COVERITLIVE.COM

11:28

Kim Quillen, T-P -

Good morning and welcome to today's online chat with John Gin. Please feel free to begin posting your questions now. John will begin answering them at 12 noon.

12:01

[Comment From Carrie]
I've been watching the stock market the last few months and am wondering if the worst is over? Should I take comfort in the stock market's recent recovery? Or do you think there's more turmoil to come?

12:33

John Gin - Carrie, no one can answer those questions precisely with any degree of certainty. We know that the recent stock market low was set on March 9th and since then we have seen a 20%+ advance. Let's weigh the pluses and minues and see where we are.

Pluses:

1) There are record amounts of cash, money market accounts, and treasuries that have come out of the stock market in the last year. Cash is needed to fuel further stock market recovery.

2) The Obama recovery plan is slowly taking shape. The global governments are also on board to do everything they can to get the recovery going. Invests will need patience.

3) Since the March 9th low, investor sentiment is slowly turning to the positive. Investors are finally seeing their March statements higher than the February statement after months of steady declines.

4) We have record low interest rates in home mortgages. This will help existing mortgage holders to refinance to a lower rate and pocket the savings that can be used to reinflate the economy. The First Time Home Buyer's program will be another incentive to buy a home that is down 20% to 40% from its high of just a couple of years ago. plus up to an $8,000 tax credit.

Minuses:

1) There will be higher unemployment and more business failures to come.

2) Corporate profits are way down. Expect more layoffs.

3) The stimulus plan may mean higher inflation down the road.

4) There is still bad news out there. Are we in a bear market rally trap?

With the above points, I would say that the recovery is starting to take hold. Economic recoveries do not go up in a straight line, rather, they have ups and downs. If you have money invested in the market, make sure it's money you do not need for 3 to 5 years. I can never over emphasize the importance of a adequate cash reserves during market declines so you stay invested and try to time the market.

It appears we are seeing a historical pattern when stocks suddenly turn upward at some point during a recession. This up turn doesn't coincide with the recovery. Because the stock market tends to be forward looking the upturn takes place in mist of bad economic news and the feel of doom and gloom. Are we there yet? It sure feels like it.

12:34

[Comment From BayouGeorge]
Is it too late to make a contribution to an IRA and deduct it on my 2008 income tax return?

12:35

John Gin - BayouGeorge, you better hurry. You have until April 15th to fund your IRA for 2008.

12:35

[Comment From anne]
do you recommend allocating IRA contributions as short-term bond funds or CD for an individual wanting minimal risk and accessing the funds in ~5 yrs?

12:56

John Gin - Anne, your 5 year time frame will work with CDs, short term bond funds and even some stocks. Since the economic turmoil has punished all types of investments, I think the opportunities are in bonds and stocks over the next 5 years. Because we expect interest rates to remain low for a while. Cds will not be paying much. Bonds will perform better in a low interest rate environment. Once the recovery takes hold, stocks will recover. A recovery would also mean higher interest rates which usually is not good for bonds.

So if you go the bond route, you should consider a treasury inflation protected bond mutual fund. If you can stomach having a little bit of stocks, you may want to consider a target retirement fund that invests no more than 35% in stocks and the rest in bonds and cash.

1:00

Kim Quillen, T-P - This concludes today's online chat with John Gin. Thank you for participating. And special thanks to John for coming in and hosting today's chat.

Be sure to tune in again tomorrow at 12 noon, when Dee Harris of the IRS will be taking your questions about the federal income tax deadline.

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