by Clark Kendall
The quarter in brief. The rally continued, the economy showed definite signs of improvement, and the most comprehensive health care reform in decades inched toward reality. Stocks were hot, with the S&P 500 rising 5.49% for the quarter. Commodities were even hotter. A wave of buyers rushing to take advantage of federal credits helped the real estate market. World economies were growing healthier. By the quarter’s end, even many practitioners of the dismal science were thinking positively.
Domestic economic health. Let’s look back at some key economic indicators during the quarter, including consumer spending. Personal spending rose 0.6% in October and 0.5% in November; personal incomes rose 0.3% for October and 0.4% for November. The jobless rate climbed to 10.2% for October, then declined to 10.0%, with only 11,000 jobs lost in November, the tiniest payroll decline since the start of the recession.
Watch Out for Roth IRA Withdrawal Rule
There are times when people want to access Roth IRA funds for early retirement or other purposes -- perhaps you’re one of them. If you have ever thought about taking money out of a Roth IRA, be sure to consider the Roth IRA withdraw rules listed below.
You can withdraw regular contributions tax-free, but not your earnings. This is a critical distinction, although many Roth IRA owners don’t realize it.
You can withdraw regular contributions tax-free, but not your earnings. This is a critical distinction, although many Roth IRA owners don’t realize it.
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529 plans – It’s Not Your Grandmother’s College Saving Plan, but it Could be Your Grandchildren’s!!!
By: Paola Saenz
529 plans are great ways to save for higher education -- the money you put away grows while being tax-deferred (and possibly tax free!).
For example, let’s say you saved $10,000 in a 529 account and your beneficiary attends a qualified higher education institution, the payments to the school would be tax free dispersal. But, if you were to withdraw funds from a 529 plan during a year with no qualified higher education expenses, the earnings portion of the withdrawal, but not the principal portion, would be subject to federal income tax. However, unlike a Roth IRA, you cannot pull out just the principal and leave the earnings in the account. Rather, each withdrawal from the 529 plan contains a pro-rata portion of earnings and principal.
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Americans with high net worth and high incomes are preparing to pay higher taxes in 2011 and subsequent years. High earners are almost certainly going to take the hit if the tax cuts fade away at the end of 2010. Here’s a summary of what’s happening – and a look at what might occur. There are some developments you will want to remember, and some tax breaks you might very well want to exploit.
No phase outs on itemized deductions and personal exemptions in 2010. This may provide you with an opportunity for some notable tax savings. Historically, high-income taxpayers have been subject to a reduction in the value of itemized deductions and personal exemptions. That has gradually decreased in this decade, and in 2010, the phase outs are gone completely. However, 2011, they are poised to return.
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GARP Portfolio
The GARP portfolio’s primary focus and strategy is to own companies with unique products and services that are growing revenues and earnings faster than the overall market. We believe these companies will have long-term superior relative and absolute performance.
Revenue and earnings for the GARP portfolio continue to be very strong. The GARP portfolio’s weighted revenue and earnings grew at 16.5% and 13.6% over the past 12 months respectively, compared to the S&P 500’s revenue growth of 4.7% and earnings decline of 34.7%. From a valuation prospective, the GARP portfolio is trading at only 14.9 times 12-month forward earnings, which again is favorable as compared to the S&P 500 which trades at 16.2 times forward earnings. We feel our GARP portfolio should be trading at a premium on a relative valuation basis.
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Stock Selections
American Medical Systems (AMMD - $19.29)
American Medical Systems Holdings Inc. develops and delivers solutions to physicians treating men’s and women’s pelvic health conditions. Its product portfolio includes products for erectile restoration and men’s incontinence, as well as products and therapies targeted at benign prostatic hyperplasia (BPH) in men. In addition, the company provides products related to urinary incontinence, pelvic organ prolapse and menorrhagia in women.
THS - TreeHouse Foods Inc. (THS - $38.86)
TreeHouse Foods, Inc. (TreeHouse) is a food manufacturer servicing primarily the retail grocery and foodservice distribution channels. Its products include non-dairy powdered coffee creamer; private label soup; salad dressings; and sauces; jams and pie fillings; pickles and related products; infant feeding products; and other food products.
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