Asset Planning, Inc Blog

The latest from the team.

Sandra Field, founder, of Asset Planning Inc. (API), is a Certified Financial Planner and has been an active professional in the financial services industry for over 23 years. She is recently named as one of nation's leading wealth mangers by Bloomberg "Wealth Manager" magazine. 

A Southern California native, Sandra graduated from California...

Sandra Field, founder, of Asset Planning Inc. (API), is a Certified Financial Planner and has been an active professional in the financial services industry for over 23 years. She is recently named as one of nation's leading wealth mangers by Bloomberg "Wealth Manager" magazine. 

A Southern California native, Sandra graduated from California State University Long Beach with a Bachelor of Science in Finance and from University of Southern California with a Masters in Business Administration.

Sandra is a member of NAPFA (National Association of Personal Financial Advisors) and the Financial Planning Association. Sandra has served on the board of directors for the Orange County Chapter of FPA. Well respected in the industry, she is a featured financial advisor for the LA Times "Money Makeovers" as well as for the "One On One" column in the Orange County Register. In addition, Sandra serves on the Mutual Fund Panel of Experts for the Orange County Register Newspaper. She is also an active member of the community, serving as past President of the Seal Beach Chamber of Commerce, past Vice President of Finance on the Board of Directors for the American Cancer Society, and past Business Advisor to the City of Seal Beach.

Last but not least, she is a featured speaker at many public and private functions such as AAII (American Association of Individual Investors), Cal State Univ. Long Beach, EWGA and USC. She recently spoke at the WISE (Women In Securities & Education) conference, conducting a live money makeover before 400 women.

Whether she is assisting clients to reach their retirement goals or selecting the right investments for clients, education is at the core of Sandra's philosophy. She emphasizes the importance of developing a relationship with and educating clients, placing the utmost importance on helping them reach their goals, whatever they may be.

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Ways to save money

Property Taxes
If your home has fallen in value, you can request a property tax reassessment if you think the appraised value exceeds the estimated market value. This may help you save on reduced property taxes. You may contact us for help on this or refer to a past blog posted by Carol, who outlines how to do it at no cost.

Travel
For those that are traveling, very good deals on hotels and airfares are plentiful. Check out www.kayak.com and www.yapta.com to watch airfares. You set the parameters of the trip you want to take and they watch the fares on multiple airlines and email you a summary when the price drops or increases. They also find flights, hotels, email alerts and help you get refunds from airlines when fares drop.

Refinance
Look at refinancing your mortgage as interest rates are very low. Several clients and staff have taken advantage of these new low rates but lending is still somewhat restricted. Be prepared to show all documentation of income, etc. This is the way lending should have been over the past several years.

Utilities
Talk to your service providers such as your cell phone, cable TV, Internet, and land line to see if you can bundle your services together for a cheaper overall price. Ask if your monthly service fee can be reduced to match any promotions currently being offered.

Memberships
Review your gym and other memberships and cancel, freeze or downgrade if you can save money. Costco offers two year memberships for 24 Hour Fitness that are cheaper than buying directly from 24 Hour. 24 Hour Fitness also offers a restricted membership for a cheaper price where you can work out only three times per week. I see many of my clients in the 24 Hour Fitness where I work out- all on a regular basis. It certainly helps combat the stress of the uncertain economy and stock market.

Sandy

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Go Green!

This brings a very nice close to this week. We had four positive days (green numbers) in a row. For the week, the S&P and NASDAQ were up 10%, the Dow was up 9.%.

Healthcare stocks were leading with merger news of several large pharmaceuticals. Banks rebounded off their lows this week when Citibank and Bank of America both released news that they have made a profit in the first two months of the year. The financial and housing recovery is key to the market recovery.

Even better news is that GM will not need another 2 Billion dollars in bailout money as their restructuring is beginning to work. So, signs of life are beginning to show, like seedlings poking up through the snow in early spring. There is still much thawing needed but maybe Spring really is around the corner.

Bernacke made a statement on Tuesday that growth may resume by year end. That would be the best present Santa could bring.

Sandy

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Federal Reserve Bank President Lacker comments

As headlines persist that the Dow is going up, down or sideways,  I have begun to hear some optimistic comments here and there. One such comment was today by Federal Reserve Bank President Jeffrey Lacker. He was interviewed on CNBC this morning as said the US economy looks dismal in the short term but should return to growth by year end, as the housing markets finally reach some sort of equilibrium. 

"I'm expecting a bottom at the end of the year and a little bit of positive growth," Lacker said. "It does seem likely that we're going to see some sort of equilibrium emerge in the housing market in the latter part of the year." He is a voting member of the Federal Open Market Committee in 2009. He said he is fine with the Fed's current stance on monetary policy and expects the fed funds rate to be near zero for some time.

I continue to believe the root of the problem is the housing market and that is where the primary focus from Washington should be. I think the banks need to adapt and quickly rewrite the loans of their clients to keep the people in their homes. The banks do not want to own any more foreclosed properties than they already have. Re-write the loans to a new forty or fifty year loan if that is what needs to be done to make the fully amortized payment  a cost the consumer can afford to pay. Let the focus be to keep the consumer in their home.

Sandy

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Dogs of the Dow

There is a theory called Dogs of the Dow that has you buy the 10 lowest value stocks of the Dow at year end and hold them one year. The theory is that those ten stocks will rise to the top over the following year. 

What has happened to the Dow 30 this year? Why had it fallen so far? Well, for roughly $75, you can buy one share of Alcoa, Bank of America, Citibank, General Motors, GE, Intel, Micorsoft, Pfizer and Disney. All of them are worth less than a collective $75. How can that be? Well, the financials have fallen to the bottom because we don't know if the banks are viable or not.  They have to undergo a stress test by Dr Tim Geithner to tell us if they are alive or dead. Those will not be finished until April. GM is dead, along with Ford and Chrysler. Tech spending is cut back for Intel and Microsoft as companies conserve. Disneyland is busy and attendance is good, yet Disney stock is cut in half.

The funny thing is that I went to the mall twice over the weekend. I hate shopping and hate going to the mall. The mall was packed both days. The parking was at the far end of the parking lots. I went to brunch on Sunday morning and it was overflowing with a 30 minute wait.  I don't cook so I do eat out a lot and the restaurants that I have been in have all been busy. I see consumers spending yet the news and the market seem to indicate we are all hoarding dollars, afraid to spend. A client I saw this morning told me of a store with women waiting in line to buy shoes that cost $6,500. That is insane to pay that, in good times or bad.

I know jobs have been lost by some of my clients and those around me. But I still see a disconnet. I did a triathlon in Los Alamitos two weeks ago. It was their first time putting on the triathlon with the 5k and 10k races they hold. Triathlon is an expensive sport and the entry is usually $85 to $115 dollars. This first time event drew a crowd of 700 triathletes, paying an average of $90. Sponsorship for the race was higher than last year instead of businesses in the area cutting back, as I expected.

I feel a market move to the upside. I think the fear on Wall St has taken over a rational view of valuations. Really, when you can buy 9 of the 30 Dow stocks for $75, the market is oversold. Or crazy. Or both. Or is it just me?

Sandy

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401k and 403b Guidance

The most common question I hear right now is "should I keep putting money into my 401k or 403b? It has lost 40% or more and I will just lose the money I put in. Why should I keep adding money to it?"

Yes, you should keep your contributions going into your tax deferred accounts. You can change your allocation within the account and have your new contributions go into a safe choice. You might have a money market option or a guaranteed cash option - something that does not have market risk. Choose that and continue to save for your retirement. Now, more than ever, we need to continue to save for our own retirement.

Our government is burdened with tremendous debt, taken on to bail us out of this financial mess. That debt load may impact Social Security for those under 60. I don't think they have a chance of taking away benefits from those people that are already near or over age 60 but the rest of us are subject to changes in our full retirement age and/or benefits we may have been depending on.

Remember that your taxable income is reduced, thus reducing the income taxes you pay, when you defer income into your 401k or 403b, 457 or SEP IRA account. Keep putting away the most you can save. We need to become a nation of savers once again.

Sandy

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Treasury Secretary Tim Geithner's proposal

The market did not think highly of Tim Geithner's new proposal, delivered live yesterday. The Dow finished down 381 points at the end of his speech. All the chatter going on last week involved creating a "bad bank" or a "bridge bank" and most on wall street expected that to be done. Instead, he spoke of a new concept that will be created with the private industry, hedge funds and 500 billion to begin with. The concept was there, the details were missing.

The market was waiting to see how the bad loans and distressed assets would be removed from the banks balance sheets, thus improving the banks positions. That was the concept of the "bad bank". The bad assets of a bank would be moved to the newly created "bad bank" that the government would thus own and they would hold the mortgages or assets to maturity.

Geithner, however, came to market with a new concept and gave no direction in how the assets will be priced or who would actually be buying them or details on how this new concept would actually work. The market wants concrete details and a path to guide us out of the financial black hole the banks have created by the CSOs, leverage and bad loans.

The plan needs to succeed so the banks do not need a continued bail-out , funded by the frustrated the tax payers. I am anxious to read the details when they are released in the coming weeks.

By the way, why was Geithner doing his taxes himself with Turbo Tax? Did this lead to the careless errors which caused him to owe payroll taxes to Social Security and Medicare? No, he underreported income. It seems as though the IRS picked up the errors in 2006 and sent him a bill for taxes owed. Geithner did not pay the taxes due until he was selected to be the Treasury Secretary (chief of the IRS) by President Obama. Ironic, I think.

Sandy

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Unemployment rises

The pink slips are coming again. For the third straight month, over 500,000 workers have lost their jobs. The numbers are staggering as layoffs are announced. Home Depot announced the closing of Expo stores and 7,000 jobs. Sprint is cutting 8,000, and Texas Instruments 3,400 employees. The largest announcement came from Caterpillar: 20,000 jobs are lost. GM is cutting another 2,000 and ING cut 7,000 workers, including their CEO. Philips shed 6,000 and Pfizer is cutting 19,000 when it acquires Wyeth.

Corporations are slimming down to weather the coming months with leaner labor payrolls. Labor is the easiest expense to cut and can make a dramatic impact on the bottom line in any quarter. This will lead to better earnings quarters ahead as the companies have lower expenses against lower income. The first quarter of 2009 is going to be difficult to post a positive growth number but I applaud the large corporations that are taking fast, decisive action to protect the bottom line, even as the layoffs are painful. No one likes to lose a job or find out their friends or relatives are unemployed.

Now, the good news. Pfizer is spending 68 Billion to acquire Wyeth. This is the second drugmaker take over in the past three months. Five different banks are lending funds to Pfizer,as they will finance one third of the purchase. The banks are lending and companies with cash can pick up good bargains. Just like shoppers intend to do at Expo as the stores liquidate.

Sandy

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Goodbye Secretary Paulson

In December, Secretary Paulson made the unilateral decision to guarantee $306 billion of CitiGroup's assets. The guarantee was in addition to the $25 billion Citi had already received in TARP funding. The $306 billion "guarantee" was not part of TARP and was extended without Congressional approval.

$306 billion is equal to what our government spent in 2007 for the departments of Agriculture, Education, Energy, Homeland Security, Housing and Urban Development, and Transportation combined. (The Economist)

Is it fair that Bank Of America made very bad business decisions to buy Merrill Lynch and Countrywide Financial and now the taxpayers are backing their losses? And, management keeps their jobs? Nancy Pelosi said it best when describing the bailout of GM and Ford that their failure and incompetence is being rewarded, instead of their success.

The number of financial institutions (and others) that are applying for TARP money is astounding. Billions of dollars are being handed out, without Congressional approval, and without a tracking mechanism to know what the banks are doing with the funds.

I guess this is how it worked at Goldman Sachs. Paulson's net worth is estimated to be near 800 million. Maybe he could make some loans with his own money.

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Estate Planning Tips for 2009

Happy New Year!

Welcome to 2009 and the changes that take place for this tax year. The annual gift tax exclusion amount has increased to $13,000. Required minimum distributions from IRAs are not required this year - see my previous blog for details.

In 2001, the Economic Growth and Tax Relief Reconciliation Act was passed. On January 1, 2010, estate and generation skipping taxes are to be abolished. Both taxes are set to resume at their prior levels as of 2001 on January 1, 2011. Be very careful of the wording in your family trusts if they were drafted several years ago or if they contain a phrase that the credit shelter trust is to be funded in the full exemption amount. This means that in 2010, the entire amount of the trust could be left to the credit shelter trust and nothing to the survivor trust.

Credit shelter trusts are normally left to the children or grandchildren and the survivor trusts are for the surviving spouse. If you have a trust with a credit shelter trust or a marital deduction is set by a formula clause, this could disinherit the surviving spouse. You would want to have a maximum amount that can go to the credit shelter trust., and set a dollar amount or a percentage of the estate value. Seek advice from your estate planning attorney if you think your trust should be reviewed or amended. You will need to see your attorney to have the trust amended.

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Madoff Madness

How did Bernie Madoff mastermind a Ponzi scheme for so long and make fifty billion dollars disappear? How was he able to hide these losses from SEC regulators and his clients? How does a former NASDAQ chairman do this and hide it for so long from the regulators? How do people know if their investments are safe?

A custodian is the firm that actually holds your securities, cash, bonds, and mutual funds.  Mr Madoff's firm was his own custodian. To open an account with him, you made your check out to Bernard Madoff Investment Securities. He allegedly had four sets of books- actually, the man must be exhausted from the moving of money on paper that he did. He made fake statements and falsified the account values on the monthly statements that were sent to his clients. Since the custodian and the money manager were one and the same, the clients had no way of knowing if their account values were correct. There were no third parties involved to catch him. His auditor was not one of the big accounting firms. His niece is married to an SEC auditor. He ran a hedge fund and the government does not regulate hedge funds. There was a lot of movement to get hedge funds to register with the SEC a year ago and the hedge funds won. They stayed unregulated.

If Mr Madoff never deposited the client monies into an account that was insured by SIPC or FDIC, his clients do not have insurance to fall back on. That would only make matters worse.

We use an outside custodian such as TD Ameritrade and Schwab to hold our clients investments. Asset Planning does not take custody of assets- meaning, we cannot ever hold securities on our own. We do not invest, nor have we ever, invested in hedge funds.

When a situation does not have transparency, there is cause for concern. Mr Madoff ran his hedge fund on a separate floor in a locked room where only three people had access. This is where the algorithms were running the money in a black box. No one understood what they were investing in, yet continued to pour millions of dollars into his scheme. The investors were let down by Mr Madoff and by the SEC, who was supposed to protect them from fraud like this.

Sandy

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