Tonight I had the opportunity to watch the State of the Union; which outlines Bush’s final plans for America in the coming year. As the President’s final months come to pass, he is also trying to set some of his legislation chiseled in stone. Of course I am referring to his tax cuts that he introduced in 2001 and 2003. Here is just someone’s opinion on what the tax cuts could do if they are implemented in the tax code for good.

“If Congress makes the tax cuts permanent, the major economic benefits begin in 2011. For example,

Total employment will rise by 1,087,000 jobs per year, on average;
Annual GDP will be over $111 billion higher, after inflation;
Personal savings will grow by $163 billion per year, on average, after inflation; and
After-tax household income will grow by an annual average of $274 billion per year, after inflation.”

Am I true believer of the tax cuts that the Bush administration has put into place over the past eight years? Take a wild guess? No, of course I don’t. Do I believe in lowering taxes? Hell yes I do, but the administration is still going about it the wrong way. I’ve said this over and over now, but the mainstream media still won’t cover the real long-term damages that these tax cuts will have on America without cutting spending. How does the government really expect to purchase all this fancy military equipment without increasing taxes? I am not in favor in cutting military budgets, by any means. I would love to see an increase in domestic military spending and a large decrease in international spending though. It’s like the game of ‘Risk.” It’s much easier defending your boarders than to have your armies spread out all over the map. The Bush administration needs to cut their credit card in half and burn it.

People need to understand that I am not in favor of increasing taxes. I truly believe that raising them will inevitably throw us into a depression, but we must lower our spending habits to save our nation’s future. My first idea that the government could implement that could save them a lot of money, while also cutting taxes for all Americans, is lowering government spending in the private sector.

There are many government programs that tax every single business, but only benefit a few. Here is just an example that helps one industry, but damages another. If the government gives a 10 billion dollar grant to an oil company for global expansion, this will inevitably hurt the alternative oil industry. What happened to the invincible hand of economics that we’ve preached about in econ classes for so many years? Here’s a quick definition - “Smith claims that, in a free market, an individual pursuing his own self-interest tends to also promote the good of his community as a whole through a principle that he called “the invisible hand”. He argued that each individual maximizing revenue for himself maximizes the total revenue of society as a whole, as this is identical with the sum total of individual revenues.”

The other factor here is that every single business will have to pay for some of this “free” grant money. A small business owner in Georgia that makes doo-dads will not see a return in this situation. All they will see is a tax hike in their quarterly payment. Imagine this scenario but a 100 times larger. Government spending has corrupted our nation and truly damaged our economic future. We need to let business fuel themselves and add the real sense of an American meritocracy. In a perfect environment a large business would loan a company the 10 billion dollars and expect some kind of return. That is the true sense of American investing. Business investing in business for the betterment of both parties.

Can we really get out of this hole we’ve dug by implementing tax cuts and still allow rampid spending? Something needs to change… What do you think? What do other people think?

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Now that the Fed cut the rates again, what do you really think will happen? Is this short-term vaccination going to bring a long-term disease? I would have to say YES! Can we seriously keep on prolonging the real issue any longer? Our nation is in over 9 trillion dollars in debt and people still think that a 150 billion dollar tax check will end up fixing our economy. This is the craziest thing I’ve ever heard. With interest rates going even lower, our debt increasing everyday and our national budget is still out of control, yet the government still wants to give out money…. How is this fiscally able to happen without kicking our country in the a$$ in the future?

What type of package do you think the federal government should implement without stubbing the toe of the American economy? I really haven’t seen anything that jumps out at me. There really isn’t any long-term plan that seems to be important enough to really cover. The stock market is not only going down because of the consumer credit market. It’s also going down because investors are taking a lot of money out of American companies and investing it abroad. They are scared that the 9 trillion dollars will end up killing the American economy in the long run.

Instead of trying to increase the dollars value and decrease our debt, analyst want us to reduce rates so low that we end up in the same situation we were in five years ago -an artificial housing boom that ends up hurting our country even more. It’s pretty amazing to me that no presidential candidate wants to talk about our national debt because everyone is so consumed about our short-term economy, the war and healthcare. We won’t even have a country if we do not correct the wrongs of the past.

Here’s my idea  

-Slash international spending

-Slash domestic spending

-Lower taxes for all Americans

-Reform our current tax system to increase domestic investments

-Remove the capital gains tax (increases investment activity)

-Increase Federal spending on education (if there’s any type of government spending I believe in, education is the way to go.)

-Cut the corporate tax code to increase business activity in America

-Reform Social Security and Medicare

 
What do you think?

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Are we really in a recession or has the dream bubble burst? Did we really expect the housing market to always go up with no top on the horizon? Come on now… When I was working at the bank and I was supposed to sell home equity lines and loans to clients that had about 30% debt to income ratio, I knew something was going to happen. Our software actually promoted the idea to sell loans to people that were in the 30-40% debt to income range. I was a simple “banker” (really just a fancy word for salesman of financial products) and I could see what was going to happen four years ago. It just amazes me that financial institutions were so leveraged to the mortgage business even though a high school student with one semester of forecasting could predict it blowing up.

This situation does not have to get you down though. This market had a self-destruct button and it was hit a long time ago. Companies did this to themselves and the ones that can’t take the heat are going to be burnt. Badly burnt. But as you know, there are plenty of companies that are just getting brought down by the huge sell off that’s been going on for a while now. Some companies that seemed too expensive just a few months ago are now extremely cheap. It’s going to me hard making a positive return in this market, but you can certainly build a nice position while the market is low. Dividends are a huge key to be successful in this market, but there are plenty of other ways to get a pay off. Diversification could be a winner here if you choose the right fund. Fidelity reopened the Magellan fund; which brought some nice returns even in a pretty crappy market in the 80’s and 90’s. Fidelity is opening up the flood gates for new investors and maybe you should be part of the rush.

I know it seems depressing when you turn on the TV and all you see is the Dow sinking even further. I wouldn’t recommend putting all your money in one stock or purchasing a ton of stocks at one time. You need to purchase slowly and keep buying even if the market keeps sinking. The best idea is just let an index fund do everything for you. Just keep on dumping $300 dollars a month (if you can) in an index fund that is spread over the S&P 500, raw materials, minerals, and petroleum. The stock market will go up and you just need to buy it as the market goes down. There will be a U-turn at some point and investors will be happy that they bought when everyone was selling.

I also think that boom markets will be produced from this mortgage disaster. There’s still a lot of older people out there that are about to retire. This situation alone will send up certain sectors to new highs. Medical and anything influenced by an aging population will send stocks soaring. And because the whole market is hitting new two year lows, this offers the opportunity to own lots of stocks for real cheap. Happy investing and I would love to hear some new investing ideas you might have.   

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With all the news circulating about the Fed’s decision on cutting rates for the third time in a row, is the economy really based on the Federal Reserve or companies blowing away earnings estimates provided by analysts? Right now it seems like it’s heavily dependent on the Fed. The complete lack of confidence in the market is creating a lot more controversy than the whole mortgage mess. I think that there’s about 600-800 points of pure speculation embedded in the Dow right now. Usually when people think of the American stock market and economy, they think of the purest form of separation of government and business.

But does this situation erase the line in the sand and mix the two together? I am starting to think that it is. It feels like a complete bail out of companies that really don’t deserve to still be around. The major companies that have suffered were in the business to make money out of thin air. Did they really think they would make money off of a consumer that can’t even pay for the minimum payments on their credit cards? Come on now! And those are the idiots the Fed is trying to save…

I am sure our country would be perfectly fine with the total disappearance of some of these companies. When you play with fire, your ass will get burned most of the time. The companies playing around with crappy mortgage portfolios deserve what they got. If I went to a casino and bet all my money on red and the ball lands on black, am I allowed to complain and try to get my money back? I could, but the manager would tell me it was my fault for gambling.

Where should we invest our money to get ahead of the game? I think we should play the market in a 10-12 stock portfolio. You need to have some consistent growers like (Kroger, (KR), Coke (KO), Costco (COST), and some that will deliver constant dividends Pengrowth (PGH), Bank of America (BAC), Unilever (UN). After the portfolio has a strong foundation, you can pick some good performers over the long-haul. I like Wainwright Bank (WAIN), Adobe (ADBE), Honda (HMC) and Hologic (HOLX). Those stocks have some varied fluctuation, but have a strong long-term performance. Your portfolio is almost complete, but it’s still missing a few more stocks to really make it happen. I am still on the E*Trade (ETFC) bandwagon even after all the news. Does this make me a hypocrite because of what I said before? Maybe a little, but their main business is still very strong and their cash infusion will certainly help. Here are some picks of my favorite movers and shakers: Nintendo (NTDOY.PK), Suncor Energy (SU), and ValueClick (VCLK).

No matter how you end up playing this wild market, keep your eye on the long-term and remember that the stuff in between is almost like an illusion. The next year might be scary, but I think that this market will end up producing a lot of rich people. Do you want to be part of the pack or sit on the sidelines with your best friend Mr. Mutual Fund?

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I hoping everyone got to see the debate that happened on CNBC yesterday. I thought it was a pretty good debate involving some important issues. Healthcare, social security, federal spending and taxes were the center of attention and I honestly feel like this was the first debate that you can start picking your potential GOP candidate.

Federal spending is the cornerstone to all of the issues that the presidential hopefuls debated about. As you all should know, federal spending has been off the charts. Yet, taxes have not increased, but DECREASED over the past eight years. Can someone please tell me how you can pay for a war and still offer tax cuts? Pretty much you can’t do that (unless you want to be in debt forever!).

This is one issue that most presidential candidates do not want to talk about other than Ron Paul (Please watch this video! It pretty much explains everything). It really does suck that Ron Paul is voted the most important presidential candidate online and in polls, yet the mainstream media doesn’t want to give him any air time. Extremely sad. He is the only candidate that wants to bring America back to what it used to be and, more importantly, what it always should be.

I just think it’s amazing how no one really wants to talk about the deficit and pretend like it’s non-existing issue (Ron Paul excluded and a lil’ McCain too). Cutting taxes and participating in a war is an oxymoron. You can’t double dip unless the government is getting the tax revenue to fund the war. One of my anti-war friends thinks that there should be an Iraq War Tax to wake up Americans. Pretty good idea… Our faux-Republican government has lost their touch and everyone can see that now. Limited government? Gone. Federal spending down? I don’t think so. Cutting taxes? Well, yeah that’s happening. We need a full scale enema. We need the Reagan times to come and shine again.

I am hearing a lot of discussion about reforming the tax code; which I am also in total favor for. BUT… it still doesn’t change our current situation. The only way we can get ourselves out of this mess is by either INCREASING taxes or DECREASING federal spending. I know everyone gets really scared when you hear tax hike, but our system will end up failing horribly at some point. And that “some point” will inevitably be in my lifetime. The math does not make sense people. Our economy couldn’t handle the credit crunch. What makes you think our federal government can? Instead of worrying about cutting taxes, start demanding federal spending cuts.

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Previous editions: Reforming the Government, Change In Politics#3, Change In Politics#2, Change In Politics#1

With the new Congress in power, what types of new legislation would you like to see happen? I know you can think of a ton of things you would personally like to see, but what are your main ones that would benefit a lot of people? Here’s my forth and last proposed change that I would like to see happen with the new government in power.

The last proposed change I would like to see is more active involvement at a domestic level instead of a global one. We invest way too much money in other nations; while we have huge domestic problems knocking at our door. We should plan a proper evacuation from Iraq and worry more about our country. That’s what we really need right now. We need our citizens to love each other once again (like the time around September 11th). There’s a huge division in our country and we need some Dr. Philin’/therapy. We need to discuss our weaknesses and problems and correct them accordingly.

I know celebrities love to say they travel the globe helping starving children, but what about OUR country’s starving children? I’ve always believed that you cannot help someone else, when you are currently in a depressive state. I would love to see our Congress slash funds in international relations and increase our domestic budget. This would allow our taxes to be the same or even decrease them permanently. Take care of our own citizen before we try to take care of others. Leave the globe for the United Nations. There has to be at least ONE reason why we have them?!?

What do you think??

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Globalization is still a pretty frightening concept for an “old-school” business type like me. Even though I cannot ignore the fact that it is happening around me, I still like having the ability of real life meetings instead of virtual meetings. Personally, I feel that because of the internet and other types of technology we are taking away one of the best parts of international business—face to face contact. “Nandan Nilekani, the Infosys C.E.O., was showing me his global video-conference room, pointing with pride to a wall-size flat-screen TV, which he said was the biggest in Asia. Infosys, he explained, could hold a virtual meeting of the key players from its entire global supply chain for any project at any time on that supersize screen. So its American designers could be on the screen speaking with their Indian software writers and their Asian manufacturers all at once.” I always remembered reading books about the Japanese never going through with a business deal without knowing their American partners for at least two years. I like the past business model and I feel like brand loyalty will suffer because of the ease of finding new business partners.

Globalization will have a huge impact on the way America operates. I will be part of the generation that might see America slip to number two or three in terms of world economics; which is the reason why I think it’s kind of scary. Previous generations always saw a bright and brilliant future for America. Now we are being painted a vivid picture on what America will look like if we do not change some of our past ways of doing business. It wasn’t always on how cheaply you could make a product, it was how well-built you could make a product. I think instead of trying to compete with cheaper labor and cheaper products we need to improve our quality.

The Japanese businesses as a whole are still looking extremely profitable in the future because of their total quality management. We need to readopt that concept in order for our country to flourish. One American company that always comes to mind because of their never ending quality improvements is Apple Computers. Apple’s business model is to provide a top quality product with revolutionary innovation that no other products possesses at the lowest possible price.

The one way that globalization will end up helping me in the future is the ability to have information at my fingertips. Investing in countries that are developing at an incredibly fast rate is one way that I will be able to profit from their success while still spending my money in America. I like business and the idea of free enterprise, but we shall see if America can still hold on to their title as the economic giant.

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Yesterday was my first American Black Friday experience, and what an experience it was. I spent most of the day touring peaceful wedding salons attempting to find myself a dress (more on that later) but I did spent a solid chunk of time in the malls searching for savings. In the process, I witnessed firsthand the insanity of the American shopping mobs.

Yes, there were deals, but I also saw people spending loads of cash I would guess they didn’t have. Here are my two simple rules for shopping wisely:

1. It’s not a deal if you wouldn’t have bought it at full price: I will never understand why a 50% off sign will send women (and some men) into a tizzy such that they start purchasing things that they will never ever use, and often don’t even like. So if you weren’t looking at it before it went on sale, don’t buy it just because it’s on sale. Instead, use the sales as a chance to buy things that you were looking at before but couldn’t quite afford. In my case, I was searching for a sale on a handbag that I have been lusting after for months. But if I was smart and had saved before hand to take advantage of the sales, I also would have used it as a chance to replace my ailing Mac laptop or finally bought myself that adorable pink ipod nano, since apple rarely puts things on sale.

2. Don’t get sucked into the credit card offers: Yes, it’s tempting to take them up on those discounts they offer at the cash, in the changing rooms, etc, etc, to get “25% off!” if you only sign up for their credit card. But trust me, don’t do it. Not only is opening multiple cards bad for your credit score but having multiple cards makes managing your finances a lot more difficult. And frankly, it’s worth saving those discounts for when you really need them (ie: I am not opening any department store cards until I figure out where to order my wedding dress from… saving 15% on a $4000 dress means a lot more to me than saving 15% on a $200 pair of jeans).

Happy shopping everyone!

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Does politics really have such a huge effect on the stock market? I would say yes and no. In certain sectors you can definitely see ups and downs depending on who has the majority in congress. The past 6 years that Republicans have been in power you’ve seen a surge in petroleum, health care, and military sectors making big time profits, while during the Clinton Era you saw tech stocks, and retail sector jumps.

What do you think will happen with the sudden switch of congressional power? I don’t think drastic changes will happen, at least not in the short term. I would think in this calming down period the Democrats will try to regulate the government spending (Yeah, I know. Democrats controlling spending. Weird wild stuff.) ; which will end up boosting the market.

I think the open market is going to self regulate itself like it always does. When there is less government involvement in business it will inevitably boom. I think the elections you saw that more Americans just wanted a breather, not a change. I think they were sick with the Republicans spending so much money and not seeing any real results. The Blue Dog Democrats that were selected to replace the Republicans are still very conservative compared to other Democrats in congress.

I am hoping that the change in the government does not influence the market in a negative fashion. What do you think?

Article on Who wins and loses after the GOP fall?

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I was surprisingly shocked when I turned on the news and finally saw some POSITIVE news. Delta is recalling 1,000 employees back to work in January. This is the kind of recall I like to hear about! They are trying to take a practical approach at global expansion by re-hiring some of their employees. I purchased Delta stock when it was dirt cheap (It’s in my risky portfolio) and I can honestly say that it has been the best buy of 2006. It’s now selling steadily over a dollar which has given me over an 90% return.

Delta, which is currently operating in bankruptcy, is trying to repair the damages they faced around September 11, 2001. They finally look like they are headed in the right direction after recalling 250 flight attendants back in September. Delta has also reported a net-income of 52 million, compared to its 1.13 billion dollar loss the year before.

Everyone told me that I was a fool for believing in Delta, but I think I will have the last laugh (hopefully). My friends all said that Delta was going under for good and that purchasing their stock was like throwing paper on a fire. Well my stock is up 94% and I am happy that Delta looks like they are striving for success again.

Full Delta Story

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