Negative Returns, Positive Asset Growth, Long Term Care, etc.

SLOPPY FOURTH QUARTER; According to Morningstar, the average returns by mutual fund category for the fourth quarter of 2007 were:
taxable bonds: +1.3%
municipal bonds: +0.5%
international stocks: -0.8%
U. S. stocks: -2.8%
SLOPPY WEEK: For the week, the Dow declined -1.5%, the S&P 500 -0.75%, Nasdaq -2.6%, and the Russell 2000 -2.4%. Year-to-date, the Dow is now down -4.9%, the S&P 500 -4.6%, Nasdaq -8.0%, and the Russell 2000 -8.0%.

GROWING RETIREMENT ASSETS: According to a recent study by the Investment Company Institute, total U.S. retirement assets climbed to $17.4 trillion at the end of the second quarter of 2007, up from $16.7 trillion at the end of the first quarter of 2007. Retirement savings account for almost 40 percent of all household financial assets in the U.S.. IRAs held $4.6 trillion at the end of the second quarter of this year, up from $4.4 trillion at the end of the first quarter. Mutual funds manage 47 percent of IRA assets. Americans held $4.4 trillion in all employer-based defined contribution retirement plans, of which $3.0 trillion was held in 401(k) plans. Those figures are up from $4.2 trillion and $2.8 trillion, respectively.

LONG TERM CARE COSTS: If you wonder what the costs of long term care are in your area (they vary wildly), check this website: https://www.ltcfeds.com/ltcWeb/do/assessing_your_needs/costofcare?action=costofcare. Some of the findings (still using 2006 figures):
United States: $194 per day
Greater Philadelphia: $227 per day
Stamford, Connecticut: $341 per day
Wilmington, Delaware: $208 per day
Bridgewater, New Jersey: $253 per day
Wyoming: $157 per day
CREDIT CARD DEBT ON THE RISE: The Federal Reserve reported this week that outstanding revolving consumer credit hit $937.5 billion in November, up 7.4 percent from a year earlier. The annual growth rate has now been above 7 percent for three months running, the first such stretch since 2001. The surge in credit card may reflect the fact that it has gotten harder for consumers to borrow against the value of their homes, both because home values have fallen in many markets and because mortgage lending standards have tightened.

NICE SEVERANCE DEAL: According to the LA Times, Countrywide CEO, Angelo Mozillo, is going to walk away with a severance package of $110 million after the sale of his company to Bank of America for $4 billion. At it’s peak in February 2007, Countrywide had a market value of nearly $26 billion.

Have a great week.

Doug

Douglas R. MacGray, J.D, C.F.P.®, C.E.A.®
Senior Vice President, Financial Planning
EGE Advisors, Ltd.

A Slip at the Start…

A BAD START: The year has started off on a bad note. (I am watching Chariots of Fire on ESPN Classic as I write this. The Scottish runner, Eric Liddel slipped and fell but finished his race in first—I hope the markets mirror this performance in 2008). After only three trading days, the S&P 500 is down 3.86% (2nd worst start ever), the Dow is down 3.5% (4th worst ever), and the Nasdaq is down 5.57% (worst ever).
JOBS: This past week’s bad news that was a bit of a surprise came in the form of the jobs report from the U. S. Commerce Department. Expectations weren’t particularly high. Analysts had estimated that we’d see about 70,000 new jobs in December. The gain was only 18,000. Also, the nation’s unemployment rate jumped to 5%.
HOME VALUES: The value of the average home in the USA has doubled in the last 10 years. Over the course of the past year, median sales prices have dropped from $217,300 to $210,200.
MOST AMERICANS PESSIMISTIC ABOUT RETIREMENT: Only 37% of Americans believe their standard of living during retirement will be equal to or greater than the lifestyle they maintained during their working years (source: Mercer Workplace Survey). 55% of working Americans are either somewhat or very concerned that they might deplete their entire life savings during their retirement years (source: Society of Actuaries).
CHANGE IN THE LAW, A TAX INCREASE OF SORTS: Children under the age of 18 with unearned income greater than $1,700 in 2007 are subject to the “kiddie tax.” The child’s unearned income (e.g., taxable income from investments) above the $1,700 threshold is taxed at the parent’s marginal tax rate instead of the child’s marginal rate. In 2008 the dollar threshold increases to $1,800 and the law is changed to affect all children under the age of 19 as well as all children under the age of 24 who are full-time students.
HEALTH CARE COSTS: The cost per employee for an employer to provide health care in 2007 was $7,983, an increase of +6.1% from a year earlier.
Have a great week.
Doug

Douglas R. MacGray, J.D, C.F.P.®, C.E.A.®
Senior Vice President, Financial Planning
EGE Advisors, Ltd.