Insights

Fourth Quarter 2003|Jim Williams| Two years ago in this newsletter, I addressed the issue of fixed-income asset classes in the investment portfolio. At that time, as now, interest rates were quite low, and the prospects for rising interest rates seemed gathering if not imminent. Rising interest rates mean declining bond prices (the longer the duration of the bond, the greater the decline in price, more about this later). And with yields as low as they are now, it makes fixed income seem like a quite unattractive investment alternative. But let’s remember why we have fixed income in the portfolio.

Third Quarter 2003|Jim Williams| New York State Attorney General Elliot Spitzer is at it again. Good for him. You are probably aware of the latest scandal to hit the financial services industry related to after-hours trading of mutual funds (Janus, Strong, Bank of America/Nations, Bank One Group, Alliance). Why have none of the funds in your portfolio been named in any of these allegations? Is it because we had some special insight into the trading operations of the funds? No. Is it because we’re smarter than everyone else? No. Perhaps it has something to do with what we look at when we evaluate investment vehicles.

Second Quarter 2003|Jim Williams| A few weeks back, I met with my favorite Registered Dietician/Nutritionist for a personal nutrition assessment. Knowing that I am carrying a few (several?) pounds of fat around my middle, I expected to be exhorted to stop eating candy and junk food, and lose weight. However, I learned more importantly that I am deficient in lean body weight and the solution is to eat more than the minimum amount of protein. I find that I have to consume a lot of protein to reach my daily target, and doing that keeps me pretty full. Interestingly, by focusing on the positive: eat more protein rather than the negative: quit eating junk food, I effortlessly made some substantial changes in my personal nutrition. I think that what we do here at J. F. Williams Co., Inc. in financial advisory services is quite similar.

First Quarter 2003|Jim Williams| I learned a lesson last month. While I was engrossed in the news coverage of the war in Iraq, my spirits were alternatively lifted and then dashed. In the space of time between the first Tuesday, when the first strike took place, and Sunday night after several Americans had died or been captured, I went from being quite optimistic about the prospect that the war would be over in a few days, to down-in-the-depths apprehension that all of the predictions of a “quagmire” were about to come true. As I considered my own reactions to the news coverage, I started to wonder if there might be some lessons with regards to the similar onslaught of information which comes at us with respect to the financial markets.

Fourth Quarter 2002|Jim Williams| President Bush recently announced a series of tax-reduction proposals that are being characterized and analyzed within the context of an economic stimulus plan. The centerpiece of the proposals is the elimination of taxes on dividends paid by recipients of those dividends, and the proposals would also accelerate reductions in the federal tax rate and marriage penalty. . Congressional Republicans are strongly in favor of the bill. Democratic opposition to the Bush plan is significant.

Third Quarter 2002|Jim Williams| Section 529 plans have become quite popular because they allow you to save for future college education costs while eliminating federal income taxes on qualified distributions. These plans have no income restrictions and contribution amounts are very generous. The beneficiary of a 529 plan can be anyone you wish, including the account owner, with no age limitations. Whether they’re a good idea depends upon your circumstances.