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"Wealth is
not his that has it, but his that enjoys it."
~ Benjamin Franklin
The Markets Markets
can turn on a dime and that’s exactly what they did last week.
The bulls were undone last week by a sharp rise in interest
rates. While many investors have been focused on rising crude
oil prices, gasoline,
the falling US dollar, etc., the yield on the 10-year benchmark
Treasury notes has risen nearly 20% since last December (4.40%
to 5.24%). While it is true that rates have been rising for
some time, the fact th Treasury notes rose above 5% was a
damaging psychological level for investors. There is no real
reason why 5% should be a catalyst, except that it is a round
number.
The
media now seems open to the possibility that instead
of lowering interest rates, the Federal Reserve might just
raise them.
The European Central
Bank raised rates, and indicated that it is ready
to increase rates again to battle inflation. The Bank of
England and Central Bank of Australia appear to be preparing
to increase rates, as well.
Last week's
market decline did a great deal of internal damage among
interest-sensitive securities, breadth, and
other factors related to our measures of investor risk
preferences. For several months, our primary reason for maintaining
a defensive stance has been a combination of overvalued,
overbought
and overbullish conditions.
There is the likelihood of a short-term
bounce for the markets, but a temporary bounce certainly
does not chase the Bears
back into their caves.
| Returns through 06/08/07 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Dow Jones Industrials |
-1.8 |
7.7 |
23.3 |
8.8 |
6.8 |
6.0 |
| Nasdaq Composite |
-1.5 |
6.5 |
20.5 |
8.3 |
10.9 |
6.2 |
| Standard & Poor's 500 |
-1.9 |
6.3 |
20.4 |
9.7 |
7.9 |
5.7 |
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.
HOW MUCH OF YOUR EMPLOYER’S 401(K) MATCHING
CONTRIBUTION ARE YOU RECEIVING? If you participate in your employer’s
401(k) plan, and your employer offers matching contributions, it can be
a good
idea to
contribute enough to receive the maximum employer matching contribution each
year. Matching contributions are like bonuses that you receive only if you
contribute to the plan—and who doesn’t want a bonus?
Employees who contribute the IRS maximum to their plan
accounts each year may not receive full employer matching contributions unless
they spread their
contributions out over the full year. That’s because some employers
calculate matching contributions by pay period rather than considering the
full amount of an employee’s contributions in any given year. As a
result, if you reach the IRS limit for 401(k) contributions during August
then you
may not receive employer matching contributions for the September, October,
November, and December pay periods.
The solution is fairly straightforward. At the beginning
of each year, do some simple calculations. Divide the maximum IRS contribution
amount by
12 (the number of months in the year), and then contribute that amount
to your
account each month. If your plan requires that you contribute a percent
of earnings, just divide the amount you want to contribute by your eligible
earnings.
If the math sounds intimidating, give us a call. We’ll help you determine
how much to contribute to receive full employer matching contributions.
DO
YOU LOVE CORN-ON-THE-COB? If you haven’t noticed yet—the
cost of corn is going up. One effect of our nation’s
shift to ethanol is that demand for corn is increasing. It takes one bushel
of corn to make 2.7 gallons of ethanol, according to the U.S. Department
of Agriculture, and ethanol producers are expected to increase their demand
for corn significantly during the next decade. Higher demand usually translates
into higher prices. Already, in Mexico, the price of tortillas—a staple
in the Mexican diet—has tripled, creating issues for vendors, consumers,
and the country’s new president. In the United States, consumers have
seen chip and cereal prices increase, and more increases may be on the way.
Inflation isn’t always predictable. Prices of everyday goods will continue
to increase over time. If you want your retirement to be all that you hope, it’s
important to begin saving and investing early.
 Annie is a freshman at Boston University.
She has spent all her money for the fall semester.
She knows
that
her father Frank
is a puzzle fan so she
mails him a puzzle as shown.
She knew her father should
be able to resolve this puzzle easily and mail the MONEY
to her. Do you know how much money
she will be receiving from her father?
Click here for the answer.
Best Regards,
P.S. Please feel free to forward
this newsletter to family, friends, or colleagues.
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