“The first one gets the oyster, the second gets the shell.”

– Andrew Carnegie

QUESTION: I want to gift my son $5,000 for him to contribute to his IRA. Does it matter when I give him the money to do this?

ANSWER: Yes, there is an advantage to making the IRA contributions as early as possible, and thus lengthening the deferral period. This point is best demonstrated by an example. It should be noted that, although the following example assumes a traditional IRA, the principle of tax deferral on earnings also applies to the Roth IRA. Further, the Roth IRA has the advantage that qualified distributions will be tax free.

Example:
Ed begins to make annual contributions to a traditional IRA when he is age 30. He invests $5,000 each year until he reaches age 60. The IRA grows at 8 percent each year. If Ed makes these contributions at the beginning of the year, the IRA will equal $611,729 at age 60; if made at the end of the year, the IRA will equal $566,416. The difference is substantial, $ 45,313.

Rates of return are for illustration purposes only. No guaranteed result is implied. 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.

Yesterday, my wife Jo Anne continued our tradition of assembling family and friends for a traditional Italian dinner on Palm Sunday. Jo Anne’s version: homemade (durum semolina flour) pasta with her own meatballs with plenty of good red wine. I applaud her energy. She made many pounds of pasta and dozens of meatballs for a total of 32 people. And, there were no leftovers – a sure sign of a success in the eyes of an Italian cook.

Last week there were many more NEGATIVE than POSITIVE developments, and the many stock markets around the world declined.

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

Positives:
1) Retail Sales in March were good, notwithstanding rising gasoline and food prices
2) NY mfr’g survey in April rises to 1-year high
3) Apr Univ. of Michigan confidence bounces 2 pts from lowest level since Nov ’09 with still elevated 1 yr inflation expectations
4) China reports stronger than expected Q1 GDP, retail sales and IP

Negatives:
1) US CPI rises 2.7% y/o/y, most since Dec ’09 and Import Prices rise 9.7% y/o/y
2) Initial Jobless Claims rise back above 400k for the 1st time since early March
3) Higher than expected trade deficit and lower than expected rise in business inventories send Q1 GDP forecasts down to around 2%
4) NFIB small business optimism index falls to 5 month low as price pressures rise, and plans to hire, expectations of better economy and better sales fall. Cap ex component did rise
5) Soft start to Q1 earnings season as seen with AA, JPM, GOOG and BAC
6) Yields in Greece, Portugal, Ireland and Spain all rise as clock ticks on inevitable timing of Greek debt restructuring. Greek 2 yr yield up 225 bps on the week and CDS goes to record high
7) Gold at record high, direct indictment of Fed policy
8) China reports stronger than expected higher than forecasted CPI and PPI.

Source: The Big Picture

U.S. stocks fell for a second straight week, although the shallow decline suggests increasing skepticism, but not yet a repudiation of the market’s central assumption that the global economy will continue to grow and inflation will stay tame in the developed world.

The pause shows that the trading world has quickly modulated its once-unbridled zeal for risk. Economists now think that the U.S. economy might have expanded just 1.5% or so last quarter, down from the more than 3% they thought likely when the year began. And the latest survey of global fund managers by BofA Merrill Lynch shows 51% fretting about too-loose monetary policy—the highest number in seven years—while the throng that had anticipated better profits over the next 12 months has shriveled to 19% in April, from 32% in March and 51% in February.

So far, companies have been reporting first-quarter profits that are nearly 5% better than analysts were expecting. That pales by comparison with some recent quarters, in which U.S. corporations were beating forecasts by double digits, but it still presents a triumph on paper. Too bad stockholders seem to be counting on more: Companies beating profit targets have been rewarded with a mere 0.6% gain in the following session, while those that dared miss were walloped 4%, according to preliminary data from Bespoke Investment Group.

Among the latter: Alcoa (ticker: AA) swung to a first-quarter profit, but fell short of its revenue target, and its stock was clipped by 6%. JPMorgan Chase’s (JPM) biggest quarterly take ever and a 67% profit jump has brought only a flat finish. Google’s (GOOG) profits increased 18%, while revenue grew 27%—but is a 54% jump in operating expenses a sign of an increasingly cavalier attitude toward pay and spending? The company lost $15.3 billion in market value Friday, as the stock fell 8.3%.

What matters more, of course, is whether higher commodity costs and government belt-tightening will start to crimp the confidence of both companies and consumers. Disruptions to supply chains in Japan also may have a lagged effect that won’t be fully felt until later this spring. Thomas Lee, JPMorgan’s U.S. equity strategist, trimmed his forecast for second-quarter profits for the Standard & Poor’s 500 Index to $23 from $24, and cut his full-year profit forecast by $1, to $96.50. But he noted that five of the seven macroeconomic indicators he watches have continued to improve, and that the crop of companies with net margins surpassing their prior peaks has grown to 30% from 22% a year ago. He thinks revenue growth of 9% will help net margins expand above their prior peak of 9%, toward about 11% by 2012.

“Fear is making a comeback, but the usual cycle-ending hallmarks remain absent,” notes Myles Zyblock, RBC Capital Markets’ chief institutional strategist. “Crowded long positions are being cleared rather quickly, characteristic of a world dominated by low-conviction optimists.” Main Street also remains underinvested in stocks, he adds, while the business cycle is buttressed by a healthy spread between the return on and cost of capital, and the yield curve points to earnings gains stretching into 2012.

Last week, the cost of insuring against a Greek default climbed further, amid speculation of a restructuring of Greece’s debt. But crude oil broke its three-week rise, dropping by 2.8% after Goldman Sachs suggested that prices might have gotten ahead of fundamentals. While the firm sees further upside in the long run, it argues that nascent signs of demand destruction in the U.S., elections in Nigeria and a potential ceasefire in Libya could weigh on prices in the next three to six months.

Companies continued browsing for growth, and reports surfaced Friday that Johnson & Johnson (JNJ) was in talks to buy Swiss medical-equipment-maker Synthes for about $20 billion. Even before this, merger volume had surpassed $934 billion so far this year for the biggest start since 2007, says the research firm Dealogic.

The Dow Jones Industrial Average snapped a three-week ascent, falling by 38 points, or 0.3%, to 12,342. The S&P, despite a two-week retreat, it is just 1.7% off its mid-February peak. The Nasdaq Composite Index fell 16, or 0.6%, to 2765, while the Russell 2000 Index of small stocks slipped by 6 points, or 0.7%, to 835(Source: Barrons Online).

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

Returns through 4-15-2011	1-week	Y-T-D	1-Year	3-Years	5-Years	10-Years
Bonds- BarCap  Aggregate Index	.8	.9	5.4	5.6	6.3	5.7
US Stocks-Standard & Poor’s 500	-.9	5.7	7.4	-3.0	-1.7	1.4
Foreign Stocks- MS EAFE Developed Countries	-1.1	3.8	5.2	– 5.9	-1.3	2.6

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.