The following are the year-end market results by market index through December 26, 2008:

 

 

As many of you know, we had a pathetic year for investments and the economy.  I thought we would see a turn around in September but then on the 15th, we had Lehman Brothers file and disappear from the investment scene.  That was the catalyst for an extremely dismal October and November. 

 

It wasn’t until December that we actual saw some plus numbers in the portfolios.  The Fed’s bailout money helped marginally, but the problems we had were so deep that the consumers that traditionally rallied to pull us out, were not there.  The hard numbers for the third quarter for real personal consumption expenditures declined by 3.8%.  Business spending and a global slowdowns further crimped demand for US exports, so going forward, we should see a much larger decline in GDP when the actual fourth quarter reports come out.

The following are my portfolios’ performance numbers for the year-end: my moderately aggressive model came in at -25.1% after fees, and including reinvested dividends.  The moderately conservative portfolio came in at -13.3% after fees and including reinvested dividends.

 

There is no portfolio that went unscathed this year.  So, this is a great opportunity to take an equity that has lost value and transfer it from your traditional IRA and place into your Roth IRA.  Let me start with why this is a good idea.  First you have a security with a low cost and the potential for upside appreciation.  When you transfer a low cost security into your Roth you will pay taxes, but you have the potential of the gains in a vehicle, which offers tax-free distributions at retirement. 

Those of you who have assets directly under my custody, may have Genworth Financial (GNW) in your IRA’s.  I will go on record as saying this was not one of my best picks of the year. 

 

However, this could be "lemonade time".  In a recent announcement, Genworth reached an agreement regarding the acquisition of InterBank.  The completion of the proposed acquisition is subject to the approval of the Office of Thrift Supervision, under the Troubled Asset Relief Program (TARP), as well as the satisfaction of other customary closing conditions.  In other words, they are not "out of the woods" yet but there appears to be a clearing in the forest.  So a rollover to the Roth could make sense with an asset that should see an increase in value.  Please call me if I am not currently holding your Roth and you want to make this conversion. 

Also, there are still AGI limitations to Roth contributions please have this discussion with your tax advisor if you are not sure if you qualify for a rollover from a taxable IRA to a Roth IRA.

The following mutual fund companies eliminated dividends for the month of December.  They are as follows: Old Mutual Analytic, Kinetics Small Cap, First Eagle Gold, BlackRock Latin American and Fidelity Advisor Energy.  Please note that this usually happens because the underlying stocks that comprise the components of the funds chose to omit dividends.  If I have any of these funds in your accounts, it is time to revisit their place in your portfolio.

When we schedule your annual client reviews this spring, we will examine the impact the reduction of dividends from these funds will have on your portfolio and if they should be replaced.  In the interim, if you have any concerns prior to your annual review, please contact me. 
 

Letters will be going this month to schedule our annual performance reviews.  Please contact my office to schedule a time where we can review your asset allocations and discuss any changes that may effect future planning decisions.

I encourage all clients to use this newsletter to supplement their knowledge base, but also to take time to call me when questions arise.  Please feel free to share this newsletter with a friend.  You need not be a client to be a subscriber.

 

As always, if you have questions regarding the content of the newsletter, please call. I will attest to the fact that an educated client develops from a trusted relationship whose basis is formed from an open line of communication over a period of time.  The relationships I have developed with my clients and colleagues are the cornerstone of my business.  Their confidence in me is my primary source of new business. 

 

Your referrals are welcome and always appreciated.  I thank you all for contributing to Coastal Financial Planning, Inc.’s success in 2008 and I look forward to our continued growth in 2009.

The year ahead will be a difficult one, but my feeling is to stick with a strategy I started in mid-December.  For those of you with a moderately aggressive approach to portfolio management, I opted for a short-term buy /hold strategy for equities.  And I do mean short term.   The last 5 equity purchases I had, I held for no longer than 2 weeks.  For some of you with taxable accounts, this does mean you will receive the short-term taxable gains treatment.  But the general consensus is taxable gains, beats losses any day.  Those of you with more conservative portfolios that would like to move into short term equity trading, please make a point of discussing this with me at your annual portfolio review.

Another reason for my strong disposition towards equities goes back to the question of the quarter.  With the dividend yields relatively high on stocks, compared to the 10 Year bond, they are really the only attractive place to put your assets to work.   CD yields are ridiculously low.  Fund managers are being forced to put their money to work; even though they may not find any investments they really think are attractive.  With cash on the sidelines, we can "cherry pick" what I feel is the best of breed to hopefully deliver a positive number in the year ahead.  And what do I feel that number is?????  

 

According to the great minds of the industry: 5% in 2009.

Unless you have been sleeping under a rock, you are probably aware of one of the biggest investment scandals of the century.  Bernard Madoff is accused of swindling investors out of close to $50 billion in investments. 

 

How did it begin? First, let’s differentiate between Madoff’s firm and how most investors hold their investments.  The average investor holds their assets with an advisor who then has those dollars placed in the custody of a large firm. For example my clients assets are in the custody of Fidelity Investments.  Other clients may hold assets with Mr. Advisor, who uses Schwab.  In these instances there are two levels of accountability.  One with the advisor and the second with the custody firm.  In the case of Madoff, his firm was the advisory and custodial firm, thus eliminating one of the steps in between the accountability process.  It is common with ultra high net worth clients to have a single house maintaining assets, although these clients are usually with private banks (who were also taken down in this scandal). Madoff’s firm was audited federally by the SEC, but the audit failed to uncover his trail of deceit. 

 

For my clients’ reference, my firm is audited by the state and they can come in at anytime within 24 hours notice.  In the past, I have been randomly audited by the state, and outside of a little dust, the auditors have been happy with what they have found in my files.

Madoff’s sons, who operated the business with him, turned in Madoff.  Many believe that this was to escape prosecution.  The other premise is that the business began the spiraling loss of money with bad investment decisions, which continued to escalate, only to further erode the large investment base.

 

Madoff lured many of his wealthy clients on board with the promise of an annual 12% interest on investments.  For those of you that are not sure of investment guidelines, it is illegal to commit to investment returns.  It is however legal to give the client a historical range of investment returns. 

Madoff not only effected the fortunes of the rich, but of charities. He diverted monies from 400 non-profits and in some cases, closed organizations down according to a Bloomberg source.

 

 

Visit Our Website

Newsletter Archive

Our Privacy Policy

Meet Angela