Spectrum Advisors Newsletter April 2010

What a difference a year makes . . . and other musings . . .

Just over a year ago, on March 9th of 2009, the market ended its seemingly limitless freefall that began in September 2008 after the collapse of Lehman Brothers and subsequent panic. From that low point, the S&P 500 index gained 68.6%(!!), with the Emerging Markets index nearly doubling- a return of almost 100%!(Source: BTN Research) This offered significant validation of the historical market precedent that panic–driven crashes most times end with eye-popping rallies!

After a slow start to 2010, March turned out to be a nice month, with the S&P 500 gaining roughly 5.8% in a low-volume rally. We anticipate further earnings driven gains in the market as the year goes on. There is still much money on the sidelines and abnormally low interest rates on bank and money market instruments may cause investors to seek higher returns in equities.

The consensus forecast for economic growth this year, supported by much of the recent economic data, has been increased to roughly 3%. Delinquency rates on consumer credit cards are falling, and outstanding credit card balances nationwide have fallen for 16 consecutive months. Employment gains have been slow to materialize, and government spending and deficits are setting new records daily, threatening the possibility of a sustained recovery. However, political activism is on the upswing. Perhaps this will force Congress to finally address unfunded entitlement programs and unsustainable spending.

Speaking about entitlements… the Congress recently added a new entitlement program by passing a sweeping overhaul of the healthcare system. The program will cover 30 million Americans currently uninsured, 15million of which will end up on the roles of Medicaid. The impact of tax hikes on upper bracket earners and a new 3.8% Medicare tax on dividends, capital gains and interest will not come until 2013. The American people will have had two major opportunities in 2010 and 2012 to reaffirm, amend or repeal the law. Court challenges are also pending.

On a more positive note, we continue to believe strongly in the return prospects for multifamily/ apartment Real Estate Investment Trusts (REITs). Multifamily REIT’s have a history of more stable occupancy rates than their retail or office space counterparts. We believe they also stand to benefit from under-building of new units as a result of the credit crisis at a time when homeownership is declining and renters are increasing. Call us for the compelling story behind this opportunity.

Some of you attended our recent educational workshop related to the ROTH conversion opportunity- available this year for the first time with no income limits! A conversion can offer continued tax deferred growth and future tax-free income. There are also significant estate planning advantages which include no Required Minimum Distributions and the potential for ongoing tax-free income for heirs. We have a number of tools available to help you understand whether the ROTH conversion makes sense for you. Call us for details.

As always, let us know if there is anything that our team can do to better serve you.

Securities offered through Purshe Kaplan Sterling Investments, Member FINRA/ SIPC Headquartered at 18 Corporate Woods Blvd., Albany NY 12211