Week of October 15, 2007

The Markets
 
As another week went into the history books, we hit another all-time high in the Dow Jones Industrial Average and the S&P 500 Index.

The stock market seems to be taking a page out of Aesop’s fable, The Tortoise and the Hare, as the stock market has slowly and steadily marched its way into record territory. Yes, there were bumps along the way, such as the subprime situation, but even that was a relatively short-term problem that seems to be under control now. So where do we go from here?

We’re not making any projections here but it’s interesting to note that Morningstar’s research suggests the Dow and the S&P 500 are still undervalued. In an October 12th article, Morningstar said the Dow was undervalued by 6.4 % and the S&P 500 by 4.2%, based on their October 5th closing prices. Their analysis was based on reviewing more than 2,000 stocks including all the Dow Jones Industrial Average stocks and 98% of the assets in the S&P 500 Index.

Of course, only time will tell if Morningstar’s analysis is correct. The point is simply that even when the stock market is hitting new highs, it does not necessarily mean that it’s overvalued. If the economy and corporate earnings stay on a slow and steady pace, the stock market may continue its positive trend, too.    
   

Source: Yahoo! Finance, Barrons Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly. Three-, 5-, and 10-year returns are annualized.  Assumes dividends are not reinvested.

HOW MUCH WAS YOUR INCOME IN 2005? To be in the top 1% of wealthiest Americans, an income of $364,657 was required, according to new data from the Internal Revenue Service (IRS). That’s an increase of just over 11% from the comparable 2004 figure. The median tax filer’s income (meaning half were above and half were below) in 2005 was $30,881. The IRS said the wealthiest 1% of Americans earned 21.2% of all income in 2005. That surpassed the previous high of 20.8% set in 2000. The top 50% of American filers earned 87.2% of all income, which was also a record high based on the available data.

According to The Wall Street Journal, “Scholars attribute rising inequality to several factors, including technological change that favors those with more skills, and globalization and advances in communications that enlarge the rewards available to ‘superstar’ performers whether in business, sports, or entertainment.” Whenever this type of data is published, it tends to generate strong feelings among people on both sides of the political spectrum and with this being a political season, you’ll likely hear the presidential candidates talking about it.   

IF YOU HAVE A CHILD APPLYING TO COLLEGE in the next few years, brace yourself for these facts set forth in a recent press release dated September 2007, from Applywise, an online college consulting company:

• Four years ago, Columbia University (Columbia College) accepted 12% of applicants. This year, the acceptance rate was 8.9%, one of the lowest of any American university.
• Washington University accepted 34% in 2000 and only 22% last year.
• SUNY Binghamton accepted only 38% this year, down from 43% the year before, and stopped accepting applications six weeks early because it had so many.

Before you get disheartened, it’s important to consider the source of the statistics. Applywise is a private college counselor hoping to convince parents that the battle for admission is tough enough that they’ll need professional help to get their sons and daughters a slot at the school of their choice. In fact, the last statistic cited on the release is that nearly 25% of last year’s entering freshman class at private colleges used private college counselors.

Scrutiny of the messenger aside, the numbers still highlight an unavoidable trend --- many schools are much more difficult to get into. Accordingly, as you work to develop your son’s or daughter’s list of potential colleges and universities, it’s worth keeping in mind, that while they should still reach high, it’s also important to have a school that you have visited and someplace you know your child will be happy.  That might be a better admissions criteria.

In the end, it may be demographics, not, sub-par SAT scores, that is the most difficult admissions hurdle for your kids to overcome.

Weekly Focus – Reserve It

If you’re thinking of starting your own business, you might consider reserving your name as your domain name. Otherwise, especially if you have a common name, it may not be available when you need it. In fact, some parents have even registered their newborn children’s name as a domain name. Talk about advanced planning!

Best regards,

Fredrick J. Livingston, CLU, CFP

Securities offered through LPL Financial, Member NASD/SIPC

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. 

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

Brain Teaser Answer:  It contains the numbers one to nine, in alphabetical order.