Market Commentary
For the week of March 2, 2009

The Market
A glimmer of hope followed last week’s market declines as the Commerce Department reported Monday
that consumer spending rose in January after six consecutive months of declines. The report showed a
0.6 percent increase, beating analysts’ predictions of a 0.4 percent increase. Personal income also rose
in January by 0.4 percent after dropping 0.2 percent in December, and personal savings rose to 5
percent of disposable income in January, compared with 3.9 percent in December. For the week, the
Dow lost 4.06 percent to close at 7,062.93. The S&P fell 4.49 percent to end at 735.09, and the
NASDAQ dropped 4.4 percent to finish the week at 1,377.84.









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.

No Repeat U.S. colleges and universities raised a record $31.6 billion in contributions in 2008, a 6.2
percent increase and a record year, according to the Council for Aid to Education. Growth in donations
has averaged 5.7 percent for the past 10 years, but most institutions do not expect a stellar year in 2009.
Indiana University had the largest percentage increase, 46.7 percent, primarily from three major
donations. Stanford University raised the most money, $785 million, but that was down 5.7 percent from
2007.

Healthy Chunk of Change Health care costs in the U.S. will average $8,160 per person in 2009, an
increase of $356 over last year, according to the Department of Health and Human Services (DHHS). In
a recent report, DHHS estimated that unemployment boosts to Medicaid recipients and aging baby
boomers reaching Medicare eligibility will put half of the nation’s health care tab on taxpayers by 2016.
By 2018, the government estimates that health care costs will reach $13,100 per person, claiming $1 of
every $5 spent in the economy.

Shrinking Nests The percentage of U.S. households with minor children hit its lowest point in 50
years in 2008. Census figures show that 35.7 million families, or 46 percent of households, include
children under age 18, down from 52 percent in 1950 and a peak of 57 percent in 1963 during the baby
boom. In addition to couples delaying marriage and children, the economy may continue the trend as
couples limit family size due to the costs of having and raising children.

Global Business The annual revenues of the companies in the S&P 500 stock index are almost
evenly produced from both inside and outside the U.S., i.e., a 50/50 split. Eight years ago (2001), just 30
percent of sales for the S&P 500 companies came from outside the U.S. (Source: Financial Times, BTN
Research).  

WEEKLY FOCUS – Bailing Out Adult Children

As the number of companies laying off workers and
freezing wages rises, parents may face their own
mini-bailout decisions: whether – and how – to help
adult children in financial difficulty. According to CNN,
parents in the U.S. extend about $45 billion in loans to
their children each year, for everything from student
loans to credit-card debt to buying a home or starting a
business. A study by Ameriprise found that 90 percent
of boomer-age parents have provided financial
assistance to their adult children – including 40 percent
who had to use their own savings and 17 percent who
had to take a loan to do so.

Even parents who have taken a hard line against bailing
their adult kids out of financial trouble have softened their stance in the face of the economy and its
fallout. Whether to provide help to your child or grandchild is a personal decision, however, we
recommend a few guidelines if you choose to loan or give money to your child:

  • Loan or gift? Parents often start out resolved to make their child repay the money, but often fail to
    follow through. Keep in mind that you can gift up to $12,000 a year without filing a gift-tax return. If
    you call it a gift, don’t harbor expectations your child will repay it.
  • If you decide your child will repay the money, consult with a tax advisor to set a reasonable interest
    rate in accordance with IRS rules. Charging nothing or too little could result in the IRS considering
    that unclaimed interest as income to you and a gift to your child.
  • Set a repayment schedule. Leaving it open-ended makes it less likely you will be repaid, ultimately
    creating hard feelings on both sides if you have to press the issue or you begin questioning your
    child’s spending and why he’s not repaying you.
  • Write it down – the purpose of the loan, the amount, interest rate and payment schedule.

A similar approach applies to letting adult children move back into your home – especially if they have a
spouse or children in tow. Create a written agreement that outlines rent or how the child will contribute to
the household upkeep in lieu of rent. Set a target end date or a set of conditions that would trigger the
child moving back out – such as finding a job at a specific income level. Review the agreement together
regularly to determine if any changes are needed.

Wanting to help your child or grandchild during times of financial stress can be well intentioned. With
planning and guidance, loaning or giving your child money can also be well executed. Our office can help
you determine the impact a gift or loan may have for your own lifestyle or future plans. Call us for an
appointment.


* 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. Written by Securities America. SAI# 294998
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Returns through 2/27/09
1 Week  
YTD
1-Year  
3-Year
5-Year
Dow Jones Industrials  
-4.06
-18.92
-40.58
-11.44
-5.48
NASDAQ Composite
-4.40
-12.63
-39.34
-15.47
-7.46
S&P 500  
-4.49
-18.18
-43.32
-15.11
-6.63
MSCI EAFE
-1.41
-19.07
-50.22
-15.30
-3.27