The streak of weekly increases is finally over for two of the three major indexes, with both the Dow Jones and the S&P 500 closing on Friday with a weekly loss for the first time in six weeks. The NASDAQ managed to eke out a positive return. Does this mean that the bear market rally has come to an end? Not necessarily, but investors who saw only an up-side to investments in the current market and took very large bets accordingly might bail out at the first sign of weakness. As stated in last week’s commentary, the market’s recent uptrend was unsustainable and a correction was inevitable. With the market already having a good case of the jitters it would not take of much for the markets to roll over and move significantly downward. We are currently investing for that possibility by taking defensive positions in the models. Currently the downside potential outweighs the upside potential in our opinion, and some of the possible events that could lead the markets lower include:

1. The bankruptcy of one or more of the big three in the auto industry

2. The results of the bank stress tests, showing a very unfavorable situation

3. The spread of swine flu in the developed world

4. Continued negative earnings releases

5. A spike in the price of oil due to a political shock to the system

6. The US consumer cutting back further on spending

7. Increasing unemployment in the US

8. The housing market in the US continuing to fall

9. Lending in the worldwide banking system continuing to be very sluggish

A few of the possible events which could move the markets higher include:

1. The US consumer growing more confident in the economy and increasing spending

2. The banking stress test results showing that banks are well capitalized

3. Upbeat quarterly earnings for the rest of reporting companies

4. The housing market bottoming out and possibly moving upward

5. The auto industry straightening out without any bankruptcies

6. Financial credit around the world beginning to flow freely

7. Drastically reduced volatility in the markets

8. Another round of monetary government stimulation

We currently feel that there is a greater possibility of seeing more events on the negative list than on the positive.

Gold moved up nicely over the course of the last week with prices increasing by more than five percent (presumably as people took some of their short term profits out of the market and bought into something with more perceived safety). We do not believe that gold will make a sustained move upward but will probably resume the downward trend of the past few weeks. Oil price, however, is probably near its current floor. It could possibly move lower, but as long as the tension in the Middle East remains at current levels there is very little that can decrease the price of oil a meaningful amount. Thus, if you currently own oil related stocks, now is probably not a good time to get out (especially if you have held them since the spike in oil prices over the last year or so).

For the trading week ending 4/24/09, the returns in our portfolio models are as follows:

	Last Week	Year to Date
S&P 500 (benchmark)	-0.32 %	-3.09 %
Aggressive Model	-1.92 %	5.73 %
Growth Model	-0.81 %	4.46 %
Moderate Model	-0.31%	1.70 %
Stable Model	-0.75 %	4.58 %

We made several changes in our various portfolio models during the course of the last trading week. One major move we made last week was to sell our small-cap fund, RYMKX. We sold out for a gain in order to take some of the current risk out of our portfolios. The small-cap indexes on Thursday created a large divergence in performance from the rest of the broad market indexes, falling by more than one percent while the other major indexes were up about one percent. Since the small-cap sector has performed the best since market-bottom back in March, this divergence was neither a good sign for small-caps nor for the broad markets in general. A second change we made last week was to sell China (UGPIX) at a very slight loss. The reason we sold this fund was that the Chinese government seems to be changing their policy on the amount of liquidity they would like in their financial markets. We feel that, over the long-term, investing in China will pay off, but for the coming few months it could be a very volatile investment while the government adjusts their monetary policies. A third move last week was to lighten our model weightings to emerging markets and Latin America. In both funds we sold half of our total positions to take profits off the table, as market volatility looks like it will temporarily increase in the coming weeks. The fourth move we made over the course of last week was to sell part of our allocation to financials based on the thought that they will probably not increase drastically in value with the release of the stress test results. We felt that the current situation did not warrant moving completely out of financials. Finally last week, we added a small hedge on our aggressive portfolios to lighten any downside potential that may occur in the coming days. This hedge is the first in a series of steps to hedge our portfolios if economic conditions do not change. We started with the aggressive portfolios since they have the most exposure to risky market sectors. Should deterioration continue, we will utilize more hedging as we move out of various positions.

A few of our current positions historically act as hedges due to the nature of their investments. Both Merger (MERFX) and the Arbitrage Fund (ARBFX) specialize in M&A investments. Historically, when a market makes an actual correction from a bear market to a bull market, the merger and acquisition industry takes off as companies that have survived the economic downturn seize the opportunity to either buy or merge with less fortunate companies to gain market position. Another relatively safe position during a market correction is the fixed income side of investing, in which we hold both high yield funds and municipal bonds. Finally, cash becomes more and more valuable as a market correction ensues, as evidenced by our heavy allocation to cash through the last part of 2008. On a very important note, if you are unsure of the model in which your investments are currently managed, or you are uncomfortable with your current model, this is a great time to give us a call and we can meet your needs.

Economic Wrap Up: Last week was a slow week for scheduled economic news releases with the only major releases having to do with the housing market. On Thursday, the existing home sales figures were released for the month of March and showed a slide in existing home sales over the previous month. New home sales figures for March came out on Friday the 24^th and showed a very slight decrease in home sales over the previous month. Durable goods orders were down but by less than half of what the street was expecting. This may signal a coming upturn in the economic cycle, although, most people are very skeptical of such an upturn at this time.

Unlike last week, this week is full of very important economic news releases starting with consumer confidence figures for the month of April due on Tuesday the 28^th. The figure released is expected to be near 29.5, a modest increase over the previous reading. If this number comes in worse than the previous reading of 26, then the markets could turn lower very quickly. Also released on Tuesday is the Case-Schiller Home Price Index, which should provide insight into whether the housing market is continuing in a free fall or if there has been some leveling off in housing prices across the US. We are leaning toward the figure showing a very small leveling off in the housing market. On Wednesday the 29^th we will see the advanced GDP figure for the first quarter of 2009, and, while the figure will likely be revised in the coming weeks, it will give a good idea of where the US economy is in the current market cycle. Also on Wednesday, the Federal Reserve will release their interest rate decision, which is expected to be a non-event with them leaving the rate between zero and one-quarter of a percent. On Thursday, both personal income and personal spending are released and could move the market if they show that the US consumer either has less money to spend or is spending less of what they could. Rounding out the week on Friday is another set of auto and truck sales figures. The expectation for the release is that automotive sales for April were much lower due to consumers waiting to see what happens to the big three with their plans for moving forward in some sort of partnership with the government.

Financial Planning Tip: Retirement Confidence Survey

A recently released survey by the nonpartisan and nonprofit Employee Benefit Research Institute (EBRI) shows record low confidence about retirement security. Only 13% of workers are very confident they will have enough money to retire comfortably, down from 18% in 2008 and from an all-time high of 27% in 2007

The reasons most commonly cited for declining retirement confidence included the recent economic uncertainty, inflation and the cost of living, job loss or a pay cut, loss of retirement savings, or an increase in debt.

The 19-year EBRI survey also shows many misconceptions still exist about retirement. Those include how much money will be needed and where the money comes from.

Here are some retirement facts:

·        Most workers in the U.S. today do not have a defined benefit plan. These plans, commonly called pensions, were common in previous generations of workers. Companies paid into these pensions and workers did not have to contribute. They have largely been replaced by defined contribution plans, which include 401(k) plans. Employees typically contribute the largest share to these plans, frequently with some company match.

The U.S. Bureau of Labor Statistics says just 20 percent of workers in private industry today have a defined benefit plan, or pension. About 43 percent have defined contribution plans.

·        Many people do not know how much money they need for retirement and large numbers of workers do not have enough saved to live comfortably. With 49% of people 55 and older having saved less than $50,000, many people will be forced to settle for a much lower standard of living in retirement than what they had hoped for.

A woman earning $40,000 at retirement would need to have $203,134 in savings by age 65 to ensure she could replace 80 percent of her income in retirement, according to EBRI calculations. This assumes she has purchased an annuity with a nominal guaranteed income and receives Social Security. A man under the same circumstances would need $190,138.

·        Few people have actually calculated how much they need to retire comfortably. Just 44% of survey respondents say they have actually calculated how much money they will need to retire comfortably, and an equal proportion (44%) say they simply guess at how much they will need for a comfortable retirement.

Please contact our office if you would like a new or updated financial plan that will project how much you need to save in order to attain your desired retirement lifestyle.

Source: “The 2009 Retirement Confidence Survey,” EBRI Issue Brief, no. 328, April

2009.