Friday Philosophy by gdpwealth

Our Friends at Syyn Labs had a big hit this week.  They created this Rube Goldberg machine and within 5 days had 3.6 million hits to this video.  I’d say the world knows what they can do now.  Congrats Adam and Team!!!!!

LAX is just like the US, once brilliant and modern; now faded and cramped – NY Times, Krugman

Starting Over at 55 – NY Times

What are the Hedge Funds Doing? Interesting to note that the top 10 positions owned among hedge funds include many in  our Alpha portfolio: Apple, Direct TV, Pfizer, Microsoft, and Wells Fargo. (not a solicitation– see disclosures at bottom of this page).

6 time wasters and what to do about them

Better Working Tip: Reclaim the morning

Estate Planning With a Roth IRA

Updated on February 3, 2010.

Estate Tax Uncertainty: Since 2001, the federal estate tax has been scheduled to die in 2010. However, the tax is scheduled to come roaring back with much sharper teeth in 2011. Nobody thought our beloved Congress would allow the estate tax to expire this year, but it happened. We expect the tax to be restored sometime in 2010, but the issue of the effective date is very uncertain. If Congress tries to bring the tax back with a retroactive effective date of Jan. 1, 2010, it might be unconstitutional. Meanwhile, the federal gift tax rules for 2010 are the same as they were in 2009. Chleicrke1 for some advice on estate planning in 2010 between now and when the dust settles.

WHEN IT COMES to saving for retirement, many investors already know how well the Roth IRA fends off Uncle Sam. But what they may not realize is that it’s equally effective as an estate-planning tool. Seniors who convert a regular IRA into a Roth account can reduce their estate taxes and eliminate the income tax their heirs would otherwise have to pay on withdrawals taken from an inherited regular IRA. Sound too good to be true? Here’s how it works.

No Minimum Withdrawals The first benefit comes from the fact that Roth accounts are not subject to the minimum-withdrawal rules that apply to regular IRAs. These rules force you to begin draining your regular IRA the year after you turn 70 1/2. Of course Uncle Sam is there for his handout, and your friendly state-tax collector is next in line. This is galling when you don’t need the money.

Converting your regular IRA into a Roth puts a halt to this nonsense. After the conversion (which is allowed in 2010 regardless of your income), you can live out the rest of your days without being forced to take unwanted withdrawals. You are free to leave the Roth account balance untouched and accumulate as many tax-free dollars as you can for your estate. (If you convert after age 70 1/2, you still have to take one final minimum withdrawal for the conversion year; whatever is left in the regular IRA can then be converted to Roth status.)

Paying the Tax Of course, you will have to pay tax on any accumulated earnings and tax-deductible contributions when you make the Roth conversion. But this isn’t a bad thing, as long as you can pay the tax out of non-IRA assets. Why? When you pay the conversion tax, you effectively prepay income taxes for your heirs without owing any gift tax or using up any of your valuable federal estate-tax exemption of $3.5 million for 2009. Plus, prepaying the income taxes reduces the size of your taxable estate — also a good thing.

After You Die Your heirs won’t owe any income tax on withdrawals from the inherited Roth account. However, the account now falls under the same minimum-withdrawal rules as regular IRAs (seeI”nheriting an IRA2″). Nevertheless, if your heirs don’t need the Roth-account money right away, they can string out those withdrawals over many years while continuing to earn tax-free income on the remaining account balance.

Example: Husband is 65 this year. He converts his regular IRA into a Roth account and lives for eight years, gloating all the while about the tax-free status of the account and never taking out a dime. After his death, his Roth IRA goes to the wife, the named beneficiary, who is age 70 at the time. According to IRS life-expectancy tables, the wife should live another 17 years. Since she can treat the inherited Roth account as her own, she need not take any minimum withdrawals. Being thrifty, she doesn’t take out a dime. As scheduled, she passes the Roth baton at age 87 to her daughter, who was designated as the beneficiary when the wife took over the account.

Daughter is age 55. The IRS says her life expectancy is 30 years. Now the endgame has been reached. She must start taking minimum withdrawals over 30 years. But she takes only the minimum, thus preserving the account’s tax-free earning power as long as possible. In this case, the account “lives” eight years with the husband, 17 years with the wife and 30 years with the daughter. That’s 55 years in all. Not bad, considering the husband was 65 when he did his conversion deal.

What really happened here is that the husband and wife used the Roth IRA to set up a long-term tax-free annuity for the daughter. But it didn’t cost as much. Of course, for all this to work out as illustrated, the husband should designate the wife to be the beneficiary of the Roth IRA upon his death. At that point, the wife should declare the account her own by retitling the account in her name and designating the daughter as the beneficiary upon the wife’s death. Finally, the daughter must begin taking minimum distributions by Dec. 31 of the year following her mother’s death. Otherwise, the daughter will have to liquidate the account after five years, which would bring a premature end to all the fun associated with tax-free Roth IRA income.

RisksRisks For this strategy to make sense, two things must happen. First, the tax rules for Roth IRA rules must remain as they are now. Second, you must believe you won’t need the money in the Roth IRA during your lifetime and that your heirs will pretty much leave the account alone, except when required to take minimum withdrawals to comply with the tax guidelines.

To the extent these assumptions prove untrue, the idea of using a Roth IRA to create a tax-free annuity for your heirs becomes that much less attractive. Remember, you are paying a high price — the upfront conversion tax — in order to set your heirs up for future tax savings that you hope will extend over many years.

Source:  http://www.smartmoney.com/personal-finance/retirement/Estate-Planning-With-a-Roth-IRA-7966/#

Could this be the fuel cell revolution we’ve been waiting for?

Five to ten years from now, you could have a $3000 fuel cell power generator the size of a clock radio in your basement, turning natural gas into electrical power at twice the efficiency possible today. That’s the promise of the Bloom Box, a tiny power plant that combines oxygen and natural gas, a biogas or solar energy, and creates electricity.

Watch CBS News Videos Online

A long report for the long weekend.  Enjoy.

President’s Economic Report 2010 –

From Business Insider:

The author of the new book, The Quants, talks on Yahoo Finance about the quantitative machine-based trading that has fully taken over Wall Street.

Scott Patterson says that there has been a huge rise in the number of quant traders on Wall Street and they make it really hard for the individual to compete on a level playing field.

“[The individual trader] has no idea the forces that are arrayed against him,” says Patterson.

As he notes, Ren-Tec alone has 90 Ph.D’s figuring out market patterns. Good luck going against them.

CLICK FOR LINK TO VIDEO

Californian scientists think they may have discovered the part of the brain which makes people fear losing money.

The study, reported in Proceedings of the National Academy of Sciences, looked at two patients who had damaged their amygdala, deep within the brain.

These patients were less worried about financial losses than the normal volunteers they were compared with.

The scientists say this could translate to how people make decisions in fields ranging from politics to game shows.

‘Loss aversion’ describes the avoidance of choices which can lead to losses, even when accompanied by equal or much larger gains.

From BBC News– Read More >>

Tuesday, February 09, 2010 – 10:05 AM EST

The worldwide smartphone market (IDC now calls them “converged mobile devices“) reached a new record level in a single quarter. According to IDC’s Worldwide Quarterly Mobile Phone Tracker, vendors shipped a total of 54.5 million units in the fourth quarter of 2009 (4Q09), up 39.0% from the same quarter a year ago. For the full year, vendors shipped a total of 174.2 million units in 2009, up 15.1% from the 151.4 million units in 2008. Converged mobile devices accounted for 15.4% of all mobile phones shipped in 2009, up slightly from 12.7% in 2008.

“Four of the top five vendors established new shipment records for a single quarter, indicating strong demand in the market,” said Ramon Llamas, senior research analyst with IDC’s Mobile Devices Technology and Trends team, in the press release. “Increasingly, mobile phone users are seeking greater utility from their devices beyond telephony and messaging, and converged mobile devices fulfill that need. To help address demand, carriers took advantage of lower prices on many older devices, ordering additional units and, in turn, offering reduced prices to end users. It was the perfect set of conditions to push shipments to a record level.”

Market Outlook for 2010

IDC anticipates that ongoing demand will drive the worldwide converged mobile device market to a new shipment record in 2010, with additional impetus from the shifting landscape of mobile operating systems. “2009 was the coming-out party for Google’s Android and Palm’s webOS as both operating systems revealed new ways to surround the users with increased functionality,” says Kevin Restivo, senior research analyst with IDC’s Mobile Phone Tracker, in the press release. “More advances are in store for 2010 as Symbian and Windows are expected to unveil new versions of their respective operating systems. These and other operating systems will compete with attention-grabbing intuitiveness and seamlessness, a thriving mobile application library, and a compelling user experience that tightly holds on to the user. In the end, users will benefit from not only greater usability, but greater personalization and customization as well.”

Top Five Converged Mobile Device Vendors, 4Q09

Nokia ended the year the same way that it began: as the undisputed leader of converged mobile devices worldwide. Nokia’s shift to bring more touchscreen-enabled smartphones to market began to pay off, as its 5800, N97, N97 mini, and 5530 models drove both revenue and profits. In addition, Nokia quickly pointed out the competitiveness of its Eseries devices. While these results signify important milestones for the company’s converged mobile device unit, it should be pointed out that reduced prices on many older models helped drive unit growth.

Research In Motion topped the ten million unit mark for the first time in the company’s history. New device launches, including the high-end Bold 9700, touchscreen-enabled Storm 2 9550, and the mass-market targeted 8520, deepened the company’s product portfolio, and lower prices on its popular Curve and Pearl models – in some cases being given away for free with a two-year service agreement – propelled shipments further.

Apple, with their iconic iPhone added another chapter to its short history by nearly doubling its shipments from the same quarter a year ago. Demand for the Apple iPhone continued unabated during the holiday quarter, and agreements with multiple carriers within the same market enabled further distribution. The fourth quarter also saw the launch of the iPhone at one of the world’s largest carriers: China Unicom.

Motorola returned to the top five vendor list after a year-long hiatus. The company fulfilled its promise of launching its first Android-powered devices before the end of the year, and earned a warm reception as combined shipments of its DROID at Verizon Wireless and the CLIQ/DEXT at multiple carriers reached two million units in their debut. Motorola still offered versions of its legacy devices, including versions of the Windows Mobile-powered Q and the Linux powered MING A1800, RAZR 2V8, and Tundra in multiple markets.

HTC launched a new marketing campaign in 4Q09 showing how ‘you don’t need a phone, you need a phone that gets you.’ This approach speaks to how its multifaceted devices align with users’ multifaceted lives. While it may be too early to gauge the success of the campaign, it does bring the company’s brand to the forefront. HTC continues to enjoy the success of its deep touchscreen-enabled device portfolio, and added the Android-powered Eris and Hero to its growing Android selection.

Top Five Converged Mobile Device Vendors, Shipments, and Market Share, Q4 2009 (Units in Millions)

Note: Vendor shipments are branded shipments and exclude OEM sales for all vendors.

Top Five Converged Mobile Device Vendors, Shipments, and Market Share, 2009 (Units in Millions)

It looks like market worries have shifted to Portugal now some breathing room has been found for the situation in Greece. Observers are pointing out several metrics showing increased investor concern about Portugal.

One metric is the price of buying insurance — credit default swaps, or CDS — on Portuguese debt. “Sovereign CDS are closing at their wides of the day with Portugal leading the way rising by 28 bps to a record 195,” wrote Miller Tabak’s Peter Boockvar. Another metric is the yield spread between the debt of countries like Greece or Portugal and those on super-safe German debt. The spread between Greece and Germany is narrowing today, says Brown Brothers Harriman analyst Marc Chandler, who notes:

The lightening rod has been passed to Portugal today and this appears to be one of the factors weighing on the euro and in general helping lift the US dollar. Portugal 10-year yields are up 21 [basis points] today the largest rise in nearly a year and the premium over Germany is the widest in almost that long too. Its 2 year yield is up 23 bp today. The 5-year CDS appears to be at record levels.

We can’t help but note that phenomenon seems to be reminiscent of the way the market reacted as the financial crisis really started gathering momentum in 2008. After Bear Stearns was saved via a shotgun wedding with J.P. Morgan Chase, CDS spreads on other investment houses — such as Lehman — began to widen as the spotlight of anxiety swung onto other firms thought to be in trouble. That’s got to be worrisome for those that hope that signs of a solution to Greece’s issues will calm market concern about sovereign default. Chandler writes:

This does not seem to be the case. First, as several European finance ministers have suggested “bailing out” Greece would unveil a huge moral hazard and investors would balk. Second, as Portugal’s debt market performance illustrates, if Greece is supported, investors may “strike” until Portugal is treated in a similar fashion. And then who is next–Spain ?

By Matt Phillips