Jersey Benefits Advisors Newsletter - Summer 2007

FED DECISION ON RATES SEEMS TO CREATE CALM

Market Watch

The Federal Reserve ended its June Federal Open Market Committee meeting on June 28th, and the only change indicated for the foreseeable future is that the Fed sees core inflation as somewhat less of a risk, while overall inflation is still a concern. Interest rates remained on hold at 5.25%, where they have been for a year now, and investors hoping for a rate cut have capitulated. This surrender by bond investors has provided a slightly positive slope to the yield curve, as long term rates are modestly higher than short term rates.

This leads me to believe there may be another way to view the inversion of the yield curve, which happened last year. While many view an inversion of the yield curve as a precursor to recession, historically we have not had a recession every time the yield curve inverts. This last inversion did precede the first quarter economic slowdown of 2007, so perhaps the inversion of the yield curve in 2006 was indicating the mid cycle slowdown which occurred earlier this year. The US economy has been expanding since November of 2001, so based on the length of the last two economic cycles, the first quarter slowdown of 2007 occurred right in the middle of the cycle. However, it should also be noted that the last two US economic cycles have been records, stretching from November 1982 to March 1991 and March 1991 to November 2001, when analyzed from the bottom of one cycle to the bottom of the next cycle, or trough to trough. There were 10 economic cycles from 1945-2001, and the average duration from trough to trough was 67 months. Nobody can really say, with any certainty, how long the current cycle will last, but given all of the shocks incurred over the last five years, the economy has been quite resilient.

Of course, as long as the economy is growing, the stock market will react in a favorable manner. Although the indices are off their peaks set in the second quarter, as the books were closed on the first half of 2007, the DJIA stood at 13,408.62 which is a gain of 7.6% year to date. The NASDAQ closed at 2,603.23 for a gain of 7.8% thus far for 2007. The S&P 500 finished at 1,503.35 which is an increase of 6.0% for 2007. While the S&P 500 is off its record close of 1,539.18, the fact that it finally surpassed the old record of 1,527.46 set back in 2000 is a significant technical feat which bodes well for a continuation of the current bull market.

The consensus of economic forecasts for the second half of 2007 predict GDP growth of between 2%-3%, which is what should be expected for a mature expansion. How much strength remains in the economy depends on a number of factors. Maintaining healthy growth without increased inflation is paramount. While core inflation seems to be under control, the increases in the prices of food and energy are being felt by everyone. There is also a great deal of concern regarding the subprime mortgage market and the collateralized debt obligations and collateralized mortgage obligations on which many hedge funds feed. With mortgage foreclosures in the subprime market increasing, which lowers the value of CDO’s and CMO’s, there is a fear many hedge funds could incur significant losses, like those at Bear Stearns, as the value of their portfolios are rebalanced at the end of the quarter. As with most aggressive investment bets, when fundamentals change, things can go south in a hurry. In my mind this is just one more reason for diversifying your assets and not chasing returns.

Hype, Hope and the 4th of July Holiday

The Blackstone IPO and Apple iPhone’s debut were two very hyped events which took place in June. While Blackstone’s stock initially surged, it is now below the original offering price as private equity houses begin to reassess the cost of doing ever larger deals as the cost of debt increases. Apple’s faithful lined up in front of stores for days, prior to the release of the iPhone, and even with a cost of $599, sales are expected to be brisk. One can’t help but wonder how many people really want to watch video on their cell phone, especially with all of the huge plasma and LCD screens available for only a few hundred dollars more. Then again, after the 4th of July fireworks, it might be nice to relive the experience again and again while sitting in traffic on the way home.

PRIVACY POLICY

At Jersey Benefits Advisors and Jersey Benefits Group, Inc. protecting your privacy is very important to us. We want you to understand what information we collect and how we use it. We collect and use information from you on applications and other forms as well as information about financial transactions with us and from non-affiliated third parties. This “nonpublic personal information” is obtained in connection with providing a financial product or service to you.
We do not disclose any nonpublic personal information about you without your express consent, except as permitted by law. We may disclose the nonpublic personal information we collect to persons or companies that perform services on our behalf.
We restrict access to your nonpublic personal information and only allow disclosures to persons and companies as permitted by law to assist in providing products or services to you.
We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information at all times.

ROLLOVER ASSISTANCE

Many people have 401k or 403b accounts from jobs they’ve left for various reasons. One of the problems with this is the duplication of objectives within each account. Having a lot of funds, in several accounts, does not always provide the diversification you aim to achieve.
If you or a family member are in this situation, and would like to consolidate assets into one diversified IRA and receive just one statement, please give me a call to analyze the accounts, make recommendations and assist with the paperwork involved. As long as you have terminated employment with the employer, or the particular plan has been terminated, you are eligible to roll the funds over into an IRA. You do not have to be of retirement age.
If you have retired, or are considering retirement, you have the option to move assets out of your employer plan and into an account, which can provide a lifetime income, when you retire. The whole idea is to work with someone you trust and is available to you, when you wish to discuss your account. Every employer plan is different, and every individual is different, so personal preference is very important, and there is no “one plan fits all”.
Depending on your appetite for risk, IRA accounts can be in stocks, bonds, mutual funds or ETF’s with one or more companies. If you’re somewhat risk averse, variable annuities offer participation in the market with downside protection and guaranteed growth for an additional fee. Feel free to give me a call to discuss your options.

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.jerseybenefits.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/

All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
Visit our website at http://johnkaighn.com

Winds of War

Normally, I write my entire blog, but on ocassion an article comes to my attention which I think needs to be shared. Such is the case of this editorial by Joshua Muravchik, which appeared in the Wall Street Journal this morning. We live in dangerous times, and I believe there are many people in this country who have not fully assessed the dangers posed by radical Islam and in particular, Iran. This article serves as a bit of a current events and history lesson as well as a warning of a future Middle Eastern regional conflict, which could draw us in, should we continue to run up the white flag in Iraq.

WINDS of WAR

By Joshua Muravchik

Several conflicts of various intensities are raging in the Middle East. But a bigger war, involving more states-Israel, Lebanon, Syria, Iran, the Palestinian Authority and perhaps the United States and others is growing more likely everyday, beckoned by the sense that America and Israel are in retreat and that radical Islam is ascending.

Consider the pell-mell events of recent weeks. Iran imprisons four Americans on absurd charges only weeks after seizing 15 British sailors on the high seas. Iran's Revolutionary Guard is caught delivering weapons to the Taliban and explosives to Iraqi terrorists. A car bomb in Lebanon is used to assassinate parliament member Walid Eido, killing nine others and wounding 11 more. At the same time, Fatah al-Islam, a shady group linked to Syria, launches an attack on the Lebanese army from within a Palestinian refugee area, beheading several soldiers. Tehran trumpets further progress on nuclear enrichment as President Mahmoud Ahmadinejad repeats his call for annihilating Israel, crowing that "the countdown to the destruction of this regime has begun."Hamas seizes control militarily in Gaza. Katyusha rockets are
launched from Lebanon into northern Israel for the first time since the end of last summer's Israel-Hezbollah war.

Two important inferences can be distilled from this list. One is that the Tehran regime takes its slogan, "death to America,"quite seriously,even if we do not. It is arming the Taliban, with which it was at sword's point when the Taliban were in power.

Dictatorships
start wars
by underestimating
democracies. Events
in the Middle East
suggest Iran is
making that mistake.

It seems to be supplying explosives not only to Shiite, but also Sunni terrorists in Iraq. It reportedly is sheltering high-level al Qaeda figures despite the Sunni-Shiite divide. All of these surprising actions are for the sake of bleeding the U.S.
However hateful this behavior may be to us, it has a certain strategic logic: "The enemy of my enemy is my friend." What is even more worrisome about the events enumerated above is that most of them are devoid of any such strategic logic. For example,the Hamas "putsch" in Gaza-as Marwan Barghouti, the hero of the Palestinian
intifada, labeled it from his prison cell-was an enormous blunder.

Hamas already mostly controlled Gaza. It is hard to imagine what gains it can reap from its "victory." But it is easy to see the losses. Fatah, and the government of its leader Mahmoud Abbas, will be able to restore their strength in the West Bank with the eager assistance of virtually the whole outside world, while Gaza will be shut off and denied outside aid far more strictly than during the past year. Israel
will retaliate against shelling with a freer hand. Egypt will tighten its border.
And Hamas has in one swoop negated its own supreme achievement, namely winning a majority in Palestine's 2006 parliamentary elections. Until now,Hamas had a powerful argument: how can the West demand democracy and then boycott the winners?
But now it is Hamas itself that has destroyed Palestinian democracy by staging an armed coup. Its democratic credentials have gone up in the smoke of its own arson.

Syria's actions in Lebanon scarcely make moresense. The murder of parliamentarian
Eido will solidify and energize the majority that opposes Syria. Some suppose that, having now bumped off two Lebanese MPs (Pierre Gemayel was the other one), Syria
plans to shave away the anti-Syrian majority in Lebanon's parliament by committing
another five murders. But if so, this is a crazy gambit. Such a campaign would invite international intervention. It might well fracture the pro-Syrian forces: More Shiites will abandon Hezbollah and more Maronites will turn against Hezbollah's cat's-paw, Michel Aoun. And the murders might be for naught anyway: By-elections are
already being planned that are likely to replace the martyred legislators with
others of the same mind.As for the attack on the Lebanese army, Fatah aI-Islam is on the brink of being crushed, leaving behind only more hatred of Syria and a better-armed, more confident Lebanese army.

As for Iran's actions, while arming the Taliban and Iraqi terrorists may make sense, what is the point of seizing British sailors or locking up the four Iranian-Americans, including the beloved 67 year-old scholar, Haleh Esfandieri, none of whom are involved even in political activity, much less in the exercise of hard power?

The apparent meaning of all of this pointless provocation and bullying is that the ails of radicals-Iran, Syria, Hamas and Hezbollah-is feeling its oats. In part its aim is to intimidate the rest of us, in part it is merely enjoying flexing its muscles. It believes that its side has defeated America in Iraq, and Israel in Gaza and Lebanon. Mr. Ahmadinejad recently claimed that the West has already begun to "surrender," and he gloated that "final victory. . . is near." It is this bravado that bodes war.

A large portion of modern wars erupted because aggressive tyrannies believed that their democratic opponents were soft and weak. Often democracies have fed such beliefs by their own flaccid behavior. Hitler's contempt for America, stoked by
the policy of appeasement, is a familiar story. But there are many others. North Korea invaded South Korea after Secretary of State Dean Acheson declared that Korea lay beyond our "defense perimeter." Saddam Hussein invaded Kuwait after our ambassador assured him that America does not intervene in quarrels among Arabs. Imperial Germany launched World War I, encouraged by Great Britain's open reluctance
to get involved. Nasser brought on the 1967 Six Day War, thinking that he could extort some concessions from Israel by rattling his sword.

Democracies, it is now well established, do not go to war with each other. But they often get into wars with non-democracies. Overwhelmingly the non-democracy starts the war; nonetheless, in the vast majority of cases, it is the democratic side that wins. In other words, dictators consistently underestimate the strength of democracies, and democracies provoke war through their love of peace, which the
dictators mistake for weakness.

Today, this same dynamic is creating a moment of great danger. The radicals
are becoming reckless, asserting themselves for little reason beyond the
conviction that they can. They are very likely to overreach. It is not hard to
imagine scenarios in which a single match-say a terrible terror attack from Gaza-could ignite a chain reaction. Israel could handle Hamas, Hezbollab
and Syria, albeit with painful losses all around, but if Iran intervened rather
than see its regional assets eliminated, could the U.S. stay out?

With the Bush administration's policies having failed to pacify Iraq, it is
natural that the public has lost patience and that the opposition party is
hurling brickbats. But the demands of congressional Democrats that we throw in the towel in Iraq, their attempts to, constrain the president's freedom to destroy Iran's nuclear weapons program, the proposal of the Baker-Hamilton commission that we
appeal to Iran to help extricate us from Iraq-all of these may be read by the
radicals as signs of our imminent collapse. In the name of peace, they are
hastening the advent of the next war.

Mr. Muravchik is a resident scholar
at the American Enterprise Institute.

John Kaighn is a Registered Investment Advisor with Jersey Benefits Advisors and writes articles on various business and investment information, ideas and opportunities. For more information about this and other topics you can visit http://www.johnkaighn.com and http://www.jerseybenefits.com
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Understanding the ROTH IRA

The ROTH IRA is a retirement product which allows the withdrawal of tax free income from a tax deferred account, and it is a fantastic savings vehicle for people of any age, but particularly for younger people. Congress created The Roth IRA on January 1, 1998 as a result of the Taxpayer Relief Act of 1997. It's named after the late Senator William V. Roth, Jr. The Roth IRA is different from the Traditional IRA because it provides no deduction for contributions, but if you meet certain requirements, all earnings are tax free when you or your beneficiary withdraw them, whereas with the Traditional IRA taxes would be due upon withdrawal. Some other benefits of the ROTH IRA are no early distribution penalty on certain withdrawals, and there is no requirement to take minimum distributions after age 70½.

While the decision to use a ROTH IRA is based on several factors, the presence of a retirement plan in the workplace is one of the major reasons for utilizing a ROTH IRA. If you still have the ability to save, after committing the maximum contribution to your 401k plan, then the ROTH IRA makes sense, because you are limited in the tax deductibility of contributions to a Traditional IRA, if you have a workplace pension plan or 401k. For people who have no workplace retirement plan, the bottom line is that most people are better off with the Roth IRA. The reason is that the dollar amount in Roth IRA is effectively larger than a Traditional IRA because it holds after-tax dollars. If you can take advantage of this feature of the Roth IRA by maximizing your contributions you'll add greater tax leverage to your retirement savings.

There are two ways to establish a Roth IRA either by making a regular contribution to a Roth IRA or by converting a traditional IRA to a Roth IRA. As mentioned before, contributions can be made to a Roth IRA even if you participate in a workplace retirement plan. These contributions can be as much as $4,000 for 2007 with a $1,000 catchup for those 50 and older. There are just two requirements for contributing to the ROTH IRA. First, you or your spouse must have compensation or alimony income equal to the amount contributed. Secondly, your modified adjusted gross income can't exceed certain limits. For the maximum contribution, the limits are $99,000 for single individuals and $156,000 for married couples filing joint returns. The amount you can contribute is reduced gradually and then completely eliminated when your modified adjusted gross income exceeds $114,000 for single individuals or $166,000 for married couples filing jointly. These dollar amounts apply through 2007. You can convert your regular IRA to a Roth IRA if your modified adjusted gross income is $100,000 or less, and if you're single or file jointly with your spouse. You'll have to pay tax in the year of the conversion, but for many people the long-term savings is preferrable to consequesnces of the tax incurred.

Distributions from Roth IRAs are tax-free until you've withdrawn all your regular contributions. After that you'll withdraw your conversion contributions, if any. Special rules apply when you withdraw your conversion contributions. When you've withdrawn all your regular and conversion contributions, any subsequent withdrawals come from earnings. The withdrawals are tax-free if you're over age 59½ and at least five years have expired since you established your Roth IRA. Otherwise, with a few exceptions, they're taxable and potentially subject to the early withdrawal penalty.

John Kaighn is a Registered Investment Advisor with Jersey Benefits Advisors and writes articles on various business and investment information, ideas and opportunities. For more information about this and other topics you can visit http://www.johnkaighn.com and http://www.jerseybenefits.com

Summer Solstice Heats Things Up!

Among other items of interest, such as the Commerce Department's release of data on housing starts and the Labor Department's disclosure of data on weekly jobless claims, this Thursday will be the longest day of the year as the summer solstice marks the official start of summer. Right on target, the temperatures here in the east are set to reach into the 90's, providing a scorching beginning to this festive season. With the core inflation reports of last week being somewhat benign, after stripping out the highly volatile food and energy prices, the market ended the week with a bang and could be poised, like the mercury, to creep up further this week.

Overall, the most recent economic reports seem to be verifying the renewed strength of the economy after the mid cycle slowdown, which we've discussed previously. With bond yields surpassing the 5.25% mark briefly last week, bond investors have realized the next move by the Fed on interest rates may be an increase, although my personal belief is that until the depth of the housing slump and subprime mortgage debacle is determined, the Fed will be on hold. Once again, the yield curve is sloping in a positive direction, which bodes well for economic strengh. Perhaps the inversion of the yield curve for part of 2006 was merely indicating the mid cycle slowdown that occurred, and not predicting recession!

So as you mark the summer solstice with whatever ritual suits your tastes, remember the economy and the markets have some upside potential left, even if we do begin to see some increased volatility going forward. I can't say this enough, but it bears repeating, that the markets are not predictable on any given day, and rarely go up without retreating. This ebb and flow of stock prices is what keeps things interesting and allows the supply and demand of stocks to be reset as the psychological drama among investors unfolds. Happy First Day of Summer 2007!

John Kaighn is a Registered Investment Advisor with Jersey Benefits Advisors and writes articles on various business and investment information, ideas and opportunities. For more information about this and other topics you can visit http://www.johnkaighn.com and http://www.jerseybenefits.com

Before the Onslaught

Every now and then there comes a time to diverge from my central theme of investment information and divulge facets from other aspects of my life, as well as other interests and passions. With the first full week of June nearly complete and temperatures soaring into the 90's here in sunny Cape May County, I am looking forward to one of the perks of living in a tourist area before the tourists show up inforce.

Most schools still have at least one more week, and so our beaches don't really get crowded until after the 15th of June. Therefore, it is the perfect time for me to enjoy a leisurely stroll along the water's edge today, perhaps in Stone Harbor, and a few hours of reading on the beach tomorrow in Ocean City. It is rather nice to be able to choose a different town and beach on any given day, because they are all so unique and variety is the spice of life. If I have the urge for a great meal and drink, the Washington Inn or Virginia Hotel provide the perfect locale for a romantic dinner in Victorian Cape May. The porch at the Virginia Hotel is a superb spot for sipping mojitos while absorbing the ambiance of the Victorian bed and breakfast hotels which line the festive streets.

It is the little pleasures that keep me plodding along through this adventure we call life, replete with its successes, failures, joys, tradegies and fun. My daily schedule, as intense as it sometimes can be, is punctuated by these delights which I relish ocassionally. The best part of my routine is that it is really not a routine at all, but rather a series interconnected events which ebb and flow with the seasons. The summer season is about to come into full bloom and my schedule will be changing along with the floral landscape.

In life I wear several hats which have a bit of a convergence. My role as guidance counselor is about to end for the current school year, which provides more time for me to spend visiting, calling and satisfying my investment advisory clients as well as the opportunity to enhance my online businesses. It's all about providing insights, information and guidance, so my routine just changes. Luckily this occurs at the right time, because the gardens at my home require my constant attention and care. I've been particularly delighted this spring by the array of color provided by the azaleas, rhododendrons and now mountain laurel which populate my property. As my dogs and I traverse the trails which wind through my yard and the National Wildlife Preserve on the eastern border of my property the fragrance of the mountain laurel is truly intoxicating.

So as the markets gyrate a bit this week, the only numbers which have any real meaning, in my opinion at this juncture, would be a DJIA close of 12,308 and a S&P 500 close of 1,385 because these closing levels would represent a 10% correction from the highs set this spring. Even a drop to these levels would not be an indication of trouble in the markets, but merely a healthy retraction, a little ebb and flow, so to speak.

Thank God it is Friday and the weekend is finally upon us, especially as many of us swelter today in the oppressive heat and humidity descending on the eastern seaboard. To anyone who reads this, get out and smell the roses, soak up the sunshine, don't overreact to the market news you'll hear this week and come visit South Jersey when the schools close. To the locals, we better get out there and enjoy today and early tomorrow, because the onslaught is about to begin! Did I hear rum runner, marguerita, mojito or a nice cabernet sauvignon?

John Kaighn

If you are interested in free information about Investments, Business, Marketing or Online Opportunities, visit my websites at:
http://johnkaighn.com
http://jerseybenefits.com

Markets Release Some Steam

We have been experiencing a bit of a sell off in the markets over the last few sessions. If you remember, I made a statement here recently that it wouldn't surprise me to see the S&P 500, and the markets in general, have a bit of a sell off, after the S&P broke the old record set in 2000. As you know it did break the record, and now the sell off has begun.

We have had some sizeable gains in the market this year, and as you know, the market usually never moves in a straight line up or down. Whether this is the long awaited correction, which is defined as a 10% drop, or just a pause, remains to be seen. Traders will be heading for the exits, as investors begin to hunker down and absorb the blows to their portfolios. For long term investors, diversification and dollar cost averaging should help you weather the current storm and add to positions at a discounted price. I do not think this is the beginning of a bear market, as the economy has been exhibiting signs of increased strength recently.

Have a great day and stay tuned for other helpful bulletins to keep you aware of investment, economic and market news!

John Kaighn

For more information on the markets, business marketing or online opportunities, visit my websites at

http://johnkaighn

http://jerseybenefits.com

Email Marketing Essentials

If you want an email campaign to succeed, you don`t want to
offend anyone when sending your messages. Turn off a
consumer with your email and you can be sure they`ll
tune out your message. Don`t let this happen to you!

A message that earns respect makes sales. That`s why I will
begin with the topic of email etiquette. Train yourself
to always stick to the rules below when crafting your email
message to potential customers.

=> RULE #1 - ALWAYS WRAP YOUR LINES AT 65
CHARACTERS OR LESS

Whenever you write an email, always format the lines so that
they`re 65 characters, or less, across. To do this, you may
need to do a "hard return" by hitting "Enter" at the end of
the line.

Wondering why to limit your lines to just 65 characters?
(Good question! It shows you`re thinking.) There are two
reasons that "less is more":

-- The first thing to remember is that looking at a computer
screen for a long time causes EYE FATIGUE for many readers.
The shorter span of characters across the screen makes
reading easier and more appealing to the recipient of your
email message.

-- The other reason to go short instead of long is this:
some email clients AUTOMATICALLY ENFORCE LINE-WRAPPING
at 60-65 characters on received messages. If your email
is wrapped at 70, the content will arrive all "chopped up."
This makes it unattractive...and worse -- unappealing.

-- Tip within a Rule #1: Email clients such as Outlook
Express allow you to SET THE LINE-WRAP to any
character-width you choose. That means you won`t have to
hit Enter each time after typing 65 characters. Makes life
easier!

-- Tip within a Rule #2 - You can type 65 asterisks or
dashes in a Notepad file to create a template. Then paste
your email below it to see if any lines extend too far to
the right.


=> RULE # 2 - BE CAREFUL USING ALL CAPS

How many times have you changed the TV channel to avoid
listening to a screaming car salesperson? No one likes a
screaming salesperson...and no one likes a "screaming" email
message, either. Odds are, when someone has over-amped the
volume of their message by using too many capital letters
(not to mention too many exclamation points and other
punctuation) - you`re going to be turned off.

On the Internet, email messages written in all caps are
considered yelling. It`s okay to write some sentences and
some words in all caps, but don`t go overboard. (As you can
see in this message, I`ve tried to use capital letters to
help break up sections of the content from time to time)

-- Tip within a Rule: Consumers buy from a source they
trust. Emails in all caps are perceived as "shady" or
uneducated, and have an appearance that damages the
credibility of an offer.


=> RULE #3 - WATCH YOUR Ps & Qs (Spelling and Grammar)

Would you be influenced by an email selling you something
that had noticeable spelling and grammar mistakes? Sure you
would...and the influence would be negative, not positive!
When a consumer reads a sales message that`s filled with
errors, they think to themselves, "Good grief, this person
doesn`t even take the time to get his emails right. His
product is probably the same quality as his emails."

When you`re in business, YOUR IMAGE IS YOUR REPUTATION
and your reputation is the reason people buy from you or the
guy down the block. It`s essential that you create an image
of INTEGRITY, CREDIBILITY, and HONESTY in the mind
of your prospects. Sending emails filled with errors doesn`t
hurt your professional image...it destroys it. (Ouch!)

John Kaighn
Jersey Benefits Advisors
The Kaighn Report

Reassurance or Foreboding?

As we begin the first full week of June, many investors should be asking themselves the same questions Michael Santoli asked in Barrons this week, which are "after a biblical seven years of wandering, the Standard and Poor's last week finally surmounted its former all-time closing high, set near the apex of the market bubble in 2000. Is this a moment to celebrate or lament, a sign of reassurance or foreboding?"

These are very good questions, indeed, because one can never be sure of the direction of the market, but higher highs are usually the sign of a bull market having the strength to continue the upward trend. However, in the short term there could be some gyrations on the way to the next record, because in a bull market one must also witness higher lows! Don't get too caught up in the various news reports you'll hear, but rather continue with your investment plan in order to reach YOUR goals.

I've reprinted an article from my newsletter written in the first quarter of 2005 that spoke of concerns about speculation in the housing market and how to cope with it, especialy if you needed to buy a home. I sure hope we don't enter another era of speculation in the stock markets again, but then, who would have thought we could create a bubble in housing, so soon after the 2000 stock market bubble? One point I must make is that even though bubbles were created, much REAL WEALTH was also created in the 2000 stock market bubble and the recent housing bubble, depending on when and what you bought. A true advertisement for the warning, "Buyer Beware".

Speculation and the Housing Market in 2005

When Greenspan finishes his term as Fed chief, I am one person who surely will miss his succinct use of language to make a point. The use of the term “irrational exuberance” to explain the dotcom bubble, in hindsight, was right on the money. In discussing the current housing boom, he has used the word “froth” to discuss the “relatively exotic mortgages which are of particular concern”. While there are no predictions of a dotcom era style bust in real estate, the fact that 20% of new mortgages in 2005 are “interest-only”, up from 5% in 2003 is the froth of which Greenspan speaks. Consider a 10% drop in home prices for a moment. With a 10% down payment and an “interest-only” ARM, all equity in the home evaporates, and monthly payments eventually will rise with no principal reduction, because interest rates are rising. Does this sound just a bit frothy or even speculative?

The point is to always remember the cyclical nature of the economy, the stock market, the housing market and life in general. In the economic cycle, we are in the middle of the expansion phase, and within this phase, there are ups and downs. The market will rise and fall during this part of the cycle, but the trajectory should be positive if you think long-term. Housing has been in a boom, since the dotcom bust and could very well be near the top. If you need a house, because it will be your home, shop wisely. If you are looking at real estate as an investment at this juncture, perhaps you could wind up in a situation like the above mentioned scenario.

Here are some facts to consider if you are concerned about the housing market. According to Business Week, “today’s housing prices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra low rates of a weak economy. Either the economy’s long-term prospects will get worse, or rates will rise. In either scenario, housing will weaken.” We’re already seeing interest rates rise, so “perhaps housing is entering a more sober period when it won’t be the prime generator of growth.” Overall, the feeling is the housing sector will cool off, and areas with more speculative markets will see more depreciation in home values than those which had a more modest increase over the last three years. This has happened before, and it will happen again. This is no new paradigm, it is just “the cycle”.

John Kaighn is a Registered Investment Advisor with Jersey Benefits Advisors and writes articles on various business and investment information, ideas and opportunities. For more information about this and other topics you can visit http://www.johnkaighn.com and http://www.jerseybenefits.com

China Hiccups

The US markets opened lower today, as investors digested the overnight news from China. Stocks in China were down sharply on Wednesday because the government raised a tax on stock trades. The reason for this tax increase is an attempt to dampen some of the enthusiasm for stocks, due to a market boom. There are growing concerns about a possible bubble.

The main Shanghai Composite Index dropped 6.5 percent to 4,071.27 after hitting a record high on Tuesday. The Shenzhen Composite Index for China's smaller secondary market closed at 1,199.45 a decline of 7.2 percent. The market plunge came on the heels of an announcement by the Finance Ministry that tripled the "stamp tax" on stock trades from 0.1 percent to 0.3 percent. The change was effective Wednesday, as the the official Xinhua News Agency reported the ministry was trying to "cool the stock market".

The last time stocks plunged in China, which was February of this year, emerging markets took it on the chin. Stocks in the US and other mature markets also swooned as investors reacted to the news. Anytime you have a precipitous drop in a major market, there are bound to be ripple effects in all of the world's markets. One thing to remember is the fact that the markets do not move in a straight line, so after a period of increasing share prices, one has to expect a decline sooner or later. Hopefully, this will not be a correction that reclaims all of the gains made this year, but it is a distinct possibility. If you have a few dollars sitting on the sidelines, this may present an opportunity to buy shares at a lower cost. For those of you who continually dollar cost average, you will automatically reap the benefits of any sale on shares.

Later in the day, the US markets responded to the release of the FOMC minutes, as the S&P 500 index advanced to its first record close in more than seven years ending at 1,530.23. Investors concluded from the Fed report the evidence of a cooling economy might be a reason for the Federal Reserve to begin cutting interest rates in the second half of the year. The DJIA also closed in record territory at 13,633.08 as the markets shrugged off the news from China. Sometimes you just never know how the market will react to news, which is why I always recommend not letting emotion rule your investment decisions.


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Remember the Point of the Holiday

A friend emailed me and commented that I write a lot about the markets and investments, but wanted to know if I had any other interests. So for anyone who might be interested, I love the beach, especially reading while relaxing. I'm also into boating and gardening, as well as walking and doing my daily workout. Well, that's enough about me! I hope you all have a great Memorial Day holiday, and if you are down here in South Jersey, enjoy our beaches and boardwalks. Also, take a few minutes during your weekend to remember the reason for the holiday. There are many young men and women in harm's way, and many who have given their lives in defense of this country, throughout its history. Take some time to reflect on their sacrifices, be safe on the highways and have a wonderful weekend.

The S&P 500 still has not broken through the record we've talked about for two weeks now. It made it to within 2 points of 1,527.46 earlier this week, but closed out at 1,515.73 today. The Dow ended the week at 13,507.30 and the NASDAQ closed at 2557.20 ending a lackluser trading week. The markets will be closed on Monday for the Memorial Day Holiday, so with that said, I will signoff until we some more information to digest.

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Amero Paranoia

I've recently read a few blogs that have discussed the creation of a "new currency" called the Amero, which supposedly is being clandestinely prepared to replace the currencies of Mexico, Canada and the United States. Once again the conspiracy theorists and pessimists, who believe America is in decline and the collapse of the dollar imminent, are seizing upon the news of a decline in the dollar as a reason for spreading their paranoia. They cite the rise of China as an economic power, and the trade imbalance we have with them as further evidence to support theories of the collapse of the dollar, even as China prepares to buy $3 billion of stock in Blackstone Group's IPO, in order to diversify their portfolio.

I did a search on the net to find more information about the Amero, and found ONE page of references to it. I've copied the best source I found, which has links to just about all the other articles you can find on the net, for those of you who might be interested in reading just about all there is on the subject. It is always important to find out all you can about a subject, before you report it as fact. My interpretation of the information about the Amero is that we are a long way from any serious discussion about such a currency, and even further away from relinquishing our sovereignity through the actual adoption of it.

The links didn't transfer over to this blog, but if you would like to see the same information with the links included, please go to my blog on myspace: http://blog.myspace.com/jerseybenefits

Here is the information I've researched:

"Sovereignty is not infinitely valuable"
Herb Grubel

These are the words of a Canadian advocate for the creation of a new currency for North American
countries. His theories seem to lead the pack of similar philosophers and economists.

In a foreword for Grubel's study on the prospect, Gordon Gibson characterizes the situation as such:
"Most fundamentally however, Mr. Grubel makes the sensible observation that "sovereignty is not
infinitely valuable." Every nation in the world, even the mighty United States, has traded off
elements of sovereignty to multi-national associations such as the WTO, NAFTA, and the United
Nations. Canada has been in the forefront of encouraging every such development--a natural policy
for a middle power."
For a "middle power" whose economy is weak and exchange rate declining steadily, such a maneuver
may be in the best interest. This is not the case when the strongest economy in the world, the United
States of America, considers diluting its monetary system with Mexico, a third world, "developing" nation
and Canada, a second socialist nation on our two land borders.

Further, U.S. sovereignty is, perhaps, our most precious facet, as defined in our Declaration of
Independence and Constitution. Our sovereignty is part of the formula that makes our Republic the most
unique political and cultural experiment in the history of civilization.

Rather than try to decode, re-describe and publish commentary on the prevailing philosophies and
arguments surrounding the need and advantages for a common hemispheric currency, this site provides
links to information from legitimate proponents and detractors.

Be advised that there is a lot of code and doublespeak in these articles. Few of the more elaborate
articles discuss the disadvantages to the U.S., but concentrate on the advantages to Canada and Mexico.
The most significant and timely aspect of the movement involves current U.S. participation in a
elaborate international program called the "Security and Prosperity Partnership Of North America, "
described elsewhere on this site.

The link-listing method on this site is in development. If you have particular comments or would like to
inform the host of this site as to a link to be reviewed for inclusion in this or any other section of this site,
please visit the "contact" page and inform us by email."

These links reach discussions of the "Amero, " "dollarization" and offer insight to the conditions of the
U.S. dollar, as well as Canadian and Mexican currencies.
The Case for the Amero: The Economics and Politics of a North American Monetary Union
Herbert G. Grubel--Herbert G. Grubel was David Somerville Chair in Taxation and Finance, The Fraser
Institute, and Professor of Economics (Emeritus), Simon Fraser University. He has a B.A. from
Rutgers University and a Ph.D. in economics from Yale University. He has taught full-time at Stanford
University, the University of Chicago, and the University of Pennsylvania; and has had temporary
appointments at universities in Berlin, Singapore, Cape Town, Nairobi, Oxford, and Canberra.
Herbert Grubel was the Reform Party Member of Parliament for Capliano-Howe Sound from 1993 to
1997, serving as the Finance Critic from 1995 to 1997. He has published 16 books and 180
professional articles in economics dealing with international trade and finance and a wide range of
economic policy issues.

The Plan to Replace the Dollar With the 'Amero'
Mr. Corsi is the author of several books, including "Unfit for Command: Swift Boat Veterans Speak
Out Against John Kerry" (along with John O'Neill), "Black Gold Stranglehold: The Myth of Scarcity
and the Politics of Oil" (along with Craig R. Smith), and "Atomic Iran: How the Terrorist Regime
Bought the Bomb and American Politicians." He is a frequent guest on the G. Gordon Liddy radio
show. He will soon co-author a new book with Jim Gilchrist on the Minuteman Project.

American University
The Threat of the Dollar: A case study

Wikipedia:
The online encyclopedia

Queens University, Canada
One of Canada's leading universities, with an international reputation for scholarship, research,
social purpose, spirit and diversity. Consistently ranked among the top universities in Canada,
Queen's is known for its high quality and incomparable 24-hour learning environment. The
University was established by Royal Charter of Queen Victoria in 1841 - twenty-six years before
Canadian confederation. Classes were first held in 1842. The earliest degree-granting institution in
the united Province of Canada, Queen's has reflected and helped shape Canadian values and
policies, educating many of the country's most notable political and cultural figures.

Help.com
Help.com is a network of people dedicated to helping you. Find answers to important questions.
Learn new skills. Achieve personal goals. Get inspired. Fix what’s broken. Build. Create. Solve
problems. Change things. Accomplish stuff that matters.

BankIntroductions.com
BankINTRODUCTIONS.com, is a private research group and banking introductions services
company based in Vancouver, British Columbia, Canada.

Fiscal and Generational Imbalances: An Update Adobe Reader required--get it here, free
A report to the Federal Reserve by Jagadeesh Gokhale and Kent Smetters, August 2005

Happy Memorial Day

The summer months, which usually are considered the doldrums by those in the investment community, could provide some interesting outcomes as we head into the Memorial Day weekend and what many see as the onset of the summer season. This is also the start of the summer driving season, and gasoline is already hovering around $3.00 a gallon. As hurricane season also begins to heat up, I hope there are no direct hits on the oil infrastructure, or the possiblity of $4.00 a gallon gasoline I've read about could become a reality. Meanwhile, the Dow Jones Industrial Average continues to set record after record, and now the S&P 500 is is less than 5 points away from its all time record of 1,527.46 set in 2000. If the Federal Reserve holds interest rates steady at the FOMC meeting in June, they will have held rates steady for a year, something the Fed does not do often. The Fed has held its target for short-term rates at 5.25% since June 2006, after raising it steadily for two years to tame inflation. Banks use the rate as a benchmark for pricing consumer and business loans. These issues could be setting the stage for a very interesting second half of 2007.

For well over a year now, I've been writing about the dual concerns of a slowing economy and inflation. Fed policy has been concerned with remaining hawkish on inflation, while some economists, investors and journalists expected rate cuts as early as September 2006. The midcycle slowdown economists predicted seems to be exactly what has happened, with the bottom being symbolized by April's paltry retail sales figures. While many thought the housing slump would drag the economy into a recession, it seems the builders and subprime borrowers are the ones bearing the brunt of the pain. Most homeowners remain solvent and able to meet mortgage expenses. As long as the employment numbers continue to hold steady, consumers should be able to continue to meet obligations and make discretionary purchases.

Where the economy goes from here no one can predict with certainty, but there are reasonable hypotheses one can make based on the data. This economic cycle is in the mature phase of the current expansion and the mid cycle slowdown was like a breather, before growth picks up again. Expansions don't last forever, so at some point in the future we will have a recession again. With that said, it looks as if the second half of 2007 will be a time when growth reignites and inflation will continue to be the number one concern of the Fed. With the productivity of workers declining, and the pool of skilled workers drained, labor will begin to demand higher wages. Usually, when the economy slows down unemployment ticks upward, but that hasn't happened during the first two quarters this year. Some economists think this is because the slowdown in housing hasn't worked its way down to the employment figures. Others think there is a possibility the economy is actually growing faster than the GDP numbers indicate. As we head into the Memorial Day weekend, one thing is certain, gas is going to cost you about $3.00 a gallon. As far as interest rates are concerned, the jury is still out. Will the Fed raise, cut or hold? Will the S&P 500 EVER break 1,527.46? Time will tell. Enjoy the holiday!

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Utilizing Affiliate Programs

If you own your own website or blog, affiliate marketing programs can greatly improve your income and enhance your credibility among your customers. When signing up for affiliate programs, it should involve consideration as to the types of information that you already have on your website or blog. For example, you are more likely to have increased sales if you own a website about cats and place affiliate links on your website related to pet care. The affiliate products that you promote should always be related to the primary website or else you run the risk of confusing potential customers. Confused customers may not provide the business you are hoping for.

There are many affiliate marketing programs to choose from, so selecting an appropriate one for your website should not be too difficult. Before you join, you want to be fully aware of the pay structure and any changes that could be made to the pay structure. Be sure to thoroughly review the affiliate program and make sure you understand it completely before you associate your name with it. Credibility is very important if you want to build a loyal group of customers. If you mislead them, they will not be back.

If you are an affiliate, many times you will need to do more than simply place their link on your webpage. Although, some affiliates are simply link based, others may provide you with an entire internet based operation, or what is sometimes called a turnkey solution. Be sure to keep the links on your site updated. Some companies may be promoting seasonal items and you will appear more credible if your links reflect the seasonality of your affiliates. If a customer visits your site in December and notices that you are still promoting summer items, they are more likely to leave your site without considering the other information or products that you offer.

Sometimes a company goes out of business and their links can be replaced by an adult site or one that is unrelated to your content. If you do not keep on top of updating your links, you could be promoting an offensive or unrelated site. You should constantly review the various links you've placed on your site and eliminate dysfunctional links, because customers can get very frustrated if a link doesn't do what it is supposed to do. If your website is professional, visitors are more likely to spend time on your site, come back for subsequent visits and eventually convert to being paying customers.

John Kaighn is a Registered Investment Advisor with Jersey Benefits Advisors and writes articles on various business and investment information, ideas and opportunities. For more information about this and other topics you can visit http://www.johnkaighn.com and http://www.jerseybenefits.com

Fed Still On Hold

The Federal Reserve left interest rates on hold at the current level of 5.25% during the Federal Open Market Committee meeting today. The central bank noted the economy has been slowing, but is still expected to grow between 2.5% and 3% this year. As a result, they felt inflation is too high for their comfort level and still the number one threat to the economy.

The Dow Jones Industrial Average sprinted to another record close finishing at 13,369.29 for the session. The Standard and Poor's 500 added 4.86 points to close at 1,512.58, which is getting closer and closer to the record set in 2000, when the index reached 1,527.46. The Nasdaq composite index rose 4.59, or 0.18 percent, to 2,576.34. Of course, it is still far from the record set in 2000. Maybe someday, it too will surpass the old record, but I am not holding my breath for it to happen before the end of the decade.

Markets, Limbo, News and Opinions

As we have been witnessing for the last seven months, the Dow Jones Industrial Average continues to set new records, since surpassing the old record attained back in 2000 at the height of the Tech Craze. Once again, the DJIA closed Friday at 13,264.32, another record high. Since the Dow surpassed the old high back in October of 2006, I have been concerned that the broader market, represented by the S&P 500 index, hasn't beaten its old mark, which was also set back in 2000. However, the S&P 500 has stealthily been adding points and is now within 21.84 points of surpassing its previous record of 1,527.46. The broader market setting a new record and adding to it would be a very positive sign for the continued advance of the current bull market. This past Friday's weak employment numbers indicate a further slowing of the economy. This should give the Fed the ability hold interest rates at the current level during the FOMC meeting on Wednesday. The Treasury Department releases the Producer Price Index on Friday, which will give a further indication of the direction of wholesale price inflation.

While I expect the S&P 500 to beat the old mark this upcoming week, I don't think the advance of this bull market will, by any stretch of the imagination, be easy or rapid going forward. One of the things I expect is that shortly after the S&P 500 sets a new mark, we could see a bit of a sell off and profit taking, which is a good thing. It is interesting to note this current rally is being led by mostly professional investors, while the retail investor is not really participating. My thoughts on that one are that the "cocktail party conversation" investors are still occupied by real estate and trying to flip houses. By the time these trend setting, band wagon jumpers climb aboard the stock market train again, the bull market will be nearing its peak. Let's hope we have some time before this happens. I'm hoping another year or so, because it may take some of them that long to sell their speculative houses!

This morning I also read an article in my local paper about Limbo, and the fact that Catholics, and any other religion that espoused the concept before, don't have to believe in it anymore, if they choose not too. For those of you who don't know the meaning of Limbo, it is the place an unbaptized baby goes if it dies. I just wonder if that means the word will disappear too, because then we wouldn't have a way to describe where our county is right now. Limbo, you see, seems to be as good a word as any to describe the standoff between Congress and the President on the funding of the Iraq War. The Democrats are showing exactly why they are so out of touch with the huge group of Americans who are neither right wing conservatives nor tree hugging liberals. Instead of coming up with a plan to have meaningful debate about the Iraq War, the Democrats have acted like they won a sweeping majority in both Houses of Congress, rather than their rather narrow majority. Immediately, out came the white flag and the pessimistic, defeatist attitude. Of course, the President hasn't been much better at listening to anyone.

So, here we sit in LIMBO, waiting for someone who "gets it" and stops catering to and polarizing the right and the left in this country. While the 2008 campaign is already in full swing, I am really somewhat disturbed by the lack of qualified leaders who might actually be able to unite this country. It must be done in the middle. We have to stop fighting the old battles between the right and left, and realize there is a real enemy out there that wants to destroy everything America stands for, and he isn't going away! I think it is safe to say most Americans are somewhere in the middle politically. Many moderates believe it is a woman's right to decide the fate of her unborn child within limits, don't have a problem with civil unions and what people do in their bedrooms, would like to keep taxes low, realize the government wastes tons of money and would like to see it be more frugal, hate the fact we are having soldiers killed in Iraq, but realize we CAN'T CUT AND RUN, understand we can't close our borders and isolate ourselves from the rest of the world, understand the threat posed by islamic terrorists, probably inhaled, and want to see policies that bring the most jobs and wealth to the largest majority of people in our country. What is your feeling on some of these issues?

John Kaighn

http://jerseybenefits.com

http://johnkaighn.com

Midweek Economic Report

The Dow Jones Industrial Average surpassed 13,200 for the first time today, after a report on U.S. factory orders generated strong investor enthusiasm and optimism about the economy. The Dow gained more than 75 points and reached its second straight record close. The Commerce Department reported orders to U.S. factories rose 3.1 percent in March. This was the most robust in a year, led by strong demand for commercial aircraft. This increase was much higher than the 2 percent rise many analysts had been anticipating. The report was accompanied by a sharp increase in the level of business investment. The Labor Department will be reporting on March job creation and unemployment on Friday, and investors will be eyeing this report, as well corporate profits. All of this information will be dissected in an effort to ascertain how rapidly the economy might be slowing and whether earnings reports, which for the most part have beaten expectations, might continue to give stocks a lift. With the direction of the economy by no means certain, the competing scenarios of inflation or economic slowdown, which we've discussed since last year, still ring true today.

The term used by economists to describe what seems to have happened at this juncture is a mid cycle slowdown. With the initial first quarter GDP growth reported on Friday at an anemic 1.3%, and with the reports concerning factory orders and business investment reported today, the conclusion one could draw is the economy bottomed in the first quarter. If this is the case, it implies there may be quite a bit more life in the current expansion. The stock market, which is a leading indicator, seems to be signalling higher highs are in the future. If this is a true mid cycle slowdown, it would be very positive because it helps to ease concerns about inflation, which in turn could mean the Fed will continue to hold interest rates steady.

In all fairness, it is important to point out this bullish outlook is not shared by everyone. While some of the statistics can give one a true dose of optimism, there are those who look at the weaker dollar, the housing slowdown and the endless use of leverage in the financial system as a harbinger of bad times to come. Those in the bear camp tend to feel the stock market is overly optimistic about an economy that has slowed substantially and will continue to do so in the face of ever mounting pressure on consumers, due to decreasing home values and the inability to refinance mortgages with ever increasing monthly payments. According to Alan Abelson, the fabled writer for Barrons and the quintessential bear, "We think the economy will slide into recession, as the drag from housing and unprecedented consumer debt make themselves increasingly felt. We think the dollar will continue down the slippery slope, complicating Mr. Bernanke's life and inducing slumpflation. We think this overleveraged, overheated, overhyped market will blow itself out and touch off a chain reaction that'll rock global bourses. And all this will happen, if not tomorrow, then soon enough, we're afraid." These are some very sobering thoughts to ponder as we march toward Dow 14,000. I am relatively sure that number will not reached in the scant six months it took to go from 12,000 to 13,000. But then again, you just never know!

So how does one deal with the starkly different opinions about the direction of the economy and the markets? Well, you could sit on the sidelines in cash. The problem with that is, you just never know when it is safe to jump back into the market. I think it is better to have a disciplined, diversified, long term approach to investing. You should use a mix of cash, stocks, bonds, mutual funds or ETF's, commodities and real estate at a comfortable level of risk for YOU. This diversification can help protect you from the gyrations of one or more asset classes, when they fall out of favor. There are many risks lurking out there in the world to upset your apple cart. While you can't protect yourself from every risk to your portfolio, the more diversified your assets, the better chance you have of riding out the financial storms you'll encounter.

John Kaighn

http://jerseybenefits.com

http://johnkaighn.com

Diversification Among Asset Classes

There has been a great deal of press in recent years given to portfolio diversification, in particular to the use of hedge funds as a means of alternative investment strategy. Many times these funds are referred to as vehicles to use for diversification, because they are not linked to traditional investments, such as stocks and bonds. However, on a closer inspection, it becomes evident hedge funds, while using sophisticated tools such as derivatives, controlling purchases in companies, merger arbitrage and venture capital, are still very much connected to traditional investments, and also remain illiquid, expensive and prone to risk.

Are these investments suitable for your portfolio? The answer depends on your appetite for risk, tolerance for illiquidity and overall investment goals. In the past, these funds were marketed to very high net worth individuals, but recently, this unregulated asset class has been marketed to a larger group of investors, in order to increase market performance during times of low returns. Some fee-based Financial Advisors have been recommending them, to increase returns in portfolios, where the advisory fee is deducted from quarterly returns, and paid directly by the client. Many hedge funds have had lackluster performance recently, and this can lead managers to increase the risk, in order to increase the return for the year. Accurate data has only been collected on hedge funds for about 10 years. This doesn't give much information on which to " base an analysis, so you need to exercise caution in interpreting such results", according to Vikas Agarwal, of the J. Mack Robinson College of Business at Georgia State University.

After the technology bubble burst in 2000, there was a rotation out of tech into real estate, energy, natural resources, bonds and emerging markets. Long term holders of real estate and these other asset classes saw huge gains, and mutual funds in these asset classes were the market leaders since the tech bust. Last year, investors began to move money out of real estate as the sector cooled rapidly. In my opinion, the idea is not to switch asset classes and try to time these these rotations, but rather to attempt to build a portfolio, which holds positions in all of these asset classes. This requires a great deal of discipline, because it means holding and purchasing positions, which may be out of favor, at the same time you are building positions in sectors, which are in favor. This is why I recommend adding to your portfolio through dollar cost averaging, and monitoring performance on a calendar year basis. When you look at your statement, check a newspaper, or review performance on the web, you get a snapshot of performance on that date. You will get the year to date return, which is valuable, but the 3 and 5 year returns are as of the date you are looking. While this information is definitely useful, be sure to check your year end data to analyze your annual performance. This should keep you from making knee jerk decisions based on short term news events.

John Kaighn
Jersey Benefits Advisors
http://Jerseybenefits.com
http://JohnKaighn.com

Market & Economic News Update

The flurry of positive earnings reports and somewhat benign inflation news has given the Dow Jones Industrial Average enough legs to be within 39 points of the 13,000 mark, as the markets take a breather this weekend. Even with a 4.5% drop in Shanghai, the US markets barely blinked, before resuming their upward surge. Given all of the negatives lurking out there, such as the housing slowdown, the trade imbalance, the declining dollar and rising oil prices, the market has exhibited some remarkable strength. This is because the strong earnings demonstrate the economy may not have slowed as much as previously thought during the first quarter. If this strong economic performance continues during the second quarter, further gains in the averages should continue.

While the 13,000 mark is really of no consequence, other than a number attained, every time the average breaks a 1,000 point increment, it does give one the opportunity to pause and reflect about it being a milestone of sorts. Of course with the declining dollar, it is a good thing we are not evaluating our portfolios in Euros, because if that were the case, we might not be quite as ecstatic. While the decline in the dollar gives the indices a lift which boosts portfolio values and also improves the trade balance, too steep a decline can also be a trigger for inflation. What this means is the Federal Reserve will have to continue their balancing act between controlling inflation and moderating growth for the forseeable future. My guess is we could see interest rates remain in a holding pattern, unless economic growth picks up further in the second quarter.

The growth in Gross Domestic Product will be reported on Friday and Lehman Brothers is anticipating 1.8%, while the consensus is somewhere around 2.1%, less than the 2.5% growth in the fourth quarter of 2006. Anything below the 2% level will have investors clamoring for a rate cut, but I really don't think the Fed will comply. It is still a wait and see situation, which is a very familiar scenario at this juncture. Stay tuned for further updates.

Reflecting on the Virginia Tech Tragedy

As a counselor and parent of a college graduate and college student I need to offer my most sincere condolences to the parents, students and staff members of Virginia Tech, who were so horrendously affected by the tragedy on your campus. There are really no words that can convey to you the extreme sadness that I feel, and I know the feelings you are experiencing, especially those who lost loved ones, can't even begin to be understood by most of us. The outpouring of grief by so many people who don't even know you must help somewhat, but in the end, the utter senselessness of this entire experience must be completely overwhelming. I only hope you can find some hope and healing in the days to come.

As the media continues to churn out multiple stories about this horrific event, one of the themes that constantly emerges is why wasn't more done to stop this from happening. This is the one thing you can always count on from the pundits in our media establishment. It seems they always want to find closure by placing the blame on one or more of the institutions involved in the tragedy. Unfortunately, our medical, psychiatric, education and law enforcement communities are ill equipped to determine in advance whether an individual has the capacity for this level of violence. Since many politicians and corporate CEO's exhibit some of the personality traits of psychopaths, and there is truly a fine line between genius and insanity, as evidenced by the endless parade of celebrities involved with self destructive behaviors, the impulse to say this young man should have been stopped long ago, due to the "signs he exhibited" is foolhearty. Most psychopaths are very intelligent and adept at acertaining the intent of psychological tests, and if we tried to isolate people from society, due to "signs they exhibited", it would probably be the least sophisticated and least violent of our psychiatric population, not the cold hearted killers. It usually takes a triggering event to cause a psychopathic personality to resort to violence of this scale, and this triggering event may be something that is eventually uncovered.

So, as you watch the various specials on television and read the multitude of solutions offered by journalists, try to remember the innocent victims of this tragedy and feelings of their families, who are suffering beyond belief. Don't be quick to rush to conclusions about who failed to do what in the heat of the moment, because it is easy to do that in hindsight. There is just one person to blame for this terrible act, and that is Cho Seung-Hui. We are all ultimately accountable for our actions, and while it is truly unsettling to attempt to understand why such a random, violent act occurs, the perpetrator of this massacre has met his fate and will surely face a wrath worse than any we could devise in this world.

John Kaighn is a Registered Investment Advisor with Jersey Benefits Advisors, a counselor in the Middle Twp. School District and writes articles on various business and investment information, ideas and opportunities. For more information about this and other topics you can visit http://www.johnkaighn.com and http://www.jerseybenefits.com

Wondering Why You Are Not Getting Rich Quickly?

The one thing I have learned, when it comes to building wealth, is the fact that there are no short cuts to instant riches. While there have been a few high profile incidents of extreme wealth being created almost overnight, as in the case of Google and a few other "instant" successes, even in these cases there has been huge risk and extensive capital expended in order to create the wealth. In fact the most important factors which lead to success in business are the willingness to assume risk, willingness to expend capital, the ability to focus on an idea and bring it to fruition and some good old fashioned luck.

While I'll be the first to recognize there are some people who just seem to stumble into a situation and are in the right place at the right time, or that some folks will win the lottery, sell a stock at just the right time, or buy and sell real estate for a quick profit, most people who have built wealth have done so over time. Furthermore, they approach investing with a disciplined plan and the relentless pursuit of their dream. I will focus the rest of this article on the people who build wealth through a disciplined approach. Following this model is more likely to lead to the desired goal of financial security.

Many people wish to own their own business and be an entrepreneur, but many of us don't have the "brainstorm idea" which leads to a blockbuster business, or one that totally changes the dynamics of a business model. Luckily, this is not necessary in order to succeed as an entrepreneur. While it would be nice to come up with one of these blockbuster ideas, there are plenty of other ways to become the owner of your own business. Purchasing an existing business is one such way to join the ranks of the business world. There are individual businesses and franchises which can be purchased outright, or financed by various means. This is usually an expensive endeavor, and usually requires leaving your full time job in order to manage the business. This also involves a degree of risk, but if you do your homework, and devote the time it takes to manage the leverage of the purchase price, plus the day to day operations, it can be an excellent way to build long term wealth.

If the idea of owning a business while maintaining a full time job is more your cup of tea, there are many business models which can facilitate this. Again, there is no free ride, because nobody is going to provide you with all of the tools to run a profitable business, without some cost. Unless you are strictly interested in doing a specific task at home for a fee, most of the business models I've reviewed for an at home or online business require money to be spent for hosting a site, joining affiliates and marketing. These are reasonable expectations when you utilize an existing franchise, or affiliate program. Developing multiple streams of income is very desireable and can be achieved by developing a home business along with your full time job. While your goal may be to eventually quit your full time employement, or augment retirement, developing an online or home business can be a rewarding way to be an entrepreneur.

So, if getting rich quickly is your main goal, then there is a good possibility you will continue to go from one "cocktail party conversation" trend to another, such as day trading or real estate flipping. We all know where those bubbles have led. This is the equivalent of gambling, and while I know full well sometimes people do quite well gambling, I don't recommend it as an investment technique. If building real wealth is your goal, then developing streams of income and systematically investing in diversified assets will lead to ever increasing equity and financial security. One day you'll look at your portfolio of investments and realize you've built wealth faster than you thought you would.

John Kaighn is a Registered Investment Advisor with Jersey Benefits Advisors and writes articles on various business and investment information, ideas and opportunities. For more information about this and other topics you can visit http://www.johnkaighn.com and http://www.jerseybenefits.com

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.