For the week of October 12, 2009
U.S. equities last week posted their highest weekly gains since July, ending a two-week losing streak.
The Dow marked its highest closing for the year, and the S&P is now up 60 percent from its 12-year
closing low set in early March. Third-quarter earnings reports begin this week, with IBM and Intel both set
to release results. The Dow ended the week up 4.05 percent to close at 9,864.94. The S&P rose 4.58
percent to finish the week at 1,071.49, while the NASDAQ climbed 4.45 percent to end 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.
Narrowing The Gap – The Commerce Department reported on Friday that a slight increase in U.S.
exports combined with a decline in the demand for foreign oil narrowed the trade deficit in August. The
3.5 percent decline brought the outstanding deficit to $30.7 billion, compared to analysts’ expectations of
$33 billion, according to Reuters. Year to date, the deficit is running at an annualized level of $357 billion
– about half of the 2008 year-end deficit of $695.9 billion.
Signs of Life – The U.S. retail sector showed its first gain in over a year, albeit a small one. The
International Council of Shopping Centers-Goldman Sachs preliminary report for September showed a
0.1 percent increase in retail sales, versus a 1.0 percent drop a year ago. It was the first gain since July
Better Service – The nation’s service sector grew for the first time in over a year during September,
reaching 50.9 on the Institute for Supply Management index, up from 48.4 in August. Analysts had
expected a reading of 50, the line between growth and contraction, according to a poll by Thomson
Reuters. The index had not registered growth since August 2008.
With the Passage of Time – Since retiring, 35 percent of retirees have reduced their investment risk
tolerance, 60 percent have maintained the same risk tolerance and only 5 percent of retirees are more
aggressive (Source: Society of Actuaries, BTN Research).
WEEKLY FOCUS – No 2009 AMT Cliffhanger
Usually about this time of year, we start talking about the
potential impact of the Alternative Minimum Tax (AMT),
that perpetually patched piece of tax law intended to
make sure the wealthiest U.S. citizens pay their share of
taxes. The original 1969 law omits an important detail –
the ability for the AMT to be indexed to inflation. As a
result, as the average American income grows, the
number of taxpayers affected grows exponentially.
In 2007, Congress acted on the AMT so late in the year
that the IRS was forced to rewrite and reprint forms for
the 2007 tax year. In 2008, the patch received approval
in October. This year, perhaps with those 11th hour
saves in mind, Congress included the 2009 patch in the
American Recovery and Reinvestment Tax Act of 2009, signed by President Obama in February. Once
again, however, the patch only covers the current tax year.
For 2009, the AMT exemptions are $46,700 for singles, $70,950 for married couples filing jointly or
qualifying widow(er)s, and $35,475 for married couples filing separately. Without the annual patch, the
exemption amounts revert to 1986 levels: $33,750 for singles and $45,000 for married couples filing
jointly. According to tax preparer H&R Block, the number of taxpayers affected by the AMT is expected to
exceed 30 million in 2010.
Like many previous patches, the 2009 Tax Act lets taxpayers use a wide range of non-refundable tax
credits to offset their AMT taxable income. Because of the number and complexity of the allowable offset
credits, you should consult a tax professional to determine how you may or may not be impacted by this
As it has been for many years, the future of the AMT remains unclear. The Taxpayer Certainty and Relief
Act introduced in March 2009 would make the 2009 exemption levels permanent and provide for inflation
indexing to the nearest $100 for 2010 and beyond. The proposed bill would also make permanent the
non-refundable personal credits that can be used to offset the AMT. The bill is currently in the Senate
If you haven’t finalized your strategies for minimizing your 2009 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. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade,
fixed rate bond market securities, including government, government agency, corporate and mortgage-backed
securities between one and 10 years. Written by Securities America. SAI# 300691
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