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Tuesday, January 15, 2013

The IRS has released the tax tables for 2013 as well as the cost-of-living adjustments for inflation for certain tax items.

But wait… before you read any further, promise me something? You understand that these are the applicable rates for the tax year 2013, right? They are NOT the rates that you’ll use to prepare your 2012 tax returns in 2013 but rather the rates that you’ll use to prepare your 2013 tax returns in 2014. I know it’s confusing but promise you won’t mix up the two (or at least that you’ll trust your tax preparer to keep them straight).

Here you go:

Married Taxpayers Filing Jointly

Head of Household

Individual Taxpayers

Married Taxpayers Filing Separate

The IRS has also indexed a few credits for 2013. Here are the updated amounts:

Adoption Credit. The maximum credit allowable is $12,970. Phaseouts apply for taxpayers with modified adjusted gross income (MAGI) over $194,580 and the credit is completely phased out for taxpayers with MAGI of more than $234,580. By way of explanation, your MAGI is generally your adjusted gross income (AGI), found at line 37 of your federal form 1040, with certain tax preference items like deductions for student loan interest and IRA contributions added back in.

Child Tax Credit. The value (as outlined under § 24(d)(1)(B)(i)) used to determine the amount of refundable credit is $3,000.

American Opportunity Credit. The “supercharged” Hope Scholarship Credit, known as the American Opportunity Tax Credit will be limited to $2,500. Phaseouts apply for the credit beginning with MAGI over $80,000 ($160,000 for married taxpayers filing jointly).

Earned Income Credit (EITC). The EITC numbers for 2013 are as follows:

Personal Exemptions. The personal exemption amount is $3,900. PEP (personal exemption phaseouts) apply.

Standard Deduction Rates. The applicable standard deduction rates for 2013 are $12,200 for married taxpayers filing jointly; $8,950 for head of household; $6,100 for individual taxpayers and $6,100 for married taxpayers filing separate. For purposes of the standard deduction, the amount under §63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,000 OR ($350 + the individual’s earned income). The additional standard deduction amount for the aged or the blind is $1,200; that amount is increased to $1,500 if the taxpayer is single and not a surviving spouse.

Itemized Deductions. The limitations on itemized deductions (the Pease limitations) kick in at $300,000 for married taxpayers filing jointly, $275,000 for head of household, $250,000 for single taxpayers and $150,000 in the case of a married individual filing separately.

Alternative Minimum Tax (AMT). The applicable AMT thresholds for 2013 are $80,800 for married taxpayers filing jointly; $51,900 for individual taxpayers; and $40,400 for married taxpayers filing separate.

The IRS included a few other adjustments at Rev Proc 2013-15. You can read it here if you have interest (downloads as a pdf).



Friday, May 25, 2012

For some perspective on the long-term performance of the stock market, today's chart presents the Dow priced in another global currency -- gold (i.e. the Dow / gold ratio).

For example, it currently takes less than a mere eight ounces of gold to 'buy the Dow' which is considerably less than the 44.8 ounces it took back in 1999. Priced in gold, the Dow has been in a massive 12-year bear market.

Recently, the downtrend of the Dow (priced in gold) has slowed to its slowest pace since peaking at the end of the previous century. In fact, the Dow (priced in gold) is now testing resistance of its reduced downtrend channel thanks in part to a significant correction in gold itself.




Friday, May 18, 2012

For some perspective on all-important long-term interest rates, today's chart illustrates the 112-year trend of the 10-year Treasury bond yield (thick blue line).

Escalating concerns over Europe in addition to a struggling global economy have encouraged investors, institutions and governments alike to move a portion of their investment dollars to the relative safety of the US. This has resulted in a significant decline of the 10-year Treasury bond yield. In fact, the 10-year yield has declined a fairly dramatic 340 basis points (i.e. 3.4%) since the peak of the credit bubble.

This decline has brought the 10-year Treasury bond yield to a 112-year low. The decline of the 10-year Treasury bond yield has been significant enough to bring the 10-year yield near resistance of what is a 26-year downtrend channel.


If you are buying Bonds now, be carefull, you could suffer HUGE PRINCIPAL LOSES to you Capital !




Friday, April 20, 2012

Today's chart illustrates rallies that followed massive bear markets. For today's chart, a 'massive' bear market is defined as a decline of greater than 50%. Since the Dow's inception in 1896, there have been only three bear markets whereby the Dow declined more than 50% (early 1930s, late 1930s until early 1940s, and during the recent financial crisis).
Today's chart also adds the rally that followed the dot-com bust during which the Nasdaq declined 78%. The current Dow rally has followed a somewhat middle of the road path and has followed the post dot-com bust rally of the Nasdaq that began back in 2002 fairly closely -- especially over the past year.
If the current rally were to continue to follow the post-massive bear market rally pattern, the market would have to work its way higher during much of the remainder of 2012.

Friday, March 30, 2012




Today's chart illustrates how the recent rise in earnings as well as recent stock market action has impacted the current valuation of the stock market as measured by the price to earnings ratio (PE ratio). Generally speaking, when the PE ratio is high, stocks are considered to be expensive.

When the PE ratio is low, stocks are considered to be inexpensive. From 1900 into the mid-1990s, the PE ratio tended to peak in the low to mid-20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s), surged even higher during the dot-com bust (early 2000s), and spiked to extraordinary levels during the financial crisis (late 2000s).

As a result of the continued surge in corporate earnings the PE ratio remains at a level not often seen since 1990 despite what has been a significant upward trend in stock prices so far this calendar year.


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