Legacy Wealth Planning

Mark Levy

August 2010 Economic Update

I have to blow our horn here. One month ago, you’d have thought that the world was ending again watching the economic news media. Slower recovery numbers had a lot of people running for the exits again from equities and many were thinking a double dip recession was a serious possibility. We wrote in our July letter that more than a little financial data remained positive, such as International Paper raising prices and that we should keep a “significant portion of our capital in the market”. Thank goodness for that as the stock market has risen 8% to 9% IN ONE MONTH!

Yesterday’s 200 point plus Dow rally was fueled by solid economic data and European bank results. Asian markets got a boost from better than expected Chinese PMI (Purchasing Managers Index) data and two bellwether European banks reported solid earnings. In general, earnings season in the U.S. is two thirds over and so far it has been a very successful reporting season.

All eyes will be looking this Friday at the July unemployment report. The focus will be on private sector employment, as workers hired by the U.S. Government to conduct the Census in the spring continue to fall off government payrolls. While the overall headline on the jobs report is likely to show another decline in unemployment (the market is looking for a 63,000 decline), the market expects private sector employment (excluding the impact of Census workers) to post a gain of 90,000. If the consensus is correct, July would mark the seventh consecutive monthly gain in private sector employment (and eighth in the past nine months). The market’s concern is not so much, whether or not the economy will continue to generate private sector jobs in the near term, but at what pace the economy can create jobs.

As we also said last month, this is an evolutionary process. The market is a little over bought right here and a correction or pause is possible after the recent run up. We are using this rest stop as an opportunity to upgrade our asset allocation accounts. We think this is a moment in time to own very few Treasury Bonds for fixed income. Certificates of Deposit, Municipal Bonds, Global Bonds and High Yield Corporate Bonds of limited maturity are preferred at this juncture.

We believe this recovery is real, albeit at a slower pace at times. We appreciate your business and your trust and please do not hesitate to call if you have any investment questions and we hope you have a great August!

- Mark

Government bonds and Treasury Bills re guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investor’s yield may differ from the advertised yield. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Stock investing involves risk including loss of principal. Past performance is not indicative of future results. Indices are unmanaged and cannot be directly invested into.

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July 2010 Economic Update

As I write this letter, it is Tuesday morning, July 6, 2010. The Dow is up 100 points this morning to 9787 after a very disappointing June. This correction of 16 percent or so from the April 24 high has come with fears of a “Double Dip” recession. We do not think the market decline last week was truly justified, as the June payroll report of the creation of 80,000 private jobs can hardly be considered a disaster.

As a matter of fact, the ISM survey (Institute for Supply Management) is still showing growth. Very economically sensitive companies like International Paper who makes that paperboard that everyone orders “goods” packaged in, are raising prices. That doesn’t sound like poor demand to us!

The S&P 500 is now selling for 11 times the projected earnings for 2011 (a P/E of 11) and corporate profits are near all-time highs. The corporations themselves are sitting on $973 billion in cash and this year $150 billion has been used to buy back there own cheap stocks versus a paltry $20 billion last year.

The obvious negative here is unemployment remains stubbornly high at 9.5% and the market correction many of us saw coming was not limited to a 5 – 10% decline. We are stuck at the moment with a high level of fear and with the help of the television we have visions of perpetual destruction. In America, we have $8.7 trillion sitting in money market earning NOTHING – T Bill rates aren’t much better at 0.19% (that’s around 1/5 of one percent interest rate).

Australia, heavily dependent on raw materials, has seen growth and the central bank there provided a more positive forecast for their economy. This helped lift European stocks significantly this morning and that has investors here today hunting for beaten down stocks.

As much as we would like to see markets go straight up from a bottom, usually it is more of an evolutionary process. It definitely takes patience, but it is certainly the place for significant portions of our capital. We have been updating our allocations programs looking for opportunities that make sense now. We see us taking some actions in those accounts and we will contact you if you are affected by these upgrades.

We hope the 4th of July holiday treated you and your families well.

- Mark

Asset allocation does not ensure a profit or protect against a loss. The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

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June 2010 Economic Update

Last week we saw a batch of economic data from April and May come in better than expected. The data included reports from New and Existing Home Sales, Home Prices, Consumer Confidence, Orders for Durable Goods, First Time filings for Unemployment Insurance and Inflation. Taken together, the data suggests that the U.S. economy continued to make a successful transition from recovery to sustainable growth as the 1st quarter of 2010 ended and the 2nd quarter began.

In my May letter I referenced the market correction phase we are currently in. Rather than look at sustainable U.S. growth, the markets at the moment appear to be focusing on the European debt problem, the gulf oil disaster and a possible Chinese economy slowdown.

On one hand, the U.S. banking system is relatively insulated from Europe’s debt woes. However, the U.S. export sector, and in turn, business capital spending, may be vulnerable to a pull back in global growth. The gulf oil spill is now projected to cost tens of billions of dollars along with the recent news that the U.S. is launching a criminal investigation. As sobering as this news is, President Obama is not expected to suspend oil production for the area, only new drilling so the economic impact should be contained to the cleanup phase – expensive enough!

LPL Research believes that in spite of the challenges referenced above, the U.S. economy will grow at a 3-4 % in 2010. The consensus outlook for U.S. GDP growth is 3.2%. The May Unemployment Report is due out this week and is expected to be positive, but the question is will the markets dismiss the data as “old news”. Considering the market correction and a solid near-term corporate profit outlook, several sectors are looking increasingly attractive. Forward price/earnings (PE) multiples for the energy sector are approaching ten times and health care valuations are similar. Technology, which trades at a substantial premium to the S & P 500, is trading at only a 5% premium currently.

So, as in all correction phases, the news is a mixed bag; some good and some bad. We believe the good will prevail but it may take some time. At Legacy Wealth Planning we are always looking for opportunities for growth, income and/or risk reduction. In our mutual fund programs we about to reinstitute rebalancing of portfolios – an important part of the asset allocation process. We welcome any contact with you, our client. Please feel free to call us at 775-850-2500 or toll free 866-591-2500 with any questions you may have.

-- Mark

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Stock investing involves risk including loss of principal *Information received from LPL Financial Weekly Market Commentary dated 6/1/2010.

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May 2010 Economic update

Last month I mentioned the increased possibility of an equity market correction after consecutive months of a sustained rally and a slight erosion of a number of internal stock market indicators. As of Tuesday, May 5, 2010 (the time of this writing), it looks like the correction is upon us.

Over the weekend, Greece accepted an unprecedented bailout from the European Union and International Monetary Fund valued at 110 Euros ($146 billion) to prevent default, by agreeing to unpopular budget cuts. These cuts include a three-year freeze in public wages and bonuses and an increase in the retirement age from 62 (the lowest of the Eurozone nations) to 67. This morning’s television shows images of protesting and rioting in the streets of Greece and it is yet to be seen if this fire will be put out, or spread to other European nations under scrutiny, such as Portugal and Spain.

Also over the weekend, China raised banks’ reserve requirements, ordering banks to set aside more deposits as reserves for the third time this year. This action comes as the government seeks to deflate a building property bubble and rising inflation after property prices jumped by a record in March and economic growth surged 11.9% in the first quarter, as measured by Gross Domestic Product (GDP), the most since before the downturn began in the second quarter of 2007. China’s government is attempting to slow credit growth and cool rising prices.

We’ve also seen good news regarding our economy. Unemployment numbers have been slowly improving and with a little over two weeks into earnings season, Zacks reports that out of the 173 companies reporting so far, 34.6% of the total , there have been 5.74 upside surprises to every downside disappointment. This, so far, has been very good news from the corporate earnings front.

We don’t know how long this correction will last. It could be days, weeks or a few months. LPL research believes a 5-10% pullback is possible that in their words; “may present an attractive buying opportunity”. The negative news of the moment seems to be building the needed “wall of worry” that healthy bull markets climb.

We Reno residents are glad to see the weather finally starting to warm – we hope it is the same for wherever you are located. Please call us if you have any investment questions or needs.

- Mark

Managing Partner, Legacy Wealth Planning

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Past performance is not indicative of future results. Indices are unmanaged and cannot be invested into directly.

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April 2010 Economic Update

One year ago, the world looked as if it was on the verge of economic collapse. I wrote back then that end of the world scenarios were unlikely and that we should hold on to our investments. You listened and your accounts have recovered dramatically and you are to be congratulated! Many investors however did not hold; they sold. They have missed this incredible investment rally and this is evident by the largest amount deposited in short term cash or money market investments this country has ever seen. What is especially amazing is these funds are earning the least amount of interest, ever! The price of safety has been an expensive one.

This large cash balance is part of the reason for the inexorable rally in the equity markets. These cash accounts are desperate for a return and as the stock market has rallied, equity investments appear less risky than a year ago and these dollars keep creeping in, thereby offering a buoyant support. Obviously, slowly improving economic news has also been the market’s upward driver, so together these forces have been powerful and it looks like we will end the quarter with solid gains.

Of course, we are never exempt from worry. The Federal Reserve may signal a rate hike in the not too distant future. China may take additional steps to slow growth. Financial stress may continue to spread in Europe and the new financial reform bill is likely to get attention in April. Any of these factors could be a catalyst to possible market correction but we expect it to be a limited one.

First quarter earnings season begins around mid-April. “Buy the rumor, sell the news” is an adage often used to describe stock market behavior. This adage well describes the market performance around the past several earnings seasons, when companies reported their financial results for the quarter. It is worth noting that the last three 5-10% market pullbacks occurred leading into or during each of the last three earnings reporting seasons. LPL research expects any pullback to be followed by a rally to new highs for the year, as conditions remain positive with above average economic growth, improving credit trends, low interest rates, and the return of job growth.

We wish you a pleasant spring. It seems many parts of the country have experienced a long winter – this has certainly been the case in Reno. As always, please call us with any questions regarding investments or your accounts, any time.

- Mark

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March 2010 Economic Update

I’m seeing a return to hypersensitivity to television “news” and realize even as I watch it that there is frequently a bear and a bull, they never agree, we go to commercial and we rarely have an idea of just what the correct answer is. Good T.V., bad economics.

So here we go – first please realize that economics is not a solo sport – there are no gurus, rather it takes a lot of work from a lot of people to come to a consensus of what IS happening let alone what will happen. I have tried to take the best information available, from the best sources, distill it down and present it to you.

Jobs: Current unemployment is at about 9.7% according to government reports. This will probably go up - maybe as high as 10.5% - as the economy improves. This does not necessarily mean more people are unemployed rather there will be more people looking for jobs (less discouraged). Then expect a drop of about 1% a year, eventually to 8.5% by the end of 2011 and continuing to 5-6% by 2014. This is how it usually works.

Where are the jobs coming from? The same place it has for the last 20 years. The biggest growth areas have been in education/health services; business professions; and leisure and hospitality. The stimulus will provide some construction and manufacturing but this will not be huge.

Corporate Profits: Good, very good, with productivity growth being the best in about 40 years. We have rising profits, low interest costs and low depreciation costs. I believe this will continue for the next 2-3 years coming very close to the S&P price/earning we saw in 2007 – pre-depression. This should bode well for equities.

Interest Rates: Short-term rates will be held low by the Federal Reserve for now and I recommend that we keep our exposure mainly in short duration/short maturities. Long-term interest rates are a wild card and probably the most dangerous to play. Just as we thought we had plenty of time in 2000 to sell our tech stocks, the probability of the economy improving, large federal borrowing and the realization that there are better places to put our money, we have to be careful in managing the longer term bonds as they could drop extremely fast causing capital losses. We do not need to see inflation or fed rate hikes first in order for this to happen.

General Economic Growth: The “4 horsemen” of the economy; autos, home building, inventories, and business equipment spending account for a huge percentage of long-term GDP growth. They have currently retraced, from their lows, by about 32% of their average growth rate as measured by the Bureau of Economic Analysis. That means they have another 68% to go just to get to their average. I suspect that this could actually go further, to above the average growth grate and then maybe settle down. I conclude then that the levels of growth must go up – a lot. The future GDP growth has been predicted by the Federal Reserve at about (an average) of 4% this year, 3% in 2011, and 4% in 2012. It will not be a straight line and there will be setbacks we cannot see at this time. Remember that frequently the things that hurt our economy cannot be predicted: 911, AIGs inability to pay, soaring oil prices, and outcomes of current Iranian, Israeli/Saudi/American issues, to name a few.

Opportunities: The consumer is still holding on to their wallets, not just at the mall but in the equity markets as well. That is, they are underinvested in stocks. Stock prices have been relatively flat this month as the recent rally has stalled as measured by the S&P Index. I believe however, as the economic data improves, that some of the trillions of dollars that are now getting less than 1% interest will be coming back into the market. I currently prefer a mostly domestic, U.S. based equities portfolio and think that it may be time to include *small and mid-cap stocks. Internationally, I like the *emerging growth countries for those people whose risk profile allows it and would rather avoid international “developed countries” equity and debt markets. This of course varies for each of you and we need to discuss your issues before any changes are made.

Conclusion: None of us really knows what will happen tomorrow, but by taking real data, from real sources such as the Federal Reserve and our business partners such as J.P. Morgan and Goldman Sachs we can make reasoned decisions for our portfolios and the future. I welcome your comments so please feel free to call me if you would like to discuss the economy and how your portfolio fits within it. Thank you for sticking with this letter and as always, thank you very much for your business.

Mark

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. * Stock investing involves risk including loss of principal.

*Small cap stocks may be subject to a higher degree of risk than more established companies’ securities. The illiquidity of the small-cap market may adversely affect the value of these investments.

*Mid-cap companies are subject to higher volatility than those of large-cap companies.

*International and emerging market investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

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February 2010 Economic Update

Our first subject is tax information reporting. LPL Financial will be sending to clients 1099’s by February 16, not January 31, as it has been in the past. This decision is due to the many corrected 1099’s that are common today and this gives issuers of tax data more time to gather and distribute accurate information. That said, some of us may still receive corrected 1099’s after the February 16 date. It would be wise to wait until March 1 before assuming most 1099 information has been sent by financial firms. OID interest and some mortgage instruments have an even later reporting date of March 15.

The new 2010 Unlimited Roth IRA Conversion rules are now in effect. The basic change allows everyone to convert a portion or all of their traditional IRA into the Roth IRA (regardless of their income level). Income Taxes are paid on the conversion amount, but the funds grow tax deferred and after 5 years is distributable tax free (after 59 ½). Please contact us if you are interested in learning of this new retirement account law.

On January 20th the stock market began a 6.6% pullback as measured by the S&P 500 Index despite solid economic and earnings data. Stock market pullbacks of 5 – 10% are very common. In fact, this is the 3rd 5 – 10% pullback during the stock market rally that began in March 2009. A pullback has accompanied each earnings season since the March 2009 low.

Maybe Washington was at fault? News from the nation’s capital has dominated the media in the last week and a half:

The president’s proposals targeting the top banks
The Federal Reserve meeting on interest rates
The State of the Union Address
Fed Chairman Ben Bernanke’s contentious Senate confirmation vote

Despite the news from Washington, recent economic activity continues to be supportive of an expanding economy. Spending on equipment and software rose at a double digit annualized rate in the 4th quarter. The manufacturing sector expanded in January for the 6th consecutive month and the overall economy for the 9th consecutive month. Within the Purchasing Managers Index, new orders, production, employment, backlog of orders, exports and imports are all growing.

LPL Financial believes the tailwinds for growth remain intact in January and the recent pullback may be typical of earnings season and will reverse in the coming weeks.

Mark

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

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January 2010 Economic Update

Yesterday was the first trading day for the new 2010 year and the Dow Industrial Average impressed us with a new rally closing high of 10,583. Will it continue? Will interest rates stay low or will we see rates rise? Will there be a stock market or bond market correction in 2010? How will these markets perform not only for the year, but how will they perform for the new decade that has just begun? Let’s take a look at the information available to us for keys to answers:

For the last year or so, there has been an “anti equities” attitude. These naysayers have been shell shocked by the powerful stock market rally that has risen from the market lows last march with little hesitation. Bond fund inflows have dwarfed equity fund inflows. Market timing advisors show a composite equity exposure of 45%. In the short term, such a cautionary attitude suggests limited stock market downside and the possibility of for upside surprises.

On the economic front, initial claims for unemployment insurance, a leading indicator, has been trading down for weeks, pointing toward increasing stability in the labor market. Durable goods orders point to increases in capital spending in the coming months. Non-defense capital goods recorded shipments (excluding aircraft) increased 8% in November and the October reading was revised upward to a 1.5% increase vs. a .3% drop. Orders rose 2.9%, a proxy for future business spending.

LPL research has noted that in the 3rd quarter of 2009, foreign purchases of U.S. stocks were well above the 10 year average. Foreigners were likely equally strong buyers in the 4th quarter. This may be a healthy demand situation that could be encouraging since foreign holdings of U.S. stocks remain below average unlike the elevated levels of 2000 and 2007.

Longer term, LPL Financial believes we may be on the cusp of a multi-year period of strong inflows to stocks by individual investors, similar to the period from 1996 through 2000 or 2003 to 2007. Historically, investors have bought an average of $14 billion per month of stock market focused mutual funds and ETF’s. After periods of below trend behavior (the last year and a half), there tends to be a period of above trend inflows.

For Bonds and interest rates, it appears that the falling interest rate cycle that has been developing since October 1981 may be ending. This 28 year secular decline is nearing a close and it seems from an asset allocation perspective a prudent time to allocate away from fixed income (certainly longer term commitments and particularly treasuries). We have chosen to use an equity/cash combination. Cash or CD’s are paying little in the form of return, but they do not decline in value when rates rise.

We wish you the best in 2010. Please contact us to discuss any information regarding investments or your accounts with us.

Mark

*sources cited: LPL Weekly Market Commentary dated 1/4/2010, author J Kleintop The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

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November 2009 Economic Update

“The magic of 10,000”

*****

Much has been made of the Dow 10,000 level over the last few weeks and since we hit the lows this last March, nothing has caused so many phone calls. Psychologically, we like to see big milestones fall and perhaps that’s what makes us such a nation of sports statistics. Who can run a bit faster or have their batting streak last just one more game? But the Dow 10,000 is just another number and not really a remarkable one at that. According to Burt White, LPL Financial ’s CIO, this level has been crossed 28 times since 1999. So while it gets the headlines, the reality is that it shouldn’t be your focal point.

The bigger picture is that corporate America aggressively reigned in the cost of doing business. Additionally, the government stimulus and powerful demand from China and other growing economies has pulled us from contraction. To move to expansion we will need corporations, through capital spending, to hire new workers and increase compensation. This should encourage the consumer, who represents 70% of the GDP to finally take over and sustain the economy. The difference is that the economy just won’t look the same as it was before the damage- it never is. We will have less consumer debt including home and automobiles, higher savings rates and more regulations on financial companies. Perhaps we’ll even see health care and energy policies that are reality based and good for consumers and corporations alike.

The changes we have been through have undoubtedly slowed medium and longer term growth rates, but I believe this is ultimately good for our economy. I would much rather see reasonable growth rates and an economy built on a rock than the crazy excesses of one built on sand. Over time, I think it will be good for our equity markets as well. The intermediate trend now seems more positive with better earnings starting to come in on both a bottom line and top line basis. So while I am still cautious and don’t mind a bit of cash on hand, I believe in the long run we have a long, long way to go on the upside. Our portfolios are still weighted towards equities, with municipal bonds and fixed income generally focused on shorter maturities and durations. One has to be skeptical about the ability of long term bonds to perform very well in a possible rising interest rate environment. Still, short-term forecasting is difficult if not impossible. Economist John Kenneth Galbraith observed, “The function of economic forecasting is to make astrology respectable.”

Guess what is just around the corner? That’s right – Thanksgiving, Christmas and the end of the year. All of which means we need to start considering tax planning now for the end of 2009. While we aren’t tax professionals and you should always consult your own tax advisor, I want to make sure we’re on the right track going into the holidays. Special attention should be paid to those accounts that tend to trade a bit more – especially equities and also mutual funds – so this is going to cover a lot of you. Please call me if you have any concerns and make an appointment so we have no surprises.

Have a great November – Mark

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. * Stock investing involves risk including loss of principal.

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September 2009 Economic Update

Ever since I was young, I’ve always viewed September as the beginning of the year. I’m sure it was because of the school year calendar that most of us were brought up by and all of us knew so well. This morning, the Dow Industrial Average is down 150 points or so and a new look at September has evolved: the markets are questioning the sustainability of the rally that has been so impressive during the last six months or so.

September has a long term history of being the worst month for the stock market (although not terrible in the past several years). What is being studied today is the question of whether or not more evidence will emerge that a definitive bottom has been made in the housing market. Additionally, can the stabilization in residential construction offset the ongoing pain in private non-residential construction (malls, shopping centers, office parks, industrial facilities), which is being impacted by the lack of financing available to developers?

The better than expected corporate earnings recently reported were mainly due to cost cutting measures by American companies and there certainly is a current air of concern regarding the probability top line growth (actual gross revenue increases) will soon occur.

Another positive, manufacturing in the Midwest got a needed boost from the cash-for-clunkers program, as the ISM-Chicago index rose by a larger than anticipated 6.6 points to 50.

So, what to do right now? We are long term bullish on the equity markets, but are aware of moments when corrections can occur and this is one of those moments. For some clients we have lightened some positions at these levels and moved a modest percentage of assets to cash or very safe, yet low yielding fixed income holdings. We are not proponents of market timing and do not believe in large position changes due to market conditions, only changes where it is prudent for an individual’s situation to be more defensive. If this is something to discuss with you, please call us because we want to be proactively communicating with you in these challenging times.

Have a good Labor Day weekend holiday – the markets are closed Monday, so we will be also. We will return to work Tuesday morning. – Mark

Opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

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August 2009 Economic Update

As of this writing at 8:10 am PST, July 30, 2009, the Dow industrial Average is up 152 points to 9,222. This is a new market high in this rally phase that we have been in since mid March. From February to April we met with most of our clients and counseled them to “hold”. Ninety nine percent did just that and are benefiting dramatically. In November 2008 we moved out of treasury bonds in our asset allocated accounts and placed those dollars into massively undervalued high yield bonds.

There are many views and theories as to the nature of this rebound from the March lows; The dollar is often given as the reason for market movements. Its weakness is speculated to have induced rising commodity prices and improving equity prices, particularly among cyclical securities.

The PMI (Purchasing Managers Index) index for manufacturing and non-manufacturing in the U.S. improved for four straight months. For manufacturing it was 36.3 in March and 44.8 in June. For non-manufacturing it rose from 40.8 in March to 47 in June. Although the total index remains below 50.0 (the threshold for expansion), some components are above 50.0. For example in manufacturing, activity /production was 52.5, supply deliveries were 50.0 for June. In non-manufacturing, prices rose to 53.7, and export orders climbed to 54.5.

The index of economic indicators has risen two months in a row and building permits have stabilized in the low 500,000 area since the first of the year.

Frequent negative headlines today read; “The market’s ahead of itself.” “The market’s ahead of the fundamentals.” “Beware of the sucking sound – it’s a bear market rally.” “The recession will be deeper and longer than anticipated.” “The American consumer is making a permanent shift toward higher savings rate and debt reduction.” “It’s a junk rally.” “The rally lacks volume.” “The buy and hold strategy is dead.”

So, as always, which to believe? It is obvious that problems will persist for some time, but investors taking a longer term view amid the growing evidence that the money and capital markets are functioning again will be the most probable beneficiaries in this recovery. We are buying securities (debt and equity) in companies that have sustainable growth and high quality management teams at good valuations. As always, feel free to call me or visit me on the web at: http://www.lwpreno.com/mark_levy.html

- Mark

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July 2009 Economic Update

The stock market’s advance has stalled in the last few weeks. Today, investors were expecting the Conference Board’s measure of consumer confidence to hold steady after big jumps in April and May, but the latest research says consumer confidence unexpectedly fell in June. Negative housing data along with a recent spike in energy prices probably had a significant impact on the consumer confidence report.

Last week, however, the Federal Open Market Committee (FOMC) said the economy was getting better. Although the FOMC didn’t say so, some of the improvement in the economy can be attributed to the $787 billion fiscal stimulus package that was enacted in February 2009. In last week’s data, the impact of the stimulus package was seen in both the May personal income and spending report and the May durable goods order report. With $400 billion yet to be spent, the economy is likely to continue to feel the impact of the fiscal stimulus plan well into 2010 and beyond.

So, we have mixed economic data that on any given day can affect the markets positively or negatively. I think this is to be expected right now and may last through the summer. The public trust has been deeply scarred and it will take time to rebuild. Public fear is still just under the surface and the willingness of banks to lend is questionable at best which causes some experts to say the probabilities of runaway deflation or inflation is low.

One possibility of this mixed environment is a return to normalcy. Over time, stabilization and slow growth in an environment of low interest rates can be a good thing. Of course, there may be other unknown economic shoes to drop and we are certainly seeing huge resets in lower valuations in this era of “cash is king”. But, in the four 10-year periods prior to this one (going back to 1836) where the stock market had zero return, the Bull Markets that rose from those ashes were impressive – especially in their initial stages.

If you have someone in mind that would enjoy receiving this monthly update, or have any questions regarding your investments, please feel free to contact us.

- Mark

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June 2009 Economic Update

Today’s (June 1st) economic news is the removal of General Motors and Citigroup from the Dow 30 Industrial Average and the addition of Travelers and Cisco. The Dow is trading this morning up 203 points to 8,704 (as of 8:40am PST). This continuing market meltup is being fueled by a series of better than expected economic reports, including U.S. Construction Spending, the ISM Manufacturing index, and purchasing Managers surveys in China and Europe. As a technical note, the S&P 500 Index eclipsed its 200 day moving average last Friday and this continued upward momentum has many investors previously on the sidelines scrambling to get long.

The credit markets have demonstrated impressive signs of healing, with April being the best month ever for High Yield Bond performance, as measured by the Barclays High Yield Bond Index. An improving trend in the labor market is becoming apparent with fewer job losses reported each month so far this year. Finally, real-time data on the conditions in the markets and economy measured by the LPL Financial Conditions Index show continued improvement in May, suggesting further improvement in upcoming monthly and quarterly data.

While the meltdown may be behind us, a continued meltup is not assured. Financial conditions are getting less bad, but are still a long way from being good. Market participants are increasingly looking forward to steady improvement and a return to economic profit growth by year end. If the improvement begins to stall, the markets are likely to reverse course and retrace some of the gains of the meltup. While some volatility is to be expected in the months ahead, as the healing process is likely to be uneven, LPL research believes a renewed meltdown that would drive stocks all the way back down to the lows of nine weeks ago is unlikely.

On a side note, I notice the media popularity now of “trading”, as opposed to “Buy and Hold”. “Buy and Hold” has been the dominate approach for me and my clients and I increasingly notice that this discipline is participating in this rally while many “Traders” are not. Remember, in investing, there is a tendency for the popular thinking to be wrong and the unpopular, long term, to be right. Contact me if you need any investment information or have any questions.

- Mark

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April 2009 Economic Update

U.S. economic data was mostly better last week across a variety of sectors including housing (new and existing home sales and mortgage applications), business spending (orders for durable goods), and consumer sentiment. Stocks ended the 1st quarter on a positive note, but many concerns remain as economic data from outside the United States continues to reflect deterioration.

The evidence is accumulating that this may be a FIFO global recession – that is, First In, First Out. The United States was the first to feel the downward pull and may now be the first to start to experience a trough in economic conditions. The better than expected U.S. data that brought new signs of stabilization helped to pull stocks higher around the world as investors increasingly look to the United States as a leading indicator of the global downturn. This week, the focus of investors may be outside the United States as they turn to the G20 meeting for policy actions to address the global recession.

The most likely outcome of the G20 meeting will be a substantial increase in the resources of the International Monetary Fund (IMF) from the current $220 Billion. Additional money from the IMF is needed to avoid economic and political collapse among emerging market countries. Iceland, Latvia, Hungary, and the Czech Republic have seen their governments topple this year in the wake of global recession. These countries have been among the worst performers of the Emerging Markets this year.

The Federal Reserve’s recent actions designed to lower mortgage interest rates are slowly succeeding. A side effect is falling interest rates for Money Market accounts, Certificates of Deposits and Treasury offerings. The price for having money in “safe“ investments is high as the interest rates for many of these investment vehicles is nearing zero.

The question for equity markets is will this impressive rally hold? As of now, no one knows, but we are encouraged to see that the “bad news” of late, is slightly, less bad. This is evidenced by the first two paragraphs of this letter. For the faint of heart, this is an opportunity to sell some positions. For those feeling bullish longer term, this is probably a time to hold, and maybe even consider a purchase here and there (there are a number of investments that are more solid than some and are paying hefty dividends at these levels).

As always, we at Legacy Wealth Planning are trying very hard every day to earn your trust and your business. Please call us with any questions you may have regarding investments or your accounts.

- Mark

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March 2009 Economic Update

We are locked in a time where “good news” is washed over quickly and “bad news” is considered in great detail. The media thrives on negativity and loves this opportunity to choose from a seemingly unlimited reservoir today of “bad news”.

Last week, Fed Chairman Ben Bernanke, predicted an end to the recession by year-end and a recovery in 2010. Did anyone care? I don’t think so. We all know we are supposed to “buy low” and “sell high”, but why is it so hard to do? The answer should be obvious: When the markets are low, they look like they are going lower and are therefore hard to have faith enough to invest in – when markets are high, they look like they will continue going higher and therefore easier to commit funds to, even though both actions tend to be wrong.

As the S&P 500 is dancing with market lows, the debt markets, Nasdaq and Mid Cap indexes have so far, fared better. The world, however, seems to be looking to Washington for direction. Many of the steps to mitigate the financial crisis have been focused on the solvency of the banking system:

The alphabet soup of programs known as the TARP, TAF, PDCF, etc. were all

designed to make short-term capital available for banks.

The FDIC established guarantees for some bank debt, to ensure banks had access

to longer-term capital.

Many large banks received direct capital injections in exchange for preferred shares.
Some banks received government insurance against losses in potentially bad assets
To avoid a run on the banks, a temporary increase in bank deposit insurance was implemented.

LPL’s Chief Economist, Lincoln Anderson, is hopeful the government lifts risk out of the banks with a updated model that doesn’t charge too high a price to guarantee troubled assets.

It is easy to get lost on the big numbers being thrown around these days. Bare this in mind; At the end of the 3rd quarter of 2008, total financial assets, after substantial write-downs and losses were about $146 trillion compared to total U.S. debt outstanding of about $52 trillion. This means that there are still a lot of companies in good financial shape.

As we move forward it is obvious the world will be different. We are all cutting back and becoming more “lean”. As an advisor, I am looking at all of the “tools” available to me to scrutinize what are reasonable investment return expectations going forward. We have been trying hard to stay in communication with our clients to keep current on these expectations. As always, do not hesitate to call if you need us in any way – Mark.

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January 2009 Economic Update

The stock market put on an impressive rally last week. On Friday, the Dow closed at 9034.69, up from the low on November 21 when it touched 7449.38 before rallying to close that day at 8046.42.

It is generally accepted that the U.S. economy has been in recession for the last year and much of 2009 is expected to produce continuing dismal economic statistics. In December, the Federal Reserve released a highly unusual monetary report. First, they announced that the fed funds interest target rate would be cut to a range of 0 to .25 percent. Both the fact that the Fed set such a low level and the fact that they indicated a range rather than an exact target are unprecedented. They also made it clear that this interest rate would stay low “for some time” – in the opinion of Lincoln Anderson, LPL’s chief economist, “an extraordinary commitment”. The Fed reiterated they “will employ all available tools” to fight this recession – they are fully engaged in dealing with the collapse of the financial system and the ensuing recession using a wide array of programs and a huge expansion of money.

Recent good news is lower energy prices and the narrowing of corporate bond yields to treasuries bond yields. This is an indicator of an improving credit market, maybe part of the reason for the improving stock market of late.

Lincoln Anderson says the decline in energy prices will cut the annual consumer bill by about $290 billion. He also says in the short term the price declines hurt equity prices in associated industries, but longer term they are beneficial to the economy and financial markets. OPEC is reducing production in an effort to drive up crude prices, but without a robust economic engine, Lincoln doesn’t believe prices will return to levels anywhere near what we saw earlier in 2008. He says, “Even with 40% of the world’s oil production, OPEC does not have as much control as they would like to believe”.

Now that the New Year is upon us, we at Legacy Wealth Planning have been working hard to have a sound forward plan for our client’s portfolios. With our assistance, many of our clients made use of establishing losses at the end of 2008, as we felt it was important to not exit the markets while recognizing the declines for tax purposes. That short term strategy has worked as the stock market has recently rallied. Moving forward, we would like to make sure portfolios are correctly allocated for our clients and the economic environment we find ourselves in. We plan to arrange portfolio review appointments in the coming few months – if you want to address it more immediately, please contact us to arrange a get-together. We wish you well for 2009.

- Mark