What’s Going on in the Markets – Monday June 6 2011

June 22, 2011 — Sam H. Fawaz

Today marked the fourth day in a row of intense selling in the stock markets immediately after the markets gave a technical “buy” signal last Tuesday.  Last Wednesday, the markets staged a hard reversal to the downside and have not yet recovered.

Economic indicators of late have been coming in worse than expected with recent slowdowns in manufacturing and hiring and higher unemployment claims. Last Friday the labor department reported the creation of 54,000 new jobs during the month of May while analysts were projecting 150,000-175,000 new jobs created.  Needless to say, the markets were disappointed and continued the sell-off that started last Wednesday.

While there are many possible reasons discussed for the market’s indigestion (e.g., the end of the Federal Reserve’s bond buying program in June, the earthquake in Japan, continued sovereign debt woes in Europe, lack of agreement in Congress on extending the debt ceiling, lower consumer confidence, high joblessness), no one really knows the exact reason why the markets sell off on any particular day.  As I indicated in a previous message, institutions take profits periodically on positions to help reset prices and make the market more enticing for those standing on the sidelines waiting to buy at lower prices.  While the institutions (who make up the bulk of buying and selling in the markets) may view slower growth as reasons to sell, they have not been selling with wild abandon by any means.  So one could say that the correction has been somewhat orderly (but any declines in prices are never pleasant).  In other words, institutions don’t appear to be positioning for a bear market or a recession in the near future.

My intermediate and longer term indicators are still bullish even as this 5% correction (so far) may get to 10%.  As a reference point, the markets corrected 13-15% last summer and that set us up for much higher stock prices.  While the gains we’ve seen so far will likely not be repeated, I still expect a respectable finish for the year with a positive return in the stock markets (though my crystal ball is in the shop, so please don’t make any investing decisions based on this prognostication.) The summer months tend to be volatile and of low volume, so market swings are frequent and sometimes abrupt.  I believe that corporate earnings (which ultimately drive stock prices) will continue to surprise to the upside (if they’re not hiring, then costs stay low).  The effects of the tragic Japanese earthquake, which caused a hiccup in the markets this quarter, will begin to wane and offer opportunities for companies to help with the rebuilding, and thereby also help with future corporate earnings.  Finally, the costs of oil and other commodities overall have come down and will ultimately reduce inflation pressure.

How should you handle this correction? For most, doing nothing may be the right answer and simply “ride out” this correction.  For my clients, I have once again begun hedging portfolios in case the correction proves to be more protracted than expected.  I have already become more defensive by reducing more risky types of positions and adding more defensive ones.  But in an overall stock market correction, ultimately 3 out of 4 stocks will follow the market down, so there’s no good place to really hide. As this correction plays out and support wanes for certain sectors, I will slowly scale out of those positions and wait to buy them back at lower prices as appropriate.  If necessary, I will add more to our hedges to reduce our overall equity exposure and risk.  New positions are on hold until a new uptrend is confirmed.  This is by no means a recommendation of what you should do with your portfolio if you’re a “do-it-yourselfer”, so please consult with a professional (like me!) if you’d like to protect your portfolio or figure out what you should do.  Every investor and his or her goals are different, and that’s how we handle each client–individually.  In any case, the correction may take us down to the 1250 level in the S&P 500 index (the March 2011 Japan earthquake low) or down to 1200 (less likely in my opinion).

With four down days in a row, we might see a bit of a relief rally tomorrow (Tuesday), but I’m not expecting any type of big reversal.  With the amount of selling that has been going on lately, I just don’t expect the markets to turn around that quickly and “rip” to the upside without a catalyst. Ultimately, corrections are healthy for the markets and they will recover in time. It’s just never fun to watch the markets (and our portfolios) go down, but if you’re a long term investor, this is merely a bump in the road.  If I see that circumstances have changed and my technical indicators flash warning signs, you can bet that you’ll hear from me again and I’ll be taking appropriate action.

I welcome your questions and feedback. If you’re not yet a client, keep in mind that your first consultation is complimentary and comes with no pressure and no obligation whatsoever.  As a fee-only advisor, I put your interests first and work as your fiduciary. Not all advisors can make this statement.

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How to Choose a Financial Advisor

March 31, 2011 — Sam H. Fawaz

You know the importance of saving for retirement, but do you have the time and know-how to accomplish your financial goals? In an increasingly busy world, it’s possible that keeping close tabs on your investment accounts isn’t exactly realistic.

Seeking the help of financial professionals has become more important to investors according to a recent survey conducted by Harris Interactive on behalf of TD Ameritrade Holding Corporation, as nearly one quarter (22 percent) of investors report relying more on a professional investment advisor following the recession.

Even if you have a good handle on your investments, you may find that hiring a financial advisor — who can put the time and energy into making sure you and your family plan for a secure financial future — may be a worthwhile investment. By hiring an independent registered investment advisor — commonly referred to as an RIA — you can make sure your investments are managed on a full-time basis by a professional advisor, while still having control.

Of course deciding to put someone in charge of your hard-earned money is not a process to be taken lightly.  Our preferred custodian, TD Ameritrade,  and we offer these tips to consider as you choose an independent financial advisor or RIA:

* Just as it is wise to do research on the background of anyone who would take care of your children, you should investigate the person or company you enlist to handle your money. The Securities and Exchange Commission, Inc. (www.adviserinfo.sec.gov), Financial Industry Regulatory Authority (www.finra.org), Certified Financial Planner Board of Standards (www.cfp.net), National Association of Personal Financial Advisors (findanadvisor.napfa.org/Home.aspx), and Financial Planning Association (http://www.fpanet.org/PlannerSearch/PlannerSearch.aspx), as well as your own state securities agency all collect background information on financial professionals that can be accessed through their websites. Use these sites to make sure the advisors you are considering haven’t faced disciplinary action for dishonest practices and are in good standing with regulators.

* Know the difference between working with an independent RIA and a stock broker, or other financial services provider. Independent RIAs, for example, are bound by law to act in their clients’ best interest. Brokers, on the other hand, are held to a “suitability” standard, meaning the advice they give must be suitable to that client’s situation. If you are looking for objective, comprehensive money management, you might want to consider an RIA.

* While RIAs are required by law to act in your best interest, there are other ways that you can ensure they will do what is best for you. One is to ask how they are compensated. Fee-only compensation generally minimizes conflicts of interest and means that your advisor is paid only for the management services and advice he or she offers, and only by you, not by investment product providers. When an advisor is paid on commission, there’s a greater chance he or she will make choices with your money that serve not only your interests, but their own as well. That’s not to say that advisors do not work fairly under this model, but potential conflicts of interest are something to consider as you choose an advisor.

* When looking for referrals from friends or relatives, the most valuable referrals may come from those in similar situations. It’s also a good idea to ask potential advisors if they specialize in working with certain types of clients and choose one that fits your unique profile.

* A third party custodian should also handle all your deposits, to ensure checks and balances. An independent custodian like TD Ameritrade can help ensure the safety and security of your assets, and will provide you with a clear, concise statement every month. A duplicate monthly statement is also sent to your advisor. Make sure this is also a legitimate and upstanding business.

Working with a trusted independent fee-only RIA can help you realize your financial goals, while allowing you to spend less time worrying about and managing your investments. If you need help and would like to talk to a fee-only planner with no sales pressure, cost  or obligation, please visit our web site at http://www.ydfs.com or call YDream Financial Services, Inc. at (615) 395-2010 or (734) 447-5305.

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What’s Going on With the Markets-March 10, 2011

March 10, 2011 — Sam H. Fawaz

Since the beginning of last September, the stock markets have enjoyed a nearly uninterrupted bull uptrend which has been unprecedented in market history.  Fueled by improving economics and Federal Reserve actions, the uptrend has withstood many geopolitical, fiscal and news driven setbacks.  But today the political unrest in the Middle East, issues with Spanish debt repayment and a higher than expected weekly first-time unemployment claim number (497,000) were the 1-2-3 punch that the markets could not recover from and therefore we suffered a 1.5-2.5% setback.  Be it stocks, gold, silver or oil today, they were all down today.

Normally, up-trending bull markets such as the one we’re in take rest periods, or “corrections” as they’re called, every couple of months while individuals and institutions take profits on stock positions and reset stock prices back to normal levels. Corrections (usually 10-20% of an index value such as the S&P 500) are healthy for the market and while uncomfortable if you watch them unfold from day to day, allow the markets to set up for the next leg up.  Two years to the day yesterday into this bull run have seen us move up about 100% from the March 9, 2009 lows on the S&P 500 index. Without a doubt, this has been an incredible run and I hope you’ve been participating.

As I’ve discussed with clients and prospects recently, a correction in the market has been long overdue and anticipated.  While today was the first big down day where we really tested key levels in the indexes, there have been several signs of exhaustion in the market. Despite this, I cannot say with certainty whether we’ve definitively entered into a correction period (technically we have, but it needs to be confirmed with follow-through on Friday and next week.)  If the bulls get their act together tomorrow and “rescue” the market by pushing it back up through heavy volume buying, then this decline may be “all she wrote.”  If not, we could head down to test the 1275 level of the S&P 500 index (we closed at 1295 today).  A failure to hold the 1275 level means that large institutions have decided to continue selling and a drop to 1240 may need to exhaust sellers.

With the “Day of Rage” demonstrations scheduled for Friday in Saudi Arabia, rocketing oil prices and sovereign debt issues, the odds of avoiding a deeper correction are not very high.  Besides, this correction is long overdue and may occur regardless of how peacefully the Middle East situation is resolved or even if oil prices come back down to earth.

What do I think? As I’ve mentioned before, the Federal Reserve has made investing in anything but the stock market earn near zero returns. That is, the government wants us to buy equities, push the stock market (and IRA’s and 401(k)’s) higher, to make us feel richer and more confident and therefore spend more.  Spending more creates demand which in turn creates jobs and so on.  So I believe that the gentle (if somewhat invisible) hand will come in to help support the market and avoid a protracted decline that might scare off the latest entrants into the market. While my crystal ball is still in the shop, I believe that a decline beyond 1275 in the S&P 500 (another 1.5%) is a stretch.  While that would make it a very shallow correction, it may be enough to breathe new life into the stock market and help resume the uptrend.

So what should you do now in light of a possible correction?  Basically, you shouldn’t do much if anything since nothing is confirmed.  If you’re investing on your own, trying to time your “in’s and out’s” of the markets is nearly impossible and not recommended unless you’re an experienced trader.  If you have a profitable position and worry about it turning into a loss, you may decide to sell a portion or all of it.  More savvy investors may be able to hedge their positions with options or inverse ETF’s if the decline proves to be protracted.  From our end for our clients, I’m watching the market technical levels on a daily basis like a hawk and already have begun to harvest some profits and protect some positions. If a protracted downturn does materialize, I may also hedge portfolios with inverse ETF’s and selectively liquidate partial positions.  But we’re not there yet and I’m not making any recommendations.  And by no means do I think we’re entering another bear market (by definition, a bear market begins when we decline 20% from the last peak in a major index).  Non-clients should consult their current advisor (or me) if you’re unsure what to do in the event of a protracted decline and should not treat this as a recommendation to buy or sell anything (see disclaimer below).

Last year we declined nearly 15% from May through August amid sovereign debt worries and economic uncertainty and then proceeded to push up nearly 25% over the next six months. I still believe that we will end 2011 with double-digit gains in the markets as this economy matures from recovery to expansion.  All economic indicators point positively and last month we even added nearly 200,000 new jobs.  We may even see housing perk up a bit later this year.  Without a doubt, sustained oil prices above $125 per barrel and $4 gasoline for an extended period (6 months or more), will put a crimp into the expansion, but I don’t believe we’re heading for a long term spike in oil prices.  Let’s just say that the oil producing countries learned what supply constraints and speculation did to oil demand the last time oil spiked to $145 a barrel. More electric and hybrid cars is just one example of how we are learning to live with less demand for foreign oil.

I hope this message helps alleviate any anxiety over the recent down days in the market.  Remember that the media loves good negative stories to help sell newspapers and advertising. Avoid the noise and try to keep your sanity during the days when it seems like there’s always something bad going on in the world.  Middle Eastern concerns have been a worry for decades, if not centuries now, and likely won’t be resolved during our lifetimes.  Like every other world incident, the markets get back to normal and we get through them.

Enjoy the upcoming weekend and don’t hesitate to contact me if I can be of any help.  If you’re not a client, your consultation with me is complimentary, no-pressure and with no obligation.  I’d love to talk to you whether or not you’re considering hiring a financial planner or money manager.

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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Highlights & Summary of the Tax Relief Act of 2010

December 17, 2010 — Sam H. Fawaz

I promised to keep you updated on the tax bill that was before congress which essentially extends the Bush era tax cuts for two years. Here are the highlights and full summary with more details to come in the next couple of weeks:

On Thursday December 16, 2010, Congress passed the Tax Relief, Unemployment Insurance Re-authorization and Job Creation Act of 2010. President Obama just signed the bill this afternoon Friday December 17, 2010.  This legislation, negotiated by the White House and select members of the House and Senate, provides for a short-term extension of Bush era tax cuts made in 2001.  It also addresses the Alternative Minimum Tax (AMT) and Estate, Gift and Generation-skipping Transfer taxes.

The following summary will provide you with key information and highlights from the bill with help from the Financial Planning Association. If you have any additional questions, please do not hesitate to contact me at (734) 447-5305 or at hf@ydfs.com. I hope that you find this summary useful for your personal and business affairs.

HIGHLIGHTS

Two-year extension of all current tax rates through 2012

  • Rates remain 10, 25, 28, 33, and 35 percent
  • 2-year extension of reduced 0 or 15 percent rate for capital gains & dividends
  • 2-year continued repeal of Personal Exemption Phase-out (PEP) & itemized deduction limitation

Temporary modification of Estate, Gift and Generation-Skipping Transfer Tax for 2010, 2011, 2012

  • Reunification of estate and gift taxes
  • 35% top rate and $5 million exemption for estate, gift and GST
  • Alternatively, taxpayer may choose modified carryover basis for 2010
  • Unused exemption may be transferred to spouse
  • Exemption amount indexed for inflation in 2012

AMT Patch for 2010 and 2011

  • Increases the exemption amounts for 2010 to $47,450 ($72,450 married filing jointly) and for 2011 to $48,450 ($74,450 married filing jointly).  It also allows the nonrefundable personal credits against the AMT.

Extension of “tax extenders” for 2010 and 2011, including:

  • Tax-free distributions of up to $100,000 from individual retirement plans for charitable purposes
  • Above-the-line deduction for qualified tuition and related expenses
  • Expanded Coverdell Accounts and definition of education expenses
  • American Opportunity Tax Credit for tuition expenses of up to $2,500
  • Deduction of state and local general sales taxes
  • 30-percent credit for energy-efficiency improvements to the home
  • Exclusion of qualified small business capital gains

Temporary Employee Payroll Tax Cut

  • Provides a payroll tax holiday during 2011 of two percentage points. Employees will pay only 4.2 percent on wages and self-employed individuals will pay only 10.4 percent on self-employment income up to $106,800.

FULL SUMMARY

Reductions in Individual Income Tax Rates through 2012

  • Income brackets remain 10, 25, 28, 33, and 35 percent
  • Capital gains and dividend rates remain at 0 or 15 percent
  • Repeal of the Personal Exemption Phase-out (PEP)
  • Repeal of the itemized deduction limitation (Pease limitation)
  • Marriage penalty relief
  • Expanded dependent care credit
  • Child Tax Credit
  • Earned income tax credit

Education Incentives Extended Through 2012

  • Expanded Coverdell accounts and definition of education expenses
  • Expanded exclusion for employer-provided educational assistance of up to $5,250
  • Expanded student loan interest deduction
  • Exclusion from income of amounts received under certain scholarship programs
  • American Opportunity Tax Credit of up to $2,500 for tuition expenses

Extension of Certain Expiring Provision for Individuals through 2011

  • Above-the-line deduction for qualified tuition and related expenses
  • Tax-free distributions of up to $100,000 from individual retirement plans for charitable purposes.  Donors may treat donations made in January 2001 as if made in 2010.
  • 30-percent credit for energy-efficiency improvements to the home
  • Deduction of state and local general sales taxes
  • Parity for employer-provided mass transit benefits
  • Contributions of capital gain real property for conservation purposes
  • Deductibility of mortgage insurance premiums for qualified residence
  • Estate tax look-through of certain Regulated Investment Company (RIC) stock held by nonresidents for decedents dying before January 1, 2012
  • Above-the-line deduction for certain expenses of elementary and secondary school teachers

Alternative Minimum Tax (AMT) Relief

  • The legislation increases the exemption amounts for 2010 to $47,450 (individuals) and $72,450 (married filing jointly) and for 2011 to $48,450 (individuals) and $74,450 (married filing jointly).  It also allows the nonrefundable personal credits against the AMT.

Temporary Estate Tax Relief and Modification of Gift and Generation-skipping Transfer Taxes

  • Higher exemption, lower rate. The legislation sets the exemption at $5 million per person and $10 million per couple and a top tax rate of 35 percent for the estate, gift, and generation skipping transfer taxes for two years, through 2012. The exemption amount is indexed beginning in 2012. The proposal is effective January 1, 2010, but allows an election to choose no estate tax and modified carryover basis for estates arising on or after January 1, 2010 and before January 1, 2011. The proposal sets a $5 million generation-skipping transfer tax exemption and zero percent rate for the 2010 year.
  • Portability of unused exemption. Under current law, couples have to do complicated estate planning to claim their entire exemption.  The proposal allows the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse without such planning. The proposal is effective for estates of decedents dying after December 31, 2010.
  • Reunification of estate and gift taxes. Prior to the 2001 tax cuts, the estate and gift taxes were unified, creating a single graduated rate schedule for both. That single lifetime exemption could be used for gifts and/or bequests. The proposal reunifies the estate and gift taxes. The proposal is effective for gifts made after December 31, 2010.
  • As noted above. the look-through of RIC stock held by non-resident decedents is extended through 2011

Temporary Extension of Investment Incentives

  • Extension of bonus depreciation for taxable years 2011 and 2012
  • Small Business Expensing: increase in the maximum amount and phase-out threshold under section 179. Sets the maximum amount and phase-out threshold for taxable years 2012 at $125,000 and $500,000 respectively, indexed for inflation.  (Previously-passed legislation raised the 2010 and 2011 max amount and phase-out at $500,000 and $2,000,000 respectively.)

Extension of Certain Expiring Provisions for Businesses through 2011

  • Enhanced charitable deduction for corporate contributions of computer equipment for educational purposes
  • Enhanced charitable deduction for contributions of food inventory
  • Enhanced charitable deduction for contributions of book inventories to public schools
  • Special rule for S corporations making charitable contributions of property
  • 15-year straight-line cost recovery for qualified leasehold improvements
  • Employer wage credit for activated military reservists
  • Tax benefits for certain real estate developments
  • Extension of expensing of environmental remediation costs
  • Treatment of interest-related dividends and short term capital gain dividends of Regulated Investment Companies (RICs)
  • Work opportunity tax credit (WOTC)
  • 100% Exclusion of qualified small business capital gains held for more than 5 years
  • Research credit
  • Qualified Zone Academy bonds

Extension of Unemployment Insurance

  • The unemployment insurance proposal provides a one-year re-authorization of federal UI benefits.

Temporary Employee Payroll Tax Cut

  • The legislation creates a payroll/self-employment tax holiday during 2011 of two percentage points. The employer’s share of the payroll tax remains unchanged.  This means employees will pay only 4.2 percent on wages and self-employed individuals will pay only 10.4 percent on self-employment income up to $106,800.  The social security trust fund is made whole by transfers from the general fund.

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

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

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

YDream Financial Services, Inc. is providing this information as a service to its subscribers. While this information deals with tax and legal issues, it does not constitute tax or legal advice and cannot be relied upon as such for avoidance of penalties in matters before the IRS. If you have specific questions related to this information, you are encouraged to consult us, a tax professional or an attorney who can investigate the particular circumstances of your situation.

Sources: U.S. Senate Committee on Finance; U.S. Congress Joint Committee on Taxation

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 the Financial Planning Association(of which Sam is a member) and is provided by YDream Financial Services, Inc.

Posted in Taxes. Tags: , , , , , . Leave a Comment »

Update on Extension of Bush Era Tax Cuts

December 7, 2010 — Sam H. Fawaz

I promised to update you on progress in changes to income tax legislation that affects all of us in 2011.  As you may recall, the Bush-era tax cuts were scheduled to expire after 2010, which essentially amounts to a tax increase if Congress didn’t act to extend them.

After the stock market close yesterday, President Obama, in a televised speech, announced a compromise with Republicans in Congress which, if passed into law, would amount to a much bigger fiscal package in 2011 than virtually anyone expected. In addition to a two-year extension of the Bush-era tax cuts, he added a one-year reduction in the payroll tax and a huge investment tax credit.  While the ultimate bill that gets passed may be different than detailed below, I wanted to get you some details right away.

I would expect that the proposal will be signed and turned into law in the next couple of weeks.  Among the highlights of the proposed bill are:

— A two year extension of tax cuts for all income levels.   The 15% rate on capital gains and dividend income would also be extended as part of the deal. The president also proposes a 35% estate tax rate, with a $5 million exemption.  It appears that the President traded tax extensions for the “rich” for unemployment benefit extensions and the below payroll tax deduction.

— Payroll tax deduction. This would reduce the 6.2% Social Security payroll tax applied to employee wages by 2 percentage points.

— Renewal of emergency unemployment benefits through the end of 2011. This would be more than the three-month extension most analysts had expected. It puts around $60 billion in the hands of unemployed citizens, which is much more than the consensus expected.

— ARRA tax cut extensions. Several small tax cuts in the American Recovery and Reinvestment Act, passed in 2009, will be extended, including an expanded earned income tax credit, and various education-related tax breaks.

— Full expensing of business investments in 2011.  This would allow the expensing of business investment in 2011, similar to the policy that the president proposed in September.  It will allow companies to deduct the entire cost of capital expenditures on their taxes rather than depreciate them.

Congress and the White House will need to work out the details, but I expect this tax bill to pass. It’s not likely that this lame duck Congress would leave for the holidays until this is sent to the President for his signature.  It’s rare that I pity the Internal Revenue Service, but with tax forms to revamp and guidance and rules to formulate, they will be behind the curve on getting this out.  I would expect some delays of 2010 income tax refunds for returns filed early, but none that are terribly lengthy.

The stock markets have been expecting this, and some of it already factored into current levels, but I still expect market reaction to be positive and further bolster any Santa Claus rally we may have coming.  This is essentially another huge fiscal stimulus plan, perhaps larger than any of us have been expecting or realize.

I’ve been saying all along that Congress will “hem and haw”, posture for their constituents, and pretend to be against tax cuts and for fiscal responsibility.  But ultimately the economy is too fragile to be saddled with a tax increase this year or next. Even I am a bit surprised by the depth and breadth of the bill, but I could not see Congress not doing something before year-end. Failing to pass something would have amounted to a quantitative easing neutralizer (i.e., rendering quantitative easing worthless).

I will keep my eyes and ears peeled open for more details about this bill and its ultimate passage and will let you know what ultimately gets passed. If you, a family member, friend or colleague would like more information about this or just need to talk about a financial situation, please feel free to forward a link to this post to them and suggest they get in touch with me (http://www.ydfs.com).  I will be sure to take good care of them.  As always, I’m available for any questions you may have and welcome your comments.

Have a great holiday season and look for my year-end and 2011 Economic and Market Outlook letter later this month.

Posted in General, investing, Taxes. Tags: , , , , . 1 Comment »

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.
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