From Bloomberg’s Dec 13, 2010, www.businessweek.com 2-Years: Estate Taxes 35% rate for those with estates less than $5 million.
1-Year: Business Write Off 100 percent of capital spending next year.
Capital Gains and Dividends 15% tax
1-Year extension 13 months Unemployment benefits to 7 million by Nov 2011 which would increase economy by about 0.5 to 1.0 percent. Comparing those who left their jobs voluntarily verses those who were laid off indicates that about 0.4 percent who had the opportunity to get any job will stay on unemployment. This number is hard to determine accurately.
A union sheet metal worker said work is party a matter of pride and partly a matter of necessity. Jobless benefits aren’t enough to live on: “When you’re in the working part of America, you typically live to what your paycheck is, aside from putting a little money aside. When that paycheck is taken away, you’re living beyond your means.”
Do tariffs hurt the domestic economy? Not so in Brazil! It costs twice as much to buy an iPad in dollars than in the USA. The pain is not as much because Brazil’s Real went up plus 39 percent compared to USA dollar. With the 50 percent tariff on products from other countries, domestic companies have thrived.
In the USA, only those with political power get no tariffs if they are importing, but we also, for example, have tariffs to protect our genetically modified Beet Sugar and rice farmers. Our economy in the past grew faster when tariffs were rather high because we had the opinion that cheap labor from other countries should not harm our workers. Not so anymore.
Investing Getting More Complicated Areas of concern:Can China hold down inflation? For the short term perhaps, but putting Trillions of Yuan in the Chinese market will be difficult to cut off as the USA has also found. They plan to cut loans from 7.5 Trillion to 6.5 Trillion. The important question to follow is whether the Chinese will embrace being a consumer.
European Union: Savvy hedge fund investors are starting to think that the survival of the current European union is not likely to last. At some point the weaker countries such as Ireland, Spain, Portugal, and Greece will declare bankruptcy and leave the Union. This could very likely have a large effect on the Emerging countries who trade the most with Europe. I am now heavily in Emerging market bonds. Since no one can accurately predict when and if these events will occur, we all have to decide when we might bail out of these investments.
Those who worry about this got out of Argentina before everything collapsed in 2001.
European countries that bought bonds might expect that they will be forced to accept much lower interest rates to prevent defaults. The smartest investors are starting to hedge their bets.
As I said a number of times, it is important to take the time to understand financial markets as best we can so that we do not panic when the sh-t hits the fan. Learn and plan what to do when the inevitable happens.
Jim Kawakami, Dec 13, 2010, http://jimboguy.blogspot.com