Ken Himmler.com

While I am on a roll I have to go back to another crash. October 19th 1987. The market dropped from 2246 on October 16th 1987 to 1738 on the 19th. This represented a drop of 29%. We dropped only 7% today, not quite a comparison and oh by the way did I say the Dow was at 1738?

As I went back onto my PC tonight I couldn’t help but notice the headlines "Dow Drops 770 – More Than After The Sept 11 Terrorist Attacks"! For those that read at first glance it would seem scary. For those that have better memories than that I have the real information for you. I have downloaded the Dow Index Table from September 4th 2001 to December 20, 2001. I want you to notice on September 5th 2001 the Dow was at 10,033. It then dropped to a low of 8235 on September 21st. While the 770 drop may have been bigger than the single day drop – who gives a rip?. What does that really have to do with the companies profitability that make up the Dow? – NOTHING. If you note on the table again on 12/19/2001 the Dow went back to 10,070. I feel really sorry for all those emotional people who jumped out at 8235 and only a few months later it was back above where it was before.

I wish I had better news about how to stay retired but the recent market scare has a lot of people making rash and emotional decisions. This usually comes from a lack of a financial plan and the lack of working with someone that has designed a (RDP) retirement distribution plan. When you are retired look at your funds as being broken into four different pie slices. Stocks, Bonds, Cash and Real Estate. Each one of these should behave differently and they should have the right amount of diversification. Usually, when someone has a scare it is because they see what is happening in the stock market. If the plan was set up correctly, they should have thier distributions coming from cash or bonds when the market drops. When the market goes up it is then time to re-balance – and replenish the cash or bond accounts. If you currently have a plan that depends on taking distributions only from stock then I do feel for you. What can you do to save your retirement portfolio?

1) Make sure that you have an adequate (RDP) retirement distribution plan.

2) Make sure that you have a plan that allows you to pay the least amount of tax possible.

3) Make sure that you have a plan to re balance the assets when they get out of tolerance to the model you use.

4) Make sure that you do not act on emotions and try to time the ups and the downs.

5) Have a process and and a system in place that calls for specific action tasks when certain things happen that may affect your stability.

6) Make sure you have your plan balanced into

Domestic Stocks Small cap, Mid Cap, Large Cap

International Stocks Emerging and developed

Real Estate, Income producing diversified between residential, commercial and industrial

Cash and cash equivalents Money Markets and Fixed Annuities (also could include equity indexed annuities)

And lastly, remember the past – there have been many other market drops and no matter how much media sensationalizes the drop remember that as long as we keep having babies we will continue to need products and services. (Historical birth rates have been directly tied to economic growth and we just had a spike as big as the baby boom in the 40s and 50s)

Tells us how you are handling the recession?

Wa Mu seems like it is going to be the largest meltdown of a bank yet. Although I would like to be a bit scared I am not. I am not sure who said that "Those who forget history will be condemned to live it again". Those people who are in great fear have short memories. It was only 20 years ago that we had a similar meltdown (1986) with the collapse of the S & L Banks. Those who may not remember need a quick re-cap. There were two geniuses in Congress at the time Graham and Rudman. Their act (the 1986 Graham Rudman Act) changed the way people could deduct investment property on their taxes. This act caused people to walk away from their real estate. In many cases people were more willing to take seven years of bad credit than to hold onto a losing property that they might not deduct. This massive foreclosure also caused the S and L ’s to go through the Wa-Mu dance. I was only a few years into my career at that point and thought the world was crashing in around me. It was only two years after that when the stock market had incredible gains. And while everyone was happy about their returns it wasn’t too long afterwards that the crash of 1989 happened October 19th otherwise known as Black Monday. The market dropped 30% in two days. I also remember the out of taste costume that a person wore to the Halloween party that year. They came as the stock broker that had bullet holes in them. This, after the man that shot his stock broker, his secretary and then shot himself – in Miami. If this man could of only held his emotions for a few years he would have has all his money back plus a nice profit. How many people are letting this short term economic fluctuation ruin their quality of life? There are inevitable truths, politicians will philander, prices will go up and in ten years you will look back and reminisce about how politicians were honest and prices were lower. – Thanks Baz Luhman for that last statement, (From his speech on wear sunscreen) Ken

I am writing this from my office away from my office, downtown Sarasota, Fl. Many times I have to get out of the office to get my mind straight and think. As I was thinking about this recession we are in I asked myself what has really caused this. I think there has been many reasons from a Rip Van Winkle fed chairman (not that I think Greenspan was any better) to a greedy real estate market and to put the cherry on the cake the unregulated oil commodity market. That brings me to my next question. How did we get back in this oil crisis? I do know that it has affected everyone we know from those who travel and now have to pay for luggage, to those who depend on transportation and finally those who are retired and are dependent on retirement income from the stock and bond markets. I am not going to complain about the situation because all that does is boil the blood. I am however going to tell you about part of the problem with our oil crises. Oil prices respond to Read more…

What is RSS? I’m regularly asked this question and thought it might be worth putting together a page to define RSS and hopefully shed some light on the topic.

Do you want to keep up to date with the latest posts on KenHimmler.com?

In the ‘old days’ of the web to keep track of updates on a website you had to ‘bookmark’ websites in your browser and manually return to them on a regular basis to see what had been added.

The problems with bookmarking

• You as the web surfer had to do all the work
• It can get complicated when you are trying to track many websites at once
• You miss information when you forget to check your bookmarks
• You end up seeing the same information over and over again on sites that don’t update very often

RSS Changes Everything

What if you could tell a website to let you know every time that they update? In a sense, this is what RSS does for you.

RSS flips things around a little and is a technology that provides you with a method of getting relevant and up to date information sent to you for you to read in your own time. It saves you time and helps you to get the information you want quickly after it was published.

RSS stands for ‘Really Simple Syndication’. Many people describe it as a ‘news feed’ that you subscribe to.

I find the ’subscription’ description helpful. It’s like subscribing to a magazine that is delivered to you periodically but instead of it coming in your physical mail box each month when the magazine is published it is delivered to your ‘RSS Reader’ every time your favorite website updates.

How RSS actually technically works is probably a lesson for another day but the key today is for you to understand why it’s good and how to use it.

Let me say right up front that I’m not the most technically savvy guy going around – but even I can use RSS. At first I found it a little strange to make the change from bookmarking to RSS but I found that when I started that I just couldn’t stop.

How to Use RSS

Get an RSS Reader – The first thing you’ll want to do if you’re getting into reading sites via RSS is to hook yourself up with an RSS Feed Reader.

There are many feed readers going around with a variety of approaches and features – however a good place to start is with a couple of free and easy to use web based ones like Google Reader and Bloglines. Either one will do if you’re starting out (I use Google’s Reader) – as I say there are many others to choose from but to get started either of these are fairly easy to use and will help you work out the basics of RSS.

Both of these feed readers work a little like email. As you subscribe to feeds you’ll see that unread entries from the sites you’re tracking will be marked as bold. As you click on them you’ll see the latest update and can read it right there in the feed reader. You are given the option to click through to the actual site or move onto the next unread item – marking the last one as ‘read’.

The best way to learn how to use either Google Reader or Bloglines is to simply subscribe to some feeds and give it a go. Both have helpful help sections to get you up and running.

Note: other options to tracking websites that you might already be familiar with include using pages like MyYahoo, MyGoogle and MyMSN.

Find Some Feeds to Subscribe to – there are two places to look for a site’s feed:

1. On the Site
2. In Your Browser

On Site Subscription
Over the last few years you may have noticed a lot of little buttons and widgets appearing on your favorite sites and blogs. Little orange buttons, ‘counters’ with how many ‘readers a blog has, links called RSS, XML, ATOM and many more.

They come in all shapes and sizes. Here are a few you might have seen:

Each time one taxpayer transfers wealth to another, the transfer is potentially subject to federal transfer tax, in the form of gift or estate tax. The federal transfer tax system is designed to impose a tax on each and every generation (e.g., father to son, son to grandson, etc.).

The transfer tax system accounts for the fact that a transfer might “skip” a generation by passing from parent to grandchild, for example. This is accomplished by imposing an additional tax whenever transfers of wealth are made to persons who are more than one generation below the taxpayer (e.g., father to grandson). This additional tax is called the generation-skipping transfer tax (GSTT). GSTT is imposed at the highest estate tax rate in effect at the time of the transfer (45% in 2008).

Additionally, most of the individual states impose their own transfer taxes. Together, these taxes can take an enormous bite whenever wealth is being handed down, and eventually eat away a family’s fortune. This can be troublesome to individuals with substantial wealth who would prefer to have their legacies benefit their own family members. It’s from these circumstances that the dynasty trust evolved.

A dynasty trust is created to provide for future generations while minimizing overall transfer tax. With a dynasty trust, a taxpayer transfers assets to the trust. This transfer, from the taxpayer (the grantor) to the trust, is potentially subject to transfer tax (although the taxpayer may use his or her exemption amounts to shield the transfer from tax). The trust then provides for future generations for as long as it exists. Although the trust assets effectively move from generation to generation, there are no corresponding transfer tax consequences.

For more information on dynasty trusts and other trusts such as family foundation, you can go to http://kenhimmler.com.

Read more…

As I sat at my desk today and watched the crazy tumble of the Dow Jones it really reinforced the difference between accumulation and distribution. Everyday I meet with retirees or people about to retire and see the stress and the worry on their faces. Their worries are more founded lately because of this massive recession that we are in. In many of their cases I can understand why they are worried. Their entire future is dependent on the outcome of the stock market and they go up and down like a slinky. If you are twenty years old then you should by all means be invested in the stock market and probably 100% in. If you are in your sixties or in your seventies and you are dependent on at least 3% to 4% coming to you in a distribution and you are more than 40% in the stock market then you should be worried. Is this because I think the stock market wont come back – no, it is because I don’t think it will come back and grow for at least another two to three years. If you think I am crazy look at the business cycle. Just now the main street businesses are starting to go out of business. I know main stream financial media says that we are coming out of this recession but all the economic factors point the other way. Just yesterday Warren Buffett stated that this recession will last even longer than he originally anticipated. Lets look at the oil crisis. The oil supply has not kept up with the demand and therefore the sellers of oil have the market ability to increase prices and the world must pay it. If you think that this isn’t true just look at what is happening in Dubai. They expect to get over 1.7 trillion in profits over the next two years. They have at least 70% of the worlds tall cranes in one city – for building high rises. To add insult to injury now they are building another mall with another inside ski slope. This sudden increase in demand cannot be met in a short term. It will take a period of time for alternative fuel sources, alternative energy (solar), alternative transportation (hybrid and hydrogen cars) to not only be designed but produced. Once this happens then the oil produces don’t have as much power as they do now. What this means for people trying to plan their retirement income is that they may have a hard time living in today with inflation above 4%.  The real question is how can a person possibly feel comfortable with their retirement income when they don’t have a good asset allocation plan in place that includes a way to get an income from a fixed – no risk investment over the next two to four years. Let me know what are your thoughts and guesstimates of what will happen in the next few years in regards to the economy?