--Missing in Action--

I have to apologize in advance. I'm going to be swamped until April 17, 2006, so check back sporadically for updates.

Another apology goes out to my friends who only knew my blog address from my AIM profile. I had no idea the link didn't work!

the facts (and my opinion) behind IRAs

An IRA, which stands for individual retirement arrangement, is a personal savings plan which allows you to set aside money for retirement (IRS Topic 451). The two main types of IRAs are traditional and Roth. But before I begin describing them, let me give you the details about both:

• must have "earned income" to contribute to either. If you're sole occupation is, for example, a landlord and physically don't earn the income, you cannot contribute. Or if all you do is sit and collect dividend or interest income, that doesn't count either. Sorry folks.
• The contribution limite for 2005 is: $4,000. If you're aged 50 and over (before 2006), your contribution amount is $4,500.
• Both have income limitations, as in if you earn too much money, it disqualifies you to contribute, although you're strongly urged to seek retirement savings elsewhere.
• If you withdraw money out of your IRA, BEFORE you turn 59 1/2, you may be subject to an additional 10% tax.
• Each year's contribution is due when that year's income taxes are due. So for your 2005 contribution, you have to make it before April 17, 2006. (April 15th falls on a Saturday this year)
• You can make your IRA contributions with brokerages, banks, and insurance agencies. It all depends on your needs.

So here's the difference between the two.

Traditional IRA - there is one main difference between the traditional and the Roth. Tax. With a traditional IRA, the contribution amount acts as a deduction of your income, so you'll pay less taxes this year. BUT! Whenever you withdraw your money (after age 59 1/2), you'll be taxed for the full accumulated amount. Think about the years of compound interest building on an ever increasing principle. Sure, you can save a few bucks on taxes now, but you could be paying out the wazoo for it later. So unless you have to contribute to a traditional (for income limitation purposes), you probably shouldn't. Very short sighted...

Roth IRA - Unlike the traditional where your current year's income taxes are lower, with a Roth IRA, there is no effect to your income taxes whatsoever. Since you're not deducting your contribution amount from your income, your income stays the same and your taxes stay the same (as if you made no contribution at all). BUT! When you do decide to withdraw your money out, it is completely tax free.

Whatever you decide is fine with me. Some people need the larger deduction this year - or the refund. But if you're thinking for the long term, the Roth is definitely the better way to go.

the Ramifications of Social Security Privatization...

I hope everyone has had a chance to read Ben Stein's article from the previous post. I wanted to take some time to write about social security.

A few years back, President Bush was really adamant about privatizing social security. Pretty much, what that means is, all of our social security contributions right now are controlled by the government. We won't see a single cent of it, until we decide to retire and take our payments. In Bush's latest budget report, hidden in the middle of 700+ pages, is a proposal to privatize social security accounts. Individual citizens will be able to draw about 4% of their annual social security contributions (with a maximum of $1100), and manage an account themselves. This could begin as early as 2010. But don't think the change to privatization will be easy, or inexpensive. As Newsweek.com's Allan Sloan wrote,

"On page 321 of the budget proposal, you see the privatization costs: $24.182 billion in fiscal 2010, $57.429 billion in fiscal 2011 and another $630.533 billion for the five years after that, for a seven-year total of $712.144 billion."

Is it worth it to incur $712.144 BILLION in costs just to privatize social security accounts? Need I remind the government that we're in a deficit right now? (And have been for a few years). Does the government really need to be incurring $712 billion in more costs? I highly doubt it.

While I do enjoy the prospect of controlling more accounts if social security were privatized, I don't really trust the market or individual investors to adequately take control of that money. I hate to bring up age-old history, but does anyone remember how many people lost their retirement when Enron went down? A sizeable portion of America lost their 401(k) money simply because brokerages invested their money in "safe" industries, such as energy. If brokerages are putting your money into "safe" industries that could ultimately collapse, the individual investor can't be any safer...

As Ben Stein's article points out, many Americans simply do not understand the concept of saving money for retirement. In fact, I'd say the largest illusion about retirement is that social security would cover their costs. Can you even imagine if social security was privatized and Americans accidentally lost more of their retirement money? Where would regular peoples' retirements come from then?

INDIVIDUAL RETIREMENT ACCOUNTS (IRA)'s. Seriously start thinking about retirement and how you're going to fund it, because solely relying on social security is definitely not enough.

Coming Soon... the excitement of IRAs.

Yahoo! Finance Story - Living Hand to Mouth -- and Barely Getting By: How Not to Ruin Your Life - Yahoo! Finance

(allinvestments@gmail.com) has sent you a news article
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Personal message: This is a fantastic article.

Living Hand to Mouth -- and Barely Getting By: How Not to Ruin Your Life - Yahoo! Finance
http://finance.yahoo.com/columnist/article/yourlife/2449

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Yahoo! Finance http://finance.yahoo.com/

Weathering the market...

A study conducted in Hong Kong during 2002 found that those who checked the stock market daily were more likely to be depressed than those who did not.

With that said, you should probably also know that within the past few days, my biggest percentage gainer in my investment club's gains have been cut in half. Before their earnings release last week, Intuitive Surgical was trading near it's 52-week highs - around $139. After their earnings (which suggested a growth slowdown), their shares tumbled. It has yet to recover. Now, days later, rumors surface about a possible Japanese company entering into the robotic surgery market. Shares tumbled again, and closed today a few pennies above $100.

To be completely honest, I am not worried. I wasn't worried when it fell to $115 after their earnings release. I'm not worried now that it continued to fall to $100 on competition worries. Why? Intuitive Surgical is a strong company, with a good product. Yes, there are concerns about the sustainability of their growth. But such is true with any company. It's call phases in a company's life cycle. It can't be in the baby/growth stage forever, can it?

Plus, the "recent" rumors about Toshiba entering into the robotic surgery market have been around for awhile, or so a Reuters.com article says. There's no use getting all worked up over an old, retold rumor.

Although I check my stocks every day, I know how to separate money from my emotions. Losing 50% of my gain in ISRG in a few days could ruffle a few peoples' feathers. Not me. I've learned to handle the short term swings. And the sooner you realize that short term ups and downs mean nothing in the long run, the sooner you'll become a happier investor.

If you really can't handle the volatile swings of the stock market, maybe your money is better off elsewhere.

When stellar profits are not enough to satisfy...

After the bell, Intuitive Surgical (ISRG) reported their 4th quarter earnings.

• net earnings $49.5 million, $1.31 a share, compared to net earnings of $11.7 million, $0.32 a share last year
• revenues rose from $45.2 million last year to $72.1 million

Analysts were looking for earnings of $0.49 a share on revenue of $67 million.

Don't these results look great? Their net came in at 167% higher than analysts expected. Too bad that's not enough to satisfy investors. ISRG closed today at $127.26, but in after hours trade (after 4th quarter results were announced) it was beaten down almost 9% to $115.85.

You'd think investors would be pleased with their results. As a shareholder, I'm very pleased. I actually had to re-read their earnings release to make sure the share slump and stellar earnings were reported correctly. They are...

I guess this just shows the fickle nature of investors. Google can "miss" their earnings estimates and investors will dump the shares. Intuitive Surgical can completely exceed estimates and investors will still dump the shares.

I'm not disappointed in ya, Google

Since the mass "disappointment" over Google's earnings have died down slightly, I wanted to say a few things about earnings "expectations." I'm sure you've seen the headline or some variation of "Google misses estimates by a mile!" What most people don't realize is Google doesn't give any guidance for their earnings. Any earnings that analysts are expecting are just mass speculation. On the other hand, if a company had issued estimated eps or adjusted previous guidance, than yes. I understand missing that by a mile. But if there are no estimates, how can you miss them?

Google ended the 4th quarter, earning $1.22 a share. Excluding the cost of stock options and other charges, Google said it earned $1.54 a share. Analysts were expecting $1.76 a share. From this, it looks like Google did miss their earnings by a mile. But wait.

Their sales rose 86% to $1.92 billion, while their net income rose 82%. Correct me if I'm wrong, but an 86% increase in sales? That's impressive in itself. Google said most of their earnings "miss" resulted from a higher effective tax rate. Original estimates had their tax rate at 30%, but actual numbers had it closer to 42%.

To many investors, the earnings disappointment signals the end of Google's bullish run since the IPO. I, on the other hand, think there's still room to grow. Analysts are currently mixed over Google's future.

• UBS cut Google from buy to neutral.
• Prudential upped their price target to $500.
• JMP Securities cut their price target from $575 to $550.

If you were wanting to buy Google before, this pullback in share price might be just the thing you need.