For the week of April 14, 2008
A quiet week on Wall Street ended with a slight stumble on Friday after General Electric Co.’s first
quarter report disappointed. The major indexes had shown moderate gains on Thursday after a larger-
than-expected drop in unemployment claims. The Dow ended the week down 2.19 to close at 12,325.42.
The S&P dropped 2.69 percent to end at 1,332.83, and the NASDAQ lost 3.41 percent to close the
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 deduction of withholding tax.
Big Daily Swings – Over the past 10 years (1998-2007), 30 percent of the trading days for the S&P
stock index finished with either a gain of at least one percent (i.e., the change from the previous day’s
close) or a loss of at least one percent. In the first three months of 2008 (i.e., the three months that ended
March 31), 51 percent of the trading days have been up or down at least one percent. The S&P 500 is an
unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock
market (source: BTN Research).
Stock Prices and Earnings – The price-earnings (P/E) ratio of the S&P 500 at the end of March 2008
was 18.3. The P/E ratio for the S&P 500 on Sept. 30, 2002, (i.e., just nine days before the bottom of the
2000-02 bear market) was 17.6. A company’s price-to-earnings ratio is equal to a company’s stock
price divided by its earnings per share over the previous 12 months. When compared over time, this
ratio may provide some insight into undervalued and overvalued stocks (source: Barron’s, Wall Street
Journal, BTN Research).
Unemployment Improvement – The number of new claims for unemployment benefits fell to 357,000
for the week ended April 5 from a revised 410,000 the prior week. Economists had expected claims to
fall to 383,000 from the initial 407,000 reported for the prior week – meaning the total number of claims
dropped by 53,000 compared to the 24,000 analysts anticipated.
Doubled in a Decade – The total assets held in U.S. retirement plans has nearly doubled in value in the
past decade. A study by Watson Wyatt Worldwide found assets in U.S. pensions, 401(k)s, individual
retirement accounts and other retirement savings vehicles rose from $7.9 trillion in 1997 to $15 trillion in
2007. The makeup of those assets has changed over that period, with defined contribution plans
including 401(k) plans and IRAs accounting for 56 percent of total assets last year, compared to 47
percent 10 years ago. Retirement assets of the 11 countries with the largest workplace retirement
systems grew just 7.4 percent since 1997.
Online Silver Lining – Online retail sales may provide a bright spot in the 2008 economic outlook.
According to a survey by the National Retail Federation (NRF), online retail sales, excluding travel, are
expected to grow to $204 billion, up 17 percent from last year. Although a slower rate of growth than the
21 percent increase in 2007, the slower growth represents maturing of the business, not a sluggish
economy, according to Shop.org, the online arm of the NRF.
WEEKLY FOCUS – Timing Long-Term Care Coverage
Cost has long been the incentive for waiting to secure
long term care insurance until a decade or even two
before retirement, but the reasons for purchasing
long-term care coverage earlier in your adult life
continue to get more persuasive. Younger policy
purchasers can lock in discounts based on health
qualifications as well as premiums based on today’s
costs, plus spread the premiums over more years.
According to the America Association for Long Term
Care Insurance (AALTCI), for those 60 or older, rates
can go up 8-9 percent per year for each year you delay
That’s assuming you can get coverage if you wait. The
actuarial firm Wakely Consulting Group studied long-term care policy applications in 2003-2004 and
found that 11 percent of those in their 50s, 19 percent of those in their 60s and 43 percent of those in
their 70s were rejected. Actuarial firm Milliman & Robertson estimates that 15 to 25 percent of those
over age 65 are uninsurable for long-term care.
If cost and risk of rejection don’t convince you, consider your risk of needing long-term care long before
you even reach retirement. A report from the Henry J. Kaiser Foundation found that more than five million
Americans between 18 and 64 years old need some type of long-term care. AALTCI’s recent study
found long-term care policyholders who had claims in their 20s and 30s due to accident or illness.
That makes sense when you look at the limitations some types of insurance have when it comes to long-
term health needs. For example, a person injured in an auto accident may receive some benefits for
medical care, but those expenses are typically capped at a level that long-term care costs would quickly
exceed. In the case of a chronic condition such as diabetes, stroke or Alzheimer’s disease that can be
managed but not cured, Medicare and most private health insurance will not pay for non-medical costs
such as home modifications, transportation to doctor appointments or assistance with household chores.
Long-term care coverage, on the other hand, will often provide beginning levels of assistance to
policyholders unable to perform two of six activities of daily living (ADLs). Disability insurance helps
replace your income, but it doesn’t cover any health care costs, long-term or otherwise.
Because of medical advancements, accidents and illnesses that once caused death may now cripple
you – mentally, physically and financially. Regardless of your age, long-term care coverage should be
part of regular reviews of your risks and insurance needs. Whether you decide to purchase a policy now
or wait, you will have made an informed decision. For more information on longterm care insurance for
you or a loved one, or to schedule a review of your risk management plan, contact our office.
* 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. SAI# 274317
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