March 31, 2010
High Higher High
I have been repeatedly asked my views on the economy and whether the stock prices will head higher. First, let me answer that my views reflect what I see are long term trends and are not based upon short term incidents. In general, I see high tax rates which will resemble the pre-Reagan world, of 50-70% tax rates. I see high rates of inflation based upon the effect of purchasing foreign sourced goods with a dollar of declining value due to unprecedented borrowings by Treasury to fund massive federal budget deficits. I believe interest rates will continue to be at historically low rates because President Obama will be able to nominate three people to the Federal Reserve and they will have a soft money outlook. The Federal Reserve will in the short term keep rates low so as to try to bolster our weak economy. Ultimately, the Federal Reserve will be forced to raise interest rates in order to choke off the inevitable inflation. I believe there will be a long term high unemployment rate since the baby boomers that lost their retirement funds in the past two meltdowns will continue to work until they are at least 67 years of age; this will prevent echo boomers from being able to have those jobs.
I do not know whether the stock market will rise or fall. I do believe it will be difficult to make money in such an environment and I refer you to my November 2008 Newsletter for investment strategies that may make sense in such an environment.
I suggest that one should give much thought as to whether you will want to look into long term mortgages at the current low interest rates and to obtain tax favored investments. Might you consider converting your IRAs to ROTH IRAs in 2010, which may have the lowest tax rates in a generation? Most of all, I suggest you contact your financial advisor after reading this to see what you might be doing to protect yourself.
How Women Handle Success
In a recent book, Find Your Strongest Life, Marcus Buckingham analyzes what the happiest and most successful businesswomen have in common. In his book, he points out that women are as bad as men at multi tasking and when you multitask, your functioning IQ drops 10 points because your brain is flitting from one task to another. Successful women and men decide what is important, set priorities and do it.
He suggests that women who take the time to manage their career do better and as women move up the ladder and take on more responsibility, they have more control over their schedule.
The book also talked about myths surrounding women such as “children want to spend more time with their working mothers.” In fact, more than a third of the children asked said they wanted mom “less stressed and tired” and only 10% wanted more time. Additionally, a survey of more than 1,300,000 men and women reveal that with better education, jobs and pay, women are less happy compared with 40 years ago as compared to men. Business Week 11/2/09 p. 070.
A Looming Crisis For Pensions
A recent report by the Public Fund Survey (www.publicfundsurvey.org) show that state and local pension fund obligations dwarfed the annual budget of most states in 2007 (Never mind the past three years!). The liability of New York State for pensions is over 500% the entire annual state budget. New Jersey’s liability was almost 400%. Twelve states kept New York company while 16 states chaperoned New Jersey and eleven states exceeded 400%.
These numbers show the states have a choice, either give money to retired workers or pay for current services, they cannot do both! If I was a government employee, I would not consider my pension sacrosanct! The CPA Journal 3/10 p.56.
As always, if you have any questions about these or any other matters, do not hesitate to call me.
Remember, We’re Here For You!!