Asset Planning, Inc Comments
Fourth Quarter 2002

Every big accomplishment is a series of little accomplishments. To achieve maximum success, you must accept that progress is made one step at a time.

2003 brings new higher limits for 401k and 403b contributions. You will be allowed to contribute $12,000 this year and $3,000 is the contribution limit for your IRA. The estate tax application exclusion remains at $1,000,000.

If you have a taxable account with us, we have matched realized gains with losses for 2002 and took additional losses, where it was applicable, to offset income. The current limit to realize an additional loss is $3,000; the same limit has been in effect for thirty years. I am hoping the new Republican House and Senate will take action to increase this limit. It could be effective for 2002 and your taxes to be filed by April 15, 2003.

Success seems to be largely a matter of hanging on after others have let go.
-William Feather

Enough is enough. This coming March will be three years since the market peaked and began the infamous decline into the bear cave. The S&P has had negative returns for the last three years. 2000 was � 9.33%; 2001 was �12.15% and 2002 recorded a loss of �21.23%. The 5- year annualized return for the S&P 500 index is �0.54.
Bear markets can occur for three different reasons. First, prices of shares may simply decline as a reflection of a downturn in the economy and corporate earnings. Second, excessive valuations can collapse, as they did for many growth stocks over the past three years. Third, misguided government policies, political or major bank failures can paralyze the financial system.
The recent bear market has been more severe than the economy alone can explain. There's clearly been a correction in stock valuations. But, we haven't seen the pervasive problems in the economy that make for chronically depressed stock prices. Economic slumps almost always end within two years -- and corrections for overvalued P/Es rarely last longer than three years.
Everything seemed to point to recovery in the economy by the fourth quarter of 2002, but the fear of war with Iraq and North Korea weighed heavily on everyone�s mind. When the market fundamentals finally showed improvement, the political agenda kept the market from a sustained rally. I do believe we have been through the worst now and I look for positive returns in 2003. The first day of trading in 2003 brought a 3.5% return to the Dow, S&P and the NASDAQ exchanges. Stocks are clearly less overvalued than they were at the start of 2000. Corporate scandals and fraudulent accounting are being investigated and cleaned up. And we're doing more to stop terrorism than we were a couple of years ago. Dare I say there is recovery ahead?

The current comments from the managers at Longleaf Partners are as follows: The return on ownership significantly exceeds the return on lending for the first time in many quarters, and equity earnings �coupons� are ultimately taxed at long-term capital gains rates and grow, while bond coupons are taxed at ordinary rates and are fixed. These numbers do not necessarily signal the end of the bear market, but the deck is now stacked in favor of long-term equity investors.

You don�t get points for predicting rain. You get points for building an ark.
�Louis Gerstner, Chairman of IBM

Tidbits

Beverly passed her CFP exam in November so congratulations are in order. We have also expanded our staff to add Joanne Liu as a research analyst and a Para planner to assist with financial planning. We now have a Medallion Stamp Guarantee available in the office (free of charge) when you need to have a signature guaranteed. I was a speaker at CSULB this past quarter. It was fun to go back on campus to meet with students that have selected finance as their chosen field. You will also notice a new format to our quarterly statements that better reflect the diversification we try to achieve with each portfolio.

Looking ahead� I will be on vacation April 14 to 20, 2003. IRA and SEP contributions need to be made early so they are posted by April 10. Plan ahead for all contributions and tax filings. I will be spending the tax-filing day on a golf course with my family.

I have written my resolutions and have worked on an action plan to map out how to achieve the goals that I have set for 2003. Have you written yours yet? It is never too late to begin dreaming, setting and reaching for new goals. I have just finished my monthly review of each portfolio and made notes for changes in 2003. Interest rate changes may be ahead and holdings will be changed to stay ahead of rising rates.

Our greatest fear is not that we are inadequate, but that we are powerful beyond measure. It is our light, not our darkness, that frightens us. We ask ourselves, who am I to be brilliant, gorgeous, handsome, talented and fabulous? Actually, who are you not to be? You are a child of God; your playing small does not serve the world. There is nothing enlightened about shrinking so that other people won�t feel insecure around you. We are born to make manifest the glory of God within us. It is not just in some; it is in everyone. And, as we let our light shine, we consciously give other people permission to do the same. As we are liberated from our fear, our presence automatically liberates others. �Nelson Mandela Inaugural Speech

Happy New Year 2003!
Sandra C. Field, CSA. MBA, CFP