Financial analysis

If money were outside, then it would be (1+.7)[to the 5th] * 25K = 36063. Difference in interest rate is 0.9%!

It makes some difference butnot enough to make me tie up my cash, since I will need it for down payments. When I truly have excess cash that I won't need, then it makes sense to put it away so it can grow for awhile and yield more which is still taxed but the capital won't ever have been taxed. MORE ON THESE IN LATER YEARS.

[Noted in top margin with arrow here] If I do anything risky like 25% it should be over more than 3 yr period (1) to average risk 2) to spread load or admin charge) but I don't want to tie up that much money now. [/note] 2) Long term capital gains provide a 60% tax free portion. But I hasten to point out that I am not going to get into stocks yet since I don't have the time, talent or interest to study companies. The only thing I would do is buy a mutual fund whereby I get the expertise of the people

running the fund. The best ones of these have about a 25% annual growth rate, but these are the most risky. Given that risk free investment yields about 13%, I should be willing to go half way risk wise and try a fund offering 19%. Now if this provides capital gains tax advantage, I would gain 19-(.63)(.4)(19) or 14.2%, after tax. [Noted to left in green ink] BUT STOCKS ARE SO HOT RIGHT NOW. [/note]

3) Bonds tax-free. People in high tax brackets can take advantage of these. As I understand it, municipalities, and other politically favored groups can offer these to raise cash, thus decreasing the cost to gov't. However federal gov't doesn't do such a practice itself. But this is because it is the taxing body. It may as well pay high rate to everyone, and

then tax the wealthy more. But according to Chap 5 of "How to Buy Stocks," fed gov't has been trying to stop tax free bonds, but cities etc. complain since they won't necessarily see an increase in federal revenue coming their way. ----------------------------------------------------------------------------------------------------------------So I guess I should buy some highly rated tax free bond. I stop to think for a minute that maybe I should consider specific stocks that have big increases, but my problem is that I would feel bad about getting out before a year. To get .14 tax free, the gain would have to be .14/(1-.67) = 38%! [noted in green ink] Just .14/(1-.5) = 28% [/note] If turned in before one year.

Further bond markets are at a low. So if I can get locked in at 14%, then if rates fall, bond value will rise.

Note: pg 29 of "Stocks" say that bond mkt is many times bigger. So what I'm doing is not real odd.

Notes on Current Interest Rates

Tax-saver 10.16 T-Bill 26 wk 13.056 (this is either 1/4% higher than the last Treasury action or the avg of the last 4 weeks) U.S. Treasury 90 day (6 month 12.8%) Monday auction 12.1 secondary mkt Friday 11.5 Money MKT (Merrill Lynch Washington Mutual) 10.71

Rainier bank IRA Fixed Variable 1 1/2 yr 13.75% 15.121 1 1/2 - 4 13 higher by 3% 4-8 12 than 90 day 8-15 10 U.S. T-Bill (min $500) (min $50)

So: LOGISTICALLY...

All of my income should go into a money market fund where it can await investment in something really good. There it will earn about 10.7 or double what money waiting at Wells Fargo earns. [Noted in red ink] Better yet use CMA II tax-free fund! [/note] [Noted in green ink] Since it's short term, it is 6.7/(1-.5) = 13.4 [/note]

There are two ways to have that with easy way to add or remove money: one is a bank account like "READY ASSETS" for which there is no charge and yet you can't write checks under $500. The other is CMA which acts just like a checking account, but costs $35. If you are going to be getting interest payments from a bond, then it will be very handy to have a CMA that those payments can fall right into. (And besides you get a VISA card which gets you cash without charge.) Also it would simplify matters if I