Special Report

2010 Tax Laws: A Mid-Year Update
Provided by Los Angeles Financial Planner, Rose Greene, CFP®

2010 has been one strange year for the U.S. tax code.

We have a huge tax issue that is still not fully resolved, the usual annual array of tweaks and changes to the Internal Revenue Code … and a chance that some tax breaks from 2009 could yet be extended for 2010, if an abbreviated version of the American Jobs and Closing Tax Loopholes Act (H.R. 4213) becomes law. This bill was passed by the House of Representatives in late May, with a June vote expected in the Senate.1 Many analysts think it will be signed by President Obama this summer.

It’s the middle of the year, so let’s take a look at where things stand for TY 2010 in terms of changes, amendments, additions and question marks. If you see an asterisk, you are seeing an expired 2009 tax break that might come back for 2010. At the end of this document, you’ll see a summary of the tax breaks that could be extended into 2010 if H.R. 4213 passes.

And by the way, if you are a contractor, a real estate developer or a partner in an investment or venture capital firm, be sure to take a look at the very last item.

Here we go …

1. The estate tax and GSTT have been repealed for 2010, and they probably won’t be enforced retroactively.

Even though the Obama administration preferred having an estate tax in 2010, Congress was preoccupied with other matters as 2009 drew to a close. So no action was taken, and as EGGTRA stipulated in 2001, the estate tax is 0% in 2010.₂

So far, anyway. The longer we go with no action taken, the harder it gets for Congress to take action and put a retroactive estate tax in place. (You could easily argue that a retroactive estate tax would be unconstitutional.)

Of course, the estate tax and the generation-skipping transfer tax (GSTT) are scheduled to return in 2011. Most estate planners think that Congress will restore things to 2009 levels ($3.5 million exemption for estate tax and GSTT with 45% estate, GSTT, and gift tax rates). Alternately, estate taxes would reset to pre-EGGTRA levels in 2011 (the exemption level at just $1 million with 55% estate, GSTT, and gift tax rates).₂

2. With no estate tax in place for 2010, the step-up basis rules have been replaced by carryover basis rules.

This year, assets in an estate are subject to capital gains taxes when sold based on the original price paid for the asset. This could mean some big problems for heirs if an asset was bought by Mom or Dad 20 or 30 years ago. Let’s say the asset is a stock. If Mom or Dad purchased shares off and on through the years, you’ll have quite an assignment to find that paper trail, and you may end up paying capital gains tax on the appreciation if the estate is really large. Fortunately, each estate can exempt $1.3 million of gains from the carryover basis rule, and another $3 million exemption applies to assets inherited from a spouse – so as much as $4.3 million of an estate can retain the step-up in 2010.₃

3. The federal gift tax rate is 35% for 2010, not 45%.

Yes, there is still a gift tax in 2010 on gifts above the lifetime exemption amount of $1 million. However, the tax bite is just 35% for 2010. Of course, if you end up gifting less than $1 million during your lifetime, you won’t have to worry about the gift tax at all.₄

For the record, IRS Publication 950 (issued 12/09) states: “In 2010, any transfer of money or property in trust is a taxable gift unless the trust is treated as wholly owned by the donor or the donor’s spouse.” ₅

To read and download the full article CLICK HERE.

Jeffrey Kleintop, CFA
Chief Market Strategist
LPL Financial

We can expect a quiet week this week, for a change. The shortened holiday week will yield little economic data, the calm before the start of the earnings season next week, and little on the political agenda as Congress heads out of town for the week long Fourth of July holiday recess. However, next week heats up with a spate of important economic data, the start of earnings season, and the Senate vote on financial regulatory reform. This week’s vacuum of news and events will provide investors time to reflect on the recent economic data and market decline from the perspective of the fundamentals, valuations and technicals.

Highlights

• This week’s vacuum of news and events will provide investors time to reflect on the recent economic data and market decline from the perspective of the fundamentals, valuations and technicals.
• The fundamentals support the view that the recent spate of softer economic data is the typical soft spot that occurs one year after the start of a recovery.
• Valuations support a bullish case for stocks with the S&P 500 forward price-to-earnings (PE) ratio having fallen to 11.5.
• The market environment that we forecast for 2010, consisting of low returns and high volatility, make watching overbought and oversold conditions the paramount technical indicators. Technical oversold conditions are now prompting us to recommend buying stocks.

 

To view the full article CLICK HERE

John Canally, CFA
Economist
LPL Financial

How Likely Is A “Double Dip”?

There has been increased talk recently about the possibility of a “double dip” recession occurring in the United States. A “double dip” recession would mean that the United States economy — which has most likely been in an economic recovery since the summer of 2009 — would slide back into another recession at some point in the near future. In our view, while the odds of a double dip have increased in the past few months, we don’t think a “double dip” is likely to occur given the current economic and policy backdrop. However, a sudden surge in commodity prices, a sharp increase in global central bank policy rates, a collapse in overseas economic growth, rapid reigning in of fiscal stimulus in the United States, and/or a dramatic flattening of the yield curve would cause us to change our view.

Highlights

After a blistering two-week stretch of mostly sub-par economic data, this week is a very quiet one for economic data and policy events in the United States.

The June employment report capped off another disappointing weak of economic data, reviving talk of a “double dip” recession.

How likely is a “double dip” recession?

To read the complete article CLICK HERE

Weekly Market Commentary, June 1, 2010
Jeffrey Kleintop, CFA
Chief Market Strategist
LPL Financial

Highlights

• “Sell in May and go away” only works about one-third of the time. With a pullback having already taken place, we find little value in this old adage.
• We believe investors should “buy in June and stay tuned” this year.
• Staying tuned to the conditions in the economy and markets will be important to investment decision making in the coming months as the economy transitions from a recovery to sustainable growth.

The old adage of “sell in May and go away” has been repeated so many times we are still often asked if this is a sound investing strategy. We do not find sound reasoning behind this maxim. Instead, we believe investors should “buy in June and stay tuned” this year.

We expressed caution in mid-April, given our outlook for a pullback in the stock market. However, now that the pullback that began on April 23 has occurred, we have spent most of May calming fears of another stock market plunge and, in general, we believe this is a good opportunity to buy stocks rather than sell. Unfortunately, investors cannot simply buy now and go away since the headwinds for the economy and markets are increasing during the second half of the year. Investors must stay tuned to the transitioning conditions for economic and profit growth warranting a tactical approach to portfolio management.

The reasoning behind “sell in May and go away” stems from the historical evidence that stock market returns, on average, are weaker over the six months from May through October, by about 2%. However, returns during this period have been positive about two-thirds of the time in the post-WWII period. This means one should only “sell in May and go away” one-third of the time. We believe 2010 warrants a different strategy.

Staying tuned to the conditions in the economy and markets will be important to investment decision making in the coming months as the economy transitions from a recovery to an environment of sustainable growth. These economic transitions are often uneven as the drivers of growth shift from government policy to private businesses while the leading indicators of economic activity peak and momentum begins to slow.

We believe the market is due for a rebound, as we stated last week in our commentary, entitled: Ten Reasons for a Rebound. However, the rebound is likely to be followed by more volatility as headwinds arise in the second half of the year, for several reasons:

• As the Fed signals coming rate hikes.
• China’s economy begins to respond to the efforts to slow the pace of growth.
• Policy stimulus fades in the United States leaving behind the drag of a huge federal budget deficit.
• Europe’s growth and solvency problems continue.
• As economic indicators peak in the United States during the second quarter, economic momentum begins to slow.
• Investors must stay tuned this summer to find attractive opportunities when presented and successfully take profits when necessary. We will be watching the LPL Financial Current Conditions Index closely for the impact of these headwinds on economic and market conditions.
  

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IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
This research material has been prepared by LPL Financial.

The LPL Financial family of affiliated companies includes LPL Financial and UVEST Financial Services Group, Inc., each of which is a member of FINRA/SIPC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and make no representation with respect to such entity.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Weekly Market Commentary, May 24, 2010
Jeffrey Kleintop, CFA
Chief Market Strategist
LPL Financial

Highlights

• We believe this pullback is merely part of the higher volatility in the markets we have been expecting this year to accompany the transition from recovery to sustainable growth.
• We offer ten reasons why we expect the markets to rebound during the second quarter.
• We still believe that while the next week or two could be up or down a little, four or six weeks from now stocks will be up and headed back near the highs of April.

Our outlook for 2010 remains for modest gains in the stock and bond markets, accompanied by a lot of volatility. Over the last couple of months, we presented our reasons for why we believed the stock market, as measured by the S&P 500, was due for another 5-10% pullback. While the current pullback that began on April 24 came as no surprise, the month long decline has exceeded our expectations with a peak-to-trough decline of 12%. Nevertheless, we continue to believe it is a pullback and not the start of a new bear market. This pullback is merely part of the higher volatility in the markets we have been expecting this year to accompany the transition from recovery to sustainable growth.

The market pullback has a number of drivers:

• Financial reform legislation has weighed on the Financials sector.
• China’s measures to slow growth have been raising fears that the sudden withdrawal of stimulus to one of the world’s biggest growth engines may be premature and tip the global economy back into recession.
• Last week’s decline in the Index of Leading Indicators, the first decline in a year, is a sign that economic growth may be slowing.
• However, the big issue affecting the market has been the debt problems in Europe and fear of another global credit crisis.

We expect the markets to rebound during the second quarter for the following ten reasons:

1. Although unlikely to improve much in the near-term, the European debt and deficit problems are unlikely to get much worse. The trillion dollar rescue package has been passed ensuring adequate capital to meet the financing needs over the next few years for Europe’s most troubled economies. Europe has some silver lining to the problems they are facing since the lower euro is a boost to the competitiveness of European exports helping to balance out weaker domestic growth.
2. The derivatives and leverage tied to the sovereign debt is very different than the financial crisis of 2008 (for example, debt-to-GDP (gross domestic product) for Greece is 1-to-1, while at Bear Stearns and Lehman Brothers it was 40-to-1). The smaller magnitude of the debt problem is unlikely to lead to another global financial crisis.
3. The concerns over the debt problems in Dubai and Iceland faded quickly after a month or two of intense concern last year. The budget and debt problems now weighing on Greece are an aftershock of the global financial crisis and not a sign of a new crisis developing. The problems are akin to what many people and businesses that overindulged during the credit boom are now experiencing, as the negative consequences of the global recession have forced belt tightening to try to make ends meet while restructuring debt. That is what happens at the end of a credit crisis and recession, rather than at the beginning.
4. Fortunately for investors, expectations for the Eurozone are low and do not need to be cut drastically leading to further declines in markets. For example, U.S. exports to Europe, European oil consumption, and Europe’s GDP are all already expected to be very low or negative.
5. The problems in Europe are good for the U.S. consumer by putting more cash in consumers’ pockets. The falling price of oil is pulling down gasoline prices as we head in to the peak demand summer driving season and the money flowing into Treasuries is leading to lower mortgage rates and a new wave of refinancing
6. As indicated by the LPL Financial Current Conditions Index, conditions remain favorable for growth.
7. Stock market valuations are now low at a forward price-to-earnings ratio of about 13 times. Also, the stock market is technically oversold by even more than it was overbought in mid-April when we were concerned about a pullback, suggesting selling may soon stall and buyers attracted by value will re-emerge.
8. China’s growth remains on track and the weakness in Europe may keep Chinese officials from invoking further measures to slow their economy in the second quarter.
9. Financial reform legislation may see a lot of changes to moderate it in conference before it is signed by the President, given some objections by the Fed and Treasury. This may help stabilize the Financials sector which has been one of the sectors that has led the stock market lower.
10. The outlook for The Federal Reserve (Fed) rate hikes may now be pushed out with the futures markets now pricing in the first hike not taking place until 2011

We still believe that while the next week or two could be up or down a little, four or six weeks from now stocks will be up and headed back near the highs of April.

What would change our minds? Not a level in the stock market, but a level on spreads and other indicators of contagion like borrowing rates in Europe and signs of bank stress. Material deterioration in indicators of contagion such as:

• The TED spread, a measure of stress in the banking system based on the willingness of banks to lend to each other, has risen this year to a slightly above average 35 basis points (bps), but remains well off of the crisis peak of 463 bps in 2008 and below the levels of 2008 that led up to the peak of the crisis in October 2008.
• The level of European interest rates and credit default swaps, which haveboth declined from the peak levels prior to the announcement of the rescue plan, but some southern European countries are elevated from levels at the start of the year.
• The value of the euro, which has fallen sharply this year but has stabilized in the past two weeks around $1.24.
• Corporate bond issuance, which has contracted sharply reflecting tighter financing conditions.
• The volume of central bank liquidity swaps, which has picked up reflecting the need for dollar-based financing overseas.

These factors would prompt us to re-evaluate our outlook and may warrant a more defensive investment stance.

For the Full Report Download Here

IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability. Investing in small-cap stocks includes specific risks such as greater volatility and potentially less liquidity.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price.
A basis point is a unit relating to interest rates that is equal to 1/100th of a percentage point. It is frequently but not exclusively used to express differences in interest rates of less than 1%.

See our Important Disclosures

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

This month I’m featuring an important research White Paper written by Burt White, LPL Financial’s Chief Investment Officer. I call it a “Coffee Cup” read, because you’ll want to settle in with a cup of joe and contemplate his foresight. Below are highlights, and I recommend downloading the full PDF report for your convenience. -Rose

The Phase After the Road to Recovery

Burt White
Chief Investment Officer
LPL Financial

From late 2008 until early 2010 the markets followed a road to recovery — they found a bottom, established equilibrium between buyers and sellers, emerged from recession to recovery, and shifted from a contracting to a rebounding economy.

In the next stage of the journey we expect to see the markets go from recession to recovery to growth. The market enters a period where the catalyst for growth will likely shift from stimulus-led to business-led and consumer-led expansion. The three stages of the Transition to Sustainable Growth are:

Transition Stage 1 — Committing to the Recovery (stage we have just entered): The market is unsure if this recovery is really sustainable. As this idea becomes accepted as reality, consumers and businesses become committed to the recovery and begin to spend to fuel future growth.

Transition Stage 2 — Preparing for Life Without Help: With consumers and businesses having committed to growth, the central banks of major countries start to hint at undertaking and even begin the tightening cycle. Markets and the economy must come to grips with the notion of growth without being propped up by government stimulus and accommodative policies.

Transition Stage 3 — The Market On Its Own Two Feet: With the tightening cycle across the globe in full force, growth shifts entirely onto the backs of consumers and businesses.

Highlights

For The Full Report, Download Here.

The LPL Financial Current Conditions Index is a weekly measure of the conditions that underline our outlook for the markets and economy. The CCI provides real-time context and insight into the trends that shape our recommended actions to manage portfolios. This index has been a useful tool for investment decision making.

Over the past week, the LPL Financial Current Conditions Index rose slightly to 236, the highest level in the past year. The stock market has tracked the CCI closely this year as it did last year reflecting the attention investors are paying to real time measures of economic and market conditions as they assess the likelihood of a successful transition from recovery to sustainable growth. The level of the Current Conditions Index indicates an environment fostering strong growth in the economy and markets. We expect that the CCI may weaken in the latter half of 2010 to reflect an environment of slow growth.

Download the Full Report

The CCI component that demonstrated the most improvement during the week was Shipping Traffic as inventory restocking continues along with rising demand. Retail Sales also improved with sales on a year-over-year basis jumping to 4.6% last week from 4.0% the prior week. Business Lending demonstrated some improvement in each of the past two weeks. While still down 18% year-over-year, bank loans have demonstrated a modest pick-up for the first time since early January. Disappointingly, Mortgage Applications deteriorated slightly in the past week even as interest rates fell slightly and the looming expiration of the first time homebuyer tax credit (buyers must have a signed agreement of sale by April 30 to qualify).

Quote of the week

It is wonderful what we can do if we are always doing – George Washington

New home sales up … 26.9%? Yes. The stampede was on in March as buyers raced to qualify for expiring tax credits, leading to the greatest month-over-month jump in new home purchases since 1963. According to the Census Bureau, new home prices averaged $258,600, almost unchanged from 12 months ago.₁

Existing home sales also jump. National Association of Realtors data had residential resales up 6.8% for March. In year-over-year terms, sales were 16.1% improved.₂

Notable gain in PPI. In March, wholesale inflation increased by 0.7%, above the 0.4% forecast by economists. Labor Department figures showed core PPI (minus energy and food costs) up by 0.1%.₃

Durable goods orders down. They slipped by 1.3% last month according to the Commerce Department. The silver lining? With transportation orders taken out, the category was +2.8% in March.₄

(Further) indications of improvement. The Conference Board’s index of leading indicators went up 1.4% in March, the twelfth straight monthly gain. February’s gain was revised upward to 0.4%.₅

8 straight for the Dow. Eight consecutive winning weeks, that is – on Friday, the Dow closed at 11,204.28 after rising 1.68% across five trading days. Even with fresh concerns over the debt of Greece, the NASDAQ gained 1.97% last week and the S&P 500 advanced 2.11%

Citations.

1 money.cnn.com/2010/04/23/news/economy/new_home_sales/index.htm [4/23/10] 2 npr.org/blogs/thetwo-way/2010/04/home_sales_rise_68.html [4/23/10]3 smartmoney.com/Investing/ETFs/Late-Rally-Boosts-ETFs-and-Stocks/ [4/22/10]4 online.wsj.com/article/SB10001424052748703709804575201793952864632.html [4/23/10]5 marketwatch.com/story/march-leading-indicators-rise-recovery-continuing-2010-04-19 [4/19/10]6 cnbc.com/id/36738472 [4/23/10]7 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=4%2F23%2F09&x=0&y=0 [4/23/10]7 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=4%2F23%2F09&x=0&y=0 [4/23/10]7 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=4%2F23%2F09&x=0&y=0 [4/23/10]7 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=4%2F22%2F05&x=0&y=0 [4/23/10]7 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=4%2F22%2F05&x=0&y=0 [4/23/10]7 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=4%2F22%2F05&x=0&y=0 [4/23/10]7 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=4%2F24%2F00&x=0&y=0 [4/23/10]7 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=4%2F24%2F00&x=0&y=0 [4/23/10]7 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=4%2F24%2F00&x=0&y=0 [4/23/10]8 ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [4/23/10]8 ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [4/23/10]9 treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [1/12/00]

Will a VAT become reality? How about Internet or energy taxes?
provided by Los Angeles Financial Planner, Rose Greene, CFP®

How do you pay down an $8 trillion debt? The Obama administration needs an answer, as the non-profit Congressional Budget Office says America’s debt could rise to $20 trillion by 2020.₁

One possible answer has a very European ring to it: a VAT, or value-added tax.

What are the chances of Americans paying a national sales tax? And what about an Internet tax? Or an energy tax? Are they also possible?

The Obama administration needs an answer to its $8 trillion debt, as the non-profit Congressional Budget Office says America's debt could rise to $20 trillion by 2020.

A VAT of bubbling controversy. Last year, Obama administration economic adviser Paul Volcker mentioned the possibility of a value-added tax. The CBO is now studying the idea.₂

India and the member states of the European Union have VATs: sales taxes imposed on producers, distributors and consumers as a product makes its way through the marketplace. VATs collect a great deal of state revenue while discouraging tax fraud. In France, the VAT is 20%; in Germany, 19%.₁

The VAT would not replace our federal income tax, just supplement it. So the furor we saw over health care reform might pale in comparison to the protests over this.

Volcker thinks a VAT is “not as toxic an idea” to America in 2010 as it might have been decades ago. White House budget director Peter Orszag thinks it will never fly, calling it “popular with academics but not seriously considered by policy makers.”₃

A VAT could generate trillions. The CBO says each percentage point of VAT could bring in $1 trillion in the next ten years. It also projects that the health care reforms will cost $2 trillion or more over that period.₁

Some economists and political analysts think a VAT is inevitable. Why, exactly?

Peter Orszag’s office, the Office of Management and Budget, has projected federal government expenses of $5.7 trillion for 2020. However, it estimates that the government will only collect $4.7 trillion in total taxes in 2020, meaning a deficit of $1 trillion. Well, at least that’s better than the 2010 shortfall of $1.6 trillion, right? Yes, but … the OMB projects income tax receipts of just $2.3 trillion in that year. So if Washington wants to wipe out a 2020 deficit using its #1 revenue generator, it would have to collect 44% more in income taxes, which is unthinkable.₃

Rather than trying to do that, it could put a VAT in place – a major tax to be sure. Think double digits. By federal projections, if the government charged Americans a 7% national sales tax on every consumable in 2020, then it could raise $1 trillion. If it spared essentials like food and clothing from VAT (it likely would), then the VAT would need to be higher than 7%.₃

One major gripe about VATs around the world is that they burden the poor. Certainly, poor people in America would be pinched by a VAT, possibly to the point of federal subsidy.

However, the government needs a lot of money in a short window of time, and the VAT is beckoning, with voices such as Volcker, Nancy Pelosi and John Kerry bringing up the idea.

An Internet tax? Back in 1998, President Clinton signed the Internet Tax Freedom Act into law, which prohibited federal, state and local governments from charging bandwidth taxes, email taxes and Internet access taxes. It was extended in 2007 with President Bush’s signature.₄

However, the National Broadband Plan out in April from the Federal Communications Commission contains Recommendation 4.20: “The federal government should investigate establishing a national framework for digital goods and services taxation.” It also says, “Recognizing that state and local governments pursue varying approaches to raising tax revenues, a national framework for digital goods and services taxation would reduce uncertainty and remove one barrier to online entrepreneurship and investment.”₅ (Huh?)

So far, this is as far as this idea has gotten. The governments of the United Kingdom and Canada are currently considering Internet tax proposals.

An energy tax? In an interview with Charlie Rose on PBS last year, Volcker floated the notion of “a tax on carbon, tax on energy, that’s a big revenue producer if you’re willing to do it. Not very popular to say the least.” It was part of a roster of potential tax code changes presented to the President in December, and he brought it up again in April in New York City._6,7

Rose Greene is a representative with Rose Greene Financial and may be reached at www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

Bookmark my blog moneymattersblog.com for more frequently posted news and views on the financial markets.

These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. www.montoyaregistry.com www.petermontoya.com

Citations. 1 tulsaworld.com/news/article.aspx?no=subj&articleid=20100327_222_A23_WSIGOm22953 [3/27/10] 2 bostonherald.com/business/general/view.bg?articleid=1245809&srvc=rss [4/9/10] 3 cnn.com/2010/02/05/news/economy/vat_deficit.fortune/index.htmss [2/5/10] 4 georgewbush-whitehouse.archives.gov/news/releases/2007/10/images/20071031-17_d-0350-2-515h.html [10/31/07] 5 washingtontimes.com/news/2010/apr/02/internet-taxation-is-on-the-way/ [4/2/10] 6 blogs.wsj.com/economics/2009/09/29/volcker-carbon-tax-vat-should-be-on-the-table/tab/article/ [9/29/09] 7 reuters.com/article/idUSTRE6355N520100406 [4/6/10]

Quote of the week

“It is easier to do a job right than to explain why you didn’t.”– Martin Van Buren

Job growth at last. Employers added 162,000 jobs in March, the biggest gain in three years. While some of the increase reflected temporary hires for the U.S. Census, private payrolls swelled by 123,000 last month. The jobless rate was 9.7% in March, exactly where it had been in January and February.₁

Consumer spending up by 0.3%. February’s gain was in line with the forecast of economists. Wages were flat last month after a 0.1% increase in January.₂

Is consumer confidence flat, or rising? Two polls tell two stories. The Conference Board’s March Consumer Confidence Index hit 52.5, up from 46.4 in February. In contrast, the March Reuters survey remained at 73.6, unchanged from February._3,4

Factory orders up 0.6%. The February number represented the tenth gain in the last 11 months. Excluding the defense category, the gain was 1.0%.₅

Home prices inch higher. The January S&P/Case-Shiller home price index (of 20 major real estate markets) showed prices up 0.3% for January and down just 0.7% from 12 months earlier, the smallest year-over-year drop in nearly three years.₃

Stocks have been red hot. At the close on April 1, the Dow, S&P 500 and NASDAQ had respectively gained 5.83%, 6.66% and 7.34% in a 5-week period. Thursday, the DJIA finished at 10,927.07, its highest close since September 28, 2008. Wall Street trading paused for a day in observance of Good Friday.₆

(Source: CNBC.com, BigCharts.com, ustreas.gov, bls.gov, 4/2/10)7,8,9,10. Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.

Riddle of the week.

A rooster sits atop a farmhouse. Its roof is unequally pitched. One half slopes down at an angle of 60º, and the other half at 70º. If the rooster lays an egg right on the peak of the roof, on which side is the egg more likely to fall?

Contact my office or see next week’s Update for the answer.

Last week’s riddle: Two-and-a-half artists spend two-and-a-half hours painting two-and-a-half models on two-and-a-half canvases. How many artists would be necessary to paint 24 models on 24 canvases in 20 hours?

Last week’s riddle answer: This would only require three artists. 24 artists can paint 24 models in 2.5 hours. Since the time available has increased by eight (20 = 8 x 2.5), then you can reduce the number of artists by the same amount (3 = 24 / 8).

Rose Greene is a Registered Representative with, and securities are offered through LPL Financial, Member FINRA/SIPC.

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