Ed's Eye on the Economy

Monthly Economic Update for May, 2009

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Thursday, June 04 2009

Ed's Eye on the Economy

June 4, 2009

Dear Client(s),

The month of May was an upbeat month for the markets with a lot of activity in the economy. The following is a summary of May’s activity:

Quote of the month. “I don’t know any other way to lead but by example.”– Don Shula

The month in brief. While economists gathered around the water cooler to discuss whether or not a recovery was really underway, stocks soared, consumer confidence grew, and home sales rose. The broad commodities market had a fantastic month; the dollar didn’t. Meanwhile, the government found that 10 out of 19 stress-tested banks needed more capital. One U.S. automaker went into Chapter 11 bankruptcy, and another prepared for it.

Domestic economic health. What would the government find out about the banks? Would GM and Chrysler go bankrupt? Those were the media preoccupations for May, and while investors worried plenty about them as well, Wall Street as a whole rode through the attached fears and crises admirably.

The results of the stress tests administered by the Federal Reserve were publicized in the second week of May. Bank of America, Citigroup, Wells Fargo and GMAC were instructed to raise more capital; BofA was told to go get a whopping $34 billion. Some other banks (notably American Express, Capital One, Goldman Sachs, JPMorgan Chase and MetLife) were judged well capitalized to face the government’s worst-case scenario.¹

Speaking of worst-case scenarios … as May ended, General Motors was poised to follow Chrysler into bankruptcy. (The official filing came June 1). There were indications that the bankruptcy process might be unusually swift. After only a month in bankruptcy proceedings, Chrysler got permission on May 31 to sell most of its assets to a group led by Fiat and emerge from court protection. Perhaps GM would do something similar. In the bankruptcy plan, the U.S. government will own 60% of GM, the UAW 17.5%, the Canadian government 12% and GM bondholders 10%.²

And now, the other notable news items. Consumer confidence rose: the Conference Board’s May survey recorded its best one-month gain in six years, and the Reuters/University of Michigan index climbed to 68.7, the highest mark since September.^3,4 Unemployment, of course, also climbed: the Labor Department figure for April was 8.9%, although the pace of layoffs declined from March.⁵

Deflation fears were calmed a bit with the release of the April Consumer Price Index. Yes, consumer prices were flat for April, and yes, CPI fell by 0.7% over the 12 months ending in April - the first year-over-year drop since 1955. However, core CPI had gone up 1.9% across the same 12 months.⁶ Durable goods orders also increased in April by 1.9%.⁷

Mayconsumer spending was down by just 0.1%, the Commerce Department reported, better than expected; personal income for May was flat rather than negative.⁸

The Obama administration got tough with credit card firms. It issued new rules forcing card issuers to notify cardholders of rate hikes 45 days in advance and curb retroactive rate increases. It also made collegians and teenagers less attractive targets for these companies by tightening credit limits for them.⁹

Global economic health. In Asia, it seemed inflation was easing notably in May. In Indonesia, it was 6.04%, the lowest level since June 2007. In South Korea, it was 2.7%, a 20-month low. In Thailand, May consumer prices were 3.3% below levels of a year before.¹⁰ The outlook for China’s economy was better, with manufacturing activity increasing for the third month in a row in May after contracting from October to February.¹¹ Japan? Well, after a -15.2% GDP in the first quarter, there was room for improvement.¹² The Japanese government did raise its economic outlook in May for the first time since 2006.¹³

Turning to Europe … we learned that the economies of the 16-country Eurozone collectively contracted 4.6% in 1Q 2009. The economies of England and Germany had respectively contracted by 4.1% and 6.9% in the quarter.¹⁴ The European Central Bank had set its key interest rate at 1% (a new low) and the EU May manufacturing PMI rose to its highest level in seven months, a sign of stabilization.¹⁵

World financial markets. May was as positive as April – that is to say, an amazing month for stocks worldwide. India’s Sensex gained – are you ready for this? – 28.3% last month. Meanwhile, the Russian RTSI shot up 21.7% and the Singapore Straits Times index gained 21.3%. So how about the MSCI Emerging Markets Index? It followed a 16.3% gain for April with a 16.7% gain in May. The MSCI World Index didn’t do too badly either, rising 8.6% for the month.¹⁶

Among Asian indices, the Australian All Ordinaries rose +1.8% in May, but that was nothing; the Hang Seng was up +17.1%, the Shanghai Composite +6.3% and the Nikkei 225 +7.9%. In Europe, the CAC 40 gained 3.7% in May, the DAX 3.6% and the FTSE 100 4.1%. Just north of us, Canada’s S&P/TSX Composite rose 11.2% in May.¹⁶

Commodities markets. Oil had a great month – in fact, the whole energy sector did. Oil futures went up 29.71% in May. Gasoline futures did even better, soaring 31.74%. Diesel fuel? Up +22.66% for the month. Heating oil futures rose 22.82% and natural gas futures gained 4.89%. Silver left gold in the dust: it rose 26.65% in May, enjoying its best month since April 1987. Gold didn’t perform too shabbily either, gaining 9.83%. It was a fine month for other metals, as these May gains demonstrate: platinum, +8.08%; palladium, +8.18%; copper, +7.33%. But the greenback didn’t fare so well: the U.S. Dollar Index dropped 6.29% in May.¹⁷

How about crops? Well, it was spring, and most ag futures were in the plus column. Oats futures gained 23.65% in May. Other big gains: wheat (+18.78%), soybean meal (+15.73%), orange juice (+12.61%) and soybeans (+12.23%). Rice futures lost 5.76% for the month.¹⁷

Riddle of the month. What is the significance of the following: The year is 1978, thirty-four minutes past noon on May 6th.

Housing & interest rates. Spring is homebuying season, right? So were the buyers out, encouraged by low prices? The April indicators we received seemed relatively positive: new home sales rose 0.3%, existing home sales rose by 2.9%. Of course, median prices for new and used homes were respectively 15.0% and 15.4% below last April’s figures. While the inventory of existing homes for sale saw no decrease the number of new homes on the market was at its lowest level in eight years.^18,19

Mortgage rates were still low at the end of May … but with bond yields rising, how long could that last? At the end of last month, Freddie Mac had 30-year FRMs averaging 4.91%, as opposed to 4.78% at the end of April. As for other types of mortgages, 5-year ARMs ticked up to 4.82%, 1-year ARMs fell to 4.69%, and averages on 15-year FRMs crept up to 4.53%.²⁰

Major indexes. For the third straight month, the market behaved as if the recession had become a memory. The Dow gained 20.39% across March, April and May, representing its best three months since September-November 1998.²¹

% Change	1-Month	Y-T-D
DJIA	+4.07	-3.15
NASDAQ	+3.32	+12.51
S&P 500	+5.31	+1.76

Source: cnbc.com, 5/29/09²¹

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.

June outlook. The stock market has healed notably in the last three months – there’s still a long way to go, but stocks have proven their resilience. If we are on the second downward leg of a W-shaped recovery, the market is paying no attention to that reality. Let’s hope we are watching a U-shaped or even V-shaped recovery instead. Confidence seems to have returned to consumers and investors – when General Motors announces bankruptcy and the market posts a triple-digit rally on the same day, that’s saying something.²²

The important economic releases for the rest of June: April factory orders and the May ISM services index (6/3), May unemployment (6/5), April wholesale inventories (6/9), May retail sales and April business inventories (6/11), preliminary June consumer sentiment (6/12), May PPI, core PPI, industrial production and housing starts (6/16), May CPI and core CPI (6/17), May existing home sales and durable goods orders (6/23), May new home sales (6/24), May personal spending and personal income (6/26), and the Conference Board’s June survey of consumer confidence (6/30).

Best Regards,

Edward J. Kohlhepp, CFP^®, ChFC

Edward J. Kohlhepp, Jr., CFP^®, MBA

Answer to Riddle - The time and month/date/year are 12:34, 5/6/78.

Please feel free to forward this article to family, friends, or colleagues.

Citations.

¹federalreserve.gov/newsevents/press/bcreg/bcreg20090507a1.pdf [5/7/09]

² usatoday.com/money/autos/2009-06-01-gm-bankruptcy_N.htm [6/1/09]

³forbes.com/feeds/afx/2009/05/29/afx6480447.html [5/29/09]

⁴bloomberg.com/apps/news?pid=20601103&sid=arayDGpmRFZU&refer=us [5/26/09]

⁵nytimes.com/2009/05/09/business/economy/09jobs.html?hpw [5/8/09]

⁶businessweek.com/bwdaily/dnflash/content/may2009/db20090515_233390.htm?chan=top+news_top+news+index+-+temp_news+%2B+analysis [5/15/09]

⁷online.wsj.com/article/SB124356196602065121.html [5/29/09]

⁸money.aol.com/market-news [6/1/09]

⁹smartmoney.com/personal-finance/debt/tighter-credit-card-rules-pass-senate-milestone/ [5/22/09]

¹⁰ reuters.com/article/bondsNews/idUSSP44166220090601 [6/1/09]

¹¹online.wsj.com/article/BT-CO-20090601-706937.html [6/1/09]

¹² chinadaily.com.cn/world/2009-05/20/content_7907710.htm [5/20/09]

¹³ bloomberg.com/apps/news?pid=20601080&sid=a.NTAJgpOfvs&refer=asia [6/1/09]

¹⁴ bloomberg.com/apps/news?pid=20601085&sid=aQw8Imt_xUA0&refer=europe [5/29/09]

¹⁵ news.easy-forex.com/daily-reports-north-america/usd-pares-losses-as-bond-yields-rise-20090601187.html [6/1/09]

¹⁶investmentpostcards.com/wp-content/uploads/2009/05/document50.pdf [5/31/09]

¹⁷cnbc.com/id/31004289/page/2/ [5/29/09]

¹⁸bloomberg.com/apps/news?pid=20601087&sid=axAR9G.3wM80&refer=home [5/28/09]

¹⁹features.csmonitor.com/economyrebuild/2009/05/27/home-prices-keep-falling-but-sales-revive-as-buyers-bargain-shop/ [5/27/09]

²⁰ sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/30/REDP17SNRO.DTL [5/30/09]

²¹ cnbc.com/id/31004289 [5/29/09]

²² usatoday.com/money/default.htm [6/1/09]

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Stimulus Bill Signed Into Law - February 19, 2009

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Friday, April 10 2009

Ed's Eye on the Economy

On February 17, President Obama signed the 1,071-page American Recovery and Reinvestment Act (H.R. 1) into law. In the interest of getting this information out to you as early as possible, I have attempted to summarize the key provisions of the bill. It is the largest stimulus bill in the history of our country, $787 billion. Here are some of the routes the money will take:

$287 billion in tax breaks include:

$116 billion in refundable tax credits for individuals & families. Is your adjusted gross income (AGI) $75,000 or less? You will get a refundable tax credit of up to $400. Families who earn less than $150,000 in AGI can get a refundable tax credit of up to $800. You won’t get a check in the mail. Instead, withholding tax on your paycheck will be lessened by about $8 per week across the remainder of 2009 and also in 2010.

$70 billion to patch the Alternative Minimum Tax. The AMT exemption has been raised to $46,700 for individuals and $70,950 for couples.

$14 billion to expand the child tax credit. This will help low-income families.

$13.9 billion toward Pell grants & education tax credits. Pell grants will increase to $5,350 per student for the 2009-2010 year. Also, if you earn less than $80,000, or if your family earns less than $160,000, tax credits of up to $2,500 will be available for college tuition. Up to 40% of that credit is refundable (as much as $1,000).

$6.63 billion to aid homebuyers. Specifically, “first-time” homebuyers. The bill defines a “first-time” homebuyer as someone who hasn’t owned a home for the past three years. If you fall into that category and you buy a home in 2009, you are eligible for an $8,000 tax credit – and you don’t have to pay it back. Some “first-time” buyers will not be eligible – the credit phases out at $75,000 AGI (individual taxpayers) and $150,000 AGI (joint filers).

1.7 billion to help new car buyers. If you buy a new car in 2009, you can deduct the sales tax on it if your AGI is below $125,000 (individuals) or $250,000 (joint filers). No Bentleys: the car can’t cost more than $49,500.

$23 billion to states. $18 billion of it goes to financing for public schools, and for investments in economically downtrodden neighborhoods.

$21 billion for energy projects. $4 billion of that goes to incentives to encourage more energy-efficient homes and more hybrid car purchases.

$10 billion in business tax breaks. That includes $5 billion via accelerating depreciation of certain capital assets by 50%, and $3 billion for General Motors.

$192 billion in direct aid includes:

$94 billion to states. $87 billion of that goes to Medicaid.

$78 billion to the jobless. That includes a one-time $250 check to Social Security, veterans’ benefits and Supplemental Security Income recipients ($14 billion). $9 billion will be spent to boost unemployment checks by $25 a week and allow extended benefits for the long-term unemployed through 2009. $25 billion subsidizes continued group health coverage for people who lost their jobs between 9/1/08 and 12/31/09; their income must not exceed $125,000 (individuals) and $250,000 (families).

$20 billion for healthcare. $17 billion of this represents incentives for Medicaid and Medicare to adopt new, digital health information technologies.

$308 billion in discretionary spending includes:

$106 billion for job training & education. $54 billion of this is designed to help states ward off cutbacks and layoffs, mostly in school systems.

$48 billion for transportation projects. $28 billion goes to road and bridge building; $8 billion goes to inner-city and high-speed rail projects.

$44 billion to energy projects. $11 billion will update the U.S. electric power grid.

$41 billion for infrastructure, environment & water projects. The biggest expense here is $7 billion to expand rural America’s broadband capability.

$29 billion in health & science funding/research. $10 billion of this heads to the National Institutes of Health, a world-respected medical research center.

$13 billion for housing programs.

$27 billion for other projects. $20 billion will extend food stamp benefits.

No scandalous spending. Specific language in H.R. 1 prohibits any use of the stimulus money “for any casino, or other gambling establishment, aquarium, zoo, golf course, or swimming pool.”

Let’s hope all the money stimulates the economy.

Regards,

Edward J. Kohlhepp, CFP^®, ChFC

Edward J. Kohlhepp, Jr., CFP^®, MBA

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APRIL FOOLS - BULL OR BEAR?

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Thursday, April 02 2009

Ed's Eye on the Economy

April 2, 2009

As we head into April, the market has had a surge which began on March 9^th. The March rally concluded as one of the 20 best months in stock market history. However it was preceded by a dreadful January and February. The question is this: Does this March rally really have legs, or will it become an April Fool’s joke and turn south sometime soon?

There are phenomenal rallies that can occur during a bear market and this is one of them. We can go up further from here but at some point the rally will end and there will be profit taking and a retreat. The talking heads on cable TV can have us believe we are heading for a depression one week, and then a week or two later convince us all that our problems are gone and we had better jump on the train (the rising market) while we still have a chance.

“MARK TO MARKET” / TOXIC ASSETS

Accounting rule makers, the FASB (Financial Accounting Standards Board) will vote today (Thursday, April 2^nd) on proposals to water down the “mark to market” accounting rules. This requires companies, including banks, to peg their investments' value to its market value.

Suspending the “mark to market” rules could be a boon for the market and banks, because companies would not have to value their toxic assets at depressed values (market value i.e. very low if there is no market to buy them) if they don’t “intend to sell” them. If mark to market is suspended, an institution would not have to recognize any losses if they intend to hold these assets (toxic) until maturity. These changes would immediately cause banks to increase the value of their toxic assets on their balance sheets to much higher numbers – good for the banks, but maybe not so good for investors. But there has been heavy pressure from Congress on the FASB to relax the rules and this is likely to happen.

PPIP INSPIRES INVESTORS

Last week, Wall Street got a detailed plan to heal banks. The federal government’s Public-Private Investment Program aims to attract private sector investors to buy $500 billion or more in troubled assets. Pension funds, insurance firms and other long-term investors can compete for federal loans in auctions, and then combine this borrowed money with their own funds to buy up illiquid securities currently burdening thrifts.

MORTGAGE RATES DROP BELOW 5%

If you have at least 20% equity in your home, and a FICO score of at least 740, there is a excellent chance you could refinance your mortgage to a rate as low as 4.5 to 4.75% with zero points. If you would like to discuss this, give us a call.

JOBS REPORT

Tomorrow the Labor Department will issue its employment report for March at 8:30 a.m. EDT. Economists are currently forecasting that the U.S. economy lost 657,000 jobs and the unemployment rate climbed to 8.5% from 8.1%

**RIDDLE: Pronounced as one letter, written with three, there are only two letters in me. I’m read from both ends, and the same either way. What word am I? Answer below. **

WHEN DO WE THINK THINGS WILL TURN AROUND?

From our experience, we believe we are much closer to the bottom then we are to the top. But if we really knew exactly where we are, we wouldn’t keep it a secret. We believe that those who are invested and investing in equities today will be rewarded down the road. We don’t know how long that will take.

There is reason for some optimism: better fiscal policy, small signs of economic revival and loosening credit. These are all slightly better signs that the banks have turned it around. The downside is increasing unemployment which is always a lagging indicator.

If you are still nervous, then repositioning to a more conservative portfolio is appropriate. If you are becoming more optimistic about the long term, then stay the course or slowly increase your equity weighting. We are here to discuss this with you. Call us any time to review your portfolio or if you would like to meet.

We are going to close today with a quote from Samuel S. Stewart, the chief investment officer of Wasatch Funds. In early March 2009 he wrote:

“Unfortunately, our immediate gratification culture seeks immediate solutions with immediate improvements, and when they don’t come, panic and fear win the day. It is times like these when perhaps we see the downside of our round-the-clock news cycle and constant communications. Our societal response to this crisis needs to be patience and creativity, not entitlement and fear.”

Hopefully, this rally is not an April Fool’s joke. Enjoy the nicer weather and the green trees and flowers of Spring.

Best regards,

Edward J. Kohlhepp, CFP^®, ChFC

Edward J. Kohlhepp, Jr., CFP^®, MBA

**ANSWER TO RIDDLE The word “eye”.**

P.S. During these turbulent times, many people are paralyzed with fear. If any of your friends or family would like a second opinion regarding their portfolio, we would be happy to have a complimentary consultation with them.

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Market Update - January 5, 2009

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Monday, January 05 2009

Ed's Eye on the Economy

Hello 2009! Goodbye 2008!

Happy New Year to everyone. Well we think everyone is happy that 2008 is behind us and 2009 is underway. We are all hopeful of a much better year in 2009.

Let’s first review quickly some recent headlines:

Governor Bill Richardson has withdrawn as a nominee for Secretary of Commerce.
The Bush administration expanded its bailout of the U.S. Auto industry by buying $5 billion in equities of GMAC and lending an additional $1 billion to GM. GMAC is the lending arm of GM and provides the bulk of financing for car buyers at GM dealerships. As a result, GM increased their incentives to car buyers.
Israeli tanks and ground troops invaded Gaza after suffering through months of mortar and rocket attacks.
An investor group consisting of several hedge funds and private equity firms agreed to buy Indy Mac bank for $13.9 billion. The FDIC said the cost to the insurance fund would likely cost between $8.5 and $9.4 billion.
The Euro celebrated its 10^th anniversary. Slovakia became the 16^th country to adopt the single currency and the Czech republic took over the revolving six month presidency for the first time. The economic problems of Europe may have been far worse without the single currency. However the Euro zone’s outlook is far from rosy as they are also mired in recession.
Investigators are only weeks into the Bernie Madoff inquiry. They are trying to determine if funds are located in offshore tax havens. The list of investors with Madoff is long and includes many celebrities and charities.

The biggest financial story of 2008 was that the world’s financial system came dangerously close to collapse. For a few nerve wracking weeks the world appeared headed for financial Armageddon. We will not rehash all the events here, but the stock markets suffered their worst one year decline since the Great Depression. Only the 89% decline between 1929 and 1932, and the 54% drop between 1937 and 1938 were worse. The Dow dropped 33.8% in 2008 and the S&P 500 did even worse, falling 38.5%. Virtually every asset class except Treasury notes and bonds fell in 2008. It was the first time in more than 50 years that asset allocation did not mitigate risk.

Guarded Optimism for 2009

We will soon have a new President and a new economic team running the country. Although the task is formidable, there is reason to believe that President-elect Obama and his team are up to the task. They will start off with a major stimulus package of $750 to $850 billion. However it may not happen until a few weeks after Inauguration Day.

Economists expect the Recession to last until mid to late 2009. Corporate profits are likely to keep falling through at least mid year. However the stock and bond markets seem to have priced in a Depression. Frightened investors are pricing in excessive gloom and doom.

Wall Street firms are predicting a major rebound in 2009. The S&P 500 year end targets from these firms are:

JP Morgan Chase +24%

Strategas Research Partners +24%

Standard & Poor’s +15%

Citi Group +12%

Morgan Stanley + 9%

This, by no means, assures us of a wonderful 2009. However, there is guarded optimism due to:

The coming stimulus package
A new president
Lower oil and gas prices
Low interest rates
Lower mortgage rates
Hope for a stabilization of the housing market
Hope for a recovering economy by the end of the year
A postponement of the increase in taxes
Eventual credit loosening and lending by the banks

2009 – The year of hope!

We are hopeful that 2009 will be a year of recovery for the economy and the stock and bond markets. Thank you for the confidence you have shown in our firm during this time of crisis. We look forward to working with you in 2009 and many years to come.

Best Regards,

Edward J. Kohlhepp, CFP^®, ChFC

Edward J. Kohlhepp, Jr., CFP^®, MBA

“Be always at war with your vices, at peace with your neighbors, and let each new year find you a better man.” Benjamin Franklin

“A New Year's resolution is something that goes in one year and out the other.” Author Unknown

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Market Update - December 22, 2008

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Monday, December 22 2008

Ed's Eye on the Economy

Hello everyone! Since this is our last market update for 2008, we wanted to provide a review of the last few weeks in the market. We look forward to a brighter 2009.

Auto Bailout

On Friday, December 19^th, the White House announced that GM and Chrysler will be provided with $13.4 billion in short term financing from TARP (Troubled Asset Relief Program) and an additional $4 billion in February.

Binding Terms and Conditions:

Firms must provide warrants for non-voting stock in return for the loans.
Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
Debt owed to the government would be senior to other debts, to the extent permitted by law.
Firms must allow the government to examine their books and records.
Firms must report and the government has the power to block any large transactions (greater than $100 million).
Firms must comply with applicable Federal fuel efficiency and emissions requirements.
Firms must not issue new dividends while they owe government debt.

There are additional targets set by the Treasury that are the real keys to viability. Unfortunately, at this time, they are non-binding. They are:

Reduce debts by 2/3 via a debt for equity exchange.
Make one-half of VEBA (Voluntary Employee Benefit Association) union payments in the form of stock. These payments are providing health insurance for union employees.
Eliminate the jobs bank.
Establish work rules that are competitive with transplant auto manufacturers by 12/31/09.
Establish wages that are competitive with those of transplant auto manufacturers by 12/31/09.

The auto companies must use their funds to become financially viable. If this does not occur by March 31, 2009, the loans will be called by the Treasury.

It appears that even though Congress did not agree to “bail-out” Detroit, President Bush did not want the auto companies to fail on his watch. Therefore, he made sure the money was made available to the autos. Thus the auto industry problem is now effectively passed on to the Obama administration.

Source of data: Wall St Journal.com

The Madoff Debacle

Bernie Madoff, thought to be a pillar of the community, is currently under house arrest for pulling off what may have been a $50 billion Ponzi scheme. This type of scam was named after Charles Ponzi who attracted 30,000 investors in 1920 and issued notes totaling $15 million. The basis of a Ponzi scheme is that Ponzi, or Madoff in this case, never really invests the money received from investors. He pays off the old investors with funds from new investors and promises unrealistic returns. Bernie Madoff’s investors were mostly affluent investors, as well as hedge funds, charities, universities, pension funds, and foreign banks. Mr. Madoff’s social, country club and business connections brought in billions of dollars. Adding to his allure was exclusivity; you had to be invited to join.

Apparently the scheme came apart in December when redemption requests of up to $7 billion were unable to be met. What I would like to know:

How can the SEC have two people spend four full days at the office of Kohlhepp Investment Advisors, Ltd. and not spend the needed time at the Madoff operation to find any wrongdoing?
Where does $50 billion go? I can’t believe it is all gone!
It is hard to believe his 2 sons had no idea what was going on!

A few tips as to how to prevent such scams:

Never write a check to the firm directly, e.g., Kohlhepp Investment Advisors, Ltd., or any other firm, for other than hourly fees/retainer. Checks should be made payable to the custodian, e.g., Schwab, Fidelity, etc.
You should always receive your monthly statements from the custodian, e.g. Schwab, Fidelity, etc. not just from the firm, such as “Bernard Madoff Associates.” Separate independent statements from the custodian confirm your investments.

We understand this can be very disconcerting to people and it is to us as well. We would like to assure you that we take our role in your life very seriously. We consider what we do to be a reflection of our character, and we take pride in our work. In fact, we are not permitted to take investment checks from clients. If a client writes an investment check to us mistakenly, we are required to return it. We must and do act as fiduciaries. As fiduciaries we must invest your money as if it is our own. We do everything in our power to uphold the values and integrity that you expect.

The Fed

On Tuesday, December 16^th, the Fed lowered its key interest rate to a range between 0% and 0.25%, the lowest in history. At the same time the Fed reaffirmed its plans to buy mortgage-backed securities and possibly long term Treasuries. This will help push mortgage rates lower. The Fed stated that they will employ all available tools to promote the resumption of sustainable economic growth.

Note: This will provide almost everyone whose mortgage rate is above 6% to refinance to a rate closer to 5%. If you would like to discuss this, give us a call.

Stimulus Package

President-elect Obama has his economic team crafting a stimulus package which Congress could debate when it convenes on January 6th. The idea is to have a new bill ready for signing shortly after Inauguration Day on January 20th. The latest numbers talked about are $775 to $850 billion. The broad parameters of the package are now known and it will include:

A $50 to $100 billion tax cut
$100 million in aid to state governments
Funding for infrastructure, school construction, energy efficiency, broadband access, and health-information technology

Happy holidays to all. Cherish your time with family and friends. During these difficult times, it is important to remember what is most meaningful in life and to be thankful for the many blessings we have. Once again, we thank you for your faith and confidence.

Best wishes,

Edward J. Kohlhepp, CFP^®, ChFC
Edward J. Kohlhepp, Jr., CFP^®, MBA

"Christmas is a time when kids tell Santa what they want and adults pay for it. Deficits are when adults tell the government what they want and their kids pay for it." ~ Richard Lamm

“The best of all gifts around any Christmas tree: the presence of a happy family all wrapped up in each other." ~Burton Hillis

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