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February 12, 2007

The market experienced a bad case of new high anxiety as investors looked for reasons to think the bull market's run is finally over. For the week, both the S&P 500 and NASDAQ declined -0.7% while the Dow fell -0.6%.

Some observers are pointing to increased tension between the U.S. and Iran for last week's market sell off. From my perspective, it's a case of an overbought condition and the fact that the NASDAQ Comp and NASDAQ 100 have still not confirmed the recent highs in the S&P 500 and DJIA.

The bulls and the bears can't put their arms around a catalyst that can trigger a market correction. Sometimes you don't get a catalyst before market corrections...sometimes buyers get satiated and support levels just give way. In March of 2000, the market mania peaked just after PALM came to market. In hindsight, that was a seminal event that marked the end of the bull market. Seven years later, hedge funds have been a major factor in the marketplace with a major hedge fund going public last week. Wouldn't it be ironic if it turns out to be another seminal event?

Regardless, you have to admire today's investors, they just (at least so far) refuse to say "good bye" to their stocks. And this is in the face of a variety of negatives such as the "hard landing" scare in housing, the war in Iraq, the massive US deficits, Iran continuing on its nuclear path, rising oil prices -- well you name it, investors just don't care about risk they are just focused on returns. What is worrisome is that at the same time individual investors are holding on for every last gain the market has it offer, corporate insiders are selling at a furious pace. As noted last week by Investors Intelligence:

"It would have been very favorable if the insiders did not increase their sales with the latest up move, as that would have shown that they had wished to hold onto their shares for more gains. But that was not to be and the latest data had their sell decisions exceeding their purchases by a factor of eight to one."

One has to wonder why there has been such large increase in insider sales when the prospects for economy and the markets are supposed to be so great. This is one of many reasons to remain cautious and remain risk averse in managing client portfolios.

Next week may be a bit more exciting. On Valentine's Day, Fed Chairman Ben Bernanke will update Congress about the economy and Federal Reserve policy. Also, we'll see economic data released on retail sales and housing starts.

IF YOU TAKE MONEY OUT OF YOUR RETIREMENT PLAN BEFORE you reach age 59 ½, you may owe ordinary income taxes and a 10% IRS penalty for early withdrawal. There are exceptions to this rule, though. They include death, disability, and taking a series of substantially equal, periodic payments.

Under Section 72(t) of the tax code, a person can take a series of substantially equal, periodic payments from some types of retirement plans, as long as the payments: continue for at least 5 years or until age 59½, whichever is longer; are distributed at least annually; are based on a single or joint life expectancy (but once the choice is made, the election cannot be changed during the time period selected); are not made until you after you stop working for the company.

The dollar amount of substantially equal, periodic payments can be calculated in one of three ways using:

• The Required Minimum Distribution method (RMD), which generally produces the relatively low, variable payments.
• The Annuitization method, which usually produces the highest 72(t) payments.
• The Amortization method, which may produce a payment that is smaller than the annuitization method and larger than the RMD method.

All three methods can be based on a single life expectancy or the joint life expectancy of the retiring person and his or her beneficiary. Once a method has been chosen and 72(t) payments have been calculated, the calculations generally cannot be modified.

Many companies have rules about office romance, but that hasn't stopped people from finding love at the office. According to Vault Inc.'s 2006 Office Romance Survey, almost 30% of employees have had a tryst in the office. That's an increase of almost 5% over 2005. Although more people are willing to admit in a survey that they've engaged in office romance, fewer are being open about it in the office. The number of couples who have successfully kept their office romances secret is up, while the number of couples being open about their relationships has fallen from 19% during 2005 to 12% during 2006. What is the most common rule that companies have about office relationships? Employees are not allowed to date a direct subordinate or a superior.

Which well-known English poet and author was responsible for tying the knot between St. Valentine's Day and romance during the 14th century?

Click here to view the answer.

Best Regards,

* 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.