November, 2006

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"Altruism is enlightened selfishness, because it ultimately serves your own happiness." The Dalai Lama
Above graphs from CNN Money	Monthly Features Seven Economic Indicators Recent Economic News Major Index Twelve Month Charts Mid Month and Recent Updates Social Security Up For Discussion Consumer inflation may have peaked "I hope this is your email" Scam Offers No Hope of Profits Monthly Magazine IRA Rollover Signed What you need to know about the 2005 tax act News Sources Past Issue Archive

News Stories

Social Security Up For Discussion
With the elections over and Democrats poised to take control on Capitol Hill, the Bush administration is making a fresh push to persuade them to help rein in the rising costs of Social Security and government health-care programs by offering to open talks with "no preconditions."
Treasury Secretary Henry M. Paulson Jr., the president's point man on Social Security and other entitlement programs, said in an interview yesterday that he has had "a number of . . . very, very general, very preliminary conversations" with lawmakers from both parties.
"No preconditions," Paulson said, means both sides get a chance to put their ideas on the table. In regard to Social Security, administration officials said that means President Bush will continue to advocate that younger workers be allowed to divert a portion of their Social Security taxes into private retirement accounts, a proposal Congress roundly rejected last year.
It also means that the White House is willing to listen to other ideas, administration officials said, including personal savings accounts that do not involve diverting Social Security taxes, as well higher payroll taxes to help cover a projected explosion in Social Security costs after members of the baby boom generation begin to retire in 2008.
11/22/06 Washington Post

"I hope this is your email" Scam Offers No Hope of Profits
NASD is warning investors about the latest twist in an age-old scam: targeting gullible investors through apparently misaddressed personal emails to lure them into fraudulent "pump and dump" schemes. A new NASD Investor Alert - "I hope this is your email" Scam Offers No Hope of Profits - includes examples of actual emails that fraudsters have used to entice investors.
Typically, they are poorly worded and appear to have reached the investor's email inbox in error - as if the sender had mistyped some personal acquaintance's email address.
Pump and dump scams involve the recommendation of a company's stock through false and misleading statements (the pump). Misled investors then buy the stock, creating demand that often causes the stock's price to soar. Then the fraudsters sell off their shares at the artificially inflated price (the dump), usually leaving the investors they duped with worthless, or near worthless, stock. NASD encourages investors to forward stock spam emails to spam@nasd.com.
11/6/06 NASD

(From Money Magazine 11/6/06)
You'd never fall for a sucker pitch because you're too smart, right? Before you answer, maybe you should consider some data (Source: FTC).

Consumer Inflation May Have Peaked
Examination of the Dallas Fed's own measure of inflation suggests that the worst news on consumer inflation may be behind us, said Richard Fisher, the president of the Dallas Federal Reserve Bank on Thursday. "It is possible that the trend in overall consumer inflation has peaked and is finally heading lower," Fisher said in a speech to an economists group. But Fisher quickly noted that the overall inflation trend remains above his "comfort zone." Fisher said he used the Dallas Fed's Trimmed Mean PCE inflation rate, which sets aside price categories that rose and fell most sharply but does not automatically exclude food or energy prices. The index slipped to 1.7% in September from 2.7% in August. The bulk of Fisher's prepared remarks discussed one of his favorite themes - the growing importance on global economic factors on the Fed's policy making. He said econometric models should be globalized, so the Fed would fly "a little less blindly" in understanding the global influence on the U.S. economy.
11/2/06 MarketWatch

IRA Rollover (Charitable Distributions) Signed into Law
President Bush has signed into law a bill that contains a series of provisions designed to stimulate charitable giving and cut down on abuses of charity tax laws by donors and nonprofit organizations, The Chronicle of Philanthropy reported 8/17/06. The bill includes a limited-time provision for qualified charitable contributions from Individual Retirement Accounts to charity, sometimes referred to as "Charitable IRA Rollovers". Between now and December 31, 2007, donors have an opportunity within certain limitations. Some of the provisions may be summarized as follows:

• Individuals aged 70 ½ and older may transfer any amount up to $100,000 this year and next directly from an IRA to a public charity
• The charitable distribution counts toward Minimum Required Distribution requirements
• Charitable distributions may be made in addition to any other charitable giving you may have planned
• Please note that, since the funds in IRA accounts were deductible from taxable income at the time they were deposited, the distribution to charity can not generate an additional tax deduction. However, because the distribution from the IRA to charity avoids the taxation that would ordinarily occur, even taxpayers who don't itemize their deductions can benefit from making such a gift.
• Distributions to Charitable Remainder Trusts, Charitable Gift Annuities, Donor Advised Funds and Supporting Organizations are not covered. State tax treatments may differ.

• AMT relief reinstated
• Capital gains tax breaks extended
• Dividends break continues
• Kiddie tax to affect older children
• Income limitations eliminated for Roth IRA conversion
  10/11/06 Times Community Newspapers

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THE ECONOMY: SEVEN INDICATORS - From CNN Money (as of 11/29/06)

Recent Economic News

Economy's Growth Outpaces Predictions - 11/30/06 Washington Post
The U.S. economy grew considerably faster than initially thought in the three months that ended in September, the government said yesterday in a report that underscores Federal Reserve fears about the risk of inflation. The nation's gross domestic product, which is the value of all goods and services produced, rose at a 2.2 percent annual rate during the July-through-September quarter, the Commerce Department said. That was a modest growth rate, but it was significantly better than the department's initial estimate of 1.6 percent, which would have been the weakest pace in more than three years. The new figures still show the economy has slowed this year, after expanding at a torrid 5.6 percent annual rate in the first three months and at a moderate 2.6 percent pace in the second quarter. But the revised figures show an economy that continues to expand, not sputter toward a recession as many analysts had feared after seeing estimates of third-quarter growth. Consumers increased their spending at a faster rate in the third quarter than in the previous quarter, while business investment and exports also rose more briskly.

Consumer spending perks up in October; Core inflation rises 0.2% - 11/30/06 MarketWatch
Real consumer spending in the U.S. rose 0.4% in October following two lukewarm months, the Commerce Department reported Thursday. Core inflation rose slightly faster than expected at 0.2%, keeping the year-over-year gain in the core personal consumption expenditure price index at 2.4%, well above the Federal Reserve's implied cap of 2%. Economists had been expecting core prices to rise just 0.1%, according to a survey conducted by MarketWatch.

U.S. initial weekly jobless claims highest in more than year 11/30/06 - MarketWatch
The number of U.S. workers applying for jobless benefits climbed by the highest amount in more than a year last week, to 357,000, the Labor Department said Thursday. First-time claims for state unemployment benefits rose by 34,000 to 357,000 for the week ending Nov. 25. The rise in claims is up from a revised 323,000 the prior week, the Labor Department said. The number of workers continuing to collect unemployment benefits jumped by 45,000 during the week ending Nov. 18, to 2.48 million. The four-week average of continuing claims also rose, by 18,750 to 2.45 million.

Home prices post record drop in October - 11/28/06 CNN Money
The price of existing homes sold in October fell for the third straight month and posted the biggest drop on record, an industry group said Tuesday, adding it expects weakness in pricing to drag on into next year. The National Association of Realtors said that the median price of a home sold in October was $221,000, the same as in September, but down 3.5 percent from October 2005.

Durable orders fall 8.3% in October, most in 6 years - 11/28/06 MarketWatch
Led by falling order for new airplanes, demand for U.S.-made durable goods fell 8.3% in October, erasing September's 8.7% gain, the Commerce Department said Tuesday. It was the biggest drop in orders for durable goods since July 2000. New orders for civilian aircraft plunged 44.5% last month. Excluding transportation goods, orders fell 1.7%. Orders for core capital goods fell 5.1% in October, the first decline in six months. The 8.3% decline was much greater than the 4.8% drop expected by Wall Street economists surveyed by MarketWatch.

Consumer confidence slips - 11/28/06 Reuters
Consumer confidence fell in November as Americans grew more pessimistic about the job market, a survey showed on Tuesday. The Conference Board said its index of consumer sentiment fell to 102.9 in November from 105.1 in October. Economists polled by Reuters on average had forecast a November reading of 106.0.

U.S. initial weekly jobless claims rise 12,000 to 321,000 - 11/22/06 MarketWatch
Initial claims for state unemployment benefits rose to their highest level since late October in the most recent week, climbing by 12,000 to 321,000, the Labor Department said Wednesday. The four-week moving average of new claims also rose, by 3,000, to 317,000, for the week ending Nov. 18. The number of people collecting unemployment benefits climbed by 14,000 in the week ending Nov. 11, to 2.45 million, the Labor Department said.

Economy weathers home-sales slide 11/21/06 Associated Press
The housing slump has reined in hopes for growth, but the overall situation is eased by a rising stock market and lower fuel prices. The feeble U.S. housing market showed more frailty in October when home sales plummeted in 38 states, hitting Nevada, Arizona, Florida and California particularly hard. The once-booming real estate market's persistent weakness over the past year has reined in expectation for economic growth but hasn't been severe enough to offset a rising stock market, lower gas prices and improved consumer expectations.
Home prices also dropped: The Realtors survey showed that the midpoint price for an existing home sold during the summer dipped 1.2 percent year over year to $224,900, Some 45 metropolitan areas saw home prices decline. Meanwhile, the latest report of building permits showed the slowest pace of annual growth in nine years in October.

U.S. leading indicators suggest slow growth - 11/20/06 MarketWatch
Leading indicators of U.S. economic activity increased 0.2% in October, suggesting slow growth will continue through the winter and into the spring, the Conference Board said Monday. Economists had been expecting a 0.3% increase, according to a survey conducted by MarketWatch. See Economic Calendar. The leading indicators increased a revised 0.4% in September, up from 0.1% reported last month. The leading indicators fell 0.3% in August. This was the first back-to-back increase in the leading indicators since last December and January.

Experts believe worst of housing bust over - 11/20/06 MarketWatch
Nearly two-thirds of the economists polled in the Wall Street Journal's latest forecasting survey believe the worst of the housing bust is over, according to a report posted Monday at WSJ.com. However, the 49 economists responding to the survey expect home prices to rise 2.8% this year and to fall by 0.5% next year. In addition, the average economists' estimate predicted gross domestic product growth at a 2.3% in the fourth quarter. According to the survey, the economists expect GDP growth to remain at that rate through the first half of 2007 and to accelerate later in the year. The economists also predicted 107,000 new jobs a months over the next year.

Consumer Price Index Drops 0.5% a 2nd Time - 11/16/06 NY Times
Consumer prices fell by 0.5 percent for the second consecutive month in October, suggesting that inflation is being contained by declining energy prices and a gradually slowing economy. Whether it was a tank of gasoline or the monthly electricity bill, lower energy prices were the main factor driving down the overall price index. But broader prices slowed as well. So-called core inflation - which excludes fuel and energy - inched ahead by only 0.1 percent, the slowest pace since February.

Housing starts plunge to six-year low - 11/16/06 MarketWatch
Home builders retreated on a massive scale in October, dashing hopes that the bottom has been found in the troubled housing sector. Starts of new homes plunged 14.6% last month to a seasonally adjusted annual rate of 1.486 million, the lowest level since July 2000, the Commerce Department estimated Friday. Building permits fell as well, down 6.3% to a seasonally adjusted annual rate of 1.535 million, the lowest in nine years. It was the largest percentage decline in permits in seven years.

Wholesale Prices Fell Sharply in October - 11/15/06 NY Times

Wholesale prices fell at a record rate last month as two economic forces that rarely move in the same direction - the costs of gasoline and light trucks - both plunged. The new statistics, released yesterday by the Labor Department, added to a growing pool of economic data that showed inflation was easing. For investors focused on the Federal Reserve's next move on interest rates, the news suggested that rates would remain stable, with some predicting that a cut in borrowing costs might even come as early as March.

Retail sales fall on lower gas prices - 11/14/06 MarketWatch
U.S. retail sales fell in October for the second month in a row, pushed lower by falling gasoline prices, the Commerce Department reported Tuesday. Auto sales showed a surprising gain, while demand at most other stores was weak. Retail sales fell 0.2% in October after sinking a downwardly revised 0.8% in September. Sales have risen in just two of the past six months. Retail sales are up 4.5% in the past 12 months, the weakest nominal growth in more than two years. Economists expected a slightly larger 0.4% decline in October sales. They thought sales excluding autos would fall 0.2%.

Producer prices fall 1.6% in October - 11/14/06 MarketWatch
Inflationary pressures eased in October as wholesale energy prices and prices for light trucks dropped. The producer price index fell a sharp 1.6%, which matches a record low set in October 2001, the Labor Department reported Tuesday. The decline in the PPI pushed the year-over-year rate on finished-goods prices to negative 1.6%, the first time it has been below zero since September 2002. The core PPI, which excludes food and energy costs, fell 0.9%, the biggest drop since August 1993. The weak numbers were a surprise. Economists surveyed by MarketWatch were expecting the index to fall by 0.5%, while core prices were expected to rise 0.1%.

Alternative Minimum Tax Targeted - 11/11/06 Washington Post
Democratic leaders this week vowed to make the alternative minimum tax a centerpiece of next year's budget debate, saying the levy threatens to unfairly increase tax bills for millions of middle-class families by the end of the decade. The complex and expensive tax was designed to prevent the super-rich from using deductions, credits and other shelters to avoid paying the Internal Revenue Service. But because of rising incomes, the tax is expected to expand to more than 30 million taxpayers in 2010 from 3.8 million mostly well-off households in 2006. Fixing the AMT has long been a top priority for Sen. Max Baucus (D-Mont.), who is in line to head the Senate Finance Committee. Last year, Baucus co-authored a bill to repeal the tax with Senate Finance Chairman Charles E. Grassley (R-Iowa).

U.S. Sept trade gap narrows to $64.3 bln, lowest since April - 11/09/06 MarketWatch
The U.S. trade deficit narrowed by 6.8% in September to $64.3 billion, the Commerce Department said Thursday. This is the largest narrowing of the trade deficit since December 2004. The trade gap is at its lowest level since April. The trade deficit was below the consensus forecast of Wall Street economists of a deficit of $66.3 billion. Exports rose to a new record high while imports declined for the first time in seven months. Despite the improvemebnt, the U.S. trade deficit with China widened to a record $23.0 billion in compared with $20.1 billion in the same month last year.

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