Legendary money manager John Templeton is dead

  Sir John Templeton, who introduced many Americans to foreign investing, died today in Nassau at the age of 95. Templeton was known for many things, including an avid interest in science and religion and the sponsorship of the Templeton Prize. In the investment world he made his mark as founder of the Templeton Funds, now Franklin Templeton Funds after being bought out by Franklin Resources in 1992.  The Templeton Funds established a presence in St. Petersburg 30 years ago when Templeton's partner, John Galbraith, brought the company's marketing and distribution arm here. Today Franklin Templeton is a major employer in the Carillon office park. I had the privilege of interviewing Sir John a few times and always found him to be patient, kind and a great optimist. He often said you should buy stock in a country when things look darkest.

[Photo credit: Times files]

Tackling investment fraud against seniors; cracking down on equity-index annuities

Regulators and politicians seem to be paying a lot more attention these days to the problem of investment fraud involving seniors.

Should federal securities law have higher penalties when the those who violate the law prey on older people? That's what U.S. Sens. Herb Kohl and Bob Casey think. Here's a press release about their bill, which would add $50,000 to civil fines when securities law violations involve someone 62 or older. Of course, there has to actually be a federal investigation for that to apply and the perpetrator has to have some money to pay the fine.

The SEC also is looking more closely at one one of the biggest problems: the sale of equity-index annuities. The commission has proposed this rule, which would classify many of these annuities as securities, subject to securities regulation. These annuities are highly complex products with lengthy surrender penalties and are a subject of frequent investor complaints.

Kohl also is concerned about the use of misleading designations that create the appearance of adviser competency even though they involve very little work. He previously introduced the Senior Investor Protection Act (S2794), which involves grants to states to reduce fraudulent and misleading investment marketing to seniors.

Don't miss out on your stimulus check from the IRS

The IRS says 405,968 Floridians who may be eligible for a $300 or $600 economic stimulus payment still haven't filed for it. That's 29% of the potential filers. Who are those people? Social Security recipients and disabled veterans who don't normally file a tax return.

The IRS announced a new program today to reach out to them. Nationwide, about $5.2-million potential filers are unaccounted for, or about 26% of filers.  Here's a state-by-state breakdown. The potential filers list includes 14,662 in Tampa, 11,605 in St. Petersburg, 4,817 in Clearwater and 3,474 in New Port Richey. Click here for the IRS' complete report on Florida cities. Most of those who did not file have not filed a tax return in for at least the past three years. As a result, the IRS says they may not be aware that they need to file a return to get a stimulus check.

You must file by Oct. 15 to receive a stimulus payment this year. Get a Form 1040A here.

The outreach initiative will partner with state and local governments and gruops such as AARP, National Council on Aging, United Way of America and National Disabilty Institute.

Still looking for your check? Here's the payment schedule for returns that were processed by April 15. The intial wave of direct deposit rebates in May went to people who had a direct deposit REFUND on their tax returns. I've heard from many people who mistakenly thought that just because their Social Security check is direct deposit that their rebate would be in the first wave of those delivered.

Questions? Call the IRS toll-free at 866-234-2942.

We're putting a spotlight on local companies

The Times is making some major changes in its business coverage, both in print and on the internet. The biggest change in print is that we will no longer be printing a comprehensive table of stock and mutual fund listings. (If you've got a stock you want to track, you can look it up through the Times Web site or many other financial sites on the Internet.) However, without the stock pages, we won't have enough pages to create a separate business section except on Sundays. Each day we will be printing a market report that focuses on stocks of local interest and the largest mutual funds. In addition, we are creating a new online focus on companies headquartered in the Tampa Bay area. We are starting with the 10 largest companies by revenue but will be expanding to include others.

Sunday's paper features a special report on local companies, including some commentary by business editor Bob Triguax and yours truly.

Watch out for online job ads

Some of them are actually scams, designed to steal your identity, says the Financial Industry Regulatory Authority. In one case FINRA cited, the information was stolen through Craigslist job ads. FINRA offers these tips to avoid becoming a victim.

Nightly Business Report launching new series on retirement readiness

In case you haven't heard (like you've been hiding under a rock somewhere), 78-million baby boomers are on the cusp of retirement. That means we'll be hearing lots about this subject. PBS' Nightly Business Report is launching a year-long series of reports called "Get Your Finances Ready for Retirement" that will appear two Mondays a month, starting May 12. The show is broadcast in the Tampa Bay area at 6:30 p.m. on WEDU. The first programs in the series are:

May 12--Getting started: What you need to consider about retirement

May 19--How much money do you need to retire?

May 26--Special Memorial Day program devoted to retirement topics, including when you should begin to collect Social Security

After they are broadcast, programs will be available on demand at the Nightly Business Report Web site. Monthly companion articles will be featured in U.S. News & World Report.

GunnAllen to pay $750,000 fine to settle charges

Regulators fined Tampa-based GunnAllen Financial Inc. $750,000 for multiple violations of securities industry rules. The Financial Industry Regulatory Authority (FINRA) said GunnAllen's lax supervision allowed its former head trader, Alexis Rivera, to defraud customers by putting profitable trades in his wife's personal account instead of the accounts of customers where they belonged. Rivera was fired in September 2005 and barred from the securities industry in December 2006. FINRA barred his supervisor, Kelley McMahon, from the industry for six months and levied a $25,000 fine.

And that wasn't all. FINRA said it found other serious violations in the investment banking department where it failed to put the stocks of its investment banking clients on a restricted list. That created the potential for misuse of insider information. Further, FINRA said GunnAllen failed to disclose a consulting contract with Richard J. Gladstone, who had been barred from the securities industry.

GunnAllen agreed to pay the fine to settle the matter and have the findings entered into the record. It did not admit or deny the allegations. Here's some of what company CEO Richard Frueh had to say:

"GunnAllen has resolved historical issues, reaffirmed its commitment to supervision and compliance and now looks forward to continuing to help our affiliates assist their clients achieve financial success."

Interest rates reset on savings bonds

The Treasury announced new interest rates on savings bonds: 4.84% on I-bonds and a puny 1.4% on newly-issued EE bonds. The EE bond rate applies for the next 20 years, which means it's basically a message from the Treasury not to bother buying EE bonds any more. EE bonds issued more than three years ago have rates that adjust every six months. The rate for bonds sold between May 1997 and April 2005 will be 2.74% for the next six months.

I bonds aren't quite the great deal they appear to be on the surface. I bonds carry a combination of a fixed rate that applies for the life of the bond and an adjustable rate tied to the rate of inflation. Well, the fixed rate on new bonds is zero, for the first time ever. That means earning any return depends solely on inflation. The fixed rate most recently was 1.2% and has been as high as 3.6%.

The Fed may be done, but can the economy get going?

Will this be the pause that refreshes? It looks like the Fed is ready to stop lowering rates, or at least take a breather after this week's quarter point drop. But as I wrote in The Times, it may be a few months before we know whether the government's recipe of lower rates and tax rebates was enough. Oil prices dropped a bit today on the news that the Fed may be done (lower rates hurt the dollar, which in turn leads to higher oil prices). Maybe that means we'll stop setting new records every day for gas prices. The average was $3.59 a gallon today in the Tampa Bay area--yikes!

I'm hoping that by fall we'll have some signs that things are picking up. I think we could use a little higher interest rates to help out retirees with their CDs and money market accounts.

Wachovia agrees to pay restitution to victims of its telemarketing customers

Interesting news today from the Office of the Comptroller of the Currency: Wachovia Bank will pay $144-million to settle charges that it allowed telemarketers to use its accounts to help them take millions of dollars from elderly people across the country. The federal Office of the Comptroller of the Currency said Friday that  Wachovia failed to act against the telemarketers even after the victims and their banks complained they were being defrauded.

The government said the telemarketers, including one based in Largo, obtained bank account information from their victims while selling vouchers for discount travel and products or offering free gifts or free trial memberships. The information was then used to draft money out of the victims’ accounts and deposit it in the Wachovia accounts of the telemarketers and payment processors. One of the companies was FTN Promotions of Largo, subject of this FTC lawsuit last year. I think it's interesting that Wachovia was not accused of any fraud but of failing to have the systems in place to adequately respond to the complaints of fraud and then do something about them. Wachovia, incidentally, says it no longer allows pure telemarketing companies to have accounts.

IRS getting an early start on rebate checks

President Bush said this morning that rebates will start going out Monday, four days earlier than previously announced. The first rebates will go out by direct deposit to taxpayers who included bank account information on their tax returns and whose returns were processed by April 15. About 7.7-million people are expected to get their rebates electronically. The IRS plans to start mailing paper checks May 9 and complete the first wave of mailings by July 11. People who filed later will get their rebates later. In fact it's not too late to file a 2007 return and get a rebate.

Rebates range from $300 to $600 for singles and $600 to $1,200 to joint filers, plus $300 for each child under 17.

Here's the rebate delivery schedule originally announced by the IRS.

Personal income growing fast in Florida--or at least it was in 2006

Thanks to population and job growth, both the Tampa Bay area and Florida as a whole outpaced the nation in personal income growth in 2006. However, on a per capita basis, we were a hair below the national average on both counts.

Here's the scoop: The Tampa Bay area saw a 7.6% increase in overall personal income to $95.8-billion in 2006. That compares to a 7.4% increase statewide and 6.7% increase nationally. On a per capita basis, though the change was smaller, 5.5% on both the Tampa Bay and state level compared to 5.6% nationally. Per capita income was $35,541 for Tampa Bay, $36,720 for Florida and $36,714 nationally. Over the decade from 1996 to 2006 wages were growing at a faster rate than investment earnings (dividends, interest and rent) or transfer payments (such as Social Security). However, between 2005 and 2006, that situation reversed with investments and transfer payments growing faster than wages.

See the info county by county here, Florida here, and a really cool map here.

Should some fraudulent insurance sales practices be a crime?

Florida CFO Alex Sink wants to make it a felony for insurance agents to forge signatures on insurance and annuity documents or trick people into swapping one annuity or insurance policy for another. But, as my colleague Jennifer Liberto wrote today, Sink blames Metropolitan Life for trying to block the bill's passage. In the story, Rep. Clay Ford expresses concern about sending more people to prison, claiming "we already have prisons filled with people who commit white-collar crimes." I'd call that statement extremely doubtful. The armed robber who steals $10 from someone on the street is far more likely to go to prison than the insurance agent who steals someone's life savings. So far no insurance agents have even had their licenses revoked for selling the EISA fraud.

Senate Bill 2082 also increases the penalty-free cancellation period on policies from 10 to 14 days.

Ouch! Wachovia cuts dividend

There are more signs that troubles in the financial sector aren't over yet and this one is really going to hurt investors. Wachovia Corp. said today it is cutting its quarterly dividend from 64 cents to 37.5 cents a share, seeking a $7-billion capital infusion and cutting 500 jobs. Wachovia blamed bad timing in its acquisition of Golden West, expanding its mortgage business at exactly the wrong time.  Of course the dividend cut is also the wrong time for investors who have seen their CD income plummet.

Economic gloom is getting us down

Are you feeling good about your finances and the future? If so, you're part of a shrinking crowd of optimists. It seems that at least once a week - and more often several times a week - I see another survey that points to growing gloom about finances. In today's paper, I wrote about the annual Retirement Confidence Survey, which this year featured the biggest ever drop in confidence about having enough money to finance a comfortable retirement.

Here's another report out today from the Pew Research Center on the "middle class blues," focused on the difficulty middle class families are having maintaining their standard of living. I recommend the report to you as it has lots of fascinating findings. Here's one: Some groups have improved their standard of living since 1970: seniors (ages 65 and older), blacks, native-born Hispanics and married adults. Losers include young adults (ages 18 to 29), the never-married, foreign-born Hispanics and people with a high school diploma or less.

Does our financial regulation need revamping?

U.S. Treasury Secretary Henry Paulson proposes an overhaul of the nation's system for regulating financial services, including banking, securities, commodities trading, insurance and mortgage brokerage. There's no question that the system we have now is outdated, but would consolidation result in more efficient regulation or just less regulation? As I wrote today, there's already a big debate under way. Consumer advocates are fearful that transferring power away from the states would mean even less oversight of brokers and insurance agents. Here's the executive summary of the plan and here's the whole thing for those who have time to read 200+ pages.

Paulson's proposals
• Set federal licensing standards and disclosure requirements for mortgage companies and mortgage brokers. Create a federal commission to evaluate state mortgage regulation.
• Give the Federal Reserve broader powers to stabilize markets, including authority to review private pools of capital such as hedge funds.
• Convert thrifts to national banks regulated by the Office of the Comptroller of the Currency, eliminating the Office of Thrift Supervision. Eventually consolidate all federal bank regulators.
• Let insurance companies choose whether they want to be regulated by a new federal Office of National Insurance or stay under state jurisdiction.
• Merge the Securities and Exchange Commission and the Commodity Futures Trading Commission. Eventually consolidate consumer protection and enforcement across all financial services.

More TV: The Retirement Revolution

Retirement planning used to consist of having a lot of children to support you in your old age. If you weren't particularly good in that department, you could end up in the local poor house. Those reminders of retirement past are among the many fascinating details presented in the Retirement Revolution, which airs the next two Monday nights at 10 p.m. on WEDU and many other PBS stations. The producers at WTTW in Chicago who put the program together managed to interview dozens of retirement experts, retirees and workers who hope some day to be retired. Three people in that last category are from the Tampa Bay area and I interviewed one of them for my column today. Unfortunately, they're examples of people who aren't financially prepared for retirement. Hopefully those who watch will be inspired to do some saving for the future. Every little bit helps.

I'll be on TV talking about the economy

Monday (March 31) with Kathy Fountain for the "Your Turn" broadcast on WTVT Channel 13. It comes on at 12:30 pm as the second half of the noon news and takes questions from viewers.

Social Security still facing some big challenges

The Social Security Administration delivered another reminder today that it's running out of money to pay promised benefits. Although there's been some improvement in the long-rate forecast, the projected disaster dates remain the same as last year: benefits will exceed tax income in 2017 and the "trust fund" will run out of money in 2041. At that point there would be enough money to pay about three-fourths of promised benefits unless there's been some cut in benefits or increase in taxes.

This report from the Center for Retirement Research puts the latest information in perspective for those who are interested in digging into the subject. I think a Social Security tax increase is inevitable, but I hate to see it happen before 2017. If it's enacted earlier, Congress will just spend the money on other things, as it does now with the current Social Security surplus. That borrowing and spending is building up the IOUs in the trust fund, which we'll turn to in 2017. I think the money in the trust fund will be there because the government will borrow the money from someplace else to repay trust fund debts. However, I can't see making the debts even bigger by giving Congress more money to spend in the meantime.

Inflation, interest rates and saving pennies

Retirees and other savers are feeling squeezed with inflation heating up and interest rates falling. As the Federal Reserve Board focuses on repairing the credit markets, it runs the risk of making inflation worse. My story today looks at this issue. In addition, my colleagues have written about why food prices are going through the roof and tips on spending less. How are YOU coping as prices rise and CD yields sink? Here's what some readers had to say about lower interest rates.

And speaking of pennies, this week's column is about penny stock fraud. Don't let it happen to you!

[Credit: Stock.xchng]

Here's when your rebate check is coming

The IRS just announced the schedule for delivering rebate checks. You go to the head of the line if you signed up for direct deposit when you filled out your tax return. Your rebate check will be deposited in the bank account you specified on your return and you should have your money in the first half of May. Mailed checks will go longer, but everyone who filed a return by April 15 should have a rebate by July 11.

People who file returns after April 15, will still get their rebates; it will just take a bit longer.

The IRS also posted this rebate calculator to help you figure out what you've got coming to you.

Good news for Florida teachers saving for retirement

Florida teachers have some of the worst retirement savings options out there with fees so high that many of them would be better off putting their money in taxable accounts with low cost providers. Their choices are about to get a whole lot better, at least in counties where school boards adopt a model plan put forth last week by the Independent Benefits Council. Read more about it in my column today.

State settles with AT&T Mobility (Cingular) in cell phone fraud case

You may be eligible for a refund if your AT&T/Cingular cell phone was billed for ring tones, horoscopes or other services you thought were free. Florida Attorney Gen. Bill McCollum announced a settlement this morning that includes refunds for customers, a $2.5-million payment to his office and an additional $500,000 to pay for consumer education on safe internet use. The state said it expects the refunds to be between $10-million and $45-million, based on the information it received from AT&T.

"Consumers should never be billed for services they thought were free of charge," McCollum said. "Today's agreement establishes a precedent for wireless companies accepting responsibility for the charges placed on consumers' bills."

AT&T wasn't behind the fraud, but made the fraud possible by including the third-party charges on customers' bills. McCollum said the fraud often targeted teenagers who didn't realize by downloading a ringtone or other content, their phones would be charged a monthly subscription fee. As part of the settlement, AT&T agreed to set strict advertising disclosure standards for third-party providers.

AT&T will send a notice of the settlement to current account holders and to former customers for whom it still has an email address. A toll-free telephone number and Web site will be set up with information on how to make a claim.

New retirement planning resource available

The Department of Labor is offering a new retirement planning resource for people who are 10 to 15 years from retirement. You can use the interactive worksheets to project retirement income and expenses. The worksheets are a companion piece to the publication "Taking the Mystery Out of Retirement," which is also available in print form. Happy number crunching!

Rebate questions and answers, Part II

Q: Is a person 55 years old who is collecting Social Security Disability benefits eligible for the $300 rebate?

A: Yes, if the person receives at least $3,000 in disability benefits. Age doesn't matter, but the person cannot be claimed as a dependent on someone else's return. Social Security retirement, disability and survivor benefits all count toward the $3,000 total. SSI payments do not count.

Q: We are both over 65 and both receive Social Security. My wife is still working and her salary income by itself makes her eligible for the $600 rebate. Will our 2 SS incomes plus her salary make us eligible for the $1200, will we get $900 or some other sum?

A: First of all, if you are married and file a joint return, your rebates are not calculated individually. They are paid to you jointly as a couple. If your wife has at least $3,000 in earned income, then you are eligible for the combined $600 minimum rebate. Whether you are eligible for a higher rebate depends not on her income but on your joint tax liability. If you don't claim the child credit or the Earned Income Credit, use the tax liability found on line 63 of Form 1040, line 37 of Form 1040A or line 10 of Form 1040EZ. Your rebate will be this amount up to $1,200. If it is less than $600, you'll still get the $600 minimum.

Q: My mother is on Medicaid. Would she be eligible for the $300 rebate if she files?

A: Yes, if she has at least $3,000 in Social Security benefits. The fact that she is on Medicaid does not disqualify her. In addition, note that the rebate will not count as income that would prevent eligibility in any federally-funded relief program.

Q: When will I get my rebate?

A: The Treasury expects to start sending out checks in May and none will be sent after Dec. 31. If you delay filing your 2007 tax return, your rebate will be delayed.

Q: I always file tax but I have not been able to pay what I owe on the year 2006 yet. My question is Can that rebate check be used to pay my tax for 2006 and 2007?
Answer: Technically not because your tax payment is due before you will get your rebate. If you don't pay on time, you will be subject to interest and penalties. However, your rebate can be seized for unpaid taxes, so effectively it could be used to satisfy your tax obligation after the fact.

Q. I tried calling the IRS toll-free number (800-829-1040) to find where I can go for free tax help so I can get my rebate, but I just get recorded messages and can't get an answer. How can I get this information?

A. To get a live person on the line, you have to press the numbers related to questions about preparing an individual tax return. That's a "1" at the first prompt and a "5" at the second. Tell the person you want information about a free tax help site for the low income and elderly. Or just click here and enter your zip code.

Lots of questions about rebates (and answers too!)

My story in today's Times about the rebates is generating lots of questions. I'll answer some of them here. If you have other questions, feel free to post them as comments. Here are links to a helpful CCH publication and the IRS Web page on rebates if you want to delve more deeply.

Q. I don't understand if we do or do not have to file a return in order to qualify. Our income is $22,224 Social Security and $8,701 other. Do we have to file a return?

A. If you want the $600 rebate for a couple, you must file. If you don't want the $600, no law requires you to file.

Q. If we owe the government money, will they deduct what we owe from the rebate or will we be able to get the entire amount?

A. The IRS will deduct payments you owe the IRS as well as other debts the IRS collects such as defaulted student loans and child support payments.

Q. I am confused. What income qualifies for a rebate? Stock dividends, interest (bond, CD , bank), Social Security, IRA withdrawals, pensions. How can retirees qualify? Please explain.

A. There are two basic ways to qualify. One way is as a taxpayer. If you are qualifying that way, all your income is reported and you qualify based on your tax liability. The other way of qualifying is for people who do not pay taxes. In that case the only kinds of income that count are wages, Social Security benefits, VA disability benefits and railroad retirement benefits. If you have at least $3,000 from those sources, you qualify. But you must file a tax return to get the money.

Q.  In this morning's article about the tax rebate, you used the phrase "up to $600."  What's it take to get the full $600? Or is it just the income of at least $3,000 that gets the full amount?.

A. To get the full $600 for a single person ($1,200 for a couple), you must have a tax liability of at least $600 (single) or $1,200 (married.)  If you qualify based only on the $3,000 in Social Security, earned income etc., you will get the minimum rebate of $300 (single), $600 (married.) If your tax liability is between $300 and $600 (single), then your tax liability will be the amount of the rebate. BTW, tax liability is defined in a somewhat peculiar way. Tax liability is the number before subtracting the child tax credit or the Earned Income Credit.

Q. I have already filed a tax return but, did not include my Social Security benefit (because it wasn't taxable). I only included income I receive from a "state retirement account". It is in excess of $3,000 and I pay taxes on it. The only "retirement" income you mention as an eligible source of income is "Railroad Retirement benefits." Do I need to file an amended return on form 1040X?

A. Whether it is worthwhile to file an amended return depends on what the tax liability number was on your original return. If it was at least $300 and you are single or $600 and you are married filing jointly, then there is no reason to file an amended return because you won't get any more money. However, if your liability was below those amounts, you should file a 1040X that includes your Social Security income.

If you want a rebate, you MUST file a tax return

News flash: Everyone who wants a share of the rebates that are part of the economic stimulus plan MUST file a tax return this year. You are eligible if you have at least $3,000 in income from work, Social Security benefits and/or VA disability benefits (and are not claimed as a dependent on someone else's return). Many people whose primary income is from Social Security are not required to file a tax return ordinarily. However, if they want the rebate, they must file a 2007 return. The minimum rebate, which will apply for low-income people, is $300 (single) or $600 (joint) plus $300 per qualifying child 16 or younger. The maximum rebate is $600 (single) or $1,200 (joint) plus $300 per qualifying child 16 or younger.

You can file for FREE at www.irs.gov (click on FreeFile) or find a free tax help site near you.

New plan offers hope to homeowners in mortgage trouble

Project Lifeline, which the government announced today, offers the possibility of help to another group of homeowners behind on their mortgages. Here’s how it will work:
Q. Which lenders/mortgage servicers are participating?
A. Bank of America, Citigroup, Countrywide, J.P. Morgan Chase, Washington Mutual and Wells Fargo.
Q: Which properties qualify?
A: Owner-occupied homes; the type of mortgage doesn’t matter. Officially the homeowner must be at least 90 days behind on mortgage payments, although some mortgage lenders will talk to borrowers who are only 30 days behind. The property cannot have a foreclosure sale date set within the next 30 days. The homeowner cannot be in bankruptcy.
Q. What kind of help will people get?
A. The lenders say they will send letters to borrowers, some going out as soon as this week. The message: Call to discuss options for modifying your loan to make it more affordable, generally by reducing the interest rate. In some cases, foreclosure can be postponed for 30 days to allow time to negotiate.
Q. Who can I call right now?
A. Call your lender or mortgage servicer directly or call the toll-free HOPE Hotline (888) 995-HOPE set up by the Homeownership Preservation Foundation.

-- Helen Huntley, Times Personal Finance Editor

Has your credit card company jacked up your rate for no apparent reason?

Some card issuers are raising rates for some customers even though the customers have never had any late payments. This Business Week story says Bank of America appears to be doing its own internal review of customer credit, raising rates on factors such as higher balances even though the customer's credit rating and payment history are unchanged. If you write the bank a letter and don't put any new charges on the card, you have the option of paying off the balance at the old rate. If you fail to do that, both your old and new balances will accumulate interest at the new rate, which may be as high as 28%

Based on the problems we've seen in the credit markets, banks should have tougher lending standards. However, it seems very unfair to entice customers into building big balances with easy terms, then suddenly change the rules. They certainly will push up their default rates as a result, but I guess they think the extra interest they're going to get will be worth it.

I'm ready for my family's $1,200. How about you?

We're still waiting for news on just how much cash the government plans to send us this summer, but in today's column I offer some advice on what to do with it. Some of my top suggestions: Paying down debt, using it in a way that allows you to avoid future debt (such as setting it aside for next Christmas or adding it to your emergency fund) and putting it toward one of your dreams (college education, a car, a house). In my house, we've got two major upcoming expenditures that will take priority--funding our IRA contributions and paying what we owe on our income taxes. But we'll be past those by the time the rebate arrives, so most likely it will be spent on this year's vacation.

Readers also comment about their plans for the windfall.

Check the interest rate on your credit cards

The Federal Reserve's rate cutting has mostly had a positive effect on credit card interest rates. However, not every card issuer is following the Fed. Bill Hardekopf of LowCards.com points out that while the Fed has cut rates 2.25 percentage points since September, some card issuers actually increased their rates. He said the rate on the Chase Freedom card went up, from 14.24% to 17.24%. Citi Platinum Select's rate went down, from 10.24% to 8.49%. The moral of the story: Unless you pay off your card balance in full each month, pay attention to what's happening with the rate you are being charged.

If your rate has not fallen, call and ask the card issuer for a lower rate. If you're turned down, it's time to go card shopping.

How are you planning to spend your tax rebate?

Congress is still working on the details, but it looks like all of us who pay federal income taxes for 2007 will get a rebate of our taxes paid up to $600 (single) or $1,200 (married joint filers) plus $300 for each child claimed as a dependent on your return. The remaining debate is over what to do for people who don't pay income taxes. The proposal the House has agreed to offers a rebate of at least $300 for anyone with earned income of at least $3,000. The Senate is looking at proposals that extend rebates to people on Social Security who don't pay taxes.

My question is: If you expect to qualify for a rebate, what are you going to do with it? If you plan to spend it, tell us what you'll buy. If you plan to save it, tell us how you'll invest it.

Have you decided how you are voting on Amendment 1?

Today's paper features comments from voters about how they are voting on Amendment 1 on next Tuesday's ballot. One of them is Betty Spivy of Ruskin, who said she lost her life savings in the Trans Continental investment scam (she's voting yes).  I have mixed feelings in that I personally would benefit from the extra homestead exemption and having the Save Our Homes tax break made portable. I sympathize with those in the real estate industry who are looking for anything that might give home sales a boost. However, I just don't think it's fair to have two people living next door to each other in similar properties paying wildly different tax rates. I think of my children and other young people, not yet homeowners, who would have to carry more than their share of the property tax burden if/when they do buy a home. And I have a lot of sympathy for small business owners who also have to pay more because long-time home owners pay less. The bottom line: I'll be voting no. How are you voting?

Fed cuts rates, wild day on Wall Street

Talk about a crazy day. The Fed delivers the biggest interest rate cut in more than 25 years and the traders who dominate Wall Street can't decide whether to buy or sell. The Dow is down 400-plus points in one moment and then only down 40 something at another.

Stock investors generally like rate cuts, but their happiness that the Fed is taking action is tempered by the news that the Fed economists apparently think that recession warning lights are going off like crazy. The good news is that as rate cuts work their way through the economy, they make it less expensive for businesses to borrow money to expand or just stay afloat and for consumers to handle their credit card debt and home equity loans. Of course not everybody has good enough credit to qualify for a loan and take advantage of the good rates. However, if you've got an adjustable rate mortgage that's getting ready to reset, this is really good news for you.

The bad news is that every rate cut increases concern about inflation, reduces income for retirees who depend on CDs and money market accounts and hurts the dollar.

Recessions are personal if your income is affected

While the important trends are clearly negative, from unemployment to foreclosures, we're not officially in a recession--that would require two quarters of negative growth. However, if your income is less than it was in the past, then you are in a personal recession. Lately my colleagues and I have spoken to some people for whom the recession is very real. Some of them are profiled in today's paper. Others were quoted in a Saturday story about rising unemployment. Others say they aren't affected at all.

How might a recession affect you?

If you're a worker: If your company's business suffers, your job might be in jeopardy or you might see your hours or commissions cut. Companies might hire fewer workers, which would mean fewer job openings.

If you're a retiree: Interest earnings on CDs and money market funds will fall if, as expected, the Federal Reserve lowers rates to try to stimulate the economy. Stock prices already have fallen and could go lower. The longer a recession lasts, the more dividends could be in jeopardy.

If you're in transition: A recession is a tough time to try to sell a house, find a job or liquidate a stock portfolio.

Today's Supreme Court ruling is a setback for burned investors

The Supreme Court ruled today that investors have no right to sue those who "aided and abetted" securities fraud but were not the primary perpetrators. This is bad news for investors looking for "deep pockets" as a source of recovery after fraud is discovered.

While I am not a lawyer, it would seem to me that in the Lou Pearlman case, this ruling would hurt investor attempts to recover from banks that Pearlman used to hold or transfer funds or from lawyers and other third parties with whom Pearlman did business. So far as I can tell, it does not apply to situations in which investors dealt directly with lawyers or sales agents who advised them to purchase the fraudulent investment.

Some other takes on this story: Washington Post, Christian Science Monitor

 

What does the Bank of America-Countrywide merger mean for customers?

I wrote about that topic in today's paper, but I've received a couple of emailed questions from worried depositors. One reader asked: "We  have  2  CD's  with Countrywide Bank. One matures in April and the other in May  2008. Are  we safe in leaving there until maturity or should we withdraw them early and pay the penalty?"

The answer is that you should leave your CDs alone. Countrywide Bank's status is far more secure with this announcement than it was before. However, even if this deal had not happened, you would have no reason to be concerned if your accounts were within FDIC insurance limits. With so many banks out there, individual depositors have no need to take the risk of exceeding insurance limits. The Bank of America announcement is very positive for uninsured depositors, who did have reason to be concerned.

Bank of America-Countrywide Financial deal is reason to celebrate in Tallahassee

Reports on Wall Street that Bank of America is close to a deal to buy Countrywide Financial is good news for stocks. But I'm guessing that nobody was happier than the folks at the State Board of Administration who made a big bet last year that Countrywide would survive. The Local Government Investment Pool's troubled "B" fund holds a whopping $650-million in Countrywide CDs, obviously well over the $100,000 FDIC insurance limit. Those CDs begin to mature Feb. 5, with the last of them coming due in June. Other SBA-managed portfolios have about $110-million in Countrywide securities. The recent talk of a possible Countrywide bankruptcy has to have had a lot of folks at the SBA office feeling prett queasy.

Friday update: The deal was announced today.

Mortgage rates are great--if you've got good credit

Mortgage rates are at their lowest levels in two years, according to Bankrate.com, which is good news if you've been thinking of refinancing or buying a house. You should be able to get 5.45% on a fixed-rate 15-year loan or 5.88% on a fixed-rate 30-year loan, according to Bankrate's survey. That's if you've got good credit, of course.

Bonds were the winners in 2007

Bonds were big winners in 2007, according to a Morningstar report issued today. Here's a look at how the major asset classes performed.

2007 returns:
Large-Company Stocks returned 5.5%, compared to 15.8% in 2006.
Small-Company Stocks were down 5.2%, compared to 16.2% in 2006.
Bonds returned 9.9%, compared to 1.2% in 2006.
Cash returned 4.7%, compared to 4.8% last year.
Inflation was 4.6%, up from 2.5% in 2006.

Beginning of 1926 through 2007 (last 82 years) average annual returns:
Large-Company Stocks (S&P 500) returned 10.4% per year (unchanged from 2006).
Small-Company Stocks (bottom 20% of companies by market cap on the NYSE and companies of similar size on the NASDAQ and AMEX) returned 12.5% per year (compared to 12.7% from 1926 through 2006).
Bonds (long-term government) returned 5.5% per year (compared to 5.4% from 1926 through 2006).
Cash (30-day T Bill) returned 3.7% per year (unchanged from 2006).
Inflation was 3.1% per year (compared to 3.0% from 1926 through 2006).

These numbers are not adjusted for inflation and assume reinvested dividends.
Source:  © 2008 Morningstar, Inc.

Jack Bogle weighs in with the Bogleheads

They're buzzing over at the Bogleheads investment forum today because The Man himself, Vanguard founder Jack Bogle, signed on to offer some personal comments. The forum, formally the Vanguard Diehards Investment Forum, is a great place to learn and discuss sound investment principles. Like their hero, the Diehards are big believers in low costs, indexing and taking the long-term view.

Bogle describes himself as "unusually risk averse," but it hasn't prompted him to change his asset allocation. This is how he says he's invested: "My year-end statement from Vanguard (the only time I peek) shows about 63% bonds and 37% stocks, and--for a conservative, fairly well-to-do investor like me--I'm comfortable doing nothing. (In fact, I've made no changes in my asset allocation for 7 or 8 years.)"

Bankruptcy filings soar in Tampa Bay area

Bankruptcy filings rose an astounding 75 percent in the Tampa Bay area last year compared to a 39 percent increase nationally. The numbers still aren't as large as they were before the bankruptcy law changed two years ago. However, they are rising very rapidly. In the Orlando area bankruptcies nearly doubled. Here's a story I wrote with the latest numbers and another story from November with more background information. The higher numbers locally probably reflect bigger problems with our housing market and the high percentage of subprime mortgages.

“The roughly 40 percent spike in consumer bankruptcies during 2007 presages even higher filings this year, as the heavy consumer debt load is made worse by the home mortgage crisis,” predicted American Bankruptcy Institute Executive Director Samuel J. Gerdano.

Help wanted: savvy money manager

The State Board of Administration is inviting bids for the job of managing its money market funds. It's all part of the strategy to rebuild confidence in the SBA's Local Government Investment Pool, which barely survived a run on the fund last month. Companies that apply for the job must have at least five years experience running a AAAm-rated prime institutional money market fund with at least $10-billion in assets under management. The company also will need to show at least five years of returns for its money funds. The main objective is to find a manager for the local government fund, which now has about $9.8-billion in its high-quality "A fund" and about $2-billion in its troubled "B fund." However, the state says it also will consider adding on contracts to manage other SBA-managed funds. These include the cash assets in the Florida Retirement System (about $1-billion), the Hurricane CAT Fund (about $8-billion), the Citizens Property Insurance fund (about $5-billion) and another money market fund (about $500-million.) Taking all that on will require a big company because the SBA says it wants its funds to be less than 20 percent of the assets the company is managing.    

New tax law offers relief for mortgage debt forgiveness

Homeowners whose mortgage lenders forgive some of their debt got a big tax break from the new 'Mortgage Forgiveness Debt Relief Act" Congress just passed.  Under the old law, debt forgiveness is considered taxable income--pretty painful stuff when the reason your debt was forgiven is because you're broke. Now forgiveness of debt or resetting of terms will not be taxable if the debt was incurred in the acquisition, construction or substantial improvement of a principal residence. A cash-out refinancing is not eligible to the extent that it exceeds the original acquisition amount.

Other features of the law include the extension of AMT (alternative minimum tax) exemptions. Basically that means if you weren't affected by the AMT last year, you probably won't be this year. In addition, there is a tax break on home sales for recent widows and extension of the mortgage insurance deduction. You can read more details on all this here.   

The downside: Tax return processing and refunds are likely to be delayed while IRS computers are reprogrammed for the changes. And once again, paper tax forms will be incorrect. If you're affected by any of the changes, you should file later and do it electronically.

SBA's relationship with Lehman Brothers draws more fire

Bloomberg has a long and very interesting story today about the State Board of Administration's relationship with Lehman Brothers. Among other things, it suggests Lehman Brothers was dumping bad investments on the state because other, more sophisticated investors, wouldn't buy it. It also notes that former Florida Gov. Jeb Bush, a former SBA trustee, was hired as a consultant to Lehman before some of the sales took place. Perhaps even more disturbing is the way that the state took on more and more risk related to the housing market last summer even as its woes were the subject of big headlines.

Update:

Here's the purchase info on SBA holdings.

Getting to the bottom of what's going on at the SBA

As someone who often has been frustrated trying to get information out of the State Board of Administration, I am pleased to see CFO Alex Sink digging for answers and pledging to improve communications. The other two SBA trustees--Gov. Charlie Crist and Atty. Gen Bill McCollum--are looking to her for leadership, and so far at least, she's stepped up to the plate. The run on the state and local government investment pool required drastic action. We don't know yet how well the restructuring will work out, but at least it gives the SBA some breathing room. Appointing Bob Milligan as interim executive director also brings some stability to a volatile situation.

I know that a lot of people are assuming the worst about what went on at the SBA. This story from Forbes claims (without any attribution) that Lehman Brothers sold the state the majority of the defaulted debt. It then raises the question of former Gov. Jeb Bush's possible involvement since Bush was hired in August as a consultant to Lehman Brothers. When he was governor, Bush was one of the trustees responsibile for the SBA. I have tried without success to get the SBA to either confirm or deny the Lehman Brothers connection. (They claim they're working on putting information together about the purchase of the investments.) Apparently Sink also has had some difficulty getting the information, because she includes the question among those she wants investigated by the SBA audit committee. The committee started its work yesterday and among other things, indicated it wants to look at communications from brokers about the investments.

It's important to understand how the state came to take on these risks. Bush may or may not have had anything to do with the purchase of the investments even if Lehman Brothers was the brokerage involved. However, innuendo flourishes in the absence of facts. Let's get some facts on the table.    

SEC shuts down Orlando pyramid scheme

If you've never invested in "Wealth Pools International" or "Recruit for Wealth," consider yourself fortunate.  The SEC says the companies were part of an Orlando-based pyramid scheme that claimed 70,000 victims in 64 countries and raised $132-million this year alone.

The SEC froze the companies' assets this week and charged them and Robert Lane with sale of unregistered securities. The SEC says the scheme involved the sale of English and Spanish language tutorial DVDs, but the profits came from recruiting new investors. "The defendants enticed investors to purchase thousands of DVDs by falsely promising them that they would earn income for life with no further effort." Hispanics in Orlando and Puerto Rico were the primary target.

A point of interest: The federal judge who ordered the assets frozen appointed Denise Dell-Powell as receiver for the two companies. She also happens to be bankruptcy trustee Soneet Kapila's attorney.

Florida pension fund has some of the suspect investments

There's been lots of news lately about bad investments in the State Board of Administration's Local Government Investment Pool. About $1-billion of those same investments are in the public pension fund (Florida Retirement System), which the SBA also manages. These investments are a concern, but in my opinion they are not something for FRS participants to worry about for two major reasons: 1. The pension fund is a long-term fund and doesn't face the kind of withdrawal demands that a money market fund faces and 2. These investments are a very tiny (half of 1%) part of the pension fund's assets. Here is a report about SBA assets  for those of you who want to know more. (Note: if you add in the items referenced in the footnotes, the pension fund's total holdings of these investments are about $1-billion).

Coleman Stipanovich resigned today as executive director of the SBA; Board approves restructuring of troubled fund

Coleman Stipanovich, executive director of the State Board of Administration, resigned this morning in the midst of a crisis that damaged the credibility of the manager of the state pension funds and other public funds. Access to the SBA's $14-billion Local Government Investment Pool has been frozen since Thursday as a result of a run on the fund.

Stipanovich's resignation came at the end of this mornings SBA meeting, at wich the board approved a plan for restructuring the investment pool, allowing participants access to part of their money as soon as Thursday morning. The board adopted a plan to create "A" and "B" funds, as described in this BlackRock report. The board also appointed BlackRock Inc. as interim manager of the investment pool for 90 days while a search for a permanent manager takes place. The fund had been managed in-house by an SBA employee. It ran into serious problems with $867-million of securities that defaulted or had to be restructured and another $1.2-billion that are considered "under stress" due to credit issues.

An advisory committee of local government investors will continue to work with BlackRock. Here is the investors' advisory committee report.

Wednesday story on Stipanovich. Wednesday story on fund actions.

Withdrawal restrictions on state fund likely to continue

Local governments aren't likely to get full access to their money in a $14-billion state-run investment pool any time soon. BlackRock Inc., a consultant hired to advise the State Board of Administration, says it will recommend that the fund be split into two parts. The largest share-86%-would be in an "A" fund containing top-quality investments that would allow limited withdrawals, possibly with redemption fees for those who withdrew large amounts. Another 14% (about $2-billion)  would be in a "B" fund holding the troubled securities, with no withdrawals on demand. Instead,  investors would have to wait for the securities to mature to get their money--and contend with the possibility that they might never get it. BlackRock consultants said they ruled out the possibility of the pension fund rescuing the Local Government Investment Pool by purchasing the troubled assets.

An advisory committee of local government officials said it wants the state to guarantee that investors will receive 100 percent of their money back. It supports the two-fund scnario but opposes redemption fees.

State names BlackRock adviser for troubled fund

BlackRock Inc. will be giving the Florida State Board of Administration advice on what to do about its Local Government Investment Pool. The pool is in a bind because about 11% of its assets are in defaulted and downgraded debt. The pool was frozen last week after a run on deposits. BlackRock will determine the fair value of the questionable securities in the portfolio and will recommend what to do with them. It also will do an overall evaluation of the portfolio. BlackRock will get a $125,000 fee. The board said it also considered JPMorgan, Goldman Sachs and Barclays for the job.

An advisory committee of depositors in the local government pool will have a conference call today at 4 p.m. Click here to listen in live.

Here is a copy of the state's agreement with BlackRock.

Who has what at risk in frozen state fund

The State Board of Administration faces a very thorny problem in deciding what to do with its state and local government fund. Calling a temporary halt to withdrawals has investors screaming--and who can blame them--but I haven't heard any real alternatives to a. a state bailout or b. liquidation at a loss. You can bet there will be lots of political pressure in favor of a bailout, which could take the form of a subsidy or a loan or loan guarantee. In addition to the cities, counties and universities that each have millions at stage, Citizens Property Insurance Corp. has $2-billion invested in the fund. Here is a list of all investors and how much money they have in the fund. Here's what was in the portfolio at the end of October. You can listen to yesterday's meeting or read the transcript here.

Here's some of today's coverage: St Petersburg Times, New York Times, Tallahassee Democrat.

Saturday update: St. Petersburg Times, Bloomberg

State takes steps to shore up fund

As local governments and school districts continued to pull money out of a state-run investment pool Wednesday, officials announced plans to shore up the fund. About $8-billion has left the pool in recent weeks, leaving it with about $19-billion. The pool, similar to a money-market fund, ran into trouble with mortgage-backed securities, some of which have had their credit ratings downgraded. (Here's my earlier story on this.) The State Board of Administration next week will consider a plan to insure about $1.5-billion of the pool’s securities against default. Executive director Coleman Stipanovich also is recommending that the board seek a AAA credit rating for the pool, adopt more conservative investment guidelines and build a larger reserve fund. Continued withdrawals could force the fund to sell securities at fire-sale prices.

Thursday update: The state suspended withdrawals from the fund after a continuing run on the fund. Another story with more background. And another.

Discrimination lawsuit against Raymond James expands

The three women who sued Raymond James Financial in September for discrimination have been joined by six others, including two current employees. In an amended complaint filed this week, the women detail more ways that they say the St. Petersburg-based company has penalized women, paid them less, denied them opportunities for advancement and hired and promoted men known for harassing women or treating them in a demeaning manner. Broker Andrea Duda, who still works for the company, says she was demoted as manager of the Ann Arbor office this summer after returning from leave for breast cancer treatment even though the office's financial performance exceeded projections for the last two fiscal years. A