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1
Key Tax Changes in the Final Version of the Stimulus Bill
2
Is Investing Now Like Trying To Catch A Falling Knife?
3
Banks Are Lending Again, But Congress Needs Somebody to Blame
4
Mandatory IRA/401(k)/403(b) Withdrawals Have Been Eliminated for 2009
5
Keeping the Downturn in Perspective – The Stock Market

Key Tax Changes in the Final Version of the Stimulus Bill

The final version of the 1071-page American Recovery and Reinvestment Act of 2009 is due to be signed by President Obama tomorrow. My summary of the bill’s key tax items two weeks ago was not far off the mark, but there are a number of nips and tucks in the final version.

“Making Work Pay” tax credit
The refundable credit in the amount of 6.2 percent of earned income finally settled in at a limit of $400 for single returns and $800 for joint returns in 2009 and 2010. The credit starts being phased out at adjusted gross incomes (AGI) …

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Is Investing Now Like Trying To Catch A Falling Knife?

Image by: Wallyg

Image by: Wallyg

Due to the treacherous equities markets of the last 16 months, many individuals are afraid to invest new dollars at this point. Most would prefer to wait until the outlook is clear and the crisis is over before diving back into the market.

However, waiting until the outlook is clear is frequently very costly for investors. Reviewing the beginning of 22 bull markets, the Leuthold Group found that bull market gains have been front-end loaded. The average gain was 18.1 percent in the first three months of a bull rally, 26.4 percent in the first six months, …

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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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