Market Commentary
For the week of June 2, 2008

The Market
Wall Street ended the week on a positive note after the government reported that Americans’ spending
rose in April to keep in line with rising costs. The Dow gained 1.27 percent to end the week at
12,638.32. The NASDAQ added 3.19 percent to close the week at 2,522.66 and the S&P grew 1.81
percent to finish the week at 1,400.38.









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.

Planes Down – Orders for durable goods, excluding transportation, rose 2.5 percent in April, the largest
gain since July, according to the
Commerce Department. Economists had expected orders for U.S.
manufactured big-ticket items would drop 0.5 percent. Transportation orders declined 8 percent, with
orders for civilian aircraft dropping 24.4 percent. Non-defense capital goods orders, considered a proxy
for business spending, rose 4.2 percent, the largest increase since December. Economists had
expected that category to fall 0.5 percent. Electrical equipment orders rose a record 27.8 percent.

Breaks for Bonds – The Supreme Court has ruled that cities and states can continue offering special
tax breaks on their municipal bonds, preserving a top incentive for investors in the $2.5 trillion municipal
bond market, according to Reuters news service. Tax-favored status for bonds allows states to hold
down financing costs for public projects. Without the tax breaks, issuers would have to offer higher
interest rates to investors. The ruling reversed a Kentucky appeals court that found the common practice
of states granting tax breaks on interest for bonds issued in the state - but not for out-of-state issuers - to
be unconstitutional.

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

Estate Taxes – The maximum amount an individual can pass onto his/her heirs estate tax free with
proper planning is $2 million in 2008, rising to $3.5 million in 2009. The federal
estate tax is then
scheduled to disappear in 2010, only to return the following year (2011) with a $1 million exemption
amount per individual (Source: IRS, BTN Research).  

WEEKLY FOCUS - Your 401(k) Is Not An ATM

With the price of food and gas, that 401(k) balance may
begin to look pretty tempting as a source for meeting
living expenses. More than half of all 401(k) plans offer
loan options for the lesser of 50 percent of the vested
amount or $50,000. But there’s a reason they call it a
“hardship” withdrawal, and that word should factor in to
any decision you, your adult child or another family
member make to tap retirement savings for anything
other than retirement.

The temptation in using a
401k loan is similar to that of
a home equity loan – the old “I’m paying myself back”
rationale. Consider the implications, however, of not
being able to pay yourself back because of disability or
loss of your job. Consider the loss of earnings and compounding opportunities by taking that money out
of play. Consider you will be borrowing pretax dollars and replacing it with after-tax dollars, so you will
have to work more hours to replace the same amount of money. And consider the fees that your plan
may impose on loans, such as asset liquidation fees.

Another potential pitfall to a 401(k) loan: If you leave employment, whether of your own volition or at the
request of your company, your employer can require repayment within 60 days. If you fail to do so, the
IRS will treat the unpaid balance as a distribution, on which you will owe regular
income tax and, if you’re
under age 59½, a 10 percent penalty.

Vacations, new cars, going back to school for a second (or third) degree and even buying a home are
not hardships. These are expenditure decisions that should be worked into your budget – not borrowed
from your future. If you or a family member is considering a
401(k) early withdrawal, hardship withdrawal
or loan, please call our office for help in considering all the implications.


* 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# 278909
Copyright © 2010 The Money Alert.com. All rights reserved.
Returns through 5/30/08
1 Week  
YTD
1-Year  
3-Year
5-Year
Dow Jones Industrials  
1.27
-3.71
-5.03
9.01
9.85
NASDAQ Composite
3.19
-4.89
-3.14
6.84
9.59
S&P 500  
1.81
-3.80
-6.70
7.57
9.77
MSCI EAFE
-0.44
-3.03
-2.53
16.61
19.24
All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to
participate in any particular trading strategy. The Money Alert does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any
information prepared by any unaffiliated third party, whether linked to this web site or incorporated herein, and takes no responsibility. All such information is provided solely for
convenience purposes only. The Money Alert is not affiliated with any of the firms or entities listed unless specifically stated. The Money Alert does not provide investment, tax or legal
advice. Please consult the appropriate professional regarding your personal situation.