WEEKLY STOCK MARKET COMMENTARY 12 3 2007

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WEEKLY STOCK MARKET COMMENTARY
For the Week of December 3, 2007

THE MARKETS
Comments made last week by the chairman and vice chairman of the Federal Reserve gave investors hope that the Fed may cut interest rates for the third consecutive month at its meeting next week. A Commerce Department report released Thursday showed consumer spending up just 0.2 percent in October, the smallest increase in four months. Meanwhile, oil prices dropped below $90 a barrel for the first time since October. Stocks posted the biggest two-day rally in five years on Tuesday and Wednesday, helping the Dow to end the week up 3.05 percent at 13,371.72. The S&P rose 2.85 percent to 1,481.14, and the NASDAQ gained 2.48 percent to finish the week at 2,660.96.

WEEKLY STOCK MARKET COMMENTARY 12 3 2007

Source: Morningstar.com. * Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three and five-year returns are annualized. The S&P, excluding “1 Week” returns, is a reflection of return to an investor, by reinvesting dividends after the deduction of withholding tax.

Even Better – The economy did even better than thought in the third quarter of 2007. The Commerce Department last week revised its gross domestic product reading from the 3.9 percent initially reported to 4.9 percent. The revised figure, attributed to strong exports and business inventory build-up, met economist forecasts.

Costly Caregiving – Caregivers of aging or ailing parents or spouses spend an average of $8,728 a year on out-of-pocket expenses – more than the average American household spends on health care and entertainment combined, according to a survey by the National Alliance for Caregiving and Evercase, a division of the UnitedHealth Group. That amounts to roughly 10 percent of their household income, with the most common caregiver costs being food, transportation, medical co-payments and medicines, clothing and home repair or maintenance. Caregivers spend less on leisure activities, vacations and major purchases or home improvements to cover the costs.

Top Ten Percent – It takes an adjusted gross income of $103,912 (i.e., approximately $2,000 per week) to rank in the top 10 percent of individual income tax returns (Source: IRS, BTN Research).

Stocks and Fed Policy – Since the end of 1973, the S&P 500 has gained 17 percent on an annualized basis during periods of expansive monetary policy (i.e., falling interest rates) and has gained 5 percent during periods of restrictive monetary policy (i.e., rising interest rates). The Fed has lowered interest rates twice since Sept. 18, 2007, and next meets on Dec. 11, 2007 (Source: CFA Institute, BTN Research).

New Limit – The Social Security taxable wage base will be $102,000 in 2008. The wage base, defined as the maximum amount of earnings subject to Social Security taxes, was $17,700 in 1978 (Source: Social Security, BTN Research).

WEEKLY FOCUS – Prescription Black Hole

The proliferation of prescription drugs to treat manageable conditions – such as cholesterol, high blood pressure and diabetes – have increased longevity for many elderly Americans. The high cost of many of those drugs, however, has made them an increasing portion of an individual’s living expenses.

A recent study by the Rand Corporation found that for many elderly individuals, that burden is so heavy they stop taking their prescription drugs when they hit insurance company caps on drug expenses or the Medicare Part D coverage gap known as the doughnut hole. Worse yet, many of those people do not restart medications at the beginning of a new year when benefits reset.

Between 6 and 13 percent of the study participants enrolled in drug plans where caps maxed out those benefits before year-end. About half of those went uncovered more than 90 days. Surprisingly, few of the patients in the study opted for cheaper generic drugs. Ironically, in some cases the cost to the insurer for complications arising from discontinued use of prescriptions – including hospitalizations – may be more than the cost of the prescriptions themselves. The drug cap meant as a cost-saving measure actually increases costs.

Another study by Directive Analytics and Medco found that one in three retirees said they underestimated medical and drug costs. One in four spent 10 percent or more of their monthly income on medications. And again, although aware of the cost savings of using mail-order pharmacies, only 40 percent used this form of purchasing medications.

If you have a family member who has considered going without a prescription because of cost – or has already done so – there may be other ways to adjust coverages or other expenses to ensure adequate funds are available for needed medicines. Our office can help you or your loved one find the resources – financial, medical or social services – that may help make prescriptions more affordable. Please feel free to call us.

* 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. 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. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. WMCSAI# 262730