December 5, 2000

The Election Results 

show that the country is equally divided and that there is a cultural war in our country.  Looking at the results on a national map, one sees one side consisting of the left side of the country including the liberal urban areas of California and on the right the unionized liberal BOSWASH with a smattering of urbanized unionized liberal areas along the Mississippi and Great Lakes.  On the other side is all the rest, the in between areas.  This writer does not have the answer to the problem or the result of this war except that we are in the beginning of a sixty year cycle where the country will become increasingly conservative.  But the evenly divided Congress shows that moderates will determine what legislation occurs, at least for the next two years.  Extremists of both sides will provide the noise, but it is those in the middle who will provide the balance of power to whomever can sway them to cross the aisle and vote for the most compelling argument. 

What this means to you is that there will not be any sweeping reforms or initiatives and because there will continue to be a legislative gridlock, the budget surplus will continue to be used to pay down the national debt thereby reducing the pressure on the bond market and making it a certainty that interest rates will go down.  This will set the stage for a powerful and sustained stock market rally and a continuation of this once in a lifetime great economy.  It is true, that, depending upon who takes the oath of office, some industries will do better than others, but this economy is a rising tide that will raise all boats. 

My suggestion is to invest in this country, in this market, and invest often.  If you do not know how to, see your financial advisor. 

Ignore the current cacophony of partisan bickering, it is a sideshow to the main event which is the increase of your personal wealth.  No matter who takes the oath of office in January, you will be better off in four years! 

Plain Talk 

            Remember Al Gore`s claim that 50% of George Bush`s proposed reduction in federal income taxes will go to the wealthiest 1% of all taxpayers.  Well, he was probably right, even if he was exaggerating for demagogic purposes.  In 1998, the latest year of available Internal Revenue Service data, the top 1% paid nearly 35% of federal income taxes up from 33% in 1993, the first year of the Clinton-Gore years.  In contrast, the bottom 50% paid approximately 4% of all taxes both in 1993 and 1998.  (Investors Business Daily - November 1, 2000). 

            Bush was probably correct in that the top 1% would get 20% of the tax cut and not 50% but regardless of semantics, it is clear that the top 1% of earners in this country are the financial support of this country, not the lower half and not the middle income.  That is because they pay most of the taxes of the country, they will get most of the benefits.

            Practically speaking, with tax cuts, the rich are encouraged to report more of their income to the IRS and to work harder and longer, to save more and take greater risks, in general to compete harder in this market economy to provide the jobs for the rest of us. 

            It is myopic to believe that under Gore`s or anyone else`s "soak the Rich" policy that they will not use their efforts to outwit the IRS. 

            Gore`s real concern is that Bush`s or anyone else`s tax cut proposal will leave the federal government with less of America`s incomes to spend (and some would say to waste).  This is the real political issue, a tax cut will result in smaller government.  Democrats are against that, Republicans are for it.  It is for you to choose sides. 

The West Wing 

            is simply the best written show on television. 

The O`Reilly Factor 

            has become the number one cable news show.  It exudes a traditional American anger against pretense and pomposity and asks the questions most of us would like to ask.  For example, when George Bush was on the program he was asked how he reconciled his professed belief in Jesus Christ with his record of executions in Texas.  WOW! See it! 

Clinton Breaks the Rules Again 

            The Clinton Administration added 1600 pages to the Federal Register on Tuesday, November 14, 2000.  Never mind that the new regulations are an end run around Congress.  Rules?  They are for the other guys.  Ignoring procedure is standard in this administration.  Oh, and forget they will cost business hundreds of billions of dollars per year. 

            Why am I lathered up?  The regulations are the work of OSHA, the Occupational Safety and Health Administration and they will affect all of us.  The regulations will impose an ergonomic standard on employers in order to protect employees from job related injuries; soft tissue problems from repetitive motions that lead to conditions such as carpal tunnel syndrome, aching backs and sore tendons. 

            There is just one little problem, there are no facts on which to base the regulations.  The National Academy of Sciences has yet to complete its ergonomics study and there have not been any Congressional hearings to ascertain facts.  There hasn`t been any public comment period. 

            It is expected that businesses will have to spend an average of $780 per employee in the first year just to bring workstations into compliance.  Employers will lose money when they are forced to pay for 90 days of leave for employees who cannot work even if the injury was suffered away from the job. 

            Sounds like we have been through this before; like Hillary`s medical plan?  The more things change, the more they remain the same!  (Investors Business Daily) 

The Mutual Fund Triple Whammy          

            This year, not only is the stock market down, (first whammy) but this month the result of rearranged mutual fund portfolios will produce large dividend distributions (second whammy) which could have the effect of producing income from a portfolio in the red.  We suggest you review your portfolio to see what year end tax planning may be in order. 

            If you are a tax client of this firm we have already reviewed your portfolio if it is with Lisch Investment Services and will contact you if I feel year end moves are in order.  Otherwise, please call your financial advisor or us, if appropriate. 

            The triple of the whammies?  High costs of administration by mutual funds which show up more when there is low to flat to negative growth. 

            If you have any questions about these or any other tax or financial matters, please call us.