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2004 Markets

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The stock market has been in recovery since late October. Stock investors have seemed more concerned about oil prices than the dollar’s downward slide. The S&P is up 5.87% year to date, with the Nasdaq Composite up 4.08%. Small companies are having another healthy year, up 11.6%. International markets continue strong and are up 10.75% year to date. Bonds, widely and erroneously expected to have a poor 2004, have returned 5.42%.

Federal Reserve Chair Alan Greenspan spoke about the importance of the falling dollar in his November 19th speech. While acknowledging that developed countries are not always hurt by a weak currency, he warned against becoming too complacent. He urged that the current administration focus on reducing the budget and account deficits. He warned that foreign investors may eventually decide to cut their risk and move away from buying US securities. Luring them back could require higher rates of return. This suggests higher interest rates and inflation may be in our future. However, a falling dollar also makes US goods less expensive abroad. It seems unlikely that the Bush administration will intervene anytime soon, but it is an issue to track, since the stock market fell sharply after Mr. Greenspan’s speech.

Recent Instances of Wrongdoing

Many well-known companies have been in the news this fall on various charges. Fannie Mae admitted to bookkeeping irregularities in September. On November 23 Ohio sued Fannie Mae for manipulating earnings to artificially inflate the stock price. American International Group (AIG) agreed to pay $126 million to resolve a federal investigation into whether it helped other companies fraudulently inflate earnings, without admitting or denying wrongdoing. Merck withdrew Vioxx from the market amidst allegations that it had known about dangerous side effects for several years.

How can you react intelligently to these unexpected occurrences? If you own one of the companies, contact us for advice or do some research before you act.

"Never buy a stock because it has gone up or sell one because it has gone down."

Benjamin Graham.

Most of you are mutual fund investors, so the impact of one company’s wrongdoing will be minimal on your portfolio. Stay disciplined and continue your regular buying through all the market changes.

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Privacy Notice

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In order to meet the requirements of the Gramm-Leach-Bliley Act of 1999, Wiiken & Gorman is writing this notice to inform you of the privacy policy of our firm. We collect nonpublic personal information about you from the following sources:

• Information we receive from you on applications, tax preparation organizers, worksheets and other documents we use in providing financial services
• Information about your transactions with us and others and
• Information we receive from a consumer-reporting agency.

We do not disclose any nonpublic personal information about our clients or former clients to anyone, except as permitted by law. We restrict access to nonpublic personal information about you to members of our firm who need to know that information to provide services to you. We maintain physical, electronic and procedural safeguards that comply with federal regulations to guard your nonpublic personal information.

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Rethinking Retirement 2004

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The Survey Basics

In 1996 UBS Financial Services established the UBS Index of Investor Optimism. It is the only ongoing survey of investor sentiment in the United States. The Gallup Organization conducted the third survey in August 2004 (previous surveys were published in 1998 and 2002.) The survey, titled Rethinking Retirement, polled 612 non-retired investors and 412 retired investors.

All the polled investors had at least $10,000 of investable assets.

The Survey Results

The results indicate that more Americans are pushing back their planned retirement dates. The percentage of Americans who say they will wait until after age 62 to retire has steadily increased, from 36% in the 1998 survey to 57% in the 2004 survey. Furthermore, the plans of current workers to develop second careers may be unrealistic. 89% of non-retired investors hope to do some kind of work immediately after retirement. This contrasts sharply with the 56% of current retirees who actually did.

What the Results Suggest

The survey indicates "how few people are genuinely prepared for retirement", according to Mary Farrell of UBS Financial. The average lifespan is much longer than in the past. A person who now reaches age 65 and retires can expect to live another 18 years on average. Health care costs are expected to soar for the elderly. Sources of income will be less secure due to the decline of pensions. In fact 51% of those surveyed who were approaching retirement admitted to being concerned about outliving their assets.

There were a few bright spots. 74% of non-retired investors expected to pursue hobbies and 76% of retirees were doing just that. 26% surveyed planned to move to a new locale and 20% of retirees had done so.

Action Plan

All three surveys from 1998-2004 revealed a direct correlation between financial planning before retirement and living comfortably afterwards. Those working with financial advisors had more success in retirement.

This survey points out the stark contrast between current hopes and dreams of the non-retired and the reality of the retirees. It gives an opportunity to plan carefully so that expectations meet reality. We want all our clients to achieve happy and fulfilling golden years.

When you became a client of Wiiken & Gorman, you signed a contract and received a document known as the ADV form. The ADV is the form that we file with the SEC. We revise this document whenever there is a material change in our business and continue to give it out to all new clients. If you are interested in seeing the current Wiiken & Gorman ADV, updated 9-30-03, ask for it the next time you are in for a review or send us a SASE and we will return the most recent version to you by mail. You can also find the ADV at: http://adviserinfo.sec.gov/IAPD/Content/IapdMain/iapd_SiteMap.asp. Click "Investment Adviser Search" on the left navigation panel to search and type in Wiiken & Gorman.

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Mutual Fund News

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Fremont Funds: On November 4 Fremont Investment Advisors settled with the SEC and the New York attorney general. The firm paid $4.2 million and neither admitted nor denied the allegations that they allowed rapid trading by favored investors in their funds.

Dodge & Cox: Dodge & Cox Balanced closed to new investors on September 11. Existing shareholders may add to their positions.

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Management

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Adult Children and Money Problems

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If your adult children are bringing their money problems to you, you may need to set some ground rules. Here are three tips to help your children learn financial independence.

Help only with survival bills and consider paying those directly. For example, buy groceries or pay the utility bill, but do not pay for the credit card debt. Credit cards are a luxury for those with money problems.

If your adult child has returned home, ask how much they plan to contribute to rent and food. If he or she is unemployed, give them jobs to do around the house until they are working again.

Be careful about co-signing on a loan. If the adult child falls behind on payments, you may not know it and your credit rating is in jeopardy. Consider having the bill sent directly to you so you can verify the account is paid to date; then hand the bill to your child for payment.

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High 401(k) Fees at Small Plans

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According to a study by HR Investments Consultants, investors in 50-person 401(k) plans pay an average 1.4% of their assets annually in fees. Participants in plans with 1000 or more persons pay substantially less, on average 1.17%. However, there are many investors in small plans who pay as much as 3% per year in fees!

Small plans are prone to higher fees because they cannot spread out the costs of running the plan. Small plans may also use expensive group annuity contracts or loaded investments rather than no-load mutual funds.

Tell your employer if you are concerned about fees. There are consultants who can review the plan. The US Labor Department also has a site on 401(k) fees at http://www.dol.gov/ebsa/Publications/401k_employee.html.

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Management

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Wiiken & Gorman manages money in pension plans, IRAs, personal accounts, and trusts. We charge a retainer fee for portfolio development, monitoring and reporting. We also help with financial life planning issues that arise. Please call us if you would like to work with us in this capacity. The minimum portfolio size is $500,000 and we welcome your business.