For the week of October 27, 2008
Declines in global markets and some disappointing third-quarter corporate earnings reports took the
markets lower last week. The Federal Reserve meets this week in its last session before the presidential
election. Economists expect the Fed to drop its rate a quarter to a half percentage point. This would
reduce the prime rate, which banks and credit card companies charge consumers, to 4.25 percent or 4
percent, depending on the depth of the cut. For the week, the Dow lost 5.31 percent to finish at 8,378.95.
The S&P fell 6.76 percent to 876.77, and the NASDAQ declined 9.31 percent to close the week at
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.
Drop Of Oil – On Wednesday, oil hit its lowest price in 16 months, dropping to $66.75. Just over three
months ago, on July 3, oil set a record high closing price of $145.29 a barrel. That’s a drop of more than
Depression Junkie – Ben Bernanke became the Fed chairman on Feb. 1, 2006, or more than two and
a half years ago. A Dec. 7, 2005, Wall Street Journal article (i.e., two months before Bernanke took
office) titled, “Long Study of Great Depression Has Shaped Bernanke’s Views,” quoted him as saying, “I
am a Great Depression buff, the way some people are Civil War buffs.” Bernanke attributed his early
fascination with the Great Depression to conversations he had with his maternal grandmother, who had
lived through the Depression in Norwich, Conn. (Source: Wall Street Journal, BTN Research).
More Buyers – The number of new and existing homes that were sold in the U.S. in 1990 was 3.4
million, essentially the same total as the 3.5 million home sales from 10 years earlier (1980). By 2005
however, the number of new and existing homes sold in the country during a single year had more than
doubled to 7.5 million (Source: Joint Center for Housing Studies, BTN Research).
Mint Green – The U.S. Mint is spending about $12 million on initial promotion for a new dollar coin
series featuring U.S. presidents. Back in 1995, the Federal Reserve estimated that using coins rather
than bills would save $500 million annually, because coins last about 30 years – 16 times longer than
paper dollars. That amount would be higher today because there are more $1 bills in circulation. The
dollar coin presidential series began last year with George Washington and will continue with deceased
presidents in the order they served.
WEEKLY FOCUS – Early AMT Patch
The Emergency Economic Stabilization Act of 2008, the
so-called “bailout bill,” included this year’s patch for the
alternative minimum tax (AMT). Congress waited until
December last year to pass its annual patch, which
temporarily increases the exemption amounts to
prevent the tax from applying to tens of millions of
The act set 2008 AMT exemptions at $69,950 for
married taxpayers filing jointly and surviving spouses;
$46.200 for unmarried individuals; and $34,975 for
married individuals filing separately. For 2008, the act
allows individuals to offset their entire regular tax
liability and AMT liability by the nonrefundable personal
tax credits, according to Forefield.
Created in 1969 to ensure that the nation’s wealthiest citizens could not shelter all of their income from
taxes, the AMT did not include a provision for indexing the tax to inflation. As a result, as the average
American income grows, the number of taxpayers affected grows exponentially. Without the 2008 patch,
the number of taxpayers subject to the AMT would have been approximately 24.2 million compared to 5
million last year.
By acting earlier in the year, Congress has saved the IRS from rewriting and reprinting tax forms, as it
was forced to do last year. The measure is still temporary, however; the AMT exemption will reset to its
stated levels of $58,000 for married couples filing jointly and $40,250 for single filers – unless Congress
passes a patch again in 2009. A permanent repeal seems unlikely. The Treasury has estimated the
resultant loss to the tax coffers would be $500 billion over 10 years.
If you haven’t finalized your strategies for minimizing your 2008 tax obligation, call our office soon for a
review. We will gladly work with your tax advisor to analyze your situation.
* 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. Written by Securities America. SAI# 289171
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