Wednesday, March 23, 2005

bubble ,bubble toil and trouble

American Retirement: Scrambling To Stay Ahead
Americans may be more prudent than often depicted…
Portion of workers saving for retirement, ranked among 15 countries
Singapore 80%
Belgium 77
U.S. 76
Italy 38
Netherlands 33

…but even the affluent are anxious about the golden years.
Portion of U.S. working millionaires worried about retirement health-care costs
Planning to work full- or part-time in retirement
Fretting about a stock-market decline
Concerned about inflation
Worried about large tax increases
Sources: AXA Retirement Scope; Northern Trust Co.

March 18th 2005

Yes I know what you have been thinking: but take a look at the above charts seems the DOWJONES Industrial Index from the early 1930’s has an amazingly similar pattern as the current NASDQ Composite. Don’t tell me you think things are worse now than in the heat of the great depression? Looks to me like we are currently running a little behind, about 6 months give or take on the time line. It is still all about energy .Short term oil prices continue to impact the market, putting us squarely in the midst of a secular bull market in energy. Higher Oil Prices are driven by risk. Risk takes many shapes and forms .There is demand risk, disruption risk, extraction risk, and production risk. For the moment these risks all seem to be heightened and look to be heightened for some time to come.

There is some concern that the real estate party is about to come to an end. 5 years of non stop gains are leading many to use the phrase, “when it can’t get any better than this it can only get worse.” I have noticed that the same people who were buying Tech stocks in March of 2000 are now talking up real estate. After the bubble burst in 2000 the FED flooded the economy with liquidity in an attempt to rescue us from the specter of deflation. This process involved lowering interest rates to 40 year lows. Low interest rates, easy credit and a powerful dynamic of a sweet spot in the demographic cycle produced a huge housing boom. Lower rates and increasing prices in housing spurred huge amounts of refinancing allowing consumers to pull equity out of there homes and apply it to other projects. As this all started many professionals wondered what would be the net effect on the bond market and interest rate sensitive equities as the FED raised rates slowly for a prolonged period of time. Higher interest rates depress bond and, preferred stock prices, as well as hurt bank, REIT and utility stocks. So far none of this has been true. The prolong raise in interest rates has not effected long bond yields and to some degree high quality tax free bonds have rallied in price. It seems to date we have something more akin to the post world war two housing boom which is also leading to a new baby boom. My concern is that as rates continue to increase there is going to be an inflection point that may undue this process and burst a bubble in housing the same way it was burst in the NASDQ.

On a final note if you recently sent your IRA or SEP contribution I have been a bit over whelmed by the volume of checks in recent weeks so I have been a bit slow letting people know their check has been deposited. Please bear with me, checks get deposited as soon as they arrive and if you haven’t herd from me you’ll hear shortly.



Saturday, March 19, 2005

Fives years later....seeing a positive attitude towards the economy and investment

March 11,2005


It seems that Michael Jackson was in the air. I look at the “thriller” of different mixed singles the market has given us last week and the one commonality is “as easy as one, two, three” Michael Jackson. Yes I know that it was the anniversary of the NASDQ hitting over 5000. But “one bad apple doesn’t spoil the whole bunch”, reminding us all how much everyone has gone thru since that time. Some of us are resigned to it. Some of us are still feeling the “hopie hopie” that everything will come back. Some of us are still in the land of “denial”. Many of us are burned out and bombed out by the market and a few of us are following the old adage “by low, sell hi”.

For those of you waiting for a rebirth of Silicon Valley the wait may be a long time coming. It has been five years since the bubble burst and we are still seeing signs of a severe hang over. Over capacity is epidemic in many industries created by the bubble, Y2K and coupled with some rather dubious financial engineering. But hey the GDP is 12% larger now than in 2000 and low interest rates ,low inflation and steady growth rule the day. Ok so English majors are not making six figures straight out of school, 13 year old wiz kids have all been suspended, and businesses really do have to have a product, generate revenue and earn a profit after all. Yes things have certainly changed from the days of: if it has a cool name, a cool symbol and nobody can figure out what they do the stock went to the moon. But I think the real problem is that we all felt in some way that we all deserved and were entitled to the fun, the excitement and especially the easy money.

The trade deficit has been around for over 40 years and yet none of the dire predictions have come to fruition. The simple fact of the matter is that the US economy is growing much faster than its trading partners and we have become the purchasers of last resort for all goods sold thru out the world. Our largest import is oil and no surprise gee wiz, when oil prices raise the trade deficit goes up. The senate seems poised to allow drilling at ANWR in Alaska in roughly 1000 – 2000 acres, the Alaska wild life refuge is well over 1 billion acres. For those of you worried about the Caribou, since the much maligned pipe line was built in the 1970’s the Caribou population, along with polar bears and other creatures of the great white north has increased significantly. ANWR is the largest find in North America ever with an expectation of producing over 1 million barrels of oil per day. That is as much oil as we import from Saudi Arabia.
Remember new oil discoveries have been meager, yet demand for oil is surging all over the world.


IRA Contribution Limits

Thursday, March 10, 2005

"Martinis with the Mayor" ,the smart ones got it and the stupid ones didn't ..No rhinoceros has a hide so thick and IRA rollovers

March 3 2005


The Market at the moment is all about being moderate. Moderate inflation, moderate growth, moderate employment growth, moderate interest rates, moderate savings and the moderation never ends. No boom and then no bust, just moderate growth going out over the horizon and pretty soon that starts to add up to be real money.

It is no surprise or coincidence that the dollar has suddenly switched direction since the presidents charm tour of Europe. As I have said before a weaker dollar hurts Europe far greater than it hurts the US. I would also surmise that it has been done on purpose and has little or nothing to do with the “twin deficits”.

Several of my clients have noticed that there have been an awful lot of stories in the press lately about women, here are a few: Martha Stewart is out and about, sporting a new ankle bracelet, she thanked her fans, her employees and her stock holders, and two of the largest returned her compliment by selling all their MSO stock. The editor and chief of Play Girl Magazine Michele Zipp has recently come out as a Republican! According to Michele and I am paraphrasing Republican men are willing to fight for what they want which transfers into a very satisfactory experience in bed room. Rush Limbaugh commented on his radio show on Tuesday, “Perhaps that’s why most single women vote Democratic and married women vote overwhelmingly Republican?” Other women in the news, Teresa (shove it, you idiot ,scumbag)Heinz Kerry in the Seattle Post is claiming the election results were “hacked” by “right wingers” and terrorist sympathizer Italian journalist Giuliana Sgrena claims the US tried to assonate her ,like we don’t have any American journalist that are pro-terrorist? Betsey Hoffman President of Colorado University resigned. The university has been under fire for more than a year over allegations of sexual misconduct and alcohol in its football-recruiting program and more recently, bigoted statements by “Professor” Ward Churchill calling people who died on 9/11 little “Ikemans” after the Nazi War Criminal of the same name. Sounds just like the UN to me. And finally in a big blow to the women all across the country X-President Bill Clinton has returned to the hospital for a second hart operation, sorry couldn’t resist that one.

The following retirement plan limit increases for 2005: 401(k), 403(b), and 457(b) Deferral Limit $14,000 Age 50+ Catch-Up Contribution Limit* $4,000* 457(b) Pre-Retirement Catch-Up Limit $28,000 Annual Addition Limitation for Defined Contribution Plans $42,000 Annual Benefit Limit for Defined Benefit Plans $170,000 Annual Compensation Limit $210,000 Annual Compensation Limit for certain eligible governmental plans $315,000 Highly Compensated Employee Definition Limit $95,000 Key Employee "officer" Definition Limit $135,000

I have been swamped lately by collecting “rollovers” .Many clients after several job changes the last few years, have assets spread out all over the place. It is easy to consolidate these assets into one tax free account. You can move assets into an IRA rollover and invest the money in safer short term bond funds if you are concerned about market direction. Consolidation also gives you a better grasp of what you are doing, eliminating over exposure of a particular asset class or duplication of fund choices. Thru Bear Stearns which is the clearing house I use you can pick from over 400 equity or fixed income fund families, that’s about 8000 funds. Most investors only need 3 to 5.

Let me know if I could be of service,