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Jan, 2010

Inside This Issue:
  • The Devil’s Rally?
  • The Estate Tax for 2010
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2010
Contribution Levels

  • 401K maximum contribution - $16,500

  • 401K additional contribution (age 50 or over) - $5,500

  • IRA maximum contribution - $5,000

  • IRA additional contribution (age 50 or over) - $1,000

  • SIMPLE maximum contribution - $11,500

  • SIMPLE additional contribution (age 50 or over) - $2,500

  • SEP/Solo 401K maximum contribution - $49,000

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Main Street Financial Solutions
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Fax: (609)730-9330


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Mike MinterThe Devil’s Rally?
 
By Mike Minter, CFP®

Earnings

Since most people feel earnings drive the market, let’s forget everything else for now and just focus on earnings and how they relate to prices. For us to do this, let’s pretend we are going to buy a business priced at $150,000. How much would we like this business to earn for us to be comfortable buying the company?

Well, after doing some research and finding that other businesses in the same industry typically sell for around 15 times their earnings, we would want this company to consistently make roughly $10,000 each year ($150,000/$10,000 = 15). Realistically, you might pay less since the earnings are not growing, but for simplicity, you get my point.

Now, let’s pretend we are going to buy the entire stock market or S&P 500 which is roughly the 500 largest publicly traded companies in the US. To make the numbers simple, let’s say it would cost us $1,000 and imagine that is a lot of money. First, you need to determine whether it is a good investment so you research how much in earnings the S&P 500 is generating. Before you see the actual numbers, you notice that over the last 80 years the average price of the S&P 500 is approximately 15 times its earnings.


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Brett DankoThe Estate Tax for 2010
 
By Brett Danko, CFP®
 
A tax act way back in 2001 allowed a very wealthy person to die in 2010 and pay no federal estate tax. Most experts anticipated that this law would be amended during the last half of 2009. Unfortunately, Congress was busy with the health care act at the end of last year and never managed to take care of this very important piece of legislation.
 
 
Disclaimer: Main Street Financial Solutions, LLC, sends this newsletter as a public service. Information has been obtained from sources believed to be reliable, but its accuracy and completeness, and the opinions based thereon, are not guaranteed and no responsibility is assumed for errors and omissions. Nothing in this publication should be deemed as individual investment advice. Consult your personal financial advisor and investment prospectus before making an investment decision. Any performance data published herein are not predictive of future performance. Investors should always be aware that past performance has not been shown to predict the future. If in doubt about the tax or legal consequences of a legal decision, it is best to consult a qualified expert.