Asset Planning, Inc Blog

The market had a rebound of nearly 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. I think most individual investors are still sitting on the sidelines in the equity market. 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% flowed 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. That is twice the size of the largest equity fund. Other mutual funds to have high volume inflows are the Templeton Global Bond Fund and the Dodge & Cox Income Fund.

I have worried 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!

Today is World Alzheimer's Day and their quest it to raise awareness of how widespread this disease is. According to their new report, there are 35 million people now living around the world with Alzheimer's or another dementia.

CBS news reports that this number is ten percent higher than what scientists had predicted just a few years ago. The report also suggests that the population with dementia will nearly double every twenty years.

Age is the biggest driver of Alzheimer's, but obesity, high cholesterol and diabetes seem to increase the risk of dementia also. Scientists aren't even sure of the true cause of Alzheimer's. There is no known cure, today's drugs only temporarily alleviate symptoms.

The US government invests 428 million dollars in Alzheimer research as compared to $6 billion for cancer, $4 billion for heart disease and $3 billion for HIV/Aids.

For more information: The Alzheimer's Association. www.alz.org

The US government is intent on finding foreign financial brokerage and bank accounts that US taxpayers own and do not report the income earned. If you have outside accounts and earn income, you should be reporting the income on your Schedule B with your federal tax return. You are also required to disclose this account on Treasury Form TD F 90-22. The form is called Report of Foreign Bank and Financial Accounts.

The deadline for taxpayers to come forth and disclose these accounts is coming due on September 23, 2009. The deadline is imposed for taxpayers to come forth before the IRS discovers the accounts and unreported income. If the income is not reported, you are liable for making a false statement on a tax return and the penalty is a possible sentence in prison for up to three years. The prison term for someone who fails to file the Treasure From TD F 90-22 is five years. In addition, the taxpayers are subject to significant civil penalties of up to 75% of the tax they failed to report and pay.

Because of the high profile cases in the news lately, the IRS is aggressively pursing all U.S. citizens who fail to report. If you have any accounts outside of the United States and have questions, please consult your CPA or tax adviser before the deadline on next Wednesday.

See how fast our national debt is growing- by the second. This is eye opening data. Look at the debt per citizen and spending data. The home foreclosures appears to be one per minute. The numbers move so quickly, I get dizzy after a few minutes of viewing.

At the time I wrote this, the national debt is $11,678,051,245,654. Take a look now.

http://www.USdebtclock.org

Fed-funds futures indicate that the Fed may raise rates at least 25 basis points by year end and up by 75 basis points by next spring. If the rates do rise, that will push mortgage rates higher also. A quick check today on a conventional (loan amount under $417,000) 30-year fixed loan is available at a rate of 5.625% with 1.0% point. The APR is 5.726%. These rates do move quite a bit, from day to day, and the price last week was 5.2%.

First time home buyers can qualify for a Homebuyer Credit and that credit will expire by year end. Home prices are beginning to rise and many areas have already stabilized. If you are looking to buy a home, this may be the opportune time.

Real estate has always been seen as a hedge against rising inflation. With inflation expected to be rising in 2010 to 2012, this also points to a good reason to buy a home.

The economy is looking better as we turn the corner to the end of the recession. GDP measures of the economy shrank at an annualized rate to 1%, as opposed to the past two quarters, ending June 2009, which had an average loss of 5% per quarter. So, with this improvement in GDP and the recent rally in the stock market, is the recession over? 

I recently went to the Coldplay concert at the Verizon Wireless Amphitheater. It was sold out and over 20,000 attended the small venue.  All these attendees helped contribute to the spending rate for July.

I was lucky enough to go to the concert in a NASCAR themed limo. This was the talk of the town! As we rode down the freeway, cars pulled up next to us to take pictures of the limo. The theme of the limo, inside and out, is checkered flags and race cars. The next time you need transportation for a group, try this!  Our driver was Tony (and the owner) and is a really great guy. www.CaRacingLimosLA.com. The kids really love the limo and the attention it gets!

Back to school shopping is the second busiest selling time period, second to Holiday shopping. Most discount retailers have begun advertising very discounted prices on school supplies, hoping to woo shoppers into the store for other purchases. Wal-Mart is the nations largest discount store and is expecting a five percent drop in year to year sales but they no longer report monthly sales figures. 

In the retailers, price is everything and the teen market has been hit particularly hard. Abercrombie and Fitch will have a harder time compared to the cheaper brands, which have lowered their prices and have updated their fashions. Costo, Target, Wal-Mart,  J.C.Penney and Kohl's will lead the back to school shopping visits.

Back to school shopping sales have not shown a decline in six years. Sales will be prevalent to move inventory prior to Holiday sales as consumers have reported their intention to spend less. 

A recent survey done by AARP estimated that 10 million American seniors need help with daily activities. The same survey showed that family members find themselves responsible for 80% of such care giving, many of which are overwhelmed or live far away.

Organizations such as Rally Round Non-Medical Home Care can help with services that enable seniors to remain in their homes, while keeping their independence and dignity. These services reduce the burden on the adult children and allow them to spend quality time with their parents. They include:

• Companionship
• Respite or relief for family
• Meal preparation
• Light housekeeping
• Errand services
• Grocery shopping
• Recreational activities such as walks
• Medication reminders
• Personal Care
• Incidental transportation
• Mail assistance and organization
• Pet care (pet walking, clean-up, vet visits, grooming visits)
• Computer Services (setting up online bill pay system, minor computer troubleshooting, email, new computer set-up,
• software installation)
• Professional grooming (hair and nails)
• Electronics set-up, troubleshooting
• Secure Web access to Activities of Daily Living reports (Future Service)
• Discussion Forum

Rally Round Non-Medical Home Care caregivers complete a training program that helps them understand the challenges seniors faces. They are insured, bonded and hold Red Cross approved certifications in both CPR and First Aid. Many of them have cared for their parents or grandparents and want to help others. For more information or to request a complimentary in person assessment of needs go to www.rallyroundhomecare.com

I have personal knowledge of this company and the owners. I find them to be honest, compassionate and trustworthy- the best qualities to have when working with seniors.

Sandy

If you have not been to www.zillow.com, I invite you to visit the site. Enter your own address and view the facts on your home. You may claim the home as your own and modify the facts the site has on record. You may have added rooms or had improvements to your home that are not reflected in the market value.

I listened to the CEO of Zillow speak this morning and heard some interesting things. He said that 50% of all current home sales are short sales or homes in foreclosure. Another fact: 30% of homeowners are ready to put their home on the market to sell but are still waiting for a better time. The average American homeowner moves every five to seven years. So, those homeowners that wanted to sell their homes up to two years ago are still hanging on, waiting to get a better price.

Zillow estimates are updated three times per week as home sales rise in value or nearby homes are sold.

21.8% of all homes are underwater right now, meaning the home value is less than the mortgage owed on the property. I have heard that banks are holding between 500,000 and 600,000 properties in inventory without putting foreclosure signs on them, for fear of flooding the market. The housing market is picking up but lending standards are very tight, with verification of every document and account. Rates on the 30 year mortgage are very volatile, moving up within the week.

People are out shopping for good deals. The LA Times profiled several couples trying to buy a home and some homes had up to 80 offers on them. Open house days are crazy with people filing in and out of houses, looking for deals. I have heard Dr Adibi say the next wave of foreclosures will begin this summer and this wave is the upper tier of mortgages. These loans were with documented incomes, and many were made with adjustable rates, now ready to reset to higher percents than the teaser rates they purchased.

While all of this is indicating the bottom of the housing market may not be near, I have ventured into the water and I am in escrow on a new house. The economy is looking better, the markets have improved and I will be able to walk to work from the new house. So, I am doing my part to reduce gas emissions from my car!

Sandy

March 6th was the low market point of the first quarter of 2009. We have had six weeks of gains since that low point in March. The S&P 500 has rallied approximately 29% from that low. It is nice to see companies begin to beat earnings estimates and they release sales numbers in this quarter. The rally has been led by the financials, and several banks have posted profits. American Express surged 21% after they released better than expected earnings. Even with the recent rally, we are still below where the year ended in 2008 and the S & P 500 is 37 points, or 4% below the December end.

We are not out of the woods yet and I expect a pullback from this recent rally. That said, it could be short lived if earnings estimates continue to surprise with good numbers. The mood of investors is starting to lean toward positive as things are progressing through Spring. As Treasury Secretary Tim Geithner released the bank stress test results, the market was relieved that more banks do not need more funding and that most US banks are well capitalized. The Federal Reserve released a white paper, saying "Most U.S. banking organizations currently have capital levels well in excess of the amount required to be well capitalized. However, losses associated with the deepening recession and financial market turmoil have substantially reduced the capital of some banks."
Several banks shares gained as the results of the stress tests were announced.

This weekend the meeting of G7 and G20 will be held in Washington. These are the leaders of the world who are shaping our response to the global financial crisis. May it be a productive meeting!

Sandy