1. LOOKING BACK – Over the 300 months ending 2/28/14 (i.e., the last 25 years), the S&P 500 has been up 65% of the months and down the other 35% of the months. The period includes the 2000-02 bear market (down 49%) and the 2007-09 bear market (down 57%). The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).
2. NOT LINEAR – $1 invested in the S&P 500 stock index on 7/31/96 in a tax-deferred account would have quadrupled in value to $4.02 on a total return basis by 2/28/14 or after 17 years, 7 months. However the original $1 doubled in value to $2.00 by 12/31/98 (i.e., after just 2 years, 5 months) and then it took another 15 years and 2 months for the total to double again to $4.02. This mathematical calculation ignores the ultimate impact of taxes on the account which are due upon withdrawal, is for illustrative purposes only and is not intended to reflect any specific investment. Actual results will fluctuate with market conditions and will vary (source: BTN Research)
3. RECESSIONS AND BEARS – Of the 11 recessions that have occurred in the last 66 years, 8 have occurred in tandem with stock bear markets (i.e., at least a 20% decline in the S&P 500), including the last 4 recessions (source: National Bureau of Economic Research).
4. COMING BACK – The average US home has increased in value by +14% over the past 2 years, i.e., 2012-13 (source: Office of Federal Housing Enterprise Oversight).
5. MORE OUT – In addition to the fact that the USA had a $475 billion trade deficit in 2013 (imports in excess of exports), Americans also bought $137 billion more in foreign stocks and bonds than the US stocks and bonds we sold to foreigners. Thus, for every $10 that left the USA because of excessive buying of foreign imports, $3 left the USA as Americans bought foreign financial assets (source: Commerce Department, Treasury Department).
6. JUST THE STOCKS THEY OWN – The wealthiest 10% of American households (i.e., 10% of 121 million households or 12.1 million households) own 80% of all US stocks. Since the total market capitalization of the US stock market was $23 trillion as of 2/28/14, that suggests that $18.4 trillion of stocks is owned by just 12.1 million households or an average of $1.5 million of equities for every wealthy household (source: Census Bureau).
7. DISCRETIONARY VS. MANDATORY – Over the next decade (fiscal years 2015-24), estimated discretionary spending of the US government will total $12 trillion, an amount that is dwarfed by the $31 trillion of projected mandatory spending (source: Office of Management and Budget).
8. TIME IS RUNNING OUT – ObamaCare requires that an individual must purchase his/her health plan through a government exchange and be enrolled by 3/31/14 to obtain subsidized coverage (source: ACA).
9. AND BORROW WE DO – The yield on the 10-year Treasury note was 3.03% on 12/31/13. The yield on the 10-year Treasury note was 4.26% on 12/31/03. Thus for the same annual cost of money, our government can borrow +41% more money today than we did 10 years ago (source: BTN Research).
10. RADICAL REFORM – The tax reform plan proposed on Wednesday 2/26/14 by House Ways and Means Committee Chairman Dave Camp (R-MI) has 979 pages of proposed changes that would repeal over 220 sections of the tax code, cutting the size of the tax code by 25% (source: House of Representatives).
11. JUST LEND IT – Excess bank reserves, i.e., amounts held at the regional fed banks by commercial banks instead of lending the money, totaled $2.52 trillion as of 3/05/14 (source: Federal Reserve).
12. THAT’S A LONG TRAIN – The proposed Keystone XL pipeline would run 1,179 miles from Alberta, Canada into the USA and would have the capability to move 830,000 barrels of crude oil a day, equal to a train with 1,200 railroad cars moving crude every day (source: State Department).
13. STILL TOO BIG TO FAIL – The 6 largest banks in the USA held $9.67 trillion of assets as of 12/31/13, 66% of the $14.72 trillion of assets in the entire banking industry (source: Federal Deposit Insurance Corporation).
14. TAXES – Instead of completing Form 8829 (43 lines), taxpayers filing a 2013 return can claim a home office deduction for $5 a square foot on up to 300 square feet (i.e., maximum $1,500 deduction). Self employed individuals claim the deduction on line 30 of Schedule C. Please consult a tax advisor for details (source: IRS).