Tuesday, January 20, 2009

Tax Savings Tips & Strategies for 2008



Accountant and Financial Advisor Glover Davis is back as a guest journalist with timely tax planning tips & strategies for the 2008 tax filing year.

In my on-going effort to bring to your attention useful tax-saving information that will enable you to take full advantage of all deductions/credits which can help you increase your income tax refund or at least to minimize the amount of any balance you might owe; I present the following tax law changes/reminders that are applicable to the 2008 income tax filing season:

***Homeowners who had mortgage debt forgiveness/cancellation due to a foreclosure or restructuring of the mortgage on your principal residence during calendar year 2008 (and receive Form 1099-A from their mortgage lender), can have the cancelled debt excluded from gross income by having Form 982 prepared and filing it with your 2008 income tax return. Previously the amount of the cancelled debt was included in your gross and taxable income and would increase your income tax burden when you could afford it the least! This law was enacted late in 2008 and is available to you for the 2008 income tax season!

***A surviving spouse, who sells his/her principal residence within 2 (two) years of January 1, 2007 – after the death of his/her spouse, will qualify for a $500,000.00 capital gains exclusion rather than $250,000.00 as was the law previous to the 2008 income tax year!
· A First-time Home buyer Credit is available for primary residences purchased after April 8, 2008 and prior to July 1, 2009. To obtain this credit, you must file Schedule 5405 with your 2008 form 1040.

***A First-time Home buyer is anyone who did not own a principal residence during the 3-year period plus 1 day ending on the date that you purchased your new home or residence. Therefore, individuals, couples and etc. who owned a home at least 3 (three) years plus 1 day prior to – and who sold that previous primary residence at least 3 (three) years plus 1 day prior to purchasing a new principal residence during 2008 – will be considered a “First-time Home buyer” and is eligible for the credit on his/her/their 2008 income tax return! This is a very significant ruling and can yield real income tax savings for you!

Look for additional income tax tips and strategies during the income tax filing season!

For more information, please contact us at daverosefinancial@yahoo.com

Apple iPod classic 120 GB Black (6th Generation)






Wednesday, January 14, 2009

Steve Jobs Takes Medical Leave of Absence

After months of speculation about the health of Apple CEO Steve Jobs, today it was announced that he would take a medical leave of absence until the end of June. In the meantime, current COO, Tim Cook, will be acting boss of day-to-day operations.

Earlier today, Jobs sent the following email to all company personnel:



Team,

I am sure all of you saw my letter last week sharing something very personal with the Apple community. Unfortunately, the curiosity over my personal health continues to be a distraction not only for me and my family, but everyone else at Apple as well. In addition, during the past week I have learned that my health-related issues are more complex than I originally thought.

In order to take myself out of the limelight and focus on my health, and to allow everyone at Apple to focus on delivering extraordinary products, I have decided to take a medical leave of absence until the end of June.

I have asked Tim Cook to be responsible for Apple's day to day operations, and I know he and the rest of the executive management team will do a great job. As CEO, I plan to remain involved in major strategic decisions while I am out. Our board of directors fully supports this plan.

I look forward to seeing all of you this summer.

Steve

Apple iPod classic 120 GB Black (6th Generation)

Tuesday, January 13, 2009

January Effect


Every year we hear discussion about the so called 'January Effect'. Simply applying the results of the S&P500 in the first month of each year to foreshadow the remainder of the year. The thought is 'as goes January, so goes the year'.

This would make sense as economic policy is often discussed and released early in the new year. Changes to agendas, new directions and more recently - economic stimulus packages - are released to both the press and American public.

Market psychology is also a key component. If 'perception is reality', this pattern may be self-fulfilling to a certain degree. In 2008, investors could have taken shelter after a January haircut of 6.1% led to an annual decrease of 38%.

Since 1972, this barometer has been correct 92% of the time. Pretty remarkable. In post Presidential election years, it has been right 12 of 14 times - an 86% accuracy rating. So, while the expression may have some naysayers, it does seem to have statistical validity.

A more abbreviated version of this phenomena has emerged in recent years and pertains to the first five trading days of the S&P500. This may seem somewhat abbreviated, but the statistics are compelling as well. The last 35 up years for the first five trading days were followed by annual gains in 30 years with annualized returns of 13.7%. This translates to an 85.7% accuracy rating. The five exceptions were 1994 and four years related to war activity.

As the month of January isn't complete, we do not have a figure to look at as of yet. Through January 12, 2009 though, the S&P500 has decreased 3.5%. The first five days trading statistic though was positive 0.7%.


Statistics courtesy of Stock Trader's Almanac

Apple iPod classic 120 GB Black (6th Generation)


Monday, January 12, 2009

Bernie Madoff - Still Free on Bail


Today, a judge allowed former hedge fund manager Bernard Madoff to remain free on bail after prosecutors attempted to argue he violated the conditions of his bail by mailing more than $1 million of jewelry to family and friends during the holidays.


Simply amazing. Steal several billion dollars and you're not considered a flight risk or a threat to the general public? Post bail and you can live in the comfort of your own multi-million dollar penthouse in NYC while you await your day in court.


For more detailed information, here is the transcript from the judge's bail hearing.

Saturday, January 10, 2009

IRA Contributions 2008 & 2009

History has shown us the benefits of funding Individual Retirement Accounts (IRA) on an annual basis. In a world where corporate pensions are becoming a thing of the past, it is our responsibility to put money aside for future needs.

The creation of social security in 1935 has evolved into the de facto retirement plan for many Americans. The intent of the original social security act though was not to be the sole source of retirement funds, but rather a compliment to other sources of income. It was to replace a portion of your salary. This is exactly how the system works today. The bigger question should be - what other sources of income will I need to compliment my retirement?

Opening and/or funding an IRA is one way to enhance your retirement plan. Contributing to your account every year as well should be mandatory. If we set aside the emotional issues resulting from 2008, capital markets go up more than down.

Since 1952, the S&P500 has increased 35 out of 56 years (63%). If we were talking baseball, American capitalism would be in the hall of fame!

Another factor rarely discussed when talking about IRA accounts pertains to when is the ideal time to fund your account? Sometimes investors think they can time the market. Sometimes cash isn't readily available. For most though, it's simply a matter of habit. They tend to make contributions for the previous year when they file their 1040 income tax return.

Let's take things a step further: What happens if you fund your account on January 1 every year for the CURRENT year as opposed to April 15 for the PREVIOUS year? Does the extra 1 year of compounding each year make much of a difference? You bet! Let's take a look.

For our example, let's assume the S&P500 has an annual return of 8% per year. Since we are not going to fund a retirement account for 56 years, we'll assume a 25 year investment period. Funding your IRA with today's $5,000 limit at the beginning of each year (January 1) would yield an ending balance of $394,772. Should you file at the end of each year instead, your account balance would be $365,529. This represents a significant difference... $29,242! By simply funding your IRA at the beginning of each year and putting time on your side (remember the S&P500 historically has increased 63% of the time since 1952) makes a significant difference.

Some investors will prefer dollar-cost-averaging as monthly investments are easier on their budget. This is logical and makes good financial sense. Others choose to make lump sum investments once per year. It is these individuals who should note the benefit of making contributions in January for the current year - every year. Put time on your side and reap the rewards!

Thursday, January 8, 2009

Unemployment Claims... January 3, 2009



Today, the Labor Department reported unemployment claims for the week ended January 3 unexpectedly decreased by 24,000 to a seasonally adjusted 467,000. The four week moving average of initial claims also fell by 27,000 to 525,750.

The bigger picture though pertains to continuing claims which unexpectedly increased by 101,000 to 4.61 million. This figure is higher than analysts expected and is at the highest level since November 1982.

This simply confirms that unemployed workers are having a difficult time finding new jobs.

This dip in new claims will probably be temporary as several prominent Corporations continue to layoff workers to curtail operating expenses. This week Alcoa announced a plan in which 13,000 employees would be released.

Reducing payroll expenses is surely one way of reducing overall expenses. However, corporations have to be careful in how expenses are cut. Recessions are temporary and hiring good staff may become difficult should the latter part of 2009 show signs of improvement.

Sunday, January 4, 2009

The Year In Review - 2008

Last year was such a dismal year, simply turning the calendar to January 2009 seems like a major accomplishment. If nothing else, it allows us to look forward and start anew.

As measured by the U.S. stock market, 2008 was the worst showing since 1931. The Dow Jones Industrial Average (DJIA) decreased 33.8% while the tech laden Nasdaq Composite Index was off 40.5% for year year. Just about every asset class (U.S. stocks, foreign stocks, bonds, real estate and commodities) had negative returns for the year. The only bright spots were money market funds and short-term bond funds which finished the year up 2%-5%.

The greatest calamity turned pleasantry in 2008 pertained to oil & gas prices. Who would have ever thought oil would decrease for the year after escalating to $147 per barrel? It managed to increase and decrease over 100% in 2008. How bizarre. I wonder how many pundits are going to say they called this and got it right (I'm sure someone will step up and take credit at some point).

There are a number of theories as to why this happened. I'm not sure anybody will really ever know for sure. The bottom line: Current prices are somewhat of a stimulus package in and of itself as families are now saving a fair amount of money on energy costs as year-over-year prices for oil & gasoline have decreased.

What can we expect in 2009? Nobody knows. In my predictions for 2009, I reference how some things are facts and others opinions (aka - guesses). Nobody knows for certain what will happen in the future and if they do, run for the hills! Or, take a contrarian approach, and do the opposite.

Equity investments have proven to be a winning formula for over 100 years. Although frustrating and painful at times, set backs are a normal part of the investment process. The capital markets will ebb & flow like ocean tides. While we'd all prefer the setbacks to be mild in nature, some storms are worse than others and 2008 would certainly fall into this category. Hopefully, the storm is now nearing completion and a rainbow is forming on the horizon. Brighter days will prevail.