Hi Everyone

I have been wondering for a while if besides the obvious reasons, some of the market volatility might be due to our upcoming election. Is the market reacting to the possibility of a one party government with a filibuster proof senate? Is the market scarred about what a potentially very liberal, left leaning government will do to our economic recovery with new social programs and an unwillingness to lower taxes on corporations, capital gain as well as individuals?

I don’t have the answer, but I do think this is a distinct possibility. We might know in the days following November 4th if the market rallies on some unanticipated election results.

Looking at history, having a filibuster proof senate run by the Democrats created large social programs like in the 30s and 60s, and a lackluster economy during the late 70s. The markets certainly don’t like that, as it will be poisonous to our worldwide competitiveness.

If this comes true, I guess we have to bullet proof our portfolios even more and expect inflation to get even worse in the years to come than it will anyway with all the money being created right now.

Cheers,

Patrick

Hi Everyone,

I talked to a friend yesterday whose broker sold a mutual fund to get a tax loss and then bought a similar fund right after wards. The fund purchased was not from the same company, but he told my friend that they are virtually the same.

I believe that this is considered a wash sale by the IRS and the loss will not be allowed. I want to make sure if someone recommends this to you that you are aware that this is likely not allowed under the current tax laws.

I do think it is a little more difficult to assess a wash sale with mutual funds, but if you buy a fund that is virtually the same as the one you sold just from a different company, it could be considered a wash sale.

As always, please feel free to comment.

Cheers,

Patrick

Hi everyone,

I had quite a few questions lately regarding the FDIC insurance limitations. Let me try to give a brief summary on how the insurance currently works.

The increased limit from $100,000 to $250,000 is temporary and will expire on December 31st, 2009.I guess there is always a chance that it might be renewed.
The limits are on a per type of account basis. The types of accounts are individual, joint, IRA’s and certain other retirement accounts as well as the beneficiary of trust accounts.
These limitations are per bank, so looking at the scenarios below you can repeat this at every bank that provides FDIC insurance coverage.
Let’s look at each of them:

Individual: The insurance covers the individual up to the limit of $250,000, no matter if the person has one or multiple accounts. If the person has multiple account, the deposits in the different accounts will be added together and are insured up to the limit.
Joint Accounts: With a joint account, both owners each get the $250,000 in coverage for a total coverage of $500,000. If a couple has multiple joint accounts at the same bank, the amounts are added together just like with the individual account.
IRA’s: The same rules apply as with individual accounts.
Trust Account: The beneficiary get the same coverage as described under the individual accounts.
If you are married, you could have $500,000 in a joint account, each $250,000 in an individual and IRA and some money in a trust account all with the same bank and be FDIC insured. This means that you could have well over $1,500,000 in a single bank and be all covered. Then you could repeat that at different banks many times over. There are a few other minor FDIC requirements.

The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if purchased at an insured bank.

Hi Everyone,

It certainly has been quite a crazy market, but I think that we are hitting bottom soon. Volume has been so high, the end of the day trading yesterday was so panicky, more than even in previous days during the past few weeks. Volatility is extremely high, which shows extreme fear. What we need is a closing on the up side for more than one day. I do think we will have a snap back, but I think we might then stay on a certain level for a while. A 20% snap back would get us back to about 10K on the Dow. Another sign that we might be close is that is the interest rate on the short term government papers actually went up yesterday, so demand for these is going down, and LIBOR went down, so banks are not asking that much interest among each other.

Anyway, these are just some thoughts, only time will tell.

Patrick

Hi Everyone,

The current market has been quite interesting over the past weeks to say the least, and many of my clients called me for my opinion.  I thought I am going to share a video from Dimensional Funds Advisors (DFA).  I am using DFA for most of the money management for my clients, and their research has been exemplary.  Click here to watch it.

This video gives an interesting historical perspective.

Please feel to comment.

Patrick