Alan's Journal

The Chris Wallace Bill Clinton Interview

2006-10-06T13:24:00.000-07:00

The Chris Wallace Bill Clinton Interview

9/27/06

I had heard about the famous Clinton temper but until the Chris Wallace interview on Fox, I had never seen it. Quite a force. President Clinton seemed a little over the line, but I’m really happy he did it. He was right. The question regarding the Clinton administration’s anti-terrorist activities was designed to embarrass Clinton and to take the spot light off the Bush administration’s mistakes. I had read Richard Clark’s book before President Clinton talked about it as a reliable source of what really went on during his administration to fight terror. Those who are now blaming Clinton conveniently forget that because of their activities the president was under investigation and was being impeached. To take more vigorous steps to eliminate Al-Qaeda would have brought about loud accusations of “diversion”. It is those same people who are now saying not enough was done. Clinton cannot escape blame though. If only he could have kept his pants zipped until he was the Ex.

A NEW STRATEGY ON THE WAR AGAINST TERRORISM

2006-09-17T11:34:00.000-07:00

A NEW STRATEGY ON THE WAR AGAINST TERRORISM

The long term strategy is to stop being dependent on oil. We should spend the money NOW to convert to the Hydrogen Economy (read Jeremy Rifkin’s The Hydrogen Economy). In addition to neutralizing our focus on the Mid-east we would move forward on eliminating Global warming.

My short term thinking is based on some history and thinking about the Sunni versus Shiite dynamic. Prior to our invasion of Iraq there was somewhat of a détente between Iraq and Iran. After the war, Iran and the Shiite majority of Iraq have joined forces. Iran has been imbolded and thus we feel even more insecure then we were when Sadaam was in charge of Iraq. I think we should leave Iraq as soon as possible and let the Shiites and the Sunnis slug it out. It is their fight not ours. Additionally, this would probably make Israel less vulnerable since the Shiites and the Sunnis would be focusing on each other instead of Israel.

We should take our Iraqi troops and put all of them in Afghanistan and finish the job we started there. We seem to have the Afghans behind us, but the Taliban is reemerging. We need to stop that movement in its tracks.

Political-Tom Friedman & General Motors

2006-06-05T10:18:00.000-07:00

Once again, Tom Friedman is right on the money. In today’s article, he excoriates General Motors and rightly so! Recently GM, in an effort to sell gas guzzlers, guaranteed gasoline at a cap price of $1.99 for one year with no limit on mileage if you live in Florida or California. The eligible vehicles are half-ton models such as the 2006 and 2007 Chevrolet Tahoe and Suburban, as well as the Hummer H2 and H3 and many of their SUVs. Hummers get approximately nine miles to the gallon. So GM is subsidizing the purchase of gas guzzling cars when the opposite is needed. No wonder Toyota is cleaning GM’s clock.

We are in Iraq because of oil. So not only are we paying for the war, we are paying to continue the underlying cause of the war. GM should be subsidizing the purchase of fuel efficient cars. Talk about corporate blinders!

Business & Politics-The latest tax bill

2006-05-19T10:27:00.000-07:00

If signed into law, the latest tax bill passed by Congress is a mixed bag. While fundamentally I think extending the tax breaks, given our deficit, is a bad thing for the country, I’m particularly incensed by the portion of the bill that opens up the window for converting traditional IRAs to Roth IRAs for people who earn over $100,000. Most of my clients earn over that amount and where the numbers work out, I will have them make the conversion. It makes sense to do it because for most of them, they will still be in a high tax bracket when they start drawing their money out—and Roth IRAs accumulate tax free. So that is the good part—I can help my clients. The bad part, creating my “mixed bag” feelings, is that once again our generation is sticking it to future generations. This tax break starts in 2010 and is over in 2011. It is estimated that about $6.4 billion will be raised. Leonard Burman, coordinator of the Tax Policy Institute in Washington D.C., estimates that the cost by 2049 will be $100 billion. The reason this break is being offered is that it will generate immediate tax revenue (because when conversions are made, taxes are paid), thus ameliorating the impact of the other tax breaks being perpetuated. So later generations will end up paying more because no tax revenue will be coming in as people use up their Roth accounts. This means my grandkids are going to suffer and that really ticks me off!

Critical Capital Management, Inc.

2006-05-05T17:38:00.000-07:00

Critical Capital Management, Inc., is an independent wealth management firm providing fee-based financial planning and investment management services. For more than a quarter of a century, we have been helping our clients define, build and protect their Critical Capital™. We can help you too.

Books-Andrew Jackson

2006-05-01T14:50:00.000-07:00

BOOKS: I’m reading “Andrew Jackson” by SeanWilentz (part of the American Presidents series). I was particularly struck by Wilentz’ prologue in which he attempts to categorize Jackson in terms of Liberal versus Conservative—only to find that it cannot be done with today’s redefinition of Liberal versus Conservative. Wilentz says “The idea, for example, that there has always been a pro-big government party and a laissez-faire party, and that presidents can be judged by which they adhere to, is as useless in interpreting the politics of the 1830’s as it is for interpreting our own time. American political parties have always blended “small government” and “big government” policies. Today, the Republican Party rejects federal regulation of business, but shows a robust willingness to regulate individuals over certain social, cultural, and political issues. Without embarrassment, Republican leaders look to the federal courts sometimes at the direct expense of state rights to secure what they consider a favorable outcome. The Democratic Party, meanwhile, is much more attentive to regulating business, but comparatively laissez faire on cultural and social matters –and, when it suits them, Democrats kick and scream about violations of state rights.” The same dynamic was going on in Jackson’s days. This writing especially resonated with me as I read about the political machinations of the FDA. We have not had a head of the FDA for the last three years because of the ideological tug and pull between Conservative Republicans who want to eliminate birth control pills and Liberal Democrats who don’t. Talk about dynamic role reversal—Republicans trying to regulate the market and Democrats advocating letting the market work. This certainly seems to be a role reversal.

I’m really enjoying learning about Jackson and would recommend the book. He is definitely somebody who would not appeal to me. But that was a different time!

Congress attempts to mitigate the gas price problem

2006-05-01T14:42:00.000-07:00

POLITICAL—Congress, in an attempt to mitigate the gas price problem, is trying to push through a $100 Rebate tax rebate!!!! It is unclear exactly how this rebate would be handled, however according to CNN and other news sources “$100 rebate checks would be written to millions of Americans who earn under $125,000 or for couples whose combined earning is under $150,000.” This amendment is tied to the current Energy bill working its way through Congress. That same bill seeks opening Anwat for drilling. It is doubtful the rebate will pass. Thank goodness! What is the matter with the Republicans? Republicans used to stand for separation of church and state, fiscal responsibility, and taking personal responsibility. This blatant political pandering is totally bazaar. It’s bad enough that we now have a deficit approaching $500 billion—but to add to it with a rebate that will do nothing to solve the problem, is just abhorrent to me. Do they think this step will help them get reelected? The American public, though often ignorant, is certainly not stupid. I guess the Republicans no longer believe in market dynamics. I’m with Friedman who says having the price of gas go to $4.00 per gallon gas is probably what is needed to convince Americans to stop driving gas guzzlers. The $100 rebate is a manifestation of a mind set which says “don’t worry, the government will take care of you.” Damn this is upsetting!

I-Bonds Update

2006-04-26T04:32:00.000-07:00

BUSINESS
It turns out I-Bonds are not the educational funding panacea I had originally thought they were. What attracted me to them was my understanding the interest would accrue federal tax free if used for secondary education. While that is true, phase out rules apply. If a married couple filing jointly has a modified adjusted gross income of $94,700, the federal interest free portion starts to phase out and is completely eliminated when the modified AGI is $124,700. I-Bonds still have the advantage of being state and local tax free and the federal tax is deferred until used. As an addition to a portfolio that is trying to lower its volatility on a tax deferred basis, I-Bonds still make sense. However for funding educational needs, 529 plans work better because of their tax advantages and because of broader investment choices.

Annuities-LA Times Article--Medicare Part D

2006-04-24T14:48:00.000-07:00

Clients & Friends,
Today's LA Times had a front page article about annuities. The thrust of the article was about unsavory insurance salespeople or investment advisors selling annuities inappropriately just to receive commissions. If one stopped at the headlines, it would be easy to conclude that annuities are being overused as an investment vehicle. It is true that annuities are not appropriate in all cases for all investors or all seniors (as targeted in the article).
However the single premium deferred annuity(ies) that we use to diversify your portfolio are ABSOLUTELY APPROPRIATE--they provide safety of principal, eliminate volatility (one of the main reasons we use them), enable you to defer taxes, and have variable interest rates that will change as the market changes. Rest assured that we have placed the annuity(ies) in your portfolio as part of the portfolio allocation that we have explained to you and to which you have agreed.
Another note: REMEMBER: The deadline for signing up for Medicare Part D is May 15th. Signing up after that date will cost more (although government publications have not made it clear how much more).
As always, if you have any questions, please let me know.

Stock Settled Appreciation Rights (SSARS)

2006-04-24T14:03:00.000-07:00

Business-SSARS aka Stock Settled Appreciation Rights will eventually replace Stock Options as an employee benefit. This is because SSARS reduce dilution. For employees it is essentially a no change phenomenon. They still get the huge advantage of leverage which stock options offer. They also are still faced with what we call the Stock Option Dilemma “If I exercise too soon, I’m liable to lose a fortune if the stock goes up. If I exercise too late, I’m liable to lose the fortune I already have.” SSARS are subject to the same taxation as stock options. For more information on how they work, go to our website http://www.ccmiplan.com/ and click on “Workshops.”

I-Bonds

2006-04-24T13:59:00.000-07:00

Business— Recently we have started using I-BONDS (Series I Bonds) to supplement 529 plans. Although 529 contributions are subject to gift tax limitations, it is possible to put $60,000 in at a time per spouse per child, covering five years of contributions in advance. After five years, another contribution can be made.

I-bonds can also be used to pay for education, and therefore are another way to save for these expenses, tax-free. I-bonds are not subject to gift tax because they are not gifts. They are owned by the purchaser. They have the advantage of being state and local tax free, and if used for educational purposes, they are free from federal taxation. They have interest rate risk but no corpus risk. The interest rate is calculated every six months based on the change in the Consumer Price Index plus 1% guarantee and the interest is accrued. So the minimum they can earn is 1%. As of today, they are earning 6.73% but that will be changing in May. The maximum amount of I-bonds that can be purchased per year is $60,000--$30,000 from a bank and $30,000 on line by going to http://www.treasurydirect.gov/. These bonds work when more money is needed to fund educational needs but are not our first choice. 529 plans are still the first choice because there are more aggressive investment options available.

Losing Carolyn & New web-seminars

2006-04-24T13:55:00.000-07:00

Blog 4/11

PERSONAL: I’m bummed because Carolyn our assistant is moving to North Carolina. She was such a great employee, took initiative, followed through and was very pleasant to be around. I know we’ll find somebody else but I’m sorry we are losing her.
BUSINESS: Two new web-seminars are now posted to our web-site http://www.ccmiplan.com/. How to Avoid the ISO/AMT Tax Trap and Managing Concentrated Positions—Insider Trading. Next week the Stock Appreciation Rights (SARS) web-seminar will be posted. Countrywide Financial is now granting SARS to its employees and I believe more companies will move in that direction too. Issuing SARS is a good way to reduce stock dilution.

Business & Politics

2006-04-24T13:43:00.000-07:00

3/1/2006 Political Too bad somebody who subscribes to Tom Friedman’s ideas is not our president. His 3/1/06 editorial “Who’s Afraid of a Gas Tax “ is right on. “Only if the total price of gasoline is brought into the $3.50 to $4 per gallon range and kept there will large number of Americans demand plug-in hybrid cars that run on biofuels…” A recent poll found that 60 percent of those polled including one-third of Republicans disapproved of how Mr. Bush is handling our energy crisis. 87% said Washington should require car manufacturers to produce more efficient cars. When asked whether they would favor an increase in a gas tax, 85% said no. When it was framed as part of a national strategy to achieve energy security and climate security, 55% favored a tax and 37 % said no. WE NEED TO BECOME ENERGY INDEPENDENT—thanks to Friedman and other notables, maybe the idea will really catch on—Bush is just giving it lip service. We need to get serious and we need to do it now.

3/2/2006 Business—This morning’s LA times had an article about two Countrywide Employees who got nailed for insider trading. It makes me think our 10b51 web-seminar should be good timing. Maybe we should get it out sooner.
3/2/2006 PERSONAL- I think I have figured how to handle the dilemma I have with the picture of the grandkids. The problem is how to handle Cathy’s being pissed at me for getting the picture and what to do with it. Re. Cathy’s being pissed, I’ll just say what happened—and I think she will understand. I’ll take it with us to my birthday party dinner at the Ranch House and say to Cathy and Greg—I have a confession and a problem. First the confession—then tell how I had originally wanted to get this picture to give to the family for Xmas—sent it (the one with the girls sitting on a bench with the dogs) to Caren (the wife of one of my client)—I think it was in September 2005. Caren e-mailed me that she would have to think about it and would get back to me. She never did. In January of 2006, I e-mailed Dan about playing golf and meeting to discuss their situation. He said yes and that Caren had finished the picture—OOPS! Now what was I going to do? No matter what, I would have to buy the picture. When Dan and I met in late February, he brought the picture with him—and I loved it! I had already told him that I was surprised that it was done and that she never contacted me again. I asked Dan how much she wanted for it and he said “I don’t know, you’ll have to talk to Caren”. I’m thinking uh-oh, this could cost me an arm and a leg. It turned out to be very reasonable. I took it and got it framed. So at dinner, I’ll tell the story—and then ask them what should I do with it—should we keep it in our house or in my office or give it as a Xmas present to the family next Xmas? One reason I want to do this now instead of just showing up with it at Christmas is that I love the picture and want to show it to everybody.

3/3/06 BUSINESS
Incentive Stock Options( ISO’s) are a great benefit if managed properly. Too often people choose to exercise and hold for long term capital gains forgetting the Alternative Minimum Tax (AMT) ramifications. Hopefully our How to Avoid the ISO/AMT tax trap web seminar will help.
3/7/06 BUSINESS— I realized that some good topics for future web-seminars would be

Insider Trading—understanding 10b51
Managing Concentrated Positions, Puts, Calls, Collars, Exchange Funds
When does it make sense to use 83b?

3/13/06 BUSINESS- Many companies are starting to issue SARS (Stock Appreciation Rights) instead of Stock Options. The major advantage is that Dilution is reduced since only the spread between the grant price and the appreciation is paid by the company. The employee has the same advantages with SARS as he/she does with stock options. Leverage is the same with SARS as it is with stock options. The spread is taxable. Not AMT kicks in. SARS still have to be expensed just as options do—so there is no advantage to the company there. However, the restrictions imposed by Sarbanes/Oxley for Cashless Exercises have been eliminated since the employee does not have to buy any shares and will receive shares or cash as compensation. The same vesting rules apply with SARS.

3/22/06 POLITICAL—Thomas Friedman’s article today once again pushed on his theme of our becoming less dependent on oil. I am so pleased that he keeps beating on that drum. Today he referred to a speech by Senator Lugar given to the Brookings Institute. The speech was exciting because it described some bi-partisan legislation that Senator Obama and he have introduced which is a comprehensive energy policy. But more important is that he is leading the charge against the Bush administration’s “just produce more oil” mind-set. Lugar’s point is we cannot just sit back and wait for the market to force the changes. The main reason we cannot do this is that demand for oil is increasing while the supply is diminishing. This can cause serious stress throughout the world as countries compete for the resource. We need to have an energy policy which will speed up the conversion—we need such things as tax incentives for the Auto industry to re-tool, more production of ethanol, international cooperation between China, India, and US and plans for what to do if there is a crisis (such as Iran deciding not to ship to one of us). His legislation initiative suggests a multi-pronged approach instead of a silver bullet one. My hope is that enough people in our country will GET IT!

3/29/06 POLITICAL—I cancelled my membership to MoveOn—because they just became too knee jerk for me. Their original purpose was to censure Clinton and “move-on.” After that, they started taking positions on things with which I did not agree. I was especially pissed off when they automatically rejected Bush’s attempt at fixing Social Security. The Democrats did the same thing. Instead of coming up with solutions, they just knocked the president’s solution. I did not like the president’s solution either (private accounts) but at least he attempted to change the country’s consciousness about it. MoveOn is now getting behind the idea of censuring the president for the illegal wiretaps. I support that move but it is not enough for me to rejoin MoveOn. Sometimes the mentality of this country drives me nuts. We practically impeach a president for his sexual actions but barely murmur when a president gets us into a war we have no business being in and breaks the law with illegal wire taps! Now the FCC fines CBS for Janet Jackson’s breastcapade and some other sexual program—but has no problem with showing all the violence on TV. Our religious right is more upset with sex than violence. I don’t get it! It really pisses me off.

POLITICAL 4/3/06: Another thing that pisses me off is the fiscal irresponsibility of our government. We need more organizations like the non-partisan Concord Coalition to raise the consciousness of the public for the flagrant spending that is going on right now. Making tax cuts in the face of huge deficits makes no sense. I hate that my grandchildren are going to have to pay for our profligacy. This war should be paid for now with current dollars. There should be a war tax. That would be one way for the American Public to feel connected to this misbegotten war. Only our soldiers and their families (plus the Iraqis and Afghans) are in this war. If we are really in a war—the whole country should be suffering. As it is, we ordinary folks just keep spending and enjoying ourselves with an occasional upset over the war.
POLITICAL 4/7/06 Cheyne’s chief of staff testified yesterday that President Bush had authorized the CIA leaks (no direct link yet to the Valerorie what’s-her-name case). So here is what gets me. The President lied to us about weapons of mass destruction, condoned unauthorized wire taping and now is leaking CIA classified information. To me, these seem like much more serious transgressions then lying about sex. Our government comes to a standstill while we impeach President Clinton because he did not want to admit to having sex with Monica. Nobody was killed because of that lie. Nobody was maimed because of that lie. The lie did not cost an extra $200 billion a year. There is something wrong with our priorities