Condor CapitalInvestment Management

info@condorcapital.com

Condor Capital

1973 Washington ValleyMartinsville, NJ 08836

(p) 732-356-7323(f) 732-356-5875

Third quarter full of volatility

Fed cuts rates 50 basis points

Growth outperforms value

October 2007

In this issue:

Condor Capital Reviews 3rd Quarter 2007

How Long Will You Live? And Why Does It Matter?

Do You Need More Liability Protection?

Ask the Experts

Condor Capital Reviews 3rd Quarter 2007

While global equity markets managed to end the third quarter in positive territory, the period was characterized by heightened volatility. Stocks began the quarter on a strong note, with many major indices surging to multi-year highs by mid-July. However, stocks proceeded to sell-off sharply over the following four weeks, as sub-prime mortgage default concerns, combined with further softening of the U.S. housing market, prompted global banks to tighten credit. These events led to investor concern that housing woes may negatively affect the broader U.S. economy. While the financial and homebuilding sectors bore the brunt of the pain, the correction was very broad-based, with most major global equity indices shedding about 10% of their value.

The good news is that stocks reversed course almost as quickly as they plummeted, as investor confidence gradually improved, with a little bit of help from the Federal Reserve. At its September 18th meeting, the Federal Reserve surprised many investors by lowering its key target rate by 50 basis points to 4.75%. This marked not only the first adjustment to the Federal Funds Rate in more than twelve months, but also the first rate cut in over four years. This aggressive move by the Fed signaled to investors that it will ensure that adequate liquidity is available in order to prevent the credit crunch from pushing the U.S. economy into recession. In response, equities recouped practically all of their losses by quarter-end.

In addition to the rate cut and increased volatility, the third quarter experienced some other divergences from recent trends. As the aforementioned concerns sent the market into a tailspin, investors preferred to seek out more stable, less-risky assets. For example, while the large company dominated S&P 500 Index finished the quarter with a return of 2.0%, the Russell 2000 Index, a measure of small-cap stocks, posted an overall decline of 3.1%. Large cap, multinational companies continued to outperform as the weaker dollar boosted their exports. Meanwhile, in terms of investment style, growth-oriented stocks outpaced their value-oriented brethren for the second consecutive quarter. Specifically, the Russell 1000 Value Index, which had been leading the large-cap realm for several years, shed 0.25% during the quarter, in contrast to

the Russell 1000 Growth Index's relatively robust gain of 4.2%. Year-to-date, as of September 30th, the Russell 1000 Growth Index is up 12.7%, more than double the Russell 1000 Value Index's return of 6.0%.

Internationally, developed markets generally traded in tandem with their U.S. counterparts, with the broad-based MSCI EAFE Index gaining 2.3% during the period. Emerging markets resumed their stellar outperformance, as the economies of rapidly developing nations such as China and Brazil continued to expand at a brisk pace, leading the MSCI Emerging Markets Index to a return of 14.5%.

The flight to quality observed in the domestic equity market was not limited to stocks, as it was equally prevalent within the fixed income sphere. While higher-rated corporate bonds exhibited some resilience, lower-quality, higher-yielding bonds generally gave back more ground, as investors shied away from more economically sensitive issues in favor of risk-free Treasuries. By the end of the period, the Lehman Brothers Aggregate Bond Index had actually outpaced several equity indices, posting a solid return of nearly 3.0%. Meanwhile, the yield curve steepened during the quarter, as bonds at the shorter end of the curve experienced a stronger rally in response to looser monetary policy relative to long-term bonds. The steeper yield curve indicates investors' fear over a recession has gradually subsided, reflecting optimism over stronger economic growth going forward.

OutlookLooking ahead, our view of the markets remains positive. We are encouraged to see larger and more growth-oriented names returning to favor, with the belief that these issues may continue to gain investors' attention after many years of underperformance. The overall corporate environment remains strong, as earnings growth is expected to continue at a respectable rate through 2008. Despite sub-prime mortgage woes and the on-going housing correction, a solid labor market and a surprisingly strong consumer have continued to drive economic growth. We believe that the U.S. economy remains on stable footing and should continue to display its unparalleled resiliency over the long-term.

How Long Will You Live? And Why Does It Matter?

Since the first baby boomers began reaching retirement age, attention has been focused on the growing number of older Americans. The news is both good--people can now expect to live many years in retirement--and bad--Social Security and Medicare will be strained, and people are saving less than they should.

A look at some statistics may convince you that the graying of America is more than just media hype. Life expectancy is on a steady upward trend, and planning for a long retire-ment is more important than ever.

Life expectancy trends

Gains in life expectancy over the last century have been dramatic. According to the National Center for Health Statistics (NCHS), from 1900 through 2004 (the most recent year for which statistics are available), life expectancy at birth for the total population increased from 47 to 78. Much of the gain in life expectancy at birth came in the first half of the 20th cen-tury, as public health projects and scientific discoveries helped control many of the infec-tious diseases and unsanitary conditions that led to a high number of childhood deaths.

Life expectancy for individuals who reach age 65 has also been steadily increasing. Accord-ing to the NCHS, life expectancy for older individuals improved mainly in the latter half of the 20th century, due largely to advances in medicine, better access to health care, and healthier lifestyles. Someone reaching age 65 in 1950 could expect to live approximately 14 years longer (until about age 79), while some-one reaching age 65 in 2004 could expect to live approximately 19 years longer (until about age 84).

Reduce the odds of outliving your money

Using life expectancy tables or calculators to estimate how long you'll live can help you plan for retirement. Once you understand how

many years you might spend in retirement, it may be easier for you and your financial pro-fessional to put together a realistic plan to help ensure that your retirement funds will last for a lifetime.

Here are some planning tips:

• Prepare for several financial scenarios. For example, how much money will you need if you live to age 75? Age 85? Age 95?

• Recalculate your life expectancy periodically. Statistically, life expectancy changes over time.

• Consider your spouse's life expectancy as well as your own when determining your retirement income needs. According to NCHS statistics, women live 5 years longer than men, on average, although the gap is slowly closing.

• Plan for the possibility of needing long-term care. The longer you live, the greater the chance that you'll need assis-tance with day-to-day tasks or even ex-pensive nursing home care that could wipe out your retirement savings.

Current Life Expectancy

SSA NCHS

Birth To age 77.2 To age 77.8

Age 65 To age 82.6 To age 83.7

Sources: Social Security Administration, Actuarial Study 120, Table 10; National Center for Health Statistics, Health 2006 (based on 2004 data for total population)

According to the National Center for Health Statistics, approximately 45% of women will live to at least age 85.

Life Expectancy: 1900 to 2004

020406080

1900 1920 1940 1960 1980 2004

Year

Age

According to the NCHS, the average life expectancy for a boy at birth is now age 75, while the average life expectancy for a girl at birth is now age 80.

Page 2

Do You Need More Liability Protection?

Liability insurance protects individuals and businesses in the event they're held financially responsible for injuring someone or causing property damage. You probably already have this important protection, but do you have enough?

Personal liability insurance

Despite the common belief that only people with substantial wealth or assets are the tar-gets of lawsuits, that's not necessarily the case. Accidents can happen anywhere, to anyone, and even people of modest means may be at risk. For example, here are some common situations that might result in a liabil-ity claim:

• Your dog escapes from the house and bites a delivery person

• A neighbor's child is hurt while jumping on your backyard trampoline

• Your vehicle broadsides another, injuring the driver

Unfortunately, if you're sued, your assets are potentially at stake--your savings, your invest-ments, and in most states, even your home. Even if the claim is eventually proved ground-less and you're not held liable for damages, the cost of mounting a defense can be high.

That's why personal liability insurance is so important. Not only does it cover any court awards you're required to pay as a result of damage or injury caused by you, your family members, or your pets, but it also covers your legal bills, up to policy limits.

You probably already have some coverage

Homeowners, renters, and auto policies all contain liability coverage, so you may already have a basic layer of protection. However, you may not have enough, especially if you have only the minimum required. For example, li-ability limits for homeowners insurance gener-ally start at $100,000, while required minimum limits for auto insurance in most states range from $30,000 to $60,000. Often, you'll need far more liability coverage than this to ade-quately protect your assets.

Ask an insurance professional to review your liability limits and help you decide how much you need, based on factors such as your age, assets, income, and lifestyle.

If you need more coverage

What if you have the highest available

coverage limits but you still need an additional layer of protection? Consider purchasing an excess liability policy, also called an umbrella liability policy. Because it offers higher cover-age limits (often starting at $1 million) than basic personal liability insurance, an umbrella policy will cover you for larger losses.

You'll need to have a certain level of underly-ing liability coverage (generally between $100,000 and $500,000) in order to purchase an umbrella liability policy, because the um-brella coverage kicks in only after you've reached the limits of your underlying policy. For example, if you have an auto policy with a liability limit of $300,000 per accident and a $1 million umbrella policy, your auto policy would cover the first $300,000 of a $700,000 claim and your umbrella policy would cover the re-maining $400,000.

Business and professional liability insurance

The widely publicized case of a dry-cleaning business that was sued for $54 million over a lost pair of pants illustrates the importance of business liability protection. Although the own-ers of the business prevailed in the lawsuit and were awarded court costs (not including attorney's fees), they did not have liability cov-erage, and they may never recover the tens of thousands of dollars they spent mounting a two-year defense against this lawsuit.

While businesses can't always prevent such liability claims, they can purchase coverage for the special risks they face. One option is commercial general liability insurance, which is often part of a business owners policy. Busi-ness umbrella liability policies that offer higher liability limits are also available.

However, some liability risks are unique to certain businesses or professions, so you may also need specialized coverage. For example, if you work in an occupation that is particularly vulnerable to professional liability (e.g., law, medicine, day care), you may also need a separate professional liability policy, usually called malpractice coverage or errors and omissions coverage. Many other types of spe-cialized liability coverage are also available.

Talk to an insurance professional who can help you determine the types and amounts of liability coverage that are appropriate for your business or profession.

Review your liability insurance limits periodically to make sure your coverage keeps pace with your needs.

Read your policy carefully to find out what's covered and what's not, and to learn about your rights and responsibilities.

Page 3Condor Capital

Ask the Experts

Copyright 2007 Forefield Inc. All Rights Reserved.

Should I have a prenuptial agreement? Although no one gets mar-ried with plans to divorce, the sad truth is that many marriages do end that way. For some couples, it can be

prudent to have a prenuptial agreement.

A "prenup" is a legally binding contract be-tween two people who are about to marry that, among other things, dictates how prop-erty will be divided in the event of a divorce, and whether alimony or spousal support will be paid. In the absence of such an agreement, state law decides these issues.

A typical prenup states that each partner will keep the property they bring into the marriage, and that assets accumulated during the mar-riage will be split 50/50. However, your prenup should be customized to your particular situa-tion. You should consider having a prenup if you fall into any of the following categories:

• You earn significantly more income than your future spouse

• You have substantial assets • You own a business or business interest • You anticipate receiving an inheritance • You have children from a previous

marriage Although creating a prenup might extinguish the flames of romance for a while, the open communication it requires can serve as a building block to a strong marriage. It can also provide each partner with financial security and peace of mind, and may save you from emotional distress and court costs later on.

To create a valid prenup, keep the following points in mind:

• Hire a separate and independent lawyer for each partner

• Sign the prenup at least six months before the wedding

• Fully disclose all financial information • Make sure the agreement is fair to both

parties and is reasonable

What is a postnuptial agreement? provided for in a postnup.

Still other couples use a postnup to resolve issues, stop conflict, and promote harmony in a troubled marriage. Provisions in this kind of postnup might include how often the in-laws can visit, who does certain chores, and where vacations will be taken.

Though postnups serve the same purpose as prenups, courts tend to scrutinize them more carefully, holding them to a higher standard of fairness. This is because the parties are mar-ried and thus in a fiduciary relationship with each other. It's also more likely that coercion or duress may have been involved. Because of this, it's important that:

• Each spouse hire a separate and independent lawyer

• There be full disclosure of all financial information

• The terms be fair and equitable • There is no coercion or duress involved

A postnuptial agreement is a legally binding contract between a husband and wife. It's similar to a prenuptial agreement, but it's signed during the marriage, not before. Its primary purpose is to stipulate ownership and distribution of assets in the event of a divorce.

There are many reasons married couples sign a "postnup." Some couples create one be-cause they failed to sign a prenup, or because they want to amend their prenup. Further, some prenups have sunset provisions, mean-ing that they expire after a specified number of years, and some couples use a postnup to renew their prenup protections.

Sometimes, a postnup is used because there has been a significant change in the financial condition of one of the spouses, perhaps through a promotion, career change, inheri-tance, or sale of a business. This spouse may want to protect the wealth earned by the sweat of his or her own brow. Or, the other spouse may feel threatened by the inequity and desires financial security, which can be

info@condorcapital.com

Condor Capital

1973 Washington Valley Martinsville, NJ 08836

(p) 732-356-7323(f) 732-356-5875

Please remember to contact Condor Capital Management if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, or revising our previous recommendations and/or services. Please also advise us if you would like to impose, add, or modify any reasonable restrictions to our investment advisory services. A copy of our current written disclosure statement as set forth on Part II of Form ADV continues to remain available for your review upon request.