Jul 08 2010
Due to changes at the Treasury Department in how they will issue U.S. Savings Bonds, DFAS will stop all Savings Bond allotments effective 31 July 2010. The Treasury Department will issue bonds through their TreasuryDirect web site or you can buy bonds from financial institutions.
See the TreasuryDirect web site at http://www.treasurydirect.gov/tdhome.htm.
For more information from DFAS, see http://www.dfas.mil/news/ussavingsbondallotments.html.
Jul 07 2010
I recently returned from trips in New York and Chicago after listening and talking to numerous mutual fund and private money managers. I went to these meetings and conferences not just looking for the golden nuggets but expecting to find them. If only.
Discussions were all over the map. We are living in strange times. No one has a grip on the current economic environment. When looking into a complex situation, depending on their area of specialization, you get positive and negative opinions. Common themes surfaced; interest rates, inflation, taxes, future laws and regulations, the country’s budget, the world’s budget issues, and finding opportunities in this confusion.
As an investor with similar goals and means as you, here’s what I came away with: “The more things change, the more they stay the same.” While some of the individual pieces have changed in this economy, in a big picture way, this country and world have always gone through turbulent and confusing times—and always will.
For those of us who continue to work and invest through our employer plans, I believe even more in the philosophies and strategies we have shared on the pages of this blog and in our presentations. You can be successful if:
• You understand some of the history of our country and our economy.
• You take the emotion out of your investment plan.
• You use strategies that take advantage of known market conditions.
o Average down, Proper Allocation, Re-balance
You can read about the details of these points in past blog posts.
• The Average Investor, Part 1, Part 2, Part 3, Part 4.
• In a Bear Market
• Market in Perspective
• Before You Pull the Trigger
If you are closing in on retirement (within 5 years), you have it a bit more challenging. It is possible that stocks won’t have a strong rebound within this period and bond values may take a hit. Continue your systematic investing by maxing out your contributions. If stocks continue their volatile ways, wild swings up and down but basically remaining flat over time, systematic investing will allow you to pick-up more shares in the down times. When stocks return to their normal course, you will be glad you have more shares. Consider a balanced allocation among your stock and bond positions and add alternative investments to a portion of your allocation.
TSP members, you are very limited in the alternative world. This is one reason why I recommend you roll your TSP into an IRA after you leave the Service. Pick an IRA with investment options and low cost. You have to go with your I, S and G funds. For illustration: C 35%, F 35%, S 10%, I 10%, G10%.
For you folks with more choice, consider adding REITs, international stocks, international bonds, cash, short-term bonds, dividend paying stocks, high-yield bonds. These would be added to a base of balanced stock-bond holdings.
Not to throw cold water on anyone’s dreams but some of you may need to delay your retirement plans to build more assets. Y’all be careful out there.
May 27 2010
The Treasury Department’s new rules will require banks to protect amounts you receive from Social Security and the VA in your bank accounts from debt collectors and garnishment.
Laws have protected these government funds from creditors in the past, but when faced with a garnishment order, banks would freeze whole accounts. The government funds would be frozen along with the funds eligible for garnishment. Freezing the whole account causes financial hardships and cost time and money. When the whole account is frozen, you have to file a claim to get your government funds released and that’s where the hardship, time and money come in.
Now the bank must determine how much you receive from Social Security and the VA. They can only allow the amount above the government payments to be frozen and made available for the garnishment order. Other government payments are also protected like CSRS and FERS income among others.
These rules are expected to be implemented in the fall or winter. See the Federal Register for details.
May 04 2010
The way human nature overrides common sense is endlessly fascinating. This is particularly true when it comes to the illusion of control – how we believe we can control events that are actually beyond our capabilities.
A good example involves people who have an inordinate fear of flying. Few of these individuals are afraid of driving to the airport despite the fact that, statistically, riding in an automobile is far riskier than flying in a commercial airplane. There are a number of reasons for this phenomenon but at least one factor is the feeling that we are in control when driving an automobile. In an airplane we feel totally dependent on the pilot.
A similar and equally erroneous situation involves the investor who is “watching the market.” The presumption is that he is waiting for a signal that will reveal what should be done next. At the extreme, individuals stay glued to their computer screens observing every transaction and using sophisticated charting software to put each data point into perspective. The more time, effort, and tools involved in this exercise, the greater the feeling of control. But it is still an illusion.
The reasons are simple. First of all, while there may be some signal that marks a turning point in the market, those signals are only obvious in retrospect. Only hindsight can differentiate the correct indicators from the head-fakes and noise of everyday market activity.
The second reason is the inability of market data to forecast the future accurately. Countless man-years of effort and billions of dollars have been spent poring over historical data looking for patterns that might reliably predict future market activity. If anyone has ever found such a pattern they certainly aren’t going to share it with us. The fact is that once a trade is posted that data-point becomes the past and is of little use in telling us what we should do next.
The proof of this occurs when “the watcher” is asked, “exactly what are you looking for and what will you do when you see it?” The usual response is a quizzical look suggesting that this question has never been seriously considered. The logical conclusion is that while the observer may not know exactly what he is looking for, he feels confident that he (like the Supreme Court justice who couldn’t define obscenity) will “know it when he sees it.”
Apr 14 2010
Forbes has an excellent article out on some major tax law changes coming up over the next three years…
It talks about key changes in the following areas:
Some of the possible financial moves recommended include:
These changes are significant, since they will drive the top tax bracket on capital gains in 2013 to nearly 24% (a 58% increase from current levels) and take the top rate on interest, rent, royalties from 35% to over 43% (a 24% jump from current levels). It is unclear which bucket dividend income will fall into at this time.
While most of these tax changes will have a mild-to-moderate impact on the Active Duty military member, the second career and fully retired face steep potential tax increases. Make sure you consult your tax and financial advisor to see what the best moves for your specific situation are…
Forewarned is forearmed!
Phil Dyer, CFP®, RLP®, CPCC
