Was it really a “lost decade” in the stock market?

Pathways Advisory Group, Inc.
Dustin Smith, CFP®














We attend a conference in Santa Cruz every August. The attendees are passionate about Financial Planning. The speakers are great. However, at this year’s gathering, one speaker (an Economist from San Francisco) used a common but extremely unpopular phrase. He referred to a chart of the S&P 500 as the “lost decade” for stock market returns. Immediately, as if he insulted each of our mothers, five to ten otherwise respectable financial planners blurted “not true”. Apparently, many of us had begrudged the reference privately. We were tired of it.

Was he correct? Was the S&P 500 flat for the last decade? Yes. From August 2001 through July 2010, the timing of the conference, the S&P 500 compounded at -0.76% per year. Then where did he go wrong? He referred to the S&P 500 as the “stock market”.

Modern Portfolio Theory has, for some time, detailed the benefits of global diversification and the small and value dimensions of stock returns. During the same ten year period, a simulated portfolio allocated 100% to stocks with exposure to international markets, small and value stocks and Real Estate Investment Trusts (REITs) compounded at 7.08% per year.¹ Not exactly an exciting number but far from a “lost decade”.
Surely the portfolio mentioned above made tactical moves to outpace the S&P 500 by such a wide margin? Nope. The results were available through design, discipline and passive mutual funds, despite two bear markets (2000-2002 & 2007-2009).¹

Was the Economist referring to the actual decade? Perhaps. The S&P 500 lost an average of 0.95% per year from January 2000 through December 2009. However, the portfolio mentioned above compounded at 6.56% per year during this period.¹ Even if you cherry-pick the worst time period, the “lost decade” reference remains a misrepresentation.²
Thanks for listening. I feel much better!

¹ Simulated results are based on a 90% Stocks/10% Real Estate Portfolio using indexes and/or DFA mutual funds with annual rebalancing. Results do not include “management fees” nor do they suggest future results.

² The S&P 500 lost an average of 3% per year from April 2000 through March 2009 (the bottom). During this period the portfolio mentioned above compounded at 3.56% per year.¹

Election Day: Politics vs. Portfolio

How much stimulus is too much? Too little? How much regulation is too much? Too little? What is the appropriate role of the Federal Reserve? These are very important discussions to have. These conversations have been particularly interesting the past few years. However, allowing these discussions to influence portfolio design may be a mistake. Consider this video.

Keep in mind last month’s post differentiating the stock market from the economy – it is unexpected information that moves the market…not expected information…or political affiliations…

PATHWAYS HOLIDAY HOURS

The Pathways Advisory Group, Inc. office will

be closed for the following holidays:

Thursday, November 25, 2010

Friday, November 26, 2010

Friday, December 24, 2010

Monday, January 17, 2011

Monday, February 21, 2011

Friday, April 22, 2011

Monday, May 30, 2011

Monday, July 4, 2011


In case of emergency, please contact Schwab directly at 1 (800) 515-2157.

Happy Holidays!

How Do Markets Work?

The past few years we have experienced an extreme down market and an extreme recovery. The only constant has been volatility. Add a loaded political environment, multiple wars and media amplification and it’s easy to lose sleep. If you have been able to ignore the noise – great! If you haven’t, then understanding markets can be a quality of life decision.

Why is the stock market unpredictable? The simplest answer; because expected information, good or bad, does not move the market. Unexpected information moves the market. Unless you can expect the unexpected, markets are unpredictable.

Why does the market move higher on the news of rising unemployment? To understand this it helps to differentiate the stock market from the economy. Remember, the stock market is a predictor of the economy; the economy is not a predictor of the stock market. Markets moved higher because markets expected a greater rise in unemployment. Rising unemployment was already factored into the market price. The bad news was better than expected.

Today’s expected news was accounted for weeks or months ago. Today’s unexpected news is accounted for today. We don’t know what tomorrow will bring. More importantly, it is all noise if you aren’t selling. Understanding these nuances can prevent media reports from leading to speculative mistakes. Understanding markets allows us to consider all outcomes and plan accordingly. Time is the answer. Portfolio design is the answer. Quality of life is the goal.

The stock market is an extremely complex mechanism. It is likely there are some pricing inefficiencies in markets. However, discovering them and capitalizing on them is difficult to impossible. For more detailed information regarding these concepts visit our website or Dimensional’s website.

Get Busy Congress!

Pathways Advisory Group, Inc.
Dustin Smith, CFP®














What is the Estate Tax this year? What will the Estate Tax be next year? What will happen to income tax and capital gains tax rates next year? Nobody really knows. Get busy Congress; there is enough uncertainty to deal with.

Estate Tax: We currently have no estate tax. In 2009 a twenty million dollar estate might have resulted in an eight million dollar estate tax. In 2010 a twenty million dollar estate will owe nothing in estate taxes. However, also in 2010, the cost basis step-up at death is limited to 1.3 million (4.3 million for a spouse). Step-up refers to the forgiveness of capital gains on inherited assets. Therefore, in the previous example, there would be no estate tax due but the estate could owe substantial capital gains taxes. What does all of this mean? Less federal tax revenue overall and a record keeping nightmare for large estates. Some heirs will have to uncover seventy years of investment activity to calculate mom and dad’s capital gain…

Income Taxes: 2010 income tax rates are known. In 2011, however, the 2001 Bush tax cuts expire and rates return to previous levels (higher), unless Congress does something first. Most expect Congress to allow top tax rates to revert to previous levels (rise) but keep lower and middle income brackets as is. Nobody really knows. Anything is possible.

Capital Gains Taxes: Imbedded within the 2001 Bush tax cuts was a reduction in capital gains tax rates from 20 to 15% for high income taxpayers (10 to 0% for low income taxpayers). These rates also expire in 2011. They will revert to previous levels (20% and 10%) unless Congress does something first. The special tax rate for dividends will also expire. Will Congress let these rates expire? Probably. But nobody really knows.

Financial planning is full of uncertainty. There is just more than usual this year. High deficits may tempt Congress to shoot for revenue. Congress still could enact a retroactive 2010 Estate Tax. The 2010 death of billionaire New York Yankees owner George Steinbrenner may be reason enough… An ailing economy may tempt Congress to extend current tax rates. The November elections may lead to inaction. Inaction appears more likely after Congress failed to address the estate tax in 2010... There is a lot at stake. We will have to wait and see.

In the meantime, read your Health Care Directives and be nice to your kids. There is a little incentive to “pull the plug” this year!

Be safe.

The above explanations are summarized. Please confirm all specifics with your tax professional.

Is Social Security broke?



Pathways Advisory Group, Inc.
Jeff Karst, Associate Planner

Driving to work this morning I was listening to talk radio. The hosts were discussing how Social Security is broke and they know without a doubt, that they won’t be able to receive a single dime from Social Security when they reach retirement age. Then I asked myself, “Is Social Security really broke?”

Well, I guess that depends on your definition of broke. I constantly tell my wife that we are broke. That’s mostly so she won’t spend as much shopping for clothes and shoes. Do we have enough money to pay all the bills? Yes. Do we manage to save some each month? Yes. Then are we really broke? The truthful answer is “no”. (But I’ll never tell her that.)

When it comes to Social Security there are many people out there who like to fear-monger. They say that Social Security is “broke” in order to get folks riled up and angry at the politicians. And it works. However, the reality of it is a different story. The American Academy of Actuaries projects that in 2041 Social Security will only be able to pay 78% of the promised benefits. Until 2041, they will continue to pay 100% of benefits. This gives us about 30 years to come up with a solution. Actually, don’t think about it as “fixing it”. Think about it like maintenance on your car. After many miles, 100,000 or so, you need to perform some major maintenance in order to ensure it will last you another 100,000.

There was another time we suffered a big scare about the insolvency of Social Security. In the late 1980’s, the Social Security trust fund ran a deficit from 1984 to 1987. At that time, many people thought Social Security was going broke and would soon be dismantled. This led many to contribute more towards their retirement through 401(k) plans. In the mid-1980s, there were fewer than 8 million participants with less than $100 billion of assets in 401(k) plans. By 2006, there were seventy-million participants with more than $3 trillion of assets in 401(k) plans. Now, many of those people are only supplementing their retirement lifestyle with Social Security. Social Security was never meant to replace 100% of your pre-retirement income. But these days, most people live the same lifestyle as before because of their 401(k) or IRA.

Let’s pretend for a moment that nothing is done to ensure benefits remain at 100% of promised. Then the question is; does it matter? Most likely it does NOT matter. My generation will be much more dependent on our 401(k) or IRA than any other generation before. Social Security will become a small supplement to what we will need in retirement. Receiving only 78% of promised benefits may not be such a big deal. (My wife would only buy 78% of the shoes she wants.)

Is Social Security broke? I think the truthful answer is “No”. Does it need some maintenance? Yes.

Perspective

Pathways Advisory Group, Inc.
Dustin Smith, CFP®














Ever find yourself in a rut? If you are human... you have. How does it happen? Why is it so easy to slip into mediocrity? I read something today that answers this perfectly. It was just what I needed. The article, Avoiding Mediocrity, referenced a book quote from Anne Bachrach's Living Life With No Regrets.

She asked registered dietician and certified exercise physiologist Dennis Collier: "What is the impact of choosing not to lead a healthy lifestyle over the short term and long term?"

His response: "This question really gets to the root of the cause of why people often choose not to do the healthy things. They key is this: There are minimal short-term consequences to making the unhealthy choice. In fact, quite often it is just the opposite - the unhealthy choice is the one that is most pleasurable. This applies to many things in life, not just health and fitness."

It's easy to talk yourself out of a healthy lifestyle... "It doesn't really matter today. There is always tomorrow." Then something snaps you out of it. Losing a loved one. A health scare. A 50th birthday. A recession. A song. A place. A book. Or in this case, a magazine article. At some point, by definition, tomorrow becomes today. Diet and exercise return to importance. A better financial balance becomes important. People become more important. Unfortunately, it's easy to lose perspective. Thankfully... it's also easy to regain.


Reference: Avoiding Mediocrity, Bill Bachrach. Financial Advisor Magazine. Sept 2010.

What Does “Safe” Really Mean Anyway…



Pathways Advisory Group, Inc.

Michelle Carter, CFP®

 











About a month ago, I was asked to give a presentation for the ladies at church. They wanted a basic overview of financial planning in about 20 minutes. Not an easy task, one could say even impossible. But we did have a lively discussion touching on many topics.

At one point in the discussion, I used the word “safe” when describing an investment. Without thinking, I immediately lifted my hands to make the infamous finger quotes as I said that word. After the presentation, I asked myself, “Why the finger quotes?” Either an investment is safe or it’s not, right? Is there such a thing as a safe investment?

There are many ways to think about this, but I would like to concentrate on just two: market risk and inflation.

For a long time, the general investing public considered bonds as a fairly safe investment. Sure there were some risks (such as rising interest rates during the life of your bond), but, for the most part, people believed they would collect their interest regularly and receive their principal back at some point. The bear market of 2007 – 2009 changed their minds quickly, as investors learned it is possible to lose principal in the bond market.

Nowadays, it seems savings accounts and CDs are the go-to safe investments. At 1% - 2%, they don’t offer much in return, but at least you know the money will be there when you need it.

Market risk may be the first thing on an investor’s mind when looking for a safe place to invest. However, I would also like to consider inflation.

If you invested $100 at 2%, you would have $110 in five years, and about $150 in twenty years. This is fine for a cash reserve or if you are saving for a short-term goal.

But what happens in retirement?

The average inflation rate over the past 20 years or so is about 4.5%. A service or product that costs $100 today could cost $125 in five years, and a whopping $250 in twenty years. Suddenly, your safe investment simply can’t keep up.

Seems the investment wasn’t that “safe” after all.

So, instead of defining what is safe versus what is not, let’s look at what is safer.

It is safer to keep your cash reserve in a bank account or CD, rather than subjecting it to short-term market fluctuations.

It is safer to keep your retirement money working for you inside a diversified investment portfolio with an allocation that matches your goals and risk tolerance.

And it is safer to stick with your investment plan over the long haul, realizing the market rewards patient investors.

On that note, I think it is now “safe” to end this blog posting. :)

It's a boy!

Pathways Advisory Group, Inc.
Dustin Smith, CFP®














We are proud to announce the birth of Bryce Robert Smith, born to Dustin and Teri Smith. He was born on July 12, 2010 at 3:09 PM; he weighed in at 8 pounds 3 ounces and was 21.25 inches long. He and his proud parents are doing well. Congratulations to them both on the birth of their baby boy!

"Freedom is the oxygen of the soul." - Moshe Dayan

Happy 4th of July weekend! Reminder: Our office will be closed on Monday, July 5th, in observance of Independence Day.

Two New Faces

We recently welcomed two new members to our Pathways team; Jeff Karst and Sarah Hinson. Both are Fresno State alumni. Jeff is currently in Pathways "boot-camp," learning as much as possible each day to ultimately become a paraplanner for us. It's not too scary for him. He did spend six years in the Navy. Sarah Hinson, ironically, will help fill the void left by Sarah Schneider. Her name was not a factor in the hiring process.

There is more to come about Jeff and Sarah in the June newsletter. In the meantime, we wanted to introduce two new faces should you stop by the office. We are excited to have them join our group!

"Flash Crash"

Pathways Advisory Group, Inc.
Dustin Smith, CFP®














You’re at the mall and suddenly a few hundred people are running from something…. Do you join them? Or do you first ask questions? I think I would ask questions later... At the very least, a little exercise won’t hurt. Would you sell a stock just because a few thousand others did? That would be the instinctive reaction. They must know something…

After about 14 months of a climbing market, fear came rushing back on May 6th. The May 6th “Flash Crash” still lacks definitive explanation. Although no-one seems to know exactly what happened during a wild 20 minutes or so, the main source was news about economic troubles in Greece.

Fears about Greece were enhanced by a nationwide strike and live video feeds (during trading) of riots in Athens. Concerns arose about a potential contagion effect on the rest of the European Union. US markets were down about 3% before dropping to nearly 9%... in 20 minutes. However, markets recovered to end trading back near the 3% (S&P 500) loss. Yep, only 3%. That sure wasn’t the headline, was it?

Within a few days, markets recovered most of their losses. Nevertheless, what a strange day May 6th was. Stories of a “fat-fingered” trade appear to be rumors. Nobody seems to know exactly what happened. After markets closed, about 450 NASDAQ and NYSE Arca (an electronic exchange owned by NYSE) trades were cancelled. The SEC announced an investigation shortly thereafter.

There has since been some discussion of additional “circuit breakers” (a halt to trading for a period of time after a quick drop) but for the most part the market sorted it out. Again, what a strange day May 6th was. It all started because of an economic mess in Greece. (Let’s throw a little Greece on the fire!) Although the Greek issues have justifiably led to concerns about other European nations and the “Euro”, it’s pretty amazing that a country with a Gross Domestic Product (GDP) comparable to the state of Georgia (the 10th or 11th largest State GDP in the United States) can cause such a ripple.

For long-term investors, it was just noise. Same old, same old. For day traders, it was a nightmare. For market procedures, it was a test. Hopefully most of you heard about it days or weeks later. I am just thankful I wasn’t on the floor of the New York Stock Exchange in the middle of the thundering herd…

Conversations - A Grandson's Perspective

Pathways Advisory Group, Inc.
Dustin Smith, CFP®














He is gone. What will I miss? I am going to miss our conversations.

I will miss the wisdom hidden within the occasional inappropriateness. Whining was always met with “the world’s smallest violin for the world’s saddest tune” as he played a make-believe violin with his thumb and forefinger. Or… “You know, excuses are like.....”

I will miss the laughter. “With 5 to 1 odds, even I am a hot commodity at the widow and widowers club”...

I will miss the quiet examples, from the man who never met a stranger and never missed an opportunity to lift someone else.

He smiled when it wasn’t required.

He was helpful when it wasn’t expected.

He was kind when there was nothing to gain.

I suspect it made a difference... to someone at the bank, the supermarket, the casino or the senior center in Crescent City, where he made his home for the last 30 years.

I will miss our conversations. But I did not miss much, from the conversations we did have. As David stated in a recent Newsletter article, true “Wealth” and “Richness” has to do with people. Relationships make our lives rich. One of the people that enriched my life was Ashby Smith, my grandpa. Born August 1st, 1926. Passed away May 28th, 2010.

I will stop now; this has gone on far too long for his liking… I travel to Crescent City this week. I return to the office next week. Grandpa once told me that the key to life, is without a doubt, a sense of humor… so I am trying not to lose mine as we say goodbye to him this week.

Retirement

Pathways Advisory Group, Inc.
Dustin Smith, CFP®














Retirement: To withdraw from one's occupation, business, or office. To retreat to a place of privacy or seclusion. To achieve financial independence. Not too fond of the second definition. Retirement means different things to different people. What matters most, is what retirement means to you.

We have guided clients through each stage of life. The accumulation years. The catch-up years. Retirement. The distribution years. And the Golden Years. No two plans are alike. We run projections. We accumulate and we accumulate. We discuss portfolio design; risk vs. return tradeoff. We help with logistics (paperwork, rollovers, and recurring distributions). We discuss gifting and estate plans. However, the most important discussions have little to do with numbers…

What does retirement mean to you? How does the ideal month in retirement look? What will you do? Where will you go? Who will you see? Does your vision include part-time work? Might there be a void in your identity? What will replace it? What does it feel like to stop working… after 25 years? You may choose a traditional retirement. You may choose to think outside the box. Or you may choose to make the best of your circumstances. But it’s wise to contemplate these questions. Without a purpose, it’s just money.

We can share client experiences. We can guide you through the preparation, implementation and sustainability. We can have these discussions. But you have to – no, you get to do the soul-searching and dreaming.

It often helps to learn from those who’ve gone before us. The following Businessweek article offers a few first hand “retirement” stories:

http://www.businessweek.com/magazine/content/10_07/b4166069331755.htm

Struggling with your retirement vision? The following book turns traditional retirement upside down. The author presents a “new” way to think about retirement. His vision may not apply to you. But it will make you think. Remember, there is no right answer, just an answer that is right for you:

http://www.amazon.com/New-Retire-Mentality-Planning-Living-Dreams/dp/0793141826#noop

2009 Tax Year

Each new year brings change. The 2009 Tax Year was no exception. Keep an eye out for the applicability of the following tax benefits to your situation this April.

Workers: The "Making Work Pay Tax Credit" came from the "American Recovery and Reinvestment Act of 2009". Payroll withholding tables were modified mid-year to account for the tax credit. However, to capture the benefit assumed by withholding tables, you must claim the credit on your 2009 Tax Return (line 63 of Form 1040).
Rules: The credit is $400 for Single taxpayers ($800 for Married Joint taxpayers). To claim the full credit, Single taxpayers must have earned income in excess of $6,451 ($12,903 for Married Joint taxpayers). The credit is "refundable" (eligible taxpayers with zero tax liability still receive benefit). The credit is completely phased out for Single taxpayers with Adjusted Gross Income (AGI) greater than $95,000 ($190,000 for Married Joint taxpayers). Keep in mind the difference between a tax credit and a tax deduction. A deduction of $400 saves you from paying tax on $400 (at a 28% tax bracket the savings is $112). A tax credit of $400 saves you $400.

For more information consult "2009 Changes" from the following link:

http://www.irs.gov/publications/p553/ch01.html

Retirees: The "American Recovery and Reinvestment Act of 2009" also contains a few benefits for retirees. The first benefit, is not a credit, but has the same effect. The 2009 "Economic Recovery Payment" was provided to all Social Security recipients. The second benefit, the "Government Retiree Credit", applies to Government Retirees not entitled to Social Security benefits.
Economic Recovery Payment Rules: No action was required to receive this payment. The payment was $250 for each Social Security recipient. If applicable, each recipient should have noticed a one month increase in social security benefit late last year. The payment also applied to SSI, railroad and veterans disability/retirement recipients.
Government Retiree Credit Rules: The Government Retiree Credit was not automatic. The benefit, a true tax credit, must be claimed on your 2009 Tax Return (also on line 63 of Form 1040). The $250 credit is available for each eligible retiree. Government retirees include recipients of Federal, State and Local Government (or instrumentality) pensions. A few people receive a Government Pension and a Social Security Benefit (they paid into both systems during their working years). These retirees would not be entitled to both benefits. Also, for those receiving a retiree benefit above and working, the "making work pay credit" will be reduced by the retiree benefit.

For more information consult "2009 Changes" from the following link:

http://www.irs.gov/publications/p553/ch01.html

Charitable Contributions: There was a late addition to this list. Tax deductible donations to Haiti Disaster Relief efforts may be eligible for acceleration into the 2009 tax year. Eligible donations between January 12th 2010 and February 28th 2010 can be added to your charitable deductions total on Schedule A (Itemized Deductions) of your 2009 Tax Return.

For more information visit the following link:

http://www.irs.gov/newsroom/article/0,,id=218678,00.html

The above explanations are summarized. Please confirm all specifics with your tax professional. Your accountant will probably claim the applicable benefits on your behalf. However, you can review your tax return for confirmation.

2010 IRS e-file Refund Cycle Chart

For those of you expecting a tax refund and have filed your taxes using e-file, the IRS has posted a chart showing when you can expect your refund to arrive. Click here to view this chart.

Investment Pornography: 2010 Predictions

Pathways Advisory Group, Inc.
Dustin Smith, CFP®














What’s in store for markets this year? Early predictions are mixed. The evidence for continued struggles is compelling. The evidence for recovery is compelling. A successful forecast must objectively account for all variables, such as interest rates, credit markets, real estate, foreclosures, regulation, global markets, unemployment, consumer behavior, government spending, taxation, etc. (not to mention the weather!!!) and apply the proper prediction and weighting to each. The evidence suggests the task is, at best, extremely difficult…

2009 will not make a forecaster’s resume!

Here are few of last year’s predictions and subsequent results. Predictions weren’t nearly as mixed. For reference, the market bottom was established March 9th2009.

Prediction: "Don’t be fooled by bear market rallies. It’s way too early to get back into U.S. stocks… Expect meltdowns in securities backed by credit card debt, home equity, student and auto loans as well as commercial real estate… Avoid emerging markets, especially China. China’s fiscal bailout contains lots of smoke and mirrors and social unrest is mounting."
Gary A. Shilling, "Field Day for Short-Sellers," Forbes, February 16, 2009.

Result: This article begins with the success of 2008 market predictions: "I hope you took my advice, because all 13 of the predictions turned out to be true". The article goes on to predict a dismal 2009. Probably should have taken the year off: March 1st - December 31st 2009:

1. S&P 500 + 55%.
2. MSCI Emerging Markets Index + 103%.
3. The Hong Kong Small-Cap Index + 114%.
4. The Hong Kong Value Index + 58%.
5. Dow Jones US REIT Index + 101%.

Prediction: "Equity bulls can argue that each fresh low brings the market closer to a bottom, but this has been a constant and increasingly hollow refrain for more than a year. Moreover, attractive valuations, reflected in low price earnings ratios and dividend yields comfortably above 10-year government debt yields, are increasingly believed to represent ‘value traps’ for investors - in other words, they are cheap for good reason."
Michael Mackenzie and David Oakley, "No End in Sight for Equities’ Bear Hug," Financial Times, February 25, 2009.

Result: March 1st 2009 - December 31st 2009:

1. Russell 3000 Value Index + 57%
2. Dimensional Small Cap Value Index + 121%.

Still waiting for that value trap….

Prediction: "The economy’s green shoots have stopped growing…. Stocks can’t ignore the economy just yet. The data suggest still more bank losses, more uncertainty about government intervention and a longer recovery process than the consensus expects. ‘We don’t have a business-cycle recovery in sight…. You can’t rule out a 2010 recovery, but we have no objective evidence to support it.’"
Quotation attributed to Lakshman Acuthan, managing director, Economic Cycle Research Institute. Gongloff, Mark, "Stocks Still Can’t Ignore The Numbers" Wall Street Journal, March 2 2009.

Result: You get the picture… 2009 was a fantastic year for stock investors.

Dustin’s 2010 Prediction: If economic reports surpass market expectations, prices will rise. If recovery trails market expectations, prices will drop. Stocks will be volatile. Markets will be markets. Investors will be surprised. Diversification will reduce volatility. Went out on a limb didn’t I…

David’s 2010 Prediction: Dustin will be right.

Michelle’s 2010 Prediction: David will be right.

Summary: The consensus was unmistakably "bearish" one year ago. We have a ways to go to recover all losses, but 2009 was certainly a nice start. The experts did not see it coming. The point of this post is not to insult the experts. I respect most of them. Their research is extensive, sound and compelling. We share a similar passion. The results simply suggest they can’t account for everything… The market humbles those who listen….

Job Hunting?

Pathways Advisory Group, Inc.

David L. Williamson, CFP®

Recently, a client came to her meeting very discouraged. She may soon lose her job. We encouraged her to begin a job search now - not wait for the ax to fall. Several weeks ago, we interviewed a number of people because of Sarah’s departure. My daughter Leah and her partner, Brenda, arrived in the San Diego area from New York a few months back - eager to find new jobs. (They both did!) So, I have dispensed quite a bit of job-hunting advice of late and stood in judgment as a prospective employer.

If you know someone out there seeking a job, you might pass along these tips:

1. Operate from a position of strength - it is easier to seek a new position while still employed, rather than waiting to become jobless, and therefore appearing more desperate. (Caveat: all of my current employees are not to follow this advice.)


2. Browse the bookstores. There are scads of great books addressing all areas of job hunting. Where to look (great internet sites). Resume tips (most resumes are yucky). Interviewing skills (be prepared, already). Guerilla tactics (be cunningly creative).


3. Resumes: Absolutely proofread the thing. Have a friend proofread. Kill all the errors - spelling, grammar, format, punctuation. I have seen this: "Atension to detail"!! Always provide a cover letter. The three resumes out of twenty that have cover letters attract more attention. The cover letter should make the reader want to meet you. Tailor the letter (and the resume) to each employer. See the internet or a good book to learn the basics of resumes - style, active language, etc. Use an attractive non-white color to stand out, with high quality paper.


4. Interviews: Be prepared to ask good questions. When the interviewer asks you whether you have any further questions - speak up - impress. If the position sounds good to you, tell them it does, and why. Rarely have I been told by an interviewee that the job sounds good and she would love to have it. Be sure to get the card or cards of the interviewer(s). You must, as soon as you can, write a thank you note (spelling all names correctly!!) and express your interest in the job and what stood out to you during the interview.


5. Be proactive. Research companies that interest you. They may not advertise any openings. No problem. Approach them. Tell them why you have an interest in their firm. What great skills, savvy, energy you might bring to them. Fire away. No competition!! Again, the books have many angles here.


6. You got the job!!! For heaven’s sake, don’t rest on your laurels. Do all that you can to deliver the goods. Find ways to solve problems. Question outmoded patterns and processes. Seek ways to support all of those around you, including those that might report to you. Your mission is to grab the opportunity and become an indispensable asset.

Am I weird, or what?

Pathways Advisory Group, Inc.

David L. Williamson, CFP®

I discovered online chess in November. I’ve played chess off and on through the years, mostly in college (usually in lieu of studying!). It’s a great mental exercise full of calculations both strategic and tactical. I enjoy it. I’ve played a lot online these past few months - with opponents all over the world. But it seems our leisure activities can strangely affect us.

I find my movements are now sometimes chesslike. (At least I think about chess as I move.) The rook moves straight ahead or straight back - think north or south. Or he turns exactly right or left and then marches directly east or west. Not much creativity there. Much of my daily movement seems predetermined this way. This, my wife tells me, is my absentminded mode. She sees a lot of that.

The bishop slides all over the compass on diagonals. Northeast, southwest, etc. Tricky movement. I use this move when sneaking up on the dog. Or when I try to pass the buck at work. (Although I prefer to call this delegation.) My wife sees the bishop in me when I attempt to slide out of doing the dishes.

The queen is all powerful. She can move just like a rook or, when circumstances warrant, slide around like a bishop. I try these power moves, but my wife seems far more adept - shifting effortlessly between blunt force and sly, fluid outflanking. I never quite know where she’s going next.

The pawn is the little dude who usually marches forward one step at a time. On my early morning walk, I’m like the pawn. One foot in front of the other. When the pawn begins his march from the 2nd rank on the board or I from the back door, we sometimes bound forward with extra vigor. The pawn is allowed this optional extra long stride only as his first move.

Then, strangest of all, is the knight - the horse like figure. The knight jumps one step in any direction, then leaps two steps more but at right angles to the first step. Picture the capital L. Or like this ­­­Γ. An extremely sneaky way to move. I use this move when I’m cornered. Or when I’m indecisive. Should I do this first or that? Almost like you forget where you are going. (Why am I looking inside the fridge? I meant to open the microwave!)

Chess affects my thinking, too. I sometimes plot just one move ahead, or two, or, on a good day, three. I sometimes face a problem or obstacle head-on, like a rook. Or, when dealing with wives, or co-workers, or grandchildren, or clients, or even myself, I’ve got to be the devious bishop. Weirdest of all is the knight. I sometimes do the crazy knight two-step until I’m back where I started! But, best of all, is to use chesslike thinking to solve a problem. First, find a good move. Then, be patient, be observant, be diligent, and find a better one.

Oh well. I guess weird is OK. By the way, you can see me in action (albeit extremely slow action) on chess.com. I go by chippook. If you play, look me up. Let’s have a game. Oops! I forgot to mention the king. The king may move one step, but only one, in any direction. His eternal problem is “Whither do I go now?” Sounds like he needs a good planner!!

First Time Home Buyer Tax Credit: Part 2

Estate Tax reform remains on the agenda. Health care reform and Financial Regulatory reform, as well. What will happen? When will it happen? We don’t know. We can, however, offer one update. The Worker, Homeowner, Business Assistance (WHBA) Act of 2009 was passed on November 6th 2009. A primary purpose of the act was to extend and expand the First Time Home Buyer Tax Credit originally described in last September’s blog post. If you are in the market for a new home - it may be worth your while to accelerate your search.

The WHBA Act extends the First Time Home Buyer Tax Credit to include eligible purchases prior to May 1st 2010. The act also includes some interesting expansions. The act broadens eligibility to higher income levels and includes a reduced credit for certain “long-time residents” purchasing a new home. Here are the rules:

1. The deadline has been extended to May 1st 2010 - a binding contract must be signed by May 1st. The credit can be used to purchase a new or an existing home - but must be your principal residence.
2. The Adjusted Gross Income (AGI) phase-out range for eligibility has increased: $125,000 to $145,000 for Single taxpayers and $225,000 to $245,000 for Married Joint taxpayers.
3. The $8,000 tax credit is claimed on your 2010 tax return. It can, however, be claimed on your 2009 tax return to accelerate the benefit or to ensure AGI qualification.
4. It remains refundable. If your total tax for the year is zero, you will receive the $8,000 by check. The home must remain your principal residence for three years.
5. The definition of a first time home buyer continues to be someone who has not owned a principal residence for the past three years.
6. The Act offers an alternate credit of $6,500 for previously ineligible taxpayers who have: owned and used a house as principal residence for any consecutive five-year period during the eight-year period ending on the closing date for the purchase of the new residence.

Your Realtor should have up to date information. The National Association of Realtors posts a summary on their website .

Please check with your accountant to verify all specifics.