Guarding Against Identity Theft
Thursday, February 21, 2013
Charles Rotblut, CFA
AAII Journal Editor

AAII Resources

Emerging and Persistent Investor Threats
A list of the schemes that concern regulators the most.

Avoiding Schemes and Fraud
10 steps that reduce the chances of being a victim.

AAII Discussion Boards
Do you have tips for protecting against fraud?

Most Popular AAII Articles

  1. “The Individual Investor’s Guide to the Top Mutual Funds 2013”
  2. “The Individual Investor’s Guide to Personal Tax Planning 2012—Updated”
  3. “Making Sense of Master Limited Partnership Tax Rules”

Sentiment Survey

This week’s AAII Sentiment Survey results:
  Bullish: 41.8%, down 0.5 points
  Neutral: 25.7%, down 3.3 points
  Bearish: 32.5%, up 3.8 points

Long-term averages:
  Bullish: 39.0%
  Neutral: 30.5%
  Bearish: 30.5%

Take the AAII Sentiment Survey »

I want to invite you to our 2013 AAII Investor Conference. The conference will be held this November at the Loews Pacific Resort in Orlando Resort. We are putting together a great list of speakers, including S&P Capital IQ’s Sam Stovall, No-Load Fund Investor founder Sheldon Jacobs, The Wall Street Journal’s Jason Zweig, Morningstar’s Christine Benz and more. The conference will give you the chance to learn from industry experts, and you will have the opportunity to meet fellow AAII members. More information and an early bird registration discount can be found on

Identity thieves may be getting more brazen. Over the weekend, Computerized Investing editor Wayne Thorp forwarded me a Reuters article about a mail carrier in Florida who was gunned down by members of an identity theft ring. The thugs were after the carrier’s master mailbox key.

Though this may have been a relatively rare event, identify thieves are increasingly taking advantage of the tax system. The criminals are filing false tax returns to profit from the tax returns. Reuters said Florida appears to be the epicenter of this activity, though the problem is being reported nationwide. I even recently heard from a member whose tax return was rejected because someone used her husband’s Social Security number to file a false tax return. (The Internal Revenue Service has a Taxpayer Guide to Identity Theft on its website.)

Identify thieves are particularly targeting retirees, a warning for those of you in this age group. Be particularly careful if you are a recent widow or widower as the thieves may try to take advantage of the delay in the Internal Revenue Service being notified about the passing of your spouse.

The best defense is to be careful about who give your information and checking your credit report regularly. Consumer Reports advises using to check your credit report. You can download one report from each of the three major credit rating agencies each year. If you chose one credit agency to check every four months, you can effectively check your credit report three times a year at no cost.

You should also be prudent about the links you click on in emails. The IRS does not contact people through email, so if you see an email from someone claiming to be with the IRS, delete it immediately. It is a scam. I also suggest physically typing in the url (web address) for your bank’s and brokerage firm’s website as opposed to clicking on the links embedded in emails. If someone calls you up unsolicited asking for information, hang up the phone. If the person requesting personal information claims to be from your doctor’s office or your bank, tell them you will call them back. Then dial the office or the bank from a number you know to be correct (as opposed to one the caller gives you), or show up in person.

Most importantly, remember that a little vigilance can provide a lot of protection. I use a shredder at home and have different passwords set up for my bank and brokerage accounts than I use for all other websites. I have a separate Google email account that I use solely for signing up for store promotions and other commercial emails. Both my Quicken and TurboTax files are password protected. Finally, I have anti-virus software installed and updated on all of my computers.

More on

Model Portfolios Updated

No changes were made to the Model Shadow Stock Portfolio or the Model Fund Portfolio last month.

For January, the Model Shadow Stock Portfolio gained 8.2%, outperforming the Vanguard Small Cap Index fund (NAESX), which gained 6.3%, and bettering the DFA US MicroCap Index fund (DFSCX), which was up 5.7% during January. The Model Shadow Stock Portfolio has a compound annual return of 16.9% from its inception in 1993, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 8.5% annually over the same time period.

The Model Fund Portfolio was up 5.3% for January. This compares to a 5.5% gain for the Vanguard Total Stock Market Index fund (VTSMX). The Model Fund Portfolio has a compound annual return of 8.4% from its inception in June of 2003, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 7.4% annually over the same time period.

The Week Ahead

Approximately 40 members of the S&P 500 will report earnings next week, as the fourth-quarter earnings season winds down. Several retailers will be on deck, including Lowe’s Companies (LOW) on Monday, Dow component The Home Depot (HD) on Tuesday and Target (TGT) on Wednesday.

The first economic reports of note will be January new home sales, the Conference Board’s February consumer confidence survey and the December Case-Shiller housing price index, all of which will be released on Tuesday. Wednesday will feature January durable goods orders and January pending home sales. Revised fourth-quarter GDP and the February Chicago PMI will be released on Thursday. Friday will feature January personal spending and income, the final February University of Michigan consumer sentiment survey, the February ISM manufacturing index and January construction spending.

Federal Reserve Chairman Ben Bernanke will give his semiannual testimony before a Senate committee on Tuesday and a House committee on Wednesday. Atlanta Bank President Dennis Lockhart will speak publicly on Monday, Dallas Bank President Richard Fisher and Chicago Bank President Charles Evans will speak publicly on Thursday.

The Treasury Department will auction $35 billion of two-year notes on Monday, $35 billion of five-year notes on Tuesday and $29 billion of seven-year notes on Wednesday.

Starting on Friday, March 1, Social Security benefits will be paid only via direct deposit or a reloadable debit card; no more physical checks will be mailed. According to National Public Radio (NPR), 93% of Social Security recipients already receive the benefits electronically. More information can be found at the Treasury Department’s Go Direct website.

AAII Sentiment Survey

Bearish sentiment is above its historical average for the first time in seven weeks, according to the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 0.5 percentage points to 41.8%. This is a seven-week low and the fourth consecutive weekly decline in optimism. Even with the drop, bullish sentiment is above its historical average of 39.0% for the seventh consecutive week and the 12th out of the last 13 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 3.3 percentage points to 25.7%. This is a four-week low. Neutral sentiment is also below its historical average of 30.5% for the 19th consecutive week and the 21st out of the past 23 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 3.8 percentage points to 32.5%. This is a seven-week high. The historical average is 30.5%.

The spread between bullish and bearish sentiment, the bull-bear spread, is above 0.0% for the 13th consecutive week. This is the longest streak of bullish sentiment staying above bearish sentiment since the 18-week span from December 8, 2011 through April 5, 2012.

We are continuing to see a decline in the level of optimism. This is due to a combination of factors, including concerns that the market may have gotten ahead of itself on a short-term basis, the increasing possibility of sequestration occurring and a reversion to the mean. Many AAII members are still optimistic, however, thanks to a combination of the ongoing rise in stock prices, continued economic growth and better-than-forecast fourth-quarter earnings.

This week’s special question asked AAII members for their opinion of fourth-quarter earnings. Slightly less than half of respondents described corporate profits as either being good or better than expected. Slightly less than a quarter of respondents described earnings or forward-looking guidance as disappointing.

Here is a sampling of the responses:

  • “Earnings seem very positive; the corporations are flush with cash.”
  • “Given the state of the economy, most [earnings reports] have been surprisingly good.”
  • “I thought fourth-quarter earnings came in a little better than I thought they would.”
  • “Mediocre. While most companies beat the street’s estimates, those estimates were lowered and reflect a slowing economy.”

» Take the sentiment survey