“When you feel like giving up, remember why you held on for so long in the first place.”

– Author Unknown

The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®. This week, Laurie will discuss:

“Your state and local income tax questions”

Laurie will take your calls on this subject and other financial planning topics at 610-758-8810. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton/Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville/Macungie area – or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.

QUESTION: My mortgage rate is about 6% and the rate will be adjusted in 2012. When should I refinance?

ANSWER: As soon as possible. Interest rates have recently dropped but this dip will probably be temporary. Act now to refinance before interest rates continue their upward trend. The reason why interest rates will rise is that mortgage interest rates are closely linked to the 10-year maturity U.S. Treasury note interest rate. In 3 months, the FED will probably stop buying these as part of its quantitative easing AND the Japanese, a big purchaser in the past, will be forced to withdraw their buying power in order to redirect its money to rebuilding Japan post earthquake/tsunami/meltdown.

Feel free to contact me if you or someone you know has this type of situation. Financial Planning and tax planning advice presented here is general in nature, and individual circumstances make applying these general rules tricky; thus, the above answer cannot be applied to all circumstances because the slightest variation could cause a different outcome.

   

My leisure reading habits are such that I flip-flop between fiction, non-fiction, fiction, non-fiction, etc., I just finished a non-fiction book titled, “This Time is Different: Eight Centuries of Financial Folly”, which presented more evidence for fearing our government’s proclivity for spending.

My next read (fiction) is a challenging project: “Atlas Shrugged”, by Ayn Rand. This literary masterpiece was first published in 1957; and, I have been toying for a decade about reading this 1,368 page behemoth of a book. Why now? Its story line seems appropriate for today’s controversy between big government and those who celebrate individual drive and the reward for a job well done, rather than the equal division of profit to all regardless of the work put in. AND…… the movie by the same name is debuting 4/15/2011 after 40 years of a tug and pull contest in Hollywood on whether to make this controversial book into an accurate rendition of Ayn Rand’s philosophy. So, I intend to read the book and then see the movie on Saturday 4/16/2011 (I marked my calendar!).

Last week, more NEGATIVE than POSITIVE developments were announced and the stock market became more volatile.

Below is a succinct list of last week’s events:

Positives:
1) Oil prices moderate but for both good and bad reasons
2) Day of Rage ends up being Day of Nothing, Saudi stocks rally this week
3) Retail Sales good but what’s next with higher gasoline prices?
4) US Treasury finds aggressive buyers for 10 and 30 yr debt
5) NFIB small biz optimism index hits best since Dec ’07

Negatives:
1) China reports unexpected trade deficit
2) Gasoline prices up another $.05 to $3.54, hasn’t fallen in 24 days
3) Initial Claims rise but remain below 400k
4) UOM confidence drops and follows fall in Bloomberg poll as one yr inflation expectations jump to 4.6% from 3.4%
5) Higher than expected US trade deficit leads to cut in Q1 GDP forecasts
6) Moody’s downgraded Spain’s credit rating, yields continue to rise in Greece, Ireland and Portugal.

Source: The Big Picture

One consequence of instant information and faster trading is that global markets increasingly tend to move as one. And last week, that move was a step back from risk.

U.S. stocks suffered their second pullback in three weeks. The loss measured just 1.3%, but more alarming was the deteriorating momentum: On Thursday, all four major stock indexes fell below their 50-day moving averages. For the Standard & Poor’s 500 Index and Nasdaq Composite, this turn came after a remarkably determined string of nearly 130 consecutive sessions when the indexes always managed to rise above their trend lines. Thursday’s selloff came even as the market’s threat du jour—higher oil prices—eased. Asian and European stocks also retreated last week, and even gold ended a five-week winning run.

Don’t look now, but the three best-performing sectors so far in March are utilities, consumer staples and health care. What might worry this already antsy herd? Tempting as it is to blame investors’ apprehension on oil, the market’s swoon also worsened after the European Central Bank signaled its intention to hike interest rates soon. Yields spiked on bonds issued by several southern European countries; Moody’s downgraded Spain’s credit rating, and Michael Darda, MKM Partners’ chief market strategist, said Europe’s monetary policy, already too tight, “is about to get even tighter, with potentially devastating consequences.” The ECB’s balance sheet is expanding at a sluggish 2.6% pace, compared to 10% when the euro was born, and concerns are rising that higher rates now could choke off the Continent’s fragile recovery and worsen its budget woes.

With the onset of spring and the arrival of daylight-savings time, traders looking ahead also smell an uneasy end to the current easy-money regime. The Federal Reserve had been buying Treasuries and mortgage securities to hold down interest rates, but that $600 billion program will end in June. Expecting Treasury yields to rise later this year, the world’s biggest bond fund, the Pimco Total Return Fund, has already pared its holding of U.S. government debt to zero for the first time in three years.

It doesn’t help that Japan, the second-largest foreign buyer of U.S. debt, might now sell a portion of its $1 trillion stash in U.S. bills to help fund reconstruction after its worst earthquake on record. “Undoubtedly, Japan’s appetite for Treasury purchases will wane,” says Jack Ablin, Harris Private Bank’s chief investment officer. And without more buying by the Fed, treasury yields will likely rise in the second half.

Higher borrowing costs don’t automatically derail stocks, and may even signal a booming economy. But they’re more problematic when coupled with a bigger energy bill. In January, when unleaded gasoline was just $3 a gallon, gas-station purchases made up just 10.3% of the retail tab. Pump prices are now rising, and “history suggests that when gas purchases make up more than 10% of retail sales, consumers are forced to make the tough choice” of cutting back on some discretionary spending, Ablin notes.

Still, few expect the global recovery to unravel just yet. Stocks rebounded 0.7% Friday, and are off just 2.9% from the Feb. 18 peak, a sign that investors are watching and waiting.

The market’s momentum change bears watching. Bespoke Investment Group examined prior instances going back to 1971 when indexes slipped below their 50-day averages after more than 100 days above it. True to its momentum-sensitive nature, the Nasdaq went on to losses averaging 3.8% after a week, 5.6% after a month, and 4.7% after three months. In contrast, the S&P steadied itself and eked out gains averaging 1.1% a week later, 1.9% after a month and 2.1% after six months, perhaps because bargain hunters in the face of risk tend to browse first among big, quality stocks.

After dipping below 12,000, the Dow Jones Industrial Average ended Friday at 12,044, down 125, or 1%, on the week. The Nasdaq fell 69, or 2.5%, to 2716, while the Russell 2000 declined 22, or 2.7%, to 803. And crude oil pulled back 3.1% (Source: Barrons Online).

Last week, US Stocks and Foreign stocks decreased. Bonds increased. During the last 12 months, U.S. STOCKS outperformed BONDS.

Returns through 3-11-2011	1-week	Y-T-D	1-Year	3-Years	5-Years	10-Years
Bonds- BarCap  Aggregate Index	.4	.6	5.2	5.9	6.0	5.6
US Stocks-Standard & Poor’s 500	-1.2	4.1	15.7	-3.3	-1.6	.9
Foreign Stocks- MS EAFE Developed Countries	-3.4	1.7	7.9	– 5.4	-.9	2.0

Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.