Einstein, Year End Tax Planning, and the Markets—Your Weekly Update

Welcome to November!

It’s hard to believe that the end of 2013 is approaching. But end it will, and with it will end the opportunity to do some tax planning that might just reduce the amount of your tax bill come April of next year. After all, if Einstein had a challenge understanding the Federal Income Tax, the rest of us might need all the help we can get.

So this week, we've segmented the Update in two parts. The first is the 2013 JL Davis Year End Tax Planning Checklist, which we suggest you put your feet up and read when you have a few minutes. Some of the information might not apply to you directly, but you can bet a lot of it will. Perhaps a nugget or two can result in tax savings in the thousands of dollars—or maybe even more.

Of course we've also provided the market data for the week just passed, which was quite steady.

As you take a moment to review these, please keep in mind that we are available to discuss your overall financial situation with you personally, as always. Just call Carol or Patti and they will set things up.

Enjoy!

All the best,
Lee and Jeremy

P.S. Of course, you’ll want to consult your tax professional on such matters as we do not give tax advice or prepare tax returns. But we do help develop tax-smart strategies to grow and protect your wealth!


This Week’s Quote:

“The hardest thing in the world to understand is the Income Tax.” ~ Albert Einstein


Market Week: November 4, 2013

The Markets

After leading domestic equities for so much of the year, the small caps of the Russell 2000 took a hit last week, while the larger caps remained basically flat. Meanwhile, lingering worries about the timing of Fed monetary action sent the yield on the benchmark 10-year Treasury up strongly on Friday, though it still remained well below its almost 3% year-to-date high.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week's Headlines

• The Federal Reserve's monetary policy committee provided little guidance on when it might begin tapering other than to say it wouldn't be now. The announcement noted the recent slowing of the housing recovery and confirmed again that the unemployment rate would need to be closer to 6.5% before the Fed would begin raising interest rates.
• Home prices continued to rise in August, seeing their biggest year-over-year gains (nearly 13%) since early 2006, according to the S&P/Case-Shiller 20-City Composite Index. However, the pace of those gains has begun to slow over the last several months, and August's 1.3% increase was the smallest gain of any month since March. Average home prices are back to mid-2004 levels, but are still roughly 20% below their mid-2006 peaks.
• Increases in the cost of energy and housing pushed consumer prices up 0.2% in September, according to the Bureau of Labor Statistics. That put the inflation rate for the past 12 months at 1.2%, its lowest level in almost 3 years. Wholesale prices fell 0.1% during the month, leaving wholesale inflation for the last 12 months at a paltry 0.3%.
• A 2.2% decline in auto sales cut retail sales by 0.1% in September, according to the Commerce Department. However, non-auto sales were up 0.4%, and total sales were still 3.2% higher than a year earlier.
• The Institute for Supply Management's gauge of U.S. manufacturing saw little change in October, rising just 0.2% from October's 56.2%. However, the reading still represents the index's highest level so far this year.
• And the hits keep coming: Mortgage lender Fannie Mae filed suit against nine of the world's largest banks, charging that it had lost $800 million because the banks had deliberately manipulated the London Interbank Offered Rate (Libor), which determines a variety of interest rates around the world. Bank of America, JPMorgan Chase, and Citigroup were named in the suit along with international institutions Barclays, UBS, Deutsche Bank, Credit Suisse, the Royal Bank of Scotland, Rabobank, and the British Bankers' Association.


Eye on the Week Ahead

Data on U.S. economic growth in the third quarter will finally be available, and investors will see whether the federal government shutdown affected the October unemployment rate. Also, the European Central Bank meets on interest rates and will announce its decision on Thursday.

Key dates and data releases: factory orders (11/4); U.S. services sector (11/5); initial estimate of Q3 gross domestic product, European Central Bank monetary policy announcement (11/7); unemployment/payrolls, personal incomes/spending (11/8).

Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.