the podium. We have several more ocean swims and triathlons to do in 2007!

You can not control what happens to you, but you can control your attitude toward what happens to you, and in that, you will be mastering change rather than allowing it to master you. � Brian Tracy

Notes from Carol:

Asset Planning is pleased to welcome Erin Nelsen to our staff. She is a student at Cal State Fullerton and is majoring in Business Administration � with an emphasis in Investments & Financial Planning. She is currently working part-time while going to school full-time. She hopes to graduate in December 2007.

Joanne is off on maternity leave awaiting the birth of her 2nd child. Her baby girl is due August 4.

Meanwhile, I am just trying to keep up with my kids. My eldest daughter graduated high school this June. My 15 year old daughter is taking driving training and my 11 year old son is busy with Boy Scouts, Little League and summer camps. Work is usually where I find my peace and quiet.

Identity Theft � Protect against Phishing

TD Ameritrade and Schwab have been encouraging all of our clients to receive their statements electronically via email notifications and some of you have signed up for this and some of you have not but many of you have computer ids that allow you to view your portfolios on-line, but still receive paper statements. While email and on-line viewing on Schwab and TD web-sites are secure, there is a scam known as phishing in which thieves attempt to get your personal information and steal your identity. Here are some ways to guard against this scam.

� Contact is usually made via an email, pop-up window asking you for your user id and password. They pretend to be TD or Schwab representatives.
� Be suspicious of any request for personal information.
� Keep your browser updated.
� Never reply to an email asking for personal information.
� Never enter sensitive information into a pop-up window.
� Do not click on links in email. Re-enter the address in the browser.
� Check the site address before you sign in.
� Look for the locked padlock or key icon at the bottom of your browser.

Call us at Asset Planning if you suspect someone is trying to get your information.

Enjoy your summer!

Carol Somoano

API 1st Quarter Update 2006

I attended the TD Waterhouse conference in Orlando, Florida in February. One of our speakers was former President George H.W. Bush. It was quite an honor to be in the presence of a former president. He told very entertaining stories about his presidency, being the Director of the CIA, his views on global problems, the economy and the war.

He told of risks and reward. He was the youngest pilot in the Navy and flew 58 combat missions during World War II. He loved flying. He went skydiving on his 80th birthday, much against the wishes of wife, Barbara. He jumped from the plane at 12,000 feet, glided down to the marked landing area, landed on both feet and proudly said to Barbara �Well, what do you think of that jump?� She replied �I have not seen a free fall like that since l992.� (This was his landslide loss to President Clinton)

You always have enough energy to do the things you love. ~Alan Cohen~

A measure passed by Congress on Feb. 1 will increase the limit on federal deposit insurance for certain bank accounts. It was included in the $39 billion budget bill. The provision raises federal deposit insurance levels on retirement accounts held at banks to $250,000 from $100,000. The bill, S 1932, was signed Feb. 8 by President Bush.

A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort. ~Herm Albright~

Interest Rate increases
Fed policymakers unanimously agreed at their meeting on March 23 to raise the benchmark federal funds rate to 4.75 percent. This was the 15th time since June 2004, when the rate was 1%, that the rate has been increased.

The Fed noted that higher oil and gasoline costs have not resulted in higher consumer prices for items other than food and energy. Such "core" prices rose just 1.6 percent in the 12 months that ended in January, well within the Fed's comfort zone. Bonds continue to fall in reaction to interest rate increases.

Morningstar Investment Reports
We have the ability to run aggregate (grouping your accounts together) snapshot views of your holdings with us at TD Ameritrade or Schwab. These reports will be available by April 10, after downloads are available, and thereafter, just after the quarter end. If you would like to receive these reports, please let Carol Somoano know and we will mail the report to you. You will see your one year return, three year return and the performance of each security in your accounts. At this time, preferred stocks and some of the other investments I use are not available to be listed. We will substitute a proxy for those investments, as similar to the original, as we can.

Cost Basis: Why I keep talking about it!
Our portfolio statement from API shows your current investment value, but it is not a true picture of your investment gains. If I purchase a mutual fund for $25,000, this is your �cost basis� in that fund. If the fund pays a quarterly dividend of $250, and the dividend is reinvested, you purchase more shares and now your �cost basis� is $25,250. When capital gains pay at the end of the year, that amount (let�s use $1,000) is usually reinvested and is added to the �cost basis�. When your portfolio statement shows the cost basis as $26,250 and the current value as $26,750, it appears this investment has only gained 2% since it is calculated using the cost basis. In reality, the investment has increased in value from the purchase price of $25,000 to $26,750, or an increase of 7%. I hope our clients look at the bottom line, or the overall investment gain in their accounts and do not read the investment gain/loss % on the bottom of the statement as the gain the account has produced. That would be very misleading and understating our performance.

Please schedule a meeting with me if your cash flow needs or investment time horizon has changed. The market is very positive and is at 5 year highs, as of the end of March.
Securities have responded well, bonds have not.

My vacation should be April 14th to April 21st. I am glad tax season is almost over and I am looking forward to Easter vacation with my family. I will be swimming and riding my bike over the hills in Napa valley, training for a longer and harder triathlon this year. I hope everyone has some exciting summer plans to look forward to.

Sandra C. Field, CSA, MBA, CFP