For the week of Feb. 11, 2008
The NASDAQ gave investors a bright spot on Friday, rising 0.52 percent for the day after Amazon.com
Inc. announced a $1 billion share buyback. For the week, the NASDAQ lost 4.50 percent to end the week
at 2,304.85. The other major indexes had similar results for the week. The Dow lost 4.29 percent to finish
the week at 12,182.13, and the S&P dropped 4.52 percent to close the week at 1,331.29.
Source: Morningstar.com. * Past performance is no guarantee of future results. Indexes are unmanaged and
cannot be invested into directly. Three and five-year returns are annualized. The S&P, excluding “1 Week”
returns, is a reflection of return to an investor, by reinvesting dividends after the deduction of withholding tax.
Miss A Little, Maybe Miss A Lot – Over the past 20 calendar years (1988-2007), the S&P 500 was up
9.3 percent compounded per year not counting the impact of dividends. If you missed the 20 best
performance days in those 20 years (i.e., 20 days in total, not 20 days each year), your average annual
return was nearly cut in half to just 4.8 percent per year. If you missed the best 1 percent of all 5,043
trading days in those 20 years (i.e., 51 days in total), your annual return was negative (Source: BTN
Oil and Gas – The price of a gallon of gasoline increased 31 percent in calendar year 2007 versus a 57
percent increase in the price of a barrel of oil. Both dropped in January 2008, with the price of gasoline
down 2 percent while the price of oil fell 4 percent (Source: AAA, NYMEX, BTN Research).
Refinancings Up – Total mortgage applications for the week ended Feb. 2 were up 73 percent over the
prior year, according to the Mortgage Bankers Association. Refinancings accounted for about 69
percent of those applications, compared to 46 percent a year ago. Lower interest rates are fueling
demand. Last week, the average rate for a 30-year fixed mortgage was 5.67 percent, compared to 6.3
percent a year ago. With the subprime fallout, lenders are getting more selective, requiring high
percentages of home equity or down payment, better credit scores and more independent appraisals of
the property, according to a Feb. 8 article on CNNMoney.com.
After a Bad Month – The S&P 500 lost 6.0 percent (total return) in January 2008, the 17th time since
1990 that the stock index has fallen at least 5 percent in a single month (i.e., 17 times in the last 217
months or 8 percent of the time). In the six months following the previous 16 market drops, the S&P 500
has had a positive total return eight times and suffered a negative total return the other eight times. The
subsequent six months have been as good as up 30 percent and as bad as down 19 percent (Source:
WEEKLY FOCUS - 2008 Stimulus Package May Increase Your 2009 Tax Bill
President Bush is expected to sign a $152 billion
economic stimulus package this week. The bill provides
rebates of $600 for individual taxpayers, or $1,200 for
couples, plus an additional $300 for each child. Those
who pay no income tax for 2007 but earned at least
$3,000 in wages, Social Security or veterans benefits
will still get checks of $300. The rebate amounts phase
out for individuals with adjusted gross incomes greater
than $75,000, or $150,000 for couples.
Congress and the President hope the rebates, which will
arrive in mail boxes starting in May, will prompt
Americans to continue their spending ways, stimulating
the economy. A national survey by CCH Complete Tax,
however, indicates that 47 percent of taxpayers would use the extra money to pay down debt. Among
high net worth individuals with an income of more than $75,000, 44 percent agreed they would cut debt
rather than increase spending.
The survey showed that 32 percent of total survey respondents plan to save the money, with a similar rate
of 34 percent among high net worth taxpayers. Only 21 percent plan to spend the money, a percentage
that held true across income levels.
Keep in mind that the government usually attaches strings to its generosity. The amount you receive in
the rebate will be considered income on your 2008 taxes, which means you may receive a smaller refund
or even owe taxes next year. Check with your tax advisor to determine if you should increase your
withholding for the rest of the year to avoid sending a check with your 2008 return.
What you do with your rebate (and this also applies to your 2007 tax refund) depends on your personal
situation. In some cases, debt reduction will be the most advantageous move. For others, it may be
investing. If you’re in that 79 percent who don’t plan to spend the money, give our office a call for help in
deciding how to get the most bang for your rebate buck.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of
the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded
blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter
common stocks traded on the National Association of Securities Dealers Automated Quotation System. The
Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely
recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies
representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all
dividends. WMCSAI# 268358
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