Category Archives: Investing/Financial Planning

Confessions of A Federal Reserve Official

Posted on February 23, 2012 by | Comments Off

As mentioned in an earlier post, Dr. Harvey Rosenblum was the keynote speaker at the Texas Investment Symposium Event (Tips). Dr. Rosenblum, a very candid speaker with a knack for making complex subjects understandable, (economics can be very confusing) said something during his speech, very matter-of-factly that I have not heard before from a Fed official.

Dr. Rosenblum confessed that the FOMC’s current interest rate policy no longer has the teeth prior policy makers had available them.  Long suspicious of this fact by many, including myself, it was interesting to hear Dr. Rosenblum so casually mention this fact.

Why is current interest rate policy less effective?

The following chart is of the FOMC target interest rate policy. Notice how this last cycle we have moved to zero and are holding.

Where can you go from here ?

Fed Target Rate: New York Fed.org

There are no more bullets in the gun! Notice in prior years there was room to move down (turn the heat up on the economy) and have an effect on the economy. Since we currently have a close to zero interest rate policy, it makes sense that the latest changes have had a much slower result in changing the direction of our current economic situation.

Other Operations Necessary

Dr. Rosenblum mentioned over a half of dozen NEW economic stimulus plans that were established during the 07-09 crisis, many of which are now closed, as the new open market operations (economic stimulus) levers of the future.  While there may be many new future tools for the FED to embrace our bet is an eventual return to normalcy.

What is old is New Again

Similar to that old phrase of what is old is new again, we are wishful of an eventual rising of short-term rates that will allow Fed policy makers to “re-load” the gun for the eventual next economic downturn.

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Economy, Interest Rates, Investing/Financial Planning

What is a K-1? An Important “Double Tax” Item Regarding K-1′s Being Incorrectly Reported

Posted on February 17, 2012 by | Comments Off

This weeks question from our field of dreams (clients and friends) is about the K-1 tax form.

A K-1 is a document that reports ownership related income. Since many entities are pass through (non-taxable) entities and are generally not taxable, the K-1 form gives the IRS a trail of where the money went, and how much of it went to the receiving person or entity, creating a taxable event for the K-1 recipient.

Do not include K-1′s that reside in an IRA or other tax sheltered investment on your tax return!

If a K-1 recipient holds the investment in an IRA or other tax sheltered type of investment, DO NOT FILE YOUR K-1 INFORMATION ON YOUR TAX RETURN, YOU ARE PAYING EXTRA TAXES!  Most K-1 creators rightly send them to all recipients regardless of the recipients tax status. If a tax filer shows unnecessary taxable income from the K-1 on his/her tax return, they may be paying extra taxes.

Why do K-1′s arrive so late during the filing season?

The IRS does not have a deadline for filing K-1′s,  such as the February 15th deadline for most other tax statements.  Also, K-1′s are often more complicated and may be only finalized after other types of returns are completed, thereby delaying their delivery.

We are not CPA’s, so be sure to check with your tax professional before making any changes based on this article.

If you are a K-1 recipient, be sure that K-1 investment is in a taxable account before reporting it on your return and you may avoid unnecessary double tax payments.

In closing, it’s a long weekend for many, as Banks and Markets are closed on Monday, in Honor of Presidents Day. As we often do, Monday will be a great day for us to sneak into the office and catch up on overdue items.

Have a Great Looong Weekend, and I look forward to bringing you comments from the Speaking Event tomorrow!

Thanks for reading!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Investing/Financial Planning, Tax Related

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All New 1099′s for Tax Year 2011 Are Posted Electronically, and Being Mailed Too

Posted on February 13, 2012 by | Comments Off

We know you have been waiting on the edge of your seats. So we are happy to announce, 1099′s for tax year 2011, have been posted electronically, and the paper versions are on their way to your mailbox.

Remember our recommendations for filing times, especially considering we would not be surprised to have multiple 1099 corrections this year, due to the new information.

Good News: 

After our various warnings concerning somebody’s watching us (Rockwell and Rockwell Part 2) our first review of the new 1099′s look fine.

While the form as expected, has more data on it, and will most likely be much longer than prior years, all seems good based on our initial reviews.

We may find a few hiccups as we continue to review, but at first glance, the new and improved, greater detailed 1099′s, seem closer to the mole hill, than the mountain we had concerns over.

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Clients/Clients Only, Investing/Financial Planning, Tax Related, Uncategorized

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Are Those Rose Colored Glasses You Are Wearing? Zigg Makes an Appearance

Posted on February 10, 2012 by | Comments Off

You guessed it, Zigg is back, and this time with a different message. For those new to Zigg, he has a residence on small island near the shore of a large group of fair weather friends, called Zagger’s, who often represent the majority voice at any given moment.

Last fall, when everyone was Zagging in the negative direction, Zigg spoke calmly and confidently to us on Friday’s, pointing out the positive events of the week, and letting us know that things are not always as negative as they seem.

This week Zigg has a different message for us. Possibly Zigg’s message is due to his Zagging friends taking residence on his island, telling him the sky is bright, and it will never cloud again. 

Zigging while others are Zagging this week means pointing out a few items:

  • Consensus moods (Zagger’s) often lead to clumsy investing, do not let your guard down, just as we bought when markets were down, we sell when they are up in order to keep your portfolio driving speed (allocations) appropriate.
  • It is very highly likely, capital markets will not match their January return of 4% throughout the year, leaving us with a 48% return for the year.
  • Shhhh……. While we hate to say it, the EU still has a few problems.
  • It is an election year!

While always positive, and never one to stick his head in the sand, Zigg did want to pull the umbrella from a few of his Zagger friend’s drinks (and maybe send a couple home.)  Zigg also understands, be careful what you ask for!

Have a Great Weekend!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Investing/Financial Planning, Market Comments

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Life Changes and Needs, Don’t Worry We Take Care of Almost Everything !

Posted on February 8, 2012 by | Comments Off

As we go through life our name, address, and beneficiaries may change on our various documented items. Not to worry, our job is to take care of this for you. That’s what we do!  While you can call directly to various vendors, we have direct (usually electronic) access that can efficiently and correctly make those life changes.

We also interface with various outside sponsors such as your 401k provider, HR person, company trustee, as well as your Tax and Estate professional.  Often times we have an inside direct contact through our 20+ years of similar experiences. We are always happy to make new contacts as well.

Whether a simple address change, a catch-up 401k election, or a pension maximization analysis, just to name a few, do not hesitate to call us, that is our job!  If we cannot complete it directly, we will certainly discover the correct answer and make it easier for you, while keeping good records, and helping effectuate your desired change.

Our job is to make your life easier!

As you read this today, I will be traveling out-of-town for a quick, in-state, turn around trip, but will be in “Constant contact, I am sure!” as Cathy mentioned to me as she left the office Tuesday …… Hey, what’s wrong with multi-tasking?

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Clients/Clients Only, Investing/Financial Planning

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Be Easy on Your CPA this Year and Expect to Pay a Little More, Meet Form 8949

Posted on February 6, 2012 by | Comments Off

As most of you know we have been warning for over a year now, (2011 Rockwell and 2012 Rockwell Part 2) of government changes due to new cost basis reporting requirements. While we agree with the overdue changes which in the long run, will be easier, the gravitation from non-reporting of basis, to full reporting of basis will be rocky at best. Given these facts we fully expect personal tax returns to be slightly more complicated and time-consuming this year, therefore more costly as well.

The Culprit: From 8949

Think of this new form as a catch-all for your long-term and short-term gains with a built-in column for errors. This new form, while simplifying other schedules on your return will be more time-consuming, may surprise you at first glance, and will throw all of us out of our tax comfort zone this filing season.

On a positive note, think of it as one step back to take two steps forward. In the coming years, it will get easier and we will all get more accustom synchronizing the data. (We attempt to give our realized gains and losses data in a form that is easy to transfer into tax return data, however we doubt the various outside reporting vendors will have such concerns at this time, they are still focused on capturing the data.)

Don’t Hurry to FILE your Return, But Do Rush to Get Your Information to Your Professional as Soon As Possible!

While we have strongly suggested those early filer’s wait until late March or early April to have their information electronically sent to the IRS, we do suggest you get your tax information to your professional in an extra timely manner. No one wants a tired tax professional doing their taxes !

As you know, we are not tax professionals, however we interface with many on an almost daily basis, especially during the final leg of filing season. If we all try to make each other’s lives easier, maybe this From 8949 will turn out to be a mole hill rather than a mountain!

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Investing/Financial Planning, Tax Related

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Question of the Week: “Should I Buy or Lease My Car?”

Posted on February 3, 2012 by | Comments Off

This week we do our best to answer the lightning rod question of buying or leasing a car. While the answer lies in a slightly grey area, we will walk you through characteristics that make each decision correct for you.

According to CNW Market research new car buyers have the following characteristics:

  • 70% finance their car
  • 18% lease
  •  12% pay cash up front

Which option is best for me?

If you are a person who must have a new car every 3-4 years and will continue to trade your car in, no matter the situation, leasing is probably best for you. For everyone else, owning a car for an extended period of time, either through cash purchase or financing options, is probably best.

What is the most economical way to own a car?

Depreciation is our main foe in owning a car. According to the Edmonds auto site, it takes one second off the dealer’s lot to lose the first 10% of value of your car. It takes another 364 days to lose the remaining 9% for a total of 19% first year loss in value on the average new car.  After year two, most of us have lost 31% of the value, and by the end of year 3, our vehicles have gone down by almost 50% in total value.

If at all possible, the most economical (strictly by the numbers, no style points here) way to own a car is to own it for as long of a period of time as possible. By doing this, you will make much of your money back during the later, low depreciation years. The old saying “The cheapest car you can own, is a car you own!” is mostly true. 

Have a Super Friday and a Great Super Bowl Weekend!

Best Wishes, and Zigg Says “Hi”

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Education, Investing/Financial Planning

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Non-Farm Payrolls Blow Past Expectations – Black Clouds… ???

Posted on February 3, 2012 by | Comments Off

This morning non-farm payrolls came in at 243k versus expectations of 140k, far exceeding expectations. This surprising report has put a fire in the capital markets around the globe.

While this is only one report, most economists believe it takes about 210k to bite into the unemployment situation.

Given the Black Cloud CFA Forecast dinner post, and the dialogue I have gladly received from many of you, we now have another positive tea leaf on the table.

Thanks for all of your emails and comments, and thanks for reading our work, we greatly appreciate it!

Have a Great Day and we have another post coming shortly today to slide you lightly into your super bowl weekend !

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Investing/Financial Planning, Market Comments

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When to File Your Personal Taxes? We Recommend You Wait until Late March or Early April

Posted on February 1, 2012 by | Comments Off

As the tax forms flow to our mail and email boxes, we thought it was a good time to give you our gentle reminder NOT to file your taxes before late March or early April, especially given our “Rockwell Somebody’s Watching You“ year.

Corrected 1099′s are a regular part of lives this day and age due to the complexities of investment products. Remember, as clients, we may have investments in stocks, mutual funds, bonds, as well as commodities, foreign stocks and bonds, and partnerships, which generate a K-1.  Many of these investments have accounting adjustments late into the tax season, resulting in a domino effect on 1099′s and other reporting instruments.

In addition to more complex investment statements, we also have our first Rockwell year, in which the government has begun tracking and reporting gains and losses. We will introduce you to a new friend, Form 8949 soon, but needless to say there are more moving parts this year to go along with our continued growth in complex investment products.

We continue to advise we all take a deep breath, stay patient, and keep our income tax lives off-line, until very late March, or early April.

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com.

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Posted in Investing/Financial Planning, Tax Related

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Facebook and Sipping from the Earnings Fire Hydrant

Posted on January 31, 2012 by | Comments Off

It appears the long-awaited Facebook IPO is nearing the Wall Street docks, with Morgan Stanley and Goldman Sachs (surprised Goldie is not lead, with their large earlier investment) being the underwriters.

Yesterday I saw or heard at least six different opinions on the Facebook IPO most of which were positive. At this time, given the lack of information that has been officially released, it is impossible to formulate an accurate opinion. It is difficult to pick the team that will win the big game, especially not having any idea who are the players. Our position is casual observers during this process, however we are always interested.

Today we have 29 companies from the S&P 500 reporting which is similar to taking a sip of water from a fire hydrant.  Most earnings have been ok, but not terrific, again setting the bar relatively low, in our opinion.

Donald is in town tomorrow for a group of expert forecasts for economic and capital market related events sponsored by the local CFA association. We will bring you the cliff note edition of facts, should they prove interesting.

Back to work as conference calls beckon.

Have a Super Day !

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Earnings Season, Investing/Financial Planning, Market Comments

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