Real Estate And Stock Market

BUSINESS IN BRIEF 26/4

noreply@blogger.com (Mehmood Best) — Mon, 4 May 2009 15:01:00 -0700

Malaysia’s Hyrax Oil Sdn Bhd (Hyrax) and Viet Nam’s Electrical Equipment Manufacturing Joint Stock Company (EEMC) inked a memorandum of understanding in the capital on Thursday.

Under the document, Hyrax will supply at least 5.1 million litres of transformer oil worth US$7 million over a period of three years to the EEMC.

The deal was among a number of agreements signed between businesses of the two countries following recent trade promotion programmes implemented by the Malaysian trade office in Viet Nam.

In a move to boost trade ties between the two countries, the Malaysian trade office said it would organise trips to help Malaysian businesses to take part in two large expos in Viet Nam, including the HCM City International Fair and Healthcare Equipment and Service Fair.

The office said it was also preparing to invite Vietnamese businesses to join in two exhibitions in Malaysia.

Trade between Malaysia and Viet Nam topped $4 billion in 2008, a year-on-year increase of 22 per cent.

Malaysia now ranks second among 60 countries and territories investing in Viet Nam, with more than 300 projects capitalised at roughly $18 billion. Malaysian businesses are interested in construction of residential and urban areas, bridge, water treatment, power plant, port, highway and airport in Viet Nam.

noreply@blogger.com (Mehmood Best) — Mon, 4 May 2009 14:59:00 -0700

More Californians are failing to make their mortgage payments than at any time in the last 20 years, but fewer of them are losing their homes, according to new figures.

The drop in foreclosures follows moratoriums adopted by major banks and mortgage giants Fannie Mae and Freddie Mac. The increase in loan defaults, meanwhile, suggests that rising unemployment and the continuing recession are still claiming fresh victims.

But another factor in the soaring default rate could be that some struggling homeowners are purposely skipping their payments so that they can get their loans refinanced, industry experts say.

Lenders are so backlogged with requests to adjust loan terms that "they focus on the borrowers who already are circling the drain and ignore the people who are keeping up with their payments," said Jeff Lazerson, president of Mortgage Grader, a Laguna Niguel loan broker.

A default notice is the first step in the foreclosure process, and California homeowners received 135,431 of them in the three months ended March 31, MDA DataQuick of San Diego said Wednesday.

That's an 80% increase over the previous three-month period and a 19% jump over the same period last year.

Meanwhile, the number of actual foreclosures, in which the home was repossessed by the lender, fell to 43,620 in the first quarter, a 6% drop from the last three months of 2008 and a 7.6% decline from the year-earlier quarter. Foreclosures peaked in the third quarter of 2008 at 79,511.

Much of the drop stems from a change in state law that made it more cumbersome for lenders to foreclose, DataQuick analysts said. That also led to procedural delays for banks and other lenders, which in many cases were not prepared to handle the additional paperwork.

"Some of these outlets weren't staffed enough to process all these loans, and so they had this huge backlog that we're starting to see work its way through," said Andrew LePage, a DataQuick analyst. "There's also a chunk of it that could be the lender pushing the borrowers into default to get the modification rolling or the borrowers doing it themselves to qualify."

Nationally, foreclosure numbers also have fallen.

Data firm RealtyTrac of Irvine said Wednesday that the number of homes taken over by banks dropped to 190,543 in the first three months of the year, a 13% decrease from the last three months of 2008. Defaults jumped 10% over the same period, to 306,785.

Late last year, the country's two biggest buyers of home loans, Fannie Mae and Freddie Mac, stopped foreclosures on many of the loans under their control. Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp., Morgan Stanley and Wells Fargo & Co. all followed suit, saying they wanted to give President Obama time to work out the details of his housing plan.

Those moratoriums have tapered off. Fannie and Freddie announced at the beginning of April that they would begin foreclosing on homes again.

The various federal efforts now underway do offer some incentives for banks to help homeowners in default -- including a $1,000 payment to loan servicers for every successful loan modification.

But the incentives are even better for loans that are current, $1,500 in those cases. The centerpiece of Obama's plan, the Homeowner Affordability and Stability Program, is aimed at people who are current on their loans.

But many troubled borrowers in California are not eligible for help under Obama's plan because they owe much more on their loans than their homes are worth. To qualify for one of Obama's programs, a mortgage's balance must be no more than 105% of the value of the home.

"California loans are so far underwater that people won't fit into that narrow window," said David Leibowitz, a bankruptcy and foreclosure attorney at Lakelaw in Chicago.

With the unemployment rate, now 8.5% nationally and 11.2% in California, expected to continue rising, economists believe more people will be struggling to make their mortgage payments, leading to a continued uptick in defaults. But foreclosures won't necessarily follow the same trend, experts say, because banks don't want to overtax a housing market already flooded with cut-rate properties repossessed by lenders.

"If they can work something out with a borrower, they are going to try to work it out because they don't want to recognize these losses," said Steve Hable, a loan modification administrator who works for San Diego attorney and AM radio show host Jeff Isaac. Isaac has been holding seminars encouraging people to hire attorneys like himself to help them through the loan modification process. He said that when he meets with struggling borrowers, he finds that getting the bank's attention has been one of their biggest problems.

"There is so much confusion out there," Isaac said. "And people end up making really bad decisions, like borrowing against their 401(k) to make their house payments. You do that and you are destined for real misery down the road."

The demand for modifications has become so pressing that Bank of America, which services more home loans than any other company, said last week that it had 6,400 employees working on mortgage restructurings.

Stock Market Crash: How to Invest in a Bad Economy & Pick Good Stocks to Buy in 2009

noreply@blogger.com (Mehmood Best) — Mon, 4 May 2009 14:58:00 -0700

The stock market should present you with a wide variety of NEW hot stocks in 2009. Many of them are going to be new technology stocks that come from the nanotech, biotech, financial, energy, healthcare & communications sectors. Most of them might seem promising, but the truth is that a good number of these trading & investing opportunities could be extremely risky, while others are simply not as good as they look. That’s why it’s very important to know how to choose among the best especially if you want to day trade them.

When you know how to pick and approach the best hot stock trading opportunities, you are able to generate a consistent and respectable amount of money in a very short period of time. Experienced day traders recognize that trading hot stocks on momentum can be the fastest way to make money in the stock market, especially on uncertain times like these. You don’t necessarily have to trade momentum hot stocks all the time. But you can learn how to take advantage of them when you encounter the best opportunities for going long or for shorting them to make money when they are poised to fall down. If You decide to day trade stocks just keep always in mind that for a trader to survive and be consistently profitable, its necessary to keep things as simple as possible. To much confusion and technical indicators will most of the time make you slow in your decisions and froze you up when a good opportunity is right in front of your screen.

In the end, stock market day trading is all about picking the best daily stock opportunities and following your buy and sell signals with ease and simplicity. Once you learn to master your trading decisions, you can aspire to produce consistent profitable results.

Nigeria Stock Market

noreply@blogger.com (Mehmood Best) — Mon, 4 May 2009 14:54:00 -0700

The Nigerian Stock Exchange was established in 1960 and in 2007, the exchange has nearly 300 listed companies. Nigeria’s stock market has a market capitalization of approximately $65 billion. All listed companies are included in the Nigerian Stock Exchange All Shares Index.
Nigeria’s stock exchange has an automated trading system and performances of the listed companies is published on a regular basis -- daily, weekly, monthly as well as annually.

The Nigerian stock market has done very well from January to September 2007. In this nine month period, it has recorded a turnover of N1.5 trillion, which is a 220 percent increase compared to the entire turnover for the year 2006.

The trading days at the Nigerian Stock Exchange are Monday to Friday from 11.00 a.m. to 1.00 p.m. The Nigerian Stock Exchange charges at 3 percent commission on the traded value of the shares and an additional 1 percent to cover the Securities and Exchange Commission fee.

The government of Nigeria is keen on getting foreign investment into the country. This would explain by the government abolished a law which prevented the flow of foreign investment into the country. Now foreign brokers are allowed to enlist as dealers on the Nigerian Stock Exchange and foreign investors can invest in Nigeria with no restrictions.

The apex government body which regulates the capital market in Nigeria along with the Securities and Exchange Commission are in favor of setting up multiple exchange system. They believe that by doing this investors would be attracted to invest in cities other Laos which is the hub for capital market activities at the moment.

Stock Market

noreply@blogger.com (Mehmood Best) — Mon, 4 May 2009 14:52:00 -0700

Antimonopoly Comity of Ukraine allowed LLC "Dormostproect" (Road&Bridge Project Company) to purchase more than 50 % shares of CJCC "Kievsoyusdorproect".

Company "Ò.Ì.Ì." attracted 180,6 mln. UAH during private accommodation of bonds. Profitableness of bonds makes 13 % annual, term of the reference - 2 years. The period of accommodation of bonds - from October, 4th till December, 4th, 2007

National Bank of Ukraine registered increasing of amount of stock of International Mortgage Bank (IMB) from 112 mln. UAH to 380,567 mln.UAH.

The European Bank of Reconstruction and Development (ERDB) has granted a loan to group of companies "Furshet". The sum of the credit has made $90 million from which $30 million have been syndicated to commercial banks. Proceeds of credit will be directed on expansion of a network in regions of Ukraine and Moldova.

Investment-construction Corporation "Avantazh" has made a decision on establishing the company LLC Esset Management Company "Avantazh Capital Management ". The authorized capital of the company will make 400 thousand euro.

Industrial group " UPEK" has sold 97,25 % of stocks of "Factorial-bank" (Ukraine) to financial group SEB. Transaction has been closed on December, 21st, 2007. Amount of transaction was $120 million.

The Ukrainian investment group - company KDD Group N.V. (KDD) has placed stocks in the alternative market of investments (AIM) the London stock exchange. As a result of accommodation the company has involved $130 million.

Post No 1:Is buying a house right now a sound financial decision?

noreply@blogger.com (Mehmood Best) — Wed, 4 Mar 2009 15:17:00 -0800

As the stock market went through an upset, followed by a rebound this week, you might be wondering if it is a good time to invest in real estate.

I wrote a post last week on ActiveRain, a social networking site for the real estate industry, in which I discussed Suze Orman's advice earlier last week on NBC's Today show. Orman gave consumers three tips to protect their money; one of which pertained to real estate. She said consumers should buy real estate if they can get a good deal, "thirty to fifty percent" off.

The response on ActiveRain has been from real estate professionals about their local markets. Some markets have shown modest appreciation of 3-5% in home prices. Others have seen a decline in home prices in varying percentages. So far, all have commented that they cannot fathom a deal in which a real estate buyer would get 30-50% off a home sale, even if the house were a bank-owned (REO) property or in foreclosure.

Last month, I wrote a short series of posts in which I interviewed homeowner Meredith Molokie, who sold her house in California and upgraded because it was the right time for her family. She ended up selling her house in a neighborhood where she beat out foreclosures, AND she was able to upgrade to a house that she otherwise might have been priced out of the market for if she had waited a few years to buy.

Lee Greve, owner and broker of Connect2Agent, wrote a post for this blog last September, "Home Prices have fallen in your area- The perfect opportunity to upgrade". Greve said even in a market where a real estate seller's house value might have decreased from the year past, that seller should still consider upgrading because of the deal he/she can get that otherwise wouldn't be available in a market with a higher demand from real estate buyers.

I pose a similar question to the readers of this blog that I did to the ones on ActiveRain, not because I want to beat a dead horse, but because I think it is an important issue:

Post No 2:"For Sale"

noreply@blogger.com (Mehmood Best) — Wed, 4 Mar 2009 15:15:00 -0800

23 months ago: A real estate "For Sale" sign hangs on the front of new townhomes in this 14 March 2007 file photo in Centerville, Virginia.Wall Street shares raced higher Tuesday after crude oil prices dipped on signals that tensions appeared to ease between Iran and Britain over the Islamic republic's holding of 15 British sailors.The Dow Jones Industrial Average advanced 111.18 points (0.90 percent) to 12,493.48 and the Nasdaq composite leapt 28.58 points (1.18 percent) to 2,450.84 at 1520 GMT.The rally gathered momentum after the National Association of Realtors said its pending home sales index rose 0.7 percent in February, a sign that the real estate slump may be easing. "The stock market appears to be resilient, having handled the Middle East flare up in pretty good shape," noted Fred Dickson, market strategist at DA Davidson

Post No 3:Weak Housing Market Affects Stock Market

noreply@blogger.com (Mehmood Best) — Wed, 4 Mar 2009 15:13:00 -0800

The National Association of Realtors (NAR) expected the home prices to finish down for the year, which would be the first drop since 1968. Single-family homes are expected to decline by 1%,to $219,800. The number of home sales is also expected to dip from 6.48 million in 2006 to 6.29 million in 2007, a drop of 2.7%. Experts believe speculative investing in real estate is not going to work any more and buyer should be in for long-term. In 2008, NAR is forecasting price gains of 1.4 % for existing homes and 2.2 % for new homes. NAR also expects interest rates, currently at about 6.16 % for a 30-year fixed-rate loan, to rise gradually to about 6.5 % by the Q4.

Subprime Lending Industry
Subprime lending industry has added to the declining home prices. High foreclosures and forced sales all add up to the already increasing inventory, expectedly hurting the real estate industry. Loan originators are tightening up lending standards this year in response to increasing defaults among subprime borrowers. This makes it even more difficult for buyer to buy homes, subsequently weakening demand for housing market.

Walls Street
Wells Fargo (WFC) has put a ban on risky lending practices where big financial institutions and investment firms have bought home loans in bulk from banks and other lenders and bundled them into securities to be sold to investors, theoretically spreading risk and helping provide more funds for lending.

Toll Brothers (TOL) reported increase in the rate of cancellations. The Q2 cancellation rate was 19%, up from 9% a year ago but still easing from 30% in Q1.

More on Foreclosures
Rising foreclosures will bring misery to many home owners but bargain prices for some lucky home buyers. Many real estate auctions market more than 500 foreclosured properties in a span of a week. Few homes will go for less than $5,000. Although many of the sales this year have clustered in the economically hard-hit Midwest, many of the homes coming to auction later this year will be higher-end properties such as California, Texas and Florida.

Below is a Heatmap, showing the foreclosure filings on a per capita basis. Darker the red color, the more per capita filings there are.

Post No 4: Market Efficiency:

noreply@blogger.com (Mehmood Best) — Wed, 4 Mar 2009 15:11:00 -0800

The differences between the stock market and fantasy sports provide great learning opportunities, too. Insider trading is illegal, but it keeps the stock market honest and efficient. What exactly is an efficient market, you ask? Well, it’s when everyone makes investment decisions based on the same public knowledge that Bob next door has. When you don’t play by the rules, like Martha Stewart and various other infamously corrupt former company executives, you go to jail. On the other hand, insider knowledge in fantasy sports gives you an incredible advantage over your competition. If you have private knowledge of a player’s injury, field and weather conditions, or in the case of the NBA, crooked referees, you increase your odds of success. While this isn’t an efficient market, it’ll still help you understand the stock market and keep the SEC from knocking at your door.

These are just a few examples of how you probably already know all you need to know about investing in the stock market, you just didn’t realize it. Granted, there are dozens of other theories and concepts that apply—diversifying your portfolio, insuring your “studs,” and buy-low/sell-high to name a few—so feel free to leave a comment if you’d like to discuss further. I may not be a true stock market guru, but I have won a few fantasy leagues in my day.

Post No 5: Fantasy Sports and the Stock Market

noreply@blogger.com (Mehmood Best) — Wed, 4 Mar 2009 15:10:00 -0800

The U.S. economy is lagging worse than reruns of The English Patient. While the banking and real estate industries have their investors in tears, oil and gas investors are sporting Tony Robbins-sized grins, puffing on a $50 Cohiba as their yacht pulls into the harbor. What’s my point, you ask? They were opportunists, seizing opportunities when others looked the other way. When asked what his investment strategy is, Warren Buffet—worth a reported $62 billion—explained that he “simply attempts to be fearful when others are greedy and to be greedy only when others are fearful.” The market will eventually rebound, that’s the beauty of capitalism. In today’s bearish market, there’s no better time to sin than now.

If you’re already investing in the market, congratulations, let me get you a cookie. However, for the rest of you, you’re either extremely conservative or just gun-shy about putting your money into something you don’t fully understand—the stock market. Let’s face it, if you knew as much about the stock market as you do about the various fantasy sports draft strategies or salary caps, things would be different, right? Well you’re in luck, because it turns out that fantasy sports actually represent an experimental market, so knowing how to run a team makes you capable of running your own stock portfolio. I know, you’re excited, but settle down a bit so that we can learn some basic concepts to get you on your way to stock market riches.

Let’s start with the “big picture.” The fantasy league represents the market, team owners are the investors, and the players are the stocks. Write it down. Still with me? Good. Now let’s get an introduction to the meat of this sandwich—relevant financial theories.

1Post No:Canada Real Estate 365 - Americans Buying

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:27:00 -0800

From Canada Real Estate 365 - While the globe watched the United States stock market convulse in January because of fears of a possible recession and troubles related to subprime mortgages, Rudy Nielsen was busy closing a million-dollar deal with another USA buyer.

"American buyers are still coming here," Nielsen told the Georgia Straight. "There's still a great demand for Washington guys to drive up to B.C. and get some great skiing, some fishing, and even some of our golf. So theyâ€™re still buying recreational land."

The veteran realtor, who has been in the property market for more than forty years, also said that the sales volume being created by his company doesn't indicate a slowdown in terms of USA purchases of recreational properties.

2 Post No:New Real Estate ETF Enters at a Challenging Time

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:27:00 -0800

PowerShares is entering into the real estate market with the United States through a new actively managed exchange traded fund (ETF) launched Wednesday.

PowerShares Active Real Estate Fund (PSR) will trade on the New York Stock Exchange and will invest in real estate securities within the FTSE NAREIT Equity REITs Index.

Billy Fisher for TheStreet reports that the Equity REITs Index has fallen 41.2% this year, more than the S&P 500’s 37.6% decline. However, the Invesco company reveals they think this is an opportune time to jump into the real estate market. The investors need to be convinced that this is the bottom for real estate. It is also important to remember that the markets will not remain depressed forever and a recovery could be just around the corner. We watch the trend lines in order to get a sense of this.

One advantage the new PowerShares fund might have is that the actively managed format allows it to avoid areas of the market that have been hit the hardest. The fund will focus more on commercial real estate than single-family housing.

The crisis has delayed the launch of MacroShares’ new funds.

SPDR Dow Jones Wilshire REIT Index (RWR), down 58.8% year-to-date

3 Post No:When the market has slumped.

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:26:00 -0800

Most folks I know get quite excited when the market is marching upwards — that’s when they ask the usual questions about what type of stock to get into or what fund is worth checking out. It’s the herd mentality at work, and when stocks are strong and market momentum is fierce, we can’t help but be swept in it. But what about those times when the market is in the dumps? If you’ve got the funds, entering the market during a correction or bearish period may yield you good value for your money, especially when you take the long view. Taking the contrarian approach can yield you bigger returns down the road since big downtrends are usually followed by even bigger rallies.

When all you hear is bad news.

As they say, buy when there’s blood on the streets. This is simply a corollary to the “rule” that states that you should consider buying when the market is down. I get particularly excited when people are selling and bad news is circulating everywhere, thereby exerting downward pressure on the markets. So contrary to what you may think, bad news is really good news….for buyers and investors!

When you stumble unto a windfall.

Okay so how many of us can admit to spending a windfall before we actually ever receive it? Have you tried mentally accounting for a windfall, and assigning it to an expense bucket before you’ve even gotten a chance to touch it? Unfortunately, it happens too often especially these days when cash flow is tight and everyday costs are up. But if we change our habits and place any unexpected extra money (such as an inheritance, cash gift, tax refund or even the remote possibility of a lottery win) into the stock market instead, that money will leave you a much bigger impression later on than if you simply spent it. Windfall + stock market + power of compounding = potentially big profits later.

4 Post No:When Should You Buy Into The Stock Market?

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:24:00 -0800

I’ve got this former co-worker who absolutely refuses to buy into the stock market. He says it’s like playing the lottery or gambling. And no matter what kind of justifications I make, he won’t listen — instead, he’s content with putting his money into real estate property in his native country. His investments have yielded him significant returns in recent years, so it may be hard to argue with him about it.

However, this just emphasizes yet one more truism about investing:

Invest in what you know best and what you’re most comfortable with.

Though many of us don’t necessarily begin our investing lives as experts on things we’ve invested in, the point here is that we do enough due diligence on matters that put our money at some risk.

Thus, if you’re open to the idea of investing in the stock market (like most people actually are ) but are somehow still on the fence about it, maybe some of the following thoughts will help you take the dip into a few investments that should grow at a greater pace than your staid FDIC insured savings account, over the long term.

The Best Time To Get Into The Stock Market?

A lot of people I know ask me about when they should start investing in the market. My quick answer to them is “Buy now!”, but that really deserves a bit more explanation. Here’s what I really mean: when somebody asks me “When should I buy into equities?” I ask them to zero in on these 8 indicators that could tell them they’re ready to wade into stocks:

When you’re comfortable about it.

Don’t jump into the market unless you’re really comfortable with the inherent risk it offers. Because of the relatively higher returns that stocks give you, the risk to your capital is also greater. Of course, there is other risk involved if you do NOT invest in the market, like the risk that your money won’t be keeping up with inflation. By diversifying your portfolio and maintaining a long term investment horizon, you’ll manage your risk of capital loss much better.

Like, yesterday!

Most personal finance buffs will tell you that you should invest early or as soon as possible. I’ll take it further and say you should have started investing yesterday — and it’s obvious why. A while back, the stock market was a lot lower than it is now. Not in the near term of course, but look far enough in the past and you’ll see how it’s climbed. If you had invested yesterday, you’d be sitting on some profits. This is the case even as the market has dipped so many times over the years: the market’s long term trend is still UP.

4 Post No:Non-Financial Hardship 401k Withdrawal

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:24:00 -0800

Although the investor must still pay taxes on non-financial hardship withdrawals, the ten-percent penalty fee is waived. There are five ways to qualify:

You become totally and permanently disabled
Your medical debts exceed 7.5 percent of your adjusted gross income
A court of law has ordered you to give the funds to your divorced spouse, a child, or a dependent
You are permanently laid off, terminated, quit, or retire early in the same year you turn 55 or later
You are permanently laid off, terminated, quit, or retired and have established a payment schedule of regular withdrawals in equal amounts of the rest of your expected natural life. Once the first withdrawal has been made, the investor is required to continue taking them for five years or until he/she reaches the age of 59 1/2, whichever is longer.

A 401k hardship withdrawal should be a last resort. An IRA, for example, has a lifetime withdrawal exemption of $10,000 for a house with no strings attached.

What is the maximum contribution limit on your 401k account? The answer depends on your plan, your salary, and government guidelines. In short, your contribution limit is the lower of the maximum amount your employer permits as a percentage of salary (e.g., if your employer lets you contribute 4% of your salary and you earn pre-tax $20,000, your maximum contribution limit is $800), or the government guidelines as follows:

401k Maximum Contribution Limits
2004: $13,000
2005: $14,000
2006: $15,000

Once the year 2006 has been reached, the total maximum contribution limit will be increased based on changes in the cost of living.

5 Post No:401k Hardship Withdrawal

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:23:00 -0800

What if your employer doesn’t offer 401k loans or you are not eligible? It may still be possible for you to access cash if the following four conditions are met (note that the government does not require employers to provide 401k hardship withdrawals, so you must check with your plan administrator):

The withdrawal is necessary due to an immediate and severe financial need
The withdrawal is necessary to satisfy that need (i.e., you can’t get the money elsewhere)
The amount of the loan does not exceed the amount of the need
You have already obtained all distributable or non-taxable loans available under your 401k plan

If these conditions are met, the funds can be withdrawn and used for one of the following five purposes:

A primary home purchase
Higher education tuition, room and board and fees for the next twelve months for you, your spouse, your dependents or children (even if they are no longer dependent upon you)
To prevent eviction from your home or foreclosure on your primary residence
Severe financial hardship
Tax-deductible medical expenses that are not reimbursed for you, your spouse or your dependents

All 401k hardship withdrawals are subject to taxes and the ten-percent penalty. This means that a $10,000 withdrawal can result in not only significantly less cash in your pocket (possibly as little as $6,500 or $7,500), but causes you to forgo forever the tax-deferred growth that could have been generated by those assets. 401k hardship withdrawal proceeds cannot be returned to the account once the disbursement has been made.

6 Post No:401k Loan Limits

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:22:00 -0800

In most cases, an employee can borrow up to fifty-percent of their vested account balance up to a maximum of $50,000. If the employee has taken out a 401k loan in the previous twelve months, they will only be able to borrow fifty-percent of their vested account balance up to $50,000, less the outstanding balance on the previous loan. The 401k loan must be paid back over the subsequent five years with the exception of home purchases, which are eligible for a longer time horizon.

401k Loan Interest Expense

Even though you’re borrowing from yourself, you still have to pay interest! Most plans set the standard interest rate at prime plus an additional one or two percent. The benefit is two-fold: 1.) unlike interest paid to a bank, you will eventually get this money back in the form of qualified disbursements at or near retirement, and 2.) the interest you pay back into your 401k plan is tax-sheltered.

The Drawbacks of 401k Loans

The biggest danger of taking out a 401k loan is that it will disrupt the dollar cost averaging process. This has the potential to significantly lower long-term results. Another consideration is employment stability; if an employee quits or is terminated, the 401k loan must be repaid in full, normally within sixty days. Should the plan participant fail to meet the deadline, a default would be declared and penalty-fees and taxes assessed.

6 Post No:Investment customization and flexibility

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:22:00 -0800

401k retirement plans give employees a range of choices as to how their assets are invested. An individual that knows he or she does not have a high tolerance for risk could opt for a higher asset allocation in low-risk investments such as short-term bonds; likewise, a young professional interested in building long-term wealth could place a heavier emphasis on equities. Many businesses allow employees to acquire company stock for their 401k retirement plan at a discount although many financial advisors recommend against holding a substantial portion of your 401k in the shares of your employer in light of the Enron and Worldcom scandals.

One of the benefits of a 401k retirement plan is that it can follow an employee throughout his or her career. When changing employers, the investor has four options:

1.) Leave his/her assets in the old employer’s 401k retirement plan
Many 401k plan administrators charge record keeping and other fees to manage your account, regardless of whether you are still with the company. These fees can take a significant bite out of your future net worth, especially if you have accounts maintained at several different employers.

2.) Complete a 401k rollover to the new employer’s 401k plan
Practically speaking, this option is only available if the employee has another job offer before leaving their current employer. In some cases, it may be the best option as it is simple. How do you know if it is the right choice? The decision should largely be made based on the investment options of the new 401k plan. If you are unsatisfied with the choices available to you, completing a 401k rollover to an IRA may be a better option.

3.) Complete a 401k rollover and move the assets to an Individual Retirement Account (IRA)
Completing a 401k rollover is almost always the best choice for those interested in providing for a comfortable retirement because it allows the investor’s capital to continue compounding tax-deferred while providing maximum control over asset allocation (i.e., you aren’t limited to the investments offered by the 401k plan provider.) Here’s how it works: A distribution of the current 401k plan assets is ordered (this is reported on the IRS Form 1099-R.) Once the assets are received by the employee, they must be contributed into the new retirement plan within sixty days; this deposit is reported on IRS Form 5498. The government limits 401k rollovers to once every twelve months.

4.) Cash out the proceeds, paying taxes and the 10% penalty fee
With the exception of failing to take advantage of an employer’s contribution match program, cashing out a 401k when leaving jobs is the single most stupid decision a working individual can make. According to a press release by the 401K Help Center, research indicates “as many as 66 percent of Generation X job changers take cash when leaving their jobs, and 78 percent of workers aged 20-29 take cash.” The tragedy is far greater than the taxes and penalty fee alone; indeed, the greater financial loss comes from the decades of tax-deferred compounding that capital could have earned had the account owner chosen to initiate a 401k rollover.

The purpose of your 401k retirement plan is to provide for your golden years. There are times, however, when you need cash and there are no viable options other than to tap your nest egg. For this reason, the government allows plan administrators to offer 401k loans to participants (be aware that the government doesn’t require this and therefore it is not always available.)

The primary benefit of 401k loans is that the proceeds are not subject to taxes or the ten-percent penalty fee except in the event of default. The government does not set guidelines or restrictions on the uses for 401k loans. Many employers, however, do; these can include minimum loan balances (usually $1,000) and the number of loans outstanding at any time in order to reduce administrative costs. Additionally, some employers require that married employees get the consent of their spouse before taking out a loan, the theory being that both are affected by the decision.

7 Post No:401k Retirement Plan

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:21:00 -0800

Begin Providing for Your Future

Anyone familiar with the time value of money knows that even small amounts, when compounded over long periods, can result in thousands, or even millions, of dollars in additional wealth. This simple truth is one of the reasons many financial planners recommend tax-advantaged accounts and investments such as traditional / Roth IRA’s and municipal bonds. In the past, these decisions were not as crucial because of the prevalence of defined-benefit pension plans. Today, those old-world pensions are going by the wayside at many U.S. firms; instead, most of today’s workforce is likely to find their retirement years funded by the proceeds of their 401k retirement plan.

What is a 401k retirement plan?

A 401k retirement plan is a special type of account funded through pre-tax payroll deductions. The funds in the account can be invested in a number of different stocks, bonds, mutual funds or other assets, and are not taxed on any capital gains, dividends, or interest until they are withdrawn. The retirement savings vehicle was created by Congress in 1981 and gets its name from the section of the Internal Revenue Code that describes it; you guess it - section 401k.

What are the benefits of a 401k retirement plan?

There are five key benefits that make investing through a 401k retirement plan particularly attractive. They are:

Tax advantage
Employer match programs
Investment customization and flexibility
Portability
Loan and hardship withdrawals

Tax advantage of 401k retirement plans

As touched on in the introduction, the primary benefit of a 401k retirement plan is the favorable tax treatment it receives from Uncle Sam. Dividend, interest, and capital gains are not taxed until they are disbursed; in the mean time, they can compound tax-deferred inside the account. In the case of a young worker with three or four decades ahead of them, this can mean can mean the difference between living at the Plaza Hotel or the Budget 8.

Employer match for 401k retirement plans

Many employers, in an effort to attract and retain talent, offer to match a certain percentage of the employee’s contribution. According to Starbucks’ “Total Pay Package” brochure, for example, the company will match a percentage of the first 4% of pay the employee contributes to their 401(k) retirement plan. Employees at the company for less than 36 months receive a 25% match; 36 to 60 months receive a 50% match; 60 to 120 months receive a 75% match; 120 or more months receive a 150% match.

In other words, an employee working at the coffee giant for over ten years earning $100,000 that contributed $4,000 to their 401(k) would receive a $6,000 deposit in the account directly from the company (150% match on $4,000 contribution.) Anything the employee deposited above the 4% threshold would not receive a match.

Even if you have high-interest credit card debt, it is preferable, in almost all cases, to contribute the maximum amount your company will match! The reason is simple math: If you are paying 20% on a credit card and your company is matching you dollar-for-dollar (a 100% return), you are going to end up poorer by paying off the debt. Factor in the tax-deferred gains generated by the 401(k) plan, and the disparity becomes even larger. For more information on this topic, I suggest you read the work of Suze Orman.

Although the topic will be discussed in further detail later in this article, be aware that employer matching contributions up to six-percent of an employee’s pre-tax salary are not included in the annual limit. For example, if you qualified, you could make a 401k contribution of $13,000 in 2004 and have your employer still match the first six-percent of your salary; that match would be deposited above and beyond the $13,000 you contributed directly.

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:19:00 -0800

Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted hedge funds with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Prior to Apex Advisors, Mike worked at UBS and Bear Stearns, focusing on asset management and merchant banking.

The accuracy of his predictions and insights detailed in the 2006 release of America's Financial Apocalypse and Cashing in on the Real Estate Bubble have positioned him as one of America's most insightful and creative financial minds. These books serve as proof that he remains well ahead of the curve, as he continues to position his clients with a unique competitive advantage. His first book, The Startup Company Bible for Entrepreneurs has become required reading for high-tech entrepreneurs, and is used in several business schools as a required text for completion of the MBA program.

Restrictions Against Reproduction: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the copyright owner and the Publisher. These articles and commentaries cannot be reposted or used in any publications for which there is any revenue generated directly or indirectly. These articles cannot be used to enhance the viewer appeal of any website, including any ad revenue on the website, other than those sites for which specific written permission has been granted. Any such violations are unlawful and violators will be prosecuted in accordance with these laws.

9 Post No:Why did I rehash the painful events of the past?

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:19:00 -0800

Because it is important to keep in mind how the market responded to events. Just like we look at previous prices to measure moving averages and volatility, we must also retrace previous market sentiment. Now let's consider some basic trend analysis. As you can see, the Dow made an all-time high in October 2007. Since then, it has made lower lows and lower highs, typical of a downward trend. But how far and how long will this bear market last? First of all, we need to remember that the previous bullish rally was quite fast, occurring over about 20 months. In fact, the lion's share happened in 6 months (May to October 2007) for about 18% gains. What does that mean? Well, in my opinion, it means the bullish rally was not that valid. Remember, price validity strengthens with time.

If we look where the Dow is now, it's easy to see that it hit some fairly strong support around the 10,800 range. However, this support was just prior to the previous bull run which began in early 2007. In other words, if in fact, the previous bull run was an artifact, it is likely that the Dow has a way to go down before any long-term trend reversal.

Next we examine a 14-month chart of the Dow. As you can see, I've drawn the upper and lower trend lines. The dashed lower trend line illustrates very short-term extreme selling pressure I typically dismiss as noise. But as you can see, we've encountered three of these periods thus far, making what I would normally consider to be noise an important consideration.

The big question is where will the market head over the next several months. No one knows for certain, as this depends upon many variables and the timing of these variables. All we can do is look at the possibilities. The first thing I will say is that, based upon the three previous periods of extreme selling pressure, it is likely that we will see additional periods of these brisk sell-offs, but only if the downward trend remains in place. As for the downward trend, currently the Dow is trying to mount a strong rally up from the previous oversold level around 10,800. This rally was triggered by the Fed's bailout commitment to Fannie and Freddie, as well as additional positive news in the financial sector. Therefore, barring any further catastrophic events over the next several weeks, it looks as if the market could continue the current rally. But by how much and for how long? Once again, it is impossible to say without knowing in advance several variables

10 Post No:Stock Market Forecasting Made Simple

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:18:00 -0800

Generally speaking, throughout the decline of a bubble, there is a new theme every month or so. And in-between these periods, the “no news is good news” sentiment is usually cause for a market rally in the early stages, as denial remains a strong force. At a later stage when “no news” isn't enough to lift the market, pundits and CEOs come out and claim that the worst is over. Let's look back at the past 18 months and see how things played out.

A Look at the Recent Past

In late February of 2007 we saw the first signs of problems with mortgage companies that were buried deep in sub-primes.

(1) After a drop of around 500 points, the market rallied to new highs by late April.

(2) Next, the move from early March to mid-July was huge, the Dow having moved from 12,000 to 14,000.

(3) Then the avalanche began and the market dropped by 1200 points over about 4 weeks.

(4) But one day in particular it fell to around 11,500 intraday and closed up significantly.

(5) That intraday low was a key level that I knew would be retested down the road. In fact, I was certain it would fall through it based on what I knew about the troubles in the real estate market and banks.

11 Post No:Wealth Evaporation of $40 Trillion: 3 Areas: Global Stock Market Capitalization, U.S. Residential Real Estate, and Oil.

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:17:00 -0800

We have never seen so much global wealth destruction happen at once. Global equity markets are off in the 50 percent range and don’t seem to be letting up. We are seeing wealth destruction at an unprecedented rate. We can debate whether inflation will show up but until the U.S. Treasury bubble pops, we can expect to see deflation in our current forecast. I think it is hard for many to comprehend that $40 trillion has evaporated from a few niche markets.

In this article I’m going to focus only on 3 areas and find $40 trillion of wealth that is now gone. Keep in mind that this figure is not all encompassing. Recent estimates put global wealth destruction upwards of $70 trillion. So where is this $40 trillion? Let us first look at global equity markets:

Global Stock Market Cap Value at Peak: $60.7 trillion

Current Global Stock Market Cap Value: $30 trillion (approximate)

At the peak the global stock market value in 2007 hit a peak of $60.7 trillion. Of course this was an epic bubble but the market was not reacting that way in 2007. The fact that most markets are off approximately 50 percent, would now put the global equity markets back to $30 trillion, a level unseen since 1999. The world it would seem has just witnessed a lost decade occur over one year.

Now keep in mind this varies. Here are a few baramoteres:

MSCI World Index: -50.1% from high

MSCI Emerging Markets Index: -60.4% from high

S & P 500: -47% from high

Hang Seng Index: -58% from high

Russia Trading System Index: -67.4% from high

Dublin ISEQ Index: -76.8% from high

Bombay Sensex Index: -54.9% from high

I think you get the picture. So right here alone, we have found our first $30.7 trillion in wealth destruction.

Running total: $30.7 Trillion

That is merely looking at global stock markets. But what about global real estate? We all know that there were multiple housing bubbles going on at the same time globally as everyone believed in the housing mania that swept the globe. From Dublin, to Sydney, to London, to Madrid, to New York, to Los Angeles, every major city seemed to be engulfed in this same housing delusion.

*Source: The Economist

In fact, as it turns out the United States did not have the most outrageous housing prices which is really saying something considering the seed of our bubble was planted way back in the early 1980s.

Countries like Ireland and Britain are in worse shape when it comes to real estate values. But let us only look at U.S. residential real estate values. First, at the peak residential real estate values were estimated to be at $24 trillion. If we look at the Case-Shiller Index we are now off by 25% from the peak. So let us do that math now:

U.S. Residential Real Estate at Peak: $24 trillion

Current U.S. Residential Value: $18 trillion

We’ve just found another $6 trillion gone but recent estimates are saying that American households have lost $7 trillion in real estate wealth. We’ll be generous and say $6 trillion. Keep in mind that we are only counting U.S. residential real estate. We didn’t even look at U.S. commercial real estate which is now imploding. In fact, I recently argued that the FDIC was ill equipped to handle the oncoming tsunami of

12 Post No:Bond Market Vs Stock Market

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:16:00 -0800

Many people think that the bond market and the stock market is one and the same. In fact, many people who invest in bond market and the stock market either with their own personal investment account or retirement plans also cannot tell the difference between the two. Although, most people have a general idea that stock market is associated with risk while bonds offer relatively more safety.
Bond market vs stock market is a crucial differentiating factor as both markets can earn you money but they are different in terms of the potential risks and rewards. Let us try and understand the difference between the bond market and the stock market.

When you buy a share of stock, you actually end up taking the ownership in the company whose stock you are investing in. This means that you will end up sharing the profits as well as the losses incurred by the company in the years to come. If a company’s revenue decreases, it would ultimately affect the stock price of that company leading to a decline in the stock price. However, if the company’s revenue increases, the stock price would go up because the company is generating more profits.

On the other hand, a bond does not allow you ownership in a company. If a company wants to raise money without dividing itself, they can decide to sell bonds instead of issuing stocks. So, when you buy a bond of a company, you become more like a creditor than an owner in the company, and you are paid back over the life of the bond. As a bondholder, you will earn a return on your money, which is a fixed percentage, and this return is paid annually. So, if a bond is for 10 years, you will get interest for each of those 10 years and then your principal amount (the amount you invested) is returned to you at the time of expiration of the bond.

In the short term, you have greater chances of losing money in the stock market than the bond market. However, in order to figure out which is a better investment opportunity, you should study your risk tolerance along with the kind of returns you are looking for and according make the choice of investing either in the bond market or the stock market.

13 Post No: HOW PROFITABLE IS REAL ESTATE AS AN INVESTMENT?

noreply@blogger.com (Mehmood Best) — Fri, 27 Feb 2009 16:14:00 -0800

The first chart below shows an overview of historical returns of stocks versus real estate.

As you can see, un-leveraged real estate has outperformed the stock market for over 5 years and 50% leveraged real estate has outperformed the stock market over any period – including down markets. Remember, Prestigious Properties typically uses 70-85% leverage to purchase existing apartment buildings.

CLICK IMAGE TO ENLARGE