Tuesday, March 31, 2009

Keeping Records of our Charitable Deductions

I have had friends tell me that they are careful not to deduct too much for charitable contributions, for fear of being audited by the IRS. So they routinely claim less than the value of the goods donated. My approach is to take the full value of our deductions for charitable contributions, by ensuring I have the written documentation required by the IRS.

For every charitable contribution I make, I get a receipt with the organization's name and address, on which I can write the date, cash amount or specific goods contributed. If I am making a cash donation and can't get a receipt, I will write a check, and use the cancelled check as documentation. For goods, I usually create a list of the donated items at home, which can be attached to the receipt from the charitable organization.

To value contributed goods, I use thrift store prices, which I obtain from a sheet provided by my local Goodwill collection center. On the sheet, clothing typically has a value of about $5 per piece, with coats and suits being more, and socks being less. For contributions of securities, I used the average price on the day the contribution was made. For last year, I didn't make any contributions of old cars or appreciated art, which have special valuation requirements.

Finally, to claim over $250 in a single contribution, cash or goods, the taxpayer must have contemporaneous written acknowledgement of receiving the donation. For me, the Goodwill receipt and our church annual summary statement meet this requirement.

I keep all the documentation for at least three years after the filing date. If the IRS should ever audit my return for charitable deductions, I can easily produce required documentation to support the tax benefits.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial or advice. Please consult a professional advisor.

Copyright © 2009 Achievement Catalyst, LLC

April Fool's Computer Worm Info

It is rumored that computers infected with the Conficker worm will be affected on April 1, 2009, April Fool's day. Although the specific action is not known, speculation has been from minor to major impact. MSN.com's article, April Fool's Conficker Threat is Likely Hype shares some easy ways to check if a computer has been infected. Specifically, an infected computer won't be able to access certain security sites, such as microsoft.com to get updates.

Based on this check, it appears my computer is worm free. However, I still plan to back up my files today, in an April 1 issue happens. :-)

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial or computer security advice. Please consult a professional advisor.

Copyright © 2009 Achievement Catalyst, LLC

Links to Carnivals from March 24 - 30, 2009

Here are links to Carnivals in which My Wealth Builder participated from March 24 to March 30, 2009:

Carnival of Personal Finance

Carnival of Financial Planning

Carnival of Family Life

For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial or family advice. Please consult a professional advisor.

Copyright © 2009 Achievement Catalyst, LLC

Monday, March 30, 2009

3/30/09 Stock Position Update - Advancing with the Rally

Since all the stocks have received sell signals, I'm no longer buying from the 7/7/08 buy list, the 10/20/08 Buy List, or the buy list of 1/12/09. On 3/18/09, I sold the 50 shares of Southwestern Energy (SWN) that I bought on 3/5/09. Although I predicted the opposite, the Treasury announcement of a plan to buy toxic assets enabled the market to advance further. If the rally continues this week, I will continue to look for opportunities to sell these positions.

During early April, I plan to update my buy list based on the modified Unemotional Investor Growth System.

The portfolio rose 7.4% this week versus 6-7% for the market, due primarily to Potash gaining about $12 this week. The energy stocks advance significantly midweek, only to pull back on Friday. The overall portfolio is down 21.4% and the remaining holdings are down 38.5%. The portfolio is now way above the previous bottoms that occurred October 10, 2008 at -35.0% and -53.0% respectively. The only positive still has been the gain from shorting Las Vegas Sands. Otherwise, the prices of these stocks have been destroyed by the October through November decline.

For reference, the stocks on my 7/7/08 buy list were: Potash (POT), Research in Motion (RIMM), Bucyrus (BUCY), Williams Cos. (WMB), Southwestern Energy (SWN), Hess (HES), and Range Resources (RRC). The system has given a sell signal for every stock: Williams Cos. (8/8/08), Range Resources (8/22/08), Hess (9/12/08), Research in Motion (9/12/08), Southwestern Energy (9/26/08), Postash (10/10/08) and Bucyrus (10/10/08). The stocks on my 7/7/08 short list were: Las Vegas Sands (LVS), Sears Holdings (SHLD), and Life Time Fitness (LTM). Southwestern Energy was the only stock identified for the 1/12/09 buy list.


From My Wealth Builder 7/7/08 and 1/12/09 Buy List
Stock [purchase date]SharesPurchase Price

Price on 3/27/09

Range Resources(RRC) [7/10/08]*50

$58.17

$42.69

Potash (POT) [7/18/08]*10

$215.09

$88.71

Southwestern Energy (SWN) [7/18/08]*50

$39.46

$31.97

Potash (POT) [7/24/08]*10

$192.02

$88.71

Southwestern Energy (SWN) [3/5/09]*50

$29.44

sold on 3/18/09 @ $30.52


*Range Resources received a sell signal on August 22, 2008. Southwestern Energy received a sell signal on September 26, 2008. After received a buy signal on 1/12/09, Southwestern Energy received a second sell signal on 3/6/09. Potash received a sell signal on October 10, 2008. I plan to sell the position once it reaches the original purchase price, which may take a very, very long time.

At this point, I will continue to hold these stocks and make no more purchase since sell signals have been give for every stock.

From My Wealth Builder 7/7/08 Short List
Stock [short date]SharesShort Price

Price

Las Vegas Sands (LVS) [7/7/08]100

$38.10

closed 7/11/08 @ $33.69


I have only able to short Las Vegas Sands so far, which I have closed. I didn't short Sears Holdings and Lifetime Fitness since both stocks need to be "rented" from a shareholder for about 0.1% a day and a minimum of $50,000 needs to be shorted.

At first, I was looking for other stocks to short, but at this point, I think it's too risky to be shorting .

On 8/15/08, Las Vegas Sands closed at a short term high of $56.30. It closed at $6.32 on 10/24/08, rebounded to $14.19 on 10/31/08 before falling a weekending low of $1.77 on 3/6/09. It closed at $3.14 on 3/27/09. It's too bad I didn't hold the short position until now :-)

The market continues to be choppy. The Dow and S&P have reached 12-year lows. As of the close on 3/27/09, the Dow, Nasdaq and S&P 500 indices were respectively at 7776.18, 1545.2o, 815.94. All three indices rose significantly from lows in 2009 in the past three weeks. The Dow, Nasdaq and S&P 500 declines are -10.55%, -2.02% and -9.0% respectively year to date.

Economists now acknowledge that the economy has been in recession since December, 2007. I expect the market will likely continue to be choppy. For now, I am looking reinvest the cash that was raised at the end of 2008 and I will no longer be trying to short stocks. I cashed in 9% of one of our managed funds, since I believe the rally will soon end. I still plan to trickle in around 25% of the funds over the next few weeks, but want to wait for a pull back. However, we will not be adding any new money, until the Dow crosses either 6000 or 10,000.

Disclosure: At time of publication, I am long Range Resources, Potash and Southwestern in my trading account. The managed accounts are long Hess, Potash, Range Resources, Sears Holdings and Williams Companies.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2009 Achievement Catalyst, LLC

Sunday, March 29, 2009

3/29/09 Bottom Fishing Portfolio - Almost Completely Closed

Since October 3, 2008, my attempts to buy stocks near a bottom have failed miserably. My first attempt was to buy financial stocks, which have since fallen 50 to 90%, and an agricultural stock, which has fallen 10%. I have also experimented with buying calls on auto stocks and financial stocks, also without success. I've had the most success selling put contracts to open on Monsanto (MON) and Energy Conversion Devices (ENER), which earned a few hundred dollars to slightly offset the losses. In addition, I have had some success buying and selling stocks that I believe will emerge well from the recession, Monsanto, Amazon (AMZN), and Energy Conversion Device.

In mid March, I took the opportunity to sell most of my positions during the bear market rally, even if it meant taking some losses. (If I had waited until last week, I would have reduced my losses in the financial stocks by about 12%.) In late March, I sold the PNC (PNC) leap call for a small profit At this point, I only have three positions in this portfolio, Monsanto, Energy Conversion Devices, and one PNC call. If the financial stocks rally again this week, I will try to close out the remaining PNC call. I will likely hold onto Monsanto and Energy Conversion Devices for the longer term.

Overall, this portfolio is down 20.9%. Financial stocks, which had losses of 52 to 84%, were the main reason for the negative returns. In the table, the sales with gains are in blue and the sales with losses are in red.

Bottom Fishing Portfolio
Stock or Option [purchase date]SharesPurchase Price

Price on 3/27/09

Bank of America(BAC) [10/3/08]100

$38.00

sold on 3/20/09 @ $6.03

J.P. Morgan (JPM) [10/3/08]100

$49.74

sold on 3/20/09 @ $23.71

Wells Fargo (WFC) [10/3/08]100

$37.07

sold on 3/20/09 @ $13.95

Monsanto (MON) [10/3/08]50

$88.97

$80.35

Ford Dec 5 call (FLA) [12/2/08]1000

$0.078

expired 12/20/08 at $0

Ford Jan 7.5 call (FAU) [12/3/08]1000

$0.088

expired 1/16/09 at $0

PNC May 45 call (PNCEI) [1/20/09]100

$1.51

$0.30

PNC Jan 55 call (WYLAK) [1/20/09]100

$1.71

$1.99

Monsanto (MON) [2/23/09]50

$76.38

sold on 3/16/09 @ $81.34

Amazon (AMZN) [2/26/09]50

$64.45

sold on 3/18/09 @ $71.13

Monsanto (MON) [2/26/09]50

$80.26

sold on 3/20/06 @ $83.56

Amazon (AMZN) [3/6/09]100

$60.25

sold on 3/11/09 at $68.87

Energy Conversion Devices (ENER) [3/6/09]100

$17.49

sold on 3/13/09 at $18.46

Energy Conversion Devices (ENER) [3/20/09]100

$19.25

$15.77



Currently, I have profited from all five our of six put contracts which have been closed, allowed to expired or been exercised.


Put Contracts Sold Short to Open
Option [short date]SharesShort Price

Closing Prices

Monsanto Nov 60 put (MONWL) [10/3/08]100

$2.39

closed on 10/29/08 for $0.91

Energy Conversion Nov 20 put (EQIWD) [11/12/08]100

$0.69

expired 11/21/08 at $0

Monsanto Dec 40 put (MONXI) [11/20/08]100

$1.19

expired 12/20/08 at $0

Energy Conversion Dec 17.5 put (EQIXW) [11/25/08]100

$1.39

expired 12/20/08 at $0

Energy Conversion Feb 15 put (EQINC) [1/14/09]100

$0.44

expired 2/19/08 at $0

Monsanto Mar 65 put (MONOM) [2/23/09]100

$1.09

expired 3/20/08 at $0

Energy Conversion Mar 20 put (EQIOD) [2/26/09]100

$0.74

exercised 3/20/09 @ $20



Since I am closing out this portfolio, there will likely only be one more updates before completing this series.

Disclosure: At time of publication, I own shares of Monsanto, and Energy Conversion Devices. I am long a PNC call contract.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2009 Achievement Catalyst, LLC

Saturday, March 28, 2009

It's a Great Day to Be Alive

morguefile.com

"It's a great day to be alive," was one of our defensive backs favorite saying as we were having our grueling summer football practices. That's how I feel today. It's been a tough month, tough quarter and tough year and it's a great day to be alive. Here's why:






  • The stock market has been up three consecutive weeks. My prediction of a market decline last week was wrong. The Treasury toxic asset plan is creating confidence that the banks will recover. Last Thursday, the Dow closed 20% above its March 9, 2009, making the 13 trading day advance of 20% the fastest since 1938.

    While I don't think the bear market has ended, this rally has been a refreshing break from the constant stock market downtrend of 2009, which has been quite depressing.


  • Spring came early. We've had above average temperatures for the month of March. Several days in the 70s and a bunch of days in the 60s made this month unusually warm where we live. It was a great opportunity to get a head start on being outside, for enjoying our yard, being outdoors and using the grill.

    Over the last month, I've been able to take our four year old daughter bike riding several times and get a head start for her soccer lessons. Our spring flowers are starting to bloom. We've grilled out four times already. I may even get to break out the hammock soon.


  • Our house value may have declined 15%. OK, that's not the real good news. On Friday, we submitted an appraisal to the county real estate office requesting a reduction in the assessed value of our home. If the appraisal is accepted, our property taxes will be reduced by up to 15%, retroactive to 2008.

    At this point, we're not worried about the value of our house, since we don't plan to move in the near future. I fully expect our home price to recover in the next five years. In meantime , we hope to be able to refinance in the next year at a rate close to 4.5%.
  • Hopefully, next week will continue with good news, specifically a continuing market rally, and more warm days. However, we won't find out about whether the appraised value of our house is revised for a few months.

    For more on Reflections and Musings, check back every Saturday for a new segment.

    Photo Credit: morgueFile.com, dtcreations

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Friday, March 27, 2009

    Reconnecting with Old Friends

    Since taking early retirement in October, 2007, I've been making a conscious effort to reconnect with some social groups from my youth. Over the years, I've remained in contact with several rugby teammates primarily because we worked for the same company, attended the same college, or previously were neighbors. Just last fall, we had a small "old boys" reunion organized by one of the group.

    Recently, I contacted the core people from our co-ed volleyball team, Friday night bar social group. For about five years, five of met up every Friday at a local bar and we were part of a co-ed volleyball league. Although four out of five still live in the area, we hadn't gotten together as a group for over a decade.

    In our past life, we were single and in our twenties and thirties. Back then we're were spontaneous and carefree. Now we're married, with kids from pre-school to high school, with many more responsibilities, and it showed :-) It took a couple weeks to find a Friday, a month in advance, that worked for everyone. And we only stayed out until 8PM, mainly because one person had a soccer game for her daughter.

    However, we still had a great time, reminiscing about the past and talking about different the world is for our kids. Although, each of us had been in contact with some of the others individually, it was a lot fun to get back together as a group. In fact, we had enough fun that we agreed to getting together another Friday night .

    For more on Reaping the Rewards, check back every Friday for a new segment.

    Photo Credit: morgueFile.com, kakisky

    This is not financial, social or retirement advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Thursday, March 26, 2009

    Kindergarten Decision Dilemma

    Our daughter is 4-1/2 and was born on the bubble month for starting kindergarten this year. Surprisingly, many more kids than those born in the borderline month are being considered for holding back one year. It seems that holding back is very common where we live. For example, some of our daughter's older classmates could be as much as 1-1/2 years older.

    When I was growing up, staying in one's class or trying to accelerate seem to norm. Since I was born in the early part of the year, my mom tried, unsuccessfully to accelerate me into an earlier kindergarten class when I was 4 -1/2. In high school, I only remember two classmates that were born in the year prior to my birth date. Holding back was the exception, not the norm.

    Until now, my spouse and I have been hedging our bets. We've paid deposits to register our daughter for both pre-school and full day kindergarten. Based on differing schedules, she could start full day kindergarten and drop back two weeks later for the start of pre-school, if needed. Although we've covered all our bases, it will cost us a $200 to $325 to keep both options open until the start of school. (Our kindergarten choice is in a public school, but the full day option carries an additional cost.)

    At this point, I'm leaning towards sending her to kindergarten, while my spouse is leaning towards holding her back. Here are the pros and cons as we see it:

    Starting Kindergarten this Year
    Criteria

    Pros

    Cons

    AgeShe makes the cutoff age for starting this yearShe may be the youngest by up to 1-1/2 years
    SportsShe will compete regularly at a higher skill levelShe will be behind in physical development
    Mental CapabilityShe will be challenged, which will enable her to learn moreShe won't be able to keep up, which will continue to get worse each succeeding grade level
    MaturityShe will mature fasterShe will feel deficient to her peers and will be behind as she gets older
    FriendsHer current friends will be starting kindergartenSome of her friends have already been held back


    While our daughter sometimes surprises us with her mental capability, she doesn't often want to take on a challenge she thinks is hard. However, when pushed a little or with help from us, she will develop the skill. In some cases, she seems to suddenly acquire the skill, even if we haven't seen an progress for a few weeks.

    On the physical side, there is risk she may be behind for awhile. I can see a significant difference from her peers and even between now and a few months ago. On the social side, she does seem a little behind those who would be attending kindergarten this year, but ahead of those attending the following year.

    The decision is a choice between the benefit of accelerating her learning and the psychological risk of going too fast, especially since there will be a number of children that are already held back. The importance of this decision is that it will affect her for many years into the future.

    Although we checked with her pre-school teach earlier this year, she recommended waiting before making the final decision. Today, we are having a parent/teacher conference day and will check again. In addition, we will have her screened by the kindergarten teacher next week.

    With all this data, we can probably decide within the next week. The safe choice appears to be holding her back. However, I think we will still keep our options open until school starts :-)

    For more on Crossing Generations, check back every Thursday for a new segment.

    This is not financial or education advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Wednesday, March 25, 2009

    Mastery Requires 10,000 Hours

    Mastery, Just 10,000 Hours Away by John Paul Newport in The Wall Street Journal provides insight about why it's hard for most people to do well at Personal Finance. The answer is that it takes 10,000 hours of deliberate practice to become really good at any task.

    To put that into perspective, working 8 hours per day, 5 days per week, with 2 weeks vacation is equal to 2000 hours per year. So 10,000 hours is equivalent to working at a job for 5 years. In addition, the time invested should be on deliberate practice, which is focused effort of doing things different in an area of improvement. In other words, hard work. So watching CNBC or reading The Wall Street Journal probably doesn't count towards deliberate practice for mastery in personal finance. However, managing a budget, analyzing stocks, or developing a retirement plan probably does.

    Assuming it takes 2,500 hours to reach competence (an arbitrary number on my part) and 10,000 hours to reach mastery, the chart below show the time to each. I assumed practice only on weekdays for 50 weeks a year, since everyone needs weekends and vacation:-)

    Years to Reach Target Level
    Practice TimeCompetence - 2,500 hoursMastery - 10,000 hours
    1 hour/day

    10 years

    40 years

    3 hours/day

    3-1/3 years

    13-1/3 years

    5 hours/day

    2 years

    8 years

    8 hours/day

    1 -1/4 years

    5 years


    Given the time to achieve competence/mastery and the complexity of personal finance, it's not surprising that many people have difficulty with financial matters. On the other hand, being a personal finance junkie has probably helped me achieve personal finance competence earlier in life :-)

    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Tuesday, March 24, 2009

    Recession Factoids - March, 2009

    CNN had some interesting facts from the recession which they summarized in Recession Snapshots: Facts, attitudes, analysis, Here are a few that I thought were interesting:

  • Number of unemployed in February, 2009: 12.5 million, 8.1%

  • Parents not confident the can pay for child's education: 40%

  • Mortgage holders owing more than their house is worth: 20%

  • Average credit card balance: $5,729

  • People polled who were cutting back on necessities: 32%

  • For more on Ideas You Can Use, check back every Tuesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Links to Carnivals from March 17 - 23, 2009

    Here are links to Carnivals in which My Wealth Builder participated from March 17 to March 23, 2009:

    Festival of Frugality #169

    Carnival of Financial Planning

    Carnival of Twenty-Something Finances

    For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

    For more on Ideas You Can Use, check back every Tuesday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Monday, March 23, 2009

    Still Planning to Sell into the Rally

    Today's explosive rally of almost 500 points in the Dow makes my prediction for a down market this week look really wrong :-) Fortunately, I am still invested in equities, with no short positions. My only "loss" was the opportunity cost of selling all financial stocks in our trading account last Friday, and missing the 25% advance today.

    I am still not convinced this is the end of the bear market. The last Geithner rally lasted a little over month, from the end of November, 2008 to the beginning of January, 2009. I expect this rally will also last about a month. At this point, I plan to enjoy the rally, and take the opportunity to take some profits as the stock market rises.

    In addition, I may once again consider buying some inverse ETFs, as a hedge. Last time, I purchased the inverse ETFs too soon after a bounce, waiting only two to three weeks. This time I will wait until the end of April, 2009 before making any purchases, to allow this rally to fizzle. Ultrashort Financial Proshares (SKF) is the primary one I am considering, although Ultrashort Real Estate Proshares (SRS) may also worth consideration, if the indices and sectors continue to have a V-shape recovery.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    3/23/09 Stock Position Update - Sold SWN during the Bear Market Rally

    Since all the stocks have received sell signals, I'm no longer buying from the 7/7/08 buy list, the 10/20/08 Buy List, or the buy list of 1/12/09. Last week, I sold the 50 shares of Southwestern Energy (SWN) that I bought on 3/5/09. If there is a strong rally this week, I will continue to try to sell these positions. Unfortunately, I currently expect the Treasury announcement of a plan to buy toxic assets to drag down the market.

    The overall portfolio is down 24.1% and the remaining holdings are down 42.7%. The previous bottoms occurred October 10, 2008 at -35.0% and -53.0% respectively. The only positive still has been the gain from shorting Las Vegas Sands. Otherwise, the prices of these stocks have been destroyed by the October through November decline.

    For reference, the stocks on my 7/7/08 buy list were: Potash (POT), Research in Motion (RIMM), Bucyrus (BUCY), Williams Cos. (WMB), Southwestern Energy (SWN), Hess (HES), and Range Resources (RRC). The system has given a sell signal for every stock: Williams Cos. (8/8/08), Range Resources (8/22/08), Hess (9/12/08), Research in Motion (9/12/08), Southwestern Energy (9/26/08), Postash (10/10/08) and Bucyrus (10/10/08). The stocks on my 7/7/08 short list were: Las Vegas Sands (LVS), Sears Holdings (SHLD), and Life Time Fitness (LTM). Southwestern Energy was the only stock identified for the 1/12/09 buy list.


    From My Wealth Builder 7/7/08 and 1/12/09 Buy List
    Stock [purchase date]SharesPurchase Price

    Price on 3/20/09

    Range Resources(RRC) [7/10/08]*50

    $58.17

    $41.03

    Potash (POT) [7/18/08]*10

    $215.09

    $76.67

    Southwestern Energy (SWN) [7/18/08]*50

    $39.46

    $30.85

    Potash (POT) [7/24/08]*10

    $192.02

    $76.67

    Southwestern Energy (SWN) [3/5/09]*50

    $29.44

    sold on 3/18/09 @ $30.52


    *Range Resources received a sell signal on August 22, 2008. Southwestern Energy received a sell signal on September 26, 2008. After received a buy signal on 1/12/09, Southwestern Energy received a second sell signal on 3/6/09. Potash received a sell signal on October 10, 2008. I plan to sell the position once it reaches the original purchase price, which may take a very, very long time.

    At this point, I will continue to hold these stocks and make no more purchase since sell signals have been give for every stock.

    From My Wealth Builder 7/7/08 Short List
    Stock [short date]SharesShort Price

    Price

    Las Vegas Sands (LVS) [7/7/08]100

    $38.10

    closed 7/11/08 @ $33.69


    I have only able to short Las Vegas Sands so far, which I have closed. I didn't short Sears Holdings and Lifetime Fitness since both stocks need to be "rented" from a shareholder for about 0.1% a day and a minimum of $50,000 needs to be shorted.

    At first, I was looking for other stocks to short, but at this point, I think it's too risky to be shorting .

    On 8/15/08, Las Vegas Sands closed at a short term high of $56.30. It closed at $6.32 on 10/24/08, rebounded to $14.19 on 10/31/08 before falling again to $3.23 on 11/21/08. It closed at $2.41 on 3/20/09. It's too bad I didn't hold the short position until now :-)

    The market continues to be choppy. The Dow and S&P have reached 12-year lows. As of the close on 3/20/09, the Dow, Nasdaq and S&P 500 indices were respectively at 7278.38, 1457.27, 768.58. All three indices rose significantly from new lows in 2009 in the past two weeks. The Dow, Nasdaq and S&P 500 declines are -16.31%, -7.59% and -14.32% respectively year to date.

    Economists now acknowledge that the economy has been in recession since December, 2007. I expect the market will likely continue to be choppy. For now, I am looking reinvest the cash that was raised at the end of 2008 and I will no longer be trying to short stocks. I held off reinvesting last week and plan to trickle in around 25% of the funds over the next few weeks. However, we will not be adding any new money, until the Dow crosses either 6000 or 10,000.

    Disclosure: At time of publication, I am long Range Resources, Potash and Southwestern in my trading account. The managed accounts are long Hess, Potash, Range Resources, Sears Holdings and Williams Companies.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Sunday, March 22, 2009

    Predicting a Market Decline for this Week

    I expect this week to be the start of another decline in the stock market, ending the bear market rally of the past two weeks. Here are the factors that I believe will turn the stock market downward:

  • Toxic asset program details to be shared. The last time Secretary Geithner held a press conference on this topic, the market fell significantly. Based on the plan details, I expect there will be little interest in private equity participating. After all, who wants to be subject to Presidential, Congressional and public outrage when profiting from a business deal, which I expect would happen if big profits are made from purchasing assets.

    I think a major issue is that Mr. Geithner is clueless that he is clueless. Knowing that he chose to consumer tax preparation software to do his taxes incorrectly while on international assignment at the IMF, doesn't give me much confidence he has a grasp of the complexity of the issues he faces.


  • Obama will promote his proposed budget, again. While the Administration is calling the budget a blueprint for the economy, many investors see it as a blueprint for economic disaster. The market will likely react accordingly and decline, as it did after the budget proposal was first shared.

    The budget proposal is about solving issues every bit as big or bigger than the current economic crisis. Also, all the problems will be inherited and not created by the current administration, as they constantly remind us about this economic crisis. I'd love to see a successful solution to the first inherited challenge before taking on the others. I think most stock market investors would also :-)


  • Selective vilification is expanding. First it was taxing the rich, which was defined as the top 2% of incomes. Then it was vilifying auto executives for using corporate jets. Next, financial intuitions who took tarp money and paid bonuses or had lavish corporate events. Last week's vilification of AIG and the punitive 90% tax on bonuses that the House passed are the latest example.

    Since the Administration and Congress seem to change to rules routinely, it will probably cause companies to avoid any participating in new government programs, even though they will help the economy. As a result, confidence in the governments ability to stabilize our financial systems will become lower this week.

  • At this point, I am preparing for a stock market decline for this week. Last week, I sold all the stocks that I had purchased 2009, only keeping two call options and a stock that was put to me last Friday after the close. In addition, I sold all the financial stocks that I purchased in October, 2008.

    If the market should unexpectedly rally, I will continue to sell some positions. If it falls, I plan to wait for a significant decline before making any purchases.

    For more on New Beginnings, check back every Sunday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    3/22/09 Bottom Fishing Portfolio - Selling into this Bear Market Rally

    Since October 3, 2008, my attempts to buy stocks near a bottom have failed miserably. My first attempt was to buy financial stocks, which have since fallen 50 to 90%, and an agricultural stock, which has fallen 10%. I have also experimented with buying calls on auto stocks and financial stocks, also without success. I've had the most success selling put contracts to open on Monsanto (MON) and Energy Conversion Devices (ENER), which earned a few hundred dollars to slightly offset the losses. In addition, I have had some success buying and selling stocks that I believe will emerge well from the recession, Monsanto, Amazon (AMZN), and Energy Conversion Device.

    Last week, I took the opportunity to sell most of my positions during the bear market rally, even if it meant taking some losses. At this point, I only have four positions in this portfolio, Monsanto, Energy Conversion Devices, and two PNC calls. If the financial stocks rally this week, I will close out the PNC calls. I will likely hold onto Monsanto and Energy Conversion Devices for the longer term.

    Overall, this portfolio is down 21.1%. Financial stocks, which had losses of 52 to 84%, were the main reason for the negative returns.

    Bottom Fishing Portfolio
    Stock or Option [purchase date]SharesPurchase Price

    Price on 3/20/09

    Bank of America(BAC) [10/3/08]100

    $38.00

    sold on 3/20/09 @ $6.03

    J.P. Morgan (JPM) [10/3/08]100

    $49.74

    sold on 3/20/09 @ $23.71

    Wells Fargo (WFC) [10/3/08]100

    $37.07

    sold on 3/20/09 @ $13.95

    Monsanto (MON) [10/3/08]50

    $88.97

    $80.35

    Ford Dec 5 call (FLA) [12/2/08]1000

    $0.078

    expired 12/20/08 at $0

    Ford Jan 7.5 call (FAU) [12/3/08]1000

    $0.088

    expired 1/16/09 at $0

    PNC May 45 call (PNCEI) [1/20/09]100

    $1.51

    $0.30

    PNC Jan 55 call (WYLAK) [1/20/09]100

    $1.71

    $1.40

    Monsanto (MON) [2/23/09]50

    $76.38

    sold on 3/16/09 @ $81.34

    Amazon (AMZN) [2/26/09]50

    $64.45

    sold on 3/18/09 @ $71.13

    Monsanto (MON) [2/26/09]50

    $80.26

    sold on 3/20/06 @ $83.56

    Amazon (AMZN) [3/6/09]100

    $60.25

    sold on 3/11/09 at $68.87

    Energy Conversion Devices (ENER) [3/6/09]100

    $17.49

    sold on 3/13/09 at $18.46

    Energy Conversion Devices (ENER) [3/20/09]100

    $20.00

    $13.23



    Currently, I have profited from all five our of six put contracts which have been closed, allowed to expired or been exercised.


    Put Contracts Sold Short to Open
    Option [short date]SharesShort Price

    Price on 3/20/09

    Monsanto Nov 60 put (MONWL) [10/3/08]100

    $2.39

    closed on 10/29/08 for $0.91

    Energy Conversion Nov 20 put (EQIWD) [11/12/08]100

    $0.69

    expired 11/21/08 at $0

    Monsanto Dec 40 put (MONXI) [11/20/08]100

    $1.19

    expired 12/20/08 at $0

    Energy Conversion Dec 17.5 put (EQIXW) [11/25/08]100

    $1.39

    expired 12/20/08 at $0

    Energy Conversion Feb 15 put (EQINC) [1/14/09]100

    $0.44

    expired 2/19/08 at $0

    Monsanto Mar 65 put (MONOM) [2/23/09]100

    $1.09

    expired 3/20/08 at $0

    Energy Conversion Mar 20 put (EQIOD) [2/26/09]100

    $0.74

    exercised 3/20/09 @ $20



    Since I am closing out this portfolio, there will likely only be one or two more updates before completing this series.

    Disclosure: At time of publication, I own shares of Monsanto, Energy Conversion Devices, and PNC call contracts in our trading account. In addition, our managed accounts are long J.P. Morgan and Wells Fargo.

    For more on New Beginnings, check back every Sunday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Saturday, March 21, 2009

    Enough Finger Pointing and Ducking

    If this week's government behavior with respect to AIG is representative of their approach to solving problems, I have low confidence that any of the economic solutions will have the necessary impact. This week was a big finger pointing and responsibility ducking event.

    Dodd: Administration pushed for language protecting bonuses at CNN.com reports that Sen. Christopher Dodd now acknowledges that he is responsible for the language grandfathering existing bonuses for companies receiving TARP funds, after denying earlier to CNN that he had anything to do with the amendment. According to the article, Senator Dodd now claims that an Obama administration requested the wording, because they were concerned about lawsuits against the government.

    The article concludes with the following quote from Rep. Barney Frank, chairman of the House Financial Services Committee, ""We own this company in effect, and we're not asking that these bonuses be rescinded because we have lent money to the company. I believe we are saying as the owners of the company, we do not think ... we should have paid bonuses to people who made mistakes who were incompetent."

    Obama Accepts Blame for AIG Bonuses in The Wall Street Journal quotes President Obama as saying,"Washington is all in a tizzy and everybody is pointing fingers at each other and saying it's their fault, the Democrats' fault, the Republicans' fault. Listen, I'll take responsibility. I'm the President." At the same time, President Obama also deflects fault by saying, "We didn't grant these contracts."

    Having spent the past two months blaming the economic woes on the Bush administration, it's time for Messrs. Dodd, Frank and Obama to stop posturing and start taking positive actions for solving the issue.

    For more on Reflections and Musings, check back every Saturday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Friday, March 20, 2009

    Bloggers Who Have Retired Early

    Today, I decided to create a list of bloggers who have retired early. Here were my criteria:

  • Retired under 50. While an arbitrary number, it seems retiring in one's forties (or younger) is aspirational.


  • No major wage earner in household. There were a number of bloggers who "retired" in their 20s and 30s, while their spouse continued working a full time job. For me, the non- working spouse is a stay at home parent, not retired. In addition, I do not consider quitting to become self employed as retirement, except in the case where they could live without working.

  • While I thought Google Search would make the task easy, it was surprisingly difficult to find bloggers that met the criteria. On the other hand, there are numerous blogs with authors who are trying to retire early, living on one income and having a stay at home parent, or quitting work to start their own business, which I don't consider as meeting my criteria.

    Here are the blogs, in alphabetical order, that I found which have authors that retired early.

  • Millionaire Mommy Next Door

  • My Wealth Builder

  • Retirement: A Full-Time Job
  • I'll keep looking for blogs to add to the list, but I'm not expecting to find many more. Perhaps most early retirees are too busy with other activities, and don't have time to blog and share their story :-)

    For more on Reaping the Rewards, check back every Friday for a new segment.

    This is not financial or retirement advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Thursday, March 19, 2009

    Expect Recessions to Occur

    In looking at a list of recessions in the United States , I realized that I have been through seven recession during my lifetime. I was born during one, was in high school during another, started my career in the midst of one and have taken early retirement at the beginning of the most recent one. Average time between recessions. . . 7 years.

    The reality is that recessions are a fact of life and it's hard to go over 10 years without experiencing one. My future advice to our four year old daughter is to plan on recessions happening. Save more during the good times in order to survive the recessionary times, because recessions will happen.

    For more on Crossing Generations, check back every Thursday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Wednesday, March 18, 2009

    The Recession Has Stress Tested our Financial Situation

    When I took early retirement in October, 2007, I thought we had a comfortable margin of safety. Even if the market returns were below normal, I believed we had sufficient retirement savings to manage. However, I didn't expect a downturn the magnitude of this recession, which has stress tested our finances. At this point, we are currently surviving the stress test. Here's my assessment of how we're doing.

  • Did we save enough? At the end of 2008, the answer was still yes. When I retired, we had retirement funds equal to 21 times my yearly salary. At the end of 2007, we had 23 times my yearly salary. By the end of 2008, our retirement funds had been reduced to 16.7 times my yearly salary. From previous calculations, I had estimated that 20 times salary would be a reasonable margin to enable a comfortable retirement.

    While a retirement fund of 16.7 times salary is still (barely) acceptable, a continuing bear market in 2009 will likely change our answer to no.


  • Was our debt low enough? In hindsight, the answer is no. Although I had planned to eliminate all debt, we did not pay off our mortgage when I retired. I mistakenly thought our retirement fund of 23 times salary offered the opportunity to delay paying off the mortgage for a couple years. In retrospect, we should have paid off the mortgage, by selling some of the funds invested in the stock market. Ah, if I only knew then what I know now :-)


  • Were our savings diversified appropriately? The answer is mostly yes. Due to our conservative investing approach, we had about 5-1/2 years of expenses invested in CDs, municipal bonds and money market funds. Although questionable as appropriate, we had 50% of our savings in my company's stock, which did not fall as much as the stock market indices. The rest of the funds were in a diversified managed stock portfolios, which declined the same amount at the indices.
  • At this point, the feasibility of me staying in early retirement depends on the economy and stock market beginning to recover in 2009. If that happens, we will try to pay off the mortgage. If we can't afford to pay it off completely, we will payoff part and try to refinance the remainder at a lower rate, hopefully around 4 -1/2 %. In addition, we will continue to maintain 4 to 5 years of funds in cash equivalents, bonds and CDs.

    If the market continues to decline significantly in 2009, I will seriously need to consider returning to full time work.

    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial, investment, saving or retirement advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Tuesday, March 17, 2009

    Getting an Extension for Filing our 2008 Tax Return

    With April 15, 2009 only 29 days away, I've decided to file form 4868 for an automatic extension of the due date to October 15, 2009. However, filing form 4868 does not extend the time to pay any taxes owe. Therefore, I will still need to do an estimate of our tax liability for 2008, and send any amount owed to the IRS by April 15, 2009.

    Unlike previous years, we won't need to send in a payment with our request for extension. This year, I expect that we will be getting a refund from both the IRS and our state. 2008 was our first year paying estimated taxes, and to ensure avoiding any penalties, I was conservative and paid estimated taxes at the higher end of the range.

    Another difference from previous years is that we have not yet made our 2008 contributions to our IRAs. Even with an extension, we will still need to make our 2008 IRA contributions by April 15, 2009.

    For more on Ideas You Can Use, check back every Tuesday for a new segment.

    Photo Credit: morgueFile.com, jppi

    This is not financial or tax advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Links to Carnivals from March 14 - 16, 2009

    Here are links to Carnivals in which My Wealth Builder participated from March 14 to March 16, 2009:

    Carnival of Financial Planning

    Economy and Your Finances Carnival

    Festival of Stocks #132

    Carnival of Personal Finance #196

    Boomers & Seniors News You Can Use Carnival

    For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

    For more on Ideas You Can Use, check back every Tuesday for a new segment.

    This is not financial, investment or family advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Monday, March 16, 2009

    3/16/09 Stock Position Update - Looking to Sell if There is a Rally

    Right after I bought 50 shares of Southwestern Energy, my system gave it a sell signal:-( Since all the stocks have received sell signals, I'm no longer buying from the 7/7/08 buy list, the 10/20/08 Buy List, or the buy list of 1/12/09. If there is a strong rally this week, I will try to sell these positions.

    The portfolio was fell a little less than the overall market. The holdings are up 2.8% from the previous week, while the Dow was up 9.14%. The difference was primarily due to the lack of financial stocks in the holdings. The overall portfolio is down 27.3% and the remaining holdings are down 40.3%. The previous bottoms occurred October 10, 2008 at -35.0% and -53.0% respectively. The only positive still has been the gain from shorting Las Vegas Sands. Otherwise, the prices of these stocks have been destroyed by the October through November decline.

    For reference, the stocks on my 7/7/08 buy list were: Potash (POT), Research in Motion (RIMM), Bucyrus (BUCY), Williams Cos. (WMB), Southwestern Energy (SWN), Hess (HES), and Range Resources (RRC). The system has given a sell signal for every stock: Williams Cos. (8/8/08), Range Resources (8/22/08), Hess (9/12/08), Research in Motion (9/12/08), Southwestern Energy (9/26/08), Postash (10/10/08) and Bucyrus (10/10/08). The stocks on my 7/7/08 short list were: Las Vegas Sands (LVS), Sears Holdings (SHLD), and Life Time Fitness (LTM). Southwestern Energy was the only stock identified for the 1/12/09 buy list.


    From My Wealth Builder 7/7/08 and 1/12/09 Buy List
    Stock [purchase date]SharesPurchase Price

    Price on 3/13/09

    Range Resources(RRC) [7/10/08]*50

    $58.17

    $38.81

    Potash (POT) [7/18/08]*10

    $215.09

    $76.76

    Southwestern Energy (SWN) [7/18/08]*50

    $39.46

    $27.43

    Potash (POT) [7/24/08]*10

    $192.02

    $76.76

    Southwestern Energy (SWN) [3/5/09]*50

    $29.44

    $27.43


    *Range Resources received a sell signal on August 22, 2008. Southwestern Energy received a sell signal on September 26, 2008. After received a buy signal on 1/12/09, Southwestern Energy received a second sell signal on 3/6/09. Potash received a sell signal on October 10, 2008. I plan to sell the position once it reaches the original purchase price, which may take a very, very long time.

    At this point, I will continue to hold these stocks and make no more purchase since sell signals have been give for every stock.

    From My Wealth Builder 7/7/08 Short List
    Stock [short date]SharesShort Price

    Price

    Las Vegas Sands (LVS) [7/7/08]100

    $38.10

    closed 7/11/08 @ $33.69


    I have only able to short Las Vegas Sands so far, which I have closed. I didn't short Sears Holdings and Lifetime Fitness since both stocks need to be "rented" from a shareholder for about 0.1% a day and a minimum of $50,000 needs to be shorted.

    At first, I was looking for other stocks to short, but at this point, I think it's too risky to be shorting .

    On 8/15/08, Las Vegas Sands closed at a short term high of $56.30. It closed at $6.32 on 10/24/08, rebounded to $14.19 on 10/31/08 before falling again to $3.23 on 11/21/08. It closed at $2.27 on 3/13/09. It's too bad I didn't hold the short position until now :-)

    The market continues to be choppy. The Dow and S&P have reached 12-year lows. As of the close on 3/13/09, the Dow, Nasdaq and S&P 500 indices were respectively at 7223.98, 1431.5, 756.55. All three indices have achieved new lows in 2009 in the past week and then advance signfificantly. The Dow, Nasdaq and S&P 500 declines are -16.93%, -9.23% and -15.67% respectively year to date.

    Economists now acknowledge that the economy has been in recession since December, 2007. I expect the market will likely continue to be choppy. For now, I am looking reinvest the cash that was raised at the end of 2008 and I will no longer be trying to short stocks. I held off reinvesting last week and plan to trickle in around 25% of the funds over the next few weeks. However, we will not be adding any new money, until the Dow crosses either 6000 or 10,000.

    Disclosure: At time of publication, I am long Range Resources, Potash and Southwestern in my trading account. The managed accounts are long Hess, Potash, Range Resources, Sears Holdings and Williams Companies.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Sunday, March 15, 2009

    Bear Market Rally - A Time to Take Profits

    If the stock market rally continues to be strong this week, I definitely plan to take some profits in our Bottom Fishing Portfolio and our Modified Unemotional Growth Portfolio. It's about time a enough of a rally happens to enable making some profit on purchases that have been made since early October, 2008. At this point, I still consider any rally to be a bear market rally. However, if last week happens to be mark the end of the bear market, I will be happy to be wrong :-)

    For more on New Beginnings, check back every Sunday for a new segment.

    This is not financial or investing advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    3/15/09 Bottom Fishing Portfolio - Financials Rocket and Profits Taken for New Purchases

    Since October 3, 2008, my attempts to buy stocks near a bottom have failed miserably. My first attempt was to buy financial stocks, which have since fallen 50 to 90%, and an agricultural stock, which has fallen 14%. I have also experimented with buying calls on auto stocks and financial stocks, also without success. I've had the most success selling put contracts to open on Monsanto (MON) and Energy Conversion Devices (ENER), which earned a few hundred dollars to slightly offset the losses.

    At this point, I am no longer buying any financial company stocks, which I consider to be toxic. In the near term, the only investment I will make in a financial rebound is buying calls, which limits the downside. I had already used the call buying strategy with Ford, with no success, prior to the auto bailout. I briefly considered buying stocks with 6-7% dividends, but then several of the potential candidates cut their payout significantly. The only strategy that has been profitable is selling puts short on Monsanto and Energy Conversion devices.

    Because the strategy is working, I will continue to sell put contracts to open. In addition, since I think a bottom is near, I have made selective buys of stocks that I believe will emerge well from the recession, Monsanto, Amazon (AMZN), and Energy Conversion Device.

    I am also taking the opportunity to sell when the market rallies. Last week, I sold 50 shares of Amazon and 100 shares of Energy Conversion Devices at a 5-15% profit after owning them a week or less. If Monsanto rises into the 90s, I may also sell the shares that were acquired in 2009. I am hoping, OK - wishing:-), that the financial stocks will rally significantly when the mark to market rules are relaxed. If they do, I plan to sell these toxic stocks.

    The portfolio was up 15.66% in the past week, versus a Dow increase of 9.14%. Financial stocks were up significantly last week in anticipation of accounting rule changes that will reduce the issue of mark to market of mortgage securities.


    Bottom Fishing Portfolio
    Stock or Option [purchase date]SharesPurchase Price

    Price on 3/13/09

    Bank of America(BAC) [10/3/08]100

    $38.00

    $5.76

    J.P. Morgan (JPM) [10/3/08]100

    $49.74

    $23.75

    Wells Fargo (WFC) [10/3/08]100

    $37.07

    $13.94

    Monsanto (MON) [10/3/08]50

    $88.97

    $79.11

    Ford Dec 5 call (FLA) [12/2/08]1000

    $0.078

    expired 12/20/08 at $0

    Ford Jan 7.5 call (FAU) [12/3/08]1000

    $0.088

    expired 1/16/09 at $0

    PNC May 45 call (PNCEI) [1/20/09]100

    $1.51

    $0.40

    PNC Jan 55 call (WYLAK) [1/20/09]100

    $1.71

    $0.90

    Monsanto (MON) [2/23/09]50

    $76.38

    $79.11

    Amazon (AMZN) [2/26/09]50

    $64.45

    $68.63

    Monsanto (MON) [2/26/09]50

    $80.26

    $79.11

    Amazon (AMZN) [3/6/09]100

    $60.25

    sold on 3/11/09 at $68.87

    Energy Conversion Devices (ENER) [3/6/09]100

    $17.49

    sold on 3/13/09 at $18.46



    Currently, I have profited from all five put contracts which have been closed or allowed to expired. I will continue to sell put contracts on Energy Conversion Devices and Monsanto.



    Put Contracts Sold Short to Open
    Option [short date]SharesShort Price

    Price on 3/13/09

    Monsanto Nov 60 put (MONWL) [10/3/08]100

    $2.39

    closed on 10/29/08 for $0.91

    Energy Conversion Nov 20 put (EQIWD) [11/12/08]100

    $0.69

    expired 11/21/08 at $0

    Monsanto Dec 40 put (MONXI) [11/20/08]100

    $1.19

    expired 12/20/08 at $0

    Energy Conversion Dec 17.5 put (EQIXW) [11/25/08]100

    $1.39

    expired 12/20/08 at $0

    Energy Conversion Feb 15 put (EQINC) [1/14/09]100

    $0.44

    expired 2/19/08 at $0

    Monsanto Mar 65 put (MONOM) [2/23/09]100

    $1.09

    $0.10

    Energy Conversion Mar 20 put (EQIOD) [2/26/09]100

    $0.74

    $1.60



    It's clear to me that the financial stocks will not likely recover in the near future. Originally I was looking to close out the long positions in the financial stocks by end of March, 2009. However, with the potential changes in mark to market accounting, I may hold the financial stocks a little longer.

    Disclosure: At time of publication, I own shares of Bank of America, J.P. Morgan, Wells Fargo, Monsanto, and Amazon. I am long PNC call contracts and short Monsanto and Energy Conversion Device put contracts.

    For more on New Beginnings, check back every Sunday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Saturday, March 14, 2009

    Waiting for Godot, I mean Geithner

    Every time Tim Geithner, the Treasury Secretary, speaks, he has a consistent message. The plan to fix the financial crisis will be "announced soon, in the next couple weeks." His actions remind of the play Waiting for Godot, by Samuel Beckett, in which the character Godot never shows.

    Hopefully, Mr. Geithner is now better advised than his last press conference on February 10, 2009. In that session, he underwhelmed the world, which led the Dow to decline 381.99 in one day.

    Here's what I hope Secretary Geithner says, when he does show up:

  • The problem is confidence which is directly correlated with current value of toxic assets held by financial companies.

  • The government going to enable better valuing of toxic assets by:
    1. Helping people avoid mortgage defaults.
    2. Pricing toxic assets based on expected cash flow.
    3. Creating a market where mortgage backed securities can be traded.
    After all, about 90% of people are still current on their mortgage payments. To me, that means that mortgage backed securities should be priced at 90% of normal value, on average. However, currently, these securities are at 20% of normal value, which prices in a significantly higher level of defaults. By taking the steps above, I believe the government can create more realistic pricing which would stabilize the financial system and bring confidence back to the economy.

    Until then, I continue to be Waiting for Geithner.

    For more on Reflections and Musings , check back every Saturday for a new segment.

    This is not financial or economic policy advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Friday, March 13, 2009

    Retirement Plans - 2009 will be a year of financial adjustments

    "The best-laid plans of mice and men often go awry." ~ adapted from a line in a poem by Robert Burns.

    Through most of 2008, I was convinced I could ride the bear market out out and wait for the market recover. However, the market performance in the last quarter of 2008 and the first two months of 2009 has been causing me to rethink our plans.

    We've already taken the following steps:
  • Reduce spending. Here is the five part series on our specific steps:
    1. Eliminate waste.
    2. Buy below regular price.
    3. Take advantage of free.
    4. Be choiceful on options.
    5. Enjoy what we already have.
  • Increase income. My initial plan was to do a few part time jobs to cover 20% of our expenses. I'm currently generating around 6% of our expenses through two part time jobs. I've applied for three other part time jobs, but it looks like I may not be hired for them.
  • Here are the additional elements that I am considering:
  • Full time employment. I recently come across a job posting in the field from which I retired, although in a different product line. It seems interesting enough to seriously apply for it.
  • Mortgage payoff. Our mortgage accounts for about 25% of our yearly expenses. If the stock market continues to rally, we'll consider selling some of the investments to fund part of the mortgage payoff.
  • Our efforts to reduce spending have been progressing well. It appears we will meet or exceed our goal of cutting costs by 5%. The progress on part time jobs has been much slower. I have put in several applications but have not heard back, leading me to assume I am not being considered. My success rate on part time jobs is 20% at this time, although I am following up on two more leads.

    Finally, I'll be working on applying for a full time job and determining how to reduce our mortgage over the next two months.

    For more on Reaping the Rewards Reflections, check back every Friday for a new segment.

    This is not financial or retirement advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Thursday, March 12, 2009

    Keeping Busy During the Summer Used to be Almost Free

    Cutting Back on Kum Ba Yah in The Wall Street Journal shares how one family may not be able to afford the $12,100 to send their two kids to camp this year. The article reports camp prices for this year range from $550 for a five days to $6500 for the summer. The benefits of camp including teaching kids independence, keeps kids busy during summer months and gives parents some alone time.

    While I know times have changed, it sure seemed a lot cheaper to get the benefits of camp when I was a kid. During the summer, all the neighborhood kids would be out playing all day. We'd play tag, hide and seek, and pick up team games. We'd hike through the nearby woods, tromp through the creek, and collect crickets, grasshoppers and worms. We'd be out from daylight until dinner time, giving our parents any alone time they needed. The cost was free and the fun was priceless.

    Of course, we still did attend some camps. I went to one week of Boy Scout camp for several summers and my sister and I did a two week swimming, tennis, trampoline day camp at the university my father was attending for his PhD. However, even with inflation adjustments, I know we were not spending the amounts of money that are needed for camps nowadays.

    For more on Crossing Generations, check back every Thursday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Wednesday, March 11, 2009

    Bear Market Maxims

    Five Bear Market Maxims was published on July 2, 2008 by Andy Kessler on Tech Ticker, a day the Dow closed at 11215.51. At the time, no one expected the Dow to fall as far as it has. However, many of the points in his video are still appropriate today, as the bear market enters its eighteenth month.



    Here a summary of Mr. Kessler's five points:
    1. It's not what you own going in, it's what you own coming out. Figure out what sector(s) are going to lead the economy out of recession. It probably won't be the sector that led the previous bull market.


    2. Don't be shy about concentrating your portfolio. Index funds go down in bear market. Be a stock picker. For example, there were stocks that were up for 2008. Do your homework, it's important to be right when choosing individual stocks.


    3. Beware of cheap stocks. Sometimes the best stocks appear the most expensive, because people are willing to pay for them, even at a premium.


    4. Successful businesses are about making the scarce abundant. Find businesses that will create significant economies of scale in the future, which will create even bigger markets.


    5. No one rings a bell at the bottom of the market. Be well positioned when the market turns. We won't know the bear market has ended until months after the bottom.

    Overall, I think these adages have merit. In our case, we've been slowly tricking in money to buy shares of stocks that we think will be successful in the future economy, specifically Amazon (AMZN) and Monsanto (MON), which I've written about in my Bottom Fishing Portfolio post

    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Tuesday, March 10, 2009

    A Roundup of Interesting Articles

    Here are some articles I read from the past week that I thought were worth sharing:

    Stock Market/Investing

    From CNBC.com Market Cap Leaders: GE at Risk of Falling Out of Top 20. I found the chart (shown below) of the top 25 S&P 500 stocks by market capitalization very interesting. Only 8 companies are worth more than $100 billion. For reference, GE was worth over $400 billion in 2007.


    From The Wall Street Journal print edition - A Week in the Life of the DJIA. As of the close on March 6, 2009, a $1000 investment is each of the 30 Dow components on December 31, 2008 would be down 30.83%. Specifically, the $30,000 investment would be worth $20,750, included reinvested dividends. Worst performer, Citigroup down 84.6%. Best performer and the only gainer, IBM up 2.5%. For reference, a $1 change in any component results in a 7.69 point change in the DJIA.

    Buying Foreclosed Homes

    From CNN.com, a foreclosure auction allows couple to buy their dream home.

    From Associated Press, Outside buyers drawn to Detroit's foreclosed homes. Investors from the UK are buying homes in Detroit and then renting them.

    From The Wall Street Journal Real Estate Archives, in 2007 this investor was making a million dollars a year buying and selling foreclosed homes. I wonder if he is still active in real estate.

    Higher Interest Rates on Savings

    Banks Offering Big Perks to Lure New Savers shares introductory rates and online bank rates that beat the 0.1 to 1.50% rates at banks in my area.

    For more on Ideas You Can Use, check back every Tuesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Links to Carnivals from March 3 - 9, 2009

    Here are links to Carnivals in which My Wealth Builder participated from March 3 to March 9, 2009:

    Festival of Frugality #167

    Tax Carnival #49

    Carnival of Financial Planning

    Economy and Your Finances Carnival

    Carnival of Family Life

    Festival of Stocks #131

    Carnival of Personal Finance #195

    For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

    For more on Ideas You Can Use, check back every Tuesday for a new segment.

    This is not financial, investment or family advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    Monday, March 09, 2009

    Finding a New Sweet Spot for Investing

    From 1985 to 2007, the sweet spot for investing was a diversified equity portfolio, which returned about 12% annually during that time. Investors did very well buying and holding the S&P 500 index, or similar diversified stock index. However, since October 2007, the stock market and the indices have been pummelled, declining 50% or more.

    I don't believe that buy and holding index funds will re-emerge as the sweet spot of investing again. Therefore, I am looking for what are potential sweet spots for the future.

    Here are two areas I am considering.

  • High dividend paying stocks. Dividend payments have been about 70% of stock market real returns after inflation. According to Credit Suisse Global Returns Yearbook 2009 page8, the stock market has returned 6% real returns since 1900, but only 1.7% if dividends are not reinvested. In addition, dividends are giving favorable tax treatment, being taxed at the capital gains tax rate. With some good companies paying dividends in the 5 to 10% range, e.g. DuPont (DD) pays almost 10%, I think these stocks may be worth purchasing. For some ideas, see this Barron's article The 20 Best Dividend Plays for 2009.

    Risk: The dividend is cut significantly, as has happened to many financial companies in the past few months.


  • Treasury Inflation Protected Securities (TIPS). These are Treasury bonds that have a nominal interest rate and an inflation adjustment to principal. I believe the economic stimulus packages and the bailouts (banking, mortgage, credit, etc) will soon lead to a significant increase in inflation. TIPS bonds will allow me to always earn a fixed percentage over inflation.

    Risk: Deflation occurs, which reduces the principal and the effective earned interest rate.
  • At this point, I will only be putting a small amount of money into these new areas. However, if the stock market keeps falling, I will divert more funds to these options.

    Disclosure: At time of publication, we own DuPont through our managed account and TIPS in our trading account.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    3/9/09 Stock Position Update - A New Purchase

    I bought 50 shares of Southwestern Energy from the buy list of 1/12/09. Otherwise, I continue to take no further action based on my buy list and short list of 7/7/08. I have taken four long and one short position, which has been closed. Since all the stocks have received sell signals, I'm no longer buying from the 7/7/08 buy list. I have also not taken any action on the 10/20/08 Buy List, which has received sell signals for 5 out of 5 of the stocks by 11/2/08.

    The portfolio was fell a little less than the overall market. The holdings are down 5.8% from the previous week, due primarily the one commodity stock, Potash, falling signficantly. The overall portfolio is down 28.5% and the remaining holdings are down 42.0%. The previous bottoms occurred October 10, 2008 at -35.0% and -53.0% respectively. The only positive still has been the gain from shorting Las Vegas Sands. Otherwise, the prices of these stocks have been destroyed by the October through November decline.

    For reference, the stocks on my 7/7/08 buy list were: Potash (POT), Research in Motion (RIMM), Bucyrus (BUCY), Williams Cos. (WMB), Southwestern Energy (SWN), Hess (HES), and Range Resources (RRC). The system has given a sell signal for every stock: Williams Cos. (8/8/08), Range Resources (8/22/08), Hess (9/12/08), Research in Motion (9/12/08), Southwestern Energy (9/26/08), Postash (10/10/08) and Bucyrus (10/10/08). The stocks on my 7/7/08 short list were: Las Vegas Sands (LVS), Sears Holdings (SHLD), and Life Time Fitness (LTM). Southwestern Energy was the only stock identified for the 1/12/09 buy list.


    From My Wealth Builder 7/7/08 and 1/12/09 Buy List
    Stock [purchase date]SharesPurchase Price

    Price on 3/6/09

    Range Resources(RRC) [7/10/08]*50

    $58.17

    $36.98

    Potash (POT) [7/18/08]*10

    $215.09

    $66.31

    Southwestern Energy (SWN) [7/18/08]*50

    $39.46

    $28.72

    Potash (POT) [7/24/08]*10

    $192.02

    $66.31

    Southwestern Energy (SWN) [3/5/09]50

    $29.44

    $28.72



    *Range Resources received a sell signal on August 22, 2008. Southwestern Energy received a sell signal on September 26, 2008. Potash received a sell signal on October 10, 2008. I plan to sell the position once it reaches the original purchase price, which may take a very, very long time.

    At this point, I will continue to hold these stocks and make no more purchase since sell signals have been give for every stock, except for Southwestern Energy, which appears on the new 1/12/09 buy list.


    From My Wealth Builder 7/7/08 Short List
    Stock [short date]SharesShort Price

    Price

    Las Vegas Sands (LVS) [7/7/08]100

    $38.10

    closed 7/11/08 @ $33.69



    I have only able to short Las Vegas Sands so far, which I have closed. I didn't short Sears Holdings and Lifetime Fitness since both stocks need to be "rented" from a shareholder for about 0.1% a day and a minimum of $50,000 needs to be shorted.

    At first, I was looking for other stocks to short, but at this point, I think it's too risky to be shorting .

    On 8/15/08, Las Vegas Sands closed at a short term high of $56.30. It closed at $6.32 on 10/24/08, rebounded to $14.19 on 10/31/08 before falling again to $3.23 on 11/21/08. It closed at $1.77 on 3/6/09. It's too bad I didn't hold the short position until now :-)

    The market continues to be choppy. The Dow and S&P have reached 12-year lows. As of the close on 3/6/09, the Dow, Nasdaq and S&P 500 indices were respectively at 6626.94, 1293.85, 683.38. All three indices have achieved new lows in 2009. The Dow, Nasdaq and S&P 500 are declines are -23.89%, -17.96% and -23.88% respectively year to date.

    Economists now acknowledge that the economy has been in recession since December, 2007. I expect the market will likely continue to be choppy. For now, I am looking reinvest the cash that was raised at the end of 2008 and I will no longer be trying to short stocks. I held off reinvesting last week and plan to trickle in around 25% of the funds over the next few weeks. However, we will not be adding any new money, until the Dow crosses either 6000 or 10,000.

    Disclosure: At time of publication, I am long Range Resources, Potash and Southwestern in my trading account. The managed accounts are long Hess, Potash, Range Resources, and Sears Holdings.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC