Fed Chairman, Ben Bernanke, testified before Congress yesterday and implied that he is in no hurry to raise interest rates. Bernanke said the Fed “will not be able to wait until things are completely back to normal” before it starts to boost rates. However, the Fed wants to make sure the economy is on a sustainable growth path, jobs are being created and wants to see more lending by banks before it starts tightening credit, Bernanke said. It could be this fall before the Fed actually makes the tough choice to begin raising interest rates, no matter when it happens it is a balancing act of not undermining the current recovery or waiting too long and risking higher inflation and possible bubbles in stocks, commodities or other assets.
Companies are beginning to react
Quite honestly, I don’t know if anyone has all the facts behind the new health care reform and probably won’t for a while. However, several large U.S. corporation; John Deere, Catepillar, Medtronics, Verizon, Boeing Co., Con-Way Inc., Exelon Corp., Navistar Inc., Verizon, Xerox Corp., Public Service Enterprise Group Inc., and Met Life Inc., just to name a few, have made some recent announcements regarding its impact on them. In effect, these companies have stated that they are going to incur increased costs via higher income taxes, may reduce or drop employee and retiree health benefits, and lay off workers as a result of higher costs.
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Maybe it’s a case of Spring Fever a few days early. However, this week instead of boring you with market and economic news, I thought it may be a nice break to give you some words of wisdom and whit on money:
“Understand yourself, protect yourself. And care enough to fight the hidden enemy of our system (economic ignorance) before it does indeed destroy us.”
Sylvia Porter
“Never spend your money before you have it.”
Thomas Jefferson
“The easiest way to teach children the value of money is to borrow from them.”
Anonymous
“Make all you can, save all you can, give all you can.”
John Wesley
“The art of living easily as to money is to pitch your scale of living one degree below your means.”
Sir Henry Taylor
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April 15th is a little over a month away. As such, anyone interested in making their 2009 traditional or Roth IRA contribution needs to have them in the mail / postmarked by that date. The contribution limits are $5,000 for taxpayers under 50 and $6,000 for those 50 and over. Please note that your contributions could be limited by your income or spouse’s retirement plan. Feel free to contact our office or your tax professional for the specific details. For those who qualify, I strongly recommend you take advantage of contributing to a Roth IRA (it is one of the few tax-free investment options currently available to you).
Along this line, the big financial / tax item for 2010 is whether to convert your IRA to a Roth IRA. By converting an IRA (tax-deferred investment) to a Roth IRA, you are paying normal income taxes on the amount you convert, but all future earnings grow tax-free. In addition, you are no longer subject to required minimum distributions upon obtaining age 70 ½. If this is something that may be of interest to you, please let us know. We have a program that allows you to analyze your specific situation and access whether it may be advantageous for you to convert. That being said, you can then take this information directly to your tax professional and let them guide you as to what may be best for you. Thus far, I have not seen a big demand for individuals to convert to a Roth IRA because they are very reluctant to pay any additional income taxes now.
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Luke (middle child) just finished his first basketball season a couple of weeks ago. During the games there was a flurry of activity up and down the court, but very little scoring. I find this analogous to the U.S. stock market this year. With all the (economic and political) headlines and announcements, three major U.S. stock indices (Dow Jones Industrials, S&P 500 and NASDAQ) are all just above breakeven as of the close of the market yesterday. Believe me, I truly enjoyed watching Luke play basketball and actually score. However, in the previous scenarios, it can be exciting and emotional at times, but in the end not much to record in the scorer’s column.
Separately, retailers said yesterday that store sales rose in February by the largest amount since November 2007. Also orders to U.S. factories in January posted their sharpest rise in four months. Overseas, both Greece and Spain had auctions for their respective countries five-year bonds and each was oversubscribed, with more buyers willing to buy more bonds than were put up for sale.
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