How high is Dow 12,000? I thought I should check it out for myself.
Here's a picture of my wife and I this weekend on top of Winter Park; Elevation 12,000 feet!

The markets had a hard time adjusting to changing expectations last week. Lower inflation, slower but stable economic growth, further rate cuts by the Federal Reserve—these have been investors' touchstones as they've envisioned a soft landing for the economy. However, recent news has supported the idea that the economy is experiencing stronger growth than many expected. Manufacturing is showing signs of strength, and housing may have hit bottom. In addition, inflation is holding steady, but increasing energy prices could create upward pressure. The new economic data makes it seem less likely the Federal Reserve will reduce rates, and that helped push 10-year Treasury yields significantly higher last week, according to MarketWatch. There is even a chance that rates could go higher. Last Friday's fed funds futures market—a gauge of investors' expectations for interest rates—indicated that an increase in rates might be a possibility during first quarter, according to Barron's Online.

Last week, the outcome was a choppy market as investors realigned their expectations to match the latest economic data. The market may remain volatile this week as earnings season continues and investors wait for the outcome of the Federal Reserve's Open Market Committee meeting.

Returns through 01/26/07	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Dow Jones Industrials	-0.6	0.2	14.5	5.5	5.0	6.6
Nasdaq Composite	-0.7	0.8	5.7	4.4	4.7	6.1
Standard & Poor's 500	-0.6	0.3	10.8	7.4	4.8	6.5

Source: Yahoo! Finance, Barrons
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three-, 5-, and 10-year returns are annualized. Assumes dividends are not reinvested.

DO YOU PLAN TO LEAVE A PORTION OF YOUR WEALTH to your grandchildren or great grandchildren? You may want to consider a generation skipping trust. There are many reasons to set one up. Perhaps your children have substantial assets, don't need additional principal, or would prefer not to pay estate taxes on an inheritance. By setting up a generation skipping trust, you can transfer your estate—large or small—to future generations while giving your children a resource that can provide annual income. If you prefer that the trust not provide income to your children, you can appoint a trustee and give your trustee the authority to distribute income to future generations.

Currently, an individual can put up to $2 million dollars in a generation skipping trust and have it be exempt from taxation. A couple can put up to $4 million in such a trust. For example, parents could set up a generation skipping trust and fund it with up to $4 million in cash or property. The $4 million would be exempt from estate taxes because the children never take ownership. In addition, if the amount in the trust is less than the exemption amount then it would be exempt from generation skipping transfer taxes and pass tax-free to the grandchildren. When properly structured, generation skipping trusts also can protect assets from lawsuits, creditors, and divorce proceedings.

If you choose to put more than the exempt amount into a generation skipping trust, and do not pay a gift or estate tax, then the non-exempt amount may be subject to a generation skipping transfer tax. Currently, the tax is a flat rate that is equal to the highest estate tax rate at the time the gift was made. You should also be aware that, unless Congress acts, estate tax and generation skipping transfer tax exemptions will be abolished in 2010. Don't worry; they will be resurrected in 2011, but the exemption amount will be smaller. If you would like more information, please call our office or speak with your estate planning attorney.

If the cost of metal keeps increasing, a penny may soon be worth more than one cent. According to the New York Times, the metal in a penny was worth about 0.8 cents during mid-2006. If prices keep going up, the metal that makes up the coin may become more valuable than the coin itself. If that happens, people may begin hoarding pennies and melting them down for the metal. The government recently took steps to prevent just that. According to USA Today, the new rules make it illegal to melt pennies or nickels, as well as to export the coins with the intention of melting them. What's the solution? Some have suggested increasing the monetary value of a penny to five cents.

Best Regards,

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* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.
* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.