Let’s look at long-term investors. They’re down, but not as out as you might think.

If you’d owned all the Dow stocks for the five years ending Dec. 31, 2008, you’d be down 5.5 percent for the entire period.
Five-year holders of the Nasdaq index were down 18 percent and of the S&P 500, down 10.5 percent. This is on a total return basis, meaning price changes plus any dividends.

This is supposed to make you feel better.

Because these five-year returns are significantly higher than what happened in the 12 months we just finished.

Last year was all-out awful. The Nasdaq fell almost 41 percent in price alone. S&P, negative 39 percent, the Dow lost 34 percent.

But the addition of time and dividends helps overcome even awful years.

2008 was just one year.

It is so easy to forget, the markets were up four years out of the last five.

If you look at all this on a chart, you’d realize that investors in these three indexes were ahead of the game during those first four – strongly ahead, too, if you were in large-company stocks – before 2008 came along and blew up all their gains or more.

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Hey there, aren't you glad 2008 is over?

I certainly am. You can read my take on the market's horrible year in the story posted on SunSentinel.com/business under the headline Suffering a Market Hangover.

If you're looking for how your stock is starting off the new year, I can help. .

You can use the service on the middle of this page, left-hand side. Simpy enter your stock or mutual fund symbol or the name or even part of the name. When you get the symbol or ticker, you can get a report of the current price and a chart of its performance.

Hope it's better than last year.
.

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Question: If I have a capital gain of $5,000 and a loss of $10,000, can I write off the entire loss plus the $3,000 to offset ordinary income?
-Steve
Answer: No.You haven’t made quite enough in capital gains to do that this year.
The tax law allows you to use capital losses to offset capital gains, which are typically profits on stocks or mutual funds. So you’d take $5,000 of your loss and use that the offset $5,000 of your gains. From the $5,000 in losses that you have left, you could use another $3,000 to offset ordinary income, typically the kind you earn from your job.
You’ll have $2,000 in losses left, to use in future tax years. You get to roll it over until the losses are all gone. You can use up to $3,000 a year to offset your ordinary income.

Send me your questions on personal finance and I'll find the answers. Either use the comments section here or email them to helpline@SunSentinel.com. I prefer to respond to people who provide me with their name and the city where they live.

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How do you pull off a $50 billion ponzi scheme, as the Securities and Exchange Commission alleges? How do you do it with no one seemingly knowing it's going on? Here are my questions:

-Who were Bernard Madoff's clients?

He was running a hedge fund, correct? So his clients should have been deemed to be qualified investors, which, by the SECdefinition, means someone who has a net worth of $1 million or at least annual income of $200,000. The notion of "qualified" is that this person is sophisticated about investments and understands risks. Why then are we hearing from investors who said they didn't understand what they were getting in to?

-Who could understand his statements?

It took The Wall Street Journal about a day to figure out that he couldn't possibly have transacted the volume of options trading that he said he did. So what was on his statements and did anyone ever call up and ask for an explanation?

Steve Pomeranz, a Boca Raton certified financial planner, told me he reviewed Madoff's statements and couldn't make sense of how he could do what he claimed to do.

Why, then, did anyone believe the statements were true? Does complicated equal smart, sophisticated, trustworthy? Not in my book.

-Why were people silent?

Because they were making money. Until now. They thought they had the smartest money manager ever, the one who knew more than anyone else. The one who had the secret to making money when markets were only losing money. It's a fiction. It continues because of secrecy.

It all has an air of a quiet, secretive club where it worked until it didn't.

It does not sound like the kind of investing that an ordinary working schlub does, going down to the broker or telling his employer to put his 401(k) savings into a mutual fund.

Oh yeah, and this one,
Where were the regulators?
No answers there

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Congress slipped a big change for Individual Retirement Accounts into the pension bil that passed Thursday.

Lawmakers inserted a provision that would suspend required minimum distributions temporarily. People over age 70 and a half must take a certain amount of money out of their IRA's every year. These required "distributions" have become quite controversial this year, because of how they are calculated.

This provision suspends the required minimum distributions or RMD's next year, for 2009.

Here's why RMD's have suddenly become controversial:

The law says you have to use the value of your account at the end of the prior year and you must take out a certain percentage based on your life expectancy. Retirees were protesting, because almost everyone's portfolio was larger last year than it is now. If they had to take money out based on last year's value, it would be a big hit to what is now a smaller portfolio. If they don't take the RMD, they're still in the hole, because the tax code says they have to pay a penalty of half of the amount that should have been withdrawn.

Watch for President Bush to sign it into law.

The proposal is HR 7327.

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Investment News had an article last month reporting that most, seven out of ten, top mutual funds that are actively managed were doing worse than the market.

That means, in the first ten months of the year, if you were paying a manager of your mutual fund to pick stocks for you, the manager was doing worse than the Standard & Poor's 500 index. You could have bought an index fund and probably paid a fraction of what you paid your active manager and lost less money. Because everyone's losing money.

The winners are losing less.
The winners are not the stock pickers.

How are your funds doing? And what do you think of my cousin's idea, that your investment advisor -- your financial planner or stockbroker or whoever -- ought to see his or her pay go down when the investments they chose decline in value?

She's talking about your personal investment advisor. She thinks that person ought to be paid based on performance, not for just showing up.

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I'm going to guess that plenty of people will disagree with what I say on The Nightly Business Report tonight. My commentary is about whether people should consider giving securities as holiday gifts this year. So tell me, what do you think? Going to give stock to the kids this year? Watch the Money File segment on WPBT Channel 2. The show airs at 7 p.m.

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You want to buy a house but you don’t think you could get a mortgage.
Bad credit? Not much a down payment?
Don’t forget FHA mortgages, one broker pointed out to me recently.
FHA loans can still be had with as little as a 3 percent down payment. And FHA itself doesn’t impose a minimum credit score requirement (although some lenders do). So those who would not qualify for a bank loan may be able to do it this way.
My point: Don’t assume you won’t get financing. It’s tough these days, but not impossible.
And,
Don't forget to send me your personal finance questions at helpline@SunSentinel.com

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Good news: Mortgage interest rates did fall again, as expected.

Freddie Mac is reporting the average 30-year, fixed-rate mortgage this week was at 5.53 percent, the lowest rate since Januray.

We've already seen a boom in refinancings, as people rush to cash out of expensive loans or ones that are about to reset to higher rates.

Bet that boom continues.

And look at 15-year, fixed-rate mortgages, they're averaging 5.33 percent, Freddie Mac says. That's the lowest since March.

A year ago, 30-year , fixed-rates were closer to 6.

This would be a great time to refinance, if you qualify.

Consider a 30-year, fixed rate mortgage of $100,000 at 5.5 percent. The principal and interest payment would be $567.79. If that rate were 6 percent, the payment would be $599.56.

The difference is a savings of $381.24 a year.

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I'm watching mortgage rates. The Mortgage Bankers Association reported Wednesday that mortgage refinancing activity shot up Thanksgiving week, as interest rates fell. Then bond guru Bill Gross of Pimco went on CNBC and predicted that rates on 30-year mortgages would fall to 4.5 percent as the economy recovers, down from 5.97 percent now. Today, Freddie Mac will tell us what happened to rates in this past week. And that may send even more people off to their lenders to refinance. Might be a good idea for struggling homeowners.

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