Advisor Confidence Decreased Slightly in February, Its Second Consecutive Fall

Monthly Survey Reveals That Advisors Will Have More AMT-Vulnerable Clients in 2006

The Advisor Confidence Index (ACI) continued to slip in February, according to Rydex AdvisorBenchmarking, Inc., an affiliate of Rydex Investments. The February 2006 AdvisorBenchmarking survey also queried advisors on the alternative minimum tax (AMT). According to the results, 63% of registered investment advisors expect more than 15% of their clients who were not subject to the AMT in the previous year to be affected in 2006 for the 2005 tax year. Advisors cite long-term capital gains (36%), state and local taxes (26%) and exercising incentive stock options (26%) as the most common reasons for investors to pay the AMT in the 2005 tax year. In cases where a sudden windfall throws clients into AMT territory, advisors suggest that clients invest in AMT-free funds with 62% of advisors stating that they are using these types of funds much more often than they have in the past.

Advisor Confidence

The ACI -- a benchmark that gauges advisors' views on the U.S. economy and markets -- slid further in February to 115.83, down from 118.44 in January. High energy prices, Federal Reserve tightening and international tensions continue to weigh on the stock market, causing a decline in advisors' confidence in the stock market and economy. However, relatively strong payroll jobs data and earnings reports continue to show economic growth.

Three out of four elements used to calculate the ACI dropped in February, with the stock market economic outlook decreasing the most--down 6.75%. A closer look at the components reveals the following:

Current economic outlook                -0.10%
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Six-month economic outlook              -2.44%
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12-month economic outlook               +0.57%
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Stock market outlook                    -6.75%
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Advisor vs. Consumer Confidence

The Conference Board Consumer Confidence Index (CCI), which increased in December, improved further in January. The CCI stood at 103.60 up 2.61% compared to a 2.44% decrease for the advisor index.

Notable Comments from Participating Advisors

Most of the advisors who participate in the survey have elected to have their names made available to reporters who would like to interview them about their economic sentiments. AdvisorBenchmarking can facilitate such interviews for reporters.

"Gold is now appreciating in almost every currency in the world. Global central banks are busy printing money at unprecedented levels. If it were legal, one could melt down a penny and sell the zinc and copper for a 60% profit. Global stock markets are doing well when priced in paper money, but not so well when priced in hard assets. These reckless monetary policies are driving GLOBAL interest rates higher and a GLOBAL industrial slow down is on tap for late 2006 and early 2007." -- James Dailey, TEAM Financial Managers

"Seasonality patterns have carried the market higher the last three months. Gains will consolidate in February as the market determines how close we are getting to the Fed being done. We believe there is still some upside over the next few months before it gets much more difficult into the summer months. It is hard to ignore the earnings and fundamental picture of the energy sector. It is hard not to include it in the portfolio. The major market indexes should be 10% - 15% higher come December 31, 2006." -- Kenny Landgraf, Kenjol Capital Management LLC

"Typically the Federal Reserve raises rates too much causing a financial crisis. If the new Chairman, Ben Bernanke, can avoid this mistake, the stock market may avoid its typical post-rate hike correction. Otherwise the S&P 500 typically corrects 10% around the end of the rate hike cycle." -- Michael Sadoff, Sadoff Investment Management LLC

"We continue to stay positive on equities and energy. Higher energy prices are creating high-paying jobs and industry, and forcing America to evaluate its dependence on non-renewable resources. We advocate short maturities on fixed-income investments." -- Mickey Cargile, WNB

"Clients are really looking at hybrid cars due to oil costs and are angry that American manufacturing seems to not realize that they would like to buy American and cannot." -- PatRaskob, Raskob Kambourian Financial

"Our assessments tell us 2006 will be a volatile year, likely ending with negative results. I hope they are wrong and the January effect pans out." -- Rob Siegmann, Financial Management Group

About Rydex AdvisorBenchmarking, Inc., an Affiliate of Rydex Investments

Rydex AdvisorBenchmarking is a research and analysis center focused on the registered investment advisor (RIA) marketplace. Every year through its survey web site, www.AdvisorBenchmarking.com, the firm conducts multiple surveys on advisors, covering a host of business-management and investment-management practices. The findings and analysis of the data are then released to the marketplace as annual studies, quarterly research notes and monthly newsletters. The service is aimed at helping advisors grow and enhance their firms by comparing how their businesses fare against other advisors. Advisors also learn best practices of the most successful advisors in the business. AdvisorBenchmarking is an affiliate of Rydex Investments.

The analysis on Rydex AdvisorBenchmarking.com is based on the number of completed surveys and reflects only information from those surveys. This information is intended to be general, and these overviews are no substitute for professional, legal or consulting advice. This information should not be construed as advice from Rydex Investments or any of its affiliates.

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