Let's take a good look at the equity markets. The U.S. equity markets for 2009 have been rallying for the last couple of months:
Since the March 9th low, the DOW has gained 26%. YTD, it is down 5.8%. The S&P 500 has gained 30% since March 9th. It is down just over 1% YTD. The NASDAQ, which consists of approximately 3,800 companies, is up 32% since the low and is up 6.5% YTD.
International markets have fared even better. The EAFE, which is an index of developed markets, is up 2.5% YTD and the emerging markets index is up 26% YTD. If we break the international markets down even further, we see that country specific returns have ranged from -1.5% and -1.9% in Germany and the UK to 30.5% and 45 % in Brazil and China. Clearly there has been a large divergence in both U.S. and international markets.
The big question is: will this last or is this a short-term bear market rally? History tells us that all of the equity markets will eventually return to historic averages. Is this the time to jump back in if you are out, or if you never got out should you stay in? If you stayed in, stay in! If you liquidated a portion of your portfolio you may want to consider the process of reallocating back to equities with some of your dollars.
The economy is rebuilding and, as I've shown you, so is the stock market. This may be the time to remember an old Norwegian proverb: Sell in May and go away.
In February, Obama signed into law the first-time home buyer tax credit. Here are six things you need to know if you already bought a house or are thinking about buying one in 2009:
- A first-time home buyer doesn't necessarily mean someone who's never owned a house before. It means someone who hasn't owned a principal residence for three years before buying a house. If you've owned a vacation home, but not a principal residence within the past three years, you would still qualify for the credit.
- The tax credit is equivalent to 10 percent of the purchase price of the home up to $8,000. And, unlike the tax credit of 2008, this one does not need to be paid back.
- The home must be purchased on or after January 1 and before December 1, 2009. Anyone who bought a house last year will not be eligible.
- The tax credit is subject to income limitations. Single buyers need to make $75,000 or less to qualify for the full credit, that's $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.
- The tax credit is refundable. That means buyers can take advantage of it even if they don't have much tax liability. When filing out their tax return next year, whatever the buyer owes will be deducted from the credit and the balance will be sent to the taxpayer in the form of a check.
- Buyers must own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government.
Also something good to note: participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. No other applications or forms are required, and no pre-approval is necessary.
Chrysler has filed for bankruptcy. Will GM be next? What could this mean for the auto industry? What will it mean for the Stateline area? Bankruptcy reorganization would allow auto-makers to emerge debt-free without unnecessary plants and taxing obligations to retirees. It would clear the companies of obligations to maintain redundant brands and dealers. A restructured Chrysler or GM could focus on designing fewer but better cars and trucks.
There will be pain then gain. President Obama vowed Chrysler's bankruptcy process would be quick, efficient and controlled. The deal with Fiat is expected to close within 60 days. In bankruptcy, a new company will be formed that will buy the assets of Chrysler, like plants, brands, equipment, and contracts with the union, and will leave the liabilities. Plants are set to idle during the bankruptcy but are expected to reopen when Chrysler emerges.
What will this mean for Belvidere? Chrysler has no immediate plans to permanently lay off workers. The Belvidere plant was recently modernized and has the ability to make the smaller vehicles Fiat will focus on, which could give the plant a better chance of remaining in operation. Governor Pat Quinn said he is prepared to offer dollars to help with a transition, but whether the Belvidere plant stays open in the long-term will be up to Chrysler and Fiat, not local government. Belvidere business owners have expressed concerns about what even a temporary lay off will mean. All local businesses will be affected if Chrysler workers are not able to go out and spend. Chrysler is the region's largest employer.