Asset Planning, Inc Blog

The latest from the team.

Dow Hits 10,000

The Dow Jones Industrial Average reached 10,000 today for the first time since October 7, 2008. The Milestone was led by strong earnings reports from Intel and JP Morgan. Oil also reached a one year high today at $75/barrel. And the VIX (Volatility Index Indicator) hit a 52 week low, meaning that investors are more positive.

The first time the Dow hit 10,000 was March 29, 1999. Here are some interesting facts of then vs. now:
Gas was $1.20/ gallon
Gold was $280/ounce vs. $1,060/ounce today
The Dollar index, as compared to other currencies, was 100.36 and today it is 75.60 - 25% weaker!
US debt was $24.6 billion and today it is $50.8 billion and growing.

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Reverse Mortgage Guidelines

You have to be careful with what you're getting yourself into when it comes to reverse mortgages. Many retirees take out reverse mortgages to generate cash to live on without having to sell their home. While this type of product makes sense for some individuals, many find themselves paying excessive fees for an unnecessary product. To help consumers navigate the world of reverse mortgages the U.S. Department of the Treasury has issued the following guidelines:

1. Explore other loan products such as home equity lines of credit & cash out refinances first

2. Reverse mortgages are generally too costly if you plan to stay in your home for less than 10 years

3. Be cautious of agents that try to sell you other products, such as annuities, in addition to the reverse mortgage

4. Consult with a counselor from the U.S. Department of Housing and Urban Development before you commit to anything

5. If you do get a reverse mortgage, make sure the loan is insured under the Federal Housing Administration (FHA) so that if the lender can't or won't continue payments, the government will.

The complete guidelines on reverse mortgages can be viewed here

Erin

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Have investors missed the time to get back into the market?

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!

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Alzheimer's Disease

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

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Ownership of Foreign Bank or Brokerage Accounts

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.

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Identity Theft

Last week I attended the FPA (Financial Planning Association) of Orange County Quarterly Education meeting. One of thepresenters, John Sileo, was an identity theft expert. He became an expert because he was a victimof identity theft 2 times. Once bypeople that went through his garbage and were able to get his information, andonce by a business partner who had access to all of his information.

I wanted to share some of the important points he made.

The most important point is that your identity is an assetworth protecting.

He suggests that you put a credit freeze on your credit withall 3 credit bureaus – Experian, Equifax and Transunion. This means that you cannot obtain new creditunless you approve it. It does notfreeze the credit you already have. Ifyou want credit for a car loan or any credit, you need to call the creditbureaus and pay a fee to unfreeze the credit for a short time. It is worth the time and effort.

Stop your junk mail. Either call 1-888-5-OPTOUT or go to www.optoutprescreen.com

Invest in a confetti shredder and use it to shred alldocuments that have identifying information on them.

Monitor your credit. www.annualcreditreport.com is run by the 3 main credit bureaus and it is free. If you want your credit score there is a fee.

He also thinks that on-line banking and bill paying is saferthan paying by mail. A check sent out by the bank has the bank's account number (and routing) on it, not yours.

He also has great suggestions on protecting your computersand laptops on his website – www.sileo.com

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Protecting yourself against U.S. Census worker imposters

The Better Business Bureau, in its consumer alert dated May 5, 2009, offers guidelines to protect yourself from imposters posing as U.S. Census workers in order to steal your identity.

The 2010 U.S. Census will require hundreds of thousands of government employees to gather sensitive information from each household occupant. You are required by law to answer their questions. Unfortunately, this is the opportune time for criminals to impersonate U.S. Census workers in order to steal your personal and financial information. The Better Business Bureau offers the following tips to protect your self against identify theft:

1. U.S. Census workers can be identified by their badge, handheld device, Census Bureau canvas bag, and will carry a confidentiality notice. Be sure to verify their badge and identification before answering any questions.

2. Census Workers will only gather address information on door to door visits. U.S. Census workers do not need to enter your home.

3. The Census Bureau will not ask for your social security number, bank account numbers, or credit card numbers. They will ask for vague financial information such as household salaries.

4. The Census Bureau will NOT email you. Official workers will only contact you by phone, door to door, or mail.

Erin

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New Proposed Tax Deduction for your pet....

US Representative Thaddeus McCotter of Michigan (unemployment rate of 15.2%) recently proposed a new bill which would give animal owners a tax deduction for qualified pet expenses up to $3,500. The goal of this deduction is to make it more affordable to provide for your pets and hopefully discourage owners from abandoning their pets. Right now, people can deduct for their own medical expenses ONLY those costs that are over 7.5% of their Adjusted Gross Income. So the tax treatment for your pet expenses would be better than your own. This bill has encouraged a lively debate among the American public, with most people thinking it is ridiculous. The bottom line is if you can't afford a pet then don't get one. I really don't think this bill will go far, but it is getting plenty of press coverage.

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Federal Debt

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

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Fed interest rates and buying a home

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.

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