The View From The Golden Dome

Views on the week's events plus some of mine.

Les Berman Weekly 8-11 Pork, College Students, Cost Segregation and much more

What a tumultuous week we’ve had, and it set the stage for potential chaos in the US financial markets on Monday. And Labor Day will never be the same again- Jerry Lewis has been booted as MDA chairman. But there is some good news for the wine industry. And the children in Washington really need their mommies. Do you think the law is an ass sometimes?

Good day everyone. Let’s get into it.

Jerry Lewis, the chairman of the Muscular Dystrophy Association since I was a kid, has been booted. His presence and visibility has enabled scientific research into these horrible diseases to proceed rapidly. I have to guess that over the years, his Labor Day MDA specials raised billions of dollars to help combat this group of diseases. I remember watching some of those fund raisers with my dad many years ago. Thanks Jerry, for helping your kids and giving so many others a chance at life.

The big issue – Standard and Poors has downgraded US debt instruments. Immediate reaction came from China – so what? You don’t understand. China owns the USA. It owns so much of our Treasury Bonds, that a simple hint that they might stop buying has caused a spike in our interest rates. China said something like – Get the politicians working together and get it done fast. What could the downgrade in debt mean for the average person – increased mortgage rates, credit card rates and interest rates on car loans. All of that will mean higher food prices, gas prices etc etc.

I’m not a doom & gloom guy. And I’m not a student of politics. If I was the latter, I might be able to understand what is going on in DC, from an analytical aspect. However, I’ve been aware of elections since a long time ago ūüôā and I know this. All politicians are liars but not all liars are politicians. Some liars are actually criminals. Others are in law enforcement. I can’t recall ever hearing a politician say that “I promise that I will do XYZ within two years or I will resign”. And of course, that could never be a law passed in DC because politicians like their perks. So they have no incentive to do the right thing – for the country. They only do the right thing for themselves, so they can protect their little fiefdom.

A few years back, I went to Washington to lobby for the mortgage industry. Most of our meetings were not with the politicians, but with their unpaid interns. These 23 – 26 year old¬† kids run the country. Their job is to tell the politicians who called on the office, what was said, and give them a recommendation on action to be taken. So, my question is… kick the politicians out and let the interns make the recommendations and enact legislation, even though they have no experience. At least we wouldn’t be lied to. We would already know that the kids have neither the experience nor the knowledge. At least they might take the time to learn things. And remember, – in a democracy it’s your vote that counts. In feudalism it’s your count that votes. (pun intended)

What has been happening in Washington is disgusting. On both sides.

Yesterday, 250,000+ people joined protests in Israel over cost of living and social issues. What happened? The PM instructed the government to convene committees and to come back with solutions within 45 days, and put the plan into effect. And this is a coalition government with many small political parties that usually works.¬† Let’s watch this to see what happens.

And after 50 years, one of the most glamorous contracts on the Chicago Mercantile Exchange passed away. We mourn the passing of pork belly futures. Why? Industry consolidation, a move to indoor pig farming (I guess this was learned from chicken processors), demand for fresh bellies, and increased sales from year round demand for bacon killed the bellies. I had to do a little research – very little. These futures were actually of frozen bellies, and pork bellies really meant pork livestock – and if they were frozen, could they actually be called ‘livestock’?

Great Window of Opportunity

You may have heard that home loan rates have improved and are back down to near historic levels. In fact, I’ve been slammed with emails and phone calls from people who wanted to take advantage of this wonderful situation.

But you need to keep the following in mind…

While some people say good things come to those who wait, others say to strike while the iron is hot. In this case, the “iron is hot” with rates at exceptionally low levels. And while weak economic reports here in the U.S. and the economic crisis in Europe are two of the main reasons rates have improved recently, signs of inflation are beginning to creep into our economy‚Äďand that never bodes well for home loan rates. That’s why it’s more important than ever to act now.

It will only take a minute‚Äďgive me a quick call at 818.305.4695 so we can look at your situation. It doesn’t cost anything to check it out, and the choice of moving forward will be up to you. Don’t miss this window of opportunity to save significantly on your monthly budget.

Here’s more good news. Spanish scientists have found that flavenoids are abundant in red wine. And flavenoids are the active ingredient in sunscreens. And another chemical, resveratrol, in red wine combats bad cholesterol. Studies also showed that red wine is like exercise in a bottle because the wine staved off the detrimental effects of inactivity in rats. So now we can have a lot of sunworshippers whose only exercise is finding the patch of beach, or lawn chair, to lie on, and lifting the bottle of red wine to their lips. Oh yeah, add dark chocolate to the equation and everybody will be happy!

Laws are getting tougher. And ignorance of the law continues to not work as a defense. Here is a situation: A father and son were camping and were digging for arrowheads. It happened that they were on federal land and, the US attorney said they were on an unmarked archaeological site that was 13,000 years old. They are both now federal criminals who received one year probation and $1500 fine each. That takes a lot of fun out of camping with your kids. Someone is watching to see if the dead twigs that you collect for firewood are actually from a tree that is 418 years old and thus part of a protected rotting wood law. Now, I understand that the intent of the archaeological issue is to protect the history. I get that. But a dad and his kid – c’mon now lawyers – take the arrowheads and just say not to do it again. Sometimes the law is an ass.

The US Constitution identifies three federal crimes – treason, piracy, and counterfeiting. Today, there are over 4500 crimes in the federal statutes, according to a study done in 2008 by a retired LSU (go Tigers!) law professor, John Baker. There are over 27,000 pages of the federal code. Bobby Unser was convicted for driving his snowmobile onto protected federal land. He got lost in a snowstorm and went to the authorities for help locating his abandoned snowmobile. And we all know that criminals will go to the police for help. And now jurists are concerned about the diminished requirement to show criminal intent in order to convict. More on this next week – if our economy is still intact.

What do we expect Monday in the financial markets. Chaos? I think we will see extreme volatility until the traders figure out what’s going on, and until the political parties make statements other than – It’s the other guys fault ! I told my kids when they were teenagers and complaining about everything ” Until you stop blaming others for your problems, you will never be in control of your own life”.¬† It’s time for the politicians to make a joint statement!

Recently it was reported that a hole has been found in the nudist camp wall. The police are looking into it. And then, two Eskimos sitting in a kayak were chilly, so they lit a fire in the craft. Unsurprisingly it sank, proving once again that you can’t have your kayak and heat it too.

QUESTION: Is my mortgage well integrated into my financial plan?

ANSWER: While securing a low rate or owing little on your mortgage are great achievements, neither will make you financially secure if you don’t also have a plan in place for retirement or have liquid cash on hand to cover an emergency. So before you get excited that you have a low mortgage rate or owe very little to the bank on your mortgage, ask yourself the following questions:

· Do I maximize contributions to my retirement plan at work?

· Do I carry balances on high interest non-tax-deductible consumer debt?

· Do I have a sufficient liquid rainy day fund established?

Remember: Your mortgage is just one element of your financial plan. And, if you’re making large credit card payments every month – which means you’re paying more in the long-term in interest on these payments than if you were able to use some of your equity to pay off your debt – than your mortgage is standing on its own, instead of helping you increase your overall worth.

If you’re not sure how your mortgage fits with the rest of your financial plan or budget issues, call me at 818.305.4695 or send me an email to . It only takes a few minutes to discuss your unique situation and determine if you have the best overall plan in place for you and your family.


Have a better week!

And remember, I appreciate your referrals to people in your sphere of influence who are considering buying or refinancing a home or investment property.


Berman’s Factoids of the Week:

All of us could take a lesson from the weather. It pays no attention to criticism.

In the 60’s, people took acid to make the world weird. ¬†Now the world is weird and people take Prozac to make it normal..

How is it one careless match can start a forest fire, but it takes a whole box to start a campfire?

First California Mortgage
Provided to you Exclusively
Les Berman CMC
Les Berman CMC
Senior Mortgage Advisor
NMLS ID # 227675
First California Mortgage
Office: 310-271-1588
Cell: 818-305-4695
Fax: 877-707-8823
Les Berman CMC
Forecast for the Week 
AnchorAnother big week is ahead, but only time will tell if it will be record-setting. Look for:

  • Perhaps the biggest market mover of the week could be Tuesday’s regularly-scheduled¬†Federal Open Market Committee Meeting.¬†What the Fed has to say about the economy, inflation and the prospects of QE3 could affect rates for some time into the future.
  • Thursday brings another weekly¬†Initial and Continuing Jobless Claims Report. Last week’s Initial Claims came in at 400,000, below the 405,000 that was expected and right at that crucial 400,000 level which signals real improvement in the labor market.
  • Rounding out the week are two reports on Friday that will give us a big hint on the state of the economy:¬†Retail Sales¬†for July and the¬†Consumer Sentiment Index.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Bonds and Home loan rates improved for most of last week, though the better than expected Jobs Report caused them to give back some of these improvements. With what will likely be another volatile week ahead, please call me 818.305.4695 or email me if you have any questions about your situation.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Aug 05, 2011)
Japanese Candlestick Chart
The Les Berman Weekly View…¬†
3 Topics to Discuss with College-Bound Students
The college fall semester is right around the corner and for most incoming freshmen it will serve as a maiden voyage for living away from mom and dad. If you’re a parent who’s facing this situation, here are three topics that are a must to discuss with your undergrad-to-be.

The pre-college to-do list is daunting to say the least. From setting up financial aid to securing a place for your child to live, getting ready for college is a process that takes many months to execute. As a result, there are several very important topics that many parents never get around to discussing with their child. Consider using the next few weeks to catch up on these conversations, establishing a line of communication that will benefit all concerned.

Study Habits and Grades

Most sources state between 20 and 25 percent of all college freshmen will drop out before their sophomore year. Furthermore, it is estimated that 50 percent of college freshmen will never make it to graduation.

There are many reasons why students drop out of college, but at the top of the list is poor grades, or an inability to adapt to the demands of an advanced curriculum. One can only wonder how many of these students would have benefited from the proper intervention early on in their college careers. In other words, now is the time to get the ball rolling.

Start by clearly establishing with your child that college will be a much different experience from high school, especially considering how far away you as the primary support system may be. An effective method for accomplishing this is allowing a peer to reaffirm the message. If you have friends or extended family with a child already attending college, arrange for your child to talk to them about their experience.

You’ll also want to be clear with your child about what you expect and that he or she is still accountable to you for the grades received. Let your child know you’ll want to see report cards, and that you’ll be asking for updates on grades throughout the semesters.

It is so important for you as the parent to make the communication process an inviting one. Think of it this way. If your child ends up having an issue with a certain class, you’ll want to know about it as soon as possible. Having open channels of communication will help facilitate this.

Lastly, take a proactive approach by encouraging your child to contact the college to inquire about any available study programs and student mentors. Many universities have programs like these in place, which help incoming freshmen adapt to their new academic curriculum.


Addressing the subject of money with your college freshman is something that will benefit you for the next four years – and your child forever. Once again, the key is to be clear and direct regarding the money received from you, and how you expect it to be spent.

Whatever your arrangement, do not send your child to college without establishing a written budget. Show your child the fixed expenses in relation to the money you’re providing. Explain that the money left over is what’s allocated for fun and entertainment. Not doing so can result in endless requests for more money, not to mention a poor foundation for your child’s future budgeting skills.

In terms of getting your child a credit card, proceed with extreme caution, as credit card debt among college students has become almost epidemic. According to Sallie Mae, a college financing company, the average credit card debt for college undergrads in 2009 is over $3,000, a thousand dollars more than it was in 2004. What’s worse is that average balances are even higher for students in their third and fourth years of college.

Don’t forget to warn your child about the high-interest cards that may be solicited to them while on campus. Talk about the responsibility that comes along with having a credit card, as well as the potential dangers. Let your child know that starting out in life with high interest debt is not the recipe for success.

Personal Responsibility

For the first time, your child will officially reach adulthood and be held accountable for everything he or she does from this point forward. The tricky part is your child won’t be living under your roof while this is happening. Explain to your child that the idea of a “permanent record” is now in effect. How people handle themselves from this point forward will either positively or negatively affect the rest of their lives.

College can be a wonderful experience with infinite possibilities. Talk about these possibilities with your child, explaining the benefits that come with embracing them. Most importantly, let your child know that the next four years will contain some of the more memorable experiences of his or her life.

Here’s to some positive memories for both you and your child.

What is Cost Allocation/Segregation? Why you should do it?

Cost Allocation is a lucrative opportunity for commercial property owners to recoup a big chunk of their purchase¬†or construction cost by apply an accelerated depreciation schedule to property usually classified as “real” (Section 1250) -but under improved IRS rulings – can be reclassified as “personal property” ( Section 1245).

The concept of cost allocation is fairly simple. The IRS Code allows the structural components of a building to be depreciated over a period of 39 years (27.5 years for residential investment property). But non-structural components such as: carpeting, electrical system, ventilation, air conditioning, plumbing, land improvements, parking lots etc. can be compressed into shorter cost recovery periods (5,7 and 15 years). When these non-structural components are segregated into a much shorter depreciation class and reclassified as personal property, substantial savings can be realized immediately. In some cases, up to 40% of the purchase price of a building can be recovered in the form of tax deferrals!

How come my CPA hasn’t brought this to my attention?

Until about 2004, Cost Allocation was only available to commercial property owners who were clients to the elite big 4 accounting firms. Most CPA’s are aware of accelerated depreciation but do not have the architectural and structural engineering background to perform this very detailed extensive study that’s needed to maximize the IRS Cash Benefit.¬† This engineering-based study must be performed by a qualified engineering firm, or thousands and even hundreds of thousands of dollars could be left on the table. More importantly, the report will not withstand an IRS Audit. Today, many CPA firms are partnering with CORE to bring this important accounting method to their clients.

What are the qualifications for the study?

·         Property cost minimum: $ 650,000 (Land Excluded)

·         You pay federal income taxes

·         You intend to keep the building for at least 2 years

·         Asset was placed in service after 1987

If you answered ‚Äúyes‚ÄĚ to these questions, then you should consider a cost allocation study.

What are the immediate benefits?

·         Increase your cash flow

·         Reduce your taxable income

·         Increase ROI

¬∑¬†¬†¬†¬†¬†¬†¬†¬† Qualify for ‚Äúcatch up‚ÄĚ depreciation

Can I do the Allocation Study?

No, for two reasons: First, you will obtain maximum benefit by hiring a firm with expertise in onsite engineering surveys, estimating, appraising and allocating construction and acquisition costs based on IRS Techniques/Guidelines and case law.¬† Second, the IRS states that ‚Äúan accurate cost allocation study may not be used on non-contemporaneous records, reconstructed data, taxpayer‚Äôs estimates or assumptions that have no supporting records.‚ÄĚ

“Cost segregation¬†studies require a skill and understanding of case law that is vested only in specialist. The studies¬†require a significant expenditure of time in preparation…Only those taxpayers with access to the professionals who can prepare a valid study may claim this tax benefit.” Ken¬†M. Berry, IRS ¬†¬†

Peter Louie  AccessPoint BTS,   Address: 2400 N Lincoln Ave. Altadena CA 91001 

Direct: (714) 606.3856  Office: (626) 296.6380 E-mail:


August 7, 2011 - Posted by | Uncategorized

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