First Quarter Update

Market Watch

The markets began the new year adding to the gains of 2006 with the DJIA racing to a high of 12,786.64, the S&P 500 increasing to 1,459.68 and the NASDAQ reaching 2,524.94 before hitting some headwinds in February. At the close of the first quarter, the DJIA was down 0.9% for the year closing at 12,354.35, while the S&P 500 closed the quarter up 0.2% at 1,420.86 and the NASDAQ finished at 2,421.64 up 0.3% for 2007. While the Dow is still above its high set during the Tech Wreck of 2000, the S&P 500 still has not reached it previous high of 1,527.46, which is a technical feat I feel needs to happen for this bull market to continue. Since the S&P 500 is an index that tracks a broad range of large companies, its march toward the all time record is an indicator of the overall health of the market and the economy.

The headwinds I spoke of earlier came in the form of higher oil prices, Greenspan's recession remarks and the slumping housing market. Oil prices have been bouncing around between $60 and $67 a barrel, rebounding from just under $60 a barrel in January. The tensions in the Persian Gulf over British sailors being taken hostage by the Iranian Navy (shades of 1979) has been the latest culprit fueling the rise in the price of oil.

Greenspan's speech placing the odds of recession in 2007 at 25% stopped the market's advance in its tracks in February. It should really come as no surprise that the possibility of a recession exists, especially since we are in the mature phase of the current expansion, know as prosperity. There are many factors which could tip the economy into negative growth and end this current expansion, but that is just the nature of the economic cycle. For the foreseeable future, it looks as if interest rates will remain on hold and growth will continue to ease from the pace of 2006.

One of the biggest drags on the economy of late is the continued slump in the housing market exacerbated by the concern that the meltdown in the sub prime mortgage market will spill over into the prime market. While defaults by borrowers are increasing, which in turn has caused bankruptcies by lenders, the real concern is how the sub prime debacle will effect the many derivative investments which have been securitized from these sub prime loans. Mortgages in many cases are not held by the companies that write them, but are bundled into securities and sold to investors to spread the risk. As the value of these assets declines, banks, hedge funds and private equity firms head for the exits. This unwinding of positions always leaves someone "holding the bag". I hope the risk management tools used in the collateralized mortgage obligation market are better than the risk management tools used by Amaranth Advisors in assessing the risk of the natural gas markets in September 2006!

Just to add a touch of irony to the current rage of private equity ventures taking public companies private, the granddaddy of private equity firms, Blackstone Group, has filed its plans to go public. Blackstone has been highly successful and according to Mike Santoli of Barrons, " Blackstone will have little problem achieving a $40 billion market cap", and no doubt, "it will become a core holding in an alternate asset management sector." The stock will "open with a big pop-which means it immediately will be unattractively valued. The idea of having access to permanent capital rather than dialing up pension funds for every cent Blackstone invests makes some sense. In other words, you can respect the logic of the deal without buying the stock."

Have You Reviewed Your Life Insurance Lately?

When was the last time you took a serious look at your life insurance coverage. Life insurance was created to provide cash for your family in the event of your death. The goal being to provide your beneficiaries a means to ease the financial burden that results from the death of a parent or spouse. The beneficiaries may choose to use the benefits of a life insurance policy in any way they choose, such as paying for funeral expenses, covering mortgage payments or investing the proceeds and taking systematic payments to augment income. Generally, the death benefit from a life insurance policy is paid free of any federal tax.

One of the most important questions to ask when evaluating life insurance needs is the amount of coverage needed. Many financial planners recommend an amount of five to seven times gross annual salary as a guideline when purchasing life insurance, but as with all things in life, each family's goals are different. It is always best to take an inventory of your family's current financial situation and then try to evaluate future needs. Listing current and anticipated future expenses, as well as income sources is a good place to start. If there are children, you might want to consider the cost of their education. The younger the children, the more of a need for coverage, due to the length of time they will be dependent on one parent, in the event of a death of a parent. Of course, this is exactly the time when a family may have the least amount of income available for insurance!

This is why there are different types of policies available. The two broad categories of life insurance are :

· Term Life Insurance

· Permanent Life Insurance

Term Life Insurance provides protection for the pure cost of insurance for periods of 5, 10, 15, 20 or 30 years and is usually significantly less expensive than permanent insurance. The death benefit is only paid if you die during the specific term of the policy. At the end of the term, the policyholder may be able to convert to a permanent policy or begin a new term, at a higher cost.

Permanent Life Insurance provides protection as long as you continue to pay your premiums, which can be fixed or tailored to your specific needs. Permanent policies include Whole Life, Universal Life and Variable Universal Life. These policies have a "cash value" feature, which means part of the premiums go into an account which builds up monetary value over time. This is why the cost of a permanent policy is higher than term. Many times a combination of the two types of policies can provide coverage and savings in stages for a lifetime. Feel free to contact me if you would like to review your insurance needs.

IRS Deadline and Retirement Plan Deferral Limits

For those of you still wanting to make an IRA contribution for 2006, the IRS deadline is April 17, 2007. The limit for 2006 is $4,000 with a catch up contribution of $1,000 for those 50 & older. The contribution limits for 2007 will also be $4,000 and the catch up will remain $1,000. Maximum salary deferrals for 401k, 403b and 457 plans is $15,000 for 2006, and for 2007 the deferral limits increase to $15,500. The annual catch up amount, which can be deferred into these plans for those 50 and older, is $5,000 for 2006 and will remain the same for 2007.
Whether you are saving for retirement, retiring soon or already retired, there are many ways to protect and grow that nest egg and consolidate assets. Developing multiple income streams in retirement is advantageous.

Company Information:
Investment Advisory services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
http://www.johnkaighn.com

Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
1150 S. Olive St. Suite T-25
Los Angeles, CA 90015
800-245-8250
Member NASD & SIPC

Third Party Administration and Insurance Services offered through:
Jersey Benefits Group, Inc
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: jerseybenefits@yahoo.com
http://www.jerseybenefits.com/
http://www.johnkaighn.com

All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.