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Carolyn McClanahan, M.D., CFP® 

Tim Utecht, CFA


Carrie Jones, CFP® 


Krissy Di Candia 


The year is flying and we've been busy. Thankfully we have no big news to report for the quarter. Carolyn made it through tax season and will now concentrate on estate planning updates, Carrie is continuing work on projections and insurance, and Tim is plowing along with the investments - keeping everything balanced in this crazy world. And of course, Krissy is the glue keeping us on track with the work flow.
We are planning the shred party for the fall, and will let you know the date once we have it pinned down. Keep all your shredables so we can make plenty of toilet paper!
With health care reform back in play, Carolyn has been pulled back into the discussion and is writing for Forbes and Financial Planning Magazine.  Last week, she had the honor of her first byline in the New York Times. Here is a link to the article if you are interested -
Have a great summer!
What Happens to Bonds
When Interest Rates Change?

Interest rates and bond prices have an inverse relationship-rates and prices are like opposite ends of a seesaw - when one rises, the other must fall.

It's all about math...

Any bond with a fixed coupon (periodic interest payment) becomes less attractive if other similar bonds are available with higher coupons. To make a lower coupon bond comparable to higher coupon bonds, the price will need to be reduced.

A simple example

A ten-year bond with a $10,000 face value and 6% coupon would pay $600 interest annually. At the end of the ten year period (maturity), you would receive back $10,000. If you pay $10,000 to buy the bond and collect all payments, the yield-to-maturity (annualized return for the life of the bond) would be 6%.

In comparison, buyers would not be willing to pay the same $10,000 price for a similar bond with a 5% coupon (all else equal, 6% beats 5%). A price of around $9,250 would be required for the buyer to earn the same 6% return. The lower price makes up for the smaller interest payments that will be collected.

How does this impact you?

A few things to note regarding changes in interest rates:
  • Cash flows don't change: Interest payments and maturity value remain the same regardless of price fluctuation 
  • Yield-to-maturity (YTM) doesn't change* after a bond is purchased: The return is based on purchase price and anticipated cash flows - interim price changes aren't part of the equation.

* For the mathematically inclined, it should be noted that the YTM does assume that all interest payments can be reinvested at the same constant rate.  This may not be an accurate assumption.

  • Rising rates have a negative impact in the short-run and a positive impact in the long-run: Bond prices adjust downward when rates rise (see the example above), but cash flows will be reinvested at higher rates.  Longer-term, higher interest payments are beneficial.
  • A "bear market" for bonds is not the same as for stocks: Stocks periodically have "bear markets" generally defined as declines of 20% or more.  The broad U.S. bond market has never experienced a decline anywhere close to that magnitude.  For bonds, a bear market is often considered to be simply a period of negative returns, and even those circumstances are infrequent.

Protecting Yourself from Ransomware
Companies all over the world, from hospitals to banks and Fortune 500 companies, have recently been attacked by ransomware. This type of virus or hack is designed to block access to a computer system until a sum of money is paid. It basically takes your computer and all your files hostage. Here are three ways to protect your computer.
1)   Keep your computer and software up to date . This hack exploits vulnerabilities in your third party plugins such as Java, Flash etc. In addition to running Microsoft updates , make sure to update your other software too.
2)    Be cautious opening attachments in emails. This sounds simple but can be tricky if it seems like it might be from someone you know or a company you do business with. Look at the sender's email address and see if anything looks out of place. L ook for misspellings and strange web links, anything that looks a bit wrong . If you are not sure , call the sender to confirm the email.
3)    Don't click on suspicious links. If you receive an email asking you to click on a link to update something again, be cautious. C all the company or log in directly to the site instead of clicking on the link.
For more information on how you can protect yourself check out these links:

As always, let us know your questions, comments, and anything we can do to serve you better.

The LPP Team