Don’t Be a Victim of Corrupt or Unscrupulous Financial Planners/Advisors

December 2, 2010 — Sam H. Fawaz

A late night news story on a Metro Detroit television station last night tells the tale of a couple (and others) robbed of their retirement by their financial adviser-here’s a link: http://bit.ly/eXgpO0

Some of you may have seen this video last night, got up, checked your online accounts, and wondered how you can avoid being an unwitting victim of an unscrupulous financial adviser or planner. Everyone would do well to heed the advice given at the end of the video.

Last year, I sent out a message on how you can avoid being Madoff’ed (see below), a reference to the New York investment adviser who bilked his clients, charities and investors of billions of their hard earned money. Bernie Madoff is currently spending a 150 year sentence in a Federal prison and his possessions are being auctioned off to repay a mere fraction of his victims’ losses.  I also sent out a message with Five Tips to Avoid Potential Investment Fraud (link below).

So what do we do at YDream Financial Services to help you sleep better and know that you’ll never become a victim of financial fraud? In cooperation with our custodian, TD Ameritrade Institutional, we have processes and procedures in place to ensure that you never become a victim to the extent that it is within our control.  In fact, I’ve written two short articles on this blog over the past couple of years that will help you rest easier knowing that your money is safe, sound and well protected:

How Consumers Can Avoid Being “Madoff’ed” https://themoneygeek.com/2009/03/24/how-consumers-can-avoid-being-madoffed/

Five Tips to Avoid Potential Investment Fraud https://themoneygeek.com/2009/04/13/five-tips-to-avoid-potential-investment-fraud/

I urge you to review these short two articles whether you are a client or not and protect what you’ve worked so hard to save and invest. If you have any question or concerns, please don’t hesitate to call or e-mail me (visit my website at http://www.ydfs.com). I will explain further how we take extreme measures to not only protect your money, but your personal and confidential information as well. Your trust in me is the most valuable asset I hold; I will work extremely hard to protect it.

Posted in Consumer Alert, Consumers, investing. Tags: , . Leave a Comment »

Happy Thanksgiving and a Quick Market Update

November 26, 2010 — Sam H. Fawaz

I just wanted to post a quick note to wish you and yours a very Happy Thanksgiving Holiday.  Here’s hoping that you are celebrating it in good health surrounded by family and friends.  Without both, life would be such a drag.

I am thankful for my family and friends, good health and the best clients and readers in the world.  I can’t imagine myself doing anything else that I would enjoy more in life than what I’m doing now.  I hope that you feel the same way about what you do, and if not, I hope you’ll take steps in your life to move closer to the activities that bring you joy and happiness.  It’s really about getting what you need and want out of the day rather than getting through the day.

A Quick Stock Market Update

The last few weeks have been quite volatile in the stock markets, and to be honest with you, it was really all my fault.  Right after I sent out my last newsletter update about the Federal Reserve pumping up the markets, we entered into a long overdue correction (a decline in prices).  As I had mentioned, the markets had gone straight up during September, October and early November, so it was no surprise that a correction was coming. We have swung up and down and sideways without much upside and thankfully without much downside either.

In some cases, I took advantage of this correction to “prune” (sell) certain client positions to lock in profits or avoid losses.  This past Tuesday, a day when everything was trending downward and things looked like they were about to fall apart (a day where about 90% of all asset classes were down) due to the events in Europe and South Korea, I took 95% of our available cash and invested it at the lows of the recent market range.  We were immediately rewarded yesterday as all the markets were up “big” to kick off what I hope to be a great year-end Santa Claus rally.  Seasonally, this period of the year tends to be the strongest for gains in the markets.  While we are technically still in a correction phase, I expect the uptrend to resume soon (but my crystal ball is still in the shop).  Recent economic news has been very positive, some much better than expected, and first time unemployment claims this week surprised nicely to the downside.

I still remain optimistic about a positive finish to the year and the rally continuing into 2011 as the economy recovers.  I believe that this is the best time to be invested in the markets as Uncle Sam has told us that he wants the markets higher. Consider taking advantage of this recent market correction to dip your toes into the market.  I like that most are pessimistic about the markets since that tends to propel them higher.  Yes, we have economic worries, future inflation, high unemployment and a moribund housing market, but those problems didn’t develop overnight, so they won’t be solved overnight either.  We are making progress, and that’s what really counts.

Later in December, I will send out my 2011 market and economic outlook newsletter.  In the meantime, year-end tax planning is in full swing and hopefully you’ve benefitted from my year-end tax planning newsletter and tips.  Remember, if you’re thinking about an IRA to Roth conversion in 2010, you only have about five weeks to complete it.  Don’t hesitate to contact us to discuss whether this option is appropriate for you. I am also available to help with your year-end financial or tax planning.

Enjoy your holiday weekend and please let me know if I can be of any help.  And remember: 50%+ off sales are great, but the best sales are those that save you more than 100% (that is, when you save and invest the money instead..sorry I couldn’t resist).  By the way, I was recently quoted in another online financial story-see the link below about Six Ways to Gift Money to Family.

New: 6 Ways To Gift Money to Family http://bit.ly/aDG90W

Sam H. Fawaz CFP®, CPA is president of YDream Financial Services, Inc., a registered investment advisor. Sam is a Certified Financial Planner (CFP®), Certified Public Accountant and registered member of the National Association of Personal Financial Advisors (NAPFA) fee-only financial planner group.  Sam has expertise in many areas of personal finance and wealth management and has always been fascinated with the role of money in society.  Helping others prosper and succeed has been Sam’s mission since he decided to dedicate his life to financial planning.  He specializes in entrepreneurs, professionals, company executives and their families.

All material presented herein is believed to be reliable, but we cannot attest to its accuracy.  Investment recommendations may change and readers are urged to check with their investment advisors before making any investment decisions.  Opinions expressed in this writing by Sam H. Fawaz are his own, may change without prior notice and should not be relied upon as a basis for making investment or planning decisions.  No person can accurately forecast or call a market top or bottom, so forward looking statements should be discounted and not relied upon as a basis for investing or trading decisions. This message was authored by Sam H. Fawaz CPA, CFP and is provided by YDream Financial Services, Inc.

Posted in General, investing, markets, retirement. Tags: , , , . Leave a Comment »

What’s Going on in the Markets?

November 8, 2010 — Sam H. Fawaz

What a great couple of weeks it has been in the stock markets! We just had the mid-term elections, an important Federal Reserve Meeting and the October 2010 monthly jobs report.  Most were expecting this past week to be one where the markets took a breather and pulled back a bit. Instead, the markets powered higher to levels not seen since 2008 and better than our April 2010 highs.  The NASDAQ market is up by double digits for the year and the DJIA and S&P500 indexes are near double digits.  With the announced quantitative easing (QE2) by the Federal Reserve this week (simply translated, the government is going to print more money to avoid deflation), more funds will find their way to the stock markets.  Therefore I believe that the markets are headed higher over the next 6-12 months (obviously, my crystal ball may be broken, but Federal Reserve Chairman Ben Bernanke came out and said that higher stock markets is one of his main objectives to stimulate spending and the economy.) Please read more about that below.  If you read nothing else in this message, please at least read “The Bottom Line” below.

 

Quantitative Easing 2-It’s HUGE!

With inflation at historic lows and prices at risk of descending into deflation, Dr. Bernanke is determined to avoid Japan’s lost two decades due to inaction to stimulate inflation.  In an environment of deflation (falling prices), spending stagnates because no one buys anything because they expect prices to be lower in the future.  So yes, I said it: Dr. Bernanke wants to manufacture inflation, believe it or not. By printing greenbacks ($$$), we increase the money supply, cause the dollar to fall in value (and thereby increase exports), which in turn causes stocks and commodities to rise in price, which causes people to feel better about their investments and retirement plans, which in turn gives them the confidence to spend, which spurs more manufacturing and hiring and so on…you get the picture.  Or at least that’s what he’s expecting and hoping to happen.  This round of quantitative easing has been dubbed QE2 since it’s the second time since the great recession began that we’ve embarked on a similar stimulative program.  This program will add $600 billion of money into the system at the rate of $75 billion for eight months to try and jump start inflation. If this doesn’t work, some analysts think that we should expect QE3 or even QE4, and by then, we may have as much as $2 trillion of money printing when all is said and done.  A trillion here and a trillion there and soon you’re talking about some real money (remember when a billion used to be a huge sum of money?)

 

One impact of the new QE2 program hasn’t received much attention.  That is, it almost guarantees that short-term interest rates will remain near zero for quite some time, perhaps for the next couple of years.  Keep that in mind if you’re one of those people who collectively still have about $3 trillion invested in money-market funds.  Has the memory of 2008 (-37% on the S&P500) kept you from earning +26.5% in 2009 and possibly +15% or so in 2010?  Then Dr. Bernanke’s program is aimed squarely at you to get you to take some risk again.  If you are still scared of the markets, then maybe you should be talking to us.

 

As expected, the value of the U. S. dollar dropped with the announcement of the QE2 program.  Printing lots of money lowers the value of any currency, even the mighty greenback.  On cue with the decline in the dollar, the value of oil, gold, and other commodities increased. The weaker dollar should help to boost American exports, reduce imports, and lessen our trade deficit with the rest of the world.  Obviously, the rest of the world – our major trading partners – aren’t too happy about it.  The risk of a worldwide “currency war” is higher as a result.

 

October Jobs Report-Much Better than Expected

The October 2010 jobs report was very positive and showed growth in jobs of about 151,000 (story below), but an unemployment rate that is still stubbornly high at 9.6%.  This was far higher than the 60,000-90,000 jobs growth expected.  Of course, at this rate it will take several years to get back to where we were in 2007, but this is indeed positive for a recovery that is likely to be disappointingly slow and painful for those who are still unemployed or are at risk of losing their homes.  Nonetheless, I will repeat what I’ve said in the past: many of the 5M+ jobs lost over the past three years are gone and will never be coming back due to technology advances, outsourcing and higher productivity.  Although many would like to see a return to 5-6% unemployment, we may be stuck with 7-8% unemployment as the norm in the future.

 

There have been numerous positive economic reports over the past several weeks that have all but put speculation of a double-dip recession to rest.  As I’ve said several times since the spring and summer, every recovery from a recession as deep as the one we’ve experienced has felt like a jobless one and real estate prices take much longer than expected to recover.  There was one report on CNBC the other day that said that Florida had an 18-year supply of condos on the market, and if you hurry you just might get one, but only if you can pay cash since most lenders are not loaning money against them.  Obviously, the housing market is not coming back any time soon, and talks of 2020 as the soonest timeframe are abound. I personally believe that’s far too pessimistic, and that by 2013, the lower supply of homes (due to low current new home construction rates) will necessitate increased building and help boost prices once again.

 

Year-end Tax Planning & 2010 Roth IRA Conversions

I’ve delayed my year-end tax planning letter this year due to all the uncertainty about what will be happening with the expiration of the Bush-era tax cuts. My expectation is that with President Obama extending an olive branch to the newly Republican controlled House of Representatives, we will see a two-year extension for everyone, not just the poor and middle-class.  The president doesn’t want to be responsible for counter-acting the QE2 program with increased taxes, especially during such a feeble recovery.  Look for my year-end tax planning letter in a week to ten days. For all my financial planning clients, I am making appointments or encouraging you to send in your year-end pay stubs and financial estimates so we can get your tax planning underway before mid-December.  This is a complimentary and year-round service for all our financial planning and money management clients.

 

2010 is the only year that you can convert all or part of your traditional or rollover IRA and spread the resultant income over 2011 and 2012. If you decide to do so and the value of your converted assets goes down by October 15, 2011 (and you’ve extended your 2010 tax return), you can undo the conversion. Beginning in 2011 (and all years thereafter), you can convert your IRA but the two year spread of income is not available to you—you will have to report all conversion income in the year of conversion.  The decision to convert your assets is a very important and complicated one, and should only be undertaken with a detailed analysis of your taxes and finances. Anyone who tells you to convert or not convert without a full evaluation or knowledge of your individual finances and future tax rates is not giving you an informed decision. Please discuss with me or your tax advisor if a Roth conversion in 2010 makes sense for you.

 

The Bottom Line

You may hate what’s happening in Washington, what the Federal Reserve is doing, how high the unemployment rate is, how terrible the housing market is, how much Washington’s spending, how we are debasing our beloved greenback, how inflation is going to be hyperbolic, and how this country is going to heck in a hand-basket.  But if you focus on those things you will miss out on what is likely to be a continuation of the current stock market rally.  The government has told us that it wants the stock market to go higher and you may have heard the expression that “You can’t fight the Fed.”  For the next 6-12 months, perhaps longer, money will find its way into the stock market and surely push prices higher.  Sure there will be bumps along the way, periods of sideways movement, and some corrections, but I believe that the ultimate direction is upward. 

 

We can debate whether the government will be successful in its objectives, but that won’t increase the value of your investments, IRA or 401(k).  If you are on the sidelines, or are considering investing money in the markets, I urge you to talk to a planner or advisor who can help you sooner rather than later.  It’s not often that the government tells you that it will help and actually does help you make money on your investments.  I believe that we’ll look back on this time period in hindsight and realize what an great investment opportunity it was.

Of course, my prognostication would not be complete without a proper disclaimer: my crystal ball is in the shop, so any forward looking statements I make should be discounted and evaluated in the context of your own financial plan and should be discussed with your financial planner.  As we all know, anything can happen and usually does to trip up the smart and dumb money in the markets.  But right now, the smart money tells me that the best place to be right now is in high quality equities, bonds and commodities.  If you have money on the sidelines waiting to be invested, you can put it to work now if it’s planned to be invested for the long term (five or more years) or wait for an inevitable short-term market correction to get in.  However, the thing about dips lately is that they’ve been quite shallow and are bought up quickly.  If you’re concerned, you can start slow, invest a little and invest a little more on inevitable corrections.

 

In my role as a fiduciary planner, I will also plainly disclose that encouraging you to invest (more) money in the stock or bond markets is a direct conflict-of-interest for me (at least for my clients and prospects) since I charge fees based on assets managed.  However, regardless of how or where you invest, I just want to see you participating and getting your share of the government’s current “asset re-inflation program.”

 

In Closing

Finally, as you can no doubt tell, I still haven’t figured out how to be brief in these newsletters. While I’ve tried to explain in as few details as possible what is going on, I’m willing to discuss in depth any of the topics discussed above with you in person or on the phone.  If you or anyone you know is struggling with their financial plans or just deciding to get back into this market, we can help them get back on track.  It is not too late to get in, and this rally, in my opinion, is not even close to being over.  Please call me at (615) 395-2010 or (734) 447-5305, visit my web site or send me an e-mail. I’m happy to help.

 

I’ve included a few links below to stories that I thought you might be interested from the past week. If you have any feedback on this newsletter, its length or the frequency that it is published please let me know.  Have a great and profitable week!

 

Market Update For Week Ending 11/5/2010
Index Close Net Change % Change YTD YTD %
DJIA 11,444.08         +325.59         2.93         +1,016.03         9.74        
NASDAQ 2,578.98         +71.57         2.85         +309.83         13.65        
S&P500 1,225.85         +42.59         3.60         +110.75         9.93        
Russell 2000 736.59         +33.24         4.73         +111.20         17.78        
International 1,671.56         +55.15         3.41         +90.77         5.74        
10-year bond 2.53%        -0.08%          -1.28%          
30-year T-bond 4.12%        +0.12%          -0.57%          
International index is MSCI EAFE index. Bond data reflect net change in yield, not price. Indices are unmanaged and you cannot directly invest in an index. Market Wrap
An unusually eventful week in the global markets left global equity benchmarks surging and Treasury yields mixed. On Wall Street, the growth-sensitive small-cap Russell 2000 fared best among major benchmarks, up 4.73% on the prospect of continued Federal Reserve action to stimulate the U.S. economy. The broad S&P 500 gained 3.6% and the blue-chip Dow industrials surged 2.93%, while the technology-rich NASDAQ added 2.85%. Foreign shares kept pace, up 3.41% in dollar-denominated terms. News that the Federal Reserve will buy up to $600 billion more short-term Treasury securities sent money down the yield curve in the bond markets, pushing 10-year yields down and 30-year yields higher. For more, please read:
http://money.cnn.com/2010/11/05/markets/markets_newyorkGlobal Markets Applaud The Fed
Wednesday’s news that the Federal Reserve had decided to step back into the bond market to buy up to $600 billion in Treasury securities won worldwide applause from stock markets, although the move was controversial in some quarters. Called “quantitative easing,” the bond-buying campaign aims to suppress long-term interest rates by creating a new source of demand for Treasury debt. The hope is that this will both encourage banks to keep lending and drive return-hungry investors into potentially higher-yielding vehicles like stocks. For more on the Fed’s maneuver and varied reactions to it, please read:
http://www.forbes.com/2010/11/04/europe-briefing-fed-markets-equities-600-billio
n-asia.html

Job Report Better Than Expected
The week was so filled with data and announcements that the normally closely watched monthly payrolls report seemed almost like a footnote to some market watchers. Still, news that the U.S. economy added 151,000 jobs in October came as a welcome surprise for economists who had expected a much gloomier number. The August and September reports were also revised to reflect apparently better-than-suspected conditions in the job market during those months. For more on the latest economic numbers and what they tell us, please read:
http://www.cnbc.com/id/40024584

 

 

Best regards,

Sam

 

Sam H. Fawaz CPA, CFP®

YDream Financial Services, Inc.

(734) 447-5305

(615) 395-2010

http://www.ydfs.com

 

 

Please check out my January-February 2010 Money Magazine Portfolio Makeover-Can I retire Early? http://bit.ly/5aGwIO

 

Have a small business?  Don’t miss out on these business tax deductions http://bit.ly/a49I1K

 

Follow me on Twitter at http://twitter.com/TheMoneyGeek for relevant personal finance advice and tips on great deals.

 

Read our blog: http://themoneygeek.com

 

Sam H. Fawaz CFP®, CPA is president of YDream Financial Services, Inc., a registered investment advisor. Sam is a Certified Financial Planner (CFP®), Certified Public Accountant and registered member of the National Association of Personal Financial Advisors (NAPFA) fee-only financial planner group.  Sam has expertise in many areas of personal finance and wealth management and has always been fascinated with the role of money in society.  Helping others prosper and succeed has been Sam’s mission since he decided to dedicate his life to financial planning.  He specializes in entrepreneurs, professionals, company executives and their families.

All material presented herein is believed to be reliable, but we cannot attest to its accuracy.  Investment recommendations may change and readers are urged to check with their investment advisors before making any investment decisions.  Opinions expressed in this writing by Sam H. Fawaz are his own, may change without prior notice and should not be relied upon as a basis for making investment or planning decisions.  No person can accurately forecast or call a market top or bottom, so forward looking statements should be discounted and not relied upon as a basis for investing or trading decisions. This message was authored by Sam H. Fawaz CPA, CFP and is provided by YDream Financial Services, Inc.

Posted in General. 1 Comment »

In The Land of Password Management, RoboForm is King

September 24, 2010 — Sam H. Fawaz

Over the years, I’ve made tens of “Cool Tools” presentations (and the like) around the country and the list of tools has varied widely as time went by.  While many of the tools make it into my presentations once or twice within a span of a few months, one staple that continues to garner the largest audience interest is an inexpensive password manager and form filler known as RoboForm.  It continues to surprise me how many people still aren’t using one of these great productivity boosters.  If you’re not taking advantage of a password manager in this internet age, let me tell you that you’re wasting precious time and probably taking unnecessary security risks.

I’ve been a user of RoboForm for several years now.  In fact, I first reviewed and raved about RoboForm in an article published a few years ago.  RoboForm remains my number one must-have application on every computing platform I own or use regularly and it is the first application I install when I move to a new operating system or get a new device.  While there are several password managers out there, both free and paid versions, nothing I’ve tried comes close to the versatility and power of RoboForm.  It cannot be ignored that, in this day and age of key loggers and identity theft, having a secure repository of personal information is essential.

I decided to review the current beta 7.0 version of RoboForm since it’s the first real upgrade in recent years.  Actually, it’s not a major upgrade; it’s more of a renovation.  I’ve been using the latest version for a couple of months now and I like the new features and enhancements.

Background

For those of you that are new to password management programs and form fillers, here’s a little background on their capabilities:

As time goes by, we accumulate more and more user ID’s, passwords, secret questions and phrases, software installation keys, personal identification information, credit card and bank account numbers, website addresses, secret notes, etc. (need I say more?), all of which we need to store and retrieve securely.  While a variety of methods have been devised and employed to accomplish this task, most are barely secure and totally inconvenient or incompatible with the wide variety of devices and platforms currently available.  RoboForm aims to be your single and most secure repository to store all this information within (yet another) master password protected and encrypted database.  Think of RoboForm as your hardened safe to store all this info which can only be opened with the correct combination (i.e., the master password).

In addition, many applications, web sites and other secure network gateways require us to change our passwords periodically and utilize strong replacements with a variety of formats and requirements.  Thinking of and remembering these changing passwords can drive one crazy and, as a result, many of us resort to easy-to-hack passwords and storage methods just to keep us sane.  RoboForm steps up here with a powerful password generator that meets a variety of criteria required by the site or the application.

Getting Started and Working with RoboForm

Downloading and installing RoboForm version 6.x (a free trial version good for storing up to 10 passwords is available at http://www.roboform.com) is quick and quite easy.  Whether you’re using Internet Explorer, Firefox, Google Chrome or one of the many available mobile platforms, RoboForm integrates nicely and stands ready to store your user ID’s, passwords and other personal data each time you access a site.  The only thing you need to get started is to specify the master password to be used to lock all of your secret information once RoboForm starts memorizing.  Naturally, with a variety of military strength encryption schemes (no fewer than five encryption algorithms are available) to secure your database, you don’t want to forget the master password once you’ve specified it.  Even RoboForm technical support will not be able to figure out your password if you forget it.  And of course, your master password should be very strong and long because it unlocks your most valuable data: your personal information and passwords.  RoboForm stores all of this securely and locally, unless you decide to use RoboForm online (discussed below.)

Visit a web site, enter your user ID and password and, depending on the options you specify, RoboForm will pop up and offer to store them in what’s called a “passcard.”  The passcard is capable of storing numerous fields.  So, if you need to enter more than just two pieces of information to log in, RoboForm can handle the job.  If you are setting up your online access for the first time, RoboForm helps you generate and store a password based on a variety of security criteria, characters, length, etc.  Thereafter, whenever you visit that site, RoboForm will offer to fill in the user ID, password and other information assuming that you’ve unlocked the database with the master password.  One available setting determines how much time you have before the master password “times out” and is required to be re-entered.  This way you don’t have to enter it each time you summon RoboForm to populate your login information or web-based form.  Since you don’t have to subsequently type in the secure information, key loggers installed without your knowledge cannot capture your valuable data.

The other powerful capability of RoboForm is an online form filler.  When you set up RoboForm, you have the option to set up profiles with your name, address, phone numbers, credit card numbers, banking information, etc.  Anytime you encounter an online form for e-commerce or other sites, RoboForm will pop up and offer to populate the relevant information on the form.  If you set up multiple profiles (e.g., one for home, one for work, one for your spouse), you can choose amongst them, choose amongst credit cards to use or choose which address to use.  This is a huge time saver since RoboForm’s built-in intelligence is programmed to recognize and remember the most common field types used on the web.  To the extent that it doesn’t, you can right-click on the form and have RoboForm save the form information for future use.  I find this capability quite handy for repetitive surveys over time, forms that require shipping and billing data, and sites that request recurring demographic data.

Have you ever been frustrated after spending a lot of time on a site completing an online form or long text box and then find out that the site timed out or couldn’t save your info?  You’ll find that saving the data in RoboForm first before submitting it can save you quite a bit of aggravation.  Just bring up the page again and let RoboForm re-populate it.

RoboForm can also securely save and store free-form bits of information known as “safenotes.”  I’ve used safenotes to store software installation keys, combinations for safes and locks, Wi-Fi network names and keys, PIN’s, frequent flier numbers, and other confidential personal or financial information.

As mentioned above, RoboForm is available on most computing and mobile platforms including the PC, iPhone, Windows Mobile, Palm, BlackBerry, Android, and Symbian.  A version known as RoboForm2go works on a USB thumb drive and enables you to plug in and out of any PC without having to install the program and move your passwords onto someone else’s PC.  Another available piece of software, known as GoodSync, keeps your RoboForm information synchronized between different platforms and locations.

RoboForm Online

Over the past year, RoboForm has been beta testing a version of RoboForm online which optionally allows you to synchronize your passcards and safenotes to a secure server.  Accessing these very secure items online requires you to register with and to log into the site (free) with a secure password.  Actually opening the secure items prompts for your RoboForm master password to be entered, thereby enabling two levels of password security.  This service has been a godsend for me on numerous occasions where I was away from my PC and didn’t have my laptop or RoboForm2go USB thumb drive with me when I needed a login ID and password.  The site functions much like the desktop version of RoboForm and assists you with automatically logging into sites that you’ve saved in RoboForm.

RoboForm Online gives you the added flexibility of synchronizing your passcards and safenotes over the internet across multiple devices.  This is a very powerful and much needed capability, though I can understand many people’s hesitation to surrender and trust their most sensitive passwords and personal information to a third party server.  My only comment is that RoboForm has the highest levels of security and encryption implemented and, with two levels of password protection, I feel reasonably secure about putting my data out there.  Besides, your online ID’s and passwords are by definition already stored on many servers in the cloud which can be equally hacked by determined thieves, albeit one at a time.

Version 7 Enhancements

One of the most significant enhancements in this version 7.0 beta is the capability to save and fill ID’s and passwords in Windows (WIN32) applications, not just online passwords.  In addition, when saving an online form, the details are now displayed for you so you know exactly what is being saved.  Furthermore, this occurs in a non-obtrusive tool-bar rather than the old pop-up box, thereby streamlining the web browsing experience.  Logging into widely known and popular websites automatically downloads site icons to make the related passcards more visually appealing and easier and faster to recognize.

Another significant enhancement for devices equipped with a fingerprint reader is the capability to enter the master password via a finger swipe.  The fingerprint device stores your master password in a secure area on the device.  This secure area becomes accessible to RoboForm only after you slide your finger and it is then authenticated against the fingerprint stored on the device.

A release date for version 7 has not yet been announced.

RoboForm Criticisms

RoboForm is not without its shortcomings and share of quirks.  For example, more and more sites are switching to an Adobe Flash version of their login screen to raise security.  RoboForm cannot currently handle most of these sites.  On those sites, you have to perform a manual RoboForm lookup and type in your ID and password yourself.

On some sites, such as American Express, RoboForm inexplicably stops working properly. This requires you to have RoboForm fill out the form (but not submit it) and then you manually click on the submit button.  In this case, you can re-memorize the site information in RoboForm and fix the problem for future visits.

As sites become more sophisticated with additional levels and types of authentication (e.g., captchas, pointing and clicking your PIN on an onscreen keyboard à la ING Bank, rotating challenge questions, etc.), this renders RoboForm unable to do anything more than show you your credentials to be manually entered.  I’m not sure how or if RoboForm can be enhanced to overcome and automatically populate these additional safeguards, but it sure would be nice if they figured out a way to do so.

Whenever you change the master password, your passcards and safenotes should inherit and respond only to the new password.  However, I’ve had a few occasions where a passcard would only open up with the old password.  Finally, I’ve had occasions where I’ve had to inexplicably remind RoboForm where my data directory resided.  Fortunately no data has ever been lost.

Options & Recommendations

The paid version of RoboForm, known as RoboForm Pro, is about $30 for the first license and less for additional licenses.  An enterprise version is available and significant discounts are available for large license purchases.  During various holidays throughout the year, a 20% discount can be found on the website.  Even without the discount, for this price, you can count on saving yourself tons of frustration and aggravation compared to using manual or spreadsheet password management and form filling.  Buying multiple licenses at the same time (whether or not on the same platform) will likely save you money compared with buying them over time.

I also highly recommend the powerful GoodSync software if you plan to sync your data or files across multiple platforms or devices.  GoodSync is one of the most powerful file synchronization tools available and is also one of my most frequently used cool tools to keep data in sync.

For those who prefer free versions of password management tools, of course the Internet Explorer and Firefox password stores are available, though they are significantly less capable than RoboForm.  The popular open-source password manager applications KeePass and LastPass are also free but, in my opinion, not as convenient as RoboForm.  If you’d like additional information about password managers including the five most popular ones, visit http://lifehacker.com/5042616/five-best-password-managers.

I welcome your feedback and questions about RoboForm or other password managers. Please feel free to write me at shf@ydfs.com.

Sam H. Fawaz, CFP®, CPA works with Y.D. Financial Services in Canton Michigan and Franklin Tennessee and has been helping clients with financial planning and financial planners with technology solutions for over 20 years. He has been writing about tax, financial planning and technology solutions for over fourteen years.  He can be reached via e-mail at shf@ydfs.com or at (734) 447-5305 with any questions.  You can follow Sam on Twitter at http://twitter.com/themoneygeek or at his blog at http://themoneygeek.com.  His company website is at Y.D. Financial Services, Inc.

Posted in Consumers, Identity Theft, Technololgy. Tags: , , , , , . 3 Comments »

What’s Going On With Gold Part 2

July 5, 2010 — Sam H. Fawaz

Back on November 18, 2009, I wrote for the first time about what’s going on with gold as an investment.  Since that date, gold has appreciated 8.4% while the S&P 500 index (a proxy for stocks) has declined 7.1%.  All indications are that the price of gold will continue to rise.

To date, I have personally not been able to bring myself to invest any of my own money in gold, and I remain a bit skeptical of it as an investable asset class.  However, as I’ve said before, I cannot ignore the fact that the uptrend that started in March 2009 has continued and has every indication that it will continue until the trend is broken.

In the past, the price of gold has appreciated while inflation was a threat or was marching upward (an inflation hedge.)  The price of gold usually continues to increase up until the point when the Federal Reserve raises interest rates enough to no longer make gold an attractive alternative; that is, until the actual interest rate paid on money market funds is something greater than the current 0.01%.  But today, we are facing the opposite environment: a potential deflationary environment in light of high unemployment, plenty of available factory capacity and low consumer demand.  Gold is not supposed to go up in this type of environment, but with governments around the world running sky high deficits and debasing their currencies (through either printing money or deficit spending), gold seems to have become a de facto currency in of itself.  Several legendary hedge fund managers and institutional investors have invested significant sums of money in gold and countries and central banks around the world continue to accumulate it.

Here’s what a fellow trusted investment writer and money manager Jon D. Markman wrote about a recent Credit Suisse report on gold:

Investment banker Credit Suisse (CS) recently increased its long-range forecast, arguing in a new report that gold should remain near current levels for at least the next four years. CS analysts’ 2014 target is now $1,300, vs. their previous forecast of $1,120, as investors have become more supportive of the yellow metal.  That may not seem like a very brave forecast since gold is already trading at $1,242, or less than $60 under the long-term forecast, but it’s likely that the estimate will go further up.

The rationale for the change: Credit Suisse believes there is an 80% chance of a renewal of quantitative easing — or money printing — due either to a full-blown sovereign debt crisis or a new recession. This enthusiastic and inflationary activity would rev up the safe haven buying that has pushed gold prices up over the past few years. The feeling is that companies and government officials may cheat and lie, but gold is steady as a rock as an irrefutable, trusted source of value.

Also, the ultra-low interest rate policy of the world’s central banks will keep gold prices on the move. Historically, gold prices tend to rise when short-term interest rates are below 2%. This relationship has been particularly strong over the last few years. With the Fed likely to stay on hold through 2012, and the potential for inflation-adjusted interest rates to move further into negative territory with another round of quantitative easing, there’s little reason to think gold’s run higher will end anytime soon.

Complicating matters has been the decline in new gold production. Global gold production has been falling since 2001 at an average rate of 1.3% per year. Increased demand and less supply equals higher prices. Credit Suisse research in 2003 and 2005 indicated that the decline was being caused by a reduction in exploration targets and exploration efficiency. In other words, it was becoming harder and more expensive to find new untapped sources of gold.

While a number of new projects are about to get started, the long-term picture looks tight. From 2013 onward, CS predicts global production to fall at an annual rate of 2.5%. Gold has always had its allure based on scarcity value. Well folks, it’s about to get a heck of a lot scarcer.

Now gold doesn’t pay any dividends or generate any income, has limited industrial uses, has not kept up with inflation, and garners unfavorable ordinary income tax (not capital gain) treatment outside of retirement accounts.  You’ve probably seen and heard the ads on TV and radio of companies trying to sell you gold coins or buy your unwanted gold jewelry (you can safely ignore them.)  In some countries, you can now buy gold bars from a vending machine, and right here in the “good ole’ U.S. of A”, department stores are hocking gold bars like perfume and cologne.  Normally this would indicate a top in the price of gold, but all evidence to date indicates that the buyers of gold have been mostly institutional, not retail (consumer) buyers.  Of course, like any other investment, gold has the potential to go parabolic and become a bubble (and it likely will), but we’re not there yet.  My worst fear about gold would be to wake up one morning and find out that the price has dropped $200-$400 an ounce overnight.

Fun gold fact: Just last week, a 200 pound Canadian collectible leaf gold coin (face value $1 million) was auctioned off for $4 million at exactly, you guessed it, the spot price of gold at the time of sale. http://news.bbc.co.uk/2/hi/world/europe/10425194.stm

If you are interested in investing in gold, I would look into the price of the SPDR Gold Trust GS (Ticker symbol: GLD) and invest on any weakness like we saw last week, and I would keep it on a “tight leash.”  I would say to invest no more than 2-10% of your investable portfolio in this commodity and be prepared for wide price swings (volatility).  It’s possible to use options to hedge the position to mitigate the risk of a sudden sharp decline or a mass exodus.  With weakness in the price of gold last week, you may be able to take advantage of a good entry price, but this article is by no means a suggestion, recommendation or an advisory to buy gold.  Some believe that the unwinding of Euro currency short interests that were invested in gold may have caused last week’s weakness (i.e., investors bought back borrowed Euro’s with the gold that they sold last week to cover their short interests).

I would appreciate your thoughts, feedback and inclination to invest in this commodity.

Sam H. Fawaz CFP®, CPA is president of YDream Financial Services, Inc., a registered investment advisor. Sam is a Certified Financial Planner ( CFP ), Certified Public Accountant and registered member of the National Association of Personal Financial Advisors (NAPFA) fee-only financial planner group.  Sam has expertise in many areas of personal finance and wealth management and has always been fascinated with the role of money in society.  Helping others prosper and succeed has been Sam’s mission since he decided to dedicate his life to financial planning.  He specializes in entrepreneurs, professionals, company executives and their families.

All material presented herein is believed to be reliable, but we cannot attest to its accuracy.  Investment recommendations may change and readers are urged to check with their investment advisors before making any investment decisions.  Opinions expressed in this writing by Sam H. Fawaz are his own, may change without prior notice and should not be relied upon as a basis for making investment or planning decisions.  No person can accurately forecast or call a market top or bottom, so forward looking statements should be discounted and not relied upon as a basis for investing or trading decisions.
Posted in General, investing. Tags: , , , , . Leave a Comment »

What’s Going On With The Markets?

June 29, 2010 — Sam H. Fawaz

Well that was quick!

I’m referring of course to the short uptrend from the stock market correction that had seen a bottom on June 8. As of today, the S&P 500 index undercut the lows of the last correction and has put us back into another market correction. With all the overhang from worldwide events and mounting evidence of a slowing recovery, investor, consumer and institutional sentiment are at their lows.

In last week’s statement from the Federal Reserve, where it continued to hold interest rates at 0-0.25% for an extended period, the “Fed” acknowledged a softening recovery and lackluster employment growth. Hints of another fiscal stimulus or monetary easing emanated from Washington to help avoid a possible double-dip recession. Now you may have heard about the G-20 Summit meeting this past weekend in Toronto where the United States was the lone voice in encouraging a coordinated effort of more fiscal stimulus to heed off a global recession; instead, most European nations were insistent that austerity measures and tax increases were the way to go to bring their fiscal houses in order. While I’m totally in favor of balanced budgets and fiscal conservatism, simultaneously cutting spending and raising taxes are the surest way to plunge your country into recession or worse, depression (history has demonstrated this time and time again.) At a time when the recovery is so fragile, doing one of the two is risky; doing both is simply economic suicide.

The Conference Board reported a sharp drop in Consumer Confidence today which caught Wall Street completely off guard. However, today’s figures are in sharp contrast to last Friday when the University of Michigan reported its Consumer Sentiment gauge at the highest level in two years. Although the 9.8 point drop in the Conference Board numbers was higher than expected, keep in mind that Consumer Confidence fell over 10 points in February just before the last stock market rally. These numbers really don’t mean a whole lot to the markets, so I’d caution against reading too much into today’s report or market reaction.

As I’ve written before, the stock markets hate uncertainty. With the BP Gulf disaster getting worse, the European Union is still arguing who should pay for whom and how much, financial regulation passage still uncertain, new job creation largely absent, and slowing growth in China, we have the makings of a “bad news salad.” Even though yields on money markets and Treasuries are at their lows, it seems that there is no appetite for risk or conviction in the markets by both the bulls and the bears. With poor May retail sales, jobs, and housing numbers, the bulls haven’t had much to hang their hat on lately. But keep in mind that one month does not make a trend.

So we find ourselves once again at a critical level in the markets today. At a closing level of 1,041 in the S&P 500, the bulls must come in and rescue this uptrend or risk dropping another 6% from here to about 980. I must admit that I believe that our only short-term hope of averting this drop is a very favorable June jobs number on Friday (on the order of 100,000 new jobs created.) Tomorrow (Wednesday), ADP will release their preliminary estimate of the jobs number (of mostly private employment; it does not include government jobs) and it is widely expected to show 60,000 new jobs created. The ADP report is widely anticipated as an indicator of the main jobs report, but it has been known to be way off. However, many institutions and traders treat it as a preview of Friday’s number. Let’s hope that the Labor Department has a nice 4th of July weekend send-off for us.

So much bad news, negative sentiment and consecutive down days are built into the market that a bounce is overdue and may come tomorrow (Wednesday) if the ADP jobs report is favorable. For our portfolios, I will be closely watching the 1,041 level on the S&P 500 index for support. If that support line is definitively broken, I will look to reinstate the portfolio hedges that have served us well in the past. Even at these market levels, we are still considered to be in a correction, not another bear market. By technical definition, a bear market is a 20% decline from a market high, which was 1,220 in the S&P 500 index. That gives us running room to 976 to avoid descending into another bear market.

I personally believe that with an undoubtedly positive 2nd quarter earnings season coming up and a good jobs report, we can avert the drop to bear market levels. I am not in the camp that believes that a double-dip recession or depression is in our near-term future. Short-term, a negative jobs report and poor earnings guidance combined with severe austerity measures around Europe will likely mean bad news for stocks. My broken crystal ball predicts however that we will pull out of this malaise and that the recovery, albeit tepid, will carry the markets upward through the rest of the year. However, if the markets insist on going lower into bear market territory, I will look to liquidate a portion of equity portfolios and increase our hedges. Recall that earlier in the spring I mentioned that the summer months would be both volatile and bumpy…and here we are.

I am working on my 2nd half 2010 market and economic outlook and will send it out to everyone later this week. I wish I had better news for you right now. Nonetheless, I hope this update helps you understand a little more of what’s going on with the markets. Please feel free to forward this message to anyone who might benefit from reading it. If you have any questions or comments, please don’t hesitate to contact me. If you or someone in your family or circle of friends is considering hiring a financial planner, please visit our website or consider a complimentary financial roadmap via the link below. Your first consultation with us is complimentary and there is no pressure to make any decisions.

Sam H. Fawaz CFP®, CPA is president of YDream Financial Services, Inc., a registered investment advisor. Sam is a Certified Financial Planner (CFP®), Certified Public Accountant and registered member of the National Association of Personal Financial Advisors (NAPFA) fee-only financial planner group.  Sam has expertise in many areas of personal finance and wealth management and has always been fascinated with the role of money in society.  Helping others prosper and succeed has been Sam’s mission since he decided to dedicate his life to financial planning.  He specializes in entrepreneurs, professionals, company executives and their families.
All material presented herein is believed to be reliable, but we cannot attest to its accuracy.  Investment recommendations may change and readers are urged to check with their investment advisors before making any investment decisions.  Opinions expressed in this writing by Sam H. Fawaz are his own, may change without prior notice and should not be relied upon as a basis for making investment or planning decisions.  No person can accurately forecast or call a market top or bottom, so forward looking statements should be discounted and not relied upon as a basis for investing or trading decisions. This message was authored by Sam H. Fawaz CPA, CFP and is provided by YDream Financial Services, Inc.
Posted in investing, markets, retirement. Tags: , , , , . Leave a Comment »

Feel Like Un-Retiring? Here’s How to Prepare

June 8, 2010 — Sam H. Fawaz

Last October, the MetLife Mature Market Institute released a study that said the over-55 workforce will account for almost 93 percent of the net increase in the U.S. civilian labor force between 2006 and 2016.  At the same time, MetLife reported that many American workers plan to stay on the job at least until age 69.

The Pew Research Center’s Social & Demographic Trends Project echoed those findings in May 2009, saying that just over half of all working adults aged 50-65 plan to delay their retirement, with 16 percent saying they never plan to stop working.   The issue, says the Pew study, is not about what these Americans earn, but how much they lost during the investment meltdown and the worst economic downturn in more than 70 years.

Add all these factors together and you have one of the most interesting labor situations for older Americans ever.  That’s why that for every retiree or potential retiree who feels they need to return or stay on the job, it’s particularly important to review investment, insurance and tax issues.  It therefore makes sense to meet to discuss these areas with a financial advisor such as a fee-only Certified Financial Planner™ professional.

Here are some critical points to address:

How are your skills? This is a valid point for current and potential retirees. The best job candidates are those with current skills in technology and procedures specific to an industry, so staying in the workforce may mean retraining.  If there’s a way to get an employer to pay, then you should take advantage of it.  But if you have to pay for your own education, then you really need to weigh whether your earnings will justify it unless you enjoy the area of education or going back to school.

Be realistic about your demographic in the workplace: While age discrimination is illegal, there are some workplace cultures where older workers frankly seem out of place.  You have to ask whether you are going to be happy staying in a field that’s populated by younger workers with different interests or whether you might try another line of work.

Consider how a return to the workplace will affect you personally and socially: If you’re 40, 50 or 60, working right now probably feels like breathing – when have you not worked?  But it may not be the best option after a year or two out of the workplace.

Consider health insurance issues: If a retiree returning to the workforce is already receiving Medicare or is covered by a “Medigap” policy, they may be able to lower their costs or improve their coverage by accepting group coverage as primary underwriter of their medical expenses.  Since people over age 55 are generally the greatest users of the health care system, coverage issues are particularly important to run by a financial planner.

Know your tax picture: Tax issues shouldn’t determine your ambitions and goals, but it’s important to consider the impact full or part-time income will have on your finances.  Most retirees realize that it doesn’t take much income to knock them into a higher bracket.  Look for ways to control the taxes you’ll ultimately pay, including continued participation in qualified plans, IRAs, and other tax-favored accumulation vehicles and using annuity income to fill the gap between the beginning of the “post-retirement” period and the age when full Social Security benefits can be drawn without an offset for employment income.  Additional work income may affect the amount of taxable social security income you’re receiving, so be sure to take that into account.

Consider what earnings will do to all your retirement payments: If you are planning to continue working or returning to work, consider not only the tax impact, but also how that might change the way you plan to draw on your retirement savings and investments as well as Social Security.  If you are planning to work, it’s important you consider suspending or delaying receipt of those benefits for as long as you can.

Look for work-related incentives: Particularly for public sector workers, there are opportunities to return to state employment and actually augment existing pensions.  Keep an eye out for these programs and see if they work for you.

Keep saving: If you return to the workplace, see what you can do to take advantage of your new employer’s 401(k) plan or any other tax-advantaged retirement savings benefit, particularly if an employer matches your contribution.  Don’t miss a chance to enhance your retirement savings.

Returning to the workforce after retiring can be immensely rewarding both professionally and personally.  If you’ve un-retired yourself, please feel free to post your comments or additional insights about your experience.

This article was produced by the Financial Planning Association (FPA), the membership organization for the financial planning community, and is provided by Sam H. Fawaz and YDream Financial Services, a local member of FPA and a fee-only member of the National Association of Personal Financial Advisors.
Posted in General, retirement. Tags: , , , , , , . Leave a Comment »

Beware of Gotchas in Growth & Guaranteed Annuities

June 7, 2010 — Sam H. Fawaz

I’ve had several prospects ask about growth and guaranteed annuities being promoted by many in the brokerage and insurance industry.  If there’s one thing you can count on in the financial industry, it’s that the industry will always come up with products that capitalize on fear amongst investors or the frenzy in a particular market segment.  Today, many investors and pre-retirees are discouraged by increased market volatility and low or negative rates of return of late.  The financial and insurance companies respond with products to try and address these concerns and they certainly do sound attractive.

I’ve analyzed and read more annuity prospectuses in my career than I care to admit, and I have yet to find one that delivers on its promise without numerous “gotchas.”  As with any financial product, there is never a free lunch. From hidden and high fees, low guaranteed returns, vague and complicated guarantees and draconian penalty and surrender provisions, the majority of annuities, variable and otherwise, simply don’t make much financial sense.  Annuity and life insurance salesmen, brokers and “financial advisors” always tout the great benefits their products have, but rarely delve into the details of the contract or the downsides.

Remember, when you sign up for any insurance or annuity product that has a penalty or surrender charge, after the right of rescission period has passed (usually three days after signing), the penalty or surrender charge you sign up for is 100% payable whether you keep the product for the requisite term (via higher expenses over 7-17 years) or pay it outright and get out of the contract early.  So waiting until the penalty or surrender period ends does not save you from paying the penalty or surrender charges.  In fact, you’ll lose more by waiting since most contracts have sub-par investment choices with higher annual expenses.

If you’re considering an annuity, keep the following points in mind:

  1. Ask yourself what you intend to use the annuity payout for and when you think you’ll need it.  It is rare that you can’t find an investment that more effectively meets your needs. If you want secure or risk-free retirement income, look at the annuity distribution options and income stream.  In most cases, you would be better off putting your money in bank certificates of deposit and simply liquidate principal as needed.  This way, your heirs get the remaining principal at death rather than the insurance company.
  2. Many people are swayed by the guaranteed current rates on deferred annuities until they realize that the guaranteed rate changes annually, is usually lower than market rates and that the annuity has a 7-17 year unavoidable surrender charge or penalties.
  3. If the guarantee is really important to you, keep in mind that the guarantor is an insurance company much like AIG. How thoroughly have you researched the financial health of the underwriter?
  4. If you are intent on buying an annuity, focus on a fixed and immediate annuity.  Find the best one with the lowest internal expenses, shortest surrender term, and best guarantees.  A fee-only planner can help you choose the best one that has no commissions or hidden compensation to sway his recommendation.
  5. Focus on how relevant the annuity is to your financial goals and whether it is the best solution to the issue you are trying to address.  This helps you move the focus from the product and toward a focus on your personal financial goals, which is what it’s all about.
  6. Remember that an annuity is not an all or nothing decision. You can commit just a portion (10-50%) of your portfolio to an annuity to hedge and diversify your holdings.

I hope this update helps you understand a little more of what goes on with growth and guaranteed income annuities.   My thanks to fellow NAPFA member Bedda D’Angelo for her tips on keeping annuities in perspective.  If you have any questions or comments, please don’t hesitate to post them here.  If you or someone in your family or circle of friends is considering hiring a financial planner, please visit our website or consider a complimentary financial roadmap.

Posted in Consumer Alert, investing, retirement. Tags: , , , , . Leave a Comment »

Market Update for May 20 2010

May 20, 2010 — Sam H. Fawaz

Today marked the 9th day out of the last twelve where the market sold off in a clear message that world governments need to get their acts together and control their fiscal, spending and regulatory policies.  With the Euro currency at historic lows, demonstrations in Greece, an environmental offshore oil catastrophe, German bans on naked short selling, higher than expected weekly job claims, and financial regulatory reform debates going on, we’ve had the perfect storm to extend this market correction.  Stock markets don’t like uncertainty and wishy-washy policy making, so they express their dismay by selling off risky assets.  As of today, the major indices have given back all their 2010 year-to-date gains and then some.  Nonetheless, the long term stock market uptrend remains intact, though as I’ve indicated before (May 6), we’re in for some bumpy times in the market for the summer.

I wish I could say that my crystal ball knew when this short-term pain to the downside would be over.  However, all technical indications is that this move downward is a bit overdone, though admittedly the move to the upside was also overdone in the short-term.  I believe that we’ll see a short or intermediate-term bounce in the next couple of days as value investors and bargain hunters swarm the markets.   We will do the same as the waters calm down.

Indications from Washington are that we may get a vote on the financial reform bill (being debated) tonight and perhaps remove some of the uncertainty in the markets.  I’m not sure what the Obama Administration will tackle next (immigration reform, tax reform, ban on sovereign bailouts, take your pick), but you can bet that it will also rattle the markets when it gets underway.  The European Union appears to be working on a few measures to further restore confidence to the markets and those measures may come to light over the weekend or early next week.  Longer term, we will have to contend with overseas currency and economic weakness, further sovereign debt issues, huge budget deficits, and a stubbornly high unemployment rate.  For the time being though, we have an improving fundamental economic picture, ultra low interest rates, excellent corporate earnings, and plenty of unspent stimulus to keep the market uptrend going for awhile.

Because I felt that it was more likely than not that the majority of the short-term move downward was over today, I decided to lift about 50% of the contra-position hedge that I held on client accounts.  This will allow portfolios to more fully benefit when the uptrend resumes. Leaving 50% of the position “on” allows me to be at least half-right in case there is more downside to come.  This is just prudent hedging.  Should the markets show signs of continuing their downward trend, then it’s just as easy to put the position back on and perhaps add to it.  As of this moment, I see no negative longer term indicators in the markets that tell me that I should be liquidating equity positions and moving to a higher cash position.

Please check out my January-February 2010 Money Magazine Portfolio Makeover-Can I retire Early? http://bit.ly/5aGwIO

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Sam H. Fawaz CFP®, CPA is president of YDream Financial Services, Inc., a registered investment advisor. Sam is a Certified Financial Planner ( CFP ), Certified Public Accountant and registered member of the National Association of Personal Financial Advisors (NAPFA) fee-only financial planner group.  Sam has expertise in many areas of personal finance and wealth management and has always been fascinated with the role of money in society.  Helping others prosper and succeed has been Sam’s mission since he decided to dedicate his life to financial planning.  He specializes in entrepreneurs, professionals, company executives and their families.

All material presented herein is believed to be reliable, but we cannot attest to its accuracy.  Investment recommendations may change and readers are urged to check with their investment advisors before making any investment decisions.  Opinions expressed in this writing by Sam H. Fawaz are his own, may change without prior notice and should not be relied upon as a basis for making investment or planning decisions.  No person can accurately forecast or call a market top or bottom, so forward looking statements should be discounted and not relied upon as a basis for investing or trading decisions. This message was authored by Sam H. Fawaz CPA, CFP and is provided by YDream Financial Services, Inc.

My no-nonsense no-spam policy: If you’d prefer not to receive future updates, just reply and let me know by typing “unsubscribe” in the subject (please don’t hit the spam button-it just puts me on a universal spammer’s list which is tough to get off of.)I’ll take you off my list immediately and permanently.  I will never sell, share, rent or give away your e-mail address to anyone.  Period.

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Learning from mistakes: Buying a New Car

April 30, 2010 — Sam H. Fawaz

The red flags in this story point to a few lessons to heed when buying a new car. (©iStockphoto.com) The red flags in this story point to a few lessons to heed when buying a new car. (©iStockphoto.com)

By Sam H. Fawaz

Anyone who has bought a new car is familiar with the hassles of going to the dealer, finding the right car with the right options, negotiating the deal, and pushing back on all the extras the dealer tries to sell. The last thing you would expect to find out, months after you bought the new car, is that the new car you bought was really a used car.

A family member told me a tale of woe that can serve as a warning for others buying a new car from a dealer. This story began when he stopped at a local Cadillac dealer with a specific request for a 2009 Cadillac CTS with certain options. Though the dealer did not have the car he wanted on-site, they told him that they had located one at a dealer in a neighboring state. While negotiating the deal, he told the salesman that he is a savvy buyer and would not pay the dealer’s document preparation charges or marketing surcharge, which were customary for this dealer to charge. The dealer agreed and the deal was signed. The car would be at the dealer’s lot in a day or two.

When the car arrived, the car buyer went to the dealer to inspect and pick up the car. While inspecting the car and test driving it, he noted that it already had 425 miles logged on the odometer. This seemed odd to the buyer, so he asked the salesperson about this. The salesperson told him that these miles were incurred to transport the car to the dealership and that this was pretty normal.

This was the first red flag for the buyer, though the car was almost exactly as he wanted it and was consistent with the deal he signed. Normally, new cars have less than ten miles registered on the odometer, but driving it from an out-of-state dealer seemed to be a reasonable basis for the number of miles (though elevated) logged on this vehicle.

Back at the dealer, and ready to sign the prepared paperwork, the buyer noted that both the document preparation and marketing charges were added to the purchase price. In addition, a dealer added undercoating treatment had been added to the invoice that was not previously disclosed.

This was red flag number two in the transaction. The salesman explained that all buyers pay these amounts and that they were customary charges. In addition, the dealer option was unknown at the time of negotiation and that they could not delete it. The buyer explained that he told the salesman that he would not pay such charges when he negotiated the deal, and if the dealer didn’t remove them and honor the original deal, he would walk out without the car. The salesman pled with the buyer and told him that they brought the car from out-of state for him and that it wouldn’t be fair if he walked away. The buyer stuck to his guns and walked out. Of course the salesman followed him out the door and told him that those charges would be removed. They were indeed removed.

Signing the final paperwork while the car was being prepped for delivery, the buyer was happy to be getting the car he wanted at the price he had negotiated. As is customary with new car purchases (when you don’t transfer a license plate), he received a temporary license plate for the car and was told that he could pick up the permanent one within a month. The dealer would call him when it was ready.

A month or so went by and the dealer hadn’t called him to pick up his permanent license plate, so the buyer called the dealer. He was told that there were some issues with the paperwork and to come by and pick up a 30-day temporary plate. The buyer did so.

Another month went by and still there was no call from the dealer to pick up the permanent plate. Concerned, the buyer called the dealer and was told that they were still having issues with the registration and to pick up another temporary plate. The dealer could not give him any further information. This process repeated for a few more months, and the buyer continued to make payments on the car even though he still had not received a valid title for the vehicle.

This was red flag number three.

Suspicious that something was amiss here, the buyer made a phone call to the Secretary of State to find out why registration had been delayed. He was told that the vehicle identification number (VIN) of his car was not registered to him and that they therefore could not give him any information about the vehicle. Of the few facts he was able to garner from the representative was that the vehicle was still registered in the name of an out-of-state dealer and that the buyer would not, when a new title was issued, receive a new original vehicle title. In other words, the car had been previously registered to another buyer and he would therefore receive a used car title.

Apparently what had happened is that the out-of-state dealer had itself purchased the vehicle for another potential buyer from yet another out-of-state dealer, and, to bring the car across state lines, had to register the vehicle in the dealer’s name (normally, dealers are not required to title vehicles purchased for resale in their name). However, that deal had fallen through, so the dealer was stuck with this car and kept it in its new car inventory system. This explained why so many miles were already registered on this vehicle even though it was transported from an adjacent state less than 200 miles away. In any case, the buyer had essentially purchased a used car under the guise of a new car purchase.

Needless to say, the buyer was not happy about this. Since he wanted to know his rights, he consulted with an attorney who advised him, that even though he had driven the car for several months, he could essentially drive the car to the dealer, demand a refund of all monies paid (including the payments made to the dealer’s financier) and “walk away” from this purchase. Alternatively, he could demand restitution from the dealer for selling him a used car at a new car price.

The buyer called up the dealer and told them that he pretty much knew what was up with this car and let them know that unless they negotiated a settlement with him, he would turn in the keys and they would once again “own” this car. The dealer inquired about the number of miles on it (about 8,000) and asked the buyer to come down to the dealership to talk. In any case, they had finally procured the plate and he could pick that up as well.

The dealer, needless to say, did not want to have to take this car back into inventory and take a large loss on it. The buyer held most of the cards here, so he asked for a settlement of $8,000 cash to keep the car. The dealer of course, low-balled him an offer which the buyer flatly rejected and let the dealer know in no uncertain terms that they would not want the media to hear about his experience with this purchase if they didn’t deal with him in good faith. In the end, the buyer ended up negotiating a $6,000 cash payment plus a $1,800 bumper repair the car had needed. He walked out with a repaired car and a check that day.

This story obviously ended well for such a savvy buyer, but most people would either not know their rights in these circumstances or would not be aggressive enough to push the dealer to settle on their terms. The red flags in this story point to a few lessons to heed when buying a new car:

1) If the dealer adds new charges to an already negotiated deal at signing, walk away and find a more scrupulous dealer.

2) Always inspect, test drive the car and check the odometer before signing the final paperwork. If the mileage on the odometer is more than 10-20 miles, find out why and ask yourself whether this is indeed a new car. Always match up the VIN on the paperwork to the one on the vehicle itself.

3) If it takes more than six weeks to receive a title or license plate, start digging deeper to find out why. When you receive the title, inspect it closely to ensure that you are getting a new car title (original owner) rather than a used car title.

4) If you find out that a new car you have purchased was actually used, consult with an attorney with experience in this area to find out your rights in your circumstances.

I can’t say how many times this kind of story happens to buyers, but I imagine that many more people would not even be aware that this type of thing goes on. Even a savvy buyer as I have described didn’t quite catch on at the time of purchase, so I imagine less experienced buyers would never suspect anything either.

Hopefully, this tale will help you avoid being a victim of this kind of transaction and you’ll be able to assert your rights. While the majority of new car dealers are honest and straightforward, this demonstrates that some clearly can be somewhat shady, even those we think have a pristine reputation.

Sam H. Fawaz CPA, CFP® (a.k.a. TheMoneyGeek) is a fee-only personal financial planner and a registered member of the National Association of Personal Financial Advisors. He has been working in personal finance since 1980 and has been writing about it since 1999. Sam’s website is http://ydfs.com.

Posted in Consumer Alert, General, Smart Buying. Tags: , , , , . 1 Comment »
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