Welcome to the November 2009 issue of Condor Monthly!

Please continue below to view the "From the Portfolio Manager" and "Financial Planning Corner" segments in this month's issue.

Special Announcements

Deadline for Charitable Gifts

With the year-end steadily approaching, many clients find the holiday season an excellent time to make their charitable donations for the 2009 tax year. If you have any intentions of gifting cash or securities out of your accounts to your favorite charity, please be aware that our custodians have deadlines on when they need to receive your request in order to process the distribution by year-end. To ensure that your gift is processed, please have your request to us by Tuesday December 15th. Requests received after this will be processed on a best efforts basis.

Required Minimum Distributions (RMDs)

The amount that the federal government requires you to withdraw annually from traditional IRAs and employer-sponsored retirement plans after you reach age 70½ was waived in 2009. Although not required to make withdrawals in 2009, you can still withdraw funds from your IRA if necessary and/or appropriate. As the law stands now, RMDs will come back in 2010 and will be based on account values as of December 31, 2009. We will be in contact with you during 2010 to make sure the RMD rules are satisfied.

Roth IRA Conversions

The Roth IRA was created more than 10 years ago, but is suddenly a hot topic again. Starting in 2010, the $100,000 income cap for converting a Traditional IRA to a Roth IRA will be permanently lifted, giving all investors the option to move money into a Roth. Plus, the taxable income due on 2010 conversions can be paid in 2011and half in 2012. It is most advantageous to consider a conversion (or partial conversion) if your tax bracket will be higher in the future. We will likely be sending out more information on this topic in the coming months. For some clients, such as those waiving their RMDs, converting in 2009 may be appropriate. Please call us as soon as possible if you would like our help evaluating a conversion in 2009.

From the Portfolio Manager

The following article originally appeared in Advisor Perspective’s 11/3/09 issue, written by Frank Wei, CFA, FundQuest Incorporated.

Worry of the Dollar’s Collapse Is Overblown

Since the global equity markets rebounded earlier this year, the U.S. dollar has resumed its decade-long decline. The pace of its decline has accelerated recently, causing worry that the dollar is headed for an imminent collapse.

The fundamentals for the dollar could not be worse. The U.S. economy has continued to struggle, the federal deficit has skyrocketed, and the government has adopted super-easing monetary policies and aggressive fiscal spending. But anxiety over a potential dollar collapse is overblown. A gradual decline appears more likely.

Let’s examine why:

The U.S. economy is currently undergoing an unprecedented, multi-year deleveraging transformation that should put a lid on rampant inflation despite the above-mentioned government policies.

This deleveraging process will force consumers to spend less and save more, lessening pressure on price levels. Housing is the largest component of the consumer price index, and the housing market is unlikely to recover for years to come thanks to high unemployment and limited credit. As a result, a sharp rise of the consumer price index is quite unlikely. On the money supply side, the money-creation function of the U.S. banking system will be limited – it will take years for most banks to repair and enhance their damaged capital base, and thus they will be very cautious when making new loans.

Externally, because of its world currency status, the dollar will face less pressure than it otherwise might.

It can be argued that any other country that dared to adopt such accommodating monetary and fiscal policies would have already seen its currency collapse, but the U.S. is unique. The U.S. dollar is the only universally accepted currency in the world, backed by a single sovereign government that oversees the world’s most influential economy and military. In many countries, the dollar is either the second-most accepted currency (next to that country’s own) or simply the defacto currency. What’s more, the majority of world’s wealth is in dollar-denominated assets. As a result, the collapse of the dollar would hurt not only the U.S. economy but also the world’s economy.

A gradual decline of the dollar (as opposed to an abrupt decline) is in almost everyone’s interest.

The U.S. is the obvious beneficiary of a gradually declining dollar. Not only would U.S. exports become more competitive, but the government’s future debt repayment burden would also ease ($100 in debt issued today will be worth less than $100 when it matures). Most U.S. consumers do not consume a lot of foreign goods, so as long as inflation is under control, the impact will be minimal.[Editors note – Although we agree with most of the concepts covered in this piece, we feel the author incorrectly asserts that US consumers do not consume a lot of foreign goods since so many items are manufactured abroad; nonetheless we agree with his conclusion that the impact will be minimal as long as inflation is under control.] As for foreign governments, by far the biggest holders of U.S. debt, it is not all that bad either. Though they may seem to be big losers in this scenario, it is in their interest to keep the dollar from collapsing, and they may benefit from other aspects of the weaker dollar. To understand why, look no further than China, the biggest creditor of and exporter to the U.S. While China would not be thrilled at the diminishing returns of its investment in U.S. debt that a weaker dollar would lead to, its exports to other countries will become more competitive because its currency, the RMB, is pegged to the U.S. dollar. A weaker dollar means a weaker RMB.

What should investors do?

I expect this to be a gradual, multi-year trend that may exhibit occasional sudden and violent counter-trend movements. For example, the dollar snapped back an eye-popping 28% against the Euro between July and November of 2008, severely punishing those who overly bet against it. Those counter-trends can last a long time, too. The appreciation of the dollar against the Euro, for example, lasted almost an entire year between December 2004 and November 2005 before it resumed its decline. Investors should take a patient, long-term approach that may include overweighting their portfolio allocations to international stocks and large-cap stocks, as these companies tend to generate more revenue and profits in foreign currencies.

It is highly unlikely that the U.S. economy will run into rampant inflation or that the dollar will collapse. This worry is largely caused by the painful experiences of many developing countries that neither had credible currencies like the dollar nor very sophisticated monetary authorities like the Federal Reserve Bank. The Fed has succeeded in taking the potential for a depression off the table and revitalizing the capital markets; it should also be capable of managing inflation down the road.

This article originally appeared in Advisor Perspective’s 11/3/09 issue, written by Frank Wei, CFA, FundQuest Incorporated

From the Financial Planning Corner

Opportunities in College-Area Real Estate Markets

• How responsible is your child?
  Your child needs to be responsible enough to act as an onsite landlord and make sure that both the interior and exterior of the property remain neat, livable, and in a condition to be easily resold. Additionally, if your child is likely to transfer, drop out, or take a break from school, you must be ready to act as landlord yourself or pay for an empty property.
  
  
  
• How is your cash flow?
  Owning a home has many costs, including mortgage payments, property taxes, insurance, homeowners/condo association dues, maintenance costs, etc. You must make sure that you are prepared and able to cover all of these things in a remote residence, as well as be ready to cover any emergencies that may arise. The location is also important to remember, as these costs will be more expensive in bigger cities (such as New York City, Chicago, Philadelphia) than in smaller towns.
  
  
• Where should your buy?
  Living closer to the campus (or on campus) may be beneficial for your child, as they want to get to class quickly and live close to other students. However, the closer to the campus you buy, the less appreciation you will likely get – especially on campus. Investors often do best buying in established, off-campus residential areas or developments that are near to campus. Additionally, you may see added benefit if you purchase a property where you often vacation or travel for business.
  
  
• When should you sell?
  While you may only want to own the property for the four years your child is in school, it may take owners a considerably longer time to sell the property at a profit with necessary investments in maintenance along the way, as well as a percentage for the selling broker.
  
  
• What are your child’s post-graduation plans?
  If your child is planning on staying in the city where they’ve graduated, parents might consider selling the property to their child. This would help to provide the new graduate with a very good head start in their post-graduation life.
  
  

Thank you for reading this issue of Condor Monthly. If you have any comments or suggestions for this newsletter, please share them with us at newsletter@condorcapital.com.

Sincerely,

Ken Schapiro
President
Condor Capital Management

To unsubscribe, simply reply to this email with unsubscribe in the header. This email was sent from Condor Capital Management, 1973 Washington Valley Road, Martinsville, NJ 08836.


Please remember to contact Condor Capital Management if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Please also advise us if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.