Market Commentary
For the week of October 19, 2009

The Market
The Dow closed above 10,000 on Wednesday and Thursday last week, but lost ground on Friday
following disappointing earnings results from GE and Bank of America Corp. A weak consumer
sentiment report issued on Friday overshadowed an earlier announcement that industrial production
increased in September. The major indexes still managed a second straight week of gains. The Dow
ended the week up 1.33 percent to close at 9,995.91. The S&P rose 1.52 percent to finish the week at
1,087.68, while the NASDAQ climbed 0.82 percent to end the week at 2,156.80.

Source: * 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.

Shorter FallEmployees who had contributed to their 401(k) plan for five or more years had an annual
average account balance decline of 24 percent at the end of 2008, compared to the S&P 500’s drop of
37 percent. Across all 401(k) holders, the average account fell 30.5 percent during 2008. Nearly 50
million Americans had a 401(k) plan last year, with combined assets of $2.3 trillion. (Source: Employee
Benefits Research Institute)

Less Debt American consumers reduced their outstanding debt by $12 billion or 5.8 percent
(annualized) in August, more than the $10 billion analysts expected, according to the Federal Reserve.
Total consumer outstanding debt now stands at $2.46 trillion, which includes credit cards, store cards,
auto and personal loans, but not mortgages or other debt related to real estate. In July, consumer debt
dropped 9.1 percent, the largest decrease since June 1975. The decline reflects both less consumer
spending and tighter credit standards among lenders.

Consumer-Fueled Economy Consumer spending on cars, clothes, food and other items accounts
for 71 percent of the U.S. gross domestic product (
GDP), according to the Bureau of Economic Analysis
– slightly more than the 70.1 percent of a year ago and well above the 65 percent long-term average.
Total personal spending, however, has actually decreased, dropping 1.9 percent in the second quarter of
2009 compared to a year ago. Over the 20 years ending in 2006, consumer spending has risen annually
by 3.3 percent.

WEEKLY FOCUS – Recession, Deflation Impact Social Security

Recently we discussed the health and financial benefits of
working longer, particularly until you are eligible for full
Social Security benefits and Medicare. Last week,
however, the Social Security Administration reported that
2.57 million Americans applied for retirement benefits in
the fiscal year that ended in September, 22 percent more
than a year ago. Based on the number of people
reaching retirement age, Social Security had expected a
15 percent increase. The difference, it said, is the impact
of the weak economy and the more than 7.2 million jobs
eliminated since the recession started in December

Phillip Levine, a Wellesley College economics professor
who co-authored a paper on older workers forced into retirement by the recession, said that group could
be 50 percent larger than the number of older employees who elect to work longer to offset the impact of
the recession on their portfolios.

A boon to retirees has been the fall in consumer prices. On the downside, the lack of
inflation led the
Social Security Administration to announce on Oct. 15 that 57 million beneficiaries would not receive a
cost-of-living adjustment (COLA) for 2010, the first time since 1975 that there has been no increase. In
contrast, Social Security recipients received a 5.8 percent COLA increase for 2009, the largest since
1982, because of higher energy prices. Because there is no COLA for 2010, there will be no change in
the maximum amount of earnings subject to the Social Security tax, which stands at 12.4 percent tax on
the first $106,800 of wages. There has been no word on how
Medicare Part B premiums for 2010 may
be affected.

Whether you are working longer or forced out of work, Social Security should be part of your overall
retirement income distribution plan. If you or a loved one faces employment changes that may affect
when you access your Social Security benefits, please contact our office to discuss the impact on your
overall investment strategy.

* 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. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade,
fixed rate bond market securities, including government, government agency, corporate and mortgage-backed
securities between one and 10 years. Written by Securities America. SAI# 300823
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Returns through 10/16/09
1 Week  
Dow Jones Industrials  
NASDAQ Composite
S&P 500  
BarCap US Agg Bond (TR)