ÿþ<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> <title>2nd Quarter 2008 Newsletter</title> <style type="text/css"> <!-- p.MsoNormal { margin:0in; margin-bottom:.0001pt; font-size:12.0pt; font-family:Verdana; } .style4 { font-size: 12px; font-family: Arial, Helvetica, sans-serif; } .style5 { font-size: 14px; font-weight: bold; } .style13 { font-family: Arial, Helvetica, sans-serif; font-size: small; } .style17 {font-size: x-small} .style21 {font-family: Arial, Helvetica, sans-serif; font-size: 16px; color: #000099; font-weight: bold; } .style22 {font-family: Arial, Helvetica, sans-serif; font-size: small; font-weight: bold; } .style26 {font-size: 12px; font-family: Arial, Helvetica, sans-serif; font-style: italic; } --> </style> </head> <body bgcolor="#e4e4e4"> <DIV align=center> <TABLE cellSpacing=0 cellPadding=0 width=717 bgColor=#cccccc border=0> <TBODY> <TR> <TD bgColor=#f5f5f5><DIV align=center><A href="http://www.investfortomorrow.com/" target=_blank><img src="http://www.activemanagersresource.com/images/images/TI/investfortomorrow.jpg" border="0" width="717" height="143"></a></div></td> </tr> <tr> <td height="31" bgColor=#f5f5f5><div align="center"> <p><FONT face="Verdana, Arial, Helvetica, sans-serif"><span class="style17"><em>Invest for Tomorrow</em> is a publication of Heritage Capital, LLC; Paul Schatz, President.<br> </span></FONT><FONT face="Verdana, Arial, Helvetica, sans-serif"><span class="style17">For more information on the following articles, or if you have comments or questions, please call 1-203-389-3553</span></FONT>.</p> </div> </TABLE> <TABLE cellSpacing=0 cellPadding=0 width=717 align=center bgColor=#cccccc border=0> <TBODY> <TR> <TD width="717" vAlign=top bgColor=#f5f5f5> <TABLE bgColor=#ffffff cellSpacing=6 cellPadding=0 width="653" align=center border=0 ID="Table1"> <TR bgColor=#ffffff> <TD vAlign=top width="50%" bgColor=#ffffff><DIV align=left><span class="style22"><a name="top" class="MsoNormal"></a> Second Quarter 2008 </span> <UL> <LI><STRONG><FONT face="Verdana, Arial, Helvetica, sans-serif" size=2> <a href="#ARTICLE1">Financial News and a Grain of Salt </a> </FONT></STRONG></LI> </UL> <UL> <LI> <P><STRONG><FONT face="Verdana, Arial, Helvetica, sans-serif" size=2><a href="#ARTICLE2">A Guaranteed Gain</a></FONT></STRONG></P> </LI> </UL> <UL> <LI> <P><STRONG><FONT face="Verdana, Arial, Helvetica, sans-serif" size=2><a href="#ARTICLE3">Window Opens to Capture Long-term Gains with 0% Capital Gains Taxes </a></FONT></STRONG></P> </LI> </UL> <UL> <LI><STRONG><FONT face="Verdana, Arial, Helvetica, sans-serif" size=2> <a href="#ARTICLE4">Contrarian Indicators Can Signal Market Turning Points</a> </FONT></STRONG></LI> </UL> <BLOCKQUOTE> <P><STRONG><FONT face="Verdana, Arial, Helvetica, sans-serif" color=#000000 size=2>ALSO IN THIS ISSUE: </FONT></STRONG></P> <ul> <li><STRONG><FONT face="Verdana, Arial, Helvetica, sans-serif" size=2><a href="#ARTICLE5">Raiding your RetireMent Plan Is a Costly Source of Cash</a></FONT></STRONG></li> </ul> <ul> </FONT></STRONG> <li><STRONG><FONT face="Verdana, Arial, Helvetica, sans-serif" size=2><a href="#ARTICLE6">Did You "Miss America Saves" Week? </a></FONT></STRONG></li> </FONT></STRONG> </li> </ul> </BLOCKQUOTE> </DIV></TD> </TR> <TR bgColor=#ffffff> <TD vAlign=middle bgColor=#ffffff><DIV align=center> <A href="http://www.investfortomorrow.com/" target=_blank><FONT face="Arial, Helvetica, sans-serif" size=2>www.investfortomorrow.com</FONT></A> </DIV></TD> </TR> <TR bgColor=#ffffff><TD height="4"></td></tr> </table> </td> </tr> <tr><td bgColor=#f5f5f5><hr></td></tr> <TR bgColor=#f5f5f5> <TD vAlign=top bgColor=#f5f5f5><TABLE width=655 align=center bgColor=#ffffff border=0> <TBODY> <TR> <TD width="649"><BLOCKQUOTE> <P align=left class="style5"><font color="#333333" face="Verdana, Arial, Helvetica, sans-serif"><a name="ARTICLE1" id="ARTICLE1"></a></font><span class="style21">Financial News and a Grain of Salt</span></span></P> <p align="left" class="style13">In one of my favorite money manager interviews, the manager is asked to account for his recent investment success. He replies that it was due to deciding to ban financial news broadcasts from the office. Turning off the television not only saved time spent watching market updates but also gave the manager an opportunity to form his own unbiased view of the market and individual investments.</p> <p align="left" class="style13"> While financial news can be great entertainment, it s easy to get a distorted view of the financial markets and individual investments if you rely on the news media. In fact, one contrarian indicator is to bet against any company or market prognosis featured on a major magazine cover. The theory is that by the time the trend reaches the cover of a major publication, the news is already fully reflected in stock prices. The only way for prices to go is in the opposite direction.</p> <p align="left" class="style13">To test the contrarian indicator, three finance professors at the University of Richmond reviewed headlines from stories in <em>Business Week, Fortune</em>, and <em>Forbes</em> for a 20-year period. Their goal was to determine whether positive cover stories were followed by superior future performance and negative stories preceded inferior future performance in comparison with an index or another company in the same industry and of the same size. </p> <p align="left" class="style13">Based on 549 cover stories, categorized positive and negative, the professors found that after the stories were published companies that received the most positive coverage underperformed while those who suffered negative coverage overall managed to beat the market.</p> <p align="left" class="style13"><img src="http://www.activemanagersresource.com/images/images/TI/man-reading-newsSmall.jpg" width="212" height="141" hspace="7" vspace="7" align="left"></p> <p align="left"><span class="style22">What s happening?<br> </span><span class="style13">By the time news makes the front cover of a major publication, all too often, it s not news. The market has typically already priced the information into share prices. The market decline in 1987 resulted in a rash of articles at the market s bottom that were the exact reverse of future reality. Among the 1987 cover stories were:</span></p> <p align="left" class="style13"><br> <strong>U.S. News</strong>  How to Ride Out the Bear Market<br> <strong>Newsweek</strong>  Heading Off Hard Times<br> <strong>Time</strong>  The CRASH<br> <strong>BusinessWeek</strong>  How Bad?</p> <p align="left" class="style13">As the researchers pointed out in their paper,  positive stories generally indicate the end of superior performance and negative news generally indicated the end of poor performance."</p> <p align="left" class="style13">The market has repeatedly turned around and performed exactly opposite of media expectations. Individuals who use the news coverage as the basis of their investment decisions are all too often destined for failure.</p> <p align="left" class="style13">Our advice to individuals is to regard financial news as entertainment rather than a reliable view of the future. Take it with a grain of salt. Be aware that favorable news may already be reflected in the value of the investment. Investing based on news coverage has a very poor track record of success.</p> <p align="left" class="style13"><a href="#top">TOP</a></p> <HR noShade> <P align=left class="style5"><a name="ARTICLE2" id="ARTICLE2"></a><span class="style21">A Guaranteed Gain</span></span></P> <p align="left" class="style13">There are very few guarantees when it comes to investing, but the one you should never overlook is employer matching contributions to your retirement plan. </p> <p align="left" class="style13">If your employer offers a matching contribution to your retirement plan, contribute whatever the employer is willing to match, even if it is only a percentage of your contribution and not a dollar for dollar match.</p> <p align="left" class="style13">It would be difficult to find an investment today that offers a guaranteed 5, 10, 15 or 25% return comparable to a matching contributions, (assuming no early withdrawal penalties apply and the matched funds are fully vested). In addition, you receive a tax deduction on your contribution. When you withdraw the money, you ll have to pay income taxes, but you will have enjoyed the increased earning power in the meantime. </p> <p align="left" class="style13">Matching contributions are most commonly found within Section 401k, 403b, and 457 plans, and Savings Incentive Match Plan for Employees (SIMPLE IRA). Even if your employer only makes a partial match up to a cap, take advantage of this opportunity. This is free money. There s no better investment you can make in terms of return or risk. If you need help setting up your contributions, talk to your plan administrator today. Make certain you understand how the plan works, your investment options and what will happen if you should leave the company. And, if we can assist you in the investment of your funds or rolling over an employer-sponsored retirement plan, just call.</p> <p align="left" class="style13"><a href="#top">TOP</a></p> <FONT face="Verdana, Arial, Helvetica, sans-serif" color=#333333 size=2><STRONG> <HR noShade> </strong></font> <P align=left><font color="#333333" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a name="ARTICLE3" id="ARTICLE3"></a></strong></font><strong><span class="style21">Window Opens to Capture Long-term Gains with 0% Capital Gains Taxes </span></strong></P> <p align="left" class="style13">If you want to sell some long-held investments but have been holding back because you would face substantial capital gains taxes, you may have a window to do so with lower tax consequences. Beginning this year and extending through 2010, the long-term capital gains tax rate for individuals in the 10% and 15% tax brackets will drop to zero. </p> <p align="left" class="style13">What hasn t been widely reported in the financial press, however, is that even if your taxable income exceeds the 15% bracket, you may still be able to qualify for the 0% rate for at least a portion of any capital gains you realize in 2008 through 2010. The reason for this is the progressive structure of our tax rates, where the last dollar is typically taxed at a higher rate than the first.</p> <p align="left" class="style22">Who qualifies for 0%:</p> <p align="left" class="style13">Based on the 2008 tax brackets, individuals must make less than $32,550 in taxable income while couples have to remain within the $65,100 tax bracket to take advantage of the 0% capital gains tax break. Taxable income includes all sources of income less any allowed "above-the-line" adjustments  itemized and standardized deductions, and exemptions.</p> <p align="left" class="style13"><img src="http://www.activemanagersresource.com/images/images/TI/tax%20bracketsSmall.png" width="461" height="239"></p> <p align="left"><span class="style22">What investments qualify:</span><span class="style13"><br> <span class="style13">The favorable capital gains treatment applies to net long-term capital gains minus net short-term capital losses, but excludes sales from collectibles, IRC section 1202 qualified small business stock (both of which are taxed at no more than 28%), and sales of depreciable real property (i.e., unrecaptured section 1250 gain, which is taxed at no more than 25%). For most taxpayers, this is simply the sum of net capital gains from the sale of stock, bonds, or mutual funds. If you sell a stock for $60,000 that you purchased for $30,000, only the $30,000 in gain counts as taxable income.</span> </p> </p> <div align="left"><span class="style22">Strategies to consider:</span><br> <span class="style13">(1) If you have a choice of sources of income, such as withdrawals from a tax-deferred retirement account or liquidating stock and bond positions with long-term capital gains, you may want to consider using the proceeds of capital gains sales before other sources of income. For example, assume you file a joint return and have taxable income from various sources of $30,000, and capital gains of $50,000. You would pay no capital gains tax on the first $35,100 of capital gains; this is the difference between the $30,000 of other income and the $65,100 maximum for the 15% bracket. You would pay 15% capital gains tax only on the remaining $14,900, that portion that exceeds the $65,100 maximum.</span> </p> </div> <p align="left" class="style13">(2) If you provide financial assistance to individuals in the 10-15% tax brackets, consider gifting highly appreciated stock or bonds that you have held for over a year. The investments can be sold without capital gains taxes as long as the recipients income remains under the maximum income levels for the 15% tax bracket. Individuals can give up to $12,000 a year, per person, without having to file gift tax return. For married couples, this can mean $24,000 a year without having to deal with gift-tax rules now. If you re considering gifting to a child, be aware that the Kiddie Tax rules have been extended to children up to age 24 who are full-time students, if their income is less than or equal to half the amount of their support.</p> <p align="left" class="style13">(3) This may be the time to take losses or make expenditures that will reduce your taxable income to the 10-15% tax brackets to take advantage of the 0% capital gains taxes .</p> <p align="left" class="style13">(4) Consider using the 0% capital gains tax opportunity to rebalance taxable portions of your portfolio to reduce individual stock risk, or to use more appropriate asset classes. </p> <p align="left" class="style13">With only a three-year window, time is limited to take advantage of this 0% capital gains tax rate. Barring action from Congress, capital gains rates are scheduled to sunset in 2011, and revert to the pre-2001 rates of 15%, 28%, 31%, 36%, and 39.6%, depending upon your income bracket.</p> <p align="left" class="style13"><em>As with all strategies to reduce taxes, be mindful of unintended consequences. Be sure you will qualify for the 10-15% tax brackets before you begin selling assets. Not all gains may be eligible for the tax break. Gains from the sale of capital investments could trigger taxes on Social Security benefits, offsetting the savings from the 0% capital gains rate. Financial gifts can also impact an individual s eligibility for programs such as Medicare. Talk to your tax adviser before you make any decisions. Future legislation could change the capital gains tax rate prior to 2011.</em></p> <p align="left" class="style13"><a href="#top">TOP</a> </p> <FONT face="Verdana, Arial, Helvetica, sans-serif" color=#333333 size=2><STRONG> <HR align="left" noShade> </strong></font> <P align=left><font color="#333333" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a name="ARTICLE4" id="ARTICLE4"></a></strong></font><font face="Verdana, Arial, Helvetica, sans-serif"><strong><span class="style21">Contrarian Indicators Can Signal Market Turning Points</span></strong></font></P> <p align="left" class="style13">The magazine cover indicator is one of several Contrarian Indicators used to indicate turning points in the financial markets. A contrarian indicator is a data point, sign or event whose actual significance with respect to the market is the <strong>exact opposite</strong> of what your first impression might be.</p> <p align="left" class="style13">These indicators are warning flags. By recognizing contrarian indicators, the investor s goal is to avoid being in the wrong investments when the market changes direction. Naturally, there s a catch.  The market can stay irrational longer than you can stay solvent, maintained economist John Maynard Keynes (1883-1946), and the years since his death have not proved him wrong.</p> <p align="left" class="style13"> With that said, however, keeping an eye on some of the major contrarian indicators can provide investors with an  alert as to the potential of a turning point in the market s direction.</p> <p align="left" class="style13">At the center of all contrarian indicators is investor sentiment. Contrarian indicators rely on the historical principle that at market extremes, investors begin reacting emotionally, becoming too enthusiastic or too pessimistic. These moments of excessive greed or fear occur prior to, or coincident with, major turning points. In these times of  certainty investors tend to follow herd-like behavior. When everyone shares the same belief, there s no one to take the other side of the trade and power markets higher or lower, often resulting in a sustained reversal in market direction.</p> <p align="left" class="style13"><strong>Commonly Followed Contrarian Indicators</strong><br> <strong>Sentiment surveys</strong> ask if investors are Bullish, Bearish or Neutral. Contrarian investors look for extremes in investor sentiment surveys, such as the AAII retail sentiment indicator. When sentiment is at an extreme Bullish or Bearish level, the indication is that the reverse is in store for the market.</p> <p align="left" class="style13"><img src="http://www.activemanagersresource.com/images/images/TI/consumerconfidencesmall.gif" width="250" height="194" hspace="7" vspace="4" align="left"></p> <p class="style26">One measure of consumer confidence is provided by The Conference Board Consumer Research Center, based on a monthly survey of a representative sample of 5,000 U.S. households. In February 2008, the Center&rsquo;s Consumer Confidence Index stood at 75.0 (1985=100), down from 87.3 in January.&nbsp; Chart courtesy of the Conference Board Consumer Research Center (<a href="http://www.conference-board.org/">www.conference-board.org</a>).</p> <p align="left" class="style13">&nbsp;</p> <p align="left" class="style13">&nbsp;</p> <p align="left" class="style13"><strong>Consumer confidence</strong> at a multi-year low often leads to market rallies. Extreme optimism is typically associated with a market high, while extreme pessimism tends to lead a recovery.</p> <p align="left" class="style13"><strong>Equity outflows</strong> much like consumer confidence, usually hit their highs before market bottoms. Inflows reach excessive levels just before markets peak. Investment levels are typically sentiment driven, often in reaction to recent headlines.</p> <p align="left" class="style13"><strong>The health of the financial media</strong> reflects investor confidence in the financial market, with high closing rates as the market nears a bottom and new media launches at market tops when Main Street investor interest is the greatest. </p> <p align="left" class="style13"><strong>Non-commercial traders surpass commercial traders</strong> as shorts at market lows. When the crowd discovers an investment strategy, it s often a clue that the strategy may have run its course. When individual or non-commercial investors have a larger total short position than professional traders, it s a good indication that the market has reached a low. </p> <p align="left" class="style13">A number of data indicators are used to look for contrarian signals in extreme market behavior such as the <strong>Put/Call indicator</strong>, developed by Marty Zweig in the early 1970s, that looks for spikes when investors are scared and buy puts, or are overconfident and call buys dramatically increase.</p> <p align="left" class="style13">The VIX volatility index, percentage of New York Stock Exchange stocks above their 40-day moving averages, advance/decline statistics, and new highs versus new lows are other contrarian indicators. </p> <p align="left" class="style13">There are also contrarian strategies that look for individual stocks that are publicly disliked but fundamentally sound, or strive to short or avoid stocks that are popular with investors, but over-valued in terms of fundamentals. The caution here again is that individual stock values can remain irrational longer than the investor can afford to bet against popular sentiment. Many of the internet stocks that still defy rational valuations are a prime example.</p> <p align="left" class="style13">The most important thing to remember about the indicators is that they are best confirmed through hindsight. Contrarian indicators are typically subject to interpretation; they re not infallible and they can be very difficult to pin down with respect to the timing of the high or low they may anticipate. But investors ignore them at their own risk. </p> <P align=left><font color="#333333" size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="#top">TOP</a></font></P> <FONT face="Verdana, Arial, Helvetica, sans-serif" color=#333333 size=2><STRONG> <hr align=left noshade> </strong></font><a name="ARTICLE5" id="ARTICLE5"></a><span class="style21">Raiding your Retirement Plan Is a Costly Source of Cash</span> <p align="left" class="style13">With retirement plans now the primary savings tool for many Americans, there s always the lure to solve a current financial problem with a loan from a 401k, 403b or 457 plan. After all, since you will pay yourself a market rate of interest, it might even sound like a good investment. But before you borrow, consider some of the risks.</p> <ul class="style13"> <li> <p align="left"> If you leave your job before you pay back the loan to your account, the remaining balance must be paid in full or else you will face taxes and possible penalties of 10% on unpaid balances if you are under age 59 ½.</p> </li> <li> <p align="left"> Loans plus interest must be repaid in after-tax dollars. This can make it harder than you might anticipate to repay borrowings. Instead of paying $1,000 in pre-tax earnings to your account, at a 25% tax rate repaying your account costs $1,250, $250 of which is lost to taxes.</p> </li> <li> <p align="left">All too often, employees who borrow from their retirement plans find it difficult to repay the loan and make new contributions, and miss out on employer matching contributions, further increasing the cost of the loan.</p> </li> <li> <p align="left">The interest you pay on the loan may be less than you could have realized in market returns if the funds had stayed in your retirement account.</p> </li> <li> <p align="left"> Your plan may charge loan origination fees and annual loan servicing fees, further increasing the cost to borrow.</p> </li> <li> <p align="left">Retirement plans are protected from creditors in the event of a bankruptcy or financial claim. They are the safest place to keep your assets if you are facing financial difficulty.</p> </li> </ul> <p align="left" class="style13">Before you borrow from your retirement fund, take a moment to look at the total cost to borrow and whether or not you will be able to repay the loan and keep up your contributions. It may be there are alternatives to borrowing that will serve you better.</p> <p align="left" class="style4"><a href="#top">TOP</a></p> <FONT face="Verdana, Arial, Helvetica, sans-serif" color=#333333 size=2><STRONG> <hr align=left noshade> </strong></font><a name="ARTICLE6" id="ARTICLE6"></a><span class="style21">Did You Miss "America Saves" Week?</span> <p align="left" class="style13">Every day, the average consumer receives via mail, magazines, newspaper, broadcast media, emails and more, invitations to borrow money. It may be a credit card offer or zero-down financing, buy now with no-interest for 1,2 or 3 months, etc. The variations sometimes seem countless. </p> <p align="left" class="style13">What s missing is an invitation to save and why.</p> <p align="left" class="style13">America Saves and the American Savings Education Council (ASEC), a coalition of such diverse groups as investment firms, the U.S. Securities and Exchange Commission and the American Association of Retired Persons, are trying to fill that void. One result was the second annual America Saves Week. If you missed the news surrounding the week (and it was limited) we recommend a visit to the <a href="http://www.americasavesweek.org/">americasavesweek.org</a> web site. The web site offers a number of tools to help organizations and individuals promote increased savings. You can sign up for a monthly email on savings, evaluate your savings progress, test your savings knowledge, access financial tools and more.</p> <p align="left" class="style13">For those who feel like they already have a good grasp on their savings habits, the site is a good way to spread the importance of saving and practical  how to build financial reserves to others - family members, friends, children and others. If you believe, as we do, that individuals and our country would be a great deal better off with the financial security of increased personal savings, we hope you will help spread the word. <a href="http://www.americasavesweek.org/">www.AmericaSavesWeek.org</a> is a useful tool to start doing so.</p> <p align="left" class="style13"><a href="#top">TOP</a></p> </BLOCKQUOTE> </BLOCKQUOTE> </TD> </TR> </TBODY> </TABLE> <TABLE cellSpacing=1 cellPadding=2 width=656 align=center bgColor=#cccccc border=0> <TBODY> <TR> <TD width="681" height="205" colSpan=2 vAlign=top bgColor=#ffffff><TABLE cellSpacing=6 cellPadding=0 width="99%" align=center border=0> <TBODY> <TR> <TD height="169" colSpan=2 align=left vAlign=top bgColor=#ffffff><BLOCKQUOTE> <HR noShade> <P align=left><FONT face="Verdana, Arial, Helvetica, sans-serif" size=1>ALL CONTENTS OF THIS E-MAIL ARE COPYRIGHT 2008 BY HERITAGE CAPITAL FINANCIAL COMMUNICATIONS ASSOCIATES, INC.ALL RIGHTS RESERVED: REPRODUCING ANY PART OF THIS DOCUMENT IS PROHIBITED WITHOUT THE EXPRESS WRITTEN CONSENT OF FINANCIAL COMMUNICATIONS ASSOCIATES. Protected by U.S. Copyright Law {Title 17 U.S.C. Section 101 et seq., Title 18 U.S.C. Section 2319}:<br> </FONT><FONT face="Verdana, Arial, Helvetica, sans-serif" size=1>Infringements can be punishable by up to 5 years in prison and $250,000 in fines. </FONT><br> <FONT face="Verdana, Arial, Helvetica, sans-serif" size=1>_____ </FONT><br> <br> <FONT face="Verdana, Arial, Helvetica, sans-serif" size=1>Nothing in this e-mail should be considered personalized investment advice. </FONT></P> </BLOCKQUOTE></TD> </TR> </TBODY> </TABLE> <DIV align=center><STRONG><FONT face="Verdana, Arial, Helvetica, sans-serif" size=2><A href="http://www.investfortomorrow.com/" target=_blank>www.investfortomorrow.com</A></FONT></STRONG></DIV></TD> </TR> </TBODY> </TABLE><br></TD> </TR> </TBODY> </TABLE> </DIV> <IMG height=1 alt="" src="http://www1.youreletters.com/db/384835/9113392/1.gif" width=1> </body> </html>