This is a weekly update from Doug MacGray a Certified Financial Planner who takes very good care of my clients and who I highly recommend.

INTEREST RATE CUTS: Are there downsides to the Fed’s cut in interest rates? Answer: Of course. First, the possibility of higher inflation usually goes along with a drop in rates. Most don’t think that’s a real issue these days due to the slowdown in the economy and the impact of globalization. Two major indications of this were announced this week. The Consumer Price Index (CPI) of -0.1% and the Producer Price Index (PPI) of -0.4% dropped.  Those low inflation numbers effectively gave the Fed “permission” to focus its concern on economic growth rather than price stability. As long as growth lags, and inflation remains modest, the Fed will be under pressure to keep rates low. The second negative consequence of lowering interest rates was the effect on the U. S. dollar. The dollar dropped to record lows against the Euro (¬) and fell to even parity against the Canadian dollar for the first time in more than thirty years. The weak dollar makes foreign goods and overseas investments more expensive, but it also helps American manufacturers sell more of their products in foreign markets. Higher exports usually translate into more job growth here at home. The Fed’s action won’t solve housing’s problems overnight, and it’s not likely to boost growth by that much, either. I have read and heard responses by many economists who know a lot more about this than me, and a slim majority seem positive about this move by the Fed.  (See some quotes at the bottom of this post)

HEALTH CARE COSTS: According to a report in the journal Health Affairs, the highest annual spending per capita on health care was in the District of Columbia, $8,295, followed by Massachusetts, $6,683; Maine, $6,540; and New York, $6,535. The lowest per person health care spending was $3,972 in Utah.

WHAT SPOUSES SHOULD ASK EACH OTHER ABOUT RETIREMENT: For those of you who are married and not yet retired, The Wall Street Journal online had a very good article on this subject, and it can be found at  http://online.wsj.com/article/SB119013933417431238.html?mod=home_we_banner_left.  If you don’t have time to read the article, at least read the questions below and see whether you have discussed these items with your spouse.1. “Do we really want to retire, and if so, when?”
2.  “What is our vision of retirement — and do we share the same vision?”
3.  “Where do we want to retire?”
4.  “What’s our strategy for building and preserving a nest egg?”
5.  “What assets do we have for retirement — and are they invested in the most beneficial ways to achieve our goals?”
6.  “How much money will we need to support our lifestyle in retirement?”
7.  “Do we have an estate plan — and where is it?”
8.  “What kind of relationships — personal and financial — do we want to have with our children and parents in later life?”
9.  “How will each of us approach, and manage, getting older?”
“Cutting rates was unnecessary.  More importantly, it increased the longer-term risks to economic growth from inflation and future Fed tightening.”  Brian Westbury, Chief Economist First Trust Portfolios, LP. “Tuesday’s Fed’s action ultimately boosts financial confidence and reduces the cost of money….bravo for Bernanke.  I give him three cheers and a big thumbs up.”  Larry Kudlow, host of CNBC’s Kudlow & Cramer. “The long-term effects of this action, and of further future rate cuts that the market expects, will be to lower growth from what it otherwise might have been.”  Donald Luskin, Chief Investment Officer Trend Macrolytics LLC.
Have a great week! Doug

Douglas R. MacGray, J.D., C.F.P.
Senior Vice President, Financial Planning
EGE Advisors, Ltd.
1150 First Avenue, Suite 600
King of Prussia, PA 19406
Phone: 610-783-4265

P.S

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