6/9/08 Stock Purchase Update - Potash Rises In A Down Week

With the market decline of early 2008, these stock purchase updates have not been as fun to write. However, I am going to remain disciplined and do a weekly update until I sell the positions from the portfolios. The original portfolio was based on a 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) and a January, 2008 stock pick update of Apple (AAPL), Research in Motion (RIMM), Intuitive Surgical (ISRG), Priceline (PCLN), Core Labs (CLB), and Google (GOOG).

The overall portfolio gained 0.5% last week and now has total return of 20.7%. The gain was due to 8.9% advance in Potash which offset losses for Intuitive Surgical and Google. Here's the current status of the remaining stocks in the portfolio:

	My Wealth Builder 10/15/07 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 6/6/08
Potash (POT) [6/7/07]	50	$71.59	$216.85
Southern Copper* (PCU) [11/13/07]	40	$108.24	sold 2/19/08 @ 109.05
CNH Global NV** (CNH) [11/13/07]	50	$55.22	sold 4/07/08 @ 56.87
BHP Billiton*** (BHP) [11/27/07]	50	$71.54	sold 2/19/08 @ $73.98

*On 1/18/2008, the system gave a sell signal for PCU.
**On 2/1/2008, the system gave a sell signal for CNH.
***On 2/15/2008, the system gave a sell signal for BHP.

	My Wealth Builder January, 2008 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 6/06/08
Apple** (AAPL) [1/17/08]	25	$160.93	sold 4/25/08 @ $169.06
Research in Motion (RIMM) [1/17/08]	25	$88.71	sold 2/22/08 @ 103.23
Intuitive Surgical (ISRG) [1/18/08]	20	$261.81	$280.91
Priceline (PCLN) [1/18/08]	25	$92.33	sold 5/20/08 @ 132.10
Core Labs* (CLB) [1/25/08]	25	$116.25	sold 2/19/08 @ $121.67
Google** (GOOG) [1/25/08]	20	$582.66	$567.00
Google** (GOOG) [2/1/08]	10	$521.27	sold 5/12/08 @ 582.12
Google** (GOOG) [2/26/08]	10	$457.44	sold 4/29/08 @ 552.99

*On 2/8/2008, the system gave a sell signal for CLB.
** On 3/7/2008, the system gave a sell signal for AAPL and GOOG. Previously, I had planned to hold GOOG since it is part of my core holdings. However, now I will sell this portfolio's remaining 20 shares (or an equivalent number of shares purchased earlier) of GOOG over the next few weeks, if the shares continue to rally.

The market continues to be choppy. As of the close on 6/06/08, the Dow, Nasdaq and S&P 500 indices were respectively down 6.86%, 6.70%, and 6.46% year to date. Although significantly up from lows of 9.37%, 16.58% and 11.86% in my 3/17/08 Stock Purchase Update, they are down 2-3% from the previous week.

I continue to believe that the probability of a recession in 2008 is relatively high, if we are not already in one. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data in early 2008 has caused the bull market to end earlier. For either case, I expect the market to continue to be choppy in 2008 with many short term rallies and declines. For now, I do not plan to add any more to the amounts that I have already invested in the above tables and will be looking to close out positions, even without a sell signal. Since Potash just became a long term holding, I will take some profits on at a 0% long term gain tax rate this week, if the price holds on Monday. Also, I may sell Intuitive Surgical if it does not rise pass $307 in the next week.

Full disclosure: I own all the stocks mentioned in this post that are not indicated as sold.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

Let The Campaigning Begin

Now that both party's Presidential nominees have been identified, the real campaigning can begin. I fully expect to be deluged by campaign information from now until November. Of course, I will be following issues that affect my personal finances, e.g. tax policy, new programs or entitlements. I also will want to hear what will be stopped create funds for the changes in spending. Thus, the congressional elections will be of interest, since Congress is where spending is determined.

In addition, I will be very interested in the local tax levies, since I expect a higher number than normal to be on the ballot. In our 2008 primary, levy supporters benefited from the higher than normal electorate turnout and passed some levies that had previously failed.

No matter who is elected, I believe that tax rates will increase and the economy will worsen. Hopefully, I will hear some good, sound ideas from the candidates on how they might "change" this situation.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

Redistribution Of Wealth

Taking money from those that have managed it well and giving it to those who don't manage money well doesn't makes any sense to me. The process is commonly referred to as "redistribution of wealth," which I think is a misnomer since it is only dealing with one aspect of wealth, money. Here are my thoughts on this matter:

Wealth is a mindset. Money doesn't create wealth, people do. Wealth results from the excellent stewardship of one's money. Giving someone money doesn't not guarantee they will be able to manage the money well. In many cases, the money will be managed in the same way as before. A good example is the subprime crisis. People who didn't qualify for prime mortgages didn't become better managers of money when they receive sub prime loans.

Money transfer may cause other behaviors that reduce wealth. A colleague told me a story about a high school student he was tutoring. She was doing very well and was on track to get a 4 year college scholarship. However, during her senior year she became pregnant and dropped out from school. She explained to him that she wanted to leave her home and having a child would enable to get an apartment and support so that she could live on her own.

In my experience, building wealth is about developing plans, making choices and doing the work to achieve the goal. Money redistribution is about meeting qualifications (e.g. income, dependents, etc.) to get "free" money. Of course, I am not opposed to short term safety net for people who have fallen on hard times. However, I also believe there are people who build "free" money payments into their plans and lifestyle. Unfortunately, "free" money often doesn't change the recipients mindset, which is the real improvement needed to truly redsitribute wealth.

For more on Reflections and Musings , check back every Saturday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

Manage Retirement Withdrawals Carefully

The Risk of Ruin for Retirees by Andy Mayo from Investopedia, shares why average returns aren't sufficient. When withdrawing funds the sequence of return may have much more impact than average return. The article demonstrates this by taking the 17 year period from 1987 to 2003, during which there was an average annual return of 13.47%.

Taking a $100,000 nest egg and withdrawing an inflation adjusted $10,000 each year left the account with $76,629 at the end of 2003. Not bad.

However, the article then reverses the order of the returns, starting at 2003 and going to 1987. While the average annual return is still 13.47%, the account balance after 17 years is -$187,606. The reason is that negative returns in years 2-4 significant reduce the account, while withdrawals are being made. Since the money is withdrawn, it can't help the account recover in later years.

I think there are two lessons to be learned from this article:

1. Use probability analysis to determine the nest egg needed. The current best approach is Monte Carlo analyses that run a thousand scenarios with randomized returns. The analysis of our savings shows we have about a 90% chance of not outliving our savings.



2. Adjust spending with market returns. Simply, spend below target in the years that returns are down and spend above target in the high return years. That way savings are preserved in down years, allow them to recover when the market has a good year.

The other strategy we are using is to have 3 -5 years of expenses in short term (3-5 years) fixed income investments. By doing this, we guarantee that we don't have to sell low to create income. And if the market does well, we can spend a little bit more :-)

For more on Reaping the Rewards Reflections , check back every Friday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

Gasoline and Fast Food Prices - Present, Past and Future

Yesterday, I saw regular unleaded gasoline for $3.799 per gallon. Gasoline has been at $3.999 per gallon for the last few days. So I jumped on the opportunity to fill up the car. While pumping the gas, I noticed an ad for a 5% gas rewards credit card that showed example savings for per gallon prices from $2.50 to $3.15. Boy, the fast rise in gasoline prices has that print advertising obsolete. If I only could buy gas today at $3.15 per gallon.

I still remember the days when my parent bought gasoline for 28.9 cents per gallon in the sixties. They would drive across town to save a penny a gallon. Then there was the gas crisis in 1974 and gasoline rose to 50 cents and then 75 cents a gallon. Adding insult to injury, there were gas lines to buy at these prices.

About the same time as 28.9 cent gas, McDonald's hamburgers were 15 cents. Fries were 10 cents and a drink was 5 cents. I remember my mom, sister and I having a lunch with all three items and getting change back from her dollar. Today, a hamburger is $0.89, french fries and a small drink are $1 each for a total meal cost of $2.89. (By the way, I also remember when an ice cream cone was a nickel a scoop :-)

So the cost of gasoline and a fast food meal is up about 10 times in forty years. If I apply the same factor to 40 years in the future, gasoline will cost $38 per gallon and a fast food meal will cost $29. In 2048, my daughter will likely remember $3.80 gas and a $3.00 fast food meal as the good old days :-)

Disclaimer: The historical prices are based on my childhood memories and may not be completely accurate.

For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

How We Think About Our House Financially

We really like our house. We live in a middle class neighborhood with a good school district. We hope to live here until our daughter graduates from high school. As a result, we do not take any financial risks with our house. Here's our financial do's and don'ts for our house:

Our Do's:

1. Think of a house only as our home. It's a place to live, enjoy and raise a family. Although it does have a value, we don't think of it as an investment, an appreciating asset or savings. We don't worry if our house is going up or down in value since we aren't planning to sell in the near future.



2. Know a house is a big expense. If we were barely meeting our expenses while renting, we would not buy a house. To me, the cost of owning is much higher than renting. There is the mortgage, taxes and upkeep. Not to mention the additional time and effort one needs to spend on maintenance.
   
   We try to set aside 1-2% of our house value each year for eventual major repairs, e.g. new roof, new furnace, that do not occur every year. For example, this year we have replaced a furnace and a/c unit and will replace our roof, at a cost of 6% of our home value.



3. Get a mortgage that is easy to pay now and in the future. When we bought our house, we could have easily qualified for a 15 year mortgage for 80% of the home value. We chose a 30 year fixed rate mortgage for 60% of the home value to keep our payments lower. When possible, we do send in extra principal payments and are on track to payoff the mortgage in 15 years.
   
   I have never seriously considered an adjustable rate mortgage. I prefer knowing that my monthly payment will be constant for the entire time that I have the mortgage.

Our Don'ts

1. Think of house as savings or an investment. We don't count our home equity in our retirement savings analysis. That's because, unlike stocks, we do not expect to sell our house to raise cash for yearly living expenses.



2. Borrow against the increased equity. We don't think of our house as a ATM to get cash. If our house increases in value, we don't borrow against that part. However, I consider OK to refinance the loan for the original amount and time, but at a lower interest rate. This reduces the monthly payment and allows some cash to be taken out.

We prefer to take minimum financial risk when it comes to our home. It's something that we definitely don't want to lose because of a short term financial set back.

For more on The Practice of Personal Finance , check back every Wednesday for a new segment.

This is not financial or real estate advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

Why I'm Avoiding Beaten Down Stocks

With the recent stock market correction, there are lots of beaten down stocks, such as Pfizer (PFE), and Ford (F) and especially financial stocks including Citigroup (C), Bank of America (BAC) and many more. Buy GM by Vito Racanelli in Barron's recommends the auto maker General Motors (GM) as a potential triple in two years.

However, as attractive as the prices are for these well known stocks, I am resisting buying any of these shares, even the ones with 6-7% dividends, such as Pfizer and Bank of America. Here's why I'm not buying:

Down for business reasons. Many of the companies mentioned have low prices due to business issues, e.g. credit crisis, insufficient product pipeline, or poor execution. Unless the issues are corrected, these stocks won't likely do well, even if they historically were a solid stock.

Can go lower. Two weeks ago, I was surprised that Pfizer was priced around $20 dollars, a 9-1/2 year low, with a 6.4% dividend. I thought, "How much lower can it go?" and thought briefly about buying it, but did not. Well, today, the stock has been as low as $18.93.

There are other better options. Rather than buy stocks going down, I prefer to own stocks that are going up. Yes, there are still stock rising in this volatile market. Potash (POT), which has been on my buy list since May, 2007, is one great example. Potash is up 41% in 2008.

Of course, some of these companies will be able to solve their business issues and turnaround the stock price. However, I am happy to wait for a clear confirmation. If there is a turnaround, the stock will still be a good deal, 20, 50 or even 100% higher than today.

Disclosure: As of the publication date, I own shares of Potash in my personal trading account. Pfizer, Citigroup, and Bank of America are owned in accounts managed by our financial advisor.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Links to Carnivals from June 2, 2008

Here are links to Carnivals from June 2, 2008 in which My Wealth Builder participated:

Tax Carnival #37

Festival of Stocks #91

Carnival of Family Life

Carnival of Personal Finance #155

For some interesting and entertaining articles from the blogosphere, check out these Carnivals.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial or family advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

6/2/08 Stock Purchase Update - Google Up Last Week

With the market decline of early 2008, these stock purchase updates have not been as fun to write. However, I am going to remain disciplined and do a weekly update until I sell the positions from the portfolios. The original portfolio was based on a 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) and a January, 2008 stock pick update of Apple (AAPL), Research in Motion (RIMM), Intuitive Surgical (ISRG), Priceline (PCLN), Core Labs (CLB), and Google (GOOG).

The overall portfolio gained 2.2% last week and now has total return of 20.2%. The three of the remaining holding all rose this week and all now have positive gains. Google had a very good rally this week. Here's the current status of the stocks in the portfolio:

	My Wealth Builder 10/15/07 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 5/30/08
Potash (POT) [6/7/07]	50	$71.59	$199.07
Southern Copper* (PCU) [11/13/07]	40	$108.24	sold 2/19/08 @ 109.05
CNH Global NV** (CNH) [11/13/07]	50	$55.22	sold 4/07/08 @ 56.87
BHP Billiton*** (BHP) [11/27/07]	50	$71.54	sold 2/19/08 @ $73.98

*On 1/18/2008, the system gave a sell signal for PCU.
**On 2/1/2008, the system gave a sell signal for CNH.
***On 2/15/2008, the system gave a sell signal for BHP.

	My Wealth Builder January, 2008 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 5/30/08
Apple** (AAPL) [1/17/08]	25	$160.93	sold 4/25/08 @ $169.06
Research in Motion (RIMM) [1/17/08]	25	$88.71	sold 2/22/08 @ 103.23
Intuitive Surgical (ISRG) [1/18/08]	20	$261.81	$293.59
Priceline (PCLN) [1/18/08]	25	$92.33	sold 5/20/08 @ 132.10
Core Labs* (CLB) [1/25/08]	25	$116.25	sold 2/19/08 @ $121.67
Google** (GOOG) [1/25/08]	20	$582.66	$585.80
Google** (GOOG) [2/1/08]	10	$521.27	sold 5/12/08 @ 582.12
Google** (GOOG) [2/26/08]	10	$457.44	sold 4/29/08 @ 552.99

*On 2/8/2008, the system gave a sell signal for CLB.
** On 3/7/2008, the system gave a sell signal for AAPL and GOOG. Previously, I had planned to hold GOOG since it is part of my core holdings. However, now I will sell this portfolio's remaining 20 shares (or an equivalent number of shares purchased earlier) of GOOG over the next few weeks, if the shares continue to rally.

The market continues to be choppy. As of the close on 5/30/08, the Dow, Nasdaq and S&P 500 indices were respectively down 3.71%, 4.89%, and 3.80% year to date. Although significantly up from lows of 9.37%, 16.58% and 11.86% in my 3/17/08 Stock Purchase Update, it still doesn't feel like a confirmed uptrend yet.

I continue to believe that the probability of a recession in 2008 is relatively high, if we are not already in one. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data in early 2008 has caused the bull market to end earlier. For either case, I expect the market to continue to be choppy in 2008 with many short term rallies and declines. For now, I do not plan to add any more to the amounts that I have already invested in the above tables and will be looking to close out positions, even without a sell signal. I will take some profits on long term gains at a 0% tax rate on Potash and Google when possible. Also, I may sell Intuitive Surgical if it does not rise pass $307 in the next two weeks.

Full disclosure: I own all the stocks mentioned in this post that are not indicated as sold.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

Exercise Motivation

The realization that my physical fitness has declined significantly has led me to take some actions to increase my motivation for exercise.

Taking inventory, I realize that I have just about every piece of equipment to do the exercise needed. I have weights, a simple bench, yoga equipment and book, punching bag and jump rope. I've acquired a bunch of stuff, but I just haven't been using any of it. In addition, we have a space that can be semi-dedicated to exercise.

Thus, it was clear it wasn't lack of equipment but the lack of motivation. With some thought, I realized that most of my successful exercise has been social, specifically on team sports. Nowadays, exercise is more of an individual activity, e.g. running, biking, or weight lifting. Interestingly, the only time I consistently did running was when I had three to four friends with whom I ran. Currently, my only remaining social exercise is a neighborhood tennis league.

Here's what I'm doing to increase my motivation to exercise:

Increase social sport activities. My indoor tennis league is only during the fall and winter. A few of us decided to continue the league through the summer on a casual basis. In addition, two of my friends are now able to play golf on weekday mornings, which is a good off peak time to play. Finally, my wife also does yoga and we could train together. My goal is to have two social sports activities each week this summer.

Combine weight training with other compatible activity. I've decided to create a financial news center in the weight training room. Since I don't have cable, CNBC is not an option. As an alternative,I will record the Nightly Business Report each day and watch it the next morning during the exercise period. I will also record WealthTrack on weekends. In addition, I will start knocking off my backlog in educational or entertainment videos.

Do exercise first thing in the morning. Since retiring in my forties in 2007, I've stopped getting up at 5:30 AM and am sleeping until 7:30 AM regularly. While I have enjoyed the extra sleep, I now realize I need to do activities like exercise before the rest of the family is awake. It looks like I'm going back to at least a 6:30 AM wake up.

This morning was the first match of our informal summer tennis league, at 7AM on Sundays. We were able to play a two set match and finish by 8:30AM. Tomorrow, I will begin my weight training and watch the Night Business Reports and WealthTrack that I missed from last week. Finally, this week I will develop a yoga routine that I can do with my wife.

We'll see how exercising goes for the month of June, 2008. If it goes well, I may be able to achieve the first of my 2008 New Year's resolutions, losing 10% of my weight :-)

For more on New Beginnings, check back every Sunday for the next segment.

This is not financial or health advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC