Question: Due to my retirement, I have not been able to itemize. Do I still have to round up my real estate tax deductions to prepare my income tax return?
Answer: YES. Although homeowners can usually deduct property taxes only if they itemized their personal deductions, homeowners who did not itemize deductions can increase their standard deduction up to $1,000 ( $500 for single taxpayers) for real estate taxes paid in 2009 (this provision applies to 2010 also)
Monthly Archives: January 2010
The Big Picture
The combination of very low interest rates, massive federal deficits, and high stock market prices is unsustainable.
Interest rates will stay low only if growth remains slow. But, if economies grow slowly, then profits will not rise fast enough to justify current stock market share prices and incomes will not rise far enough to justify the prevailing level of house prices (see #5 in Facts That Make A Difference below for more info on home values).
If, on the other hand, the markets are right about the prospects for economic growth, and the current recovery is sustained, then governments (both U.S. and foreign) will react by cutting off the supply of cheap money later this year by raising interest rates among other maneuvers. Historically, the stock market has declined when interest rates started to rise.
In summary, government actions including the FED’s movements must be closely monitored. This is the best litmus test for the direction of the 2010 stock market.
Motivational Quote of the Week
“It’s wonderful what we can do if we’re always doing.”
–George Washington
Facts That Make A Difference
1. New Year’s Resolution?- the Dow industrials Index ended the first week of the new year up 190, or 1.8%, to 10,618, their highest level in more than 15 months. For what it’s worth, a strong five-day start has led to further gains three out of every four years in the Dow’s history. (source: Barrons).
2. Growing– online sales increased an impressive 15.5% this past holiday season (source: MasterCard Advisors Spending Pulse). 
3. Out for a Movie – Americans shelled out $10,500,000,000 (that’s $10.5 Billion) at U.S. movie theaters in 2009, a record (source: Hollywood.com).
4. 58%– the percentage of parents who say they are not currently setting aside any money for their children’s college education (source: FINRA Investor Education Foundation). 
5. Home, sweet, home – American homes are priced at around fair value on the basis of the long term relationship between current value and their market rental rate. Britain is still overvalued by 20%, and Australia, Spain and Hong Kong by 50% (The Economist magazine).
“Your Financial Choices” Airs on WDIY Wednesday Evenings, From 6-7 PM
The show is hosted by Valley National’s Laurie Siebert CPA, CFP®. This week Laurie will discuss Financial Planning: Putting The Pieces Together. Laurie will take your calls on this subject and other financial planning topics at 610-758-8810. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton/Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville/Macungie area – or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com
Personal Notes
Tea or coffee? I’ve been drinking mostly tea for the last few years. But, after reading about some medical benefits of coffee, I have been sharing cup-time with java. I have to admit, there’s something special about that first cup of coffee in the morning.
The Markets This Week
YOU might say 2010 began with a bang.
Stock indexes kicked off the new year’s first session with rare gains of more than 1%, and the opening number was backed by a rousing chorus: Auto sales are up, factories are buzzing with a hum unheard since the spring of 2006, and even Taser International (ticker: TASR) delivered a happy jolt with news of a big shipment of stun guns to Brazil — just in time for Carnaval.
Impressively, the vibe survived even after the market hit a discordant note. The government said Friday that employers had cut 85,000 jobs in December, disappointing those expecting hiring to begin anew (although officials revised November’s payrolls to show a marginal gain of 4,000 — the first job creation since the recession started). Yet stocks shrugged off the blow to inch higher Friday.
The Standard & Poor’s 500 rallied for the fifth time in seven weeks and the Nasdaq Composite Index added 48, or 2.1% to 2317 and is up 83% from its March low. The Russell 2000 jumped 19, or 3.1%, to 645.
Fresh highs were logged by sectors as disparate as financials, materials and semiconductors, and crude oil snaked higher on 11 of the past 12 trading days. In a potential break from 2009 patterns, commodity strength didn’t come at the dollar’s expense, and the buck fell less than 1% against both the euro and yen. Is this evidence investors are starting to look beyond the cost of government bailouts, toward the resulting, hard-won recovery?
Some 85% of S&P 500 stocks are now ahead of their 50-day averages. The median stock in the benchmark fetches 22.2 times earnings, and while many investment advisers are bracing for an inevitable but mild correction, a whopping 72% are bullish. A well known research firm warns the market is becoming “overvalued and over-believed,” but he is still tilting bullish, perhaps mindful of the danger of fighting market momentum too early.
So here we are, noses to the wind, straining to catch the first whiff of trouble. Our checklist of warning signs: A jump in the 10-year Treasury yield and long-term interest rates, a shunned Treasury auction that signals sated appetite for U.S. debt, and any hint of faltering global growth. Most important, if more good news fails to lift shares, that would suggest expectations have become too exacting. But there was no such failure amid last week’s celebration (Source: Barrons Online).
The Numbers This Week
In an unusual occurrence last week, U.S. Stocks, Foreign Stocks and bonds all increased. During the last 12 months, STOCKS have substantially outperformed bonds.
Returns through
1-08-2010 1-week Y-T-D 1-Year 3-Years 5-Years 10-Years
Bonds-
BarCap
Aggregate Index .4 .4 6.3 6.0 5.1 6.4
US Stocks-
Standard & Poor’s
500 2.7 2.7 28.9 – 4.7 1.4 -.5
Foreign Stocks-
MS EAFE
Developed Countries 2.3 2.3 27.3 -7.6 1.8 -.4
Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Assumes dividends are not reinvested.
The Markets This Week
The Markets This Week
WHAT 2010 NEEDS IS A CORRECTION.
Stocks staged a colossal comeback in 2009, but as the ball dropped on a wet, snowy Times Square Thursday night, the outsized gains were matched by a sense of unease. The S&P 500’s 23% rally delivered its best annual gain since 2003, but the 65% levitation since March without any setback worse than 7% feels a little unreal, undependable, uncomfortable. Four of every five stocks are now above their 50-day moving averages. A correction will appease increasingly unrequited — and increasingly loud — bears, moving the mood meter closer to neutral.
A rejuvenating pause might not come quickly, even though stocks did end the year’s final session down. The market’s advance has been robust lately, and the fourth quarter’s rally was propelled by a phalanx of companies and every sector except, notably, financials. Even as uneasy traders booked profits on New Year’s Eve, the crop of stocks plumbing fresh lows barely made it to double-digits, while those busting new highs hit 285. The Nigerian on a Northwest flight who failed to detonate a bomb in his underwear sparked a rally in security screening stocks. Makers of body scanners like OSI Systems (ticker: OSIS) jumped 24%, while American Science & Engineering (ASEI) rose 6%.
The trickle of data also did little to disturb the notion of economic recovery. Slippage in home prices slowed, consumer confidence repaired to a three-month high, and weekly jobless claims shrank to the lowest level since July 2008. Economists ratcheting up their forecasts now expect the government to report Friday that no jobs were cut in December, and stocks’ reaction will offer an early gauge of investors’ appetite after the 2009 feast.
Quite worryingly, the huddle of bearish newsletter writers has shrunk to its smallest since April 1987, and fund managers are increasingly sanguine. But the public is still wary of stocks after a decade with one credit crisis, two recessions and assorted burst bubbles. The $3.9 trillion they stashed in money funds early last year has shriveled to $3.3 trillion, but that money didn’t go to stocks; investors funneled more than $380 billion in 2009 into bond funds even as they siphoned $35 billion from U.S. stock funds. The withdrawals haven’t let up, despite the rally.
The Dow ended 2009 up 1652 points to 10,428, and the 18.8% annual gain was its best since 2003. Three of its four top gainers were tech outfits, including Microsoft (MSFT), International Business Machines (IBM) and Cisco Systems (CSCO), although American Express’ (AXP) 118% rebound made it the top blue-chip by far. The Dow pulled back 0.9% last week, but still ended the fourth quarter up 7.4% — its third consecutive quarterly gain.
Here’s a breakdown of how its 500 stocks did in 2009. The 50 best performers from 2008 gained just 9% last year, but the 50 worst doubled. The 50 biggest stocks in the benchmark rallied just 22%, while the 50 smallest shimmied up 113%. Steady eddies paying the richest dividends were shunned, rising just 36.5%, while the yield-free climbed 72%. The most heavily shorted stocks jumped 60%, three times that of the least shorted. Companies with the most foreign revenue rallied 71% as the dollar weakened, while those with the least rose 28%.
Meanwhile, crude rallied 78% to top $79 a barrel. And with the government printing money to revive the economy, gold hit record highs no fewer than 27 times in 2009. It closed up for the fifth straight quarter — and the ninth consecutive year.
The Nasdaq Composite has rallied in nine of the past 10 months, and its 43.9% rise in 2009 was its fourth-biggest annual gain ever. Yet despite bouncing a whopping 79% off its March low, the tech benchmark is still 55% off its dot-com era peak of 5049, reached when the decade began (Source: Barrons Online).