December 2007, 4th Quarter

It wouldn’t be January without a comment about my Trojan football team!
The Trojans (10-2, 7-2 Pac-10) won their final four regular-season games to earn an unprecedented sixth consecutive conference championship. It also gives them a record 32nd appearance in the Rose Bowl as well as a sixth straight BCS bowl berth. They easily won the Rose Bowl 49 to 17 over Illinois. Go Trojans!!

Money Magazine Makeover
I again had the pleasure of doing a money makeover for Money Magazine. The story is about a young school psychologist, Patty, who like so many others bought real estate at the peak of the market and will face mortgage resets in the near future. You can read the entire enclosed article to find out how Patty can bring herself out of her current bind without ‘mortgaging her future’.

Junk Mail and Going Green
Did you know that you can stop 90% of all bulk and junk mail from being delivered to you? Join for a $20 fee and they will stop your junk mail and plant 10 trees. I am doing what I can to become more “green” and help preserve the environment. I take my cloth bags to the grocery store, I recycle plastic, glass, cans and paper and dispose of paints, pesticides, florescent bulbs and batteries on a monthly basis at a designated drop off site. I got an artificial Christmas tree this year- also to stop my puppy from chewing a real one. If you want to cut paper use by Asset Planning, we can email your quarterly statements to you. Both TD Ameritrade and Schwab have electronic confirmation and monthly statements available.

2007: The year in review
What a crazy year this has been. The market has been more volatile this year with the subprime mortgage mess and the talk of recession in 2008. The S&P gained only 3.5% for 2007, the Dow gained 6.4% for the year. Large, mid and small cap value stocks were negative for the year and growth showed positive returns. This is the first year growth style equities had returns higher than value style during the past five years. Oil began the year at $51.57 and crossed $100.00 a barrel last week. Gold began the year at $650 per ounce and recently traded at $863, driven by the dollar’s steep decline against the euro. The euro finished at $1.4773 versus the dollar.
Will 2008 be a recession year? I believe the answer depends on how much lower home prices will fall and if the trouble with lenders persist. At the national level, a recession is commonly defined as two or more consecutive quarterly declines in real GDP. I think the GDP will grow by 1.5% in 2008, barely avoiding recession. I also think the Fed will cut rates again, but that will not help the homeowners that need to refinance their adjustable mortgages. Why? With home prices falling, most of the troubled homeowners cannot obtain an appraisal that will match or exceed their current mortgage. Also, lending standards have tightened and now require proof of income to obtain new mortgages. Foreclosures will increase, and market prices will fall further. The job losses in retail, mortgage and construction have impacted Orange County more than LA County. One positive is that 2008 is an election year and that usually bodes well for the market. Economists at Morgan Stanley and Merrill Lynch commented today that the U.S. Economy was transitioning into a recession at the end of 2007, based on the jobless rate of 5% in December.

Credit report
It is time to review your credit report for possible fraud and see who is accessing your credit information. You should review all your credit card accounts you have open and close those you do not use any longer. Having too much credit available will decrease your overall credit score. Go to and get your free report. You can also request the report by phone from any of the three credit reporting agencies and they will mail the report to you.

You may regret many things in life but you will never regret being too kind or too fair. -Brian Tracy