patrick.net

All I know is that of the 5 or so reports that came out this week, my interpretation of them was that statewide, sales are down once again by almost 30%, inventory is still piling up, foreclosures are up, prices in some parts of the state are inchingt slightly down, and in my hood, nothing, and I mean nothing seems to be selling.
So.. we can debate here all we want, but the truth is that what has been said by people like us foe years is coming entirely true. We don't have to use complex analytics or theories. The basic background of our idea of what will happen is happening on very simplified terms: Investors overinflated the market, propping the market up for an additional 2-3 years, intrest rates are going up, and people now see that the party is over. The prices will start to fall heavily by this fall and winter. There will be no soft landing, and the economy will likely have a period of bad performance. The unemployment rate will skyrocket in construction heavy areas, and people that worked hard to save, act wiselt, and invest in their careers like we did will have our day, which was a long time coming.
Speaking of gold, indeed there is a rebirth in procuring new sources. Me and my wife love going up to Auburn, CA. There is a state park there that's in an old mine. The interesting thing is that there are many of these in the region. Many shut down in the 1940's and 50's. With the surging prices, there are several that are going to reopen and begin mining operations once more, quite possible including the mine that the state park sits on simply because the land " under" the park is still owned by the mining corportation.

MA,

There is a fund company that has "inverse" funds that short AND use leverage so a 50K acct. just became a 100K acct. I know, it goes against everything we've been taught for years but this has stood up to the IRS "acid test" as it trades on it's NAV and can only go to "zero". I've challenged the guys at Rydex repeatedly and I've never had their holdings trigger any kind of an audit issue. I'm not bad mouthing options in general but this is just so much easier and there's no need for a "specialty" acct.

MA,

That's largely b/c they aligned themselves with the very same "traditional spread banks" they claimed to have set out to abolish. It's actually now "TD Ameritrade" as in the "old" Toronto Dominion Bank. What this all boils down to is that very little if any of their profits come actual trading. Even Chuck has struggled mightily after defecating on the full service side of the business they are now frantically attempting to up grade "do it yourselfers" to full service/consulting etc. with virtually NO success.

Bob,

Uh, my sentiments exactly.

MA,

All I was trying to share is that by touting the ready availability of TRADING OPTIONS! (in your IRA) this is yet another desperate bait and switch tactic that discounters love to use. I mean, let's be honest here, when you have discounters enter ANY arena the only thing they can compete on is price. Once they've driven that down as far as they possibly can the only thing that's left is bad mouthing everybody else in the industry and attracting assets through this type of deceptive practice. By the time the avg. ETrade client has figured out he can't really leverage his IRA they already have the assets!

Look, I really couldn't care less what these guys (or their clients) do. Total assets at all of the discounters still don't add up to rounding error to the wires.

George,

HARM likes to refer to these as "because we can" fees. Believe it or not the scenario is not markedly different here in OR. The "up scale" sub-d nearest me charges about 85K for a buildable lot (all in). They recently updated their "because we can" fee from 16 to 20K. All of this from a state that usually ranks about 38th in per capita income. Great.........

I don't think derivatives belong in tax deferred retirement accounts. Then again, I'm old fashioned when it comes to retirement savings. I won't even touch ETFs yet with my SEPIRA, and I use Vanguard.

I certainly don't wannabe a trader. By "active trading" I mean a couple few a week with monthly rebalancing. Anything more doesn't cover commissions or the value of my time.

Michael,
I don't know 100% if the fall will happen this winter en' force, but to me, if sales are sliding in what's supposed to be the hottest time of year to sell, then that tells me that things will likely not get any better for the slow season. I don't see anything really improving as far as sales go, and we're only a few months away from fall.
That said, I wouldn't be surprised if some areas are more stubborn than others. States like Florida are already having massive reductions. California has only one area that has gone down very slightly. As George pointed out a while back, CA might be as much as 12 months behind Florida. I think it's more like 6 months, but we'll see. Anyway you cut it, it does appear that the atmosphere has changed dramatically in just a few months from: " yes, things have slowed" to:" Things are still slow" to: Holy crap, things are getting bad, I gotta sell!"

MA,

One way around that would be to set up a trading firm as either an LLC or a Sub S to skirt tax issues. (Yes, I know, *astrid* believes this should all be treated like a pay check). The truth is that you/your clients would have all the lattitude in the world AND it adds an extra layer of protection for you as an adviser.

My father always told me, "If you're going to do a crime, plan it from the witness stand backward". (Meaning assume you'll be caught). God forbid this were to wind up in litigation the arbitration panel will look at the title block on the acct. form, see that they have filed articles of incorporation (complete w/corp. seal) and say "Next case"! I'm not by any means implying options trading = criminality but when it comes to money, everyone's an a$$hole!

*Not Legal Advice?

Randy H,

Yeah, what's up? I'm popping ETF's like candy in my SEP! They're cheaper, more concise and more fun! While their popularity has surged in recent years (they are actually older than "open ended" funds).

True, the NASD has clamped down on a lot of this "back tested data" track record stuff but still and all they're a great deal.

MA,

100K price reduction hasn't sparked ANY interest? But Bend is so HOT! It's "white hot"!

The Sunday Oregonian just ran a huge feature on how 2nd. homes in general and Bend in particular were going to do nothing but continue to benefit from the aging boomers. (Nothing like on site intel.)

Michael,
I'm going to place my bets on the fact that people are easily persuaded by the media. The papers, networks and sites ( especially sites like these) have probably done most of the erosion in the buying public's confidence. For years it was the "unstoppable RE boom". Just in the last year they've changed their tune to the drama filled unfolding events that are the foundations of a new, hot, soap opera drama that'll be sure to grab attention: The RE implosion and all the woeful stories about homeowners and so others in serious problems.
Basically, the public has been shifted into a new mode of though concerning RE. It's no longer the miraculous machine it was for the last few years. They knew the risks and heard the warnings. The kind of people that risked everything to invest in bubblicious housing are also the types of people who will want to ditch the fastest. They have to because they only had one plan for the homes they bought which was to sell and pocket the profit, and only the profit in the form of additional appreciation. Otherwise they're simply sitting on something they can't pay for or expect to even break even with. If you had the option of buying a car that would only be more expensive due to increasing car payments, would you do it? No, of course not, and neither are the approximatly 40% of the buyers in the last 2 years who made up the entire spectrum who bought only as investments.
That's why the fall will more than likely be hard and fast. These people do not have the option to simply hold. They will have to sell, and sell it fast. The public perception is now that housing prices will fall. If there is a massive amount of homes being sold at reduced prices, then buyers will hold off even longer because the perception will be that prices will tumble quite a bit.

I probably shy away from ETFs in my Vanguard acct because they don't have enough history to produce valid statistical Monte Carlo simulations. Like I said, I'm very old skool when it comes to my SEPIRA. Just old fashioned, boring MVO and Monte Carlo. When the ETFs I have available to me hit a high enough RSQ and F-Test I'll include them too.

Call it waiting to see if anyone dies from the newly approved drugs first, if you will. It's more a hyper conservative reaction I have to seeing all my Midwestern elder relatives retire with nothing but the gov't to support them. I'm not going out that way.

DinOR,

Not only do you get the tax advantages with S-elected corps, but you get a huge potential to make SEPIRA contributions. My last corp was a C and we still managed to hit the IRS max on SEP 5 of 7 years. That adds up pretty fast.

Randy H,

I hear what you're saying and have been a little leery of some of the "offerings of the week" from I/Power Shares. A lot of their "track record" leans rather heavily on things that didn't even exist during their data sample period. But there are plenty of well established ETF's and when it comes down to it I only track a few.

Randy H,

Exactly, and they're not near as arduous to set up as most imagine. The atty. does most of the work and it's very competitive so the fees are reasonable. Maxing out your SEP is the best feeling in the world.

MA,

Bend is going to be a nightmare anyway we slice it! They're talking about adding 10,400 new jobs over the next 3 years! Really? Based on their esteemed opinion how many of those new jobs would have been in construction?

Don't get me wrong, I think Bend is purdy too but when it boils down to basic economics people will dump Bend like an ugly girl at a dance!

For some reasons I still do not believe in retirement accounts.

I probably shy away from ETFs in my Vanguard acct because they don’t have enough history to produce valid statistical Monte Carlo simulations.

There's that, plus Vanguard's current offerings are still fairly limited. For RE, there's only a (commercial) REIT ETF. No homebuilder stocks, GSE or residential REIT ETFs --yet.

http://flagship4.vanguard.com/VGApp/hnw/FundsVIPERByType

Well we started a 401k, but I feel like that it's a bad idea - we have no control over when our contributions are invested, the funds don't correlate exactly with the funds on the xchange - I feel like the retirement firm can take us for a ride and charge us for it! What's to stop them form "buying" the funds (with our money), wait a few days and then "sell" us the funds for a profit? As well as charging fees etc

To me ETFs are just more liquid and transparent mutual funds with minimal fees.

They are also shortable, and in some case optionable mutual funds.

Taxable accounts are not all bad...

To avoid large long-term capital gains, one can always donate the shares, help the world, and get a nice write off.

To avoid short-term capital gains, one can offet them against short-term capital losses.

Claire,

The actions you describe would be MAJOR infractions in the eyes of ERISA, DOL, IRS, EBSA and the PBGC. Other than that, no problem. One issue you might see is that firms like ADP and Paychex become like banks b/c they sit on America's pay check for two weeks and actually do lend to the commercial arena.

Are 401K firms complacent? Oh HELL YES! Do they care if you ever see a dime in appreciation? HELL NO! Unlike Peter though, I will advocate if nothing else at the very least contribute up to the company match and dump the balance into a roth or reg. IRA. We've got to stop inventing excuses for not saving. In the end that's what these are, "savings plans".

Peter P,

There's nothing wrong with "pay as you go". You can also amortize a long term cap gain over time. There are also a number of "turn-key" trusts that you can set up at no expense to you and actively direct those proceeds to the bona fide charity of your choosing. Used to be trusts were expensive (and a pain) to set up.

The 401k is not even matched, but at least it's before tax, I thought you could only have a regular IRA if you don't have a 401K?

There are also a number of “turn-key” trusts that you can set up at no expense to you and actively direct those proceeds to the bona fide charity of your choosing.

I think Fidelity has a charitable fund. It may be a tax-efficient way to improve karma. :)

For some reasons I still do not believe in retirement accounts.

Have to second DinOR here --if you can't trust your own retirement accounts (401k/IRAs), what can you trust?

However, I completely understand not "trusting" federal entitlement programs (Social Security, Medicare, etc.) or defined-benefit pension plans. I fully expect those either to be bankrupt or severely scaled back and/or means-tested to the point most people will have little chance of seeing any payoff. SS/FICA to me is basically "Boomer retirement payroll tax" for future generations.

Have to second DinOR here –if you can’t trust your own retirement accounts (401k/IRAs), what can you trust?

I trust something that can be readily cashed out.

The 401k is not even matched, but at least it’s before tax, I thought you could only have a regular IRA if you don’t have a 401K?

Nope, I have both. As I don't yet have children or a CA personal ATM (house) and I don't itemize, these are about the only tax shelters I have at the moment.

You can cash a ROTH IRA out, just not the gains or you'll get taxed on them.

I trust something that can be readily cashed out.

Point taken, though technically you can (for a big hefty penalty, of course :-( ). IRAs/401k/403b rules also allow one-time penalty-free withdrawals for certain events --like buying a first home, paying for kid's college tuition, and such.

HARM -

So you have a tax-deductible IRA not ROTH?

AFAIK, if you contributed to a 401K plan, your contributions to a regular IRA (if they are allowed based on income etc) are NOT pre-tax. In that case, it makes sense to contribute to a Roth IRA, again if income levels allow it.

* NOT A TAX ADIVCE

IRAs/401k/403b rules also allow one-time penalty-free withdrawals for certain events –like buying a first home, paying for kid’s college tuition, and such.

Withdrawal or loan?

So you have a tax-deductible IRA not ROTH?

Yes, though I would like to convert it to a Roth at the next opportunity (2007 I believe?).

I thought it was 2010? For conversion of IRA's that is.

Peter P,

Some of the "charitable trust remainders" are set up so that you can,

Make the contribution

Get an immediate tax break

Keep the income (dividends)

Will it to an heir (also rec. the income)

And upon their passing the $'s finally go to the charity

Pretty good deal.

Pretty good deal.

Yes indeed. Do your clients have any donor-advised fund (e.g. Fidelity Charitable Gift Fund)?

HARM,

I'm kind of in your position except that one of us is self employed. Through my SEP I can "fairly" well adjust my tax position by making a final contribution just prior to the cut off.

Just as Peter questions the "value" of retirement accts. I seriously challenge the sagely wisdom of "fluffing up" your sched. A through the use of Mort. int. ded! If in the process of "fluffing" you are ignoring virtually all of your other savings options "it just doesn't make sense". (Particularly since many fluffers NEED that big fat tax return check to get caught up on bills)!

Withdrawal or loan?

Withdrawal. Though it looks like I was mistaken about first homes & college tuition being exempt from the 10% early withdrawal fee. These would be considered "hardship withdrawals" and are subject to tax + 10% beffore age 59 1/2.

Getting a penalty-free withdrawal is a bit more restrictive:

--You become totally disabled.
--You are in debt for medical expenses that exceed 7.5 percent of your adjusted gross income.
--You are required by court order to give the money to your divorced spouse, a child, or a dependent.
--You are separated from service (through permanent layoff, termination, quitting or taking early retirement) in the year you turn 55, or later.
--You are separated from service and you have set up a payment schedule to withdraw money in substantially equal amounts over the course of your life expectancy.

http://www.401khelpcenter.com/mpower/feature_121902.html

Peter P,

Just as a matter of convenience I typically use Eaton Vance in Boston. They're pretty comfortable with the process and have an in house stable of tax experts that keep things current. It really helps people that have a low cost basis in a stock and can even help folks that have sold off RE holdings. I hate to say it but it really is a "last ditch effort" when all other "relief" has been exhausted.

*Not a plug for EV