Making Money Alert
IS THIS RALLY FOR REAL?
11/28/2007
During the past few weeks the technical damage to stock prices has been severe. We broke below the August lows in the Dow Jones Industrials and in the Russell 2000, but we managed to bounce off of those lows in the S&P 500 Index.
Looking at the chart of the S&P 500 Index above, we clearly see that although we did hit the August lows, we also managed to bounce right off of this key support level.
After Monday's session stocks officially were down more then 10% from their recent highs. This decline marks the first official correction in stocks in more than six years! International stocks, including the emerging markets, have seen price drops as well.
At this point in the game, I will be watching the action in the S&P 500 scrupulously for confirmation that the year-end rally is here. As of now, we still are below the long-term, 200-day moving average. To call this latest surge in stocks a breakout, I think that we would need to see the S&P 500 climb above 1,480 and remain there for at least a little while.
Hey, we are not far from 1,480 now, and given this market's penchant for volatility we might get there before you even read this alert.
May you live in interesting times!
Short Timers
On the exchange-traded fund (ETF) news front, I want to tell you about the new offerings from ProShares. The ETF issuer recently put out a bevy of Short and UltraShort International ETFs. These funds move in the opposite direction of the underlying indices that they represent.
For the Short ETFs, when the underlying indices go down, the ETF goes up by the same amount. For the UltraShort ETFs, when the underlying indices go down, the ETF goes up by twice that amount.
These new ETFs track the MSCI Emerging Markets and EAFE indices, along with the MSCI Japan and FTSE/Xinhua China 25.
If you've been lamenting not being short this market for the past month, it might be time for you to investigate the following new ProFunds offerings:
ProFunds Short & UltraShort International ETFs | ||
Fund | Ticker | Benchmark Index |
| Short MSCI Emerging Markets | EUM | MSCI Emerging Markets Index |
| Short MSCI EAFE | EFZ | MSCI EAFE Index |
| UltraShort MSCI EAFE | EFU | MSCI EAFE Index |
| UltraShort MSCI Emerging Mkts | EEV | MSCI Emerging Markets Index |
| UltraShort MSCI Japan | EWV | MSCI Japan Index |
| UltraShort FTSE/Xinhua China 25 | FXP | FTSE/Xinhua China 25 Index |
Downshifting Into Income
In January, the first Baby Boomer will start to receive a Social Security check. After that, a literal tidal wave of payouts will begin.
Consider this startling statistic: Every 10 seconds for the next 15 years, another Baby Boomer will reach for his or her share of that grand government entitlement program. That's a lot of money to be paid out in the aggregate, but how much will you personally get?
The answer is not very much.
Can you live on $1,500-$1,800 a month? Of course not, and that is why you need to listen to my special audio report with Ameritas Advisor Solutions CEO Mitch Politzer. Mitch has studied the coming shift in demographics, longevity and retirement for nearly his entire career, and that means he's got a lot of great stuff to say about this issue.
If you are even close to making that downshift into income investing, you'd be well advised to listen to what Mitch has to say.
Now is the time to start thinking about how you will generate the income you need for the next two-to-three decades.
To listen to my interview with Mitch, just click here.
Note: Ameritas Advisor Solutions is a sponsor of my weekend radio show.
Five Common Estate Planning Mistakes
This week I am proud to present a guest editorial from my friend and colleague, Kevin Yurkus, of Fairway Capital. Kevin's firm specializes in innovative solutions tailored to high net worth senior citizens. From estate planning to life settlements, Fairway Capital is definitely a company that I recommend.
If you want to find out more about Kevin and Fairway Capital, I invite you to go to my free audio special report. To hear my discussion with Kevin, just click here.
And now, here's Kevin!
Five Common Estate Planning Mistakes that Rich People Make -- and How to Avoid Them
by Kevin Yurkus, president, Fairway Capital
You may not consider yourself to be rich, but if you have an estate in excess of $2 million, you certainly need an estate plan. Here are five common mistakes that are made in relation to estate plans, along with simple solutions to avoid them.
Mistake #1: Not having an estate plan.
It's a fact -- most people do not have estate plans. They have living trusts and wills -- but these are not estate plans. Unfortunately, most people believe that their estate planning process is completed merely with a living trust and a will, but nothing could be farther from the truth for wealthy individuals. A living trust helps rid your estate of probate but it doesn't solve your estate planning needs. Likewise, a will may help in expressing your post-mortem desires but it is not an estate plan.
Not having an estate plan is a crucial mistake. For example, John Wayne didn't have an estate plan; he had a will. Yet 25 years after his death, his estate is not yet settled. Once again, remember that trusts and wills are not estate plans.
Some people recognize this mistake and take the necessary step of going to an attorney and having an estate plan developed. However, it is only too common that they then fail to actually implement the plans, such as putting their assets in a trust or follow-up on other aspects of the plan.
The solution is straightforward: Find a competent estate planning professional, get an estate plan and implement it.
Mistake #2: Not maintaining your estate plan.
Let's assume that you've had the foresight to develop an estate plan. But when did you last review it to determine whether you needed to make any revisions?
People may have completed estate plans when real estate values were less, when stock or other investment portfolios were dramatically different, or when family members were different. For example, divorced in-laws still may be in the estate plan. Is that what you really desire now?
It is important to recognize that changes in the value of your estate need to be regularly evaluated. For example, stock portfolios may have changed dramatically -- what if your estate plan was built, in part, based on stock values prior to the tech-bust? Such assets may have been designated for one heir, but now those assets are dramatically less in value than some other assets, such as real estate. Many parents want to assure equity in division of assets, but unknowingly they set the stage for an inequitable division of assets because of the directives of the estate plan. Your plan needs to be reviewed regularly for such updates.
Also, the laws may have changed in many areas of the tax code. Estate plans need to be reviewed for such potential ramifications. If anyone thinks that estate taxes will be eliminated, it is foolish planning. There is a "sunset provision"in the tax code that is scheduled to disappear after 2010. It will be tax suicide for the government to not have some type of implementation of estate taxes. As individuals continue to accumulate wealth, you can be sure that the government will continue finding ways to tap into it.
On another note, like anything else, change happens -- we get older, and we may have different values or philosophies. This means that we might decide to distribute our estate differently than we originally had planned.
The solution here is to make a point of evaluating your estate plan once a year. If you do this on a regular basis, you may be surprised at how frequently minor, or even major, aspects of your estate plan need to be updated.
Mistake #3: Not involving your adult children in your estate plan.
Failing to involve your adult children in your estate plans is a huge mistake because ultimately it is your children who will be writing the check to Uncle Sam. Since people don't like to talk about their mortality, or because they want to avoid sticky subjects such as inequitable division of assets, they totally avoid the discussion with their heirs.
It is very common for parents to pass away and leave the children scrambling around to determine what the estate's assets are, what their value is and what to do with them. For example, children may find something in a safe deposit box and not know what to with it. Or they find a trust deed for a piece of raw land that no one seems to know about. This happens all the time and it is a big mistake.
The solution is to communicate with your kids. Tell your children what you have done and how to implement your estate plan. Discuss the value of your assets. Your children will find out eventually, so why not take the time now to tell them something that will help them?
Mistake #4: Not understanding the asset mix in an estate.
It is common for someone to think, "I've got plenty of money in my estate, let the kids handle the estate taxes."This is a mistake because people often do not have the amount of liquid assets that might be necessary to pay estate taxes in the best manner.
When we die, the government requires that within nine months of the second death (i.e., the remaining spouse) the estate must be settled. In many cases, estate taxes must be paid. You are then asking your children/heirs to write a check to the government. The mistake that people make is that they have assets that are very illiquid, which cannot easily be converted to cash in a short period of time. I call this scenario "liquidity confusion"because people are confused about the liquidity of the assets in their estate.
In California, for example, real estate assets may make up a large majority of an estate. However, real estate is an illiquid asset. The credit crunch that we are experiencing today, which is part of the reason why real estate values currently are suppressed, shows why being forced to sell a real estate asset at a given time is not a healthy aspect of settling an estate. Only having nine months to convert such assets to cash can be very difficult and even cause a significant reduction in that asset's value. Real estate is not a viable liquid tool to settle an estate to pay any required taxes.
Other examples include businesses, private placements, private stock investments and personal loans, which all are highly illiquid assets that add to net worth but are difficult to convert to cash without a potentially significant loss in value and/or difficulties in converting the asset to cash within the required nine-month time frame. Do you want your kids to be forced to sell your business to pay the estate tax?
It is very important to understand how you can achieve liquidity in enough of your estate to pay any necessary taxes. The solution is to understand the assets in your estate and what portion truly is liquid.
Mistake #5: The estate tax is a voluntary tax -- we choose to pay or not to pay it.
Too many people believe that the estate tax is inevitable. However, the truth is that it is truly a voluntary tax. An individual can choose to use different estate-planning techniques to limit estate tax liability -- or he/she can fail to do so and thereby "donate"a sizable portion of a life's work to the government.
It is truly incredible what a well-designed estate plan can accomplish in terms of estate-tax minimization. For example, Joe Kennedy had an estate in excess of $600 million. Ordinarily that would equate to around $300 million in estate tax liability. However, his heirs paid less than $200,000 because he chose to deal with the problem of estate taxes.
The solution is to employ the help of estate planners. Numerous estate-planning scenarios can be developed to limit the estate tax. Each situation is different, so seek professional advice.
About the author:
Kevin Yurkus is the president of Fairway Capital, a leading life insurance and financial services firm based in Newport Beach, Calif., serving clients nationally and internationally. Fairway Capital specializes in innovative solutions, tailored to high net worth senior citizens, ranging from estate planning to life settlements. Contact Kevin at 800.338.1035 or see the firm's Web site.
Thanks Kevin.
Once again, if you want to hear my audio special report featuring Kevin Yurkus, just click here.
One Big Taste of Sour
Our infamous Fabian Lemon List, a scorecard exposing the worst-performing mutual funds, now is available here.
This list represents approximately $1 trillion in assets during Q3, 2007, and identifies nearly one third of all mutual funds as lemons.
That's one big taste of sour!
The real interesting thing is that mutual funds on the Lemon List are not just from obscure fund families. Rather, they include funds from names like Fidelity, Putnam and Vanguard.
For a fund to make it onto the Lemon List, it must under perform its category average for the past one year, three years and five years. By comparing funds to their category average, we are able to assess a specific fund's performance against that of its peer group. This apples-to-apples (or in this case, lemons-to-lemons) comparison makes the Lemon List a unique tool that investors can use to see if their mutual funds measure up.
The latest Lemon List includes the 10 largest lemon funds, along with their performance data during the past one year, three years and five years. Each fund's category average performance also is listed, so investors can see just how poorly these 10 largest funds measure up to the average fund with the same objective.
The 10 largest lemon funds include a surprising list of familiar names whose assets total more than $172 billion. They are:
Now if you will excuse me, I have to go wash this big sour taste out of my mouth.
Fabian Wealth Coaching: A Unique Financial Consulting Solution 3
As this year comes to a close, I continue with a steady stream of wealth coaching sessions. What is really amazing to me is how very similar all of our goals are. People want financial security, they want to take care of their kids and they want a retirement free from financial worry.
I'm happy to report that literally everyone who I've sat down with this year for a wealth coaching session has come away with a concrete plan in place to help them reach their objectives. Although many of these goals and objectives are similar, everyone is in a different stage and everyone has his or her own unique situation that requires a unique and personal solution.
Do you have a vision of what you want for the future, but no roadmap to get there? If so, we can help.
Fabian Wealth Strategies offers personalized wealth coaching for individuals and couples designed to jump-start you and your family in achieving your financial goals.
As a wealth coaching client, here is what you will receive:
- Personalized Wealth Strategies to achieve your goals and objectives
- Current assessment of assets, including your real property and business interests
- Review, recommendations and projections for your 401(k), IRA and other retirement accounts
- An asset allocation snapshot, recommended adjustments and fee assessment of your current investment portfolio
- A customized ETF portfolio tailored to your objectives
- A review and opinion of your life insurance and annuities
What are Wealth Strategies?
Wealth Strategies are financial and investment plans designed to achieve a specific goal. At Fabian Wealth Strategies, we are all about helping you get what you want out of life: college savings for your kids; financial independence in retirement; the dream of starting your own business, or just the financial peace of mind for you and your family.
Fabian Wealth Strategies helps you to achieve financial fitness with a personalized plan tailored to your goals and objectives.
Remember, money does not take care of itself.
For more information about Fabian Wealth Strategies, or to schedule your very own coaching session, please visit our new Web site.
You can also schedule your very own coaching session by calling David Fabian at 800.391.1118, or just e-mailing him.
Always Something New In Fabian Land 3
The innovation never stops in Fabian land.
You've already been told about our new asset management and wealth coaching services Web site and I invite you all to check and see if wealth coaching is right for you.
But wealth coaching isn't the only new rabbit in our bag of tricks. For you fans of my radio program, we have a new show airing in the Phoenix, Ariz., market every Monday morning from 8-9 a.m. PST.
The Monday show can be heard on AM 1510 KFNN in Phoenix and adjacent areas. If you don't live in the area, you can still listen live or get a podcast of the show by clicking here.
And finally, want to know how your mutual funds are performing? If you've been worried about the performance of your funds, then you are in luck.
This week we launched the new Fabian Lemon List, which is a complete rundown of America's worst-performing mutual funds. To find out more about the Lemon List, and to get our free special report, Turning Lemons Into Lemonade, just click here. The report and the Lemon List are both free, so get yours today!
Blogs Away: A Fabian Aural & Visual Fixation 5
Want to hear my latest rant about the state of the financial markets? Well, listening and watching now is as easy as a mouse click.
To listen to the audio blog, simply click here.
The Crown of All Virtues
"An individual's self-esteem stems from a sense of control over reality. Whenever we carry out a conscious effort, such as, completing a record bench press, an ‘A+' in school or writing a book, we feel a specific power rising, a sense of will. The abundant self-esteem associated with successful people flows from their having achieved goals by exerting the proper effort -- long range. People are not successful due to an accident of birth; they took the time and expended the necessary effort to develop their self-respect. They sufficiently value life and happiness to exert complete effort. As a result, they experience what Aristotle referred to as the ‘crown of all virtues': Pride."
—Mike Mentzer, author, bodybuilder and 1978 Mr. Universe
With tremendous effort comes an enormous sense of pride, even if the effort you've expended falls short of your concrete goals. The way I see it, pride is a virtue, not a sin. Why not give life your all? At the very least, your effort will yield you the "crown of all virtues.”
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars or anything else.