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This page is designed to be a central location where we at FCVA can quickly and/or permanently disseminate information to our clients all around the globe at one time. Such information may be of immediate investment interest, but more likely it will be of a more general nature but of enough importance to demand its inclusion here. 

No IRA or Retirement Plan Required Minimum Distributions in 2009
Congress approved legislation that includes a one-year suspension of the required minimum distributions for 2009 for taxpayers who are 70½ and older.  Requirements for 2008 remain unchanged.  The legislation, H.R. 7327, the Worker, Retiree, and Employer Recovery Act of 2008, passed the Senate by unanimous consent Thursday, December 12, and is expected to be signed by the President. 

While there has been some speculation about regulatory relief for 2008, Congressional tax staff feel that the 2009 RMD waiver provides fair and adequate taxpayer relief. We will continue to monitor and report on any developments in this area.

Other provisions of the bill would:

Today, I read a column that tells a similar story from a more modern perspective. Jeff Clark, the author, writes an investment newsletter. Here is an excerpt from his paper today:

“. . . The stock market, right now, is a giant guessing game. Neither fundamental nor technical analysis is working. And investors doubt their faith.

It's like finding your spouse in bed with your priest. Two deep-rooted bonds are shattered at once.

So how do we get through this?

I can only offer you this advice (which Keanu Reeves shared in The Replacements, an otherwise forgettable football move)...

"Pain heals. Glory lasts forever. Chicks dig scars."

• Pain heals. We've been through this before. We survived the stock market crash of 1987 and the sequel in 1989. We endured the Asian currency crisis in the late 1990s and suffered through the Internet meltdown in 2000.

Today feels worse. But it's not. Investors have weathered all the other financial crises over the years. And we'll get through this one, too.

• Glory lasts forever. The ability to keep one's head while all others are losing theirs creates greatness. Warren Buffett earned his fortune by making smart decisions in a bear market. His investment prowess will live on forever in the minds of long-term value investors.

I'm certain that five or 10 years from now, we'll all look back at some of these debt-free stocks trading at less than eight times earnings, slap ourselves on the forehead, and wonder why we didn't buy more.

• Chicks dig scars. The battle-tested warrior gets more respect than the rookie just entering boot camp. Traders who've been in the trenches for decades have more followers than hedge-fund managers just out of business school. . . Experience is valuable. . .

It's okay if your faith in the market has been shaken. Mine has too.

But just as the sanctity of marriage is much stronger than the indiscretions of one spouse, and faith is mightier than the actions of one priest... the free market and capitalism are much stronger than the shenanigans in Washington and Wall Street. . .”

Between the two of us, Michael and Louis, we have seen almost 75 years of market swings, both up and down. We know that proper portfolio design and attentive execution go a long way to cushioning your portfolio from drastic swings like the ones we are experiencing now. While it may sometimes seem like we are repeating empty platitudes, the mantra of "stay where you are, this too will pass" is still true.

How does this affect you and your assets? In August 2007, FCVA moved virtually all of our clients' money market balances to the TD Bank FDIC insured money market account because we saw that "breaking the buck" may very well happen. Thirteen months later, we were proven right. I am very glad to say that not one of our clients has or had any money in the Reserve Primary Fund.

Because of the assurances from TD Ameritrade, we have begun moving assets back into the "regular" TD Ameritrade money market funds to take advantage of the higher returns. TD Ameritrade has issued numerous notices, memos and white papers to us, the Advisor, stating the company's stability and that TDA has no investments in any of the real estate related securities that have been the catalyst for this market turmoil. Specifically, TDA has outlined how their money market funds have no exposure to the types of credit securities that caused the Primary Fund to price its shares below $1.00 each. In addition, while they were certainly not required or even expected to, TDA has put up $50,000,000 to make sure that all of its clients who lost money in the Reserve Primary Fund can be made whole. Remember, TDA has no business relationship with the Primary Fund, they just felt that it makes good business sense to maintain their clients' security and loyalty by offering to make whole those who lost money in what they perceived to be a safe investment that was held by TD Ameritrade.

That attitude kelps me feel comfortable that we have chosen an honest and customer-focused custodian.

Mid-January 2008  updated March 20, 2008 and March 22, 2008 and March 26, 2008
"Are we in for a recession?"
"What should I do about my investments? Which ones should I keep?"
"Should I sell everything and wait for the markets to settle down?"

These are legitimate questions for the times we are now experiencing. There is angst in the markets and in the economy. People are worried about their futures. Investors are fearful of the performance of their holdings. How should you, an FCVA client, react?

The quick and dirty answer is: "Don't react!"

Reacting to market fluctuations almost always produces less than desirable results. Rather than react to daily or even yearly fluctuations in the markets, you should be more proactive and design a well diversified portfolio of investments that can withstand the blows dealt by wildly fluctuating prices. Does this mean that a well diversified portfolio will not allow losses? Of course that is not true. Losses are a part of the investing cycle. It's a bit like the flu. No one ever wants to get the flu. We protect ourselves by getting a flu vaccination, but sometimes, we still come down with a pretty bad case of the flu. Sometimes, the vaccination even makes you feel bad -- the prevention hurts. The diversification of your portfolio across different types of investments and different economies helps insulate your portfolio from the drastic swings that a non-diversified collection of investments may subject you to. Some of the tempering investments included in the well diversified portfolio may, indeed, reduce the overall gain, but they help moderate the degree of price volatility so your portfolio remains as stable as an investment portfolio can reasonably be. If you want absolute stability -- without the potential for growth -- you should be saving rather than investing.

Recession? It has been said that "Economics is the only profession in which two highly educated people can share a Nobel Prize for saying opposing things." We do not know -- nor does anyone else really know -- whether or not the region or state or country or world will fall into a recession or what it will take and when, to recover from one. (Please see the short interview of Louis and Michael conducted by the local NBC affiliate, WAVY-TV 10 here) We do know that ups and downs in the markets and in local and global economies are normal, natural occurrences that tend to repeat somewhat regularly. That is called a cycle. All businesses go through cycles of profit and loss. It is no different for your portfolio. The end intent is to make more profit than you suffer loss.

Last August, we took the precaution of moving your money market funds from a money market mutual fund to TDA Bank's insured money market (jump to read). We continually review our investment decisions and your allocations and make adjustments where and when we feel it is in your best interests to do so. Your best interests may indeed fluctuate from seeking return to preserving capital. This is a time to lean more towards preservation without abandoning the growth ship. We do foresee the next few years being a time of difficult and lower growth rates for many classes of investments. What may have been perceived as safe in previous cycles may be just where you don't want to be now. We are continually reading and researching and studying what to do next. It is not a clear course, but together, we'll make the trip.

As we try to make sense of the financial world around us at a time when that has become a daunting task, we are comforted by the company we keep. There are times when what you want to say has been better expressed by somebody else. A writer for the New York Times recently put it this way in an article entitled, Can't Grasp Credit Crisis? Join the Club.

"Raise your hand if you don't quite understand this whole financial crisis. It has been going on for seven months now, and many people probably feel as if they should understand it. But they don't, not really. ... I'm here to urge you not to feel sheepish. This may not be entirely comforting, but your confusion is shared by many people who are in the middle of the crisis. . . . I spent a good part of the last few days calling people on Wall Street and in the government to ask one question, 'Can you try to explain this to me?'  When they finished, I often had a highly sophisticated follow up question,
"Can you try that again?" 

The world of modern finance is populated by a lot of very smart people and powerful computers, who work very hard and, most of the time, make a great deal of money. But every now and then those clever people and their machines get a little ahead of themselves and all hell breaks loose. Now is one of those times. We at Financial Counselors of Virginia, Inc. are working hard to understand and react sensibly to the rapidly unfolding financial crisis. In the meanwhile, we urge our clients to keep in mind that another word for "crisis" in finance is "opportunity," and to remember that the very justification for a well diversified portfolio is exactly times like these.

For a more in-depth treatise of what may be the root causes of this current debacle including references to Jimmy Stewart, click here.

If you have specific concerns, please call us today.

Financial Counselors of Virginia, Inc. has evolved into a more complete "wealth management" firm than the FCVA of old that was almost exclusively an investment management company. While investment portfolio design and management is still of utmost importance, it is not the only service we provide to and for you.

We can help with planning your retirement income. You always thought that retirement planning was all about accumulating the dollars that would allow you to retire with confidence and security. Well, now that you are retired, taking an income from your accumulated capital requires careful planning, also. The products that may be required for that income stream are, as are all financial products, available through FCVA at a lower cost to you because we do not accept (read that as you do not pay) commissions from anyone or any company.

For those who wish to take advantage of the service, we offer discounted income tax preparation services. Income tax planning -- planning in advance to pay as little as is legal, is an on-going process. Having your tax return done in-house gives us an extra insight into how to save you tax dollars.

Estate planning to make sure your accumulated capital goes where you want it to go, requires thought and planning well in advance of the need. In addition to the obvious tax and other financial concerns that surround the end of life, we can help you make your survivors' jobs a bit easier by stating exactly what you want done so they do not have to make hard decisions. You will have already done that for them.

College planning for kids or grandchildren can be quite overwhelming. The cost of a four-year college degree can cost more than your house. If you want to help with the expense, you should plan well in advance and make sure your contributions do not interfere with any financial aid that may be available.

Refinancing your mortgage? We can help you decide which of your offers make the most financial sense for you.

Should you buy or lease that next car?

Do you need to incorporate your sole practitioner business?

You get the point that FCVA can help you with almost any financial question. We do not "know it all," but we do know where to find most information and we know who to call.

You can access the current version of our form ADV at any time here on our web site. Click this link or click on the "Disclosures" link on any public page to gain access to our Form ADV.

One of the common concerns of retired people is the need to make quarterly estimated income tax payments because their taxable Social Security benefits cause the normal tax withholding amount to be insufficient. Go here to access a voluntary federal tax withholding form for Social Security. You can type directly on the form before you print it. You then sign it and return it to your local Social Security office.

October 27, 2007
This morning's Virginian Pilot greeted me with a startling headline about Fred Martin, founder of the truly silk-stocking Norfolk investment firm, Virginia Investment Counselors. Mr. Martin is alleged to have diverted more than 13 million dollars of his clients money to a Virginia Beach company of which he was the majority stock holder.
 (Go here to read the article.)

While we read about such things happening in other parts of the country, it always has more impact when it happens right here at home and with an established, respected pillar of the community. It is disappointing to say the least. It also brings into question FCVA's security of client assets.

Louis, Linda and I are all such honest people that we, perhaps naively, hardly ever mention asset security. Since none of us have ever even considered how a client's money could benefit us directly, we have exerted little effort in communicating how we assure the security of client assets.

First, we never take custody of any client assets. We direct all assets to the custodian of the client's choice. If a client has no other preference, we prefer to use TD Ameritrade as the primary custodian. The designated custodian holds your money, not FCVA. Each month all clients receive statements from TD Ameritrade showing all positions (holdings) and transactions. Nothing can happen in your account that is not reported to you by a distant third party. FCVA cannot hide any diversions such as those mentioned in Mr. Martin's article.

One of the statements early in the article posits how much Mr. Martin's clients trusted him. That trust is what every advisor seeks to earn. It is a sacred trust that goes beyond mere promises. You are entrusting not just your money to us, but your future financial security. We accept that charge very seriously.

The article says that many of his clients were of advanced age or lacked the sophistication to scrutinize or understand what Mr. Martin was doing in their accounts. Yesterday afternoon, before the newspaper article was published, Louis and I were discussing how important it is for us to insist that any client we believe to have any trouble understanding what we do and why, to have a representative with them during our meetings. Your doctor insists that you have someone with you after surgery, when your mind may still be impaired by anesthesia, to drive you home and to understand your release instructions. We insist that any client who, for reasons of age, language, culture or any other reason, may have difficulty comprehending what we recommend and accomplish, must have a representative with them to interpret or explain or at least agree that it is in the best interests of the client. In such cases where we would effect financial transactions for such a client, we insist that the representative have legal authority to act in a fiduciary capacity. The typical arrangement would be a durable or financial power of attorney. A friend will do for a first meeting, but whenever real money comes into the equation, we insist the representative have legal authority. This arrangement serves both the client and FCVA. The client's interests are better served by making sure the client understands and agrees with what we are doing for them. FCVA's interests are served by making full disclosure to all legally interested parties.

This is the ugly part of our profession. There will always be those who, for whatever reasons, find themselves operating outside the bounds of the fiduciary oath. Just because there are some unscrupulous lawyers does not mean the entire profession is corrupt. Just because there are some inept doctors does not dissuade you from seeking medical treatment when you need it. Though there have always been and will always be those financial advisors who seek to gain more than a fair wage from their clients, that is not a testament to the entire profession.

At FCVA, we welcome your close inspection of everything we do. If you don't feel qualified to understand the details of what we are doing for you, bring your lawyer or other representative. We are always open for inspection and welcome the opportunity to discuss our strategies with you and your representative. We have nothing to hide.

Michael B. Broadhurst, CFP
President

Hold the Date
The Annual FCVA Open House Holiday Party will be Thursday, December 13, 2007 from 5:00 PM 'til 8:00 PM or until we finish the wine . . .  We hope you plan to be there.

August 21, 2007
The hurricane season came a little early this year, just not in its customary physical form. A very strong wind indeed has risen in the world’s financial markets in the form of what is thought to be a liquidity crisis brought about by the sub-prime mortgage debacle and the subsequent mis-pricing of risk in financial markets. Quite simply, packaged investments consisting of multiple mortgage loans were thought to be much less risky than recent events have shown. Financial institutions have been caught off guard and both stock and bond markets have been shaken since the middle of July.

Thus far the crisis has been confined to the stock market, which has dropped close to 10 percent since its July peak, low grade bonds and a number of hedge funds that suffered abrupt losses. However, in the last two or three days there has been a sudden flight to safety as investors grew fearful that even money market funds might be tainted by risky sub-prime mortgage loans. The yield on 1 month Treasury bills, which has fallen from just over 5 percent to as little as 2.50 percent since the first of August, actually dropped from a yield of 4.18 percent to 2.47 percent in just the last three business days.

When the markets speak so loudly it generally pays to listen. Consequently, FCVA has today taken the precautionary step of moving all clients’ money market fund holdings at TD Ameritrade into a money market account at TD Bank USA, NA because it is FDIC insured. TD Ameritrade offers a government money market fund, but a careful examination of its prospectus revealed that only 80 percent of the fund is required to be invested in direct US government or agency obligations. Treasury bills are an option to be considered later but have risen so sharply in price in just the past few days that even they present a modest price risk if interest rates return to normal levels before even 30 to 90 day Treasury bills mature and funds are needed for investment or other purposes.

We intend to protect what we all assume is the safe part of the portfolio.

When in the account aggregation program Dashboard, click on the Profile tab and then on each (one at a time) TD Ameritrade entry. [Click on TD Ameritrade Institutional - Advisor Access, not the account number.] When the account credentials are displayed for editing, replace the initial 5 of the account number with a 9 and add a 0 (zero) to the end of the account. The new account number should have 9 digits; beginning with a 9 and ending with a 0. Do not change the user ID or password. You can then go to your Dashboard and Update all accounts.

You can add other accounts by clicking the Add Accounts tab.

If you need help, don't hesitate to call.

We strongly recommend that all clients elect to receive their statements and confirmations electronically. We can effect that for you. We ask that you please let us know by May 5, 2007 if you DO NOT want to receive your statements and confirmations electronically.  Otherwise, we will assume you do want to receive them electronically and will notify TD Ameritrade accordingly.

May 14 Update -- SEC will not challenge overturned rule. Go here for more.

Click here for more information from FCVA and from Ameriprise. One interesting document from the Ameriprise web site is the Proposed Plan of Allocation; or who may get what.

• Chicago Tribune
• The CPA Journal
• Pittsburg Post-Gazette
• San Francisco Gate

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Financial Counselors of VA is an independent Registered Investment Advisor based in Portsmouth, VA, providing
fee-only financial planning services and investment management advice to individuals and families since 1985.

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