Leading Rich

It has been a few days since I updated Leading Rich, but I am sure you have heard the latest and if you missed it, here it is again.

Bear Sterns stock price was nearly $160 per share last year, it was trading at $58 on Thursday March 13 then fell to $30 on Friday March 14, 2008 and over the weekend, JP Morgan Chase made a bid to purchase them for $2 per share.  From a valuation of $21 Billion Bear Sterns was dealt a blow on Sunday with a valuation of $230 Million.  With the backing of the Federal Reserve Bank of New York, JP Morgan received a guarantee of all mortgabe backed securities and also the very lucrative Manahattan Commercial Real Estate owned by the 85 year old firm that was the 5th largest investment bank in the US. 

What does this mean for you?

It means that the government bailed out the Rich and really don’t care for Americans who are hurting in this economic environment.  Will the Federal Reserve back my subprime mortgage with my Bank and bail me out - I think NOT!!!!!

Federal Reserve Largest Mortgage Holder

Now that the Bear Sterns deal is moving forward, the Federal Reserve will be the largest holder of mortgage debt.  They can sit on all this debt or properties for a long time, or until property values go up.  And where are they getting this money from… they are just going to print it.

How does this impact you?  It means that the real estate market may not corret appropriately, they will take their eye off the ball with the economy as they focus on their holdings and therefore impact your life by extending the economic hardships for years rather than months.

Federal Reserve Lower Fed Funds Rate by 3/4 point

Federal Reserve Lowers Rates - Great News - NOT!!!! If you have CD’s, then expect all your rates to fall for your savings.  You will now get 3% on your 1 year CD, when you were getting 5%.  And at the same time inflation is running at 4% plus.  So you will be losing 1% purchasing power on your money in 2008.  Most people will move their money to the Stock Market, but how can they do that when the stock market is falling.  Don’t look at todays $400 plus move on the Dow, for all of 2008, the market has been in a free fall.

It is time to hunker down and protect your assets.  Here are a few tips for 2008.

• Job Security - Solidify your position at your company.
  • Make sure that management sees the value of your contribution to the organization
  • Work smarter and stay later to show that you are committed to getting your job done when others are leaving to go home
  • Find new ways for your company to save money or incrase revenue in this economic downturn
• Protected Your Financial Assets
  • Make sure that your mortgage is solid and will not be subject to a rate adjustment
  • Refinance to protect your low interest rate
  • Clean up your dogs - Get rid of Stocks that have no future return - Remove the emotion of your holdings
  • Pay off credit card debt, banks may start raising rates even if you have a low promotional rate
• Get Control of your Budget
  • Manage your monthly budget and closely monitor spending
  • Don’t buy the Flat Screen TV with your tax rebate
  • Cut out luxuiries in your life - Get coffee at 7-Eleven rather than Starbucks
    • If you still need your Starbucks, get a small coffee and cut out the blended drinks and muffin

More tips to follow.  Remember that if you take care of your finances now so you can get ready to invest at the market bottom and really make out when the economy recovers.

Many questions have come into LeadingRich.com about the eligibility of SSDI income for the 2008 economic stimulus tax payment.
According to the IRS, “Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.”

But SSDI - Social Security Disability Income is not mentioned specifically.  The IRS says “Social Security retirement or disability benefits” are eligible.  If you take the assumption that SSDI is the Social Security disability benefit, then you are eligible based on certain rules of how much.  But to make everyone more confident about this answer, I personally called the IRS at (800) 829-1040 and was told by the Tax support representative, that SSDI payments are eligible for the tax rebate.

What You Need To Do

• You will need to file a 1040A form as stated by the IRS and let them determine eligibility and tax rebate amount.
  • The form and instruction are available at http://www.irs.gov/pub/irs-pdf/k1040a3.pdf.
•  Remember to write “STIMULUS PAYMENT” at the top of the return
• Write your social security number
• Fill out the rest of the form per the instruction
• Definitely don’t forget to sign it.

Also according to the IRS, if you have not filed a 2006 tax return, they will be sending you information about the stimulus and instructions.The IRS has also setup a hot-line for the stimulus payment at (866) 234-2942, but not much information is available.

April 15 is almost a month away and many people have not even begun the tax preparation process. This year many more people will be inclined to start the preparation process earlier as they may be eligible for a tax rebate.

If you are looking to prepare your tax returns this year we offer this look into the top options for your personal tax preparation needs.

TaxCut

TaxCut includes everything to complete your federal and state taxes, plus guidance for every personal tax situation from 1040EZ to Schedule C. The software included an interview process to assist you step-by-step and guides users through a customized process, and includes advice on how to find every deduction your customers deserve and get the maximum refund—guaranteed, as well as H&R Block DeductionPro to maximize tax savings from donations. There are also advanced tools for investors and business owners such as guidance for rental property and expenses, assistance on investment income and stock options, and how to maximize business deductions for sole proprietorships.

Turbo Tax

Turbo Tax has an interview process that allows you to answer easy questions about your life, and it will put your answers on the right forms for you.  The software will maximize your deductions TurboTax Deluxe searches for over 350 deductions, including mortgage interest, donations, and education.   TurboTax Deluxe checks your return for errors and shows you how to reduce your risk of audit.  Another capability is eFile or Print that will help you get your money sooner. File electronically, and you’ll receive your refund in as few as 8 days.* (Per Turbo Tax - *IRS typically estimates 8-15 days for e-file with direct deposit.)

Online Tax Preparation

If your tax preparation needs are simple, you may want to entertain the option of preparing your taxes with online tax preparation services from Tax Cut and Turbo Tax.

Although we have not tested these services, they may be worth a try if you only receive employment income and take only the standard deduction.  Since they are fairly new offerings, simplicity is the safest option.

Forbes has release the latest listing of the Worlds Richest Men and the man on top is Warren Buffet. It was once hip to be in technology and be able to take over the world. Given the recent economic events, it now makes sense to own real assets such as Insurance Companies, Clothing Manufacturer, Jewelry Retailer, and many others.

The holding company Berkshire Hathaway stock has been on a tear closing at $139,000 per share, reaching as high as $151,000 per share in December 2007 (BRK.A). If anything this man is someone to keep tabs on and follow into investments. You ask what is he currently in? Berkshire’s top 5 holding include

• American Express - 12.8% ownership, worth $71.5 billion
• Burlington Northern Santa Fe - 18.3% ownership, worth $5.7 billion
• Coca-Cola - 8.6% ownership, worth $12 billion
• Johnson & Johnson - 2% ownership, worth $3.9 billion
• Kraft Foods - 8.6% ownership, worth $4.2 billion

The top 20 on Forbes list include:

1. Warren Buffett
2. Carlos Slim Helu
3. William Gates III
4. Lakshmi Mittal
5. Mukesh Ambani
6. Anil Ambani
7. Ingvar Kamprad
8. KP Singh
9. Oleg Deripaska
10. Karl Albrecht
11. Li Ka-shing
12. Sheldon Adelson
13. Bernard Arnault
14. Lawrence Ellison
15. Roman Abramovich
16. Theo Albrecht
17. Liliane Bettencourt
18. Alexei Mordashov
19. Prince Alwaleed
20. Mikhail Fridman

Prices for Gold, Oil, Wheat keep on going higher.  Here is a great story from BloggingStocks.com on why you can’t miss Gold in your portfolio during this inflationary time.

I would add that you could also put Oil into the mix, but you cant put Oil under your mattress.  But more people are likely to cut purchases of Gold rather than Oil.  So having both might make sense as a hedge against inflation.  One other item Gold is used for other than Jewelry is for industrial purposes.