2006 - 1st Quarter Report (Download printable .pdf version here.) We are pleased to bring you our first quarter report for 2006. A few announcements regarding our firm: Value Architects which had been registered as an investment advisory firm in New Jersey received its SEC registration on February 24th. Because of this, you can be ensured that we are required to meet a national compliance standard mandated by the Securities and Exchange Commission, a more stringent requirement than our prior registration. We would also like to mention that Rick Konrad received his Certified Financial PlannerTM   designation on January 4th. CFP® Certificants are individuals who have met CFP Board’s education, examination and experience requirements, have agreed to adhere to high standards of ethical conduct and who complete CFP Board’s biennial certification requirements, including continuing education. Certificants must pass a two-day, ten hour examination that tests their ability to apply financial planning knowledge in an integrated format. This further strengthens our abilities to serve our clients in the financial planning area including retirement planning, estate planning, taxation, insurance and business succession planning. We emphasize that we are a fee-only financial planner, unlike most, and do not receive a commission on any product. Hence, we can provide completely unbiased recommendations based strictly on what is best for our clients, not what is best for ourselves. Our overview of the macro environment remains quite positive as far as continuation of the economic cycle. For 38 days starting in late December, two-year U.S. Treasury yields were above those of 10-year notes, a rare phenomenon in the bond market that preceded the last four recessions. This occurrence received a fair amount of publicity and is also known as the inverted yield curve. No less an expert than Bill Gross, manager of the world's biggest bond fund said the economy was poised to slow. Bond yields may have sent a false alarm. Recent statistics indicate that U.S. employers added 211,000 jobs in March, capping the best start for hiring of any year since 2000. Rather than prepare for slowdown, the Federal Reserve is talking about the need to keep raising interest rates to make sure the economy doesn't overheat. The data bolstered many economists’ belief that the Fed will raise its benchmark lending rate by at least another quarter-percentage point from 4.75 percent. As one fellow described the current situation, "If you were in the camp of people who were praying for the Fed to stop, you probably need to pray a little harder." Instead of Fed obsessing, however, we’d like to point out a specific oddity about the recent action across capital and commodity markets: Gold has risen to 25 year highs; Oil has rallied up from high $50s to $70; Interest rates on the 10 year are approaching 5%; Equities have rallied to 5 year highs. This foursome doesn’t make a whole lot of sense marching in lockstep. Usually, oil, gold, and bond yields do not rally in concert with equities. Our feeling is that something in this group will diverge. That said, we continue to believe that our intrinsic value approach will provide ample opportunities to achieve satisfying returns with less than market risk. As you can see from the Ameritrade flood of confirmations and the anguished look on your mailman, we have been busy assembling your portfolio. We apologize for this torrent of paper, once completed; your portfolio will be subject to far less activity. We generate the bulk of our ideas through traditional methods, computer screening of databases, reading financials, periodicals, and newsletters, interviewing managements, and checking the required regulatory filings of investors that we respect. We set out to understand the intrinsic values of each investment by modeling conservatively what we hope are common sense assumptions about each business. But as Einstein observed, common sense is the collection of prejudices acquired by age 18. Consequently, we test our assumptions thoroughly to ensure that we can overcome preconceived notions that conventional thinking may hold about these businesses. But studying the past will only take you so far. When the great hockey star Wayne Gretzky was asked what made him such a star he replied that he went where the puck was going, not where it was. We believe that in this crowded investment world, taking the time to think ahead and demonstrate the willingness to put a stake in the ground early are two traits that are required for an investor to stand out. As mentioned, we spent most of the quarter rebalancing your portfolio by selling securities from your previous manager and adding our portfolio choices.  We will commence performance reporting next quarter when your portfolio is completely established.  If you have any questions, please do not hesitate to call. We thank you for choosing us and look forward to a long and successful relationship. All the best, Richard H Konrad, CFA, CFP®