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1
Banks Are Lending Again, But Congress Needs Somebody to Blame
2
Mandatory IRA/401(k)/403(b) Withdrawals Have Been Eliminated for 2009
3
Keeping the Downturn in Perspective – The Stock Market
4
2009 Stimulus Bill – Tax benefits
5
Increased Volatility

Banks Are Lending Again, But Congress Needs Somebody to Blame

Yesterday’s House Financial Services Committee hearing gave evidence that bank lending is flowing again, but credit is still tight.

A webcast of the hearing “TARP Accountability: Use of Federal Assistance by the First TARP Recipients” is available at the Financial Services Committee website.

As is traditional in these affairs, a good deal of time was chewed up by congresspersons zealously jawboning to express vicarious anger on behalf of their constituents.

Executives from eight major banks showed up to testify on how they spent their share of the TARP money.  The CEOs actually did a pretty good job of demonstrating

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Mandatory IRA/401(k)/403(b) Withdrawals Have Been Eliminated for 2009

Just before Christmas of 2008, the president signed the Worker, Retiree, and Employer Recovery Act of 2008. The bill suspended 2009 Required Minimum Distributions (RMDs) for IRAs, 401(k)s and 403(b)s.

The intent of this change was primarily to give a break to retirees whose account balances probably cratered last year.  Normally, when a person turns 70½, he or she is required to begin withdrawing money from most kinds of retirement plans so that the IRS can collect its share of income tax.  In addition to being taxed as income, the funds removed lose the benefit of tax-free accumulation in the …

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Keeping the Downturn in Perspective – The Stock Market

I’d like to pass on a “back-of-the-envelope” calculation performed by Mark Coffelt of Empiric Advisors, a fellow NAPFA member:Keeping the Downturn in Perspective

Ten years ago, the S&P 500 yielded about 1.4 percent. The price-to-earnings ratio was close to 28 times. Earnings over the decades have grown about 6 percent per year. To calculate the expected return 10 years ago, we would take the dividend (1.4 percent) plus the earnings growth (6 percent) plus the change in valuations. Given that stocks historically sell at 18 times earnings on average, a change in valuations from 28x to 18x implied an expected loss over the decade

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2009 Stimulus Bill – Tax benefits

CCH has published a summary of the 2009 Stimulus bill that President Obama is scheduled to sign Tuesday, February 17th.  Significant items include:

  • Making Work Pay: For 2009 and 2010, $400 per person tax credit for AGI under $75,000; phased out to $95,000 (double everything for married filing jointly).
  • One-time $250 payment to Social Security and other fixed income recipients.
  • AMT patch for 2009: increase AMT exemption amount from 2008 levels by $500 per person or $1,000 per couple. (Comment: this should have been separate legislation and didn’t need to be part of the Stimulus bill)
  • First-time home
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    Increased Volatility

    030 - Volatility Index
    Unfortunately, most individuals who have assets to invest are hesitant during this market pullback and many individuals who see this market lull as a buying opportunity don’t have funds to invest. This is a common scenario during periods of increased market volatility, and often stretches out the duration of stagnant equity markets.

    How volatile is this investment environment? As measured by the S&P 500, the market moved more than 3 percent in either direction during a single day only once between 2004 and 2007. By comparison, the market moved at least 3 percent in one day 40 times in 2008, …

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