QUESTION: I always feel silly when I read stock market stories in the newspaper because I don't understand half of what I read. Lately, I've been particularly confused by all the comments that bonds are less popular now because interest rates are starting to go back up. What is the explanation for that? And can you list some investments that become attractive when interest rates go up?--H. I.
ANSWER: Investors flee from bonds when interest rates rise--or when they think they're going to rise--because bond prices move in the opposite direction from interest rates. Thus, bonds--which are interest-bearing debt securities issued by governments and corporations to raise money--are a good investment during periods of low interest rates.
When rates begin to rise, investors often seek havens in certificates of deposit, Treasury bills, commercial paper and money-market mutual funds.
Q: When I first moved to California five years ago, I was told that salaries in the Western United States were rising faster than anyplace else in the country. That was very attractive to me and was one reason I left the East. But my sense is that things have changed. I know my salary has barely increased in two years, and a lot of my friends are in the same boat. Do you know of any statistics that might confirm my feelings?--T. C.
A: The federal government, keeper of just about any statistic you could possibly want, comes through again. A recent U.S. Labor Department survey shows just what you thought: The West no longer leads the pack in per-capita income gains. That honor goes to New England.
As of last year, the government found, per-capita income in New England totaled $16,952, up 6.5% from 1985. The mid-Atlantic states weighed in next: per-capita income was $16,388, up 5.5% from a year earlier. And third was California and the rest of the Western states, with per-capita income of $16,168, a 4.5% increase from the previous year.
Rounding out the eight-region list were the Great Lakes area, where per-capita income rose 4.1% from 1985 to $14,178 last year; the Plains states, with per-capita income of $13,832, up 4.1%; the Southwest, where per-capita income rose 1% to $13,180; the Rocky Mountain states, with per-capita income rising 2.8% to $13,109, and the Southeastern states, with per-capita income at $12,504, a 4.3% increase.
Q: I recall that you wrote recently about children getting Social Security numbers, but I think the column just talked about children with part-time or full-time jobs needing a Social Security card. Now I hear that all children have to have them because of some silly new rule in tax reform. Is that possible?--G. V.
A: You aren't far from the truth. Every child age 5 or older who is claimed as a dependent on his or her parents' tax return must from this year on have a Social Security number. The penalty if you don't comply and you're found out: $5 times the number of exemptions you claim if you have a "reasonable cause" for the omission, or stiffer penalties if negligence can be shown.
Q: Can you remind me how long I have to file a new W-4 withholding form to escape any penalty if I wind up short?--P. G.
A: You missed it. You had to have had a new one on file with your employer by June 1 in order to escape full IRS penalties in the event that your tax withholding for 1987 is more than 10% off the actual tax bill.
Don't be too alarmed, though. As long as you pay at least 90% of your 1987 tax bill before the end of the year, you will escape a penalty. So, just make sure the W-4 you file by October is accurate.
Debra Whitefield cannot answer mail individually but will respond in this column to financial questions of general interest. Do not telephone. Write to Money Talk, Los Angeles Times, 780 Third Ave., Suite 3801, New York, N.Y. 10017.