Yesterday, the market dealt a disturbing blow to frustrated bulls who were riding the recent rebound in equities.  Before the market opened, futures were a bit weak after a report showed German business sentiment was not as strong as expected.  (Remember, Germany is one of the primary countries which is expected to be responsible for bailing out Greece).  But while the pre-market futures were relatively tame, the market quickly turned lower after the US consumer confidence numbers were released at 10:00 AM EST.

Economists were surprised to see the confidence index drop to 46 which is the lowest reading since 2009.  At issue was the continued absence of employment recovery and a frustratingly lower reading in the “future expectations” category.  It seems that while the market has been pricing in a robust recovery, the average American is not quite assured.  Since consumer spending is a major part of our economy, weakness in consumer confidence is particularly troubling.

Fed laid groundwork for tightening last week

Weak confidence calls into question the stealth rate increase which the Fed undertook late last week.  The Fed is walking a delicate tightrope between loose policy which could quickly lead to excessive inflation, and tight policy which could cut off growth in our fragile economy.  Raising the discount rate last week signaled that the Fed was ready to begin tightening, which could have widespread implications on the economy.  One of the more disturbing results could be an increase in mortgage rates charged by refinance companies which would increase the difficulty of home refinancing for many borrowers.

As adjustable rate mortgages reset (at potentially much higher levels) this could not only reduce the amount of discretionary spending available to many consumers, but it could also cause another wave of losses for banks and mortgage lenders.  Such a crisis could have ripple effects including continued restraint in lending to small businesses which in turn could be unable (or unwilling) to increase hiring in the face of uncertainty.  Not to sound like a broken record, but it appears the dominoes are stacked and the consumer confidence report may have been one of the first to fall – setting off a chain reaction and leading to lower market prices.

Lower prices and a difficult economy does not mean that we as investors need to be resigned to suffer losses.  There are plenty of opportunities to use this scenario to our advantage including purchases of companies that will thrive in this environment as well as owning ETFs that trade inversely to market trends.  One example of an industry that should do well in a poor consumer environment is the payday loan / pawn shop industry.  ZachStocks has discussed a potential investment in First Cash Financial which should see its business pick up as consumers look for non-traditional financing options.

Inverse ETFs are also a helpful tool to offset losses in more traditional growth investments.  New products are quickly being rolled out that allow investors to bet against individual sectors, commodities, or geographic regions.  If you have significant exposure to energy companies, you might consider taking a position in the ProShares Ultrashort Oil and Gas (DUG) which will increase as this sector declines.  The beauty of these instruments is that they can usually be traded in an IRA (which typically would not be able to short securities) and offer an excellent hedging opportunity.

Before investing in any vehicle, make sure you understand the risks and potential rewards.  This is true for both traditional growth stock positions as well as less traditional positions that allow you to hedge your exposure.  If you are worried about potential losses associated with declining consumer confidence and the potential for more economic and market volatility, then please visit Sound Counsel Investment Advisers and allow us to help you navigate the turbulence.  Potential for market losses are significant, but sound investors should be able to use discipline and many available tools to keep their capital intact and even benefit from what may very well be a sustained downtrend.

FD: Author does not have a position in any stocks mentioned in this article.

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The last few weeks have been challenging for the markets as trend lines are being broken, and many speculative issues are reversing to give up recent gains.  After falling 3.7% in January, the S&P 500 has begun February with plenty of volatility and is currently showing losses for a second straight month.  Both domestic and international forces are combining to leave investors unsettled, and it is unlikely there will be any quick solutions to the issues the market is beginning to discount.

On a personal level, the last few weeks have also been challenging as I was admitted to the hospital with an infection in mid January and ended up spending 17 days recovering before I was released to go home.  Unfortunately, it will likely still be another 6 to 8 weeks until I am fully recovered, but I am thankful to be out of the hospital and slowly getting back to work.  Thanks to many of you who have checked in on me and I look forward to being back to a normal work schedule in the weeks to come.

From an investment standpoint, caution continues to be a theme as the recent declines in the market are more likely to be the beginning of a new trend than an isolated event.  Investors who are positioned conservatively risk missing some opportunities to capture profits, but should find their account to be more stable than more speculative investors.  At this point I would rather miss an opportunity or two, than allow my clients to shoulder too much risk and potentially sustain major losses. There are three issues which are particularly concerning to me and seem to encapsulate the risk investors are dealing with today:

1. China Hits the Brakes While China continues to be one of the fastest growing economies, many (including the Chinese government itself) are concerned that a speculative bubble could potentially be on the rise.  In a proactive move, the Chinese regulatory officials have raised the reserve requirements for bank lending, effectively reducing the amount of capital available to lend to businesses and individuals.  While this move is likely a wise decision to curtail speculative lending and borrowing practices, it could begin to weigh down Chinese growth which would in turn become constricting for many other nations as well.  If China is not able to carry the growth torch, there are very few countries which have the resources to step in and take their place.
2. European Debt Concerns Greece has become a ticking time bomb as the country struggles to meet heavy debt obligations.  Unlike the US, Greece cannot simply print its way out of a debt crisis as the country does not have the authority to manufacture Euros.  The global recession has sent tax revenues lower, and a weak financial position means that borrowing costs are prohibitively high (or simply not available).  While many economists say that Greece isn’t large enough to cause a major problem, investors fear contagion where problems spread to other vulnerable countries such as Portugal, Ireland and Spain.  A major disruption in Europe could be a very disturbing catalyst for global markets.
   
3. US Economy Continues to Struggle Despite the fact that headline unemployment dropped during January, the employment picture is actually quite bleak.  Many workers have been unemployed for so long that they have given up looking for work (and consequently dropped off the unemployment tally).  There are a rising number of workers who have exhausted their unemployment benefits, and plenty of part-time workers who are “under-employed” and simply doing their best to make ends meet.  Some estimate that 20% of the US workforce is either unemployed or significantly under-employed and this dislocation is causing economic growth to stall.  Statistics are easily manipulated to look good, but in reality our economic expansion is quite weak and vulnerable to a double dip recession.

So with these concerns on the horizon (or directly overhead) it makes sense for investors to employ risk management techniques to guard against investment losses.  These techniques could include raising cash by selling portions of existing positions, adding short exposure through purchasing inverse ETF positions or shorting individual stocks, or possibly using option strategies to lower account volatility.  If you would like more information about how to implement a defensive investment strategy please fill out an information form for Sound Counsel Investment Advisers and I will personally get in touch with you to discuss how we can protect your account. As always, stay nimble and make sure you have an appropriate plan in place for the current market environment.

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In today’s uncertain market, investors are looking for a wider variety of tools to help them capture returns and protect their investment capital.  One of the most powerful (and sometimes dangerous) tools is the leveraged ETF.  These investment vehicles have been trading for a few years and have become very popular both with daytraders and investment managers looking for ways to hedge their exposure.

A leveraged ETF is designed to trade at twice (or three times) the velocity of an underlying index.  So if the Russell 2,000 were to trade 3% higher today, the Daily Small Cap Bull 3x Shares (TNA) should rally by a full 9%.  In contrast, the leveraged 3x short vehicle (TZA) should trade down by 9%.  The inverse funds can be very helpful in helping long-only managers to offset their daily risk as a small position in the 3x bear funds can capture significant gains on a negative day which will offset that managers portfolio losses.

But leveraged vehicles have gotten a lot of bad press lately because of a mathematical property I call volatility decay.  Now to be clear, this is not an error in the design of the funds, it is simply a mathematical property that many do not take into account when using these tools.  The tools work exactly the way they were designed to – it’s the investors who need to understand how to use the tools.

Let’s take a volatile week and see how a triple index fund would perform:

• Monday: Down 5%
• Tuesday: Up 3%
• Wednesday: Down 4%
• Thursday: Up 6%
• Friday: Down 2%

Using the returns for the index, you would end up with a 2.42% loss.  So if you were using a triple leveraged inverse fund, you might expect your gains to be 7.26%.  However, the math doesn’t quite work that way.  Here is how a $10,000 position would likely trade if the fund perfectly tracked the market:

• Monday: Up 15% – now holding $11,500
• Tuesday: Down 9% – now holding $10,465
• Wednesday: Up 12% – now holding $11,721
• Thursday: Down 18% – now holding $9,611
• Friday: Up 6% – now holding $10,188

So you see, in a volatile period, the investment would only have returned 1.88% despite the fact that the market was down 2.42% and your investment was supposed to return three times the opposite of the index.  That’s because each day the funds reset to offer 3x exposure the next day.  This daily reset works to our favor in a steadily trending environment (assuming the trader picks the right direction), but works against us in a highly volatile market.

But don’t give up on the idea of using a leveraged investment to help protect your capital (or supercharge your returns).  Direxion Funds has developed a series of mutual funds which are designed to help avoid the volatility decay associated with the daily volatility.  These mutual funds are instead geared to return double the monthly performance of the index they track. So with these funds, if you buy on December 31, you can expect that on January 31, you will receive 200% of the price movement of the underlying index.  The funds do not reset daily and so you don’t have the negative (or positive) compounding effect on a daily basis.  There is still a volatility decay property to the funds, but it occurs on a monthly basis rather than a daily basis.  This is much easier to manage and makes the mutual funds a bit more relevant to long-term investors.

One thing to consider is that if you buy a fund in the middle of the month, you may be getting higher or lower exposure to the market through the end of the month.  This is because the funds do not reset mid-month to account for the price movement that the market has already undertaken.  But Direxion has a good solution for this potential problem.  If you click on this link you can see the “estimated current exposure level” which can serve as a guide for how much of a particular fund you should buy to meet your hedging or speculation target. Mutual funds offer the benefit of more accurately offsetting your losses over a longer period, or making a directional call on the market for a wider time frame.  However, the drawback is that the funds are traded on a daily basis, so you can’t liquidate your position at any point throughout the day.  But don’t worry, there are plenty of leveraged ETFs to help offset your mutual fund exposure throughout the day!

FD: Author does not have a position in any stocks mentioned in this article.

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Note: This is a recap of performance for the stocks picked at the beginning of 2009.  Picks for 2010 will be posted January first.

To paraphrase a hedge fund manager that I follow closely, “Nothing has happened this year the way I expected it to.”  While this statement does little to instill confidence in this money manager, William posted returns north of 20% for the year in his long-short fund which remains fairly neutral as far as market exposure is concerned.  The point is that although 2009 was a year of major shifts in market direction, policy decisions, and investment risk; it was still possible to adjust trading style along the way to account for the changes and book significant profits.

My four picks for 2009 did not turn out to be very profitable despite a significant market rally from March through December.  Thankfully, portfolios managed for Sound Counsel Investment Advisers were able to trade actively throughout the year and performed much better than the 2009 recommendations.  As I choose growth opportunities for the portfolios I manage, I am careful to use stop points in order to exit losing trades, while letting winners continue to compound gains.  Often we use covered calls to manage some of the risk, and the advent of inverse ETFs has also been helpful in managing downside risks for entire markets as well as individual sectors.

So without further adieu, here is some commentary on the four picks for 2009.  Stay tuned for the 2010 picks which will be posted January 1.

1. JA Solar Holdings (JASO)
   While Alternative certainly received its fair share of headlines this year, the solar industry was plagued with rising inventory levels and falling prices for solar products.  On top of the supply dynamics, many countries which had implemented strong solar energy tax incentives had to pull back on the stimulus measures due to financial strain.  As a result, many solar companies experienced a difficult period and those with excessive leverage were especially hard hit.  At the time of writing, it looks like JASO will finish the year with a gain of 30.5% which is certainly healthy, but the majority of the gains came in the last few weeks of the year.  JASO could continue to post additional gains in the coming year, but there are still significant uncertainties surrounding the alternative energy market.
2. AECOM Technology Corp (ACM)
   AECOM is an international construction management company which is expected to benefit from global stimulus projects aimed at improving infrastructure projects such as bridges, roads, power plants and other developments.  Since AECOM has a well diversified client base, it was expected that the company would grow earnings (which occurred quite nicely) and see its stock price rise as a result (which unfortunately did not occur).  Much of the stimulus spending took longer than expected to reach the market, and investors have placed a lower multiple (paying a smaller price for every dollar that the company earns).  The lower multiple is likely due to a perception that the company will not continue to grow quickly after the stimulus projects are completed.  At this point AECOM still looks like a great investment with little debt and a low earnings multiple, but it has taken longer than expected for the stock to bounce.  Currently it looks like ACM will finish 2009 with a loss of 1.2% – not a very healthy showing considering the strength of the market.
3. TBS International (TBSI)
   At the end of 2008, it looked like shipping companies were primed for a significant rebound.  The financial crisis had sent many of the more leveraged players into the abyss, but companies with longer-term charters and reasonable debt levels were showing signs of improvement.  The wildcard in this industry was whether the day rates for dry bulk shipping would improve over the coming year.  Unfortunately, shipping has continued to be a challenging area for the economy, and since TBSI does not pay a dividend, it has been especially unattractive to investors.  The stock is down 27.2% for the year which is extremely disappointing.  Looking into the coming year, there is little evidence that this company will offer investors much hope of improving profits so I would not recommend an investment in this stock and have kept clients out of this name for some time.
4. China Medical Technologies (CMED)
   China Medical is another disappointing story as the stock is now down 30.2% for the year.  Midway through 2009, CMED had traded higher as the company’s rapid growth caught investor’s attention and the diagnostic company was expanding its base of customers.  However, a management change along with significant debt has caused investors to lose confidence.  At the current price, CMED is looking like a very solid value, but I am not invested right now because I want to know for sure that the business metrics are solid.  If management were to issue healthy guidance for the coming year (ending March 2011), I would consider working back into the stock, but for now it appears to hold excessive risk.

We have many risks and many opportunities in front of us as we enter this new decade.  Flexibility and damage control will be important skills to employ as the markets face the risk of inflation, mounting sovereign debt, and significant fluctuations in currency rates.  I would welcome the chance to help you develop a comprehensive plan for your investments in the coming year.  Please email me if you would like more information on Sound Counsel’s investment strategies.

Wishing you a happy New Year!

Other Bloggers 2009 Results

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The Financial Blogger

My Trader’s Journal

The Wild Investor

Four Pillars

Where Does All My Money Go

Million Dollar Journey

It’s not easy being a bank these days.  Oh sure, it’s nice to still be alive.  After all, last year at this time it was uncertain exactly how many financial institutions were actually going to stay in business.  But after begging for taxpayer money to keep them alive and kicking, banks are now finding that the strings attached are more like giant anchor chains and regardless of whether an individual firm has paid back the funds or not (and really it doesn’t matter whether the institution received any funds or not), banks are now being held to a standard that requires them to focus on the public good more than the pursuit of profits.

This week, Barack Obama delivered a very pointed address to US banks, declaring that he didn’t run for office to help a bunch of “fat cats” get rich.  With many high profile banks repaying TARP liabilities and removing themselves from the compensation restrictions imposed by the government, Obama is sending the message loud and clear that banks are still required to be good stewards of their capital.  This implies that the president believes that US banks should significantly increase lending in order to supply liquidity to businesses and consumers in need of financing.

Currently, banks are enjoying one of the best rate environments possible due to the low short-term borrowing costs these institutions can take advantage of.  With the Fed Funds target rate at zero to 0.25%, banks can borrow for quite literally no interest expense (or marginal expense at worst) and invest that capital in nearly anything paying a nominal yield.  Of course Bernanke would like to see this capital lent to businesses and individuals for higher rates of return but also to prime the pump for additional economic growth.  But most recently, banks have been taking the capital they can borrow at low rates and investing in treasuries which carry a smaller profit but much more stability.

The process of borrowing cheap and investing “just a bit less cheap” does very little to stimulate our economy.  In fact, the only good it really does is to help the bank report stable profits and show a balance sheet with an improving risk picture.  (Now I’m well aware that most major banks have plenty of legacy risk associated with assets already on their books – but new lending is following the path of zero risk tolerance).  If banks continue on this path, they will likely face even more harsh criticism from an administration who believes that the financial institutions owe it to the taxpayers to be offering more liquidity.

As it turns out, the choices for banks are not pretty regardless of which angle you take.  If banks are more free with their lending, the amount of risk taken could turn out to be devastating.  This is actually a major part of the problem that got us into our difficult position in the first place.  Credit flowing freely to consumers and businesses who are not good credit risks is certainly not a good idea for the banks, or for the taxpayers.  Imagine the public backlash if these new loans turned to losses and the government had to bail out the banks again! You can bet the heads would start to roll.

But on the other hand, if the lending institutions decide not to extend credit to businesses and instead use the low borrowing rates to fortify their balance sheets, they will likely face the ire of an administration desperate to manufacture economic growth.  As it stands now, rates for borrowers are extremely low – definitely an attractive point for businesses.  But the credit standards required are extremely high.  Even showing a rock solid balance sheet, business plan, and collateral does not ensure that a business will be able to raise capital.

My personal fear is that banks are buttressing their capital base because of the off-balance sheet exposure that many still have to weak assets and structured products.  As these products are moved back on the balance sheet due to regulations imposed next year, the capital picture could turn much uglier.  With this in mind, I would recommend steering clear of major banks as an investment in the first half of 2010 while regulation continues to unfold and the picture becomes clearer.

As for the banking industry, the government should certainly continue to monitor the risk associated with these institutions, but should refrain from pushing these companies toward making loans.  Once the risk picture is cleaned up and transparency returns, competition will cause the banks to naturally lend at fair market rates.  But forcing these institutions to lend regardless of credit quality will ultimately lead to higher risk and systemic failure.

FD: Author does not have a position in stocks mentioned in this article.

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Today is traditionally known as “Black Friday” in the retail industry for a number of reasons.  Traditionally, it was the day after Thanksgiving when many retailers actually crossed into the black, meaning they became profitable for the year.  More commonly, retailers and shoppers  refer to the day after Thanksgiving as “Black Friday” because of the madness at store locations where door busters, huge crowds, and short tempers make for a chaotic shopping experience.

This year we may face fewer shoppers than we have traditionally seen, due to lingering unemployment, an economy likely to still be in recession (or only recently beginning to show signs of recovery) and a level of wealth that is diminished from last year.  However, we may still end up with a significantly “black” Friday as far as the markets are concerned.

Most US investors were unaware of the carnage that was sweeping world markets yesterday as we all binged on turkey and remembered to be thankful.  However, the European markets along with many other international markets were down more than 2% as Dubai rocked the international sense of economic improvement.  Dubai World is a sovereign wealth fund which has huge liabilities related to its leveraged investment.  On Thursday, the country announced that it would seek arrangements to delay the repayment of a good portion of its debt.  This has caused quite a stir in the international community and brings liquidity questions into play.

As I write, the US pre-market futures are pointing to a negative open of about 3%.   While a drop of that magnitude is not extremely concerning, it should be noted that markets are likely very susceptible to a sustained decline, due to rich valuations in equities, and generally bullish pricing trends on securities across many asset classes.  Sometimes it only takes a small catalyst to shift sentiment enough to completely reverse the trend.  In today’s markets, there is enough dry powder which could lead to a morally bruising market decline, and Dubai’s news could be just the spark to set off the explosion.

US markets will only be open a half day today with the majority of the country still in celebration (or shopping) mode.  That leaves trading desks largely full of rookies whose trading decisions are fairly unpredictable.  If these managers begin to panic with losses mounting, selling could begin in earnest shortly after the 9:30 open.  If this happens, there will be very little liquidity in the market to support prices and the declines could quickly accelerate.  I’m not predicting this to be the most likely outcome, but investors should at least understand that this is a possibility.

With equities largely pricing in a full fledged economic recovery, stocks holding multiples that imply significant growth, and short-term treasuries at levels that are simply unsustainable, there are few safe places to hide.  We have been recommending purchases of precious metals for quite some time, but it now looks like gold may e a bit extended on a short-term basis, and while silver may have a long way to run, it will likely experience a temporary pullback if the markets decline.

So please keep your capital safe and wait patiently for buying opportunities.  I wouldn’t plow any capital into growth positions today or next week, even if the prices drop significantly.  The market will need to take some time to adjust to the declines and buying opportunities should only be pursued after careful thought and deliberation.  So keep the defense on the field and watch out for the dreaded “Black Friday” Enjoy this article? Sign up for the ZachStocks Newsletter, Your source for Sound Market Commentary, Growth Stock Analysis and Successful Investment Strategies

What if I walked up to you this afternoon and asked you personally for a loan?  I know, we probably haven’t met and already you are uncomfortable with my overt start to our conversation.  But let’s run with this for a few minutes…  Assuming you had the money to lend, and I appeared to be a legitimate borrower with every intention to repay my personal loans, you might actually consider the transaction.  After all, loaning someone money can be a benefit to both the borrower and the lender – I would have the capital needed for whatever project I was undertaking, and you would negotiate a reasonable return for the capital you trust me with.

Treasury securities are not all that different.  In fact, a good friend and colleague of mine likens treasury liabilities to Loans to Congress. Essentially, buyers of these securities are allowing the US government to borrow capital, and Congress is the body primarily responsible for spending that money.  So let me pose my original question to you from a different standpoint.  If your congressman walked up to you this afternoon and asked you personally for a loan – would you consider lending him money?  Would your answer change if he offered the full faith and credit of the United States as a guarantee on your principal?  Well, many investors today are saying “yes” to this request – possibly without fully understanding the risks involved.

Three Considerations for Lending Money

When loaning money to an individual – or for that matter when loaning capital to a corporation – there are three primary categories that must be analyzed in order to make a rational decision.  Banks perform this type of analysis all the time as part of their underwriting process.  In order to distribute capital, lenders should look at the borrower’s position on these three factors.

1. Revenue or Income – What type of cash inflow is expected to be used in order to repay the loan?
2. Fiscal Strength – What shape is the borrower in financially – what assets and liabilities should be considered?
3. Ongoing Expenses – What level of operating expenses or household spending is in place and how will that affect repayment?

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As far as revenue or income is concerned, I would likely be a decent credit risk.  I receive a monthly check from a publishing company which has employed my services to write a series of financial newsletters.  I own an investment advisory which yields and increasing amount of revenue, while also performing some consulting work on the side.  It makes for a busy life, but a lender would see a diverse and stable source of revenue which would certainly be attractive.

Looking at Uncle Sam, the revenue base is more complicated.  Currently, the Internal Revenue Service (IRS) is dealing with low receipts as the economic recession has caused both businesses and individuals to earn less and therefore pay lower taxes.  Now Congress can easily pass laws requiring higher tax rates (and I believe we will see this as a trend over the next several years), but that strategy can be self-defeating.  Not only could citizens and businesses move offshore to countries with better tax rates, but heavy taxation can also lead to frustration where employees and employers alike simply do less business because there is less incentive to succeed.

The Issue With Printing

Now when we talk about our Loans to Congress (Treasury Securities) most people feel relatively safe because the notes are backed by the full faith and credit of the United States of America.  Even if the economy tumbled to the point where revenues were cut in half – or by 80%, the US could still print the money necessary to pay for the treasury liabilities.  So we are secure knowing that even with a worst-case scenario, the income stream can come from the printing press.

OK, let’s assume I made the same argument to a banker when I was applying for a loan.  ”Sir, I have an off-set printer in my basement that can turn out genuine $100 bills and while I don’t intend to make use of this, you should know that if my revenue decreases I will resort to printing these bills and you will still get paid.”  Of course this is highly illegal (and for those spoofs out there reading, I actually do not have an off-set printer in my basement.  But even stepping away from the legality of the situation, why would that be such a bad idea?  Why is printing money illegal in the first place?

The act of illegally printing money can have a devastating effect on the local or even national economy.  As cash floods the system, the laws of supply and demand come into play.  More cash chasing fewer goods leads directly to inflation.  It’s not a theory, it’s a fact!  As this money circulates, the value of each dollar will decline.  The US government places a high priority on guarding against counterfeit money as a means of protecting the integrity of our currency.

But in our Loans to Congress example, the government is essentially making the other side of the counterfeit argument.  ”If we get into trouble, you can rest assured that we will simply print more cash in order to make sure that you get paid.”  Why is that not comforting?

Fiscal Strength

Moving on to our second metric worth considering before making a Loan to Congress, we want to look at the fiscal strength or balance sheet for anyone we lend money to…  If you were looking at my personal finances, you may have been comfortable with the income side of my equation, but the balance sheet may paint a different story.  As a dad with six kids and some medical issues in the family, we have accumulated a bit of debt from hospital admissions, surgical procedures, and medical specialist consultations.  On top of that, we have the mortgage on the house, and a mortgage on a rental property.

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While the family is making progress working down these balances, the numbers would be enough to cause a banker to raise his eyebrows and consider charging a higher interest rate.  After all, the more debt that is on our balance sheet, the more risk the bank is taking.  The only saving grace for our family would be the progress we have made over the past few years in decreasing those liabilities.

As we look at the balance sheet for Uncle Sam, the picture is much different.  Not only do we see an eye-popping number eclipsing $10 trillion dollars, the level of indebtedness continues to rise at an alarming rate!  This week the Treasury Department is scheduled to sell more than $80 billion in notes and bonds to the general public as part of its ongoing funding process.

In addition to the explicit debt in the form of outstanding treasury securities, the US government has made enormous agreements to backstop financial and industrial institutions which still have a very real risk of failing.  The FDIC has a $500 billion dollar credit line which it can borrow from the Treasury should it need additional capital and many of the stimulus and rescue programs of the past year have included Treasury guarantees on loans and asset values.

The fiscal strength of the US government is not in a state that should make lenders feel comfortable.   Ironically, we are currently operating in an environment where yields on treasuries are some of the lowest in history.  Investors are flocking to the “relative safety” of treasuries because the risk in other asset classes is high.  Unfortunately, the risks in Treasuries are masked, but still significant.

Ongoing Expenses

The final issue that a lender should consider before making a Loan to Congress, or a loan to any other applicant, is the level of ongoing expenses which must be paid.  After all, as your borrower is paying his expenses, there needs to be enough cash left over to eventually pay off the loan.

On a personal level, my household would likely have a difficult time meeting standards in this regard.  With my oldest turning 10 last month, there is less than a decade until the college expenses start to hit.  And with my youngest two just turning a year old (twins), it is likely that quite a few dollars will go to the hallowed halls of many of this nation’s higher education institutions.  Top it off with five weddings to pay for (yes, David has five little sisters), I am basically out of luck when it comes to long-term expenses.

Turning to Congress, the picture doesn’t get much brighter.  We are in the middle of a raging debate over health care and how much responsibility should be taken on by the government.  Health care costs have been rising sharply over the last several years (rightfully so considering the advances in medicine and what we receive for these costs).  At the same time, the current population is entering a demographic phase where there will be significantly higher need for long-term medical care.

At a time when we can ill afford to debate this issue, it appears that the US government will begin spending billions (if not trillions) to ensure health care is provided to every citizen.  Now don’t get me wrong, I’m a compassionate guy and want the best for each of our countrymen…  But from a financial perspective, we are running into some pretty serious challenges.

Add to that, the cost of social security which is the biggest (legal) Ponzi scheme in history, and you have a recipe for disaster.  The young and emerging workforce paying into the system will not be able to keep up with the withdrawals from retirees and within the next few years, this source of government funding will quickly become a net exporter of money.  So the long-term prospects for government expenses makes for a dismal picture and it is difficult to rationalize lending money to this type of institution.

Alternative Capital Allocation

So what is the solution?  What should investors who need stability and income do?  Well, unfortunately, there are precious few “good” solutions right now when you consider the risk and potential return for investment capital.  But I do think that long-term treasury securities are some of the most dangerous vehicles to own for the reasons mentioned above.  Eventually when rates are ratcheted higher and lenders require a higher return for the risk of 30 year treasuries, the face value on these Loans to Congress will drop significantly and cause huge losses for many who believed they were in “safe investments”

Instead, I would consider very short-term treasury securities and bank deposit products (FDIC insured of course) for capital that you simply must have protected.  Over time, it makes sense to diversify into resource rich investments including precious metals, commodities, and foreign currencies with higher yields.  While these asset classes may sound more risky, the benefit of diversification, coupled with a conservative approach can actually add stabilization to your true purchasing power or real net worth.

Gold and silver have had a sharp run in recent weeks and while I like them as investments for a long-term approach, there may be some weakness in the coming few weeks as investors take profits.  Using pullbacks to slowly add exposure can be a conservative way to approach these trending markets.

Similarly, commodities have volatility, but can offer stability.  Aside from hiring a commodities broker, you can also look at individual equities which have exposure to the agriculture, energy, or metal prices.  Many of these investments can be in blue chip names that actually pay healthy dividends and yield capital appreciation.  This can be significantly better than the tiny yields currently paid on treasury securities.

Finally, foreign currencies can offer diversification and better returns.  Consider the Australian dollar.  The country recently increased its equivalent of the Fed Funds rate, and Australia is rich in natural resources.  This bodes well for its currency which is holding up strongly against other currencies despite our turbulent markets.

The bottom line is that when you make an investment (whether in treasuries, metals, commodities, equities – or loaning capital to an individual or business) you need to understand the risks and potential rewards.  Loans to Congress have underlying risk that may not currently be priced by the market.  Having a defensive approach to your investments may include a more diversified approach – after all, you are the one who has to live with the risk and return for your own investments.

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The Federal Open Market Committee (FOMC) concluded its two day meeting yesterday with their customary announcement at 2:15 PM.  The statement concluded (as everyone expected) that the Fed would leave rates unchanged at a target of 0% to 0.25%.  More importantly, the committee said that it plans to keep rates exceptionally low for the foreseeable future – a very popular stance with the masses, but one which could lead to significant trouble down the road.

Essentially, it looks like the committee is trying to have its cake and eat it too.  The official posture is that the economy is improving and capital markets are once again functioning.  To back up this assumption, the Fed points to improving consumer spending, and home buying activity.  Now those two areas have been artificially propped up by two major government programs…  The “cash for clunkers” measure, along with the first time homebuyers tax credit.

While these programs have been terribly inefficient and mismanaged, they did in fact push consumer spending into a positive trend.  The government has taken capital from current and future taxpayers, allocated it to encourage two specific types of transactions, and then used these transactions as “proof” that the economy is recovering.  Meanwhile, unemployment continues to increase, and an asset bubble has begun to inflate around risk related assets.

The Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability. ~FOMC Press Release

At the same time the Fed is stating verbally that the economic picture is improving, the posturing states that they are scared to death of the underlying economic situation.  Keep in mind that a zero to 0.25% interest rate is basically unprecedented in modern economic history.  The decision to cut rates to zero was born in the days of full-fledged panic when it looked as if our entire global financial system would fall apart.  Even a 1.5% or 2% fed-funds interest rate is considered “accommodative.”  But our rate structure implies that we are still at DEFCON 1.

Has the S&P Broken Final Support?

The difficult pill to swallow in this situation is that fiscally conservative individuals are being unfairly treated in an attempt to create more risk taking.  Interest rates on deposit accounts are at all time lows.  Retirees with more than a million in net worth cannot possibly live on the interest they receive on their capital.  Not unless they put that capital at risk in a shaky economic environment where they could easily lose a substantial portion of their nest egg.  It seems the government is content to offer incentives to encourage the very same risky behavior that got us into this mess in the first place.

A prominent money manager has been quoted (and this is admittedly a poor paraphrase) as saying that the tragedy of this recession is that we will emerge having learned absolutely nothing.  I fear that this may be true for our society in general, but does not have to be true for us individually as investors.  Some of the takeaways I have gleaned from the last 24 months include:

• Risk control is always paramount in any investment strategy
• Markets can be carried to unexpected extremes (both higher and lower)
• Lost opportunity is easier made up than lost capital
• Always understand the other side of the trade

We’ve got a ways to go before the economy and our markets are out of the woods.  If you have participated in the run up since March, count your blessings but make sure you have an exit strategy in place.  The markets gave up nearly all gains in the wake of the “positive” FOMC announcement which may be indicative of a sharply lower move in the next few weeks.

So keep your defense on the field and consider raising cash or initiating short positions.  There’s no reason to lose all of the gains from the last eight months.

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The market melt-down caused a significant decline in the number of IPO transactions over the past two years.  While a typical year used to include more than 200 major offerings, there were less than 50 such offerings in 2008 and so far I count 44 major transactions for 2009.  However, the pace of deals has picked up as markets once again offer liquidity and private equity investors and corporations are using that liquidity to cash out and raise capital.

The health of the most recent deals will have a major affect on both the pricing and frequency of upcoming deals.  If investors are willing to take on risk and the market has a speculative tone, then underwriters will likely have little trouble in pricing deals and getting top dollar for the selling shareholders.  But as we start to see a shift to more caution on the street, underwriters will have to adjust terms in order to get shares sold.  This doesn’t necessarily mean the rate of deals will decline, but it may mean that sellers will have to settle for lower prices and for selling smaller allocations in order to match market demand.

Dole Food Company Inc. (DOLE) was able to raise $419 million in its most recent transaction, netting the underwriters more than $26 million in fees.  The stock met selling its first day of trading with the IPO price of $12.50 quickly shunned by investors.  The majority of the capital is expected to be used to pay down the company’s debt which is likely to be a wise move given the uncertainty surrounding capital markets and the company’s interest expense.  However, investors appear to be worried that a faltering economy could still pressure shares and without earnings growth, the debt repayment will do little to add to shareholder value.

On a more positive note, Verisk Analytics Inc. (VRSK) was offered to the public at $22.00 and has quickly traded higher offering the IPO investors a handsome profit.  The risk management and analytics company is broadening its customer base to extend beyond its roots with insurance companies.  Essentially, the company will be able to offer internal credit reports for customers in many industries and should be able to grow revenue and earnings steadily in future quarters.  While the stock has pulled back a bit in the last week of trading, it is still 24% above the IPO price which is encouraging for the IPO market.

The most anticipated upcoming IPO is undoubtedly Hyatt Hotels.  Barron’s had a scorching article on the company this week including information surrounding the family squabbles which have plagued this closely held company for years.  The company is expected to offer 38 million shares to the public between $23 and $26 per share, valuing the entire firm near $4.1 billion.

Investors could justified in concern over the Pritzkers dysfunctional management of the company, especially considering that the family will retain voting control over the company through the use of two classes of shares representing ownership of the company.  The public will be issued class A shares, while the family will retain class B shares for their continued ownership.  The class B shares have 10 votes for every vote class A shares have which means that for the foreseeable future, the family will retain control over Hyatt.  Institutional investors will likely bulk at such a stipulation, which will likely lead to a lower share price than would be reasonable if the company were controlled equally by investors.

Although there are negative issues surrounding the deal, Hyatt has a strong brand, a full portfolio of attractive properties, and a top tier underwriting firm.  Goldman Sachs (GS) will likely pull out all the stops in order to get this deal priced and trading attractively.  I would not be surprised to see the company buying shares heavily after the deal to prop up the price and maintain that the deal was positive.  This would give the Pritzker family more confidence in the investment bank so that when it is time for round two of selling (a secondary offering) Goldman will get the deal and collect the fees.

I would keep indications low if you intend to participate in the IPO.  While profits could be substantial if Goldman does a good job, the risk in this offering is higher than normal.  I would prefer to allow the stock to start trading and establishing a pattern before committing capital.

FD: Author does not have a position in any stocks mentioned.

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This week ZachStocks hosts the 112th edition of the Carnival of Financial Planning, the best personal financial planning and personal investment articles this week from personal financial blogs.

Welcome to the October 23, 2009 Edition #112 of the Carnival of Financial Planning.

The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus on efficient and sustainable personal financial planning practices that can lead to lifetime financial security.

This edition is arranged by subject heading, so that you can browse efficiently.

Enjoy!

The Skilled Investor, Editor

Budgeting

Wise_Bread presents 3 Steps to Organize and Track Your Finances Without the Hassle posted at Wisebread.

GLBL presents Money Savings Tips for a Wedding posted at Gather Little By Little, saying, “I will share all the money savings tips related to weddings that I used for my own wedding: – Talk to people – Go back to school – The DIY method – Try combinations – Prioritize”

Susan Savering presents Personal Budgets posted at Family Financial Planners, saying, “When you don’t understand how much you spend and how much you save and invest, you do not have a financial plan. This dramatically increases your family’s long-term financial risk.”

Economics

Darwin presents Could the US Dollar be Replaced as the World’s Reserve Currency? What it Would Mean posted at Darwin’s Finance, saying, “Could the US Dollar be Replaced as the World’s Reserve Currency? Based on alleged secret meetings between Central Bankers of foreign countries that fund our debt, the US Dollar may have seen its best days. What it Would Mean?”

Roshawn Watson presents The Rich Get Poorer posted at Watson Inc, saying, “The implications of this recent recession have been far-reaching enough to put a big dent in American and world wealth. Both the magnitude of wealth and the number of millionaires decreased profoundly in 2008.”

Tyler Tervooren presents I Am Responsible for the Corporate World’s Waste, or A Lesson in Micro Economics posted at Frugally Green, saying, “When a fellow blogger questioned why we focus our environmental efforts at the individual level when large businesses waste so much more than each of us without prejudice, this is the response I wrote. The answer, interestingly enough, is all about money. You may not have much, and I may not have much, but together, we have more than we could ever imagine. Money talks, and when we use it to tell the business world what we really value, they listen and provide.”

Zach Scheidt presents Mortgage Crisis, Part Deux posted at ZachStocks, saying, “Commercial Mortgages continue to clog bank balance sheets and losses do not appear to have been recognized. Watch for weakness in regional banks with heavy exposure to commercial real estate loans.”

Estate Planning

The Financial Blogger presents Estate Planning: 5 Reasons Why You Should Have A Professional Among Your Liquidators posted at The Financial Blogger, saying, “managing an estate is more complicated than simply writing a few checks! Fortunately, for those who can afford it, you can name a professional among your liquidators.”

Financial Planning

Patrick @ Military Money presents How Much Life Insurance Do Military Members Need? posted at Military Finance Network, saying, “Military members may have different life insurance needs than civilians. Here is information regarding how much life insurance military members should buy, and some resources for finding the best life insurance deals.”

Big Larry presents Fantastic Free Resources for Your Annual Credit Check-Up posted at Out of Debt Christian, saying, “Just like your annual physical, it’s vital that you perform a credit check-up each year. We’ve uncovered some great and truly free resources to help you make sure your credit reports are accurate and your scores are as high as they can be.”

jim presents Beware Bank-paid Complimentary AD&D Insurance posted at Blueprint for Financial Prosperity, saying, “If your bank offers you “free” AD&D insurance, take a closer look because you might be signing up for more than you bargained for.”

Susan Saverton presents Financial Advisor Pasadena California posted at Pasadena Financial Planner, saying, “Appropriately setting your personal asset allocation in line with your personal risk tolerance is a critical decision for every investor. The percentages that are allocated to various asset classes tend to change slowly over time, so it is important to get it right at the outset.”

Dividend Tree presents Building Core Competency for Long Term Survival posted at Dividend Tree, saying, “whether it is running a business or individuals’ investment portfolio, it is important to build a core competency for long term sustainability. In my case, I focus on good quality companies that consistently pay or have potential to pay growing dividends over time.”

Financing a Home

Alex Fotopoulos presents When to Refinance a Mortgage? posted at My Trader’s Journal, saying, “Some key points to consider when refinancing your home.”

Financing Education

Praveen presents Will Education Follow the Housing Bust? posted at My Simple Trading System, saying, “Tips for students to avoid excessive loans and debt”

Health Care

KCLau presents Withdraw EPF Fund to Pay Insurance Premium? posted at KCLau’s Money Tips, saying, “Vincent Lee from Penang generously shares an idea to use your EPF”

Income

FMF presents The Top Ten Turnoffs About Networking posted at Free Money Finance, saying, “Networking is a key part of making the most from your career. This piece lists some of the circumstances that keep people from reaching out to others.”

April presents Five Steps to Six Figures in Seven Years posted at Get Rich Slowly, saying, “FMF from Free Money Finances offers up a guest post in which he recounts, step-by-step, how he was able to generate a 6-figure income in just 7 years.”

Dividend Tree presents Three Companies with Sustainable Dividends posted at Dividend Tree, saying, “Even in soft economic environment, there are companies out there that are continuing to increase dividends for their shareholders. While dividend increase is good, it is more critical to make sure we understand that companies can sustain their dividends.”

Investing

The Investor presents Think you’ve spread your risk? Think again posted at Monevator.com, saying, “Research shows different asset classes are more closely correlated than ever before. Is it still possible to create a less risky portfolio?”

Super Saver presents Why Stocks Still Make Sense to Me posted at My Wealth Builder, saying, “I still believe stocks are a great investment.”

Manshu presents Brazil ETF List posted at OneMint, saying, “A list of ETFs that give you exposure to Brazil”

ABC presents Stock Purchase – Bid/Ask Prices posted at ABCs of Investing, saying, “Bid and Ask prices – Information if you are buying or selling a stock.”

Praveen presents India Fund (IFN) Trade Example posted at My Simple Trading System, saying, “An example of how having a trading system gives you an edge, and let’s you take advantage of market moves outside of your control.”

Jules Wells presents Best Investment Strategy posted at Financial Planning Software, saying, “Personal investing seems incredibly complex, but the best investment strategy also tends to be a more simple investment strategy.”

Leslie Brown presents The Ten Best ETFs You’ve Never Heard Of posted at ETFdb.

Zach Scheidt presents Strategic Acquisition Boosts EBIX posted at ZachStocks, saying, “Ebix Inc. (EBIX) made a strategic acquisition this month which should increase earnings and give the company an inroad to serving a new sector of clients. Shares could increase 50% in the next few quarters.”

Fred Elkins presents Bond Fund Primer: Part Two – Look Before You Leap posted at Finance Banter, saying, “Part two of our bond fund investing series”

Tomas Escent presents Professional Investment Management posted at Nerds on Wall Street, saying, “Think of this book as sort of a Hitchhiker’s Guide to Wired Markets. There are no robots parking cars for six million years, but there are robots trading millions of shares in six milliseconds, so maybe that’s close enough.”

The Skilled Investor presents Investing Strategy posted at Personal Investment Manager, saying, “Investors more easily understand investment costs that are directly measurable, such as fees deducted on investment statements. However, many investors ignore or are unaware of the opportunity costs of their sub-optimal investment behaviors. Opportunity costs are usually much more difficult to measure directly, but these investment costs can be even higher than more visible investment fees.”

The Financial Blogger presents ETFs VS Index Mutual Funds: The Ultimate Battle! posted at The Financial Blogger, saying, “Let’s look at why you probably think ETFs are the best investment in the world: The very first argument is the one that doesn’t lie: yield graph over the past 5 years comparing the TSX 60, the XIU (TSX 60 ETF) and the Altamira Canadian Index Fund (NBC814)”

The Smarter Wallet presents Lending Club Review: Lending Money For Profit posted at The Smarter Wallet, saying, “Alternative investing using a lending platform.”

Tushar Mathur presents Can’t Control the Markets? Try controlling the Costs posted at Everything Finance, saying, “As 2008 proved, the financial markets are prone to unpredictable periods of turbulence. That can make investing feel a bit like a roller-coaster ride. The disappointing results that many mutual funds posted in 2008 and at the outset of 2009 may have left you feeling concerned over your financial future. You’re not alone.”

Frank Vertin presents Low Cost Index Fund posted at Best Index Fund, saying, “Buying an S&P 500 index fund through an investment counselor can substantially increase your initial purchasing costs and and drive up your annual management expense fees. Unfortunately, the vast majority of individual investors buy mutual funds and ETFs through brokers and investment advisers. Rarely do financial advisors recommend that you buy index funds with low fees. This is because low cost, no load mutual funds do not pay them as well as loaded, high fee mutual funds.”

Dividends4Life presents 3 Dividend Stocks Rewarding Their Shareholders posted at Dividends Value, saying, “Investing in dividend stocks provides the investor with continuous feedback. As time passes, dividend investors see their income steadily grow. You do not have to wait five to ten years to determine if the strategy is working.”

FMF presents Bond Primer: Yield vs. Total Return posted at Free Money Finance, saying, “The basics of investing in bonds.”

Larry Russell presents NoLoad Mutual Funds posted at Best No Load Mutual Funds, saying, “Taken as a whole, the vast body of investment research studies show that there really are better approaches to buying and owning mutual funds and ETFs. You do not need to frantically chase fund performance. Performance chasing simply does not work.”

ABC presents More Exciting Facts About Stock Indexes posted at ABCs of Investing, saying, “Some interesting facts about stock indexes.”

Mike Piper presents The Best (Lowest-Cost) ETFs to Buy & Hold posted at The Oblivious Investor, saying, “A collection of the lowest-cost ETFs in each asset class–ideal for constructing a buy & hold portfolio.”

Managing Debt

Adam Williams presents Dave Ramsey said to sell my stuff and payoff debt posted at RabbitFunds.com, saying, “A post in the form of a letter to Dave Ramsey about my experiences in selling my stuff to pay down debt as Dave suggests in his Financial Peace University course.”

Peak Personal Finance presents Teach Your Child About Responsible Credit Use posted at Peak Personal Finance, saying, “Help your children understand proper use of credit.”

Patrick @ Cash Money Life presents What to do About Increased Credit Card Interest Rates posted at Cash Money Life, saying, “Tips on your options if your credit card company raises your interest rates or changes the terms of your credit card agreement. Options include closing the card, transferring the balance to another credit card, or accepting the terms.”

Tom Drake presents When To Consider Filing For Bankruptcy posted at The Canadian Finance Blog, saying, “There are many people who are feeling overwhelmed by the burden of their high credit load. If you are feeling like you’ll never be able to pay off the debt you’ve accumulated, you might be wondering if you should file for bankruptcy.”

The Smarter Wallet presents How To Get A Credit Card That’s Right For You posted at The Smarter Wallet, saying, “How to shop for the right credit card.”

MoneyNing presents Credit vs Debit Transactions with Your ATM Card posted at Money Ning, saying, “Are there any difference with saying credit or debit when you hand over an ATM card?”

FMF presents Make Sure Your Credit Card Has Smart Features posted at Free Money Finance, saying, “Use the right credit card and make it work FOR you — not against you.”

Peak Personal Finance presents How to Compare Secured Loans posted at Peak Personal Finance, saying, “Selecting the right secured loan can save you a heap of money over the life of the loan. This article helps you avoid common pitfalls to identify the best loan for you.”

Miscellaneous

FMF presents The Basics Will Make You Rich posted at Free Money Finance, saying, “If you follow a few, simple steps, you will become wealthy.”

No Load Bond Funds presents Low Cost Bond Funds posted at Bond Index Fund, saying, “Simply put, if you pay higher bond mutual fund fees, then these bond management expenses tend just to be a deadweight loss to you. The best bond fund buying strategy is to pick only very low-cost no load bond funds.”

nissim ziv presents Career Statement: Examples of Career Statement posted at Job Interview Guide, saying, “The purpose of writing a career statement is to give the professional a clear direction for the future. A career statement is a creation of your career vision for inspiring and motivating youself.”

Roshawn Watson presents Should You Buy A House Outright? posted at Watson Inc, saying, “Suppose you find yourself in the somewhat unique predicament of having the resources to purchase your house outright without a mortgage. Is it then financially-wise to make the purchase?”

Susan Savering presents Personal Financial Strategy posted at Family Financial Planner, saying, “When pursuing optimal financial planning and investing strategies and controlling your costs and capital gains taxes, you also need to establish a time-efficient system to monitor, adjust, and adhere to your financial plan.”

Retirement Planning

Jeff Rose presents Why You Should Keep Contributing to Your 401k posted at Jeff Rose.

Madison presents 2010 Roth 401k and Roth IRA Limits posted at My Dollar Plan, saying, “Time to plan for 2010. Here are the 2010 401k and IRA limits.”

Patrick @ Cash Money Life presents Should You Rollover a 401k into an IRA? posted at Cash Money Life, saying, “When you leave your company you have to decide what to do with your 401k. One option is to roll it over into an IRA.”

Paul Kamp presents Bad Attitude, Las Vegas, Retirement, Caution, Risk, American International Group, Gambling Bias, Rationality posted at Don’t Quit Your Day Job – Personal Finance, Economics and Investing, saying, “Vegas is not a good place to learn about retirement planning. It is a good place, however, to learn what not to do.”

Top Stock Index Mutual Funds presents Stock Index Funds posted at Top 10 Index Fund, saying, “To build your retirement portfolio, buy some of these top 10 very low cost no load S&P 500 index mutual funds directly. You do not have to pay the heavy added expenses of buying through a stock broker, financial adviser, investment adviser, or investment counselor.”

Risk Management and Insurance

Jeff Rose presents Term Life Insurance Vs. Cash Value Life Insurance: What Is the Difference? posted at Jeff Rose, saying, “Depending on what your needs are will decide if term life insurance vs. cash value is better in your situation.”

Evolution Of Wealth presents Social Psychological Change posted at Evolution of Wealth, saying, “Have you ever heard of cognitive dissonance? Chances are it is intertwined with your life. It is probably causing some undue stress. If you don’t know you have a problem or want to pretend you don’t then it becomes extremely difficult to fix it. It might just be time to make a change in your financial world.”

Patrick @ Military Money presents COBRA Benefits 2009 Economic Stimulus Recovery Act posted at Military Finance Network, saying, “The 2009 Economic Stimulus Plan includes additional COBRA and unemployment benefits.”

Savings

Silicon Valley Blogger presents Ally Bank (GMAC Bank) Review posted at The Digerati Life, saying, “A review of a popular savings bank.”

Jody T Fransch presents The Law of Saving | jody fransch posted at jody fransch.

MoneyNing presents Why Do High Yield Savings Account Rates Change posted at Money Ning, saying, “Here’s a way to figure out which online bank is best for your money going forward.

KCLau presents How much money you spend in a lifetime? posted at KCLau’s Money Tips, saying, “How much do u spend in a lifetime”

Four Pillars presents $8,000 Credit For First-Time Homebuyers Extended 6 Months – Not Increased To $15k posted at Quest For Four Pillars, saying, “Home buyers credit extended 6 months.”

Four Pillars presents Back To School Cell Phone Deals posted at Quest For Four Pillars, saying, “Comparison of the best cell phone deals for students heading back to school.”

Taxes

Mike Piper presents 72(t) Distribution Rules posted at The Oblivious Investor, saying, “An explanation of the 72(t) rule, which can be used to withdraw money from an IRA prior to age 59 1/2 without having to pay the 10% penalty.”

Jeff Rose presents 2010 Traditional IRA to Roth IRA Conversion Tax Rules posted at Jeff Rose, saying, “Tax implications of converting from a Traditional IRA to a Roth IRA. Don’t forget the after-tax contributions.”

Super Saver presents End of Year Tax Planning – Deductions posted at My Wealth Builder, saying, “For me, October is a good time to review my 2009 financial status for tax return filing purposes. It gives me a few months to make any changes that can lower my taxes.”

That concludes this edition. Submit your blog article to the next edition of Carnival of Financial Planning using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

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