ftp.xmission.com/2014.06.ftp.xmission.com.tar/ftp.xmission.com/pub/lists/persfin/archive/persfin.9808

Internet Message Format | 1998-08-30 | 155KB

From: [e-mail] (John D. Dennis)
Subject: social security, FWIW
Date: 01 Aug 1998 07:01:04 +0900 (JST)

For those interested in another view of social security check the June '98
issue of Harper's for an excerpt from an essay by Robert Reich--Clinton's
former secretary of labor.

I won't try to summarize what he says, but it's esay to see that his
concepts are quite different from those that have been expressed here.

john





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From: [e-mail]
Subject: Re: How do "tax deductible" contributions work?
Date: 31 Jul 1998 16:24:25 -0700

Kristina Miranda asked:

>I am wondering what "tax deductible" really means. Is it a 1:1
>relation to what you owe in taxes? For instance, If I am going to
>owe $3000 to the IRS next April, can I make $3000 in tax-deductible
>donations before January and pay nothing to the IRS?
>Thanks,
>Kristina Miranda

Kristina and all PersFiners-

There are three terms you need to know: adjustment to income, tax deduction
and tax credit. There are a lot of tax law changes effective in 1998 that
affect deductions and tax credits. (See IRS Publication 17.)

Adjustments to income are taken on the first page of the 1040, 1040A. These
are items such as IRA deductions, medical savings account deductions,
moving expenses, half of self-employment tax (social security),
self-employment insurance premiums, Keogh and self-employed SEP and SIMPLE
plans, penalty on early withdrawal of savings, alimony paid. These reduce
total income to adjusted income. The effect is to reduce the amount of
income that is taxable. The resulting reduction in the final tax paid
depends on your tax bracket; if you are in the 15% bracket, each dollar
reduction in income reduces your tax by 15 cents.

Tax deductions are a different kind of reduction in income, in that they
are subject to limits. The Congress "gives" every taxpayer a standard
deduction, varying according to your status--(1998 amounts) single
($4,250), married filing jointly ($7,100), married filing separately
($3,550), or head of household (6,250). There are increases in standard
deduction for taxpayers over age 65 or blind. If the sum of your allowable
itemized deductions do not exceed your standard deduction, you use the
standard deduction and not get any deduction for any contributions you have
made.

Itemized deductions are further limited by income. For example, only
medical expenses that exceed 7.5% of your adjusted gross income are
eligible for deduction (providing all itemized deductions total more than
your standard deduction.) There is also an income test that limits
deductibilty; if your income exceeds a certain amount, the amount of
itemized deductions that can be claimed starts phasing out.

Finally, Tax Credits. These are direct reductions in taxes, $ for $ 1:1.
There are tax credits for child and dependent care expenses, for low income
elderly or disabled, adoption, foreign taxes paid, and some others.

This is probably more than you asked for, so to address your specific
question: You cannot reduce tax $ for $ by making a contribution. Further,
contributions to be ductible must be made to IRS qualified non-profit,
^^^^^^^^^^^^^
charitable or other tax-exempt entities. Each qualified one has a tax ID
number, which you must obtain. And large donations (more than $250) must be
acknowledged by the recipient organization with a receipt that has the tax
ID#.

Kristina -- It appears that you are not well versed in tax filing. That's
OK. But you are smart enough to use a computer. So I'll bet that you are
smart enough to learn how to do your own taxes. Get Pub 17 and read it. You
can do it!!

However, if doing your own taxes is not high in your stack of priorities,
here are some other suggestions. If you are young and your income is low
enough, I suggest you go to a VITA site to have your taxes done. If you are
middle-to-low-income, are over age 60 and have a simple tax return, I
suggest you go to an AARP Tax-Aide, Tax Counseling for the Elderly site.
You can get the address of a nearby site from the IRS tax information
hotline [phone]) or the AARP tax line (1-888-AARPNOW)
(1-888-227-7669) or the AARP web site:
http://www.aarp.org/taxaide/home/html .

Now for the commercial announcement for all PersFiners: How about all of
you computer and financially literate people volunteering some of your time
to prepare tax returns for low-to-moderate-income taxpayers who need
help??? The commitment is pretty minimal--about forty hours of classroom
instruction in January 1999, pass an IRS test (open book at home), and work
four hours a week at a Tax-Aide or VITA site for ten weeks, February 1 thru
April 15, 1999. To get information, surf on over to the AARP web site:
    http://www.aarp.org/taxaide/home.html .

Frank Kafer, District Coordinator, AARP Tax-Aide Program.
Contra Costa County, Calif.
===========================message separator ===================



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From: Rich Carreiro <[e-mail]>
Subject: Re: How do "tax deductible" contributions work?
Date: 31 Jul 1998 19:54:06 -0400

>I am wondering what "tax deductible" really means.

It means that your *taxable income* is reduced by the
amount of the deduction (to first order).

>Is it a 1:1 relation to what you owe in taxes?

Absolutely not!

A $1 deduction reduces your taxable income by $1, and therefore
reduces your *taxes* by $1 times your tax bracket.  So if you
are in the 28% bracket, $100 of deductions will reduce your
taxes by $28 (to first order).

The 1:1 thing is a tax CREDIT, not a tax DEDUCTION.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.1



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From: [e-mail]
Subject: RE: Income reduction from rental property
Date: 03 Aug 1998 13:09:37 -0400

To make a small correction to this discussion...

>
[e-mail] asked:
>
>
>I bought a house recently, and am now living with my parent
>and relatives.  If I move out (may be out of state) say, for
>a new job, I will most likely need to pay at least $300 out
>of my pocket each month to cover the mortgage because they
>can't afford it. I don't think i can kick them out without
>breaking the relationships, so this isn't an option for me.
>
>My questions are:
>1. Will I still be eligible for getting a tax break if I
>   don't live there ?

Lynn R. Davis responded:

>>Yes, and you have two choices.  You can charge those who do live there
>>"rent" (which you have to recognize as income) and then take ALL
>>expenses (including insurance, depreciation, repairs) as deductions
>>(and possibly have a net loss to charge against other income).

[> ]  My comment.  Unfortunately, you cannot charge your rental income loss
against non-rental income.  This I understand was taken away in the Reagan
years.  If you own and rent out 1 property, and take your expenses (including
insurance, depreciation, repairs, advertising, mileage, agency fees, lawn care,
etc) as deductions, you can only go down to $0 rental income.  Your regular
income (from your job, other investments etc) cannot be reduced by a rental
loss.  If you own more than 1 rental property, you can charge a loss on 1
against a gain on the other.  In other words, you can look at your rentals as a
pool, and take all your income and all your losses together.  But if you have a
net loss, you cannot apply that loss to income from a non-rental source.

Standard disclaimer: I'm a tax payer -- not a tax advisor.


Rick Schafer




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From: [e-mail]
Subject: RE: Mass. politix
Date: 03 Aug 1998 13:25:29 -0400

GeorgeS <[e-mail]> wrote:

>John Silber is  the man who finally drove what we fondly call the democratic
>peoples republic of Ma. into the hands of a republican governor. It takes a
>special guy to do that.

George, we're probably boring the folks from the other 49 states, but it was
most definitely Michael Dukakis who killed the dems in Mass.  Remember the
Duke's completely phony 'Massachusetts Miracle', which he used to pave his way
into the Presidential race?  (And who can forget his stoic face peering our from
under a helmet as he took a ride in a tank for a publicity photo that also
backfired).  As soon as he left the governorship to run for pres the whole thing
collapsed.  There was no miracle, only a nightmare, and he knew it he'd put
something like 23,000 people on the state payroll to get the unemployment down.
It took Weld and company (and an actually great economy) to get us back on
track).  So, you can thank Silber for growing Boston U. (if you care) and you
can blame Dukakis for Weld, who you can thank for the current state of Mass.

Sorry, everyone.


Rick Schafer




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From: "L. Chen" <[e-mail]>
Subject: Recent articles on taxes
Date: 03 Aug 1998 18:52:19 -0400 (EDT)


Reply-To: [e-mail]


                       ESTATE AND GIFT TAX BULLETIN

   Vol . 4,  No 13  *******      Copyright 1998    *******     Aug 3 1998



.............. snip ...............


     Recent articles offering tax advice to individuals include a U.S. News &
World Report article by Steven D. Kaye on computerized advice being offered by
mutual fund companies for participants in 401(k) plans, 6-29-98, p. 75; a New
York Times article on using a Roth individual retirement account in estate
planning, 6-28-98, p. 7 of business section; a Wall Street Journal article by
Lynn Asinof on the gift tax rules, 6-18-98, p.  C1; and a Washington Post
article on municipal bonds, 6-28-98, p. H3.






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From: PRIMO <[e-mail]>
Subject: Subject: Asset Allocation
Date: 03 Aug 1998 19:04:59 -0400

> > I'm trying to gather opinions on whether the mutual funds I have > > >contain enough diversification.
> >
> > Baron Asset - 8.5%
> > Janus - 10.9%
> > Vanguard Wellington - 34.9%
> > Vanguard Windsor - 24%
> > Vanguard Windsor II - 21.7%
>
> Only one of your funds has any history of success beating the market;
> Janus. It's a keeper and really the only one you should own.
========================================================================
Really?  If I had to choose, I would choose Vanguard Windsor II for the
longer haul.  It has the same beta as Janus and charges less in internal
transaction fees.  If I had my choice, I would own both Windsor II which
is a more value-oriented stock fund and Janus, which is a more
growth-oriented fund.

Performance: Trailing Return %  (SOURCE:  Morningstar)
                                                           3 Yr    5 Yr
                                    1 Mo    3 Mo    1 Yr     Avg     Avg
........................................................................
S&P 500 Index                       4.06    3.30   30.15   30.22   23.06
Janus                               6.01    6.12   31.99   25.60   19.23
Vanguard/Windsor II                 1.33    1.80   30.43   30.18   22.29
Vanguard/Windsor                   -0.79   -2.24   17.01   22.35   19.03



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From: "Lloyd Colston" <[e-mail]>
Subject: Re: Politics
Date: 03 Aug 1998 18:18:39 +0000


>      First of all - I disagree with you.   Anyone who thinks taxes and
>      government have nothing to do with money and finances is not rational.
>      If you can't handle a little disagreement - try http://www.disney.com.

With the battle Disney has because of their allowance of influence by
homosexuals, this company is not the uncontroversial company it once
was.    :)


Lloyd Colston        Excellence is not an accident
Pryor, OK USA         social worker, writer, editor
Member: International Small Business Consortium
KC5FM Home page http://www.Lloyd.Colston.com/



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From: [e-mail] (Lynn R Davis)
Subject: Re: Income reduction from rental property
Date: 03 Aug 1998 19:01:43 -0500 (CDT)

>
>Date: Mon, 3 Aug 1998 13:09:37 -0400
>From: [e-mail]
>Subject: RE: Income reduction from rental property
>
>To make a small correction to this discussion...
>
>>
>[e-mail] asked:
>>
>>
>>I bought a house recently, and am now living with my parent
>>and relatives.  If I move out (may be out of state) say, for
>>a new job, I will most likely need to pay at least $300 out
>>of my pocket each month to cover the mortgage because they
>>can't afford it. I don't think i can kick them out without
>>breaking the relationships, so this isn't an option for me.
>>
>>My questions are:
>>1. Will I still be eligible for getting a tax break if I
>>   don't live there ?
>
>Lynn R. Davis responded:
>
>>>Yes, and you have two choices.  You can charge those who do live there
>>>"rent" (which you have to recognize as income) and then take ALL
>>>expenses (including insurance, depreciation, repairs) as deductions
>>>(and possibly have a net loss to charge against other income).
>
>[> ]  My comment.  Unfortunately, you cannot charge your rental income loss
>against non-rental income.  This I understand was taken away in the Reagan
>years.  If you own and rent out 1 property, and take your expenses (including
>insurance, depreciation, repairs, advertising, mileage, agency fees, lawn care,
>etc) as deductions, you can only go down to $0 rental income.  Your regular
>income (from your job, other investments etc) cannot be reduced by a rental
>loss.  If you own more than 1 rental property, you can charge a loss on 1
>against a gain on the other.  In other words, you can look at your rentals as a
>pool, and take all your income and all your losses together.  But if you have a
>net loss, you cannot apply that loss to income from a non-rental source.
>
>Standard disclaimer: I'm a tax payer -- not a tax advisor.
>
>
>Rick Schafer

Lynn Davis:

Rick, it is good that you are a payer and NOT an advisor, as MOST people CAN if
they do it right deduct rental losses against other income.

First, they must "actively manage" the property themselves.  For example, they
must select the renters, and carry out other landlord responsibilities.

Second, they must earn less than $150,000 in other income.

Then, they can use a rental loss to offset other income up to a limit of $25,000
(if your adjusted AGI is less than $100,000).  The $25,000 limit decreases by $1
for each $2 your AGI goes above $100,000.

Suppose that the person in question would not be losing more than $10,000 per
year, he can then earn up to $130,000 in other income and take full advantage of
his $10,000 loss.

Even most tax PAYERS can tell you that - IF they have a rental property as part of
their tax return AND do their own taxes.

If you have a loss one year that you cannot take advantage of, any remainder gets
carried over to future years to whenever you qualify (or sell the property in
question).

This is all in the instructions for Schedule E and related schedules.

Lynn Davis
Fremont, California



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From: Rich Carreiro <[e-mail]>
Subject: Re: How do "tax deductible" contributions work?
Date: 03 Aug 1998 20:17:57 -0400

>instruction in January 1999, pass an IRS test (open book at home), and work
>four hours a week at a Tax-Aide or VITA site for ten weeks, February 1 thru
>April 15, 1999. To get information, surf on over to the AARP web site:
>    http://www.aarp.org/taxaide/home.html .

I'd be more than happy to do that (and have tried), but I have been
unable to get a reply from anyone.  I've called the number listed on
the web page and left my name and number more than once and no one's
ever gotten back to me :(.

Anyone else have this happen?

FWIW, I live 6 miles west of Boston, MA.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.1



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From: Marcia Cramer <[e-mail]>
Subject: capital gains tax
Date: 03 Aug 1998 22:20:36 -0700

We just closed on the sale of a piece of land and have a capital gain on
the sale.  Do we need to pay the tax now or can we wait until April 15?

     Thank you.

       Marcia





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From: "Siedlecki, Mary T." <[e-mail]>
Subject: Home Ownership versus Renting
Date: 04 Aug 1998 08:44:53 -0400

For many years I have wondered whether it was financially smarter to
purchase a home or to continue renting an affordable apartment that
allows me to make tax deferred contributions to a pension plan.  As a
renter, I am neither building equity nor reaping tax benefits.  However,
as a renter, I believe I am able to save greater sums of money than I
would otherwise and I have shown myself to be a disciplined saver.
Also, although I have lived in this area for more than five years, this
was not a given when I first moved to this area.  At this time, it is
much more of a given.  Any comments would be appreciated.




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From: <[e-mail]>
Subject: Dental Insurance
Date: 04 Aug 1998 09:37:24 EDT

    In Vol. 5, #40 of Persfin-digest Al Kondo asks about dental insurance to be
purchased thru his business.

    Well, Al you have asked the right question.  I think more and more people are
finally getting interested in the quality of the Drs. in the programs rather
than the programs.  Your request means that you also have to change the way
you purchase coverage.  From what you wrote, the last time you got coverage
you bought a plan and found Doctors in it that didn't meet your expectations.
This time go out and first find a Doctor you like and than ask him/her what
Dental Insurance Carriers(Plans) they work with.

    All Insurance is State regulated.  What this means is that programs that are
available in your State are NOT the same programs that are available in a
neighboring State or New York for that matter.  For me, or anyone, to tell you
to look at the ABC Plan or the MNO plan is not doing you justice.  We have no
idea where your Business is located!  You want a good Doctor.  Go find him/her
and hopefully there will be a plan available to cover your costs.

Richard Allen, CFP
The Employee Benefits Group
http://www.iix.com/ny/tebg

   Your Business OWES You-
take advantage of your Business!




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From: [e-mail]
Subject: tax deductible
Date: 04 Aug 1998 10:11:49 -0400 (EDT)

my wife is in a nurseing home
its cost me 3300.00 per mouth
is it tax deductible
fully or % wise
thank
john walters




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From: Mike Broadhurst <[e-mail]>
Subject: RE: Income reduction from rental property
Date: 04 Aug 1998 09:04:22 -0700


on Mon, 3 Aug 1998 13:09:37 -0400 [e-mail] wrote:

>>Unfortunately, you cannot charge your rental income loss
against non-rental income.  This I understand was taken away in the Reagan
years.  If you own and rent out 1 property, and take your expenses (including
insurance, depreciation, repairs, advertising, mileage, agency fees, lawn
care,
etc) as deductions, you can only go down to $0 rental income.  Your regular
income (from your job, other investments etc) cannot be reduced by a rental
loss.  If you own more than 1 rental property, you can charge a loss on 1
against a gain on the other.  In other words, you can look at your rentals
as a
pool, and take all your income and all your losses together.  But if you
have a
net loss, you cannot apply that loss to income from a non-rental source.<<

Are you sure about this? I thought the tax law change applied to passive
losses. If you own and rent out one unit, and actively manage it, I believe
you are entitled to apply any rental loss to ordinary income (within
certain limits).

Can anyone confirm or refute this? If I'm wrong, I hope I don't get audited...

Mike Broadhurst
[e-mail]






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From: "Molly K. Parsley" <[e-mail]>
Subject: (8/7-8/9) San Francisco Money Show
Date: 04 Aug 1998 16:51:22 -0700

If you are in the SF Bay Area, this event is a great opp to learn
about investing in technology funds.  It's this Fri-Sat at the San
Francisco Mariott, below is more info:

-molly

THE 20th ANNIVERSARY SAN FRANCISCO
MONEY SHOW AUGUST 7-9, 1998

Wednesday, July 30, 1998, --  The Amerindo Technology Fund, along with
other top financial institutions, celebrate the 20th anniversary of the
San Francisco Money Show, August 7-9, at the San Francisco Marriott.

The Money Show, a three-day conference, aims to help participants understand
which market indicators analysts watch. The conference will focus on
technology investing and feature seminars led by America's top financial
experts and portfolio managers. Highlights include the workshop "Emerging
Growth Technology Investing" (8/7) and a panel lunch "Screening the Best
Buys in Technology" (8/8), presented by Emeric J. McDonald, Director of
Research of the Amerindo Technology Fund.

There is no admission charge to The 20th Anniversary San Francisco Money
Show if you are a subscriber to one of the many promoting financial
advisories. You can pre-register through the Money Show's On-Line
Registration Desk located at
http://www.moneyshow.com/moneyshow/sfhome.htm or call 1-800-822-1134.

The Amerindo Technology Fund is an aggressive growth mutual fund. The fund
invests in the Internet, business software and data communications companies.
The key investment criteria include the following: 1) large open-ended markets
2) quality management and 3) leading market share.  You can learn more about
Amerindo Technology Fund at http://www.amerindo.com or you may call the
Fund directly at 1-888-TECH FUND (888-832-4386).

Contact: Mr. James Kiriakis
Phone: [phone] x310
Email: [e-mail]
URL:   http://www.moneyshow.com/moneyshow/index.htm






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From: jack law <[e-mail]>
Subject: Refinancing Advice
Date: 04 Aug 1998 20:34:15 -0400

Dear Listmembers


I am sure that many of you will offer me some helpful advice.  I am
trying to decide whether I should take some money out of my house.  My
wife and I (combined income 100k) have a fifteen year mortgage @ 6.75%.
 We owe $85,000 with about ten years left to pay.  Our house is
currently worth about $175,000, and we have not seen any recent
appreciation because of extensive new development in our area.  Both of
us are in stable jobs which should not show great fluctuations in
income.  We have pretty sound financial (retirement and insurance)
arrangements except we have not saved any considerable amounts for
college for our three children (ages 15,12, and 9).


My question is should a refinance ( at around 7%) at a thirty-year
mortgage and invests the cash (approximately $40,000) in a mutual fund.
 The new mortage would be around $135,000.  The advantages that I see
are:


1. Possible greater appreciation of investment over time to put toward
college for kids.

2. Larger tax write-off which would be helpful.

3. Lower monthly mortgage payment - we plan to stay in the house at
least 8 years.


The disadvantages:


1. More interest paid to the bank.

2. Home equity would not be available for future use.

3.  Mutual fund holdings would work against my kids when applying for
financial aid, scholarships, etc.


What am I missing?  Please advise on whether we should refinance.


Thanks.  Jack

        Frederick,MD






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From: <[e-mail]>
Subject: Artificial Intelligence/Neural Net based mutual funds
Date: 05 Aug 1998 12:44:42 EDT

Does any know of a mutual fund that makes it stock selections
based solely on a neural network (artificial intelligence) analysis
of a historical database?   I'm familiar with James O'Shaughnessy's
work, but I don't think he used neural network software.

Thanks,

 -- Mike Mills



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From: Lisa Bellamy <[e-mail]>
Subject: Speaking of wills
Date: 05 Aug 1998 22:48:05 -0400

My husband and me -- both in our mid-30s -- have two preschoolers and
are expecting a third child. We've some assets, though not a ton. We
think it's time we did a will. Anyone have ideas on software that would
allow us to do our own, customizing it to fit North Carolina law (our
home state) so that it would be legally recognized should the need
arise? Any recommendations appreciated.




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From: Randy Barnes <[e-mail]>
Subject: Re: Asset Allocation , part 2
Date: 05 Aug 1998 23:00:53 -0400

>Really?  If I had to choose, I would choose Vanguard Windsor II for the
>longer haul.  It has the same beta as Janus and charges less in internal
>transaction fees.  If I had my choice, I would own both Windsor II which
>is a more value-oriented stock fund and Janus, which is a more
>growth-oriented fund.

Performance: Trailing Return %  (SOURCE:  Morningstar)
                                                           3 Yr    5 Yr
                                    1 Mo    3 Mo    1 Yr     Avg     Avg
........................................................................
S&P 500 Index                       4.06    3.30   30.15   30.22   23.06
Janus                               6.01    6.12   31.99   25.60   19.23
Vanguard/Windsor II                 1.33    1.80   30.43   30.18   22.29
Vanguard/Windsor                   -0.79   -2.24   17.01   22.35   19.03
~~~~~~~~~~~

Primo,

Three cheers for your opinion and input. Serious discussion of
investment topics has been pretty lame around here for a good while. I
applaud your effort and think you could be right.

I took a second look at the reasons I'd picked Janus in the first place
and rediscovered another reason I'm no fan of mutual funds. Fund data is
available in a million places but it is very inconsistent and VERY easy
to manipulate.

I too went to Morningstar to get a peek at performance figures etc. This
is where I found the data that led to my previous post. The funny thing
is that the figures I find aren't the same as those you quote. Sometimes
different services report different figures and sometimes the same
service reports different figures for the same thing. Go figure;-)

At the following links you'll see Janus beating the S&P in the 10 year
time frame buy better that 1%. THe WinsorII lags the index, as does just
about every mutual fund in the universe. I give Janus the nod, with a
1.68% advantage (at least using this particular quote).

Janus -
http://www.morningstar.net/FundQT/RR_Performance/JANSX.msfhtml
Winsor -
http://www.morningstar.net/FundQT/RR_Performance/VWNFX.msfhtml

A small account of $200 per month for 10 years gains $7,600 more using
the Janus 10 year figure. (Ignoring taxes completely!)
[pv=-200,pmt=-200,n=12,r=.x/12] - Careful. The next 10 years results
will be different.

Now, this brings to mind another question. Are the S&P returns inclusive
of dividends, or not?  THis is quoted both ways depending on who is
reporting. Before you know it you've written a thesis on which mutual
fund manager beat the market, or at least came close.

SPYders,(or index funds if you have a very small account), will
outperform almost every mutual fund over the long haul. SPYders are far
less trouble to own, and will serve you better for the future, with much
less energy.  Save money by not buying crap like magazines with "10 HOT
Funds to Buy NOW!!" on the cover. Instead, buy yourself a self-help
book, put an extra few bucks in your account, buy a kid something
foolish, take a class, you get the picture. Use the savings to not pay
your accountant to figure out the mutual fund statements you will no
longer get each year. Even more valuable than the money is the time. If
your time isn't worth $20-100 an hour then get busy and figure out what
you need to learn to make something of yourself.

For SPY info see - http://www.amex.com  or
http://www.fool.com/funds/funds5.htm

One more tidbit. The S&P is always got a wonderful blend of growth and
value stocks. No muss, no fuss.

FYI, I DO own positions in 2 funds, but only in a 401k, and there I have
no tax issues (for now) and I don't have much to choose from. We don't
even have an index fund in the mix .(Not my decision!)

I am not really trying to flame mutual funds. (lie) It's just that
anyone with a little common sense and intelligence soon sees the fact
that funds are too often laggards. Smart money just buys the market and
leaves it alone.
(still my favorite link, see:
http://www.pathfinder.com/fortune/investor/1998/980706/dfa.html

If you're like me and must spend hours knee-deep in invest-o-mania, then
stick to owning stocks, not funds.  Statistics have shown that owning
just 16 stocks eliminates 93% of market risk, so the diversification
issue that this started with is sorta meaningless.  The average person
really can beat the market, but not in a fund.

God bless you for sharing an opinion that is more insightful and
valuable than how to save 8 bucks on a credit report!

-Randy



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From: Tim Glaze <[e-mail]>
Subject: looking for Expenditure verses Income Level statistics
Date: 06 Aug 1998 08:45:16 -0700

I was hoping someone might be able to help me locate statistics showing expenditures as a
percent of income for various income levels.  I have looked in the Statistical Abstract of the
United States  (http://www.census.gov/prod/www/abs/cc97stab.html).  It has great detail of
average expenditures for various regions and family size, but not expressly for income levels.

My thought would be that people would pay proportionally more ($) on housing as their income
rises, giving a (more or less) constant percent verses income level.  While the amount of food
($) would increase as income rises, it would not increase proportionally.  Thus higher income
levels would spend less percent of their income for food.

Has anyone run across such statistics or know where I might look?

Thanks for any suggestions.

tim glaze




-


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From: "Jackson, Anthony D." <[e-mail]>
Subject: Re: Speaking of wills
Date: 06 Aug 1998 12:30:01 -0400

Lisa wrote:
--------

My husband and me -- both in our mid-30s -- have two preschoolers and
are expecting a third child. We've some assets, though not a ton. We
think it's time we did a will. Anyone have ideas on software that would
allow us to do our own, customizing it to fit North Carolina law (our
home state) so that it would be legally recognized should the need
arise? Any recommendations appreciated.
--------------
Lisa I use Quicken Family Lawyer.  It has a good will option and can be
customized for North Carolina.  I would use it as your baseline then take it
to a lawyer to make sure its OK.  DO IT YESTERDAY!

"TJ"

P.S. Are you related to Mike Bellamy in Charlotte?






-


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From: <[e-mail]>
Subject: Re: Buying or renting a home
Date: 06 Aug 1998 13:51:37 EDT

<< For many years I have wondered whether it was financially smarter to
 purchase a home or to continue renting an affordable apartment that
 allows me to make tax deferred contributions to a pension plan.  As a
 renter, I am neither building equity nor reaping tax benefits.  However,
 as a renter, I believe I am able to save greater sums of money than I
 would otherwise and I have shown myself to be a disciplined saver.
 Also, although I have lived in this area for more than five years, this
 was not a given when I first moved to this area.  At this time, it is
 much more of a given.  Any comments would be appreciated.   >>

It's financially better to own if real estate in your area appreciates. It's
financially better to rent if houses in your area are depreciating!
Hindsight's a great thing, ain't it? :)



-


-------------------------------------------------------------------------------

From: GeorgeS <[e-mail]>
Subject: Re: persfin-digest V5 #41 Mortgae for Mutual Funds
Date: 06 Aug 1998 14:06:58 -0400

> My question is should a refinance ( at around 7%) at a thirty-year
> mortgage and invests the cash (approximately $40,000) in a mutual fund.

I probably should work the numbers, but this seems like a non number issue.
At base, you are mortgaging something you need to live, your home, for
something you do not particularly need, the return on the money.

Now if things turn out well, the return on the money can pay off the
mortgage early. But.. if they turn out poorly, you can  loose the house, or
at least, your fincancial interest in the house.

I've often wondered why folks consider a house an investment, to me, it's
where I live. To put it in play in the markets, like I would disposable
income, seems to treat it too lightly.

>From a tax point of view, you borrow the money at
        (bank interest) (1- tax rate)
you make mone at a rate
        (return on mutual fund) (1 -tax rate)

So the taxes drop out of the equation, and so long as the return on the
mutual fund is better than the bank interest, you are better off. Part of
the problem is the return on the mutual fund varies, sometimes you win,
sometimes you loose.





-


-------------------------------------------------------------------------------

From: John Leipold <[e-mail]>
Subject: Re: Speaking of wills
Date: 06 Aug 1998 14:22:32 -0400

> My husband and me -- both in our mid-30s -- have two preschoolers and
> are expecting a third child. We've some assets, though not a ton. We
> think it's time we did a will. Anyone have ideas on software that would
> allow us to do our own, customizing it to fit North Carolina law (our
> home state) so that it would be legally recognized should the need
> arise? Any recommendations appreciated.

Lisa & others:

It's not time; it's past time.

If you have children & don't have a will and you both die, then the
state assumes guardianship of your children and places them wherever the
judges decide. If you're comfortable with that, don't worry. Otherwise,
RUN, don't walk either to the nearest software shop or lawyer & get one
done.

A simple will, in which there are not a whole lot of assetts to divy up,
is not that expensive, even if done by a lawyer. In most states, all you
absolutely have to have is a statement of what you want, signed & dated,
with the signatures of two people who witnessed your signature. They
don't have to read any of the will; they only witness your signature.
Some states require three witnesses. Then file your will with the local
probate court, and your children have much more protection than they
currently have. You really don't even need a lawyer to do enough of one
to specify who gets what and who you would like to be your children's
guardian.

HOWEVER, such an informal document could only be considered a temporary,
stop-gap measure, to be used only until a more formal will can be done,
via lawyer or software.

Now, to specifically answer your question, I have used Parsons
Technology software for wills and other legal documents, and have been
satisfied. The software is called "Quicken Family Lawyer" and is
available on CD-Rom or 3 1/2" floppy. The cost is $34.95. Their phone
number is 800/223-6925 and their website address is
http://www.parsonstech.com (it can be downloaded from their site for
$29.95). I am not an employee, just a satisfied user of their products.

Big disclaimer: I am not a lawyer and my free advice may be worth no
more than you paid for it, etc etc yadda yadda yadda

Good luck!
John Leipold




-


-------------------------------------------------------------------------------

From: "J. Morgan" <[e-mail]>
Subject: Re: Speaking of wills
Date: 06 Aug 1998 13:26:28 -0600

>Date: Wed, 05 Aug 1998 22:48:05 -0400
>From: Lisa Bellamy <[e-mail]>
>Subject: Speaking of wills
>
>My husband and me -- both in our mid-30s -- have two preschoolers and
>are expecting a third child. We've some assets, though not a ton. We
>think it's time we did a will. Anyone have ideas on software that would
>allow us to do our own, customizing it to fit North Carolina law (our
>home state) so that it would be legally recognized should the need
>arise? Any recommendations appreciated.

We're in a similar situation, and what I'd advise is to pay a good
lawyer the few hundred bucks it'll take to draft a will (and
possibly a trust and powers of attorney), and *not* rely on a
do-it-yourself kit.

(Sorry, Nolo. ;-)

Guardianship of your children is probably of primary importance.

My wife and I recently had our wills redone, and created a trust
that will become effective on both of our deaths.  In essence,
if I go, she gets all our stuff, if she goes, I get all our stuff, and if
we both happen to step in front of the same bus, my sister has
guardianship of our kids and control over our assets, which must
be used for the benefit of our kids.

Assets remaining in the trust will be distributed to the children at
age 30.

There are, of course, clauses addressing how much can be spent
and for what reasons, and provisions protecting the trust from
fiduciary irresponsibility, and sections dealing with the unlikely
event that our children should predecease both of us.

The two wills, the trust, two medical powers of attorney (living
wills), and two springing (take effect at death or incapacity)
general powers of attorney ran a shade over $400.

I consider that money well spent.  I think your childrens' welfare
is too important to be left to some piece of software or a
self help book.

Curiously enough, I chose my new .sig line before I phrased
this reply...  :-)


J.
At the bookstore I asked "where's the self-help section?"
The clerk said "if I told you, it would defeat the purpose."






-


-------------------------------------------------------------------------------

From: "Melinda Johannes" <[e-mail]>
Subject: High income, low risk? :-)
Date: 06 Aug 1998 14:16:08 PDT

Hi all, I hope you can help me.

I'm having a difficult time determining how to allocate some
assets for the short term while still maintaining liquidity
and achieving a better return than that offered by CDs or
money market accounts.  Here are the specifics:

I have $140,000 in a money market fund.  There are other assets,
but those are tied up in retirement accounts and don't figure in
this scenario.  This $140,000 is also above and beyond my 6 month
"emergency fund."

I'll be starting up a franchise within the next 2 to 8 months.
The time frame is indeterminate because we are still looking
for a suitable site.  We may find one in 3 weeks, we may find
one in 6 months.  It'll be a retail kid's clothing operation.

Up until the business opens, I'll need to make this $140,000
work as hard as possible, but will still need to keep most of
it as liquid as possible, too.

I plan to use up to $100,000 for startup costs (inventory,
training, lease, insurance, legal fees, building out the store,
etc.) and the remaining $40,000 for working capital.

What I'm planning to do is maintain $70,000 in the money market
account and split the remaining $70,000 between the following
funds, all chosen because they're available as Fidelity
"no transaction fee" funds, and have good Morningstar ratings
and a good long term (5 years+) track record:

10% to Baron Asset fund (small cap)
15% to Hotchkiss and Wiley Equity Income fund
10% to Invesco Strategic Finance fund (sector)
40% to Loomis and Sayles Investment grade bond fund
25% to Dreyfus High Yield bond fund

I'll be routing all the income and dividends from these funds
into the money market account to bolster my working capital
and protect it (the income, at least) from share price declines.

As the actual startup date approaches, I'm planning on kind of
"reverse dollar cost averaging" back out of the funds as necessary,
until I am in a cash position (well, maybe 80-90% cash,) on the
date I open.

Given my short time horizon and need to preserve capital, am
I too heavily vested in equities and/or high yield bonds?

Can anyone suggest an alternate allocation?  I realize that
safety lies in money markets and CDs, but as I said, I'm willing
to assume a little risk to achieve a better short term return.

Am I assuming too much risk that I'll buy in at a market high
if I put the $70,000 into the funds all at the same tims?  I
don't have time to DCA in and DCA back out.

Should I just bag this whole idea and leave it all in money
market and laddered short term CDs and forget about taking any
risk at all?

Thanks in advance for any and all responses.

+=+=+=+=+=+=+=+=+=+=+=+=+=+
: Melinda Johannes        :
: [e-mail]  :
+=+=+=+=+=+=+=+=+=+=+=+=+=+


______________________________________________________
Get Your Private, Free Email at http://www.hotmail.com



-


-------------------------------------------------------------------------------

From: Rich Carreiro <[e-mail]>
Subject: Re: capital gains tax
Date: 06 Aug 1998 18:55:55 -0400

>We just closed on the sale of a piece of land and have a capital gain on
>the sale.  Do we need to pay the tax now or can we wait until April 15?

It depends.  :-)

Your best bet is to get the 1998 Form 1040ES from the IRS (it's
on their web site) and complete it.  If it tells you that you
don't have to pay estimated taxes, then in all likelihood you
won't have to do anything.  You'll just have a higher bill (or
a small refund) come April 15.

If it does indicate that you'll need to pay estimated taxes,
you can either do so or you can fill out a new W-4 form to boost
your paycheck withholdings and eliminate the need to pay estimated
tax.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.1



-


-------------------------------------------------------------------------------

From: Allan Spring <[e-mail]>
Subject: Disney's controversy
Date: 06 Aug 1998 20:51:43 -0700

>>      First of all - I disagree with you.   Anyone who thinks taxes
and
>>      government have nothing to do with money and finances is not
rational.
>>      If you can't handle a little disagreement - try
http://www.disney.com.

>With the battle Disney has because of their allowance of influence by
>homosexuals, this company is not the uncontroversial company it once
>was.    :)

Won't it be a great day when we have a society where it will be
considered uncontroversial and downright positive to not be influenced
by homophobes?




-


-------------------------------------------------------------------------------

From: [e-mail] (Jay Maness)
Subject: neural networks
Date: 07 Aug 1998 05:02:56 -0700 (PDT)


<[e-mail]>  asked:


Does any know of a mutual fund that makes it stock selections
based solely on a neural network (artificial intelligence) analysis
of a historical database?   I'm familiar with James O'Shaughnessy's
work, but I don't think he used neural network software.

Thanks,

 -- Mike Mills


<reply>

Mike,  I have some interest in this field also.

Here is a lightly edited copy of a posting from MONEY that I kept.

<begin quote>

Reply-To: [e-mail]
Sender: Money Daily <[e-mail]>

For an enhanced HTML version of the Money Daily,
visit http://moneydaily.com.

Weekend, May 9-10, 1998

How one fund capitalizes on market inefficiency

The new N/I Larger Cap Value Fund trades hard and fast
on a fair value model that's recalculated hundreds of
times a day - and so far, it's working

By Michael Brush

In business school, they teach you that the stock
markets are completely efficient. All public
information about a company, the professors tell you,
is fully reflected in a stock's price at all times.

Rubbish, say many seasoned investors. They know that
stock prices often bounce around maddeningly, even
when there is no news. And when there is news, look
out! Investors are prone to overreact, driving prices
to extremes.

Capitalizing on these temporary price anomalies would
seem like a winning strategy. A relatively new mutual
fund that tries to do just that is the Larger Cap
Value Fund (NILVX), launched by N/I Family of Funds (800-
NUMERIC) last December. The fund is based on the
premise that when it comes to the stock markets,
business school professors have it all wrong.

"The markets are not efficient. They are partially
efficient," says Langdon Wheeler, who founded N/I in
1989, and helped develop the computer programs behind
the Larger Cap fund. "It is not all machines yet. The
markets are people and people get carried away. They
are out there saying `I have to buy because he is
buying.' Or `I have to sell because he is selling.'"

And that kind of emotion often helps drive down prices
of good stocks to attractive levels. "Prices slosh
around quite a bit," notes Wheeler, an former engineer
who became fascinated by financial markets and changed
careers. "Just look at a price chart. You see all
kinds of ups and downs when the fundamentals did not
change that much."

To take advantage of buying opportunities caused by
market inefficiencies, the Cambridge, Mass.-based N/I
has developed a `fair value model' which tries to
"mathematically model the excesses of human behavior
in the market," says Wheeler.

The first step is to figure out the `fair value' -- or
how much the market is usually willing to pay -- for
certain qualities of stocks. These include things like
book value, expected earnings, the growth rate, the
quality or consistency of earnings, and the number of
analysts covering a stock. The market, for example,
tends to pay less for volatile earnings as opposed to
more predictable earnings. And it pays more for
companies that are followed by more analysts.

"You figure out how the market prices all these
factors each day," says Wheeler. "Then you go back and
assign each factor a weight for each stock, and bingo!
You have a theoretical price." The computers at N/I x-
ray the stock market about once every 90 seconds to
see if investors are underpricing any aspects of a
company, like its earnings growth or book value. If
so, portfolio manager Arup Datta and N/I traders
pounce on the stock.

As you might suspect, such a portfolio management
style leads to heavy trading. The fund has about a
250% annual turnover -- way above what many fund
advisors believe is an acceptable level. Two factors,
however, make this high turnover rate palatable.

First, the fair market value strategy creates a good
enough return to offset the cost of all that trading.
As of March 31, the Larger Cap Value Fund had a return
of 16% since it was started at the beginning of
December, compared to a Russell 1000 return of 11.6%.
And over a full year, use of a similar model in
private accounts has produced the same kind of edge.

Second, N/I has a record of keeping down other costs.
Like other mutual funds at the group, the Larger Cap
Value fund has annual expenses capped at 1% -- below
average for an actively managed fund. And there is no
load or 12(b)-1 fee.

Sometimes, of course, the model leads fund managers in
the wrong direction. Stocks, after all, do sometimes
go down in value because of bad news that is not yet
out. "You know you are going to be wrong on some of
them," admits Wheeler. "But you have to follow the
discipline, if you have a discipline that works most
of the time. A relatively small informational
advantage applied over a large number of trials will
get you a persistent outcome."

One of the advantages of the system is that it leads
the fund to low valuations "in stocks that most value
investors would not understand," says Wheeler. By that
he means that it finds bargains not only among the
typical down and dirty value stocks, but among quality
growth stocks as well.

If you are interested in the fund, don't wait too long
to look it over. To date, it only has about $15
million in assets. But N/I, which has about $5 billion
in assets under management, has a habit of shutting
down funds to keep them manageable -- and this one is
scheduled to close at $500 million.

<end quote>





-


-------------------------------------------------------------------------------

From: Bill La Mar <[e-mail]>
Subject: Re: Disney's controversy
Date: 07 Aug 1998 10:36:16 -0500

Allan Spring wrote:

> >>      First of all - I disagree with you.   Anyone who thinks taxes
> and
> >>      government have nothing to do with money and finances is not
> rational.
> >>      If you can't handle a little disagreement - try
> http://www.disney.com.
>
> >With the battle Disney has because of their allowance of influence by
> >homosexuals, this company is not the uncontroversial company it once
> >was.    :)
>
> Won't it be a great day when we have a society where it will be
> considered uncontroversial and downright positive to not be influenced
> by homophobes?

Won't it be a great day when we have a society where it will be
considered uncontroversial and downright positive to not be influenced
by homo-philo activists?

<editor's note:  This thread ends right here...>




-


-------------------------------------------------------------------------------

From: Stephen Brodeur <[e-mail]>
Subject: IRA expenses part of contributions, or separable?
Date: 06 Aug 1998 20:19:25 -0400

I'm probably going to start a Roth IRA this year.
My retirement funding rate is now a mere shadow of its former self after a
job change,
and I like the idea of starting the 5 year Roth clock ticking.
I'll probably open the account with an online discount broker.
I have two questions for the group.
I plan to hold mutual funds and/or stocks. Any broker recommendations?

Are there any expenses (commissions, annual fees, service fees) related to
the account that I can pay
with  "non-contribution" cash- that is, can I buy $2000 worth of stock in
the account with my annual
contribution, and pay for the commission with additional money out of
pocket?

I suspect that I can't get around the "commission bite", and it's probably
small money in the long term,
but even a $20 commission on a $2000 trade is a 1% "front end load" on the
investment.

Thanks in advance.
-Steve




-


-------------------------------------------------------------------------------

From: [e-mail] (Lynn R Davis)
Subject: capital gains tax, renting vs. owning
Date: 07 Aug 1998 15:11:12 -0500 (CDT)

You wrote:
>
>Date: Mon, 3 Aug 1998 22:20:36 -0700
>From: Marcia Cramer <[e-mail]>
>Subject: capital gains tax
>
>We just closed on the sale of a piece of land and have a capital gain on
>the sale.  Do we need to pay the tax now or can we wait until April 15?
>
>     Thank you.
>
>       Marcia

Marcia:

The answer is rather more complex than now or April 15th.

If your tax withholding is not enough to cover the total income tax that you will owe
next April, then you may need to either increase the withholding or pay additional
estimated tax payments, due quarterly.  (Next due date is September 15th.)

It is rather complicated to figure out whether or not you need to do one of these
things.  It depends upon (a) your estimated total taxes due, (b) how much you are
having withheld, (c) what your income tax was last year, (d) how much your income is
growing this year over last.  For example, you are usually safe if your withholding is
100% of what you owed last year - but NOT if your income is over a certain amount THIS
year!

My advice is to call the IRS and ask them to send you the 1040-ES form.

Finally, if you find that your withholding totals will not be enough to keep you from
owing a penalty, then the better choice is to increase withholding rather than make an
estimated tax payment.  This is because the IRS considers withholding as having come
in evenly through the year, even when it does not.  Otherwise, you may still not owe
any penalty if you make a payment this quarter for the capital gains tax incurred from
this quarter's sale, but you will likely have to explain the timing to the IRS and
fill out a special form for that as well.

Lynn Davis
Fremont CA


>------------------------------
>
>Date: Tue, 4 Aug 1998 08:44:53 -0400
>From: "Siedlecki, Mary T." <[e-mail]>
>Subject: Home Ownership versus Renting
>
>For many years I have wondered whether it was financially smarter to
>purchase a home or to continue renting an affordable apartment that
>allows me to make tax deferred contributions to a pension plan.  As a
>renter, I am neither building equity nor reaping tax benefits.  However,
>as a renter, I believe I am able to save greater sums of money than I
>would otherwise and I have shown myself to be a disciplined saver.
>Also, although I have lived in this area for more than five years, this
>was not a given when I first moved to this area.  At this time, it is
>much more of a given.  Any comments would be appreciated.

Mary:

I believe that a lot of questions come to play in that.  One is the relationship
between home purchase prices and rents in your area.  Another is any personal
preferences between apartment and house living (although you can also rent a house).
Another is the question of how long you plan to stay in an area, and what could force
you to move.  Many homeowners run into problems when job transfers or layoffs come and
they have to move out of the area at a time when real estate is in a slump.  (And
those two things - big layoffs in an area and real estate slumps - tend to come
together at the same time!)  Finally, there is the question of what you believe the
real estate market will do in your area over the time you would expect to own.  (But
be careful, as people tend to be too optimistic when the market is going up.)

The tax benefits of real estate can be overstated, as they mostly consist of the
deductibility of interest paid to others.  If by owning you would be merely trading
the tax benefit of tax deferred contributions to savings for the tax benefit of an
interest deduction, that does not necessarily sound like a good tradeoff.  Of course,
those are not the only two issues involved.

Lynn Davis
Fremont, CA



-


-------------------------------------------------------------------------------

From: "Catherine Steinberg" <[e-mail]>
Subject: retirement accounts for contract employees?
Date: 07 Aug 1998 13:36:32 -0700

Hi, Persfiners--

I haven't been following the list closely of late, so forgive me if my
question has been addressed recently. Here goes:

I'm currently a staff employee for a software company, and have been offered
a contract position at another company for about 50 percent more than I'm
making now. I have been participating in my current employer's 401(K) plan,
but as a contractor, this will no longer be an option. However, I still want
to sock away savings for retirement.

If I understand it correctly, I *can't* open a tax-deductible IRA in the
same calendar year during which I have participated in a 401(k) plan. Have I
got that right? What I need to know is this: What choices do I have in the
way of putting away pre-tax dollars in a retirement account this year? I
will be working through an agency on a W-2, but the agency doesn't offer a
401(k) plan, unfortunately.

Thanks in advance for any guidance.

Cheers,

Cathy



-


-------------------------------------------------------------------------------

From: "Ken Meinken" <[e-mail]>
Subject: Re: refinancing advice
Date: 07 Aug 1998 23:46:40 -4

> From: jack law <[e-mail]>

> My question is should a refinance ( at around 7%) at a thirty-year
> mortgage and invests the cash (approximately $40,000) in a mutual fund.
...
> What am I missing?  Please advise on whether we should refinance.

Well, the most obvious thing that you are missing is the possibility
that your investments will drop.  Have you considered the possibility
that the current "correction" will lose an additional 40%?

Basically, you are thinking of borrowing money to invest in the stock
market.  That's risky, ESPECIALLY with the market as high as it is.
There are plenty of opportunities out there that could turn this into
a full fledged bear market.  The market is nervous and it could break
down in a hurry....or slowly, bit by bit.

Will the market drop 40% more?  I don't know.  But based on history,
it certainly could.

Also don't forget that the "tax writeoff" only recovers a portion of
the money you are "giving away" to the bank.

Ken



-


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From: [e-mail] (Lynn R Davis)
Subject: contract "employees" retirement account
Date: 08 Aug 1998 12:55:39 -0500 (CDT)

"Catherine Steinberg" <[e-mail]> asked:

>I'm currently a staff employee for a software company, and have been offered
>a contract position at another company for about 50 percent more than I'm
>making now. I have been participating in my current employer's 401(K) plan,
>but as a contractor, this will no longer be an option. However, I still want
>to sock away savings for retirement.

Cathy:

Are you a CONTRACTOR or an EMPLOYEE of the new entity?  If you are actually a
contractor (e.g. you pay self-employment taxes at the full 15.3%, whereas employees
have the employer pick up half of that for them), then you are SELF-employed, and
not an employee.

Anyone who has ANY self-employment income in any year can open a KEOGH plan, which
is simply your own one-employee retirement plan.  There are lots of places to open
one.  I prefer to have mine self-directed.  My life insurance agent at The New
England told me about their program, where I use their plan and pay an annual fee,
but I run the plan, with its own checking account and investments.  The cost was $80
the first year and $40 each year thereafter (so far).  I am sure that there are many
others out there offering Keogh plans where they are the trustee and you invest in
their mutual funds.

My plan is a "profit sharing" plan where I can decide each year how much of my
self-employment income to put in, up to a maximum of "15%" of "self-employment
income".  [I say 15% in quotations because it is really 15/115 the way they
calculate it, or about 13% of what most people would consider "income".] I have
until April 15th (or when I file my tax return each year) to decide how much to
contribute from the previous year's self-employment income.

But again, Keogh plans such as I have described above are for those who report their
income on Schedule C as self-employed business people with no employees, not for
"employees" of any type.  Keogh plans are also for people who have a Schedule C
business on the side (with no employees), even though they themselves may be
employees elsewhere.

(Business owners who have employees can open Keoghs as well, but that gets WAY more
complicated as you have to cover your employees as well in most cases, and involves
issues much more complex than I can discuss here.  If you own any significant part
(I think it is 5% or more) of ANY business anywhere that has employees, lots of
special rules would apply to you.)

Lynn Davis
Fremont, CA



-


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From: <[e-mail]>
Subject: Re: Wills
Date: 08 Aug 1998 15:07:27 EDT

Speaking of wills, my husband and I recently had ours updated by a lawyer. A
few thoughts:

You have got to be kidding if you think using a piece of software is a better
deal than paying the measly $200 or so a lawyer will charge. Besides ensuring
that we got it done right, our lawyer gave us information we were unaware of,
such as how our life insurance policies would impact our estate and how we
should change the "ownership" of the policies from how they were currently
titled.

And we didn't even pay the $200 fee. It was a covered service in the
Montgomery Ward Legal Services Plan, which we belong to. For $9/mo we have
access to an assigned lawyer. It has worked out great for us. Each time we've
needed him, he helped in a timely, efficient manner and it didn't cost us a
cent. He resolved problems for us that we probably would have just let go if
we had to pay a consulation fee. I highly recommend this plan. I believe you
have to be a Wards credit card holder to participate.



-


-------------------------------------------------------------------------------

From: "Lloyd Colston" <[e-mail]>
Subject: Re: Disney's controversy
Date: 08 Aug 1998 14:49:25 +0000


> Won't it be a great day when we have a society where it will be
> considered uncontroversial and downright positive to not be
> influenced by homo-philo activists?
>
> <editor's note:  This thread ends right here...>


Thanks to Bill for his support, however, Ira is right that this
thread should be ended, if for no other reason than it is off-topic
for the list.

Thanks to Ira for his wisdom in nipping this in the bud.


Lloyd Colston        Excellence is not an accident
Pryor, OK USA         social worker, writer, editor
Member: International Small Business Consortium
KC5FM Home page http://www.Lloyd.Colston.com/



-


-------------------------------------------------------------------------------

From: David Martin <[e-mail]>
Subject: Re:High income, low risk? :-)
Date: 08 Aug 1998 16:46:20 -0500

Melinda writes:


>Am I assuming too much risk that I'll buy in at a market high
>if I put the $70,000 into the funds all at the same tims?  I
>don't have time to DCA in and DCA back out.

    Yes.

>Should I just bag this whole idea and leave it all in money
>market and laddered short term CDs and forget about taking any
>risk at all?


    Yes.


                        -David Martin
                         [e-mail]



-


-------------------------------------------------------------------------------

From: Rich Carreiro <[e-mail]>
Subject: Re: IRA expenses part of contributions, or separable?
Date: 08 Aug 1998 15:36:44 -0400

>with  "non-contribution" cash- that is, can I buy $2000 worth of stock in
>the account with my annual
>contribution, and pay for the commission with additional money out of
>pocket?

Nope.

The only expenses that can come from outside are the annual custodial
fees (if any) if they are separately billed.

Commissions and other transaction fees come out of the account, and if
you try to pay them from outside, they are considered IRA
contributions.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.1



-


-------------------------------------------------------------------------------

From: Rich Carreiro <[e-mail]>
Subject: Re: retirement accounts for contract employees?
Date: 08 Aug 1998 15:41:00 -0400

>If I understand it correctly, I *can't* open a tax-deductible IRA in the
>same calendar year during which I have participated in a 401(k) plan. Have I

Probably correct.  Participating in a 401(k) for even one day in a
tax year means you are subject to the income tests on IRA deductibility.
Depending on your AGI, you can deduct some, none, or all of your IRA
contribution.  See Pub 590 for the details.

Pedantic note -- there's no such thing as a "deductible IRA" or
a "non-deductible IRA."  There are traditional IRAs, Roth IRAs,
and Education IRAs.  With respect to the first, you can (until age
70.5) always contribute $2000/yr (or earned income, whichever is less).
Whether you can deduct any or all of the contribution depends on if
you participate in a qualified plan, and if so, what your AGI is.
Non-deductible contributions cannot be segregated into an individual
IRA account.  Once a non-deductible contribution is made, it becomes
proportionally part of all your traditional IRA account.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.1



-


-------------------------------------------------------------------------------

From: jack law <[e-mail]>
Subject: Re: refinancing advice
Date: 08 Aug 1998 20:48:07 -0400

>Well, the most obvious thing that you are missing is the possibility
>that your investments will drop.  Have you considered the possibility
>that the current "correction" will lose an additional 40%?

I agree.  If I do the refinance, I certainly wouldn't dump the entire amount
in an aggressive stock fund.  I understand that there are no guarantees.


>
>Basically, you are thinking of borrowing money to invest in the stock
>market.  That's risky, ESPECIALLY with the market as high as it is.
>There are plenty of opportunities out there that could turn this into
>a full fledged bear market.  The market is nervous and it could break
>down in a hurry....or slowly, bit by bit.

I agree again.  I certainly would stay in a balanced fund for at least five
years.


>
>Also don't forget that the "tax writeoff" only recovers a portion of
>the money you are "giving away" to the bank.

I get the picture.  I am gambling getting a higher return against a guaranteed
%6.75 minus my tax bracket by paying down my existing mortgage.  In addition,
the peace of mind that a low mortgage brings.

I really appreciate you taking the time to contact me.  Thanks I appreciate
your advice.
 Jack








-


-------------------------------------------------------------------------------

From: Randy Barnes <[e-mail]>
Subject: Re: Affordable Attorney drafted Wills - NC and GA
Date: 09 Aug 1998 09:50:45 -0400

> Lisa wrote:
> - --------

> My husband and me -- both in our mid-30s -- have two preschoolers and
> are expecting a third child. We've some assets, though not a ton. We
> think it's time we did a will. Anyone have ideas on software that would
> allow us to do our own, customizing it to fit North Carolina law (our
> home state) so that it would be legally recognized should the need
> arise? Any recommendations appreciated.


Lisa,

 If mom and dad die the kids are devastated emotionally and without a
will/trust they are unable to get your assets, including your life
insurance, until they are 18. Now just what's the FIRST thing an 18 year
old will do with $100k? College, right? Please include a trustee for
children in your plan.

Since you're in N.C. you are in luck. You have an opportunity to obtain
wills prepared by dedicated estate planning attorneys very easily. I
believe the fee for two simple wills is still $99 per couple, but it
could be a little higher. They offer a couple of trust packages
including Powers of Attorney that can't be beat. The only problem is
that they are only in Greensboro and Charlotte,N.C., plus an office in
Atlanta.

This beats the pants off any do-it-yourself plan. I have done a little
looking but have not been able to find a similar service in the 48 other
states. Anyone know of something like this?

I used to work for this company, (which has been around for nearly 20
years), and think they offer a fantastic service.  Any company that
offers a 60 right of cancellation, in writing, HAS to deliver the
service and product that thrill customers.

Look up *Personal Legal Plans, Inc. in the phone book and call them this
week.

You could also reach one of their consultants at
mailto:[e-mail]

IN most every state you could also obtain a free will (and much more)
prepared by your provider attorney firm, via PrePaid Legal Services.
This 27 year old public company (Ticker:PPD)is also top drawer and is
sort of like a legal HMO at around $16 month.  If want more info on this
mailto:[e-mail]

- Randy

( OK, I'm no lawyer either, and your kids' guardian can have access to
the money IF they appear in your county probate court and get permission
from the judge to have a certain amount for a certain purpose..yadda
yadda. If you'd ever seen anyone living under these circumstances, as I
have, you would act promptly to take care of this. Stick your documents
in a drawer and rest easily for the next 20 years, then review your plan
for the next stage of your life.)



-


-------------------------------------------------------------------------------

From: "ingrid" <[e-mail]>
Subject: Can a non-professional advertise investments
Date: 09 Aug 1998 11:38:45 -0700

I recently heard from a relative in Germany about an interesting way to
invest in high- tech recycling centers there.  I am not writing this to
solicit business from persfin readers, but to ask:   I would like to help
publicize this as a sociallly responsible investment on the Web.  Is there
a way I can do this legally as a non-professional, meaning, I'm not a
broker?

Ingrid Good

----------




-


-------------------------------------------------------------------------------

From: "L. Chen" <[e-mail]>
Subject: Re: High income, low risk? :-)
Date: 09 Aug 1998 16:37:05 -0400 (EDT)


> I'm having a difficult time determining how to allocate some
> assets for the short term while still maintaining liquidity
> and achieving a better return than that offered by CDs or
> money market accounts.  Here are the specifics:
>
> I have $140,000 in a money market fund.  There are other assets,
> but those are tied up in retirement accounts and don't figure in
> this scenario.  This $140,000 is also above and beyond my 6 month
> "emergency fund."
>
> I'll be starting up a franchise within the next 2 to 8 months.
> The time frame is indeterminate because we are still looking
> for a suitable site.  We may find one in 3 weeks, we may find
> one in 6 months.  It'll be a retail kid's clothing operation.

Conventional wisdom has it that if you need the money within 5 years, don't
put that money in the market.


> Up until the business opens, I'll need to make this $140,000
> work as hard as possible, but will still need to keep most of
> it as liquid as possible, too.
>
> I plan to use up to $100,000 for startup costs (inventory,
> training, lease, insurance, legal fees, building out the store,
> etc.) and the remaining $40,000 for working capital.

I don't know how you come up with that $140K figure.  But statistics show that
small businesses generally under-estimates startup costs and working capital.


> What I'm planning to do is maintain $70,000 in the money market
> account and split the remaining $70,000 between the following
> funds, all chosen because they're available as Fidelity
> "no transaction fee" funds, and have good Morningstar ratings
> and a good long term (5 years+) track record:
>
> 10% to Baron Asset fund (small cap)
> 15% to Hotchkiss and Wiley Equity Income fund
> 10% to Invesco Strategic Finance fund (sector)
> 40% to Loomis and Sayles Investment grade bond fund
> 25% to Dreyfus High Yield bond fund
>
> I'll be routing all the income and dividends from these funds
> into the money market account to bolster my working capital
> and protect it (the income, at least) from share price declines.

It is not clear to me how you will protect your working capital from share
price declines.  The market movement in the past 10 days should convince you
that  a extra 3%(?) PER ANUM return will not compensate for a 10% decline in
share prices in a month -- figuratively speaking.


> ...................
> Should I just bag this whole idea and leave it all in money
> market and laddered short term CDs and forget about taking any
> risk at all?

DEFINATELY.

Chen




-


-------------------------------------------------------------------------------

From: "Steve Foulks" <[e-mail]>
Subject: Re: Asset Allocation , part 2
Date: 09 Aug 1998 20:35:24 -0400


> Date: Wed, 05 Aug 1998 23:00:53 -0400
> From: Randy Barnes <[e-mail]>
> Subject: Re: Asset Allocation , part 2
>
> >Really?  If I had to choose, I would choose Vanguard Windsor II for the
> >longer haul.  It has the same beta as Janus and charges less in internal
> >transaction fees.  If I had my choice, I would own both Windsor II which
> >is a more value-oriented stock fund and Janus, which is a more
> >growth-oriented fund.
>
> Performance: Trailing Return %  (SOURCE:  Morningstar)
>                                                            3 Yr    5 Yr
>                                     1 Mo    3 Mo    1 Yr     Avg     Avg
> ........................................................................
> S&P 500 Index                       4.06    3.30   30.15   30.22   23.06
> Janus                               6.01    6.12   31.99   25.60   19.23
> Vanguard/Windsor II                 1.33    1.80   30.43   30.18   22.29
> Vanguard/Windsor                   -0.79   -2.24   17.01   22.35   19.03
> ~~~~~~~~~~~
>
> Primo,
>
> Three cheers for your opinion and input. Serious discussion of
> investment topics has been pretty lame around here for a good while. I
> applaud your effort and think you could be right.
>
> I took a second look at the reasons I'd picked Janus in the first place
> and rediscovered another reason I'm no fan of mutual funds. Fund data is
> available in a million places but it is very inconsistent and VERY easy
> to manipulate.
>
> I too went to Morningstar to get a peek at performance figures etc. This
> is where I found the data that led to my previous post. The funny thing
> is that the figures I find aren't the same as those you quote. Sometimes
> different services report different figures and sometimes the same
> service reports different figures for the same thing. Go figure;-)
>
> At the following links you'll see Janus beating the S&P in the 10 year
> time frame buy better that 1%. THe WinsorII lags the index, as does just
> about every mutual fund in the universe. I give Janus the nod, with a
> 1.68% advantage (at least using this particular quote).
>
> Janus -
> http://www.morningstar.net/FundQT/RR_Performance/JANSX.msfhtml
> Winsor -
> http://www.morningstar.net/FundQT/RR_Performance/VWNFX.msfhtml
>
> A small account of $200 per month for 10 years gains $7,600 more using
> the Janus 10 year figure. (Ignoring taxes completely!)
> [pv=-200,pmt=-200,n=12,r=.x/12] - Careful. The next 10 years results
> will be different.
>
> Now, this brings to mind another question. Are the S&P returns inclusive
> of dividends, or not?  THis is quoted both ways depending on who is
> reporting. Before you know it you've written a thesis on which mutual
> fund manager beat the market, or at least came close.

The S & P 500 index measures total return, which includes dividends.

>
> SPYders,(or index funds if you have a very small account), will
> outperform almost every mutual fund over the long haul. SPYders are far
> less trouble to own, and will serve you better for the future, with much
> less energy.  Save money by not buying crap like magazines with "10 HOT
> Funds to Buy NOW!!" on the cover. Instead, buy yourself a self-help
> book, put an extra few bucks in your account, buy a kid something
> foolish, take a class, you get the picture. Use the savings to not pay
> your accountant to figure out the mutual fund statements you will no
> longer get each year. Even more valuable than the money is the time. If
> your time isn't worth $20-100 an hour then get busy and figure out what
> you need to learn to make something of yourself.
>
> For SPY info see - http://www.amex.com  or
> http://www.fool.com/funds/funds5.htm
>
> One more tidbit. The S&P is always got a wonderful blend of growth and
> value stocks. No muss, no fuss.
>
> FYI, I DO own positions in 2 funds, but only in a 401k, and there I have
> no tax issues (for now) and I don't have much to choose from. We don't
> even have an index fund in the mix .(Not my decision!)
>
> I am not really trying to flame mutual funds. (lie) It's just that
> anyone with a little common sense and intelligence soon sees the fact
> that funds are too often laggards. Smart money just buys the market and
> leaves it alone.
> (still my favorite link, see:
> http://www.pathfinder.com/fortune/investor/1998/980706/dfa.html
>
> If you're like me and must spend hours knee-deep in invest-o-mania, then
> stick to owning stocks, not funds.  Statistics have shown that owning
> just 16 stocks eliminates 93% of market risk, so the diversification
> issue that this started with is sorta meaningless.  The average person
> really can beat the market, but not in a fund.

While I agree with your basic premise that non index mutual funds are
generally poor investments, I disagree with your premise that "the average
investor can beat the market"  It just doesn't make sense.  Mutual funds are
run by average people who have been trained in financial analysis.  The
reason why mutual funds underperform the market is due to transaction costs
(management fees, brokerage fees, mailings, etc.) A study by Michael Freund
in the 1970's showed that when you eliminate transactions costs, mutual
funds performed exactly like the market.  Since professionals perform
exactly like the market, how can average people (non professional managers)
beat the market?

In fact US stock markets are highly efficient, which means that on average
NO ONE is going to beat the market, and those that do may just be lucky?.

If capital markets operate in this fashion, what do you do?  Low cost mutual
funds are one alternative, and the other is to construct a well diversified
portfolio of individual stocks, and hold them for ever, which is my
strategy.  I never look at annual reports, investment news letters, etc.
Rather than wasting hours analyzing knee deep out dated investment crap,  I
enjoy life.  My returns have been better that the market, because I
generally chose blue chip stocks, not because I "time" the market, or know
how to pick winners.  I buy stocks when I have money and would only sell
stocks if I needed money.  If I spend an hour a month thinking about my
investments, that would be an unusual event.

Obviously financial publications (Barron's, Value Line), financial
institutions (brokers, banks, etc.) have a vested interest in convincing you
that you can beat the market if you just buy their services.  They like to
pooh pooh the notion that capital markets are efficient, and most investors
like to believe them because it feeds their fantasy that the stock market
offers get rich quick potential, for those who really do their work!

Steven M. Foulks, CPA, CFP, PhD
<http://www-instruct.nmu.edu/business/sfoulks/>

Northern Michigan University <http://www.nmu.edu/home.shtml>





-


-------------------------------------------------------------------------------

From: Mike Broadhurst <[e-mail]>
Subject: Re: Income reduction from rental property
Date: 10 Aug 1998 09:54:29 -0700

In a recent discussion of landlord tax breaks, [e-mail] (Lynn R
Davis) said:

>>MOST people CAN, if they do it right, deduct rental losses against other
income.

First, they must "actively manage" the property themselves.  For example,
they must select the renters, and carry out other landlord
responsibilities. <<

Now I ask:
Exactly how active is "active?" I own a property, currently tied up in an
unlawful detainer action, that I've actively managed -- up to this point --
as you've described. However, I've been considering hiring a management
firm to handle the property once the eviction is complete.

The company offers varying degrees of management. Under one option, they
will advertise and screen prospective tenants and negotiate the lease. I,
however, retain full responsibility for choosing the tenant and setting the
rent, and dealing with the tenants for the duration of the lease.

Under another option, the management firm handles everything -- from
screening, leasing, handling maintenance problems, to collecting rents and
paying the mortgage, homeowners association, etc. -- and just send to me
any money that's left over (there won't be any). They'll even guarantee to
pay the monthly amount due me, even if the tenant defaults.

I'd love to be rid of the headache of leasing and collecting rents. But I
don't want to forego the ability to deduct my rental losses this year (and
they will be considerable) against income. If I contract with a management
firm on Sept. 1, do lose my deductions even though I managed the property
on a solo basis for nearly three-quarters of the year? How about if I just
have the firm screen tenants and negotiate the lease? Or, am I small-time
enough to take the full-service management arrangement (which will likely
result in a small negative cash flow situation) and still claim that I'm
actively involved in managing the property?

Thanks, in advance, for any advice!
Mike Broadhurst





-


-------------------------------------------------------------------------------

From: PowellFamily <[e-mail]>
Subject: Stock options - not public
Date: 10 Aug 1998 14:15:06 -0400

My husband has a stock option  for the young company he works for.  When looking on the open
market for what the ticker symbol may be for this company, I find nothing.  Would this be worth
anything if the company is not publicly traded?  How would I find out what it's worth?

Sherri






-


-------------------------------------------------------------------------------

From: <[e-mail]>
Subject: Vacation Rental Ownership
Date: 10 Aug 1998 19:46:08 EDT

>  Subject: Real Estate
>
>  I am considering buying a beach-condominium as rental/investment
>  property. I've never owned a house at all before, what are the best
>  references to learn about the ins and outs?
>
>  The cash flow is negative by approx $100 per month, but the prices have
>  been climbing fast in these developments for several years, and they will
>  make ideal retirement homes for aging baby-boomers (pool, beach, golf,
>  tennis).
>
>  Appreciate any input
>
>  Scott Mabel

Aloha Scott,

Three years ago we bought a small condo in Kihei, Maui, Hawaii. We are
very pleased with the condo. We live in Maui at the condo four months a year.
We did not realize that we would enjoy coming back to our own place as much
as we do.

When we are not at the condo we rent it out for $60.00 a night in the summer
and $80.00 a night in the winter. We have been very successful with our rental
program, but we do work at it on the web.

Our best teacher has been just doing it and talking to other, similar condo
owners. Please e-mail if you would like to discuss further.

Bob



-


-------------------------------------------------------------------------------

From: Adam Londre <[e-mail]>
Subject: Is investing all at once the best way?
Date: 11 Aug 1998 10:51:02 -0400

I'm in the process of converting my 401(k) investments to
4 different IRA accounts.  During the process I converted roughly
70% of my stock positions to a money market account (and thus am
missing out on this latest stock price correction).

Anyone know if the best investment strategy is to reinvest
all my proceeds into the market all at once(86% stocks, 14% bonds)
or would it be better to invest half now  and then every 3 or 6
months transfer funds from my money market account into the market say over
a period of 2 years?





-


-------------------------------------------------------------------------------

From: [e-mail] (Shankar Prasad)
Subject: Term Life Insurance - Company ratings
Date: 11 Aug 1998 10:34:14 -0700

Hi

I am looking to buy term life insurance (level for 20 years).
I called my auto insurance agent (All State), and he was able
to provide a quote from Lincoln Benefit (he said that it was
a subsidiary of AllState).  The quote was not the very best,
like I got from QuoteSmith or MasterQuote (mail-in cards).
But the difference is not very large, and taking the local
presence of the agent into account, I would rather go with
the Allstate agent.  However, I would like to know details about
the ratings (financial, customer service etc) of the Lincoln
Benefit company.  Is there some place I can check AM Best or
other insurance ratings ?

The quote was about $94/100K/year for 20-year level (32-year Male).
The best quotes from QuoteSmith etc ranged from $74-$120.  Should I be
calling other AllState agents as well ?  Any suggestions about other
agents or term-life companies are welcome.  I am in the SFO Bay Area,
and have not always been a US resident, and will also be travelling
occasionally to India.

--
Regards
Shankar Prasad
[e-mail]



-


-------------------------------------------------------------------------------

From: <[e-mail]>
Subject: Re:  tax deductible
Date: 11 Aug 1998 14:46:44 EDT

>my wife is in a nurseing home
>its cost me 3300.00 per mouth
>is it tax deductible
>fully or % wise
>thank
>john walters

Check IRS Notice 97-31 for the conditions which must be met.



-


-------------------------------------------------------------------------------

From: T Koyn <[e-mail]>
Subject: When to Contribute to SIMPLE IRA Q
Date: 11 Aug 1998 23:08:02 -0500 (CDT)

When operating a SIMPLE IRA for a sole proprietorship business with no
employees, when is the latest that one may make their contribution for the
year?  SIMPLE IRA forms from a stockbroker provide an employee deferal
form where you specify a percent of pay or dollar amount per pay period
suggesting it should be done throughout the year.  For a sole
proprietorship, one can't know what the profit or compensation is until
the end of the year when all income and expenses have been tabulated.  I
heard that the employee deferal must be within 30 days of the last day of
the month after being withheld from the employee's wages.  Does this imply
that for a sole proprietorship that the "employee" portion must be sent in
by Jan 30 of the new year under an interpretation that "wages" are paid to
oneself at the end of the year?  Are there any other interpreations of
when compensation is considered paid in a sole proprietorship that might
require money to be contributed sooner or throughout the year, e.g. does
the timing of receipt of payments from customers matter?  I understand
that the employer match can be sent until April 15.  Or is the whole
compensation issue moot and we have until April 15 to send in the entire
contribution to the broker for a sole proprietorship SIMPLE IRA?

Thanks for any information on these questions.

[e-mail]





-


-------------------------------------------------------------------------------

From: Randy Barnes <[e-mail]>
Subject: Re: Asset Allocation , part 3: it's a TIME thing
Date: 15 Aug 1998 22:02:26 -0400

> While I agree with your basic premise that non index mutual funds are
> generally poor investments, I disagree with your premise that "the average
> investor can beat the market"

First you say the average person cannot beat the market, then you say
you do. Are you not average? ;-)

You can beat the market by investing in a handfull of the top companies
that will still be around 10 years from now. Avoid companies that the
average person has never heard of. The names in our account include
Dell, AOL, Home Depot, Safeway etc.. Buy big companies that are really
live and kicking.


> If capital markets operate in this fashion, what do you do?  Low cost mutual
> funds are one alternative, and the other is to construct a well diversified
> portfolio of individual stocks, and hold them for ever, which is my
> strategy.  I never look at annual reports, investment news letters, etc.
> Rather than wasting hours analyzing knee deep out dated investment crap,  I
> enjoy life.  My returns have been better that the market, because I
> generally chose blue chip stocks, not because I "time" the market, or know
> how to pick winners.  I buy stocks when I have money and would only sell
> stocks if I needed money.  If I spend an hour a month thinking about my
> investments, that would be an unusual event.

 [snip]
> Steven M. Foulks, CPA, CFP, PhD
> <http://www-instruct.nmu.edu/business/sfoulks/>
>
> Northern Michigan University <http://www.nmu.edu/home.shtml>
>

Really, I am pleased that someone gets it.  Your point about hold
forever is the key. Your strategy IS THE strategy for beating the
market.  The average person CAN do this. This is not as risky over a 10
year time frame as owning a bunch of stock funds.  The efficient market
will make your little account of top companies outperform the overall
market by some amount, which will translate into a more comfortable stay
in the nursing home. Marketing and management costs will not be a drag
on an account like this.

Another way to beat the market is follow a simple strategy, and let your
portfolio autopilot for a long time period. My favorite is what I call
the Fab 4, actually a version of the Foolish four, called "RP", whatever
this means. Currently the 4 stocks are IP, GM, CAT, CHV. This is the
surest, safest, easiest way to a million that I've ever seen. Check the
numbers on this. The last 37 years are proof enough for me.

http://www.fool.com/DDow/1998/DDow980213.htm

Thanks again for your insight and extremely valuable information.  I
hope that a few lurkers on this list see the light and realize just how
easy building wealth really is. Buy the market in the S&P index, or just
a small group of the best BIG companies, and let time do it's thing.

- Randy Barnes,
Regular Guy

PS, If you think you not average enough to beat the market then ride
over to the library and read  What Works on Wall Street, by James
O'Shaughnessy. His new one (title unknown)is a top seller right now and
is probably a good choice too. Having read/skimmed this you'll be far
above average and have better knowledge than anyone that ever attempts
to "sell" you investments.



-


-------------------------------------------------------------------------------

From: [e-mail] (Lynn R Davis)
Subject: "Active Participation" in Rental Real Estate Activities
Date: 16 Aug 1998 01:58:27 -0500 (CDT)

Your described two management scenarios and asked what standards applied to
meeting the "active participation" test for deducting rental real estate
losses.

The second scenario you describe does not seem to me as a layman to meet the
criteria that I would consider "active management".

The first scenario sounds as if you are paying them for a marketing service,
while retaining management control yourself.  Whether or not that service is
worth the price they are asking is up to you to determine, but I do not think
it would bring into question your "active management" any more than hiring a
painter rather than painting the rooms yourself.

But I am not the one to tell you how far you can go in between these two
alternatives.  The 1997 IRS instructions for Schedule E on page E-3, near the
top of the third column says:

"Active Participation.  You can meet the active participation requirement
without regular, continous and substantial involvement in real estate
activities.  (LRD:  I think this is IRS speak for you don't have to do this
full time.)  But you must have participated in making management decisions or
arranging for other to provide services (such as repairs) in a significant and
bona fide sense.  Such management decisions inlcude:

*  Approving new tenants.
*  Deciding on rental terms.
*  Approving capital or repair expenditures.
*  Other similar decisions.

You are not considered to actively participate if, at any time druing the tax
year, your interest (including your spouse's interest) in the activity was
less than 10% by value of all interests in the activity."

Since the problem seems to be the current tenants, I would ask you why you
believe that the management company is less likely to have a repeat experience
than you are.  There are books with good advice and good forms for
applications, and places you can inexpensively get credit checks done.  Also,
management companies tend to want to use long-term leases (minimum one year).
My belief is that in most cases that protects the renter more than the
landlord, and that month to month leases are best.

Anyway, before I wander too far beyond the scope of your original question,
let me simply wish you the best of luck.

Lynn Davis
Fremont CA

You wrote:
>------------------------------
>
>Date: Mon, 10 Aug 1998 09:54:29 -0700
>From: Mike Broadhurst <[e-mail]>
>Subject: Re: Income reduction from rental property
>
> However, I've been considering hiring a management
>firm to handle the property once the eviction is complete.
>
>The company offers varying degrees of management. Under one option, they
>will advertise and screen prospective tenants and negotiate the lease. I,
>however, retain full responsibility for choosing the tenant and setting the
>rent, and dealing with the tenants for the duration of the lease.
>
>Under another option, the management firm handles everything -- from
>screening, leasing, handling maintenance problems, to collecting rents and
>paying the mortgage, homeowners association, etc. -- and just send to me
>any money that's left over (there won't be any). They'll even guarantee to
>pay the monthly amount due me, even if the tenant defaults.
>



-


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From: "Cal Lester" <[e-mail]>
Subject: Wills, Life Insurance
Date: 16 Aug 1998 11:29:29 -0400


-----Original Message-----


>persfin-digest        Saturday, August 15 1998        Volume 05 : Number
043
>

>
>Date: Sat, 8 Aug 1998 15:07:27 EDT
>From: <[e-mail]>
>Subject: Re: Wills
>
>Speaking of wills, my husband and I recently had ours updated by a lawyer.
A
>few thoughts:
>
>You have got to be kidding if you think using a piece of software is a
better
>deal than paying the measly $200 or so a lawyer will charge. Besides
ensuring
>that we got it done right, our lawyer gave us information we were unaware
of,
>such as how our life insurance policies would impact our estate and how we
>should change the "ownership" of the policies from how they were currently
>titled.
>

>>>>    My compliments to the expertise of your legal counsel. My experience
of over 35 years in the Life Insurance Industry, has been that MOST
attorneys are ignorant of the use and traps of Life Insurance. I am pleased
that he did discuss this with you. You now have an opportunity to make the
proper designations, so that "Uncle Sugar" does not get his meat hooks into
your Estate. You seem to be on the right road.

Cal Lester CLU
Insurance Course Coordinator
Broward Community College



>Date: Tue, 11 Aug 1998 10:34:14 -0700
>From: [e-mail] (Shankar Prasad)
>Subject: Term Life Insurance - Company ratings
>
>Hi
>
>I am looking to buy term life insurance (level for 20 years).
>I called my auto insurance agent (All State), and he was able
>to provide a quote from Lincoln Benefit (he said that it was
>a subsidiary of AllState).  The quote was not the very best,
>like I got from QuoteSmith or MasterQuote (mail-in cards).
>But the difference is not very large, and taking the local
>presence of the agent into account, I would rather go with
>the Allstate agent.  However, I would like to know details about
>the ratings (financial, customer service etc) of the Lincoln
>Benefit company.  Is there some place I can check AM Best or
>other insurance ratings ?
>

>>>>    LBL is a subsidiary of Allstate Insurance. It has a A+ rating
from Bests. You can examine the ratings of ALL companies by going
to your local library, and checking thier copy of Best's.
            Since you do seem to be a "shopper", then you might want to
take a look at an "On-Line" company that is offering a LEGITIMATE
15% rebate of the Annual Premium for Low Cost Term Insurance.
Check out  http://www.noagent.com

            Please note that neither I nor Broward Community College
in any way reccomd that particular company, nor any of the products
that they offer.

Cal Lester CLU
Insurance Course Coordinator
Broward Community College









-


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From: "Richard A. Bauer" <[e-mail]>
Subject: RE: Is investing all at once the best way?
Date: 16 Aug 1998 14:43:45 -0500

Adam Londre wrote:
I'm in the process of converting my 401(k) investments to 4 different IRA
accounts.  During the process I converted roughly 70% of my stock positions
to a money market account (and thus am missing out on this latest stock
price correction).
Anyone know if the best investment strategy is to reinvest all my proceeds
into the market all at once(86% stocks, 14% bonds) or would it be better to
invest half now  and then every 3 or 6 months transfer funds from my money
market account into the market say over a period of 2 years?
****************
IMO: at todays market, dollar cost average over 24 months

It has been said that investing in kind, stock to stock, bond to bond, that
you can invest all at once.  I agree in more usual times.

One could say that at today's dip from all time highs that investing all at
once is okay.  But who is to say what the market will bring in next 24
months - perhaps a 10000 dow, perhaps another dip of 10 to 15 percent.

Richard Bauer
Not a professional, just my personal opinion




-


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From: "L. Chen" <[e-mail]>
Subject: Re: Can a non-professional advertise investments
Date: 16 Aug 1998 16:54:25 -0400 (EDT)


> I recently heard from a relative in Germany about an interesting way to
> invest in high- tech recycling centers there.  I am not writing this to
> solicit business from persfin readers, but to ask:   I would like to help
> publicize this as a sociallly responsible investment on the Web.  Is there
> a way I can do this legally as a non-professional, meaning, I'm not a
> broker?

I would stay away from publicizing the company -- unless you personally know
the company or have done thorough research on the company.

There are a lot of overly optimistic projections, scams, etc. out there.  Just
look at the 2 recent examples:  Cedent and United Health (?  Humana's former
acquirer).

Chen






-


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From: [e-mail] (Jeff Salisbury)
Subject: Re: Asset Allocation , part 2
Date: 17 Aug 1998 15:52:05 -0600

On Aug 9,  8:35pm, Steve Foulks wrote:
> Subject: Re: Asset Allocation , part 2
> If capital markets operate in this fashion, what do you do?  Low cost mutual
> funds are one alternative, and the other is to construct a well diversified
> portfolio of individual stocks, and hold them for ever, which is my
> strategy.  I never look at annual reports, investment news letters, etc.
> Rather than wasting hours analyzing knee deep out dated investment crap,  I
> enjoy life.  My returns have been better that the market, because I
> generally chose blue chip stocks, not because I "time" the market, or know
> how to pick winners.  I buy stocks when I have money and would only sell
> stocks if I needed money.  If I spend an hour a month thinking about my
> investments, that would be an unusual event.

Steve,

I too, am a buy and hold advocate.  However, being a CFP, what do you do for,
or recommend for your clients?  Mutual funds?  Or, a portfolio of stocks?  How
do you choose a mutual fund or stock since you indicate that you don't do much
research?

Best Regards,

Jeff Salisbury



-


-------------------------------------------------------------------------------

From: David Peterson <[e-mail]>
Subject: Re: Montgomery Ward Legal Services Plan
Date: 18 Aug 1998 09:06:55 -0700 (PDT)

>
>     Re: Montgomery Ward Legal Services Plan
>

Will they also do living trusts?




-


-------------------------------------------------------------------------------

From: <[e-mail]>
Subject: Re: Montgomery Wards legal plan
Date: 18 Aug 1998 14:15:39 EDT

<<Will they also do living trusts?>>

To be free, a problem or service has to be resolved with no more than 3
visits. Or with three letters written on your behalf, or three phone calls. A
will is accomplished with just one or two visits, so it's free. For more
complicated problems, you get a discounted hourly rate. I don't know what's
involved with a living trust; I never looked into it. Business legal advice
and services aren't covered, just personal.



-


-------------------------------------------------------------------------------

From: <[e-mail]>
Subject: Re: Investing
Date: 18 Aug 1998 14:24:12 -0400


Randy (& Readers)

>Date: Sat, 15 Aug 1998 22:02:26 -0400
>From: Randy Barnes <[e-mail]>
>Subject: Re: Asset Allocation , part 3: it's a TIME thing

>You can beat the market by investing in a handfull of the top companies
>that will still be around 10 years from now. Avoid companies that the
>average person has never heard of. The names in our account include
>Dell, AOL, Home Depot, Safeway etc.. Buy big companies that are really
>live and kicking.

Fortunately there are as many different methods of investing as there
are investment opportunities.  I found myself disagreeing with both you
and Steven Foulks.  I do not purchase Blue Chips, nor do I purchase
top companies and hold them for long periods of time.  I also do not
believe in the notion that the market is purely efficient.  Do you realize
that there are many people who bought into a two-bit company years
ago called Microsoft who have since not regretted their investment ?

Market efficiency is a phenomenon that seems to hold at the macro
level.  This includes all activity over infinitely long periods of time
(more
specifically, a total economic cycle), across all participants in the
market
(traders, consumers, news media, foreign countries, exchange rates, etc.),
and among all economic systems that have first round, second round, or
tertiary influence.  For the individual investor, the market is *far* from
efficient.  Case in point - you can open a margin account and trade
securities during the normal market hours.  You could, alternatively,
establish a Level II margin account (NASDAQ), enabling you to trade
on the fringe (before/after market open) of those hours.  As a daytrader, I
have seen more colleagues earn abnormal gains during pre-market trading
than proponents of "market efficiency" would have you believe.



>> strategy.  I never look at annual reports, investment news letters, etc.
>> Rather than wasting hours analyzing knee deep out dated investment crap,
I
>> enjoy life.  My returns have been better that the market, because I
>> generally chose blue chip stocks, not because I "time" the market, or
know
>> how to pick winners.  I buy stocks when I have money and would only sell
>> stocks if I needed money.  If I spend an hour a month thinking about my
>> investments, that would be an unusual event.

>> [snip]
>> Steven M. Foulks, CPA, CFP, PhD
>> <http://www-instruct.nmu.edu/business/sfoulks/>


>Really, I am pleased that someone gets it.  Your point about hold
>forever is the key. Your strategy IS THE strategy for beating the
>market.  The average person CAN do this. This is not as risky over a 10
>year time frame as owning a bunch of stock funds.  The efficient market
>will make your little account of top companies outperform the overall
>market by some amount, which will translate into a more comfortable stay
>in the nursing home. Marketing and management costs will not be a drag
>on an account like this.

I have to disagree with you.  BOTH of you.  The majority of my securities
are never held for more than a week.  Most of them are held for only
a few hours.  By using my trading methodology, I turned $6k into $23k
in under a month.  It's a simple one, too, that limits your exposure to
broad market, macroeconomic, and microeconomic effects.  After
all, the idea *is* to buy low, sell high.

I *do* read annual reports, newsletters, and whatever else I can get my
hands on.  There is a wealth of information buried in annual reports
that financial analysis can pull out.  Especially for you investors who are
in it for the long-term !  For example, how is your target security faring
against
its competitors with regard to revenues, expenditures, R&D ?  Is it plowing
earnings back into solid capital investment or pissing too much away to
shareholders ?  Is it making poor M&A decisions (i.e., acquiring a business
unit in which it has no core competency or is not a component of
vertical/horizontal
integration) ?



>Another way to beat the market is follow a simple strategy, and let your
>portfolio autopilot for a long time period. My favorite is what I call
>the Fab 4, actually a version of the Foolish four, called "RP", whatever
>this means. Currently the 4 stocks are IP, GM, CAT, CHV. This is the
>surest, safest, easiest way to a million that I've ever seen. Check the
>numbers on this. The last 37 years are proof enough for me.
>http://www.fool.com/DDow/1998/DDow980213.htm

I would no more allow my portfolio to autopilot any more than I would
allow my career to autopilot.  The problem with most investors is that
they do not understand the market microstructure.  Why do experts like
to brainwash those who are less sophisticated with notions that the
market is efficient ?  I imagine because it is easy to grasp, has an
element
of truth, and is the foundation for many laws governing the market.  After
all, who wants to believe that others are making a profit on information
not readily available to everyone the broad market ?  Investing your
hard-earned money into stocks or mutual funds and not thinking
about it for more than an hour a month is BAD !  You *always* have to
look for opportunities and do not make the mistake of investing all
of your wealth into a single investment type.  Diversification outside
of the stock market is preferable.  Buy some land or apartment units.

It's not difficult to research and locate opportunities for abnormal
gains on a daily basis.  I typically utilize both long positions and short
positions.  The important thing is to do your research, understand how
the market operates mechanically, be able to execute trades quickly,
and in a high volume of shares.  My stock trades are done on highly
volatile securities, preferably those with frequent $0.25 intraday price
volatility or more.  Purchasing 100 shares is practically worthless,
considering
you can purchase 10,000 shares and earn $1k if the price moves
only 10 cents up or down; depending, of course, whether you are
holding a short or long position.

It's also a matter of utilizing common sense.  Last fall there was a
security,
Biospherics Inc. (BINC), that I was selling short around 7 7/16 and buying
to cover around 7 1/4 during the first and second weeks of September.  As
soon as I would cover my short I would take a long position and ride it
back as close to 8 as I could.  You can see by the 2-year chart
http://www.bigcharts.com/quickchart/quickchart.asp?sid=0&o_symb=binc&symb=b
inc&time=9
that this security was volatile and had a large volume of trading activity
during certain periods.  Efficient ?  Or an abnormal opportunity ?

Another example is a bank stock, Essex Bancorp (ESX), that ran up
over $8 per share from around it's average of $2 per share.  The
CEO in an interview could not explain the run up in price, nor could the
market.  I was  able to sell 3,000 shares short at $5 per share and cover
at $2 1/4.  My gain on that transaction was slightly less than $8,200
after fees with a holding period of less than two weeks.

Those are just two examples of many.


>Thanks again for your insight and extremely valuable information.  I
>hope that a few lurkers on this list see the light and realize just how
>easy building wealth really is. Buy the market in the S&P index, or just
>a small group of the best BIG companies, and let time do it's thing.

>- - Randy Barnes,
>Regular Guy

>PS, If you think you not average enough to beat the market then ride
>over to the library and read  What Works on Wall Street, by James
>O'Shaughnessy. His new one (title unknown)is a top seller right now and
>is probably a good choice too. Having read/skimmed this you'll be far
>above average and have better knowledge than anyone that ever attempts
>to "sell" you investments.

True, it's not difficult to build wealth.  The important thing is to find a
method with which you are comfortable and will permit you to have little
trouble sleeping at night.  I also recommend enhancing your (the readers)
education in finance and the market microstructure at a reputable business
school (Carnegie Mellon Univ (http://www.gsia.cmu.edu),
Wharton(www.wharton.edu),
 etc.) where you have access to the world's top researchers.  The *worst*
mistake anyone can make is to not invest at all.


--mk


The information transmitted is intended only for the person or entity to
which it is addressed and may contain confidential and/or privileged
material.  Any review, retransmission, dissemination or other use of, or
taking of any action in reliance upon, this information by persons or
entities other than the intended recipient is prohibited.   If you received
 this in error, please contact the sender and delete the material from any
computer.





-


-------------------------------------------------------------------------------

From: Bertrand Horwitz <[e-mail]>
Subject: purchase of one share
Date: 18 Aug 1998 14:46:34 -0400

I wish to purchase one share to give to a child as a birthday present.
Where is the least expensive place that this can be done?




-


-------------------------------------------------------------------------------

From: <[e-mail]>
Subject: WILLS, WON'TS AND TRUSTS
Date: 18 Aug 1998 16:31:38 EDT

Wife and I  just got thru second round of wills. This one required a trust for
a disabled son. These things aren't a hundred or two each anymore.

On subject of insurance. I have dropped all mine except one paid up policy and
a free one that followed me into retirement. Adding coverage of a years pay
would cost over 2k a year and would go to uncle sam as the unified credit
isn't big enough.  Group policies are difficult to have ownership in someone
elses name.
To me insurance is not required when everything is paid for and significant
assets are in place. Pensions pay costs, income from investments pays for
travel and other needs. A reserve for medical expenses can't require too much
over basic medicarea/HMO complete coverage. I would love to be able to tax
shelter a couple K a year each in a MSA for nursing/home care expenses later
on. Not yet on horizion.


Jointly owned property is a big bugaboo too.  The passage to the survivor is
OK and tax exempt, but the wasted credit of the first death is gone forever.
Divided ownership and establishment of a Trust bypass and or revocable living
trusts get around this mess. And make the lawyers rich!!   But it avoids the
37 to 55% estate taxes.

My assets seem to be increasing faster than the unified credit.  Another
problem for those (not me) who have expensive houses and a big loan. It is
valued in the estate at the house value and not net of loan. A real bummer.
Dunno if same for investment accounts with margin loans, but I'd bet it
similar.


 duke



-


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From: Jerry Conley <[e-mail]>
Subject: Income tax on investments
Date: 18 Aug 1998 15:03:17 -0500

I am trying to project the taxes I will have to pay on the gains from my
investments once I begin to draw on them during retirement.

I have some after tax investments that are not tax-deferred and I have some
investments in IRA & 403(b) that are deferred.

Presuming that I have no income and begin to live off of my investments,
that all of my investments are long-term, that I am married filing jointly,
and that my tax bracket is 15%, what will I pay in taxes on $36,000 from my
tax-deferred withdrawals? And at what tax % rate?

In comparison, what if that $36,000 comes from after tax investments with a
basis of say $10,000?

Another question would be will the tax rate be different on the withdrawal
of tax-deferred investments if other income pushes the income above the 15%
rate level?

I am trying to figure out which investments I should tap into first, the
after-tax or the tax-deferred.

Thanks in advance for any help you can give.

Jerry Conley




-


-------------------------------------------------------------------------------

From: "Louis J. Schwarz, CFP, RFC" <[e-mail]>
Subject: Re: Investing
Date: 18 Aug 1998 20:06:02 -0400

> Date: Mon, 17 Aug 1998 15:52:05 -0600
> From: [e-mail] (Jeff Salisbury)
> Subject: Re: Asset Allocation , part 2
>
> Steve,
>
> I too, am a buy and hold advocate.  However, being a CFP, what do you do for,
> or recommend for your clients?  Mutual funds?  Or, a portfolio of stocks?  How
> do you choose a mutual fund or stock since you indicate that you don't do much
> research?
>

The bottomline is the "lifetime" discipline method!

If investors do not want to read news, they better do DCA (Dollar Cost Averaging)
methods with several mutual funds outright their working years.

If investors do not want to trade from time to time, they better invest at least
75 percent of unneeded money in several stocks selected from the publicized list
of 100 best stocks and use their DRIPs (Dividend Reinvestment Program) during
their "buy and hold" years. Perhaps by the time they retire, they will receive
nice bigger dividends.

If investors want to make advantages of making possible better gains, they should
have stayed to the discipline method (can be anything but must be consistent) such
as if the price of conservative stock drops ten percent, sell it, so forth for
moderate stock (15 or 20%) and for aggressive (25 or 30%).  They should be patient
at least 12 months for each investment for sake of maximum 20% taxable long term
gain unless the unexpected event warrants for the immediate sale.

I, as the CFP, merely make the financial independence projections at the suggested
rate of return, including the factors on inflation and taxation. If the total
investment portfolio meets the given rate or better, I will be happy because my
clients are happy too - regardless of such unexpected high rate of return
currently.

Of course, all CFPs must do due dilgence on selecting any investment to be sure
each does meet the client's specific goals and objectives. So they must do some
research or review on investments before recommending to clients.
--
$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
Louis J. Schwarz, CFP,RFC                             TTY: 301 587 5996
Schwarz Financial Concepts                            FAX: [phone]
814 Thayer Avenue, Suite 301                        Voice: 800 735 2258
Silver Spring, MD 20910-4500            Email: [e-mail]
WWW: http://www.moneysigns.com




-


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From: Mark Orr <[e-mail]>
Subject: Bridge Loan - How Do They Work?
Date: 18 Aug 1998 23:17:11 -0800

We are in the process of relocating from WashDC to VA Beach due to new
job assignment.  I've told about something called a "bridge loan" which
provides a short term loan mechanism to put a contract on the new house
prior to settling on the old house.  Once the old house completes
settlement, I believe the bridge loan then gets closed-out and proceeds
from sale used to establish a longer term mortgage on new house via
bank.

Can anyone on the list provide more information on exactly how these
type of loans work and are there any downsides I should be concerned
about (e.g., higher interest rates, potential financial impacts
resulting from carrying two loans if settlement difficulties are
encountered, etc.).
--
Cheers,
Mark Orr
mailto:[e-mail]



-


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From: [e-mail] (Mike M Wyman)
Subject: Company slow rolling over retirment account
Date: 19 Aug 1998 07:08:34 -0700

Three years ago I left Company A to work for Company B, but left my 403-b
account intact at Company A.  Now, I'm trying to roll over my 403-b
account to the new company, and I need the money fairly quickly, so I can
borrow against it for a new home.  The problem is, Company A seems to be
dragging their feet.  It's been over 2 months since I first requested the
rollover, and repeated phone calls keep ending with empty promises.  Is
there a limit to the time they can keep my money?

_____________________________________________________________________
You don't need to buy Internet access to use free Internet e-mail.
Get completely free e-mail from Juno at http://www.juno.com
Or call Juno at (800) 654-JUNO [654-5866]



-


-------------------------------------------------------------------------------

From: "Steve Foulks" <[e-mail]>
Subject: Re: Asset Allocation , part 3: it's a TIME thing
Date: 19 Aug 1998 11:17:47 -0400

Randy Barnes said:

>First you say the average person cannot beat the market, then you say you
do. Are you not average? ;-)

I would say that as a stock picker I am certainly average (after all I spend
little time at it) and my above average return is due a lot to luck.  When I
started my PhD program in 1990, I decided to move my Keogh plan assets from
mutual funds to individual stocks.  I had a feeling (hunch) that computers
were going a big market world wide in the future.  I thought of 4 stocks -
Intel, Microsoft, Motorola, Apple.  Since I was using Wintel machines ( my
first supplied by my employer)  and I really enjoyed the advantage that my
computer gave me, I split my money equally between Intel and Microsoft.
Those two investments have made my returns "above average".  Was it superior
picking skills - no, it was luck.  My employer could have bought me a Mac
and I probably would have went with Apple / Motorola.

>Really, I am pleased that someone gets it. Your point about hold forever is
the key. Your strategy IS THE strategy for beating the market.

I wish I could say that I developed my strategy because I was born with
infinite investment wisdom, but in fact I probably made the same mistakes
that every other investor has made.  I used fundamental and technical
analysis, and when I first started investing, I invested on "hot tips" from
my broker.  The key for me was going to The University of Chicago and
getting my MBA with a concentration accounting/finance and learning about
empirical testing of investment methods.  Prior to the 1960's investment
strategies were based upon "arm chair" philosophizing (i.e., if the head a
Wall Street brokerage firm's research staff said you should chart stock
price movements and analyze them in a certain way you would make money, then
the average investor would say this guy must know what he is talking about,
so they would buy his advice, etc.)  In the 1960's with the advent of high
powered computers and stock price data tapes academics began to analyze
these arm chair philosophers' techniques and found that when you applied all
of the various strategies that you investment returns were no better than
throwing 30 or darts at the WSJ stock listings and buying and holding those
stocks.  In fact this method gave superior returns because you avoid
transaction costs (brokerage fees, time wasted on stock research which could
be spent earning more wages, etc.).  It was at this time that I quit giving
money to brokers, quit listening to them and starting keeping money for
myself.

Something else happened early on in my investment career that made me change
my investment strategy.  I worked for a big CPA firm as a specialist in the
brokerage industry.  One of our clients was a trust set up a wealthy
individual to sponsor medical research.   It was at this time that the IRS
imposed a tax on certain tax exempt trusts.    One of the things that we had
to do was establish a basis for all stock owned by the trust to calculate
any gains or losses, should they sell the stock.  The trust's philosophy was
to  buy and hold stock in top quality companies.  Some of these stocks had a
cost basis of 10 cents a share, but were worth $60 to a $100 a share when I
did my work.  I thought to myself, why am I buying these "fly by night"
stocks on the recommendation of a broker, Barron's, etc.?  Since that time I
have only bought stock in real quality companies.  They don't go up 1000% a
year, but over the long haul, they make you wealthy.

Most investors are encouraged to be greedy by their brokers.    They want to
buy those stocks that give 1000% annual returns (I would like to also).   I
have learned that only occurs by chance and chasing that dream enriches
others at your expense.   I hope others will seriously think like you and I
do and begin to keep their own money and profits rather than giving it to
others!






-


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From: "Steve Foulks" <[e-mail]>
Subject: Re: Asset Allocation , part 2
Date: 19 Aug 1998 11:17:47 -0400


Jeff Salisbury wrote:
>Steve,
>I too, am a buy and hold advocate. However, being a CFP, what do you do
for,
>or recommend for your clients? Mutual funds? Or, a portfolio of stocks? How
>do you choose a mutual fund or stock since you indicate that you don't do
much
>research?
For beginners with little money I urge them to buy cheap index funds (like
the Vanguard S & P 500 fund, CREF Equity index fund) and hold them and also
to acquire stock in top quality companies and to hold them forever, using
dividend reinvestment plan and additional stock purchase plans.  In picking
a stock I use the following philosophy:  Does the company make a good
product and will people still want it 50 years from now? On that basis I
pick companies like Coca cola, WalMart, Exxon, etc.

As wealth increases, I urge people to drop mutual funds and create their own
diversified portfolio of stock and bonds, thus cutting out the middle man
(mutual funds) altogether.

Steven M. Foulks, CPA, CFP, PhD
<http://www-instruct.nmu.edu/business/sfoulks/>

Northern Michigan University <http://www.nmu.edu/home.shtml>





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From: <[e-mail]>
Subject: market makers
Date: 20 Aug 1998 00:00:27 EDT

I have a basic Wall St question:

I know there are "market makers" for each stock but am curious- is there a
person or computer somewhere that actually adjusts stock prices in real time
based on demand?  What types of criteria do they use? Is it based on precise
formulas or just a feeling that "demand is growing and I should raise the
price"?  When you see footage of the  exchange floors, are the guys in the
middle of the crowds the market makers?



-


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From: [e-mail] (Shankar Prasad)
Subject: Joint Term Life insurance
Date: 26 Aug 1998 10:53:46 -0700

Hi

I have been considering buying separate 20-year level
term policies for myself and my wife.  Someone mentioned
that JOINT policies are available.  I am wondering whether
there is any type of joint (level term) life insurance
policy which will pay death benefits when the FIRST person
dies, and preferably continues with some residual coverage
for the SECOND one.  This would be a FIRST-to-DIE-with-survivor
coverage type of policy, if such a beast exists.

Using such a joint policy might mean lower premiums than
two separate individual policies.  Does anyone have any
experience or opinions on the effectiveness of such
policies ?  Are there any insurance companies which offer
such policies ?

I have looked at www.insure.com, but cannot find any background
material on such joint policies.  Any other websites which
might cover the specifics and pros/cons ?

--
Regards
Shankar Prasad
[e-mail]



-


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From: "Sushil Agrawal" <[e-mail]>
Subject: Can I offset a sort term loss against a dividend
Date: 26 Aug 1998 16:53:49 -0400

If I sell a fund NOW (which was bought in Nov 97)  at a loss can I use the
dividends from other stocks to offset the loss.

I have a fund of which I bought  50 shares @ 18.73 now it is trading
at 14.42 (it had a capital gains distribution of $2.02  recently) so
actually is down only couple of dollars but if I sell it I will incur a
loss of about $200. can I offset this loss against the dividend from another
stock.

I plan to sell the fund, take a loss and buy back the fund.




-


-------------------------------------------------------------------------------

From: Richard Alpert <[e-mail]>
Subject: purchase of one share
Date: 26 Aug 1998 17:04:52 -0400

Bertrand Horwitz asks:

> I wish to purchase one share to give to a child as a birthday present.
> Where is the least expensive place that this can be done?

I bought single shares of Disney for my nephews a couple of years ago from
Ron Johnson (Dean Witter in Dallas, TX, 1-800-366-9194).  I don't remember the
terms, but chose him after some research, so, at that time at least, it was the
best deal I could find.

 - Richard Alpert



-


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From: "Jackson, Anthony D." <[e-mail]>
Subject: Re: Purchase One Share
Date: 26 Aug 1998 17:22:05 -0400

Bertrand wrote:

I wish to purchase one share to give to a child as a birthday present.
Where is the least expensive place that this can be done?
-------------------------

Go to http://www.moneypaper.com/ check the Temper Enrollment Service which
allows you to buy your first share for $15.00.

Or you buy shares directly from some companies the minimums are ~$250 -
$1000 for your initial purchase.  Check http://www.netstockdirect.com/

"TJ"





-


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From: "Steve Foulks" <[e-mail]>
Subject: Re: Investing
Date: 26 Aug 1998 23:15:29 -0400

Michael E Kurela said


>Fortunately there are as many different methods of investing as there
>are investment opportunities.  I found myself disagreeing with both you
>and Steven Foulks.  I do not purchase Blue Chips, nor do I purchase
>top companies and hold them for long periods of time.  I also do not
>believe in the notion that the market is purely efficient.

In order for stock markets to be efficient there have to be some
nonbelievers who believe that there is some reward for analyzing stock data,
making sure that stock prices reflect underlying economic values.  However
they are not rewarded for their efforts unless they are fund managers,
employees who earn a salary, in which case they make money whether their
fund does well, or not.  In your case, assuming you aren't a person paid for
analyzing stocks, you are simply wasting your time.

Capital Market efficiency isn't a religion, so believing in it isn't
important.  What do empirical tests show?  Given that tests of the
proposition are always going to be somewhat deficient (i.e., they require a
mathematical definition of risk), they do show that markets are highly
efficient.

>Do you realize that there are many people who bought into a two-bit company
years
>ago called Microsoft who have since not regretted their investment ?

First, Microsoft was not a two bit company when it went public.  It wrote
the operating system used on all PC computers.  Secondly, if they followed
your strategy (below) of never holding a position for a week, those people
would have never had the excellent long run returns that you mention.

>For the individual investor, the market is *far* from
>efficient.  Case in point - you can open a margin account and trade
>securities during the normal market hours.  You could, alternatively,
>establish a Level II margin account (NASDAQ), enabling you to trade
>on the fringe (before/after market open) of those hours.  As a daytrader, I
>have seen more colleagues earn abnormal gains during pre-market trading
>than proponents of "market efficiency" would have you believe.

This shows is that you don't have a clue, what it means for capital markets
to be efficient.  It simply hypothesizes the following with respect to the
stock market:

STOCK MARKETS PRICES REFLECT ALL INFORMATION WHICH COULD EFFECT A STOCK,
INSTANTLY, AND CORRECTLY.

If market functions in that way then by the time you get your information,
it is old, dated, and reflected correctly in the price - it is useless to
you.  If people earn more by day trading after hours as you allege, that
becomes information that the market will use, in which case it can't be used
to make abnormal profits again.  Capital market efficiency doesn't preclude
an individual from having a technique that can earn abnormal profits, but if
that person blabs about it to the world, and then everyone else uses it
because it is so great, then it won't work any more.  I think you would
agree that logically everyone can't earn above normal returns.

>The majority of my securities are never held for more than a week.  Most of
them are held for only
>a few hours.  By using my trading methodology, I turned $6k into $23k
>in under a month.  It's a simple one, too, that limits your exposure to
>broad market, macroeconomic, and microeconomic effects.  After
>all, the idea *is* to buy low, sell high.

Michael, you are a broker's dream.  I hope you use Charles Schwab (I own
stock in it).
I love your statement about your investment performance, but if you have
been at it for less than a month, I think it is a little too soon to start
crowing about how wonderful your system is.

Ignoring taxes for a moment let's assume it took you a whole month to turn
$6M into $23M, that translates into a 283% monthly return, or an annualized
return of 996,288,900% return(assuming monthly compounding)!!!!  Even Warren
Buffet would be impressed. After one year your $6M will be worth $21 billion
plus, putting you up there with Gates, Buffet and the Sultan of Brunei,  and
after two years you will be worth $210 quadrillion (210 million billion),
at which time you will own every asset on the face of the earth and then
some!!!

Two things are possible for investors like you, you wake up to reality
(which is what happened to me), or you waste a lot of time and money chasing
after the next Microsoft, and give up on investing altogether when you have
shot your wad.

Steven M. Foulks, CPA, CFP, PhD
<http://www-instruct.nmu.edu/business/sfoulks/>

Northern Michigan University <http://www.nmu.edu/home.shtml>







-


-------------------------------------------------------------------------------

From: "Richard A. Bauer" <[e-mail]>
Subject: RE: Re: Investing
Date: 26 Aug 1998 22:54:02 -0500

Michael Kurela responded:
I have to disagree with you.  BOTH of you.  The majority of my securities
are never held for more than a week.  Most of them are held for only a few
hours.  By using my trading methodology, I turned $6k into $23k in under a
month.  It's a simple one, too, that limits your exposure to broad market,
macroeconomic, and microeconomic effects.  After all, the idea *is* to buy
low, sell high.
****
So, just do this for 12 months Michael, and you will have 15,757,731!  Good
luck.






-


-------------------------------------------------------------------------------

From: Rich Carreiro <[e-mail]>
Subject: Re: market makers
Date: 26 Aug 1998 22:35:53 -0400

>I know there are "market makers" for each stock but am curious- is there a

Actually, the Nasdaq uses market makers and the NYSE uses specialists.

A Nasdaq market maker is an entity which holds a particular stock as
inventory and posts bid and ask quotes that it is willing to buy or
sell at least 100 shares at.  The market maker makes the bulk of his
profits by pocketing the spread between bid and ask prices.

Until recently MMs didn't even have to expose customer limit orders.
So if you put in a limit order to buy INTC at $80 when the MMs bid
quote was $79.75, it was very common that no one would ever know about
your order, i.e. the bid quote would remain at $79.75.  Thankfully, that's
been changed, and MMs have to expose most (all?) customer limit orders.

The MM sets a bid and ask prices based on the supply and demand it is seeing.
I'm sure that computers are used a lot in setting these prices, but they
don't have to be.

Note that in general all Nasdaq trades will go through a MM, unlike exchange
trades.

>price"?  When you see footage of the  exchange floors, are the guys in the
>middle of the crowds the market makers?

No.  They are the specialists.  They are tasked to help maintain an
orderly market.  Ideally (and unlike the Nasdaq system) trades occur
between brokers in an open outcry auction, not involving the specialist
at all.  However, if no brokers are currently interested in being
the counterparty to a trade, the specialist will often (and sometimes
is required to) buy and sell from his own account.  When he does so,
the trade must be of a stabilizing nature (i.e. must by an uptick in
a down market and vice versa).  The specialist also maintains the list
of limit orders on the stock he's specializing in.  He CANNOT trade
ahead of the limit orders in his book

For a far better first level discussion of all this, see the current
edition of Engel's _How to Buy Stocks_ at any library or bookstore.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.1



-


-------------------------------------------------------------------------------

From: Rich Carreiro <[e-mail]>
Subject: Re: Income tax on investments
Date: 26 Aug 1998 22:26:29 -0400

>Presuming that I have no income and begin to live off of my investments,
>that all of my investments are long-term, that I am married filing jointly,
>and that my tax bracket is 15%, what will I pay in taxes on $36,000 from my
>tax-deferred withdrawals? And at what tax % rate?

Tax-deferred monies are treated as ordinary income when withdrawn.
So some of that $36,000 will be taxed at 15% until the point where
it pushes you into the 28% bracket (which point depends on any other
income you have) and the rest of it will be taxed at 28%.

>In comparison, what if that $36,000 comes from after tax investments with a
>basis of say $10,000?

A long-term cap gain of $26,000 will be partially taxed at 10% and partially
taxed at 20%.

Your best bet would be to get copies of the 1997 tax forms and fill them
out as if you were in the position you are describing.  That'll be the
best way of telling you what your taxes would be.

>Another question would be will the tax rate be different on the withdrawal
>of tax-deferred investments if other income pushes the income above the 15%
>rate level?

Ordinary income is taxed at 15% in the 15% bracket, 28% in the 28% bracket,
and so on.  Long-term gains are taxed at 10% in the 10% bracket, 20% otherwise.

You might also want to check out www.fairmark.com, which has one of
the better guides to taxes and investing that I've seen.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.1



-


-------------------------------------------------------------------------------

From: Ira Krakow <[e-mail]>
Subject: Are DRIPs worth it?
Date: 27 Aug 1998 11:29:35 -0400 (EDT)

With the dramatic decrease in trading commissions (Brown and Company charges
$5 for a market order, a number of other charge less than $10, even
Schwab.com at $29.95 isn't too bad), why bother with DRIPs?

If you have an online brokerage account, you get instant liquidity, you can
in many cases reinvest dividends, and you don't have as much paperwork as
with DRIPs.  I'm starting to believe that DRIPs aren't really worth it any more.

Comments?

Ira




-


-------------------------------------------------------------------------------

From: Derrick Cole <[e-mail]>
Subject: Re: Are DRIPs worth it?
Date: 27 Aug 1998 21:03:43 -0400

</lurk>

I used DRIPs to start from literally nothing (read as $0).  Through periodic,
consistent investing of small amounts (i.e., <= $50) at no "cost" (I strategically
chose DRIPs with no measurable commissions), I was able to amass enough equity to do
exactly as you describe - I've since consolidated my DRIPs into a single discount
brokerage account with free dividend reinvestment, and can "enjoy" the improved
liquidity, single statement, etc.

Over the couple of years the above took to accomplish, I improved my cash flow such
that I'm now able to make larger periodic investments (i.e, > $1500) into that one
account, so the commission paid is (by percentage) still negligible.

>From my position, DRIPs indeed remain a viable means by which to begin investing,
with most/all your investment dollars working for you day one, and not requiring a
loan to get started (to begin investing directly with a broker might require $2000
or more up front).

My $.02,
Derrick

Ira Krakow wrote:

> With the dramatic decrease in trading commissions (Brown and Company charges
> $5 for a market order, a number of other charge less than $10, even
> Schwab.com at $29.95 isn't too bad), why bother with DRIPs?
>
> If you have an online brokerage account, you get instant liquidity, you can
> in many cases reinvest dividends, and you don't have as much paperwork as
> with DRIPs.  I'm starting to believe that DRIPs aren't really worth it any more.
>
> Comments?
>
> Ira
>
> -






-


-------------------------------------------------------------------------------

From: "Peter & Karen Diamond" <[e-mail]>
Subject: Stock Splits
Date: 29 Aug 1998 08:11:56 -0400

Hello everyone,
I was wondering what happens if you purchase a stock after the record date
for a split, but before the actual split occurs?
Thanks for the info.
Peter




-


-------------------------------------------------------------------------------

From: "Peter & Karen Diamond" <[e-mail]>
Subject: Stocks in IRA accounts
Date: 29 Aug 1998 08:16:21 -0400

Hello everyone,
I am thinking about opening a Roth IRA with a broker and purchasing
individual stocks with the contributions.  The broker who told me that I can
contribute $2000, but my actual stock purchases cannot be for the whole
$2000 since I have to include the commissions in the basis.  This doesn't
make sense.  With my mutual fund IRAs, I purchased $2000 in fund shares and
sent a separate check for the annual maintenance fee.  If I were to make
several stock trades during the year, how would I know how much I could buy
each time?
Thanks for your help with this.
Peter




-


-------------------------------------------------------------------------------

From: "Ken Meinken" <[e-mail]>
Subject: Re:  Are DRIPs worth it?
Date: 30 Aug 1998 01:17:22 -4

> From: Ira Krakow <[e-mail]>
> Subject: Are DRIPs worth it?
>
> With the dramatic decrease in trading commissions (Brown and Company charges
> $5 for a market order, a number of other charge less than $10, even
> Schwab.com at $29.95 isn't too bad), why bother with DRIPs?
>
> If you have an online brokerage account, you get instant liquidity, you can
> in many cases reinvest dividends, and you don't have as much paperwork as
> with DRIPs.  I'm starting to believe that DRIPs aren't really worth it any more.
>
> Comments?


Ira,

to a degree, I've also come to the same conclusion.  If you are going
to put a significant chunk of money against a stock (say enough to
buy 10 or 20 shares), you might come out ahead by buying at the right
time (buying a stock that fluctuates a lot at a better price ).  It
also allows you to sell at a precise time and/or price.

However, I think DRIPs have some definite advantages:
- a better approach if you want to routinely invest a small amount
(e.g. $25 each month).  That schedule/discipline can help some people
- helps to avoid panic decisions to sell

One definite negative to DRIPS is if people look for DRIP stocks for
investment ideas (limiting their universe to only DRIP stocks.)

Ken



-


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From: [e-mail]
Subject: Re: purchase of one share
Date: 30 Aug 1998 13:02:18 EDT

In a message dated 98-08-29 22:22:54 EDT, you write:

> Bertrand wrote:
>  Date: Tue, 18 Aug 1998 14:46:34 -0400
>  From: Bertrand Horwitz <[e-mail]>
>  Subject: purchase of one share
>
>  I wish to purchase one share to give to a child as a birthday present.
>  Where is the least expensive place that this can be done?

I recently did this through Ameritrade.  I paid the normal $8.95 for the
trade, but then had to pay another $30 to transfer the name on the certificate
and have that certificate mailed.    I'm not sure how these costs may differ
elsewhere, but it was very easy.

Scott



-


-------------------------------------------------------------------------------

From: Rich Carreiro <[e-mail]>
Subject: Re: Stock Splits
Date: 30 Aug 1998 08:12:30 -0400

>I was wondering what happens if you purchase a stock after the record date
>for a split, but before the actual split occurs?

You are still entitled to the split.  Even though you won't be a shareholder
of record for the split, the shares come with a "due bill" which means that
when the person who sold the shares gets the extra shares from the split, he
has to pass them along to you.  Of course, that's all handled internally by
the brokers these days.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.1



-


-------------------------------------------------------------------------------

From: Rich Carreiro <[e-mail]>
Subject: Re: Can I offset a sort term loss against a dividend
Date: 30 Aug 1998 08:07:50 -0400

>If I sell a fund NOW (which was bought in Nov 97)  at a loss can I use the
>dividends from other stocks to offset the loss.

It depends.  A short-term capital loss is first netted against
short-term gains.  The result of that is then netted against net
long-term gains.  If the result of all that is a loss, then the first
$3,000 of loss is taken against ordinary income, with the rest carried
over to next year.

>I plan to sell the fund, take a loss and buy back the fund.

Remember to wait 31 days before doing so.  If you buy the security
back from 30 days before the loss sale to 30 days after the loss
sale, the wash sale rule comes into plan and disallows the loss.
The disallowed loss is then added to the basis of the "replacement
shares", so it is not lost forever.

Rich Carreiro
[e-mail]
P5-100/RedHat Linux 4.1



-


-------------------------------------------------------------------------------

From: "Michael Kurela" <[e-mail]>
Subject: Re: Investing
Date: 31 Aug 1998 00:31:06 EDT

>Date: Wed, 26 Aug 1998 23:15:29 -0400
>From: "Steve Foulks" <[e-mail]>
>Subject: Re: Investing

>In order for stock markets to be efficient there have to be some
>nonbelievers who believe that there is some reward for analyzing >stock
data...  In your case, assuming you aren't a person paid for
>analyzing stocks, you are simply wasting your time.

Stock markets are efficient ONLY in the broadest sense of the terms.  In
the short-term, they are not efficient.  The research and facts on which
you are basing your statement is predicated on statistical analysis of
stocks and the random walk that the prices exhibit.  Statistical
analysis requires large stretches of chronological data (large samples)
by which to make inferences.  The data normally used is the price at
close.  I conducted research (unpublished) while working on my masters
of intraday prices and bid-ask spreads of 100 NASDAQ securities that
demonstrated intraday inefficiencies.  INTRADAY means short-term,
between market open and market close on a single day.

Whether there are nonbelievers or believers of efficient markets, it is
not the belief that causes the market efficiency but the collective
activity over long periods of time.  The effects of supply and demand
can also raise or decrease the price of a security, whether new
information has been released to the market or not.  I would not
consider the human trait of wanting something that is low in supply and
willing to pay more to obtain it a contributing factor to market
efficiency.  However, once the higher price is paid and the market price
of the security increases THEN the market efficiency paradigm has been
satisfied.  *sigh* Now if we could only predict human nature.

There is some pretty interesting research I've read about the psychology
of the market.  Just think, if a statistically significant portion of
trading volume is due to irrational investors who do not care about the
price or information inherent in the price of a security, their
irrationality is driving the prices higher or lower.  Some of the
greatest experts in the world will tell you, "Oh, well that
irrationality is captured in Beta."


>Capital Market efficiency isn't a religion, so believing in it isn't
>important.  What do empirical tests show?  Given that tests of the
>proposition are always going to be somewhat deficient (i.e., they
>require a mathematical definition of risk), they do show that markets
>are highly efficient.

Empirical tests become increasingly inaccurate as samples of data become
smaller.  How, then, do you propose to empirically test for market
efficiency if your data set is not large, contiguous, and rationally
gathered ?  How do you ensure a proper definition of market risk ?  The
standard is to use Treasuries, but I have seen arguments against the use
of them as the proxy for market risk.  Does risk change when the Fed
increases the discount rate and Treasury yields respond accordingly ?
Monetary policy should not drive the definition of the risk-free rate of
return that one would desire to use in an empirical test of market
efficiency.



>First, Microsoft was not a two bit company when it went public.  It
>wrote the operating system used on all PC computers.  Secondly, if
>they followed your strategy (below) of never holding a position for a
>week, those people would have never had the excellent long run >returns
that you mention.

You are taking my statement out of context.  Your recommendation was to
invest in strictly Blue Chip Securities and I was pointing out that
there are good investment opportunities outside of the Blue Chips.  I
also provided the reader(s) with examples of trades I had executed to
support my individual methodology.  Microsoft was not a Blue Chip when
it went public.



>This shows is that you don't have a clue, what it means for capital
>markets to be efficient.  It simply hypothesizes the following with
>respect to the stock market:
>STOCK MARKETS PRICES REFLECT ALL INFORMATION WHICH COULD EFFECT A
>STOCK, INSTANTLY, AND CORRECTLY.

Is your only method of debate to insult people who offer differing
opinions and evidence to support their opinions ?  I certainly hope that
you are a better educator in the class when responding to your students'
comments.  I *do* have a clue what the efficient market hypothesis
states and I happen to believe that it does not hold in the short-term.
Stock prices do not reflect all information which could affect its price
immediately, instantly, and correctly.  To illustrate this with another
example:

I took a class by Chester Spatt, of Carnegie Mellon University, who
developed models to value securities with interest-rate dependent
claims.  His research and identification of RJR Nabisco bonds during
mid-January 1991 revealed that the market mispriced the bond by more
than $11 per $100 face value.  The article appeared in The American
Economic Review, December 1993, vol. 83 No. 5.



>If people earn more by day trading after hours as you allege, that
>becomes information that the market will use, in which case it can't
>be used to make abnormal profits again.

It is not as I allege, it is a fact.  Granted, their trading activity
helps to establish the prices at market open.  Your expertise is in
accounting, tax management, and personal finance.  Have you researched
market microstructure at all ?  Check out margin accounts for Level II
trading.



>Capital market efficiency doesn't preclude an individual from having >a
technique that can earn abnormal profits, but if that person blabs
>about it to the world, and then everyone else uses it because it is >so
great, then it won't work any more.  I think you would
>agree that logically everyone can't earn above normal returns.

...and with this market efficiency, the January effect in small cap
stocks still exists.  How on earth do abnormal returns occur cyclically
if everyone knows about it ?



>Michael, you are a broker's dream.  I hope you use Charles Schwab (I
>own stock in it).

I use a few electronic brokerage firms for trading securities and have
quite a bit in mutual funds such as TIAA-CREF, Vanguard, Alliance, MFS,
and Lexington Troika Dialog.  The nice feature of TIAA-CREF and Vanguard
is that I can redistribute between equity portfolios and fixed-income
portfolios without incurring trading costs when I see macroeconomic
evidence that the market shifting.  Two weeks ago I moved most of my
mutual fund amounts out of equities and into fixed-income.  In my
opinion, we are approaching a period of declining stock values.



>I love your statement about your investment performance, but if you
>have been at it for less than a month, I think it is a little too >soon
to start crowing about how wonderful your system is.

As we debate the hypothesis of market efficiency (note that a hypothesis
is still a hypothesis and not a fact), I have been daytrading for over a
year.  My gains at December from stock trading activity alone was a
little over $352,000.  I'm not crowing and do not have a "system" that
I'm hawking to anyone - I think it is important to inform others who
want to learn about investing that there is more out there than
believing only in the market efficiency hypothesis and foregoing
portfolio income because self-termed "experts" ramble on that no one can
earn abnormal returns.  Successful investing, not just plugging away for
40 years at dollar-cost averaging, requires continuous attention to the
world around you.  The U.S. economy right now, for instance, is on a
downward slide.  Exports are down, imports are up, U.S. manufacturers
have too much product in the pipeline, credit card debt is high, and
foreign economies are beginning to falter.  Why take a 15% loss (oh,
wait, Wall Street is calling it a market correction) on long-term,
dollar-cost averaging in securities when fixed-income securities would
have provided protection against downward slide for the regular investor
and still kept you a little over inflation ?



>Ignoring taxes for a moment let's assume it took you a whole month to
>turn $6M into $23M, that translates into a 283% monthly return, or an
>annualized return of 996,288,900% return(assuming monthly
>compounding)!!!!  Even Warren Buffet would be impressed. After one
>year your $6M will be worth $21 billion plus, putting you up there
>with Gates, Buffet and the Sultan of Brunei,  and
>after two years you will be worth $210 quadrillion (210 million
>billion), at which time you will own every asset on the face of the
>earth and then some!!!

{laugh} A comedian you are not, so don't quit your day job at Northern
Michigan.  However, I hope I am not the first person to tell everyone
that you should never go to an accountant for business or investment
advice !  Accounting advice, yes - but I'd rather have economic profit
than accounting profit personally ;)



>Two things are possible for investors like you, you wake up to >reality
(which is what happened to me), or you waste a lot of time >and money
chasing after the next Microsoft, and give up on investing >altogether
when you have shot your wad.

Or three, they make a respectable amount of money and are intelligent
enough to not continually let it ride and risk it all in securities.

--mk

______________________________________________________
Get Your Private, Free Email at http://www.hotmail.com



-


-------------------------------------------------------------------------------

From: [e-mail]
Subject: Are Drips Worth It?
Date: 31 Aug 1998 09:04:20 -0400

     I'm not convinced that they are.  Recently, I wanted to sell
     my position (93 shares) in Motorola.  I had no control over
     when the stock would be sold by Harris Bank and Trust.  And,
     when it was sold they charged a $70. commission!!!  I'm
     ready to get out of my Drips and use a brokerage Div.Reinvest.
     In order to transfer these funds, I understand I need 100 shares
     for a stock certificate.  Is that right?  Marjorie
     <[e-mail]>



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From: [e-mail]
Subject: Re: Are Drips Worth It?
Date: 31 Aug 1998 09:26:43 -0400

     On Aug 27 Derrick Cole wrote
     "... I've since consolidated my DRIPs into a single
     discount brokerage account with free dividend reinvestment, and
     can "enjoy" the improved liquidity, single statement, etc."

     How did you do that?  I have Intel as a DRIP that I probably
     should consolidate in the same way to make it easier to sell,
     etc.  With the advent of discount brokers I don't think I will
     ever do a DRIP again.  I have enough paperwork in my life.

     [e-mail]




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