Market Update - SPY

Bob Brinker remains fully invested.  Bob Brinker has not made a change from 100% equities for Model Portfolios One and Two since March 2003.   His Model Portfolio Three was 50% equities in March 2003 but since he has not rebalance, even in 2007, Portfolio three is roughly two thirds in equities.  For more, see Bob Brinker's Asset Allocation History

SPY - S&P500 SPDR: This “trust” is comprised of the 500 stocks in the S&P 500 Index, an index designed to capture the price performance of a large cross-section of the U.S publicly traded stock market. The S&P 500  has better diversification than the widely followed DJIA and NASDAQ markets. The main objective of SPY is to replicate the total return of the S&P 500  500 Index. 

This chart shows the S&P500 via its ETF (exchange traded fund) SPY has corrected back to its 50 day moving average or  MA(50) on this chart.

After an “Auto Buy” for 40 shares at $127.50 on 6/2/12, on 1/18/13, I sent an email alert saying I took profits at $147.55 to lock in a $20.05 or $15.3% gain including commissions. Now I have ammunition to buy these shares back if the market corrects. My “break-even” price for my 130.723 shares of SPY in my “explore portfolio” is now only $104.25 per share as I reinvest dividends and trade the volatility.

My chart shows SPY tested the breakout from above and moved to a new high, which is very bullish. My chart below shows SPY adjusted for dividends experienced a 20.9% bear market in 2011 and two corrections below the 200-DMA in 2012 of the typical 7 to 16% variety that are painful, but often “health restoring.” I expect either of the two dashed green support lines on my graph will contain any corrections from here.

• From http://www.sectorspdr.com at $155.48, the dividend yield for SPY is 1.78%
  (3/15/13 quarterly dividend was $0.69)
• The 10-year US Treasury currently has a yield of only 1.73%
  See US Treasury Rate Quotes at http://verybestcdrates.com/Bonds/US_Treasury_Rates_Quotes.html
  
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We hear a lot of nonsense about stocks being a lousy investment for the last decade. The truth is they were ONLY bad investments for those who bought at the tops and sold out near the bottoms on fear. Anyone who followed my advice to own stocks in “core and explore” portfolios, reinvest dividends and rebalance as I have recommended in my newsletter since 1998 should be at or near all-time highs. Those who took profits when up and bought when down with me are even better off.

If stocks go nowhere for the next 10 years, they could still outperform a 10-year treasury held to maturity since SPY can pay a higher and growing dividend. If we have a large recession, then stocks may go significantly lower, but in the next decade, stocks should significantly outperform a 10-year treasury, especially if you reinvest stock dividends.

On a personal note: In October 2008 I bought 115 shares of SPY at $87.54 to help rebalance my personal core portfolio at a time I needed to add some large cap equities in a taxable account. I may never sell this position, especially if the reinvested dividends continue to receive a favorable tax rate.

More SPY Charts and a current Quote

For market commentary and my current outlook for select stocks I like, read "Kirk's Investment Newsletter"  

Don't miss out! Subscribe now and get the April 2013 issue of "Kirk Lindstrom's Investment Letter"  for FREE!

Proposal to Cap Retirement Accounts & 2013 Taxes

Moneytalk with Bob Brinker Commentary for April 14, 2013 Radio Show

The following commentary is from my "Retirement Advisor" writing partner,  David Korn. 

PROPOSAL TO CAP RETIREMENT CONTRIBUTIONS

Brinker Comment: Bob discussed an expected proposal from the White House on the budget that would limit individuals form accumulating more than $3 million in individual retirement accounts and other tax-preferred retirement accounts. The proposal would cap an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, equal to about $3 million this year.  Bob slammed the proposal and that it was totally outrageous and would never pass Congress and was pandering to politics.

Caller:  This caller has heard of situations where Mitt Romney a ton of money to his children by gifting severely undervalued stock that then increased dramatically in value.  The caller said if you drove the stock down to nothing and then gifted it to someone, then you move the company to China and the value of the stock starts to accelerate in value like crazy and do that a few times you could end up with $100 million in your retirement account. 

Bob said he doesn’t think the proposed policy to cap retirement accounts is aimed at that kind of thing which would be a rare thing if it did happen.  Bob said this looks like an anti-wealth accumulation policy measure and is consistent with the policy momentum that we have in Washington that wants to make it harder and harder for you to put money away.  There are politicians that are responsible for raising the kiddie tax liability age into adulthood.  This is really bad policy and the sooner we get past that thing the better.  On top of that, it doesn’t even raise any countable money toward the deficit. It is just lashing out at people’s efforts to accumulate a nest egg.

EC(David Korn): US News and World Report wrote a detailed article about it entitled, “Obama Budget Proposes Cap on Retirement Savings” that you can read for free at the following url: http://tinyurl.com/cupd3m6


Kirk Comment:  I stopped putting money into regular IRAs in 1998 when I started to work for myself and don't get a match from my employeer like I did when I worked for HP.  Instead I put the money into a ROTH IRA.  Unless you are paying at the very top tax rate in 2013, I think it makes much more sense to pay the taxes now when they are low, put the money into a ROTH and take it out tax free.  Money above the ROTH should go into index funds or individual stocks where you get lower capital gains or dividend rates (0 to 20%) compared to the much higher normal income tax rates you are charged with IRA RMDs (required minimum distributions.)

For more on tax rates, see:

• April 15  US Federal  Income Tax Brackets - Federal Tax Rates for 2013
• April 15  US Federal Capital Gains Tax Rates for 2013
• April 15 Historical Top Marginal Income Tax Rates: Top US Tax Rates from 1776

Some of the above commentary is courtesy of my writing partner, David Korn: 

David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service.  Copyright David Korn, L.L.C. 2013

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