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Bill’s By The Number$

Posted by: Kim Vo | Posted on: October 18th, 2016 | 0 Comments

1. UP FOR THE YEAR – In spite of tumbling 20.5% on the single trading day of 10/19/87 (29 years ago this week), the S&P 500 gained +5.3% (total return) for the entire 1987 calendar year. 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 value (source: BTN Research).

2. LOOKING INTO THE FUTURE – 8 of 10 Wall Street equity strategists polled by Barron’s on 12/12/15 forecasted a year-end 2016 closing value for the S&P 500 between 2100 and 2200. The S&P 500 index closed last Friday (10/14/16) at 2133 (source: Barron’s).

3. LUMP-SUM NEEDED – A present value (PV) amount of $1.96 million in a pre-tax retirement account is required today to fund a future payment stream of 30 years of $100,000 annually (with a 2.5% increase for maintenance of purchasing power) assuming that a 6% rate of return (ROR) can be maintained into the future. If the ROR falls to 5%, the PV amount rises 13% to $2.21 million. If the ROR rises to 7%, the PV amount falls 11% to $1.75 million. These calculations do not account for the payment of federal income taxes which would be due as a result of withdrawals from any pre-tax retirement account (source: BTN Research).

4. ANNUAL DEFICIT AND NATIONAL DEBT – For fiscal year 2016 (the 12 months that ended 9/30/16) the United States had a $587 billion budget deficit. During fiscal year 2016, the United States increased its national debt by $1.423 trillion to $19.573 trillion (source: Treasury Department).

5. TOP AND BOTTOM – American families in the bottom 50% of pre-tax household income are expected to receive 17.7% of national income in 2017. American families in the top 1% of pre-tax household income are expected to receive 15.4% of national income in 2017 (source: Treasury Department).

6. TAX CHANGES – The Tax Reform Act of 1986 was enacted on 10/22/86, i.e., 30 years ago this week. The legislation, signed into law by Ronald Reagan, was the last time the US tax code underwent major simplification. The number of tax brackets was reduced from 15 to 3. The top marginal rate was lowered from 50% to 28% while the lowest marginal rate was increased from 0% to 15% (source: Tax Reform Act of 1986).

7. GROWING – The US economy has been growing for the last 87 months (i.e., no recession), an expansion exceeded in length only 3 times since 1900 (source: National Bureau of Economic Research).

8. BIG INCOME – Warren Buffett, the 3rd wealthiest person in the world (ranked behind only Bill Gates and Amancio Ortega), reported $11.6 million of adjusted gross income in 2015. Bill and Hillary Clinton reported $10.6 million of adjusted gross income in 2015 (source: Forbes).

9. A CHANCE TO START OVER – After peaking at 1.562 million in 2010, personal bankruptcies (either Chapter 7 or Chapter 13) are on pace to decline on a year-over-year basis for the 6th consecutive year in 2016. Through 9/30/16, just 593,000 Americans have filed for bankruptcy protection YTD (source: American Bankruptcy Institute).

10. SOME DAY – As of Friday 10/14/16, the bond market was priced to reflect a 7% chance of a Fed rate hike at its 11/02/16 meeting and a 69% chance of a rate hike at its 12/14/16 meeting (source: CME Group).

11. IT WAS NO BIG DEAL – Last Friday (10/14/16) was the 1,300th trading day since S&P downgraded the USA from a top credit rating on Friday 8/05/11 (source: BTN Research).

12. HOUSE PRICES – The average price of a single family home in the United States peaked in March 2007, bottomed in May 2011, and then rose back above its March 2007 average high price in November 2015 where it has stayed through July 2016 (latest data released). From its May 2011 low, home prices are up +32%. From its March 2007 previous high, home prices are up just +4% (source: Office of Federal Housing Enterprise Oversight).

13. NOT COMPLETELY ON OUR OWN – 24% of the petroleum consumed by the United States in 2015 (including crude oil, gasoline and diesel fuel) was imported from foreign countries. The 24% was the lowest import percentage since 1970 (source: Energy Information Administration).

14. KILLER STORMS – Hurricane Katrina (August 2005) killed 1,833 people. Hurricane Matthew (October 2016) killed 1,045 people (source: National Oceanic and Atmospheric Administration).

15. A LOT MORE MONEY TODAY – Kevin Chappell made $4.5 million on the PGA Tour this year in 27 starts, winning zero times. Arnold Palmer and Johnny Miller made a combined $4.6 million on the PGA Tour in their careers, winning 87 tournaments, including 9 Major championships (source: PGA).

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