Thursday, December 30, 2010

Farewell 2010

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

The main purpose of this contribution is to wish you and your family a very happy, healthy, safe and prosperous New Year. Let's hope the world is a better and more peaceful place one year from now! As I take my usual time away from the office to be with my family this time of year, it's been the most fun with my wife and the kids ever. It's amazing how much they've grown and matured during the past year.

As one of my friends and ski buddy often says, "It’s always something in your house". And this time has been no different with a plethora of stories and incidents, not limited to my youngest son separating his elbow (nursemaid's elbow) on Christmas during the blizzard in Vermont. With the ER 30 miles away and over the mountains, there was little chance of risking further injury by going out. Instead, we called a local family practitioner who literally walked me through snapping my son's elbow back in place over the phone. Simply incredible that after screaming bloody murder for five minutes, he was back to his usual self, high five'ing me and wrestling with his siblings.

While I do the much needed battery recharge with everything from eating to skiing to eating to napping to eating to working to eating to visiting with friends to eating to falling asleep on the couch watching the groomers on the mountain, I want to say that I've never been more excited about the beginning of a new calendar year. And no, it's not because I think 2011 will be a blockbuster, record setting year in the financial markets. I rarely come in with that feeling and usually start out with more modest expectations.

I do feel very strongly about the value we provide you and our clients, not only from our investment process and strategies, but our information, education, service and communication. We continue to build a sensational team and I can't wait to attack our growing list of projects in 2011.

In the coming weeks, you can count on reading my annual financial market forecast, top shockers for 2011 and a host of other outside the box and sometimes controversial topics. I'll do my part to contribute as long as you continue to share your questions and comments, both pro and con.

That's about it as we say adios to 2010. It’s been one of my favorite and most satisfying years since I entered the business in 1988. From the looks of the picture at the top of the page, I’ve heard the wisecracks over and over that it doesn’t look like I am old enough to drive or graduate college or run a business or have a family, etc. Yes, that photo is very old and one of my projects for early 2011 is to update it, graying hair, wrinkling skin and all!

In the stock market, we are dancing very close to the door as the worries and concerns I've had continue to mount. That's unlikely to change without a significant pullback or outright correction. Stocks have been grinding higher all month without so much as a .75% daily decline as Bernanke & Co.'s tsunami of liquidity sees no end. When the train stops, we are likely to see at least a sharp decline that wipes away much or all of the recent gains in short order. I'll have much, much more to say on this early in the New Year.

FYI, I will be on CNBC's The Call on Jan. 4 at 11:05 a.m. as well as on Squawk on the Street on Jan. 11 at 9:35 a.m.

Feel free to e-mail me with any questions or comments at Paul@investfortomorrow.com.


Until next time…

Paul Schatz

Heritage Capital LLC
http://www.investfortomorrow.com/
http://RetirementPlanningConnecticut.com/

Friday, December 24, 2010

Stop and Smell the Roses for a Change

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

First and foremost, if you celebrate Christmas, I hope you have a truly wonderful holiday! For me, it's hard not to love the period from Thanksgiving through New Year's with so many fun holidays and the chance to spend quality time with family and friends. If only someone could invent a way to not add 10 pounds, I would be even happier!

Writing a financial newsletter and contributing to this blog can sometimes seem like one negative topic after another. Very few people really want to worry about their money or their future. They just want it to take care of itself. So with that said, it's time to look at some of the positives.

As a country, we are saving more. That may not be so great for the economy in the short-term, but it’s very healthy for Americans to have a rainy day fund. The real key to financial security both as individuals and as a nation is to have money in the bank that can be spent when needed not just the minute it is acquired. Once you outlive your money, you don’t have many favorable options left. Individuals have gotten the message. Local and state governments are being forced to face the same reality. Next up, hopefully, is the federal government.

Necessity truly is the mother of innovation. Difficult times in the past have resulted in new innovations, new businesses, new realities. Recessions have historically brought about a surge in true entrepreneurship and I eagerly await what is being conceived, researched and created.

Our environment is vastly improved from 30-40 years ago. It's hard to remember sometimes how very polluted our lakes, streams, air and grounds were just 30 years ago. In the United States, we have made tremendous changes in how we treat our environment and in doing so have set standards others throughout the world are striving to achieve. These changes have led to better technologies, cleaner energy and awareness of how small actions, good and bad, add up.

We are living longer, more active lives. Eighty is not quite the new 60, but the potential is there. Advances in health care have been astonishing over the past few decades and that needs to continue ahead. Laparoscopic, arthroscopic, non-invasive surgery is but a small example of how far we have come. From days and weeks in the hospital recuperating to hours, we keep getting better.

Life is actually much less expensive than it was 10, 20, or 30 years ago. The price of a loaf of bread may be more, but a transcontinental phone call, plane ticket, computer, telephone and many technology related conveniences are incredibly cheap in retrospect. I still remember buying my first computer in college, the Apple II E for more than $1000. Computing power must be thousands, if not millions of times faster for the same price or less. The variety of clothing and household items that surround us today would have had our great-grandparents in awe.

Information is among the greatest riches of our lives today. The libraries and references of the world are open to anyone with a computer and Internet access. This is such a completely transforming reality that it is hard to grasp. Can you remember thumbing through the newspaper for products on sale? I remember spending hours in the library using the Dewey Decimal System doing research for a term paper, not to mention the encyclopedia Britannica at home. It’s almost beyond my grasp to think about life without the Internet.

Thanks to technology, many people have the freedom and flexibility to work in the environment they choose. Investing is an excellent example of that. Thirty years ago, managing assets required access to information and people available only in the money centers - the New Yorks, Chicagos and other major cities. Today, some of the best money managers are located in what would have once been considered the most unlikely locations. Moving away from the "herd" I believe leads to new and better ways of managing assets and the growth of active management approaches.

Market-wise, the vast majority of sentiment indicators I follow are and have been flashing warning signs for some time, yet the market just thumbed its nose and continued moving higher during this seasonally positive period.

It's extremely rare not to see any weakness between Thanksgiving and now. It may be unprecedented, but I would have to research that. Yes, selling from corporate insiders remains extreme. Yes, the various sentiment surveys are all frothy. Yes, option traders are uniformly bullish. Yes, volatility has shrunk to low levels. Yes, yes, yes. There are lots of very worrisome signs.

But price, still the most important arbiter, refuses to give in. Why is that? Interestingly, the Federal Reserve's Permanent Open Market Operations (POMO), which I wrote about in Bernanke Manipulating the Markets, has been a buyer in the treasury market almost every single market day this month.

You know the old adage, "Don't Fight the Fed". Well, Ben Bernanke and his quantitative easing (QE) has certainly been a boon to the stock market with not a single significant down day in December. Bears have been beaten, bloodied and left for dead! Worth noting but by no means predictive, the Fed will NOT be in the market buying on the 23rd, 27th, 30th and 31st. The countdown to 2011 could have a few fireworks left!

Feel free to email me with any questions or comments at Paul@investfortomorrow.com.

Until next time…

Paul Schatz
Heritage Capital LLC
http://www.investfortomorrow.com/
http://RetirementPlanningConnecticut.com/

Friday, December 17, 2010

Bernanke on 60 Minutes… AGAIN

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

For the second time in 18 months, Fed chairman Ben Bernanke appeared on CBS' 60 Minutes about two weeks ago. What a dramatic and impressive shift in Fed policy to have the most powerful central banker on earth sell his story to the world on network television. Or a cynic could say that things must be incredibly bad economically for Bernanke to degrade the hallowed institution of the Federal Reserve so much by having to subject himself to common media interviews.

Only time will tell which is true, but it gives me a good feeling that Bernanke is comfortable coming down from the ivory tower and sharing, something his predecessors would never have done. It's still unconscionable to me Alan Greenspan has the nerve to continually defend his actions as Fed chair.

Long time readers know that I have NEVER been a Greenspan fan, even during the booming economic times. After all, his first action upon taking office in 1987 was to immediately drain liquidity, greatly contributing to the stock market crash that year. While he is lauded for always providing liquidity and saving the world during the 9/11 tragedy, Long Term Capital debacle and Asian currency crisis, his reactive, not proactive behavior was symptomatic of the problem, not the solution!

Anyway, I found Bernanke's interview with 60 Minutes very interesting and informative. Although his choice of words were supposed to exude control and confidence, he seemed fidgety, nervous and a little uncomfortable, not the pillar of strength we are used to seeing combat Congress several times a year.

To be unfairly picky, it was hard not to notice that little twitch or lip quiver during the interview. So called body language experts have pointed out a lack of total conviction in his forecast and opinion. He often shook his head no when talking about a positive topic and this supposedly meant he really didn't believe what he was saying.

My takeaway just confirmed what I have believed since January 2008. Ben Bernanke and his supporters are, have been and will always be more concerned about deflation over inflation. He absolutely refuses to let another depression befall our economy.

As I continue to believe and have written here more times than I can count, if the Fed could engineer some real inflation with money velocity, wage growth and increased industrial capacity utilization along with higher consumer prices, it would truly be mission accomplished. As Bernanke hinted and I firmly believe, my 7-year-old daughter could combat inflation. It's just not that difficult! Deflation is the economic killer without a known cure.

Food and energy prices may have risen dramatically, which hurts consumers, but we don't have any wage growth. Capacity utilization remains elevated, but still at recession levels. There is lackluster money velocity from the banks as they continue to hoard cash at the Fed, not to mention the record levels of cash on corporate balance sheets. As I've said for three years, including DEFLATION: The REAL Boogeyman to Fear, there is no worrisome inflation now or in the foreseeable future.

Bernanke should be commended for doing his homework. His detractors point to over the horizon inflation with his appetite for creating money. But Bernanke was quick to point out that our supply of currency has not increased with quantitative easing. In fact, M1 (liquid currency) is actually declining year over year.

When the Fed "prints money" to buy treasury bonds, they are buying them from Uncle Sam to keep interest rates low, in hopes of spurring on economic growth. They do not desire to throw $100 bills from helicopters as Bernanke famously wrote about in a paper regarding cures for the Great Depressions. (Hence the name Helicopter Ben)


Feel free to email me with any questions or comments at Paul@investfortomorrow.com.

Until next time…


Paul Schatz


Heritage Capital LLC
http://www.investfortomorrow.com/
http://RetirementPlanningConnecticut.com/

Monday, December 6, 2010

My Take on Real Estate… Not the Forecast You Want

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)


Let’s pick up where I left off in Where Real Estate Is Headed… Part I. The survey I did from blog readers as well as my firm’s Street$marts subscribers yielded almost identical results; you are short-term (five years or less) negative on housing and long-term (10 years or more) positive. That’s pretty much as expected and probably similar to what folks would say around the country.

As you would also expect from reading my posts for a while, I usually disagree with the masses and do here as well. For the past 30 years, interest rates have been declining. So not only for new home buyers, but refinancers too, have only been able to make the correct decisions. Lock in a conventional 15 or 30 year mortgage and you only had to wait a short time to refinance and reduce payments or even withdraw equity. Use an adjustable rate mortgage and you were pretty much guaranteed to see your payments decline. The mortgage rate environment was simply the most favorable in the history of the market.

Why is that important? If the landscape continues to be that of lower and lower payments, demand for houses increases. And when demand increases, prices tend to rise too, until so much supply floods the market that the tide shifts in the other direction. The major tailwind (think jet flying with the wind) housing has seen since 1981 has just about died out, unless banks want to loan money without interest.

Almost as important, since the great experiment of using and living on more and more leverage (borrowing) has imploded, there’s simply not the access to capital there once was, even for good credit risks. Banks and other lenders have sharply tightened their lending standards and they are not going to make unlimited amounts of capital available like they did during the “Go Go” years.

To go one step further, we all know how important the Baby Boomers have been to the economy, financial markets and housing. Now that they are in or approaching retirement, a very large number of Boomers will downsize their lives. For many, their single biggest asset is their primary residence. Not only won’t this group be huge purchasers of real estate, they will likely be net sellers into a market where most of the 30 year tailwinds have dissipated or turned into headwinds.

In a nutshell, the longer-term prognosis for interest rates is stable at BEST, but rates will likely begin a 20 to 40 year period of rise sooner or later. Access to capital has been diminished and Baby Boomers have become net sellers. So overall, I find the former compelling case to own real estate pretty hard to swallow.

I am going to turn to the technical side with some charts and graphs. Below, you can see how new home sales have fared since the 1960s. Right now, they are back to levels usually seen at the end of recessions and right before they begin a new rising period. If this was a “normal” recovery, new home sales should be very strong in 2011 and 2012. I believe that the deleveraging process is going to trump this and 2011 will not be a bang up year, but I would love to be wrong here!


To support my point, look at chart below regarding the job market. I think it’s from Casey Research, but I cannot find the attribution. I did not create it. An important driver of real estate prices is the employment climate. Real estate super agent Judy Cooper sat with me for an hour and shared her thoughts from decades of experience. From a local level, she thought that some of the major macro trends could and have been overcome by a strong jobs market, which makes sense. The problem is that non Fairfield County Connecticut hasn’t seen a truly good employment scene in a very, very long time. We are one of the few states where people continue to leave and the business environment is and has been somewhat hostile towards corporations.


The chart below shows the massive job losses during the crisis and sharp comeback earlier this year with the government’s tsunami of programs and money into the system. But the past four months haven’t been encouraging. If this was truly a “normal” recovery from a recession, the jobs market should turn much stronger almost immediately. While I would love to see, I am certainly not planning on it, especially in non Fairfield County Connecticut.






To overwhelm you a little more, below is another great illustration, courtesy of economist supreme David Rosenberg, formerly of Merrill Lynch and now of Gluskin Sheff in Toronto.  This shows the number of residential vacancies in raw numbers as well as in percentage terms.  While it’s horrifically ugly to look at, the rate of ascent is clearly unsustainable and should begin to rollover shortly.  That’s the good news.  The bad news is that it’s going to take years and years to soak up all of the excess inventory.  Organic population growth will certainly help, but this is not solved overnight. 



While Americans are typically optimistic long-term, and rightfully so given our history, I think it’s premature on the real estate front with so many factors working against. I think the best case scenario is for stability over the next 10 years, meaning -5% to + 10%., but I repeat; I would LOVE to be proven wrong!

FYI, I will be on CNBC’s The Call at 11:05am on Wednesday, November 24.


Feel free to email me with any questions or comments at Paul@investfortomorrow.com.


Until next time…

Paul Schatz

Heritage Capital LLC
http://www.investfortomorrow.com/
http://RetirementPlanningConnecticut.com/

Wednesday, November 17, 2010

IRS holding $1.53 million in undelivered refund checks to CT taxpayers

The Internal Revenue Service is looking for 1,013 Connecticut taxpayers who have not yet claimed their share of undelivered refund checks totaling $1.53 million.

These undelivered refund checks were returned to the IRS by the U.S. Postal Service due to mailing address errors. The IRS can reissue the checks, which average $1,517, after taxpayers correct or update their addresses with the IRS.


Nationally, there are 111,893 taxpayers with undelivered refunds, totaling $164.6 million with an average refund of $1,471.

“We want to make sure taxpayers get the money owed to them,” IRS Commissioner Doug Shulman said in a statement.  “If you think you are missing a refund, the sooner you update your address information, the quicker you can get your money.”

Gregg Semanick, the IRS Connecticut spokesperson, said taxpayers only need to update the information once for the IRS to send out all checks that are due.  “Some taxpayers are due more than one check,” Semanick said.

Nationwide, undelivered refund checks average $1,471 this year, compared to $1,148 last year. The average dollar amount for returned refunds rose by 28 percent this year, possibly due to recent changes in tax law which introduced new credits or expanded existing credits, such as the Earned Income Tax Credit.

Taxpayers can generally update their addresses with the online “Where’s My Refund?” tool, where they also can check the status of refunds.

A taxpayer must submit his or her Social Security number, filing status and amount of refund shown on their 2009 return.
Those checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

While only a small percentage of checks mailed out by the IRS are returned as undelivered, taxpayers can put an end to lost, stolen or undelivered checks by choosing direct deposit when they file either paper or electronic returns. Taxpayers can receive refunds directly into their bank, split a tax refund into two or three financial accounts or even buy a savings bond.

Friday, November 12, 2010

If It's Obvious... It's Obviously Wrong

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

In my Special Election Update, I discussed the three big events for the markets last week, the election, Fed announcement and jobs report. The market's reaction to the election could not have been more expected. As I mentioned, a Republican takeover of the House with at least 60 seats and headway in the Senate was fully baked in the cake. That's why stocks did almost nothing the next day.

Bernanke & Company also gave the markets exactly what they were looking for with another round of quantitative easing to the tune of $600B (whether that’s good medicine is a topic for a different piece). Say what you want about this Fed, but they have done an excellent job of telegraphing their moves well in advance and making sure not to disappoint the markets. In typical Fed day fashion, stocks were quiet in the morning and saw a brief surge in volatility before modestly rallying into the close.

The surprise of the week came on "no news" Thursday when most of the major markets surged higher with the Dow, S&P 500, S&P Mid Cap, Nasdaq and Dow Transports all scoring breakouts to new 2010 highs. Only the lonely Russell 2000 index of small caps remains below its April high.





Since mid October, I've been concerned that the rally from where we committed so much money at the July bottom was getting a bit ahead of itself.  Not so much where we would pull the ripcord, but enough that should warrant a short-term pullback to digest those gains.  With so many bears becoming bulls, a surge in call buying by option traders and sentiment surveys showing a bit too much excitement, taking some chips off the table seemed like a good plan.


So far, the market hasn't cared. After last week's price action and heavy news flow, it's pretty hard to find many folks negative on the stock market with most of the major indices at new 2010 highs and the Fed committed to pumping another $600B into the markets. If their first round of QE with $1.25T was any indication, the old adage of "don't fight the Fed" should be wise to follow.

But the skeptic in me still worries. It's getting too easy. No one is worried anymore. Just buy stocks, commodities and high yield bonds. Sell the dollar and treasuries. It's a layup! History (and Joe Granville) has taught me when it's obvious... it's obviously wrong.

That's why I started pounding the table to buy the dollar last week. There are NO bulls left. Everyone is bullish on the Euro and bearish the greenback. That's the exact opposite of what we saw in late May when I offered on CNBC that the Euro was so bad, it was actually good. You had to just hold your nose, close your eyes and buy it.

Everyone seems to be embracing this new world financial order. Quantitative easing is supposed to help the economy by flooding the system with more and more money, which in turn lowers interest rates and helps banks, corporations and consumers.

I don't know about you, but besides helping fuel the financial markets, I don't see the positive economic effects that QE is intended. Money in the system isn't the problem. Banks have more than a trillion dollars sitting at the Fed earning peanuts, while corporations are also sitting on more than a trillion in cash, unwilling to spend and invest.

Summing it all up, although the major stock indices, sectors and high yield bonds have all broken out to new 2010 highs and everyone is partying like it's 1999, I am not willing to imbibe any more beverages. We have plenty on the table, but less than the maximum we had during July, August, September and half of October.

The most bullish thing stocks could do right now would be a sideways digestion for at least a week to wind up for another move higher. I think it would be constructive to see an orderly pullback of 2-4%. Much more than that would indicate that the recent breakout was false and sharply lower prices could ensue. As I mentioned last week, I would be very surprised to see stock breakout and explode higher without a pause. I think that would be dangerous and perhaps even a terminal move.

Feel free to email me with any questions or comments at Paul@investfortomorrow.com.


Until next time…

Paul Schatz

Heritage Capital LLC
http://www.investfortomorrow.com/
http://RetirementPlanningConnecticut.com/

Thursday, November 4, 2010

Post-Election Wrap-up...STILL Great to be an American!

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)
It’s a great day to be an American! Although that’s true every day, it’s especially true after election day. Far too many people take for granted what our forefathers fought and died for to make this possible. Just think what goes on around the world. Citizens of emerging democracies stand in lines for hours and hours, risking being intimidated, beaten and even killed to cast one single vote in what may end up being a rigged process.

It seems like our country has increased its level of fickleness when it comes to the big elections. 2008 was a resounding and embarrassing defeat for Republicans that was supposed shake the party to the core. Only two years later, the red states completely thumped the blue, the likes of which hasn’t been seen since the 1930s. Now, this is supposed to be a shot across the bow to Democrats to wake up or 2012 is going to be ugly.

I watch and read an awful lot of market and political pundits and no one has been able to get to the root of the dramatic change. I understand all about Iraq and the economy and jobs and deficits and spending, but there’s some hot topic every election. Americans seem to want instant solutions to problems more so than at any other time. Maybe it’s the tsunami and speed of all the information we’re exposed to? I really don’t know.

Getting back to the election and the markets, we now have a split Congress, something that’s not exactly typical in this country. As you can see from the chart below thanks to dshort.com, there is not much history to use in order to guide us on what the markets usually do in this case. They performed well in the 1980s, poorly in the 1930s and fair in the 1910s. I have heard many people confuse a split Congress with an overall split of the President on one side and Congress on the other. That worked very well for the markets under Reagan, Bush I and Clinton, but not so great in 2008.



On election night, America spoke loud and clear. People hated what George Bush did and now they hate what Barack Obama is doing. For the work that I do, the only things that matter are what was the market expecting and how did it react. Just before the election, I had this to say in my Street$marts newsletter.

“With the stock market just completing 10 good weeks, certain things are now baked in the cake. Check out Intrade.com for a few examples. Republicans are poised to win at least 60 seats in the House, unseating Nancy Pelosi et al. I'd like to be a fly on the wall when she hands over the gavel to John Boehner. Are they civil to each other? Does she smash him over the head with it? What wisecrack comment does he let slip?

In the Senate, it's expected that the Republicans gain major seats, but do not gain control. It's hard to believe that Harry Reid could actually lose his seat, but there is precedent in the House with Tom Foley (I think) and not in the Senate. Anyway, that's what the stock market is expecting.

If we see Linda McMahon in CT come from behind to win the Senate seat or Barney Frank lose his seat in MA, something much bigger will occur. Conversely, if Harry Reid retains his seat and a few of the "locked" Republican seats don't turn out that way, Barack Obama may get an early boost in his reelection bid. I think the bottom line is that the higher the turnout, the more it favors the Republicans.

Turning to stocks, the few days before and after the election are usually positive. We've seen a very strong rally and a "sell the news" mentality would not be the least bit surprising, whether it's right away or a few days later. On the other hand, I would be surprised if stocks launched higher after the election and did not come back to earth soon thereafter.

Let's turn to more "ifs". If the Republicans' expectations end up being a lot of hot air, I would put my hard hat on as stocks should see some nasty downside in the coming weeks. Taxes would surely increase next year along with more regulation and government spending. As of now, if Congress does not act, Americans will be punished with the largest tax increase in the history of our country.

If Republicans somehow take control of the Senate, the most unlikely of all scenarios, the odds favor a strong surge higher. But I would expect whatever initial move to be quickly reversed over a the following few weeks. The overall market theme based on the election is that volatility should increase greatly, at least over the short-term.

Besides the election on Tuesday, we also have Ben Bernanke's shindig with the FOMC on Wednesday. While no one on earth expects Ben to touch rates, the markets have been waiting on the edge of their seats for the final announcement of QE2 (running the printing presses 24/7). Although initial expectations were for another trillion to be created by purchasing more treasury bonds over a period of months, that has been tempered to at least $500B.

As a side note, it's pretty amazing that we use the word "only" and five hundred billion in the same sentence. And so cavalierly throw around the word "trillion". Like they're nothing! It almost feels like we've accepted all this nonsense matter of factly.

So on Wednesday morning, we'll get immediate market reaction to the election and then the Fed's news at 2pm. And let's not forget the employment report being released Friday at 8:30am. If stocks somehow hold up this week and rally into and on that news, I imagine that will spark a key reversal to the downside, giving back whatever gains were made during the week in short order. On the treasury bond side, given their weakness coming in to this week, I would expect (as with stocks) a significant increase in volatility, but a rally as stocks pullback.”

As expected, the markets had a very muted response to the election as there were no real surprises. Later that afternoon, also as expected, the Fed announced their second round of Quantitative Easing (QE2) where they are going to create $600B to purchase treasury bonds of varying maturities over the next 6-8 months. After an hour of volatility, stocks chugged higher but bonds sold off hard as Bernanke’s plan didn’t include as many long dated bonds as expected. No huge deal…

And as I type this, stocks are soaring; gold I soaring; oil is soaring; bonds are soaring; and everyone is parting like it’s 1999! By the time this posts, the October employment report will have been released at 8:30am. Given the rally over the past week, etc., I would imagine it comes in better than expected and stocks open up strongly. If that’s the case, all major indices will be trading at new 2010 highs, along with many sectors.

How much better could it get?

Based on history, if that scenario unfolds, I would expect a downside reversal to begin to take shape within a day or two. I didn’t believe stocks would explode higher without pulling back before this week and I still don’t. A really good jobs report should create some exuberance and that usually spells at least short-term trouble for the markets.

FYI, I will be on CNBC’s The Call today (11/5) at 11:05am, analyzing today’s employment report and again on CNBC’s Squawk on the Street next Tuesday (11/9) at 9:35am discussing the markets’ next move.

Feel free to email me with any questions or comments at Paul@investfortomorrow.com.


Until next time…

Paul Schatz

Heritage Capital LLC
http://www.investfortomorrow.com/
http://RetirementPlanningConnecticut.com/

Thursday, October 21, 2010

4 Tips on Applying for a Credit Card

 The credit card application process can be mysterious because many credit cards issuers don't fill in the details about the most important terms of your account--the APR, minimum payment, and credit limit--until the credit history has been reviewed and the loan approved.
Here are four things Bill Hardekopf says we should pay attention to earlier rather than later in the application process:

1. Start with Credit Score

Before you apply for a credit card, get a copy of your credit report and credit score because lenders use this to set your credit card terms. If your score is lower than you anticipated, check your credit report for errors and correct those before you apply.

Your credit score will help direct you to the cards that you should consider. While scores may vary among lenders, there are some general guidelines. If your FICO score is 750 or above, you should apply for the cards specifically offered for excellent credit.

A score of 720 or above is considered good credit; 660-720 is acceptable. A score of 640-660 is considered risky and the rates will be on the high end of the rate tiers; below 640 falls into sub-prime and credit card options are limited.

"Credit card issuers pull credit reports for every application. Consumers should not waste their time and apply for a card for which they are not qualified," says Hardekopf, CEO of  LowCards.com and author of The Credit Card Guidebook. "If you apply for too many credit cards at once, this is a red flag and may actually cause your score to drop."

LowCards.com is a free, independent website that helps consumers easily compare credit cards in a variety of categories. It also gives an unbiased ranking and review for cards.

Hardekopf points to Capital One as one of the few issuers that offers consumers some helpful guidance for its credit categories. The description in their application reads:

* Excellent credit if you have: had a loan or credit card for at least five years; a credit card with a credit limit greater than $10,000; never declared bankruptcy.

* Good credit if you have: a loan or credit card for three years or more; a credit card with a credit limit above $5,000; not been more than 60 days late on any credit card, medical bill, or loan in the last year.

* Fair credit if you have: a U.S. loan or credit card; credit limit on a current credit card less than $5,000.

* Limited credit history if you have: your own credit card for less than three years or never had one; a limited credit history; a valid credit score that can be found at one of the major credit reporting companies.

2. APR

Most issuers still split the APR into interest rate tiers with three rates. If you have excellent credit, you will receive the lowest rate. If you have poor credit, you will receive the highest rate.

"If you typically carry a balance on your card, don't look at reward cards because these typically have slightly higher interest rates. Find the card with the lowest rate for your credit tier," Hardekopf says.

The federal Credit Card Accountability, Responsibility and Disclosure (CARD) Act prohibits issuers from raising interest rates during the first twelve months of the account (exceptions are late payments and increase in prime rate). After this, the issuer can raise the rate but must provide a 45-day notice.

3. Compare Minimum Payments

The minimum payment percentage sets your monthly payment. The minimum payment varies by issuer and the majority of issuers do not disclose this in their terms and conditions. The minimum payment typically ranges between 1%-3%.

LowCards.com surveyed the terms and conditions of 85 online credit-card applications. Very few included minimum payment calculations in the application's fine print. Some can be very difficult to understand.

4. Credit Limit
The credit limit is the most unpredictable and most frustrating of the three elements. The best way to guess what your credit limit will be is to average the credit limit of the other cards in your wallet. However, over the past two years issuers have slashed credit limits to reduce their loan risk. As a result, the credit limit may be less than you expect.

Foxwoods turns over $15.1 million to state of CT

MASHANTUCKET, CT – Foxwoods Resort Casino and MGM Grand at Foxwoods reported slot revenue of $56.1 million for the state of September to the state Division of Special Revenue.

Casino officials said that amount represents an increase of 2.1 percent in slot win and 4.1 percent in total slot handle ompared to September of 2009. The Mashantucket Pequot Tribal Nation, the casino’s owner, also reported a $15.1 million payment to the state of Connecticut for September 2010.

Last month's contribution increases the total dollar amount given to the state to approximately $3.08 billion since January 1993, when slot machines were first introduced at Foxwoods.

"While we are pleased with September’s results, we remain keenly aware of the sluggish economy and will continue to focus on new initiatives that keep visitation strong," Mashantucket Pequot Gaming Enterprises (MPGE) President William Sherlock said in a statement. "We keep customers coming through our doors by providing them with an unparalleled entertainment experience and offering signature events that appeal to a broad audience, such as our annual Foxwoods Food & Wine Festival."

This fall the Fourth Annual Foxwoods Food & Wine Festival will run from Nov. 5 to 7, featuring nationally-acclaimed chefs from Foxwoods and Craftsteak chef/owner Tom Colicchio; Michael Schlow of Alta Strada; Paragon's Scott Mickelson; David Burke Prime's David Burke; and Foxwoods' Franck Iglesias.

There will be a variety of culinary events, from book signings to cooking demonstrations, epicurean seminars to cocktail receptions, as well as luncheons, tastings, and celebrity chef dinners.

For more information, call 1-800-FOXWOODS or visit http://www.foxwoods.com/.

Friday, October 15, 2010

Concerns Growing with ALL this Good News and Happy Investors

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

The financial markets have continued higher, almost unabated since the secondary low we saw in August. I’ve written several pieces about the short and intermediate-term direction for stocks since I turned positive at the July bottom, Time to Cheer or Jeer? and Explode Higher or Implode Lower? to name a few. Although I am more than pleased to get one right for our clients, even during that tenuous week in August to test our resolve, it’s hard to be as rosy after such a big rally.




Third quarter earnings season has just begun and so far, companies are not disappointing. Intel, JP Morgan and CSX are just some of the key reports that came in better than expected. Ben Bernanke & Co. have repeatedly stated that they are ready to take further action (print another trillion or so but who’s counting) if the economy sputters. So all should be well and good, right? Not exactly. Isn't this the same behavior we saw in April as the stock market was peaking before the 15% correction?

While I am not expecting an imminent collapse, my concerns are growing that stocks have rallied hard and fast for months right into earnings season. It makes you wonder how much of the rally is based on good reports that are already baked in the cake. Historically, we've seen at least a sharp pullback within a few weeks of good earnings news after such a dramatic rise.

Investors who strongly disavowed the rally started to believe late last month and that trend is continuing right now. It seems like most of my market emails are from investors who were negative, negative, negative, but are now turning positive after being beaten up for too long simply because price has gone strongly against them. I remember all too well how difficult it was being long and wrong during a correcting market. When bears throw in the towel and start buying, the end of the rally usually isn't too far off.

The popular indices like the Dow, S&P 500 and NASDAQ are getting ever closer to the April highs, which were the highest levels of 2010. In late August, when my forecast looked like a total dud, I offered the best case scenario for the bulls in this very early morning CNBC interview. 1200 - 1220 is almost here on the S&P 500 and while that could provide some short-term fireworks, I would have to believe it to be a better selling opportunity than anything else at this point.

The mid-term election is just weeks away and it certainly seems that along with earnings, some of this rally is based on a certain outcome in the election. If the Republicans do not take control of the House, forcing political gridlock, I imagine some hot air will be let out of the market in short order.

In 1994, when Newt Gingrich & Co. swept the Democrats in the mid-term election, it took the market another month to gather itself for the epic ride higher in 1995. Back then, we did not see a major rally into the election so for sure, some of the early 1995 move was based on the delayed election resolution.

Today, although much in the financial markets seems sanguine, I continue to worry. As I've mentioned before, the higher markets go, the more I worry. One good cleansing that restores some fear will go a long way. Even though we are very long, I would hate to see the market further accelerate to the upside in a final and terminal move that would be very difficult to exit at the right time and set up 2011 in a very bad way.

FYI, I am scheduled to be on CNBC's The Call today, Friday, October 15, at 11:05am.

Feel free to email me with any questions or comments at Paul@investfortomorrow.com.

Until next time…

Paul Schatz

Heritage Capital LLC
http://www.investfortomorrow.com/
http://RetirementPlanningConnecticut.com/

Friday, October 8, 2010

What’s Wrong with California (and our country)

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

I had hoped to have part II of my piece on where real estate is headed done this week. But it wasn’t to be with month end and quarter end reports along with a last minute business trip. I will do my best to have that done for next week. Thanks for your patience.

The good folks at Casey Research published an article based on the comments from one of their readers. When trying to explain all that ails his home state of California, he became frustrated during the research process. California has been without a budget for months with no end in sight. Draconian cuts need to be made, but those are politically unpopular and semi-suicidal in an election year. The bottom line is that California can’t have it both ways and neither can our country.

Without editorializing further, below you can see the unimaginable.

LIST OF EXISTING CALIFORNIA STATE AGENCIES:

California Academic Performance Index (API) * California Access for Infants and Mothers * California Acupuncture Board * California Administrative Office of the Courts * California Adoptions Branch * California African American Museum * California Agricultural Export Program * California Agricultural Labor Relations Board * California Agricultural Statistics Service * California Air Resources Board (CARB) * California Allocation Board * California Alternative Energy and Advanced Transportation Financing Authority * California Animal Health and Food Safety Services * California Anti-Terrorism Information Center * California Apprenticeship Council * California Arbitration Certification Program * California Architects Board * California Area VI Developmental Disabilities Board * California Arts Council * California Asian Pacific Islander Legislative Caucus * California Assembly Democratic Caucus * California Assembly Republican Caucus * California Athletic Commission * California Attorney General * California Bay Conservation and Development Commission * California Bay-Delta Authority * California Bay-Delta Office * California Biodiversity Council * California Board for Geologists and Geophysicists * California Board for Professional Engineers and Land Surveyors * California Board of Accountancy * California Board of Barbering and Cosmetology * California Board of Behavioral Sciences * California Board of Chiropractic Examiners * California Board of Equalization (BOE) * California Board of Forestry and Fire Protection * California Board of Guide Dogs for the Blind * California Board of Occupational Therapy * California Board of Optometry * California Board of Pharmacy * California Board of Podiatric Medicine * California Board of Prison Terms * California Board of Psychology * California Board of Registered Nursing * California Board of Trustees * California Board of Vocational Nursing and Psychiatric Technicians * California Braille and Talking Book Library * California Building Standards Commission * California Bureau for Private Postsecondary and Vocational Education * California Bureau of Automotive Repair * California Bureau of Electronic and Appliance Repair * California Bureau of Home Furnishings and Thermal Insulation * California Bureau of Naturopathic Medicine * California Bureau of Security and Investigative Services * California Bureau of State Audits * California Business Agency * California Business Investment Services (CalBIS) * California Business Permit Information (CalGOLD) * California Business Portal * California Business, Transportation and Housing Agency * California Cal Grants * California CalJOBS * California Cal-Learn Program * California CalVet Home Loan Program * California Career Resource Network * California Cemetery and Funeral Bureau * California Center for Analytical Chemistry * California Center for Distributed Learning * California Center for Teaching Careers (Teach California) * California Chancellor's Office * California Charter Schools * California Children and Families Commission * California Children and Family Services Division * California Citizens Compensation Commission * California Civil Rights Bureau * California Coastal Commission * California Coastal Conservancy * California Code of Regulations * California Collaborative Projects with UC Davis * California Commission for Jobs and Economic Growth * California Commission on Aging * California Commission on Health and Safety and Workers' Compensation * California Commission on Judicial Performance * California Commission on State Mandates * California Commission on Status of Women * California Commission on Teacher Credentialing * California Commission on the Status of Women * California Committee on Dental Auxiliaries * California Community Colleges Chancellor's Office, Junior Colleges * California Community Colleges Chancellor's Office * California Complaint Mediation Program * California Conservation Corps * California Constitution Revision Commission * California Consumer Hotline * California Consumer Information Center * California Consumer Information * California Consumer Services Division * California Consumers and Families Agency * California Contractors State License Board * California Corrections Standards Authority * California Council for the Humanities * California Council on Criminal Justice * California Council on Developmental Disabilities * California Court Reporters Board * California Courts of Appeal * California Crime and Violence Prevention Center * California Criminal Justice Statistics Center * California Criminalistic Institute Forensic Library * California CSGnet Network Management * California Cultural and Historical Endowment * California Cultural Resources Division * California Curriculum and Instructional Leadership Branch * California Data Exchange Center * California Data Management Division * California Debt and Investment Advisory Commission * California Delta Protection Commission * California Democratic Caucus * California Demographic Research Unit * California Dental Auxiliaries * California Department of Aging * California Department of Alcohol and Drug Programs * California Department of Alcoholic Beverage Control Appeals Board * California Department of Alcoholic Beverage Control * California Department of Boating and Waterways (Cal Boating) * California Department of Child Support Services (CDCSS) * California Department of Community Services and Development * California Department of Conservation * California Department of Consumer Affairs * California Department of Corporations * California Department of Corrections and Rehabilitation * California Department of Developmental Services * California Department of Education * California Department of Fair Employment and Housing * California Department of Finance * California Department of Financial Institutions * California Department of Fish and Game * California Department of Food and Agriculture * California Department of Forestry and Fire Protection (CDF) * California Department of General Services * California Department of General Services, Office of State Publishing * California Department of Health Care Services * California Department of Housing and Community Development * California Department of Industrial Relations (DIR) * California Department of Insurance * California Department of Justice Firearms Division * California Department of Justice Opinion Unit * California Department of Justice, Consumer Information, Public Inquiry Unit * California Department of Justice * California Department of Managed Health Care * California Department of Mental Health * California Department of Motor Vehicles (DMV) * California Department of Personnel Administration * California Department of Pesticide Regulation * California Department of Public Health * California Department of Real Estate * California Department of Rehabilitation * California Department of Social Services Adoptions Branch * California Department of Social Services * California Department of Technology Services Training Center (DTSTC) * California Department of Technology Services (DTS) * California Department of Toxic Substances Control * California Department of Transportation (Caltrans) * California Department of Veterans Affairs (CalVets) * California Department of Water Resources * California Departmento de Vehiculos Motorizados * California Digital Library * California Disabled Veteran Business Enterprise Certification Program * California Division of Apprenticeship Standards * California Division of Codes and Standards * California Division of Communicable Disease Control * California Division of Engineering * California Division of Environmental and Occupational Disease Control * California Division of Gambling Control * California Division of Housing Policy Development * California Division of Labor Standards Enforcement * California Division of Labor Statistics and Research * California Division of Land and Right of Way * California Division of Land Resource Protection * California Division of Law Enforcement General Library * California Division of Measurement Standards * California Division of Mines and Geology * California Division of Occupational Safety and Health (Cal/OSHA) * California Division of Oil, Gas and Geothermal Resources * California Division of Planning and Local Assistance * California Division of Recycling * California Division of Safety of Dams * California Division of the State Architect * California Division of Tourism * California Division of Workers' Compensation Medical Unit * California Division of Workers' Compensation * California Economic Assistance, Business and Community Resources * California Economic Strategy Panel * California Education and Training Agency * California Education Audit Appeals Panel * California Educational Facilities Authority * California Elections Division * California Electricity Oversight Board * California Emergency Management Agency * California Emergency Medical Services Authority * California Employment Development Department (EDD) * California Employment Information State Jobs * California Employment Training Panel * California Energy Commission * California Environment and Natural Resources Agency * California Environmental Protection Agency (Cal/EPA) * California Environmental Resources Evaluation System (CERES) * California Executive Office * California Export Laboratory Services * California Exposition and State Fair (Cal Expo) * California Fair Political Practices Commission * California Fairs and Expositions Division * California Film Commission * California Fire and Resource Assessment Program * California Firearms Division * California Fiscal Services * California Fish and Game Commission * California Fisheries Program Branch * California Floodplain Management * California Foster Youth Help * California Franchise Tax Board (FTB) * California Fraud Division * California Gambling Control Commission * California Geographic Information Systems! Council (GIS) * California Geological Survey * California Government Claims and Victim Compensation Board * California Governor's Committee for Employment of Disabled Persons * California Governor's Mentoring Partnership * California Governor's Office of Emergency Services * California Governor's Office of Homeland Security * California Governor's Office of Planning and Research * California Governor's Office * California Grant and Enterprise Zone Programs HCD Loan * California Health and Human Services Agency * California Health and Safety Agency * California Healthy Families Program * California Hearing Aid Dispensers Bureau * California High-Speed Rail Authority * California Highway Patrol (CHP) * California History and Culture Agency * California Horse Racing Board * California Housing Finance Agency * California Indoor Air Quality Program * California Industrial Development Financing Advisory Commission * California Industrial Welfare Commission * California InFoPeople * California Information Center for the Environment * California Infrastructure and Economic Development Bank (I-Bank) * California Inspection Services * California Institute for County Government * California Institute for Education Reform * California Integrated Waste Management Board * California Interagency Ecological Program * California Job Service * California Junta Estatal de Personal * California Labor and Employment Agency * California Labor and Workforce Development Agency * California Labor Market Information Division * California Land Use Planning Information Network (LUPIN) * California Lands Commission * California Landscape Architects Technical Committee * California Latino Legislative Caucus * California Law Enforcement Branch * California Law Enforcement General Library * California Law Revision Commission * California Legislative Analyst's Office * California Legislative Black Caucus * California Legislative Counsel * California Legislative Division * California Legislative Information * California Legislative Lesbian, Gay , Bisexual, and Transgender (LGBT) Caucus * California Legislature Internet Caucus * California Library Development Services * California License and Revenue Branch * California Major Risk Medical Insurance Program * California Managed Risk Medical Insurance Board * California Maritime Academy * California Marketing Services * California Measurement Standards * California Medical Assistance Commission * California Medical Care Services * California Military Department * California Mining and Geology Board * California Museum for History, Women, and the Arts * California Museum Resource Center * California National Guard * California Native American Heritage Commission * California Natural Community Conservation Planning Program * California New Motor Vehicle Board * California Nursing Home Administrator Program * California Occupational Safety and Health Appeals Board * California Occupational Safety and Health Standards Board * California Ocean Resources Management Program * California Office of Administrative Hearings * California Office of Administrative Law * California Office of AIDS * California Office of Binational Border Health * California Office of Child Abuse Prevention * California Office of Deaf Access * California Office of Emergency Services (OES) * California Office of Environmental Health Hazard Assessment * California Office of Fiscal Services * California Office of Fleet Administration * California Office of Health Insurance Portability and Accountability Act (HIPAA) Implementation (CalOHI) * California Office of Historic Preservation * California Office of Homeland Security * California Office of Human Resources * California Office of Legal Services * California Office of Legislation * California Office of Lieutenant Governor * California Office of Military and Aerospace Support * California Office of Mine Reclamation * California Office of Natural Resource Education * California Office of Privacy Protection * California Office of Public School Construction * California Office of Real Estate Appraisers * California Office of Risk and Insurance Management * California Office of Services to the Blind * California Office of Spill Prevention and Response * California Office of State Publishing (OSP) * California Office of Statewide Health Planning and Development * California Office of Systems Integration * California Office of the Inspector General * California Office of the Ombudsman * California Office of the Patient Advocate * California Office of the President * California Office of the Secretary for Education * California Office of the State Fire Marshal * California Office of the State Public Defender * California Office of Traffic Safety * California Office of Vital Records * California Online Directory * California Operations Control Office * California Opinion Unit * California Outreach and Technical Assistance Network (OTAN) * California Park and Recreation Commission * California Peace Officer Standards and Training (POST) * California Performance Review (CPR) * California Permit Information for Business (CalGOLD) * California Physical Therapy Board * California Physician Assistant Committee * California Plant Health and Pest Prevention Services * California Policy and Evaluation Division * California Political Reform Division * California Pollution Control Financing Authority * California Polytechnic State University, San Luis Obispo * California Postsecondary Education Commission * California Prevention Services * California Primary Care and Family Health * California Prison Industry Authority * California Procurement Division * California Public Employees' Retirement System (CalPERS) * California Public Employment Relations Board (PERB) * California Public Utilities Commission (PUC) * California Real Estate Services Division * California Refugee Programs Branch * California Regional Water Quality Control Boards * California Registered Veterinary Technician Committee * California Registrar of Charitable Trusts * California Republican Caucus * California Research and Development Division * California Research Bureau * California Resources Agency * California Respiratory Care Board * California Rivers Assessment * California Rural Health Policy Council * California Safe Schools * California San Francisco Bay Conservation and Development Commission * California San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy * California San Joaquin River Conservancy * California School to Career * California Science Center * California Scripps Institution of Oceanography * California Secretary of State Business Portal * California Secretary of State * California Seismic Safety Commission * California Self Insurance Plans (SIP) * California Senate Office of Research * California Small Business and Disabled Veteran Business Enterprise Certification Program * California Small Business Development Center Program * California

If you haven’t taken 30 seconds to share your opinion on where the stock market is headed (no right or wrong answers), please CLICK HERE and take a 30 second survey for a future contribution.

Feel free to email me with any questions or comments at Paul@investfortomorrow.com.


Until next time…

Paul Schatz

Heritage Capital LLC
http://www.investfortomorrow.com/
http://RetirementPlanningConnecticut.com/

Wednesday, October 6, 2010

Consumers want high-performing security systems online

WINDSOR — According to a recent survey conducted by ING, nine in 10 adults agree that financial services companies should be doing more to protect customers’ personal and financial information.

Survey findings also indicated that 75% of respondents access financial accounts online, such as checking, savings, 401(k) or investment accounts. However, when it comes to their level of experience with protecting their personal and financial information online, just 5% of adults surveyed characterize themselves as being an expert.

While few consider themselves experts when it comes to protecting their information online, 93% agree that they are aware of the risks involved with managing online accounts.

Due to the high levels of awareness regarding online security threats, 93% of survey respondents report that they take online privacy and security very seriously and do everything they can to protect their own information.

Some of the security steps they take include keeping their anti-virus software updated (72%); only accessing their accounts from secure computers (60%); and only working with companies or financial institutions that they trust (56%). However, 84% expect companies to notify them of any suspicious activity and to utilize the most up-to-date security protocols and software (76%).

"Protecting customers’ personal information is one of ING’s highest priorities," Rob Leary, chief executive officer, ING Insurance U.S., said in a statement. "Our customers put a great deal of trust in us to manage their financial futures, and with that trust is great responsibility - a responsibility to secure their personal and financial information. As Americans become more and more comfortable with managing their finances online, it’s important that financial services companies continuously upgrade and evolve their technology capabilities around protecting customer data."

ING said it is responding to security concerns with the opening of its new global security operations center in Minneapolis. The culmination of five years of investment, the center is staffed with employees 24 hours a day, 7 days a week, 365 days a year.

Friday, October 1, 2010

Where Real Estate Is Headed… Your Survey Results Part I

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

For several weeks, I asked you to offer your thoughts on where the residential real estate market is headed. With primary homes being the greatest asset many people own, I thought it would be a good topic here as well as in my Street$marts newsletter. As I think I mentioned, my wife and I sold our house in August. She had been wanting more space and I have been concerned about another significant leg down in real estate. So although our reasons were about as far apart as possible, we both agreed to sell. By doing that, according to our real estate super agent, Judy Cooper, we also would have maximum flexibility when it came time to buy and be viewed very positively by sellers as we wouldn’t have a house that needed to sell first.

When my wife first mentioned the idea of selling, like I unfortunately do with almost everything in life, I created a financial model that compares properties on an apples to apples basis using several different metrics and formulas so we could rationally and unemotionally determine what our house should sell for along with how much to pay another house. Over the past two years, this has prevented us from leaping into what ended up being some very overpriced properties.

As an aside, when we were first house looking in 2000 and 2001, my wife had a habit of loudly telling me in front of the seller’s agent “I want it. I want it. I want it. Let’s pay asking price!” Little did she realize so early in our marriage that her husband (me) wasn’t known for parting with a buck so easily! But after all this time, as she just emailed me a new listing with the word “perfect” in it, she now knows that unless the house is able to be bought within the parameters of the model I created, it’s unlikely to happen. And before you open an email to tell me, yes I know, I am a pain in the rear end when it comes to money! My wife deserves an award for putting up with me!!

Getting back to the topic, I found it interesting that unlike the survey I did regarding what our government’s top priority should be along with where you sit politically, the real estate results were almost the same from blog readers as they were for my Street$marts newsletter readers. Here are the results:

Over the next year real estate prices will:

Rise 32%
Fall 68%

Over the next 5 years real estate prices will:

Rise 64%
Fall 36%

Over the next 10 years real estate prices will:

Rise 82%
Fall 18%

Over the next 20 years real estate prices will:

Rise 90%
Fall 10%

Generally speaking, as you would expect, the longer the time horizon, the more favorable you view an investment in real estate. I am a bit surprised that only 32% believe that home prices will advance in the next year. I imagined that number would have been closer to 50%. The five year number of 64% makes sense and 10 years from now, the vast, vast majority of you believe things will be back to “normal” and real estate will rise.

If I had to guess, I would think that the real estate bears 10 and 20 years out are folks with a semi-permanent bearish stance, just like what I will guess on the stock side. I am not saying you are right or wrong, just that I think that’s somewhat as expected.

The group with a positive long-term opinion must have used the past 30 years of real estate pricing as a guide. We’ve seen several busts during that time, but prices always seemed to have come back over a period of years. Coincidentally, the last 30 years have seen the greatest bull market in bonds (read: lower interest rates) in history. With the conventional 30 year fixed rate mortgage at or near all time lows around 4.50%, you have to ask yourself what the likelihood is of continuing this bond bull market for another 10 or 20 years.

I am going to end this piece here and pick up again next Friday with some analysis and charts, so please be sure and check back next week!

I would be interested to learn your feelings about stock prices, so if you have a chance, please CLICK HERE and take a 30 second survey for a future contribution.

If you watched CNBC’s exclusive interview with well respected hedge fund manager David Tepper last week or read or heard his comments repeated that the only path for stock prices is UP, I offered a very different tune in a CNBC interview on September 27.

Feel free to email me with any questions or comments at Paul@investfortomorrow.com.

Until next time…


Paul Schatz
Heritage Capital LLC
http://www.investfortomorrow.com/
 http://RetirementPlanningConnecticut.com/

Tuesday, September 28, 2010

An open letter from the IRS to CT charities: File or lose tax-exempt status (w/list)

The Internal Revenue Service released this open letter Tuesday, as an outreach effort to let these charities and nonprofits know that they must file by Oct. 15 to retain their tax exempt status.



Dear Editor:

We at the Internal Revenue Service are concerned because as many as 3,900 small community-based nonprofits in Connecticut are in jeopardy of losing their tax-exempt status. The loss of this status could greatly impact the organizations' charitable work and their donors' potential tax deductions.

Among the organizations that could lose their tax-exempt status are local sports associations and community support groups, volunteer fire and ambulance associations and their auxiliaries, social clubs, educational societies, veterans groups, church-affiliated groups, groups designed to assist those with special needs and a variety of others.

The organizations that are at risk failed to file the required returns for 2007, 2008 and 2009, according to IRS records. The requirement to file is the result of a tax law change that occurred in 2006. For many of these small organizations, complying with the new law may be as simple as completing a 10-minute form online. They can preserve their exempt status under a one-time relief program the IRS announced in July, but only if they file by Oct. 15, 2010.

The IRS has made numerous attempts to alert these organizations, but we are concerned that many may not have gotten the word. A list of the organizations that were at-risk as of the end of July is posted at IRS.gov along with instructions on how to comply with the new law.

We encourage everyone who is connected with a small nonprofit community group to make sure that their organization is aware of the law change and is in compliance before the Oct. 15 deadline.

Best regards,
Gregg Semanick
IRS CT Spokesperson
200 Sheffield Street, Mountainside NJ

Friday, September 24, 2010

The Coming Tradeoff between Dividends and Appreciation

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

The 2003 tax cuts reduced the tax rate on most ordinary dividends from the taxpayer's personal income tax rate to a maximum of 15%, equalizing the tax treatment of dividends and long-term capital gains. One result of the change was renewed focus on income investing. Many public companies initiated dividend programs to attract stable investors.

Unless the 2003 tax rates are extended, or new rules are enacted before then, dividends will be taxed at ordinary income rates once again after December 31, 2010.

The question for investors is how will that impact dividend payouts or the number of firms paying regular dividends.

Studies of corporate behavior following the 2003 tax cut show total dividends reversing their recent downward trend and special dividends spiking. Perhaps more important was the increase in the number of firms paying regular dividends.

  Total Regular and Special Dividends
Non-Financial, Non-Utility and Non-Foreign Firms

 
 
 
   
Effect of Tax Cut on Initiation of Dividends
Breakdown by Expected Earnings Growth




With the expiration of the 2003 tax cuts, dividends again will be taxed at a taxpayer's personal tax rate. This could be as high as 43.5% when the tax to pay for health care, imposed on couples who earn more than $250,000 a year, goes into effect in 2013. In addition to giving the U.S. one of the highest dividend tax rates in the industrialized world, the change in dividend tax treatment can also be expected to change investor behavior and corporate dividend plans.

The reason is simple mathematics. A dividend of $10,000 will be worth $5,650 in after tax value at the highest income rates. A capital gain of $10,000 will have an after tax value of $8,000 based on the long-term capital gains tax rate of 20% effective 2011. The incentive to high income investors and corporations is to increase long-term capital gains and minimize dividends. Another advantage of long-term capital gains is that investors have greater ability to "schedule" the recognition of capital gains to offset losses.

For assets held in a tax-deferred retirement account, the tradeoff between dividend and long-term gain is a non-issue, because all withdrawals are taxed at the individual's personal income rate (with the exception of non-deductible IRA contributions where only gains are taxed).

What's the best approach for you to take with respect to dividends versus capital gains? The right answer depends on your personal circumstances.

Feel free to email me with any questions or comments at Paul@investfortomorrow.com.


Until next time…

Paul Schatz

Heritage Capital LLC
http://www.investfortomorrow.com/
http://RetirementPlanningConnecticut.com/

Thursday, September 23, 2010

Insurance Fraud Swells During Storm Season

This past summer, when Connecticut Department of Consumer Protection investigators were operating an undercover sting house designed to catch unregistered home improvement contractors, they were "amazed" at the offer they received from one contractor. Their work and cooperation with local police and agents from the National Insurance Crime Bureau led to the arrest of the contractor for insurance fraud, and the case is now being tried in court.

The investigators were posing as homeowners seeking bids on a variety of home improvement jobs, including roof repairs. According to the investigators’ report, a contractor visited the house in June, and before even inspecting the roof, asked if any roof damage had been caused by wind or storm, and indicated that if he, the contractor, “can time the damage to a storm, [the homeowner’s insurance company] will pay.”

In other words, he told undercover agents (who were posing as homeowners) that they could get a free roof, paid for by their insurance company.

The contractor offered to bury the insurance deductible into the cost of the job and to contact the insurance company right away to begin the claims process. When inspecting the roof, he noted where damage existed and indicated that he would have to show damage to both sides of the roof in order to get the entire job paid for.

Once the insurance company paid the claim, the 'homeowners' were to sign the check over to the contractor.

“Consumers should avoid doing business with anyone whose business practices are questionable or seem fraudulent. When arrested, this contractor claimed he didn’t believe he had done anything wrong, and placed that the blame on the consumers. You don’t want to place your home and your trust in the hands of someone who is ready and willing to involve you in committing a crime,” Consumer Protection Commissioner Jerry Farrell said.

Nationwide, the total cost of non-health insurance fraud is estimated to be more than $40 billion each year, Farrell said. “That means insurance fraud costs the average family between $400 and $700 a year in the form of increased premiums," the commissioner said.

Friday, September 17, 2010

Washington Needs a Wake-up Call

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

So far so good on the preferred path for the stock market. I’ve written many times since early July about higher and much higher prices coming and now, the major indices are sitting right at their June and August high levels. While I am very happy to see that (beats a stick in the eye), as stocks go higher and higher, so does risk. Once we see another 1% on the upside, I believe volatility is going increase along with the chance for a downside reversal within 3-5%. If you’ve benefited from the rally, now is not the time to get complacent and party like its 1999. Dancing close to the door is a good strategy now and will be even more warranted at higher levels.

I am keenly watching the behavior of high yield (junk) bonds along with the number of stocks advancing and declining daily and which sectors are leading the market higher or not participating. This should give at least some warning of a change coming, but it’s far from guaranteed.

The big political/market news lately was something I discussed during the summer; the potential for the democrats to throw a Hail Mary in hopes of saving the mid-term elections in November, although with the Tea Party doing so well this week, that’s got to have dems celebrating!

Barack Obama did not disappoint. From my seat on the positive side, the administration is seeking to allow businesses to write off all new plant and equipment investments in 2011, rather than amortizing over many years. The end result is a potential positive shock to jobs to create the goods as well as potentially more jobs from the company making the investment.

This is one area I've written about and discussed in the media for years; the need to offer tax incentives and credits and help business help themselves without bailouts and handouts. Hopefully, this is a sea change for the administration and more programs like this will follow,

On the negative side, long time readers already know my skepticism (to put it politely) regarding government stimulus. It's a slippery slope that once begun, there's no turning back. During the first quarter of 2009, Congress and the administration passed a record $787B spending bill without the means to pay for it that was sold as a modern day New Deal, heavy on new jobs and infrastructure. It's far from a stretch to say that it's been a bust with only a small percent of "shovel ready" projects funded and underway.

Now we are being a sold another infrastructure bill of goods that emphasizes jump starting the jobs market with "only" $50B to start and at least another $50B over the next five years. Do we need monies allocated for our aging and almost decrepit infrastructure? OF COURSE, we do! And we need monies for job training and education improvements and disease research and technological upgrades and renewable energy, etc. But targeting big energy by "closing loopholes" because the ground is fertile against them isn't the answer.

Where does it end? Does the government just keep creating spending bill after spending bill and hoping they work? Hope certainly isn't a viable investment strategy and it's no better a fiscal one either! As George W. Bush so eloquently mumbled in 2002, ""There's an old saying in Tennessee - I know it's in Texas, probably in Tennessee - that says, fool me once, shame on - shame on you. Fool me - you can't get fooled again."

Regarding taxes, I am pleased that both parties have embraced making the Bush tax cuts permanent for the middle class. That makes perfect sense in any economy, but especially one in as poor shape as ours. The problem I’ve had all along is that raising taxes on any constituency is bad enough in good times (but sometimes necessary and palatable), but is simply disastrous in bad economic times.

According to Wilbur Ross, fully 40% of all discretionary spending in the U.S. is from families making $250,000 a year or more. Raising taxes is only going to curtail and hamper what little growth is currently occurring. To further rub salt in the wound, the Obama administration is also floating the idea of adding more taxes on top of the already largest tax increase in history. While I am not a believer in high taxes and big government, it’s more tolerable in “normal” years without trillion plus dollar deficits. Raising taxes will not work to cut the deficit!

I’ve noticed a very interesting paradigm shift in this country since I began my career in 1988 when the entrepreneurial spirit was so high. It used to be that we all strived to become successful, and revered and idolized people who made it on their own with creativity, perseverance and good ole American ingenuity. It seems like successful Americans are now demonized and targeted, as somehow they are to blame for our woes and should be punished. That’s not good for our long-term health and survival as a world power. We are all in this together!

I will be on CNBC’s The Call today (September 17) between 11:05am and 11:15am.

Feel free to email me with any questions or comments at Paul@investfortomorrow.com.


Until next time…

Paul Schatz

Heritage Capital LLC
http://www.InvestForTomorrow.com
http://RetirementPlanningConnecticut.com/

Friday, September 10, 2010

Sell Rosh Hashanah...Buy Yom Kippur

(Editor's Note: Paul Schatz, President of Heritage Capital, LLC, in Woodbridge, will be contributing to Fi$callyFit every Friday. Read his biography here)

I was watching Squawk Box this morning on CNBC and heard an interview with a Chicago regular who offered that stock market volume may remain low for the rest of 2010 as many large market players are in the process of essentially closing up shop, not for the quarter, but for the YEAR. By "closing up shop", I don't mean that they are liquidating all of their portfolios and going to cash, but rather, not committing new money to trades, not taking on more risk and hedging where appropriate. It's dumb enough to hear this mindless drivel in October when mutual funds have their own fiscal year ends, but now? With four full months left in a toss-up year? It's absurd!

I can’t imagine what my clients would say if I took that tact, yet still charged them management fees. I’ve always thought we were hired and paid to do a job over the long-term. If we compromise that for an arbitrary annual date, how long until it’s quarter by quarter and then month by month?

Turning to the markets, we left off with stocks set to Explode Higher or Implode Lower? at a critical juncture and my call for a significant rally looking like the former division leading San Diego Padres, losers of 10 games in a row. The Dow was trading just below 10,000 and it was make or break time for the bulls. With all of the positive indicators and supportive sentiment, the market was supposed to rally strongly. If it could not, I feared an imminent meltdown that would have really turned our own very good year into sour grapes.

The bears came close, but their efforts were thwarted several times in late August and the bulls turned around and shot stocks higher, something I was very glad to see! The stock market continues to support a rally, although it's come very far, very fast. A few days down to refresh the rally would be healthy and welcomed, and set up another assault on the June and August highs this month.

With the Jewish holidays upon us, the old Wall Street adage may apply. Sell Rosh Hashanah, buy Yom Kippur, which means the market tends to be on the weak side during the week that separates the two holidays.

As I mentioned recently, I fully expect this rally to be more selective with some sectors rising to new 2010 highs, like our largest positions, REITs and Consumer Staples, while other sectors, like banks, will be pulled along but lag the market.

The ultimate peak, which I had forecasted to be in place by Labor Day still seems unclear to me. It could have been the April high, but there just may be enough energy to test that high before long. As always, we'll take it one day at a time and let our models guide us. Unless we see dramatic improvement in market internals, like the number of stocks going up and down, new highs and lows along with sector leadership, the potential for a 10-20% decline still exists this year.

On the bond side, there continues to be a tsunami of money heading that way from the investing public along with corporations issuing debt at a record pace, just like we saw with tech stocks in 1999 and 2000 and housing after that. Similar to tech and housing, the bond party isn't going to end well, whether that's this year or 2011 or 2012. Manias tend to go on much longer and higher than anyone forecasts, but when they end, it's with a bang and not a fizzle.

Several of our investment programs own high yield, investment grade and treasuries, but are under no impression that it's for the long-term. As I mentioned here and on CNBC, we happily rode the treasury bandwagon for many months in our Global Asset Allocation Program before becoming more active of late with our trades. I continue to believe that the more nimble you can be, the better the chance to avoid the upcoming bond collapse and earn money elsewhere.

I will be on CNBC’s Squawk on the Street this Monday, September 13, at 9:35am.

Feel free to email me with any questions or comments at Paul@investfortomorrow.com.

Until next time…

Paul Schatz
Heritage Capital LLC
http://www.investfortomorrow.com/
http://RetirementPlanningConnecticut.com/