Commentary for the week ending November 6, 2009
I just want to take a moment to reflect on the tragic event that took place in Fort Hood, Texas. It is very easy for me to get caught up with the challenges of being business owner, dad and husband, and at times I complain about these challenges. However, what occurred yesterday makes me realize how easy I have it and how protected I am in my office and suburban life style.
I sincerely hope that as individuals and a nation, we can take a moment and reflect on what has occurred and pray for these brave soldiers who lost their lives protecting our country. I take the comforts I have for granted. As such, I need to really stop and thank the past and present soldiers and their families for the sacrifices they’ve made which allow me to have the freedoms I do, and I sincerely hope you do the same. Maybe it is an event like this that triggers many of us to take our freedoms more seriously and become more involved in the policies shaping our nation and local communities.
For now, I just ask God to bless our soldiers and their families!
Part of me wanted to end the commentary at this point today, because the content pales in comparison to this event and what we may need to take from it. However, I had the information ready to share with you and will do so.
Good economic news yesterday – not so good today
Yesterday the U.S. Labor Department reported a drop in unemployment claims (the lowest level since January); however, just this morning it reported that the unemployment rate hit 10.2% – which is worse than most of the most bearish forecasts. Job losses may be slowing; however, new openings are not occurring. As such, I would not be surprised to see unemployment hit 11% – 13% before it subsides. Unfortunately, the government has been overly optimistic in its projections thus far.
Global technology giant Cisco reported good earnings and an upbeat forecast going forward which helped boost the stock market yesterday. Separately, the Federal Reserve stated that it intends to keep interest rates “exceptionally low” for a long time despite signs of economic recovery. The Federal Reserve realizes that the economy is too fragile to raise interest rates currently and either a decline in the unemployment rate and/or signs of inflation turning up would be the main reason why it would raise rates any sooner.
Of the previous announcements, I believe that Cisco’s is especially important since it sells to businesses all around the world. A global economic upturn is exactly what the U.S. economy and stock market need to continue to make headway.
It doesn’t make sense – robbing Peter to pay Paul
This week Congress passed legislation that would extend unemployment benefits by as much as 20 weeks from the current 79 weeks, which is a welcome relief for those who can’t find work. Also, in a bid to aid the housing market, the bill would also extend for five months a tax credit for homebuyers, and expand it beyond first-time purchasers. In addition, some large U.S. companies hit by the recession are receiving a tax break. However, the tax relief provided to individuals and some large U.S. companies is to be paid for by proposed tax increases on large multinational (i.e., corporations who deliver product or services outside the United States) companies.
How does it make sense to have U.S. multinational companies that sell product and services all around the world pay for all the previously mentioned benefits and tax breaks for others? All it does is make the latter (U.S. multinational companies) less competitive against their global competitors and could possibly lead to additional job cuts. Let’s make all U.S. companies as competitive as possible, so that the profits they generate will eventually make their way back home. China’s lifeblood is exports, if it took this same approach – it would be killing the goose that lays the golden eggs.
On a side note, this tax increase is just the beginning of what we might see in the near future. As Bruce Josten, executive vice president of the U.S. Chamber of Commerce, noted in the Wall Street Journal this week, “we clearly are going to have tax increases going forward.”
Tax break for buying a home – not without problems
The previously mentioned legislation also would extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30.
The bill also creates a $6,500 credit for those who buy a home after living in their current house at least five years. That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years.
The credit would be available only for the purchase of principal residences priced at $800,000 or less. The bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.
The credit, however, has also posed many problems. Critics say it’s a waste of money because most of those claiming the credit would have bought homes anyway. It’s also been the target of fraud. Some 74,000 people claimed more than $500 million in credits even though they may not be first-time homeowners, according to Treasury officials. And more than 580 children, including some as young as 4-years-old, have claimed the credit.
We are putting programs in place without some key controls that would prevent an individual from erroneously or fraudulently claiming the credit and receiving an erroneous refund of up to $8,000.
It just appears to me that we have too many carrots/dollars up for grabs and not enough safeguards to ensure they are properly applied.
Quotes
“If a man could have half his wishes, he would double his troubles.”
Benjamin Franklin, statesmen, inventor
“I think there is only one quality worse than hardness of heart and that is softness of head.”
Teddy Roosevelt, former U.S. President
“It’s a recession when your neighbor loses his job; it’s a depression when you lose your own.”
Harry S. Truman, former U.S. President
Tony Moeller, President
Integrity Investment Advisors
12721 Metcalf, #202
Overland Park, KS 66213
tmoeller@iia-kc.com
913-897-2074
The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only. It is not a recommendation or solicitation of any particular investment or strategy. A risk of loss is involved with investments in the stock and bond markets.
If you enjoy the commentary and believe others may benefit or find it of interest, please feel free to forward it on. Also, interested individuals can contact us, and we will be happy to add them to our mailing list.
