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Cypen & Cypen
NEWSLETTER
for
SEPTEMBER 9, 2004

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. UPDATED DATA STILL SHOW THE MARKET CANNOT BE TIMED:

The Standard & Poor’s 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 market value. For the ten years ending June 30, 2004, the S&P 500 Index averaged annualized returns of 11.82%. Take out just the ten best days in that decade, and the yield drops to 6.66% per annum. Take out twenty, and the returns drop to 2.76%. And minus only the thirty best days -- out of over 3650 days -- and the annualized return plummets to -.59%! More proof: between January, 1993 and December, 1993, if one invested at the “best” time (the day that the S&P 500 Index hits its low) as opposed to the “worst” time (the day that the S&P 500 Index hits its high), the annualized difference is only 1.2% (11.98% vs. 10.78%). And, finally, the following chart shows that despite its short-term cycles, in the long term the stock market has trended up:

S&P 500 INDEX 1994-2003 1926-2003
Annualized Return 11.06% 10.42%
Average Annual Return 13.04% 12.41%
Years of Positive Performance 7 Yrs. (70%) 55 Yrs. (71%)
Average Annual Return 24.8% 22.9%
Years of Negative Performance 3 Yrs. (30%) 23 Yrs. (30%)
Average Annual Return -14.36% -12.60%

So, as we have said in the past, if you think you can time the market, you are wrong again, Bulova breath.

2. AIR TRAFFIC CONTROLLER ENTITLED TO GREATER PENSION THAN AS CALCULATED BY OPM:

Killeen appealed from an order of the Merit Systems Protection Board denying his petition for review of the decision of an administrative judge. Thus, the Office of Personnel Management’s computation of Killeen’s retirement annuity was affirmed. The annuity of a retiring air traffic controller is computed according to statute. Although there is a sliding scale of benefits based upon service, the annuity may not be less than 50% of average pay. Average pay is statutorily-defined as the largest annual rate resulting from averaging an employee’s rate of basic pay in effect over any three consecutive years of creditable service. In computing an annuity for an employee whose service includes service that was performed on a part-time basis (as in Killeen’s case), the average pay of the employee, to the extent it includes pay for service performed in any position on a part-time basis, shall be determined by using the annual rate of basic pay that would be payable for full-time service in the position. In other words, the statute requires the 50% minimum annuity amount to be calculated with an average pay value using a high-3 year period based on the deemed full-time pay rate. On further appeal by Killeen, the United States Court of Appeals for the Federal Circuit reversed, finding a federal regulation requiring otherwise to be inconsistent with the statute it implements. Killeen v. Office of Personnel Management, Case No. 04-3033 (U.S. Fed. Cir., August 31, 2004).

3. MEDICARE ANNOUNCES VALUES FOR 2005:

The 1.45% payroll tax rate paid by employers and employees for Medicare Part A will continue on all wages in 2005. The premium for Medicare Part A coverage will increase from $343.00 per month to $375.00 per month. The Medicare Part A Inpatient Hospital deductible will rise from $876.00 to $912.00. The Medicare Part B monthly premium will increase from $66.60 to $78.20. And the Medicare Part B deductible will increase to $110.00 next year.

Copyright, 1996-2004, all rights reserved.

Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.


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