Broker Check

August 16, 1999

Model Portfolio Update

          You may have noticed that your assets performed well  in the  past  several months. This is because the model portfolio constructed by Howard Lisch of Lisch Investment Services outperformed the  S&P 500 Index by 1.73 percentage points over the three months ended June 30, 1999.

          What you are seeing  is a  classic  change  in  the  leadership  of the stock market.   For the past  several  years,  the  winners were the  S&P  500  Index companies and large capitalization technology firms.  Now, the trend is toward the small and mid capitalization companies.  In fact,  the  valuations of  the  small  cap companies is the lowest in 40 years.  Therefore, with this change in the market, the model portfolio should resume its competitive advantage over the S&P 500 Index.

Employers Advised to Continue to Withhold for Non-NYers

          The New York City nonresident tax was no longer  effective as  of  July 1, 1999  to the  450,000  New York State residents.  What is in issue is the fact that Connecticut and  New   Jersey   obtained   a  lower   court  ruling  that  it   was unconstitutional for the 300,000 out of state commuters from the  49 other  states, the District of Columbia, Puerto Rico  and  more  than  a  dozen foreign  countries to pay the nonresident New York City tax.

          The New York  State Attorney General appealed  the  ruling and  the new State  Taxation  and  Finance  Commissioner,  Arthur  Roth  advised  New York companies to continue to withhold the tax while the decision is being appealed.

          If you have any questions as to what to do, you can call 1-800-CALLTAX or contact New York on the Internet at

Are Americans Up to the Task of Managing Their Retirement?

          America is becoming a nation of shareholders-of  necessity  and by  choice. Today, nearly half of American households own stocks, either directly  or through mutual funds or retirement accounts.   Twenty-five  (25%)  percent  of all  U.S. household assets, almost  $11,000,000,000,000, is invested in the stock market, up from just 10 1/2% in 1988.   Half is invested in mutual funds, almost double the amount on deposit in U.S. banks.    This is not a rich person’s area, among mutual fund holders, 70% have a household income of less than $75,000.

          But are they up to the task of managing their own  money?  People who are not participating in old fashioned pension plans need to save at least $1,000,000 to supplement Social  Security.   Only  24%  of  workers surveyed by the  Employee Benefits  Research Institute are “very confident” they  are  doing a  good  job  of preparing financially for retirement.

           While some are enjoying a heady  success  born  of the bull  market  of  a lifetime, others have found it’s not so easy to trade their  way  to  riches  or  even security,  having  lost  money  to  fraud,  technology glitches  or  their  own  poor decisions.

          Three out of four people have not earmarked retirement funds for long term health costs. Worse, half think they won’t have a need for it.

          If you feel you need to save more and need  some  professional  advice we suggest you call Howard Lisch who is a licensed Registered Representative, for an appointment. He can create a financial plan as well as invest you money for you.

New Reporting Rules on Payments to Attorneys

          The IRS has provided additional guidance for firms  on  reporting  payments to lawyers. Businesses must report payments to  lawyers  for services on  Form-1099-Misc. The new rule applies even if the payment is  made  to  a  professional corporation (P.C.) or to a limited liability corporation (LLC) for legal services.

          Settlements paid in lawsuits have to be reported if the payer knows that  the lawyer is receiving the check in connection with legal services.   It does not  matter that the check is payable to the lawyer’s client.

          The new rule means that the payers may have to report  the  same payment twice: first to the lawyer, and then to the client if the settlement is taxable, such as a payment in a case involving back wages or job discrimination.

          Payers must withhold 31%, if the lawyer does not supply a tax identification number.

Kosovo Tax Issues

          Both the IRS and New York State have provided detailed guidelines on the tax relief resulting from President Clinton’s executive order designating areas in and around Yugoslavia as a combat zone retroactive to March 24, 1999.

          For more information from  New  York  you  can  obtain  Publication  361, New York State Income Tax Information for Military  Personnel  and  Victims, or go to the Tax Department’s website at If you have  questions about these or any other tax or financial matters, please call me.