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Show DAILY March HERALD ee HE WALL STR AT JOURNAL SUNDAY. The Weekly Guide toManaging Your Money ©2006 DowJones WSJ.com/Sunday & Company, Ine. All Rights Reserved. Yes, Stocks Are Up, but Don’t Go Crazy By E.S.. BRowNING The Dow Jones Industnal Average has nsen 55% from 2002's bear-marketlow. It will Somemarket watchers see more reasonfor caution than for celebration at these levels. Average 1s flirting witha six-year 12000 10000 9000 high At times like these, withstocks returning to landmark leveis, in vestors who had been wary of the stock market sometimes wake up Jan. 14, 2000 ——, —May21, 2001 1172.98 11337.92 Friday's close: 11279.97 8000 interested. Based on the 7000 ime-tested premisethat it is bet ter to buy low-andsell high, how ever. umes like these may not be oct 9, 2002— 6000 5000 best ones suddenly to shift 7286.27 ‘oO your investment stra’ egy Financial advisers are locked in a debate right now about the Themost negativeof the pessi stock rlarket’s direction. Theopti 1 2 Dow is up5.2% sofar this year, Strong gains this year, with the a housing lender, a big investment mists see some kind of blowup—at with the Standard & Poor's conomy returning to “Goldilocks mode—not too hot, not too cold fund or some otherinstitution that i00-stock index up 4.4%, the Nasdaq Composite Index up 4.9% and mists see stocks resuming. their gets the They see intense competition in interest-rate outlook wrong and takes a hit Who will be right? The impor- he international economy, fueled by low wages in countries like China, holding U.S. prices down tant thing for aninvestor to under standis that this is impossible to The economy will cool a bit predict. The economy could be fine, and stocks could keep grow trom last year's 3.5 growthrate, Ingfor years to come, as theydid but not much, these optimists say inflation. low interest rates and after the Fed stopped raising interest rates in 19 Or something could go wrong, environment for corporate profits, as happened in 1998 and again in 2000, when Fed rate increases led whose double-digit growth in turn fuels stock gains. and sharp declines for stocks. ind keeping inflation tame They see the combination of low steady growthproviding a perfect to problems for corporateprofits (Even after 14/rate boosts. by There are very smart analysts fore: tasting each eventuality. Others are saying that neither of those things will happen, and that the stock market will muddle through the year as it did in 2004 and2005, with single-digit gains or maybeeven a small decline. the Federal Reserve, and another expected this week, cash and bond yieldsarestill modest by historical standards.) Pessimists See Rate Pain Thepessimists see a darker pic Right now, the optimists have ture, with the Fed forced to keep pushing interest rates higher to hold back suddenly resurgent infla. tion. They worry that the higher the upper hand, as early quarterly profit reports have been coming in strong andinflation has remained interest rates will stifle corporate profits: and cause slowdowns or tame. That's why stocks have even disruptions in the mortgage The Dow industrials werevirtu: risen strongly in thefirst quarter and housing markets ally unchanged last week. The INVESTOR'S CALENDAR THIS WEEK a a ae ROUGH RIDE: General Motors’ sweeping buyout offer isthe latest attemptto ad dress financial woesthat have weighed heavily on the auto maker's stock @ Bernanke's First: Federal Re serve Chairman Ben Bernanke pre sides over his first Federal Open Market Committee meeting this k. The Fed is expected toraise $40 ts interestrate target to 4.75% from 4.5%. 35 30 which would be the 15th such boost since June 2004 With rates up, the average yield on Mwcm, | Googling the S&P: Google replaces oil-and-gas producer Burling: ton Resources in the Standard & Poor's 500-stock indexat Friday's close. The change. which Is likely to increase the index’s swings cheers other Internet startups. Google rose 7% Friday on the news H Delphi Dispute: Otficials of auto than 4% below one. But the S&P 500 and the Nasdaq, which fell harderin the bear market of 2000 to 2002, are farther away. The S&P 50 is 14.7% below its high, while the Nasdaq is 54% shy of its,peak. Some Pros Pile On Some’ professional investors to.clientsthis month.“In the short term, however, we would be little back of some money managers’ minds is: ‘Whatif the market suddenly catches a bid here and more cautious.”If financial authorities in the U.S., Japan and Europe all raise interest rates at the same time, he worries, therisk rises of a market shoots upward. “In the trades to the upside and youaren't involved?"". says stock trader Michael Driscoll at New York bro- keragefirm Bear Stearns. Many money managers’ ca reers depend on producing gains that match or exceed competitors’, which makes money managers imitate one another and helps fuel the market's herd mentality. An individual investor, however, probably shouldn't tryto be. financialcrisis such as occurredin 1998, when Russia defaulted onits debt and the bond market was thrown into turmoil. Higher interest rates and re- strictive governmentfinancial poli cies are “going to put further downward pressure on the financial markets—stocks and bonds,” worries Jon Brorson, head of growth- stoek investing at money-management firm Neuberger Berman. He Thomson’ Basehie @ Economic Update: The govern. ment Thursday will revise how the gross domestic product grew in the fourth quarterof last year. Analysts think GDP grew at an annual rate of 1.7% instead of 1.6 United Auto Workers to try to rene: in bankruptcy-court protection, has said it may seek court approval to void its UAW contract. The talks fol- LAST WEEK low last week's big buyout pact. Be Our Guest? The Senate Judi ciary Committee will begin its two week consideration of President Bush's “temporary worker” pro posal. The program, if passed would allow foreigners to gainlegal status for a set period to do spe. cific jobs, under the condition that they would then return home. | Buyouts for Auto Workers: Gen: eral Motors reached a landmark buyout and early-retirement agree ment with the United Auto Workers. and former GM unit Deiphi. GM agreed to finance buyout offers to as many as 131.000, GM and Del. phi workers, effectively offering an entire generation of workers a chance toleave rather than risk los ing their jobs. Buyouts would run from $35,000for those with the mostservice to $140,000 to some others further from retirement age. Wrapping Up: Prosecutors in the trial of former Enron executives Ken nethLay and Jeffrey Skilling hope to wind uptheir case this week, clearing the wayfor the defense mt | cufflinks. After Hours Formaiwear sells an all-wool tuxedo coat and pants for $179. Some Web-based retailers also offer deals: thetuxedostore.com and com sell tuxedo sets with accesso But to some extent, the deci- sion isoutof its hands, since everything depends on whetherinflation remains tame. The longer the Fed worries about inflation and keeps raising rates, the highertherisk of economic trouble: The other thing to keep in mind is that this is an election year. Stocks tend to waffle or even decline in the midyear months ahead of a big election. They tend to recoverin the fall—as long as what- ever investors are worried about shows signs of being resolved by the election, Email: forum.sunday03@ws).com hen you're just starting out, you're worried more about preparing for your futurelife than for your death. It's ‘little surprise, the numberof Sept. 11 victims, But writing a will is something manyyoung people should includeas partof their financial planning. Here's why. Microsoft said the next version of its Office software won't be in retail stores in time for-the holiday season. times. But be careful: tuxedo styles changewith the times. Buy one that you'll fee! comfortable wearing again. (Skip the fire-enginered cummerbund this spring, experts say.) Magdalena Andreozzi, an event plannerin Cranston, R.l., notes that tuxedorentals often come with extra fees, such as $20for losing a cufflink or late-return charges. The quotedprice “soundsgreat until you walk in the door andfind all these hidden fees.” Butdon't rule out renting. Some fental shops have lowered their rental prices to less than $50 a night. And if you buy one of those low-price tuxedos, you'll probably have to pay for alterations yourself. (Rental shops may levy a “rush ak teration fee” but usually it’s free.) Whateveryou do,pick out your tux at least a month or two before you needit, so you can make a adjustments, says Mary Sushinski, a Los Angeles event planner. By Kelly K.- Spors that have legal meanings different from what you intend, lawyers say. If you havelots of assets, talk to an attorney about options to minimize probate fees and estate taxes, such as by using varioustrusts. Regardless of how you make the will, to be official it must say it's yourwill, it must be dated and signed by you, andit generally also must be signed by two people who witnessed your signa- { ture. The witnesses should not be people whowill inherit your assets. You don’t need your will notarized, but doing so can help sles-of havingto testify that the It is absolutely critical to have a will if you have a child. We'll talk about that below. But evenif you haven't gotten to that stage in life, you may want or need a will to direct what happens to valued possessions— such as a dog, a car, an-apart- mentyou own aloneor a special comic collection—in-case of your early death. A will typically wouldn't control who gets “joint property” (such as a house you bought with your spouse) or accounts for which you have designated a beneficiary, such as 401(k)s and individual retirement accounts (and possibly bank and brokerage accounts as well). But when it comes to your other assets, if you die “intestate,” or without a will, your 1 Drug Deal: Bayeroffered $19.73 billion for fellow German drug makerSchering. topping a hostile bid by Germany's Merck KGaA, which bowed out of the bidding. The Bayer-Schering deal would create oneof the world’s largest drug makers. 10.5% in February, the sharpestfall riesfor about $140. Designer tuxe dos cost much more, Buyers get a new tuxedo,not ‘one worn 100 times. And you'll save money if you. wearit multiple save your witnesses later has- When to Get One usually first to siblings, then to other living relatives, andfinally to the state, says John McCabe, legislative director with the Na- in nearly nine years. as inventories of $99. Add $30 for an accessories Too Young to Need a Will? Think Again | state's laws will determine who homeson the market grew.... edo suit coat and pants for about . Starting Out / ByJennifer Saranow @ Trans-Atlantic Talks: Lucent Tech: nologies and France's Alcatel are in advancedtalks on a merger that would create a telecommunicationsequipment supplier with a market value of $33 billion, A combination would probably spark a new round of consolidation amongother * telephone-equipment suppliers. Briefly: New-homesales dropped | or so fora rental. J.C. package including shirt, bowtie and who handled the estates of a MAMJJASONDJIFM 2005 2006 THE WEEK ity investments. The appropriate mix depends on your age and how soon you plan to use the money. things who died in the Sept. 11 meee eee prices that r+ val the cus- wey 100 with somereal-estate or commod- have like a money manager. Most Then try hard not to let short-term individuals are investing for the swings interfere with your plan. For those determined to try to long term and aren't being paid figure out what the market will do for quarterly performance. It can be risky for a proto chase a rising . in coming months, there are probably two main things to watch. The market when investing other people’s money.It can be evenriskier first is the outlookfor interest rates. for individuals whoare investing The Fed holdsits next interesttheir own money and who don't rate meeting tomorrow and Tueshave the experience or the quick day. Another quarter-point increase in the Fed's interest-rate access to traders that pros enjoy. “We remain bullish about the benchmarkis considered almost inevitable. Less clear is what the prospects for the market long: term,” wrote stock strategist JaFed will say about how much son Trennert of NewYork research longer it plans to keep: raising and brokerage firm International rates. It may or may not give a Strategy & Investment in a report hint on Tuesday. have loaded up on stocks because they fear beingleft behindif the deal on a tuxedo you can keep. Sensing an opportunity as formal weargets used more often,several major retailers now sell tuxedos at Penneysells a traditional black tux- wills, says T. Randolph Harris, anestate-planning attorney with McLaughlin & Stern in New York r parts maker Delphi meet. with the gotiate wages and benefits. Delphi (203) 966-7001 jolun.canyphell(adlnajo | Contronesnt He you vies 200 Liberty: Street New York. NV. 1028 Fon y Srecie do OntrK. Cutts baieaee- 2112 The Russell 2000 is at anall timerecord, and the Dowisless etting an affordable tuxedo for that special occasion no longer means just heading to the rental shop. You may find a comparable The solution? Set a longer-term plan, with a mix of U.S. and foreign stocks and bonds, perhaps terrorist attacks didn’t have for the first time since May 2001. Hanon up 12 What You Should Do that manyof the twenty money-market funds now tops 4% Law reawe Aout Si stot Euro the Russell 2000 small-stock index tors is those scary moments between the early gains and the end of the year. The temptation will be to jump in now, when stocks are rising, and then jump out later, when they suddenly dip. In other words, to buy high andsell low. Barbora Pottak the If he is right, the risk for inves- beat a sn-year high if it surpassesthe level of 11337.92 reached in May 2001. But pected. The Dow Jones Industrial get sees a sharp pullback in midyear, followed by a recoveryat year’s end, leaving the market with small’ single-digit gains. Divining the Dow's Course Imost every stock average you look at is showing solid gains for the year—better than many of the pundits ex. Tux Buy May Beat Rentals gets what. The distribution laws vary by state, but generally your possessions pass first to your spouse andchildren, if you have ny. If you don’t, then mostoften your assets go to yourparents,if they'restill alive. If they aren't, then the order of succession is tional Conference of Commissioners on Uniform State Laws. Check your state’s probate code for details. “The principal time to think about having a will is if you would wantyour estate to go differently than the way thestate's intestate laws would distribute it,” says Mr. Harris, who is also an executive committee member documentis your will. Finally, you'll also wantto in- clude a living will and other of the American College of Trust and Estate Counsel, an associa- tine Albright, a trusts and estates lawyer in Chicago and tion of trust and estate lawyers. Unless you havea will, a significant other you're living with won't get anything, nor would a favorite charity. One of Mr. Harris’s Sept. 11 cases was a young chairwoman-elect of the American Bar Association's Section of man who was about to be married. Because he hadnowill, his estate went entirely to his family, and nothing wentto his fian- cee. If you have children, a will lets you determine whowill take care of them and managetheir money if, say, you and your Spouse die together in a plane crash. In addition, you can use a will to set up a trust for your children, so they don't get the "inheritance until they reach a certain age. If one parent dies, a will can make sure everything goes to the surviving spouse, and not partially to young children. If you don't do this, your spouse may have to go through hoops like filing certain papers and checking in constantly with a court to manage your children's money. Keeping It Simple A simplewill is generallyjust a document that specifies how your assets will be distributed. It's typically formulaic. The outline is along the lines of “upon my death, take the assets that are in my namealone and here is who you give them to and how yougive it to them,”says Chris- Real Property, be treated if you can’t make decisions aboutlife-sustaining medi- and cal treatment. (For example, would you wanta feeding tube?) If you're young, single and don’t have significant assets (in That's a document you can’t Trust Law. Probate health components in your final documents, In living will, you can say how you would want to the realm of hundreds of thou- sandsofdollars), you could consult do-it-yourself books or software programs from companies like Nolo that can guide you through simple will writing. Nolo offers a software program called Quicken WillMaker Plus, which costs about $50. Later this year, it plans to offer an online will that can simply be filled in (www.nolo.com). A guide such as the American Bar Association Guide to Wills and Estates, available in bookstores for under $20, also can help. p Range of Costs If you hire a lawyer, charges for wills generally start at around $250 and run up to more than $1,000 for a young married couple who just had their first child, Mr. Harris says. have early enough, says Peter Bielagus, a financial adviser for young adults. Generally, you'll also need documents naming someone to makehealth decisions for you and someone to handle your financial issues for you if you are not capable. Preserving the Documents Once youhaveall your end-oflife documents prepared, you'll needto put them somewhere for Safekeeping. Tf you have a lawyer, theares inal documents are ly kept at his or her office. Keep a copy ina secure andeasily accessible place where someone. looking could find it—say, with your other important papers in file cabinet orin a fireproof box. . Albright advises against Ask people you know for refer- keeping your will in a safe-deposit box since getting into the box could be a hassle for the peo- tals or try the lawyer locator at ple you leave behind and could the American Bar Association's Website (abanet.org)or the site of the American College of Trust and Estate Counsel (www.actec. org). Getting help from an attorney-could help ensure you don't miss important nuances of will writing or use words or terms require a court order. “A safe-deTost box is not usually a good idea.” The “Getting Going” column by Jonathan Clements will returm next week. For comments on today's “Starting Out” column, email: forum.sunday03@wsj.com tasers fi |