Losses pared

As the market continues to move higher, most indices are moving into the black for the year. Here are the results as of April 30, 2009.

The Monthly Index Report for May 2009

Index	Apr-09	QTD	YTD	Description
S&P 500 Index*	9.4%	9.4%	-3.4%	Large-cap stocks
DJIA*	7.4%	7.4%	-6.9%	Large-cap stocks
Nasdaq Comp.*	12.4%	12.4%	8.9%	Large-cap tech stocks
Russell 1000 Growth	9.6%	9.6%	5.1%	Large-cap growth stocks
Russell 1000 Value	10.7%	10.7%	-7.9%	Large-cap value stocks
Russell 2000 Growth	15.1%	15.1%	3.8%	Small-cap growth stocks
Russell 2000 Value	15.9%	15.9%	-6.9%	Small-cap value stocks
EAFE	13.0%	13.0%	-2.7%	Europe, Australasia & Far East Index
Lehman Aggregate	0.5%	0.5%	0.6%	U.S. Government Bonds
Lehman High Yield	12.1%	12.1%	18.8%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	-1.8%	-1.8%	-3.9%	Managed Futures
3-mo. Treasury Bill***	0.0%	0.0%	0.1%
All returns are estimates as of April 30, 2009. *Return numbers do not include dividends. ** Returns are estimates as of April 28, 2009.

Great Article

I really enjoyed this article in the May 2009 issue of Smart Money. It really puts things in perspective for me and definitely gives new meaning to the phrase, "Long term investor"!
http://www.smartmoney.com/investing/stocks/Meet-3-Stock-Pros-Who-Survived-the-Depression/?hpadref=1

First Quarter 2009 update

Thanks to the March mid month rally, or the first quarter of 2009 could have been much worse. Here are some market statistics:

The Monthly Index Report for April 2009

Index	Mar-09	QTD	YTD	Description
S&P 500 Index*	8.5%	-11.7%	-11.7%	Large-cap stocks
DJIA*	7.7%	-13.3%	-13.3%	Large-cap stocks
Nasdaq Comp.*	10.9%	-3.1%	-3.1%	Large-cap tech stocks
Russell 1000 Growth	8.9%	-4.1%	-4.1%	Large-cap growth stocks
Russell 1000 Value	8.6%	-16.8%	-16.8%	Large-cap value stocks
Russell 2000 Growth	9.0%	-9.7%	-9.7%	Small-cap growth stocks
Russell 2000 Value	8.9%	-19.6%	-19.6%	Small-cap value stocks
EAFE	6.4%	-13.9%	-13.9%	Europe, Australasia & Far East Index
Lehman Aggregate	1.4%	0.1%	0.1%	U.S. Government Bonds
Lehman High Yield	3.2%	6.0%	6.0%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	-2.5%	-2.2%	-2.2%	Managed Futures
3-mo. Treasury Bill***	0.0%	0.1%	0.1%

The Growth style of investing continues to outpace the value style, which is a little odd for a bear market but has very much to do with technology companies doing very well with NASDAQ only down 3.1% for the year.
There are so many different opinions out there, even from the so called experts, of what investors should be doing. Here is a link to a great article in the Washington Post a few weeks ago that summarizes three of the world's greatest investing pros' current ideas. http://www.washingtonpost.com/wp-dyn/content/article/2009/03/14/AR2009031400057.html?referrer=emailarticle

I can give you an idea of what other people are doing: some, only a handful, have thrown in the towel on the stock market. I suspect these investors may never invest in the market again . A viable alternative exists, as many recent research reports have confirmed, bonds have beaten stocks for the past 10, 20 maybe 30 or 40 years--so an all bond portfolio isn't the silliest thing one could invest in. Especially now that interest rate differentials on corporate, high yield and municipal bonds are so large compared to the past 15 years, bonds look very attractive. A hefty percentage of investors continue to wait patiently for a market rebound, maintaining diversified portfolios with plenty of cash to meet liquidity needs. And lastly, a small handful have decided today's market offers ample opportunity to increase investment and have methodically been adding with every market decline, believing that one day, markets will rise again.

One thing that everyone is doing is really taking a close look at spending and finding ways to cut back. The key to starting is to know where all your money is going. Maintaining a spreadsheet or using something like Quicken or Microsoft money is the first hurdle. Once you know what your money is being spent on, you can begin to set limits. This is one way I, as a financial planner, can be very helpful because I analyze a lot of budgets and so I know what people spend on various things, on average. This isn't about living a life of deprivation but rather making reasonable choices about how you want to spend your money and taking control over spending.

What I see going on

I think many find it helpful to know what other people are doing during these trying times. More than anything else, I see folks looking for ways to spend less and save more. If you don't have an emergency fund, and still have your job, you need to make sure you have 3 to 6 months worth of expenses in case you are unlucky enough to get laid off.
The only thing we can control is our spending and how much risk we are taking in our portfolios. Last year was a disaster for portfolio management professionals as no diversified portfolio was able to weather the storm with any amount of success. The only investment that did well were Treasury Bills and cash. Does it make sense now to try to turn back the clock and get more conservative in light of what has happened? Well I really believe that 10 or 20 years from now we will look back on this time as the best buying opportunity of a generation. I wish I knew how many people have been telling me they don't have a long term time horizon. But unless you plan on jumping off a bridge at some point, every reader has a good chance of living to a ripe, old age. Do you want to run out of money when you're 93? what will you be able to do about it then? So my rule is, if you 80 years (young) or older, we can talk about having a more conservative portfolio--if not, you really need to hang in there, keep saving and keep adding to the market when it's down if you can. If you are unwilling to take on portfolio risk, then there really is only one other solution, that is to cut back spending and learn to live on a lot less. So you see, we always have choices....
Going back to my experiences lately, I am receiving more phone calls than I ever have in the past five years from people who want a financial plan done. Not because they are necessarily worried about their investments, but more so that they have been earning good salaries but not saving as much as they could. I view this as being a huge positive for the economy going forward. It obviously doesn't benefit our retail sector for Americans to be spending less, however in the long term, I see a much stronger economy developing, one that is actually able to with stand market gyrations and economic downturns better. Because when , you have savings you have a sense of security and you have flexibility.

February Results UGH

More bad market news. When will it end, or just stop going down? Barron's over the weekend suggested that a major rally is due because of the over-sold condition of the market. Art Cashin appears on CNBC every morning to give a trader's market take--he's the head of floor operations for UBS (been on the floor for decades)--he thinks the market is due for a good bounce...alright then, bring it on. Here are February's performance numbers as published by Investment Advisor Magazine:

The Monthly Index Report for March 2009

Index	Feb-09	QTD	YTD	Description
S&P 500 Index*	-11.0%	-18.6%	-18.6%	Large-cap stocks
DJIA*	-11.7%	-19.5%	-19.5%	Large-cap stocks
Nasdaq Comp.*	-6.7%	-12.6%	-12.6%	Large-cap tech stocks
Russell 1000 Growth	-7.5%	-12.0%	-12.0%	Large-cap growth stocks
Russell 1000 Value	-13.4%	-23.3%	-23.3%	Large-cap value stocks
Russell 2000 Growth	-10.4%	-17.2%	-17.2%	Small-cap growth stocks
Russell 2000 Value	-13.9%	-26.2%	-26.2%	Small-cap value stocks
EAFE	-10.2%	-19.0%	-19.0%	Europe, Australasia & Far East Index
Lehman Aggregate	-0.4%	-1.3%	-1.3%	U.S. Government Bonds
Lehman High Yield	-3.1%	2.7%	2.7%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	-0.2%	0.4%	0.4%	Managed Futures
3-mo. Treasury Bill***	0.0%	0.0%	0.0%
All returns are estimates as of February 27, 2009. *Return numbers do not include dividends. ** Returns are estimates as of February 26, 2009.

2009 IRS Numbers

For 2009, the maximum contribution for 401k/403b plans is $16,500 for employees younger than 50 years old and $22,000 for those 50 or older if the plan allows for catch-up contributions. The annual gift tax exclusion is $13,000 per person. The estate tax exemption for this year is $3.5 million. If there is any way to save a little bit more in your retirement plan, now would be a good time to do it. Seems like saving is in vogue again (thank goodness), there is no better way to get a tax break and be able to buy investments at levels that, by most standards, are below intrinsic value than by contributing more to your retirement plan. Even $50 extra a month is worth it.

A New Year

If you are looking for more negative viewpoints or insights, you won't find them here. We all know by now that 2008 was the worst year for the market in 79 years--only 3 other times has the market been down more than 40% in a year. Of course, the only thing most of us care about is: when will it stop? Things looked pretty good until last week--we had very inconspicuously gone up by 20% from the November lows--now the market still stands at 5% above those same lows. That's how the market rebounds, slowly, quietly without fanfare. David Swensen, the manager of the Yale endowment fund who has written several books on investing and has had an average annual return of something like 15%, was interviewed in the Wall St Journal last week. In the interview, Swensen made an excellent point: you either have an aggressive portfolio that does well most of the time over the long term or you have a portfolio that is defensive whose goal is to not lose money. If you have a long term portfolio you have to expect there will be times you will lose money. We can't change what happened in the past-but we can affect the future by our behavior today. History has shown when the market is down and there is "blood in the streets" it is the wrong time to get more conservative, it's the time to get more aggressive actually. I know this concept is difficult because of the emotions--and I know I'm getting a little long in the tooth with my optimism--but I know this market will just one day, quietly, slowly without anyone really noticing start to go up in leaps and bounds. Research has shown if you are uninvested (sitting cash until the market stabilizes) and miss the best 10 days in a market rebound, your overall return will be diminished by 10%-30%. Hopefully we won't have to live through too many more 2008's in our lifetimes.