Interest Rates

Here we are after yet another interest rate increase! Is there an end in sight? I hope so. I believe that Mr Ben is making his statement to set his style and clearly outline that this is not Alan Greenspan�s house anymore. Most Federal reserve board meetings are scheduled for two days and if there is action taken by the Fed, it is usually announced by 1:00pm on the first day. By that time on June 28, we were told he would make the interest rate action announcement by the afternoon of the second day. I can not remember that happening for many, many years. Mr Bernacke is clearly marking his turf. He has issued several reports and the economists have poured over every word to form their opinions.

The reports validated the idea that economic growth is moderating - and it is that moderation, the Fed indicated in its recent FOMC statement, that should help to limit inflation pressures over time. In normal English, this means they may pause and not raise rates again in August, their next scheduled meeting. Today, the prime rate stands at 8.25% and one year ago, it stood at 6.25%. I hope we have an end in sight.

The Bond Market

We have a flat yield curve, as opposed to an inverse yield curve. An example of this is that a six month t-bill will yield 5.28%. A ten year treasury will yield 5.19% and the 30 year yield is 5.28%, exactly the same as the six month rate. This indicates that you can lend your money for six months or thirty years and receive the same rate. There is no premium earned for lending your money (buying a bond) with a longer maturity, so smart money is staying with short durations right now.

The Stock Market

During the months of May and June, the market was a Disney adventure ride. The market fell and the bears were out. The market rose and the bulls were back. All in response to the outcome of the fed meeting (inflation under control?), rising interest rates by 25 or 50 basis points, housing construction falling and the dollar falling against the euro.

Enjoy your summer!

I am still training for the Vineman Aqua Bike on August 12. It is a 1.2 mile swim and a 56 mile hilly bike ride through the hills and vineyards of Santa Rosa, Ca. I will also swim in the Seal Beach rough water swim on July 15 as long as I do not see any dorsal fins in the water! Get out and enjoy the outdoors and summer bbq�s.

My Mom

Funeral services for my mother were held July 5, 2006. She has rejoined my father, brother, and all of my grandparents. She was a strong, beautiful, gracious woman who was loved by many friends and family. There is now an excellent bridge player in heaven.

Sandra C. Field, CSA, MBA, CFP

And in the end, it�s not the years in your life that count. It�s the life in your years.
~Abraham Lincoln~

Other Information

In addition to our regular phone number 714-827-5794, API now has a toll free number, 866-642-5173.

The new privacy laws (HIPPA) are impacting the use of Health Care Directives (HCD). I have enclosed a form that should be signed and kept with your HCD. This form directs your doctor to release all protected health information to the individual named in your HCD. If you would like the form emailed to you, please call or email me at carols@assetplanninginc.com.

Medicare Premiums

Starting in 2007, the Medicare Part B premium will be based on the member�s adjusted gross income (AGI). Currently, the part B cost is $88.50/month. In 2007, the premium is expected to rise to $99.50. If a married couple has an AGI of $160,000 or more the premium will be $112.70; AGI more than $200,000 will be $132.60; AGI more than $300,000 will be $152.50 and if your AGI is over $400,000 the premium will be $172.40.

If you are properly diversified, you always have something to complain about. ~J. Patrick Collins, Jr. ~

Enjoy the summer and let us know of all your adventures!

Carol Somoano, MBA, CFP
Asset Planning, Inc.