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Labels: update
Tax day is coming! And what better way to mark the upcoming day income taxes are due than by providing another form for you to fill out to see how much you would have been taxed when income tax forms were first issued by the IRS in 1913!
Our tool below is based upon the first page of the original Form 1040, which originally consisted of just four pages: the summary sheet modeled below (Page 1), the Gross Income calculation sheet (Page 2), the General Deductions sheet (Page 3) and finally, one page of Instructions (Page 4). Yes, you read that right. Just one page of instructions!
We'll make it just a bit easier still. All you need to do is to enter the indicated data (shown in boldface type) below with your figures from this year, and we'll take care of the math (which we show in the shaded rows of the form!):
Excerpts from the Instructions
3. The normal tax of 1 per cent shall be assessed on the total net income less the specific excemption of $3,000 or $4,000 as the case may be. (For the year 1913, the specific exemption allowable is $2,500, or $3,333.33, as the case may be.) If, however, the normal tax has been deducted and withheld on any part of the income at the source, or if any part of the income is received as dividends upon the stock or from the net earnings of any corporation, etc., which is taxable upon its net income, such income shall be deducted from the individual's total net income for the purpose of calculating the amount of income on which the individual is liable for the normal tax of 1 per cent by virtue of this return.
19. An unmarried individual or a married individual not living with wife or husband shall be allowed an exemption of $3,000. When husband and wife live together they shall be allowed jointly a total exemption of only $4,000 on their aggregate income. They may make a joint return, both subscribing thereto, or if they have separate incomes, they may make separate returns; but in no case shall they jointly claim more than $4,000 exemption on their aggregate income.
Well, wasn't that a fun exercise! Are you ready for the "improved" modern version of the same thing now?
As a final note, we first published our "Original Form 1040" tool back on 10 April 2007 - we hope you enjoyed this trip to yesteryear!
Earlier this year, we posted a tool that allows you to estimate how many employees of the U.S. federal government there are within a given range of income. It turns out that our tool was a bit off, in that we assumed that the number of federal employees would add up to two million in 2010.
That assumption turned out to be wrong. Going by the budget proposal that President Obama recently submitted to the U.S. Congress, that number turns out to be 7.5% lower than what the President projects will be the real number of federal employees: 2.15 million.
We've made the necessary adjustments to our code to accommodate the higher number of federal government employees, and for your convenience, we're reposting the tool below:
The Bureau of Labor Statistics released the Consumer Price Index for March 2008 today, which means that we can finally update our signature tool for finding the average performance of the stock market between any two calendar months since January 1871, The S&P 500 at Your Fingertips!
But wait, that's not all! With the first quarter of 2008 now officially over, and the fourth quarter of 2007's earnings finally finalized, we've gone back and revised all our dividends and earnings data in the tool going back as far October 2007. Quick summary of the revisions: dividends same to better, earnings worse.
Meanwhile, as the March 2008 inflation figure (CPI-U) came in at 213.528, a 4.0% increase over March 2007, investments in the S&P 500 held over this time have fared worse that just the point drop in the index value since December 2007 would suggest.
Of course, we just don't talk about the market. We take pictures of it as well! First up, here's he S&P 500's average monthly index value since January 1952, which covers the modern era of the U.S. stock market:
Next, here's the S&P 500's trailing year dividends per share from January 1952 through March 2008:
And here's an update of our signature chart showing the S&P 500's average monthly index value against its trailing year dividends per share since June 2003, coinciding with the most recent period of market stability and the beginning of a disruptive event in the market in January 2008, complete with a bonus point showing where the stock market is as of the April 15, 2008 market close:
Finally, here's an update of our chart tracking the Price Dividend Growth Ratio, or rather, the ratio between the year-over-year growth rate of stock prices and the year-over-year growth rate of dividends per share, from January 1952 to March 2008:
These latter two charts indicate that the turmoil being created by the troubles of the housing sector and financial institutions are, as of March 2008, largely contained to those sectors. The stock market is so far proving to be somewhat resilient and the level of distress in the market is not yet building toward a spike.
That's important as spikes in stock market distress often coincide with recessions in the U.S. economy. For that to happen, a serious erosion of earnings would need to occur that would then lead to zero year-over-year growth in the market's dividends per share. The trend at present is that this rate of growth is declining, but still well in positive growth territory (as projected by S&P, the year-over-year dividends per share growth rate will slowly decreased from 10.45% in December 2007 to 9.27% by year end.)
However, a spike in stock market distress is not a requirement for a recession to occur, as the U.S. economy is a lot bigger than its stock markets. At present, the best analog we have in our historical data to today's economy and market conditions is the period from 1978 to 1980.
Ultimately, we may see things play out along those lines, albeit on a much smaller scale, as both inflation and unemployment are much lower today than in those strained days. With the Price-Dividend Growth Ratio at -0.58 as of March 2008, we note that a negative value of this ratio often precedes periods of real distress in the stock market.
Labels: SP 500, stock market, update
Right on schedule, the Bureau of Labor Statistics has released the Consumer Price Index numbers for January 2008 today, which means that we've officially updated our signature tool The S&P 500 at Your Fingertips with all the data you need to find the rates of return that you might have received from investing in the S&P 500 between any two months since January 1871!
But that's yesterday's news! If you're like us, you want the picture of what's going on right now. Or even tomorrow! And since we only recently figured out that our view of the future was flawed, we've been working to capture the full picture that we should have been using in the first place.
In doing that, we've projected a new future for where corporate dividends are expected to go and, to avoid the situation that we found ourselves in where we didn't catch on for several weeks that we were missing important parts of our data, we're opening our books to you to show how we did it. After all, what's a blogosphere for if not to provide very smart people with the opportunity to point out where the problems in your analysis might be?
We began with by taking what S&P projects the year-over-year dividends per share will be for 2008, $30.30. Since this value represents an increase of 9.3% over the full year dividends per share of $27.73 for 2007, we'll use this annualized growth rate in our projections for dividends per share for each quarter this year.
Our next step is to take this growth rate and apply it to each of the year-over-year dividends per share for each quarter of 2007 to get the corresponding value for 2008. Our intermediate results are presented in the table below:
| S&P 500 Year Over Year Dividends per Share for 2007 and Projected for 2008 | ||
|---|---|---|
| Quarter | 2007 [Actual] | 2008 [Projected] |
| First (Ending in March) | 25.49 | 27.86 |
| Second (Ending in June) | 26.17 | 28.60 |
| Third (Ending in September) | 26.97 | 29.48 |
| Fourth (Ending in December) | 27.73 | 30.30 |
The next step is to fill in the months in between these quarterly figures, for which we'll use the same linear interpolation method utilized by Robert Shiller for his S&P 500 data. The table below summarizes our projected dividends per share results for 2008:
| S&P 500 Projected Dividends per Share by Month for 2008 | ||||||
|---|---|---|---|---|---|---|
| Month | Jan | Feb | Mar | Apr | May | Jun |
| Dividends per Share | 27.77 | 27.82 | 27.86 | 28.11 | 28.35 | 28.60 |
| Month | Jul | Aug | Sep | Oct | Nov | Dec |
| Dividends per Share | 28.89 | 29.19 | 29.48 | 29.75 | 30.03 | 30.30 |
So that's how we determine the dividends per share data that we use in our tool. We expect that we'll need to revise these figures in the future, which we'll do in the course of our regular monthly updates, preferably when S&P releases the actual dividends paid for each of the quarters that we've projected or perhaps if they revise their annual projection for the S&P 500's dividends per share.
We use a similar technique for the earnings per share data but here, S&P provides quarterly projections of the earnings data so we only need to perform the linear interpolation step to get the values for each month.
And now, finally, what you've been waiting for, we'll combine the average monthly index value of the S&P 500 with our anticipated dividend per share data to produce the picture of where the S&P 500 is today!
It really is that easy, and anyone with a little bit of math know-how can do it!
Labels: dividends, SP 500, update
The Bureau of Labor Statistics just released the latest Consumer Price Index data for November 2007 just minutes ago, and we here at Political Calculations are on top of it! We've already updated our signature tool, The S&P 500 at Your Fingertips, with the stock market's data through the previous month, and the table below shows the index' performance for the year-to-date, year-over-year and since January 1871:
| S&P 500 Selected Performance Data | |||
|---|---|---|---|
| Annualized Rates | Nominal Rate of Return (%) | Rate of Inflation (%) | Real Rate of Return (%) |
| Since January 1871 | 9.15 | 2.09 | 7.06 |
| Year over Year | 7.27 | 4.28 | 2.99 |
| Year to Date | 5.17 | 4.58 | 0.59 |
Today's S&P 500 Chart
Building on our earlier work for benchmarking the performance of the S&P 500 in terms of the remarkable relationship between the index' value and dividends per share, we've plotted the S&P 500 index value at market open on December 14, 2007 (1488.41) against where S&P anticipates the trailing one-year dividends per share will come in for December 2007 (27.85):
The chart demonstrates that for all the volatility we've seen given the liquidity issues in the financial sector related to the fallout in the sub-prime mortgage portions of these companies' portfolios, the basic order that emerged in the post-Dot-Com Bubble stock market continues to be robust. As such, the current value of the market is well within the range of where we should expect it to be in the absence of a disruptive event.
In preparing the latest update to Political Calculations' signature tool The S&P 500 at Your Fingertips to incorporate the latest price, earnings, dividend and inflation data through October 2007, we noticed that Standard & Poor has now revised the reported earnings (via this Excel spreadsheet) for the S&P 500 in September 2007 significantly downward.
As recently as last month, S&P had put the trailing one year earnings per share for the index at $86.03, an increase of $1.11 over the previous quarter's $84.92 per share. That older figure remains unchanged, however the S&P 500's reported one-year trailing earnings per share has now been set to be 79.16 for the quarter ending in September 2007, with the S&P 500's trailing one-year earnings per share now having decreased by $5.76, a 6.8% decrease from the quarter ending in June 2007.
Going by the spreadsheet linked above, Standard & Poor is now anticipating that the S&P 500's earnings per share will continue to decrease through December 2007, then begin increasing with each quarter in 2008. The trailing one-year earnings per share anticipated in December 2007 is $78.92.
Meanwhile, Standard & Poor has also revised the reported 12-month dividends per share for the S&P 500 for September 2007, with this figure now coming in at $26.97 per share instead of the previously reported $27.06 per share, a nine cent per share decrease. Unlike the revised earnings per share, this is still an 80 cent increase over the trailing one-year dividends per share recorded in the previous quarter ($26.17). At present, S&P anticipates the S&P 500's dividends per share for 2007 will come in at $27.85, just one cent below where they had previously forecast it to be as recently as last month.
In any case, here is our regularly updated table showing the S&P 500's performance in the year-to-date, year-over-year, and since January 1871:
| Selected S&P 500 Performance Data Through October 2007 | |||
|---|---|---|---|
| Annualized Rates | Nominal Rate of Return (%) | Rate of Inflation (%) | Real Rate of Return (%) |
| Since January 1871 | 9.19 | 2.08 | 7.11 |
| Year over Year | 14.95 | 3.54 | 11.41 |
| Year to Date | 12.94 | 4.32 | 8.62 |
Since we're breaking bad news today, which will have the recession hounds flooding and linking this post to gawk at the earnings carnage, we're going to save our historic S&P 500 chart that we had prepared for another day. That's a shame, because it's maybe one of the most remarkable stock market-related charts we've ever seen - and has led to analysis that has nearly completely changed how we view the market. Ah well, maybe in December....
The latest update of our signature tool, The S&P 500 at Your Fingertips, in which we've brought the tool up to date with all the price, dividends, earnings and inflation data for the S&P 500 through September 2007, comes just as the index has retreated below the new highs it has set in the past week.
For those just discovering Political Calculations, our S&P 500 tool can find the rate of return an investment in the S&P 500 would realize between any two months from January 1871 through September 2007, both with and without reinvesting dividends and with and without the effect of inflation! Here are the S&P 500's compound annual growth rates since January 1871, since September 2006 (Year over Year) and since January 2007 (Year to Date):
| Selected S&P 500 Performance Data, January 1871 through September 2007 | |||
|---|---|---|---|
| Annualized Rates | Nominal Rate of Return (%) | Rate of Inflation (%) | Real Rate of Return (%) |
| Since January 1871 | 9.17 | 2.08 | 7.09 |
| Year over Year | 15.64 | 2.76 | 12.88 |
| Year to Date | 9.70 | 4.53 | 5.17 |
This month's bonus chart illustrates the history of the Price/Earnings Ratio (P/E Ratio) for the S&P 500 since January 1871:
For the chart above, the P/E ratio is found by taking the average monthly price per share for the S&P 500 and dividing it by the preceding 12 months of earnings per share for the index (one-year trailing earnings).
What might be surprising to most people is that the all-time peak in the S&P 500's P/E ratio was set nearly three years after the peak of the stock market in the midst (and previous all-time peak of the P/E ratio) during the bubble market of the late 1990s! This outcome is really a bit of a mathematical artifact - it occurred as stock market earnings bottomed out during the recession of 2001 while the forward-looking nature of the stock market anticipated a recovery, increasing the relative price per share with respect to the past year's earnings per share.
Since then, earnings in the S&P 500 have largely caught up to the index's price per share, which now puts the P/E ratio for September 2007 at 17.40, marginally higher than the P/E ratio's long term average of 14.87.
We've just updated our signature tool The S&P 500 at Your Fingertips to incorporate all the latest stock market and inflation data through August 2007.
Why do we wait so long to update the tool? After all, August ended nineteen days ago. As it happens, we are, more or less, held hostage to when the U.S. Bureau of Labor Statistics releases their inflation data for the previous month. It just wouldn't do to only make partial updates for the The S&P 500 at Your Fingertips tool!In any case, here is the S&P 500's compound annual growth rates Since January 1871, Since August 2006 (Year over Year) and Since January 2007 (Year to Date):
| Selected S&P 500 Performance Data, January 1871 through August 2007 | |||
|---|---|---|---|
| Annualized Rates | Nominal Rate of Return (%) | Rate of Inflation (%) | Real Rate of Return (%) |
| Since January 1871 | 9.15 | 2.08 | 7.07 |
| Year over Year | 15.17 | 1.97 | 13.20 |
| Year to Date | 5.53 | 4.70 | 0.83 |
For fans of dividends, the following chart shows the annual dividends per share (not adjusted for inflation) for the S&P 500 since January 1871:
Since January 1953, Annual Dividends per Share in the S&P 500 have grown at a very stable average annualized rate of 5.4%.
We've updated our signature tool The S&P 500 at Your Fingertips to incorporate all the latest data for July 2007, including the inflation data just released by the BLS earlier today.
July 2007 was interesting in that the S&P 500 opened at 1,504.66 on July 2, closed at an all-time high of 1,553.08 on July 19, then promptly dropped to 1,455.27 at the closing bell on July 31. Overall, the index achieved an average value of 1,520.70 for the month, also an all-time high, which is confirmed below in our chart showing the average monthly value of the S&P 500 index from January 1871 through July 2007:
For fun, we thought we might show the value of the S&P 500 adjusted for the full reinvestment of dividends over the span for which we have data:
That's not a mistake - once reinvested dividends are included, we really are over S&P 732,000 as of July 2007! (Kind of makes Dow 36,000 seem like kind of a sheepish prediction, doesn't it?)
In any case, here are the compound annual growth rates for the periods covering the year-to-date, year-over-year and since January 1871 that we found for the S&P 500:
| Selected S&P 500 Returns, with Dividend Reinvestment | |||
|---|---|---|---|
| Annualized Rates | Nominal Rate of Return | Rate of Inflation | Real Rate of Return |
| Since January 1871 | 9.2 | 2.08 | 7.11 |
| Year over Year | 22.78 | 2.36 | 20.42 |
| Year to Date | 16.03 | 5.89 | 10.14 |
Labels: investing, SP 500, update
We have incorporated some minor revisions that Standard & Poor had made to its dividend and earnings data for the S&P 500 index (going back to September 2004) into our signature tool for providing historical S&P 500 returns: The S&P 500 at Your Fingertips!
But, that's not the big news! In making these revisions, we realized we could make some pretty accurate short term projections of these values, which means that we're no longer held for S&P to update their data each quarter! That means that we can now update our tool with the most recent month's market data when the Bureau of Labor Statistics releases their inflation data on the third week of each month.
That means that you can go use our tool to find historic market returns for any month from January 1871 through May 2007, right now! For those who hate clicking through, here's the quick summary:
January 1871 through May 2007: For those with really long term investment horizons, the S&P 500 returned 2.28% before reinvesting dividends and after adjusting for an inflation rate of 2.09%. Reinvesting dividends increases the inflation-adjusted really, really, really long term annualized rate of return to 7.11%!
May 2006 through May 2007: For those who like year over year returns, an investment in the S&P 500 in May 2006 returned an inflation-adjusted 16.37% with full reinvestment of dividends in the one year period. Inflation clocked in at 2.69% over this period.
January 2007 through May 2007: Finally, for those who like their data as Year-To-Date, an inflation-adjusted, full dividend reinvested investment in the S&P 500 in January has produced an annualized rate of return of 12.56%. The annualized rate of inflation is something to behold however, as it registered a level of 8.42% for the period from January through May 2007.
With today's release of the latest Consumer Price Index data, we finally have all the information we need to update our signature investing-related tool The S&P 500 at Your Fingertips! The tool now spans from January 1871 through March 2007 and incorporates all the available dividend, earnings and inflation data available for this time span.
Running the numbers, we find that the year-over-year gain in the S&P 500 from March 2006 to March 2007 provided a non-inflation adjusted return of 8.75% without the reinvestment of dividends and 10.73% with full dividend reinvestment. The tool does not consider the effects of taxes or commissions and fees in its calculations, which vary from year to year and broker to broker.
If you factor the 2.78% gain in reported inflation over that time period, the real rates of return for the S&P 500 are 5.97% without reinvesting dividends and 7.95% with reinvested dividends.
And if we just run the tool's newly updated default settings, from January 1871 to March 2007, we find that the S&P 500 has provided nominal returns of 4.32% without dividend reinvestment and 9.15% with dividend reinvestment. Considering the very long term rate of inflation of 2.08% from January 1871 through March 2007, the real rates of return for the S&P 500 are 2.24% without reinvesting dividends and 7.07% with full reinvestment of dividends!
One last note: the dividend and earnings data taken from Standard & Poor reflects their estimates of these figures for this latest period, which means they may be subject to revision in the future. We'll update the tool along with S&P's data as they do each quarter.
Labels: investing, SP 500, update
We have just updated our signature investing-related tool The S&P 500 at Your Fingertips! The tool now spans from January 1871 through December 2006 and incorporates all the available dividend, earnings and inflation data available for this time span.
Just playing with the numbers this morning, we find that the year-over-year gain in the S&P 500 from December 2005 to December 2006 provided for a nominal (non-inflation adjusted) returns of 12.23% without dividend reinvestment and 14.27% with the reinvestment of dividends.
If you factor the 2.54% gain in reported inflation over that time period, the real rates of return for the S&P 500 are 9.69% without reinvesting dividends and 11.73% with reinvested dividends.
All in all, 2006 was a very good year for index investors!
Labels: investing, SP 500, update
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
ironman at politicalcalculations
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