|
|
|
Our
on-line
newsletter bulletin now going on our seventh year!
Offering our clients and readers news items and headlines
often not covered by the mainstream media, articles of interest
regarding banking, economics, real estate, taxes, living or investing
abroad, plus much more. Finally, our very popular readers write
in section, with answers to some of the questions many of our readers
have - that no one else wants to answer truthfully, except us!
Want to See our
Other Back Issues from 2002 - 2006?........Click Here
|
|
|
|
Visit
The Main Newsletter Section &
Read Past Issues On-Line:
Dominican Republic
Real Estate, Residency
Filing, Banking and Interest Rates.
Panama Residency and Retirement. Naturalization and Dual
Citizenship - Expatriate Issues.
Economics commentary, inflation, housing, stock markets and investing -
Plus a Whole Lot More ! .
|
Our September 15, 2007 Newsletter
Edition
|
.
|
IN
THE NEWS:
.
.
SUBPRIME
CRISIS CLAIMS S&P SCALP - By Gillian Wee -
September 1, 2007
.
STANDARD
& POOR'S has named Deven Sharma to replace Kathleen Corbet as
president after lawmakers and investors criticized the credit rating
company for failing to judge the risks of securities backed by
sub-prime mortgages. McGraw-Hill, the parent of Standard &
Poor's, said in a statement yesterday that Ms Corbet had resigned to
spend more time with her family. Her exit was not related to the
current turmoil in credit markets, said Steven Weiss, a spokesman for
the company. Mr Sharma is executive vice-president of investment
services and global sales.
.
S&P
and Moody's Investors Service failed to downgrade bonds backed by loans
to borrowers with poor credit until July, when some had already lost
more than 50c in the dollar. McGraw-Hill shares have dropped 26 per
cent this year amid concerns that the rout in the credit markets may
curtail new debt sales. The chairman of the US Senate Banking
Committee, Christopher Dodd, said yesterday credit rating companies had
to explain why they assigned AAA ratings to securities that never
deserved them.
.
http://www.smh.com.au/news/business/subprime-crisis-claims-sp-scalp/2007/08/31/1188067371061.html
.
EDITORS NOTES:
According to some statistics, the average annual salary in the US is
$29,500 (although the US Census bureau claims that current figure to be
US$48,000 - so you never know who to believe sometimes when it comes to
statistics). In any event, using the lower number, the Associated Press
calculates that the average US CEO earns 364 times that amount, or
about $10.8 Million. With that said, while I do not know what the
salary is at S & P for the position of president, we can certainly
assume it is something higher than minimum wage. And so, it does
seem suspect that someone would voluntarily give up a presumably
million dollar paycheck in order to spend more time playing Nintendo
with their kids. Regardless, it does seem accurate enough to
deduce that some very angry foreign bankers now have their pound of
flesh (or probably about 130 pounds I am guessing). The
atmosphere in the executive suite at Fitch and Moody's must be tense
right about now. Regardless, this commentary is not about
somebody getting fired for incorrectly estimating the credit rating of
these CDO securities (although that, plus a rash of lawsuits, are
surely in the tarot cards going forward).
.
Which
is to say, even more interesting, is the appointment of Mr. Deven
Sharma (who we can presume does not have any kids, and ergo prefers to
take the job and not resign). Mr. Sharma graduated from the Birla
Institute of Technology and Science (BITS), which is among the top
ranking universities in India offering degrees in various branches of
Engineering, Management, Economics, Pharmacy, Sciences, Engineering
Technology, Information Systems and Finance. The current annual
2006 tuition at the University for locals is between US$1,000 to
US$2,500 (that is per year, just to be very clear) , depending upon
courses and discipline elected. The University is located in the
Rajastan province, in the town of Pilani, a rural area with a
population of 50,000. It should be noted that the school,
although being located is what many would consider to be a rural
backwater, is highly competitive and accepts only the best and
brightest students in terms of math, engineering and other sciences
(the school recently has been touted as having one of the best schools
of Pharmacology in India, and maybe even elsewhere, given the caliber
of its graduates). Right now, in 2007, a total of 88,000 students
registered for the rigorous university placements exam in India, but
only 1,404 students have been admitted at the two campuses of BITS for
first year courses in science, technology or engineering (which
translates into an acceptance ratio of 1 out of 80). In other
words, we can surmise that Mr. Sharma is no dumbbell (as a graduate of
this school), but the gentleman's intelligence and capacity is not the
real point here either.
.
The
bottom line is, this illustrates a trend in terms of jobs and
education. Which is to say, globalization also means taking the
worlds best and brightest from countries previously thought of as poor,
undeveloped and rife with uneducated citizens. Such stereotypes
could not be farther from the truth. If you are an American or
European parent of college bound children, understand very clearly who
your kids are competing against in the job market. Also
understand that while you might be paying US$30,000 per year for a
mediocre education at a domestic state university (I am speaking about
the US of course, as higher education is free or subsidized in Europe),
university aged students in these so-called third world nations are
getting an education for a mere fraction of the cost, and a good one at
that. While American parents complain that school teachers in the
US assign too much homework (and the kids do not have enough time to
watch MTV), their counter-part parents in developing countries usually
complain the opposite. These kids of rice farmers are cracking
the books, they are smart, they are hungry, they want your job - and
they are going to get it. Be forewarned.
.
Can't
afford the high cost of education in the US? Send your kids to
India, Argentina, The Dominican Republic, Singapore, Chile, and a host
of other places where higher education is affordable and competitive
(move yourself too if you like). At the same time, make sure your
kids are bi-lingual or multi-lingual. Make sure they get
residency and maybe even dual citizenship as the tuition costs may be
lower as a result, but not only that, you are putting them on track for
far more advantages than you realize (in terms of taxation, employment
opportunities, etc.).
.
Along
these lines of Americans moving abroad (or maybe educating their kids
abroad), according to the U.S. State Department, there are 6.6 million
Americans living overseas, but we think these figures are
incorrect. Which is to say, that is only the number of people
that the US State Department knows about, as many people simply leave
permanently, and do not report in. In other words, we believe
those statistics are very much under-reported, and the number of
expatriates are exponentially much higher. See the news article
at the end of this newsletter regarding this trend.
.
.
WHEN
RISK IS HOME-GROWN, IS IT TIME TO LOOK ABROAD?
By
William J. Holstein - NY Times - September 2, 2007
.
When
it comes to their investments, many Americans associate the word
foreign with high risk. Advisers routinely recommend that foreign
holdings amount to no more than 10 or 20 percent of a stock portfolio.
Otherwise, the theory goes, investors risk heavy losses in the event of
a foreign crisis, like the Asian financial upheaval of the 1990s.
But the latest round of world financial problems started at home, in
the United States, as a result of the sub-prime mortgage crisis. This
time, the United States has exported volatility to the rest of the
world. At least that's the argument of some financial experts, who say
that individual investors should not necessarily look at the United
States as a haven. Instead, they say that investors should hold a
substantial percentage of their portfolios in non-American companies,
through mutual funds or exchange-traded funds. If the recent
volatility in the United States is what scares you into doing the right
thing, great, says Uri Landesman, head of global growth and
international at ING Americas, a subsidiary of the Dutch bank.
But it's what you should have been doing all along.
.
These
aren't your father's emerging markets, says Arthur P. Steinmetz, who
manages $20 billion in assets at Oppenheimer Funds, $5 billion of which
is invested in emerging markets. Mr. Steinmetz, based in New
York, says that most emerging markets are far more sophisticated and
stable than they were 10 years ago, when the Asian financial crisis
hit. He notes that Brazil, for example, has $160 billion in foreign
exchange reserves and that its foreign debt, once an issue of concern,
has shrunk dramatically. It is much better able to withstand
volatility. The sandbags that Brazil has around it against global
flooding are much higher than they used to be, he says.
.
http://www.nytimes.com/2007/09/02/business/yourmoney/
.
EDITORS NOTES:
The only problem is, for Americans especially, getting a foreign bank
or brokerage account open can be a challenge, simply because of their
passport or citizenship. Meaning, tremendous pressures have been
placed on jurisdictions, such as Switzerland, whereby many financial
services firms will not accept US citizens (which in turn is why many
of the banks there will not call you back once they find out you are an
American). This may not be the case will all foreign financial
institutions, but enough of a problem that many Americans will find it
frustrating. For this reason alone, a second passport or
citizenship comes in handy. In fact, these days, to get out of
the US Dollar and insulate from devaluation, it may actually become a
necessity.
.
.
BARCLAYS
BORROWS $4B TO COVER FOREX BLUNDER
By
Edmund Conway and Philip Aldrick - September 1, 2007
.
BARCLAYS
has been forced to tap the Bank of England's emergency lending fund
after a major error in London's trading systems wreaked havoc on the
money markets. The bank borrowed up to £1.6 billion ($4
billion) from the central bank's standing facility after it failed to
settle its positions on the open market. It is the second time in as
many weeks it has had to turn to the lender of last resort.
Barclays took the money at a penal rate of 6.75 per cent - almost a
full percentage point above money market rates.
.
The
embarrassing move came on Wednesday, a chaotic day in which a major
problem with the electronic settlement system, CREST, forced the Bank
of England to take the extraordinary step of extending trading for
almost an extra hour. Barclays said: There are no liquidity
issues in the UK markets. Barclays itself is flush with
liquidity.
.
However,
traders expressed surprise at the excuse, saying if these technical
problems were really to blame, then the glitch would have affected far
more institutions. Either way, the mistake was a costly one for
Barclays. It borrowed £314 million from the facility last
week, forcing the bank to reject concerns about the health of its
balance sheet and the state of its money market operations. The
revelations pushed the pound temporarily lower as traders speculated
the lending could be symptomatic of worsening problems facing financial
markets. John Anderson, of Rensburg Fund Management, said: When
people tap into this facility, it can mean only one thing: liquidity is
gone. Neither the Bank of England nor any of the major banks
would comment.
.
http://www.smh.com.au/news/business/
.
EDITORS NOTES:
It is interesting to note that the list of banks out there that have
reported major exposure to high risk derivatives (currency swaps,
interest rate swaps and other forms of modern financial alchemy)
include: JP Morgan Chase, Bank of America, Citibank, First Union,
Wells Fargo, Bank One, Bank of New York, Fleet National Bank and State
Street Bank. Barclays is not mentioned - but should they
be? According to the above article, a Barclay's spokesman is
quoted as saying: Barclays itself is flush with liquidity. If
they say so - but it does seem odd there should be a need for an
emergency $4 Billion Dollar loan from the central bank in such a case -
no?
.
We
have heard from a number of clients in the past few years, from Costa
Rica, Honduras, The Dominican Republic and a number of other places,
who have complained about how difficult it is to borrow money from the
local banks in the countries just mentioned. Which is to say,
such financial institutions in these so-called emerging markets want 20
to 25 percent down as an initial deposit or down payment, a co-signor
and a list of other requirements (the nerve of those banana farmers -
eh?) In addition, such banks, who supposedly lack the polish and
sophistication of the money center banks in New York and London of
course have stayed out of the mess, as it were, in regards to all the
sophisticated shenanigans of the major banks in the modern financial
world.
.
Many
people have shied away from doing business with the so-called
developing countries (despite our opinion to the contrary), with the
argument such banks are not up to grade with their larger, more well
heeled competitors. Of course, the highly regarded comments about
the financial stability, acumen, and intelligent management of these
larger and more worldly banking institutions could be perhaps
justified. After all, it does take a special kind of genius to
misplace US$4 Billion Dollars of depositors money - in one day - would
you not say so? Too bad the dull and unsophisticated banks in
many emerging market nations are not so bright (or perhaps the
contrary, if you are an account holder in such dull institutions, which
might be a very good thing after all).
.
.
BIG BEN ASSURES WALL STREET FED WILL ACT
By
Daniel Arnall - ABC NEWS Business Unit - Aug. 31, 2007
.
In
the beauty of the Grand Teton National Park, Fed Chairman Ben Bernanke
made what could easily be categorized as the most important speech of
his tenure leading the nation's central bank. Pretty much
everyone on Wall Street was waiting for the release of the speech's
full text hoping to get some assurance that Ben & Co. were serious
about a rate cut to deal with the recent credit and stock market
volatility. They weren't disappointed.
.
The
Federal Reserve stands ready to take additional actions as needed to
provide liquidity and promote the orderly functioning of the markets,
said Bernanke just three pages into a 12 page speech. He went on
to repeat the fairly direct assurance of a rate cut a second time to
underline that the Fed knows what the markets are screaming for.
Bernanke acknowledged as much in the first sentences of his speech,
laying blame for the seizing of the credit markets and stock market
volatility at the feet of those sub-prime loans. He said the issues
could affect the broader economic health of the country.
.
Although
this episode appears to have been triggered largely by heightened
concerns about sub-prime mortgages, global financial losses have far
exceeded even the most pessimistic projections of credit losses on
those loans, said Bernanke. In part, these wider losses likely
reflect concerns that weakness in U.S. housing will restrain overall
economic growth. But Bernanke doesn't want to be seen as running in to
bailout lenders who lowered their standards and started underwriting
loans that borrowers simply can't pay back. It is not the
responsibility of the Federal Reserve, nor would it be appropriate to
protect lenders and investors from the consequences of their financial
decisions, said Bernanke.
.
http://www.abcnews.go.com/Business/MarketTalk/
.
.
BUSH
PROPOSES STEPS TO DEAL WITH MORTGAGE CRISIS - By Tabassum Zakaria
.
WASHINGTON
(Reuters) - U.S. President George W. Bush on Friday tried to calm
financial market turmoil from the credit crisis by announcing proposals
intended to prevent homeowners from defaulting on risky
mortgages. Rising U.S. defaults on so-called sub-prime mortgages
to less credit-worthy borrowers have caused volatility in financial
markets around the world and raised concerns that the U.S. economy
could fall into recession. n trying to soothe those worries, Bush said
the U.S. economy was healthy enough to weather the credit crisis and
that the sub-prime market problems represented only a small part of the
economy. The recent disturbances in the sub-prime mortgage
industry are modest, they're modest in relation to the size of our
economy, he said.
.
But
he emphasized that it was not the federal government's job to bail out
the mortgage lending industry, a comment that caused U.S. stock prices
to pare gains. The government's got a role to play. But it is
limited. A federal bailout of lenders would only encourage a recurrence
of the problem, Bush said
.
http://uk.reuters.com/article/topNews/
.
EDITORS NOTES:
In addition, The New York Times
chimes in on September 1, with an article titled: Bush Plans Limited Intervention On
Mortgages whereby it is reported:
.
Administration
officials said that Mr. Bush's statement reflected the president's
determination to oppose Democratic proposals for the federal government
to help set up trust funds or use Fannie Mae and Freddie Mac, the
government-sponsored housing companies, to rescue families in danger of
losing their homes.
.
http://www.nytimes.com/2007/09/01/business/
.
Sounds
like nothing more than verbal damage control, although we are getting
some contradictory comments from Mr. Bush and Mr. Bernanke. On
the one hand, both seem to be talking tough to assuage conservative
concerns of a government (read that to mean tax payer) financed bailout
for middle class homeowners now in trouble. And the very adamant
statement from Mr. Bush is: It's not the governments job to bail out
those who made the decision to buy a home they knew they could never
afford. Fair enough, but despite the talk, bailouts for the banks
or Wall Street seem to be acceptable regardless, and of course
Philadelphia Federal Reserve President Charles Plosser is quoted as
saying in a September 8th article from the Wall Street Journal
(regarding the discount window as a source of presumably unlimited
funding for the banks): We don't care why you want to do it
(borrow the money). Is this guy out of his mind? Didn't the
bankers make enough of a mess as it is with irresponsible lending
practices? And yet, the Federal Reserve Bank is basically saying,
we don't care what foolishness you folks (the bankers) get involved
with, we will give you all the free money that you want. He might
as well hang a dinner bell outside the Federal Reserve bank and have
the watchman ring the darn thing every hour, calling all the bankers to
chow down. Too bad it will be the average citizen who suffers
from the inflation, or devaluation of the currency, as a result.
Is not always the little guy, or the average middle class citizen who
gets hurt?
.
However,
the real divergence in comments made by George and Ben seems to be
about the state and health of the US economy.
.
George Bush says:
The U.S. economy was healthy enough to weather the credit crisis and
that the sub-prime market problems represented only a small part of the
economy - The recent disturbances in the sub-prime mortgage industry
are modest, they're modest in relation to the size of our economy.
.
Ben Bernanke says:
Global financial LOSSES have FAR EXCEEDED even the most
pessimistic projections of credit losses on those loans - In part,
these wider losses likely reflect concerns that weakness in U.S.
housing will RESTRAIN overall
economic growth.
.
One
recent news article from the UK
Guardian newspaper from Aug. 31, titled: Leading Lender Likes US Credit Crisis to
Great Depression states:
.
The
US financial industry displayed fresh signs of distress from the credit
crunch afflicting global money markets yesterday, with one mortgage
provider describing lending conditions as the worst since the Great
Depression of the 1930s. Leading accountancy firm H&R Block
revealed huge losses at its up-for-sale mortgage arm, Option One, and
said it was considering a halt on new loans. Reporting a quarterly loss
of $302m (£150m), Mark Ernst, chief executive, said: The loan
originations market is in the midst of the most severe dislocation it
has seen in years, maybe the most severe since the 1930s.
.
http://www.guardian.co.uk/usa/story/0,,2159716,00.html
.
In
other words, the chief executive of a company owned by H & R block
(the nice folks that help prepare your tax returns) says this is the
most severe credit crisis since the depression of the 1930s (just in
case his actual comments were not abundantly clear enough). This
all leads us to ask the question, in the words of Aretha
Franklin: Who is Zooming Who? One of these two gentleman
(Mr. Bush and Mr. Bernanke) perhaps is not telling the truth, I am so
inclined to postulate.
.
.
FORECLOSURES
HIT THOSE WITH GOOD, BAD CREDIT
By
Gail Marks Jarvis - September 7, 2007
.
The
number of U.S. homes entering foreclosure broke a record during the
second quarter, as more homeowners with good and bad credit struggled
to make mortgage payments, according to the Mortgage Bankers
Association. Nationally, 5.12 percent of mortgage loans are past
due because homeowners have been unable to make their monthly payments
or are unwilling to pay as home values have dropped below the amount
owed on them. About 0.65 percent are so far behind with payments that
lenders have started foreclosure proceedings -- the process of taking
away a home.
.
Distress
in the housing market has led to three consecutive record-breaking
quarters of foreclosure starts, and Mortgage Bankers Association
economist Douglas Duncan said the current quarter may be even
worse. Duncan said Federal Reserve interest-rate cuts could help
ease the situation, but if unemployment rises because of weakness in
the economy, the housing recession could last even longer and more
people could lose their homes.
.
http://www.chicagotribune.com/business/yourmoney/
.
.
U.S.
HOME FORECLOSURES, DELINQUENCIES AT RECORD HIGH
By
Kathleen M. Howley - September 6, 2007
.
The
number of Americans who may lose their homes to foreclosure reached a
record in the second quarter as late payments by sub-prime borrowers
surged to one out of every seven loans. Foreclosures are rising
as real estate prices tumble in a third of U.S. real estate markets
tracked by the National Association of Realtors and as state and
federal lawmakers seek to stem delinquencies. Investors have abandoned
the market for mortgage backed securities, spurring 100 home loan
companies to halt operations or seek buyers. The ensuing scarcity of
credit is making things worse, said Doug Duncan, MBA's chief
economist. We will see delinquencies and foreclosures rise for
another quarter or so, Duncan said on a conference call today.
Home prices are falling as rates are resetting higher, making it
difficult for people to refinance.
.
http://www.bloomberg.com/
.
.
MIDDLE
CLASS GETS SQUEEZED
St.
Petersburg Time Editorial - September 1, 2007
.
It's
tough out there. For anyone supporting a family on a regular paycheck
and not a fat stock portfolio, the economy has not been kind in recent
years. Hidden within some of the rosy-sounding economic statistics is
the truth: Most American families are having a harder time. Prices are
going up for food, energy, health care and higher education while wages
for typical breadwinners are not keeping up.
.
Earnings
by full-time workers fell last year by more than 1 percent, meaning
that the rise in household income is likely attributable to an increase
in the number of hours worked or the addition of members of the
household in the work force, not a pay raise. Since 2001, the
gains in the economy have largely accrued to the people at the top of
the economic ladder. There is little trickling down. The median income
of households headed by someone younger than 65 was more than 2 percent
lower last year than in 2001, even though the five years between 2001
and 2006 were ostensibly a time of economic recovery. Meanwhile, the
share of income going to the top 5 percent of households is at record
levels, and it was only this group that enjoyed earnings higher in 2006
than in 2000.
.
Beyond
dealing with stagnating wages, middle-class Americans are confronting
inflation that is not being reflected in broader indexes. We all know
the pain being felt at the gas pump and when the monthly electricity
bill arrives. But far less attention has been given to the rise in food
prices. Staples of the American diet rose by double digits over
the last year. Egg prices went up 33.7 percent from July 2006,
according to the Bureau of Labor Statistics. Whole milk was up 21.1
percent, navel oranges 13.6 percent and beans 11.5 percent. Yet the
inflation figure for all goods and services was a reasonable-sounding
2.4 percent, because things like computers and clothing went down in
price.
.
http://www.sptimes.com/2007/09/01/Opinion/
.
EDITORS NOTES:
All of these things you already know, and there is no point rehashing
it, although it is quite comical that the official US government
statistics say inflation is running at about 3 to 4 percent. Are
the people that assemble these figures high on model airplane glue or
some other similar substance? Eggs have gone up 33 percent, milk
has gone up 20 percent and the price
of flour is expected to double,
accordingly to some economists. In China, pork prices are up 90
per cent, and in Britain food prices are growing at their fastest in a
decade. While it is estimated that food costs make up only 10
percent of the average consumers budget in the developed countries (and
perhaps up to 65 percent in the less developed ones), let us not forget
about the cost of petroleum, which effects almost everything in one way
or another. However, regardless of petroleum costs or anything
else, running the printing presses alone will almost guarantee
devaluation and price inflation going forward.
.
According
to James Kirby, writing an article for Australia's
New Age newspaper on September 2, he reports that: Food prices are set to surge 50 per cent
within five years. US investment guru Jim Rogers, who
correctly called the hard commodities boom of recent years, now says
soft commodities will shine. In other words, the price of wheat
is ready to go through the roof. For some reason, I am reminded
of the old Roman domestic policy of placating the masses with Bread and
Circuses (I cannot explain why that thought popped into my mind, but
for some reason, it did). We have had government cheese, so why
not government bread?
.
However,
the point is, as many feel they are being burdened financially these
days to keep up (by inflation), the call for more taxes or more
government bailout deals (which will surely result in more taxes or
more inflation down the road) will not get much sympathy from the group
that is still swimming, economically speaking, or at least attempting
to. Ergo, we have a severe divide and social problem coming to
light, as the new question will be: Can we still afford to fund the
welfare state? What can we do about the unlucky, the unfortunate
and perhaps even, those that have been just plain stupid with their
personal finances? Who is going to pay for whatever liabilities
that currently exist today, never mind anything new? As the
United States (and the UK as well) moves more towards the previous
third world schematic of extremes in income distribution (with almost
no middle class, where as those very same third world countries are
looking more and more like what the US used to look like, economically
speaking, with a growing middle class) - tensions are sure to flare up,
and new questions as well come up regarding how (and whom) will pay for
it all.
.
.
NO-PROPERTY-TAXES
PLAN DRAWS FIRE FROM LOCAL LEADERS
By
James Salzer - The Atlanta Journal-Constitution - 09/02/07
.
The
dew had yet to burn off the golf course as North Fulton leaders filed
into the Country Club of the South's clubhouse to hear House Speaker
Glenn Richardson propose a property tax revolt. Richardson let
his audience finish their breakfast of eggs, bacon and grits before
hitting them with a plan to wipe out property taxes on homes, cars and
businesses and replace the revenue with taxes on things such as legal
fees, groceries and haircuts.
.
The
idea of vaporizing the $8 billion in property taxes Georgians pay each
year is tantalizing to homeowners who have seen their tax bills grow.
But many of the people who run cities, counties and schools fear local
government would be starved of funding while most of the key decisions
would be deferred to politicians in Atlanta. And people who
provide services or goods that are now not taxed say tacking on a sales
tax would make their products more expensive, possibly putting them out
of reach of some consumers. If you want to buy or sell a home,
there will be a tax on legal services; if you want to change your will,
there will be taxes on those services, Atlanta lawyer Linda Klein
said. This tax is going to affect real people in real ways.
.
Wooing
the public has been another matter. The heat he has taken from some of
the people he has spoken to took him by surprise. I thought
counties and cities and school districts were so tired of hearing
people complain about property taxes and land values that they would be
relieved to change from that crazy, antiquated, agricultural ad valorem
system, he said. Some property owners don't have to be
persuaded. Richardson's proposal plays on a universal gripe: Property
taxes are too high, they always go up, and the government can take away
your home if you don't pay them.
.
The
first slide of his power-point presentation is one most homeowners
relate to all too well. It shows a man with a startled look on his face
as he reads his property tax bill. The caption says, Surprise!
Why do we choose to tax the American dream? Richardson asks.
.
While
Richardson complains about property taxes, Georgia isn't considered a
particularly high property tax state. The Tax Foundation, a
nonpartisan, Washington-based policy research group, ranked Georgia
33rd in the country in per capita property taxes. Among neighboring
states, Georgia's taxes were about the same as South Carolina's, higher
than Alabama's and Tennessee's, and lower than Florida's. Still,
the concept appeals to people who say it's fairer than the current
system. Not everyone owns property, although landlords often pass along
property taxes to renters.
.
Judy
Barker, 52, a Jonesboro resident who owns a small business, said she
would have to pass along a higher sales tax to her customers. But she
supports Richardson's idea. It makes everyone pay their fair
share. A lot of people are getting a free ride on taxes, said
Barker. You can only bleed a turnip so long. Richardson's
plan, developed with the help of economist Arthur B. Laffer, is fairly
simple. No more annual property taxes on cars, homes and businesses. To
make up for the loss of income, the state would expand the current
sales tax, charging taxes on services and eliminating many of the more
than 100 sales tax exemptions currently in place. All the current
exemptions, from most groceries to fuel used in agriculture, are worth
about $10 billion a year.
.
http://www.ajc.com/metro/content/metro/stories/2007/09/01/taxes_0902.html
.
EDITORS NOTES:
We have to see where all this goes, but for sure, it should be
interesting to watch as it certainly pits the home-owners versus the
home-less (many of whom might be new members of the later category,
considering the amount of bank foreclosures we have already seen, and
those predicted yet to come). However, while some do choose to
fight the problem from within, by perhaps challenging the current tax
code, others of course are electing to head for the exit.
.
With
this thought in mind, some people have posted concerns about moving to
a so-called emerging market country whereby there might be a large
percent of poor - working class citizens. I am not really worried
about such a social or economic group. They were poor yesterday,
they are poor today, and they have no where to go but up, economically
(look at where the middle class is still growing, as it is in the
emerging or developing countries, with Australia as one other noted
exception). Personally, I am more concerned about the guy that
just lost his half million dollar home due to foreclose (plus maybe he
lost his job and his wife left him also). That is the guy that
could loose it, mentally and emotionally. That is the kind of
person I would want to distance myself from, because he is the real
danger socially speaking, and not the poor fellow in Ecuador, India,
The Dominican Republic, etc. that still has his home and his job intact
(and has somewhat more hope of positive prospects for the
future). In fact, things are looking pretty good in these
emerging markets (see below).
.
.
U.S.
CONFIDENCE FLOWS SOUTH OF THE BORDER
By
Carl Gutierrez, August 22, 2007
.
The
confident economic environment in the United States on Wednesday made
its way south, warming Latin America's stock markets. Carlton
Delfeld of Chartwell Advisor Global ETF Report said it has been a good
day across the board for Latin America, as money has been returning to
emerging markets after losses of last week. In general, it's
people feeling more comfortable with the liquidity situation, Delfeld
said. Delfield said the region's middle class is growing,
increasing consumer spending and political stability. The Latin
American story has legs and that is what we are seeing today, Delfeld
said, and days like today aren't unusual in these markets.
.
http://www.forbes.com/markets/2007/08/22/
.
EDITORS NOTES:
It is not all bad news for at least some of the OECD nations.
Australia is doing quite well in fact, and is perhaps the only
developed nation that actually has a trade surplus with China (an
Australian company just signed a deal to sell US$45 Billion Dollars
worth of gas to China - that is Billion, with a B). Australian
economist Craig James says: even if the US economy did slip into
recession, the consequences for Australia would not be as severe as in
the past. This was partly due to trade with the US no longer being as
significant and partly due to the strength of the Australian
economy. The good news for Australia is that our economy is rock
solid at a time when the US economy is slowing down, so we are well
prepared for this.
.
And
the Central Bank in Sweden (Riksbank) recently increased interest rates
to fight inflation (mainly occurring from higher food prices).
The bank says: the Swedish economy is continuing to develop
strongly. This move of increasing interest rates to fight
inflation is mimicked by the central banks in Norway, Poland and the
Czech Republic, which have all raised rates in the past few
weeks. And if inflation is truly a global problem (China now
exporting inflation, and higher so-called soft commodity prices, such
as for wheat and beef) it would seem in direct contrast to what the US
Fed is doing. Meaning, some countries are taking steps to fight
inflation and prevent a loss in value of their currency, whereas the US
is cutting rates and opening up the flood gates. If you are
disturbed by the price increases in the US now, we can predict that you
have not seen anything yet IF, and we temper this by highlighting the
term IF, the US Federal Reserve stays on this course of throwing the
proverbial gasoline on the fire (remember, we are coming into an
election year, so economic common sense, and sound fiscal policy, be
damned).
.
.
MIDDLE-CLASS
PENSIONS SLASHED AS PAY OUT BECOMES A POSTCODE LOTTERY
.
Middle-class
earners were dealt a new blow to their hopes of a comfortable old age
yesterday. The pensions industry announced a scheme to set
retirement payouts according to postcode. It means those who live
in apparently more prosperous and healthy areas of the country would
receive less generous pension payments than those in less affluent
districts. Financial analysts want to boost annual payments to
pensioners in poorer areas because they are expected to die
sooner. Those who live in leafier postcodes would be paid less
every year because of an assumption that they are healthier and will
live longer.
.
Their
overall pension pot should, in theory, end up the same because it will
be paid out over more years. But many in wealthier postcodes may
well die sooner than anticipated - meaning they will have been
discriminated against with lower payouts every year of their
retirement. The plan to pay pensions by postcode has been
developed by the Legal & General company. Its annuities chief
Simon Gadd said: Postcodes will mean we are able to more
accurately assess and so price the longevity risk for each customer.
.
Tom
McPhail, of Hargreaves Lansdown, a financial consultancy involved in
developing the scheme, said: Taken to its logical extreme, I
would expect that people with high life expectancy would in the long
term get lower pensions. The lesser pensions for living in a
better class area will affect the one million who are believed to have
their own private pension scheme and the five million estimated to have
private sector occupational pensions.
.
The
millions of workers with lower pensions as a result are also paying
higher taxes to meet the fast-rising bills of the gold-plated inflation
linked pensions enjoyed by the vast majority of public sector
workers. A far higher proportion of people work for the public
sector in the poorer parts of the country. Private-sector workers
in these poorer areas will, however, benefit from the postcode
pensions. Areas where pensioners would get lesser pensions would
include wealthy city suburbs and rural districts.
.
http://www.thisislondon.co.uk/news/
.
EDITORS NOTES:
This is one of those things that belong in the unbelievable but true
corner. In any event, I have a great idea for a new
business: Mail Forwarding Services located in extremely poor
neighborhoods. What you do is, sign up and get a new address in
the worst, poorest, crack infested area you can find, and of course
tell your pension plan that this is your new address. As a
result, you get a bigger pension check. While this applies to
private pensions, I wonder if any government pension plan is pondering
the same? Maybe based on the fact you have a company pension,
annuity or 401K - they will cut you off from the government deal
altogether (social security)?? I guess only time will tell what
alchemy they come up with to try and balance the books. However,
speaking of an address change as a way to make your pension or other
income go further, the following may be of interest to you.
.
.
GOING
NATIVE
By
Rosalind Cummings-Yeates - August 19, 2007
.
EXPATRIATES -
Whether it's work or wanderlust, many people -- including a former
Chicagoan -- leave the States behind in search of new American Dream.
.
The
house in the suburbs, the white picket fence and the lucrative job,
qualifies as just half of the American dream. The other part involves a
getaway to an exotic island, a glamorous tour of European cities or a
six-month escapade around the world. Many Americans fantasize
about sipping cappuccino in Florence, Italy, or trekking through an
Algerian souk and they realize their dreams by extensive international
travel. But what about the truly daring? The American travelers
who discover their love for a particular country and actually plop
themselves down and relocate? Whether for job relocation,
retirement or wanderlust, Americans are becoming expatriates in growing
numbers.
.
http://www.suntimes.com/lifestyles/
.
.
RECORD
NUMBERS LEAVING BRITAIN FOR NEW LIFE ABROAD - August 22, 2007
.
A
record number of British citizens are leaving the country, according to
official figures published yesterday. An unprecedented 196,000
left the country last year, with Australia, Spain, America, New Zealand
and France the most popular destinations for those seeking a new
life. The exodus is countered by high levels of immigration, with
the Office for National Statistics saying that 574,000 people came to
live in Britain between June 2005 and 2006.
.
Overall,
the population has risen by 349,000 to more than 60 million. The news
came as it was revealed that hundreds of thousands of asylum seekers
will be granted an amnesty to live in Britain on human rights
grounds. Many have been waiting years to have their cases
processed, meaning deporting them now would breach their right to a
family life. The ONS figures also showed the numbers arriving
from Eastern Europe are still close to the boom levels seen after eight
countries including Poland joined the European Union in the spring of
2004.
.
The
new figures also suggested that middle-class Britons are beginning to
move out of towns in southern England that are home to large numbers of
immigrants. This phenomenon - called churn by Whitehall officials
and middleclass flight by other commentators - saw 240,000 people move
out of London last year. Independent experts said the high
emigration figures showed that many Britons are fed up with life here
and believe they will do better elsewhere. They do not believe
that the services and the system can cope with the number of people
coming into the UK at the moment, he said.
.
Even
fairly rural areas and villages seem to be coming under the threat of
having an increased population and lack of services. People are
worried about their children and they worry about their jobs and their
future here and possibly the economy as well. Perception of crime
is another of the main reasons for people wanting to leave.
.
http://www.thisislondon.co.uk/news/
.
.
EDITORS NOTES:
According to another related news article dated August 24, 2007
appearing in the UK Telegraph (Exodus
as 1.8 Million Britons leave the country):
.
This
is almost certainly the greatest emigration since before the First
World War. Nearly 200,000 of those leaving for a year or more
were British citizens - one every three minutes - and the rest were
foreign nationals returning home or going elsewhere. The
departure of so many Britons is exacerbating the demographic and
cultural changes that have been wrought by high levels of
immigration. Little research has been carried out on the reasons
for the migration, though retirement, work opportunities and quality of
life issues are the main drivers.
.
http://www.telegraph.co.uk/news/
.
Why
are they all going to Australia? Maybe because the economic
situation there is still attractive? The above article says that
the reasons for the migration include work opportunities and quality of
life issues. Sounds like the same reasons given by poor and out
of work Poles, Romanians, and other Eastern European groups that are
flocking to London.
.
Whatever
the reason, the numbers are staggering. A British citizen is
getting on an airplane and leaving every three minutes. That
comes out to 20 every hour, or 480 per day (in a 24-hour period), or
about 5,000 per week. Unbelievable, but not unforeseen. One
can surmise that anyone with common sense is voting with their
feet. The bureaucrats in the UK government call it churn, but we
call it by the same term we coined years ago - TRADING PLACES.
The unemployed and uneducated move in, tap into the generous welfare
state, force the already tenable finances of the state coffers to erode
further - and the somewhat solvent middle class move out. We
identified this trend awhile back, and it is not abating. In addition,
this will change the schematic tremendously, as the welfare state
continues to bleed red ink. Also, as the welfare state
governments look to tax those remaining middle-class even more to pay
for all these benefits they really can no longer afford, this in turn
will fuel the desire for even more people to exit stage left, as they
say.
.
According
to a news article titled - Move
Abroad and Save Money:
.
As
if cheaper property wasn't enough, many properties abroad do not face
as much of a tax burden as they do in the UK. Plus, some countries have
far more lenient tax ratios on income, as well as cheaper living costs
in general. If you choose wisely and opt to move abroad in order
to work you can benefit not only from experiencing another part of the
world and its culture, but you can actually earn more and pay less in
tax by living abroad.
.
http://www.financedaily.co.uk/News/MoveAbroadandSaveMoney_616.html
.
.
EDITORS NOTES:
No kidding? You can actually earn more and pay less in tax by
living abroad, the article says. In addition, it would seem that
the UK is heading down the same tenuous road that the US has been on in
terms of the housing market, mortgage issues, jobs, inflation and so
on. If someone wants to know why so many middle class people are
jumping ship, I do not think you need a doctorate degree to figure it
out.
.
.
READERS
WRITE IN:
.
I
just sold property in Belize and my account tells me I have to pay
taxes on the gain. I read your article with interest but find that it
is not true about paying no taxes. Belize does not report anything to
our government but my accountant tells me it is jail time if I choose
not to pay the taxes to the FEDS.
.
EDITORS REPLY:
We have repeatedly said time and time again, that the United States is
one of the few countries in the world that subjects its citizens to
taxation on world-wide income and profits or gains, regardless of the
location of the citizen or the asset (salaried income earned abroad
does get a break, up to about US$88,000 at the moment, but everything
else is fair game). However, as you alluded, Belize does not
necessarily proactively report bank account interest, capital gains on
real estate, or anything else to a foreign nation (the US being the
foreign nation in this case), and this is true for many, many, other
countries around the world as well. Why should they? Which
is to say, the onus falls upon the individual tax-payer for the
reporting in many cases (and the subsequent payment as well).
.
However,
we have also said that bank account interest, investment income,
capital gains and or issues such as inheritance as well certainly could
be Tax-Free
in terms of the local jurisdiction
(country) where the assets are located. And so, this leads
to a common dilemma for many Americans. Which is to say, if you
are not living in the US, and if all your assets, bank accounts and or
real estate holdings are outside of the US, AND if it happens to be the
case that there is NO taxation in the country for such matters in the
country where you are currently residing, or otherwise have your assets
- then the question becomes: is there any value for you to retain your
US citizenship and continue to be taxed accordingly? Obviously
the idea of renouncing citizenship (assuming you already have a new
one) is a very personal matter, and for some, conjures up all sorts of
personal feelings as it pertains to patriotism and so on. But,
from a purely taxation or dollars and cents perspective, holding onto
your US citizenship in such a case could be very costly indeed, and a
tax burden that may not really pay back any dividends. For this
reason, some of our clients have decided it to be in their best
interest to renounce, but this has not been the case for all our
clients. Again, it is truly a very personal decision, but we
believe the trend is there for more, and not less, citizenship
renouncements going forward.
.
With
that said, there are of course some very legitimate and legal ways to
arrange your affairs to minimize the tax burden, and there is not
enough space to discuss them all here (which may not necessarily
involve renouncement). However, the main point is, certainly it
can be very important, when planning your affairs or investments, to be
aware of how certain events can trigger a tax consequence, and to plan
ahead of time accordingly. But, I will throw out one more general
comment, or prediction, in this regard. Which is, I believe, as
the tax revenues continue to dry up (corporate income taxes especially
have been legislated down by the politicians to the lowest they have
been in decades), and as the pressures on the tax funded (pay as you
go) social welfare systems increase (demographics involving the
retiring baby boomers, and also the wave of immigrants, illegal and
otherwise, tapping into the tax payer funded health care and public
education systems) - I am convinced you will see more pressures to
close the gap. Inflating the money supply (or running the
printing presses) may indeed be one way the bureaucratic geniuses
choose to do this (they have been doing so already, so why not keep
going?), and more taxation as another runner up. And so, if you
think these issues surrounding taxation will abate, I would tend to
suggest otherwise.
|
|
|
