September, 2006

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• Talk it over first. No matter what your age or level of financial resources, consult a qualified financial/tax adviser first.
• Do your research. Any charity of quality should have detailed financial records available for potential donors to review.
• Figure out if you'll need income from your gift. It is possible to give and receive. There are ways you can draw income from a donated asset with tax advantages besides.
• Consider that charity is not all about money. A giving strategy can be about time and expertise, not just money. Charitable giving should involve an exploration of values first and how the giver - and possibly the giver's family - should be involved in the process over time.
  Bradenton Herald, Florida

Raising Charitable Children
Carol Weisman is a speaker on philanthropy, volunteerism and fundraising. Back in the '80s when her sons were young, she found ways to instill in them a sense of philanthropy (on their birthdays, for example, they made a small donation to the charity of their choice; it became a family tradition). Her book, "Raising Charitable Children," does a good job of helping parents guide their children in the right direction.

• Introduce kids to charitable giving when they're 3 or 4; even that young, they understand the concepts of giving and caring.
• A donation doesn't have to be money. Show children how they can donate their time. (Weisman tells of a friend who made sandwiches and took them to a homeless shelter with her son.)
• If it is money, have your child contribute to the donation as well.
• Make sure that you and your children are a good fit with the organization you're helping. You can't expect a 7-year-old to stack cartons of groceries at a food pantry for three hours without a complaint.
• Choose a charity that appeals to your child.
  9/7/06 Chicago Tribune

From the IRS - Simple Steps Can Prevent Tax Scams as Private Debt Collection Begins
The IRS is beginning its private debt collection effort, where a small segment of taxpayers who owe back taxes will be contacted by private sector debt collectors.Scamsters try a variety of tricks to impersonate the IRS in hopes of tricking taxpayers into divulging personal or financial information or even conning people out of cash. Scam artists try to impersonate the IRS in person, by phone, by e-mail and over the Internet. There are several simple steps that can provide protection against scam artists. Currently, there are several key elements of this program that will alert taxpayers they are part of this program and help other taxpayers from being scammed by impersonators:

• Taxpayer notification. All taxpayers who will be part of the private debt collection effort will know they are in the program before they are contacted by a private collection agency. If you haven't previously heard that you're in the program, be wary of any bill collectors saying they are working on behalf of the IRS.
• IRS letter. All participants selected for the program will get a letter from the IRS, telling them they've been selected for the private debt collection program. The name of the company will be included in the letter.
• Collection agency letter. All participants will subsequently receive a second letter, this one from the collection agency, informing the taxpayer they will be contacted soon regarding back taxes.
• Money collected. When paying a collection agency on behalf of the IRS, remember that the check will be made out to the U.S. Treasury - not to an individual or firm. The collection agency will provide the appropriate IRS coupon and mailing address for the payment. The collection agencies will never ask for cash or checks written to individuals.
• Contact the IRS. If in doubt, check IRS.gov or call the IRS at 800-829-1040 for more information.

IRA Rollover Signed into Law
President Bush today 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 up to $100,000 per year directly from an IRA to 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.
  

Economy Often Defies Soft Landing
In the cool and quiet marble corridors of the Federal Reserve, the strategy for taming inflation sounds painless, even soothing: a "soft landing" for the economy after several years of flying high. As the central bank contended on Tuesday, when it decided to pause in its two-year effort to raise interest rates, inflation is "elevated" right now but will begin to decline because economic growth is poised for a modest slowdown. Many economists, though, warn that the soft landing may seem anything but soft, and suggest that the Fed is either too rosy about the looming slowdown or naïve about the difficulty of reaching its goal for inflation.
In practice, the Fed has achieved only one true soft landing - in 1994-95, when, under the leadership of Alan Greenspan, it was able to slow the economy enough to cool spending and ease inflation pressure but not so much as to cause a big jump in unemployment. But even Mr. Greenspan, whose ability to fine-tune policy made him famous, presided over two formal recessions, in 1991 and in 2001.
This time, many analysts say that the Fed and its new chairman, Ben S. Bernanke, face considerably tougher challenges. Crude oil, at more than $70 a barrel, is selling at prices that would have been unthinkable in 1995. Productivity growth, which was accelerating in 1995, is slowing these days. The dollar, which was climbing against other major currencies in 1995, is declining against most of them now. Analysts and other experts say that if Mr. Bernanke is serious about his goals for controlling inflation, at least two million more workers may have to lose their jobs over the next two years.
8/11/06 NY Times

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THE ECONOMY: SEVEN INDICATORS - From CNN Money (as of 9/21/06)

The Indicator	What It's Telling Us	Next Update
Consumer Confidence	Consumer confidence edges up	Sept 26
Retail sales	Moderate growth	Oct 13
Leading Economic Indicators	Points to cooling economy	Sept 21
Manufacturing Activity (ISM)	Surprise decline in August	Oct 2
Industrial Output	Unexpected decline	Oct 17
Job Growth	Giving while living creates legacy today	Oct 6
Inflation (CPI)	Moderate uptick	Oct 18

Recent Economic News

Leading indicators fall for 4th time in 5 months - 9/21/06 MarketWatch
A leading gauge of the U.S. economy fell for the fourth time in the past five months in August, suggesting continued moderate growth through the end of the year, the Conference Board said Thursday. The index of leading economic indicators fell 0.2% in August for the second straight month, the independent research group said. Economists were expecting the 0.2% decline, according to a survey conducted by MarketWatch.

FOMC holds rates steady at 5.25%, door open for more hikes - 9/20/06 MarketWatch
The Federal Open Market Committee on Wednesday held its benchmark federal funds rate unchanged at 5.25%. This is the second straight meeting with no change in policy after 17 straight meetings with a quarter-point rate hike. The decision to hold rates steady was expected by traders and economists on Wall Street. The Fed said the economy is slowing. It said the moderation in economic growth partly reflects a cooling housing market. "Inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand. Some inflation risks remain."

Producer prices barely budge - 9/19/06Reuters
Producer prices edged up a smaller-than-expected 0.1 percent last month and core prices posted a surprise drop of 0.4 percent, the biggest since April 2003, on the back of sliding car prices. The decline in the core producer price index, which strips out volatile food and energy costs, reflected a 2.6 percent drop in auto prices and a 3.4 percent decline in the price of light trucks and SUVs. But even stripping out those sharp price declines, core producer prices would have been unchanged. Wall Street economists had expected the report, which comes one day ahead of a Federal Reserve meeting on interest rates, to show both overall and core producer prices had risen 0.2 percent last month.

Home builders' confidence falls again in September - 9/18/06 MarketWatch
The confidence of U.S. home builders fell for the eighth straight month in September, dropping to the lowest level since February 1991, the National Association of Home Builders said Monday. The NAHB/Wells Fargo housing market index dropped by three points in September to 30 from a revised 33 in August, indicating that most builders think the housing market is poor. Economists expected the index to fall to 31. A year ago, the index was at 65. A reading of 50 would indicate builder sentiment was balanced between good and poor.

Housing starts tumble - 9/16/06 CNN
Home builders slammed on the brakes in August as starts on new homes sank to their lowest level in more than three years, and a drop in permits signaled more weakness ahead for the real estate market. Housing starts sank to an annual rate of 1.67 million last month from July's 1.77 million pace, the Census Bureau reported Tuesday. That marked a 6 percent decline from July and a nearly 20 percent drop from a year earlier. Starts are at the lowest level since April 2003. It also marked the sixth time in the last seven months that starts have fallen from the previous month's level. Economists surveyed by Briefing.com had forecast starts would drop to a 1.74 million rate.

U.S. Aug CPI, core CPI up 0.2% - 9/15/06 MarketWatch
Consumer price inflation moderated in August as gasoline and home ownership costs rose at a slower pace, the Labor Department said Friday. The consumer price index increased 0.2% in August after a 0.4% gain in July, while prices excluding food and energy rose 0.2% for the second straight month. The 0.2% gain in the core CPI matched expectations on Wall Street. The headline CPI came in one tenth of a percentage point below expectations. The core CPI is now up 2.8% in the past year, the biggest gain since December 2001. Energy prices rose just 0.3% in August after rising 2.9% in July. Owners' equivalent rent - which accounts for 23.4% of the CPI - rose just 0.3% in August after three months at 0.4% and one at 0.6%.

Price Index Moderated in August - 9/12/06 NY Times
What a difference a few weeks make. A month ago the economy seemed to be in dire straits - wedged in by the inflationary pressures of soaring energy prices and rising labor costs while threatened by the prospect that the weak housing market would decimate consumer spending. But yesterday, the government reported that consumer prices rose only 0.2 percent in August, pushing annual inflation to 3.8 percent, the lowest since April. Meanwhile, retail sales rose by a respectable rate of 0.2 percent in August. And in September, consumers' confidence about the future increased sharply.

Continuing jobless claims rise to 6-month high - 9/7/06 MarketWatch
In a sign that the labor market isn't creating enough of the right kind of jobs, the number of people collecting state unemployment benefits over the past four weeks rose to the highest level since February. The number of continuing jobless claims rose by 15,000 to 2.49 million in the week ending Aug. 26, bringing the four-week average of continuing claims to a six-month high of 2.49 million.

U.S. services expanded at faster pace in August - 9/6/06 MarketWatch
The nonmanufacturing side of the U.S. economy expanded at a faster pace in August, the Institute of Supply Management reported Wednesday. The ISM nonmanufacturing index jumped to 57% from 54.8% in July. Economists expected the index to rise to 55.4%, according to a survey conducted by MarketWatch. Despite the rise in the business activity, most of the subindexes were weaker in August. In the ISM services index, the headline isn't a composite of the components.

U.S. 2Q Home Price Index up 4.7% Annualized - 9/5/06 MarketWatch
U.S. home prices were appreciating at a 4.7% annual rate in the second quarter, the slowest gains since 1999, the Office of Federal Housing Enterprise Oversight said Tuesday. In the past year, home prices are up 10.1%. The purchase-only index is up 8.3% in the past year. The deceleration in OHFHEO's home price index is the fastest in the three-decade history of the index. "These data are a strong indication that the housing market is cooling in a very significant way," said James Lockhart, OFHEO director. In the first quarter, home prices had risen at an 8.8% annualized rate, with prices up 12.8% year-over-year.

Jobless Rate Fell Slightly In August Inflation, Recession Fears Kept in Check - 9/2/06 Washington Post
Employers added jobs at a moderate pace in August, enough to lower the unemployment rate a notch without deepening worries about inflation. the Labor Department said payrolls rose last month by 128,000 workers, while the jobless rate fell one-tenth of a percentage point, to 4.7 percent. The expansion in the number of employees suggested that the economy, while slowing from the torrid pace of earlier this year, is showing little sign of falling into recession. At the same time, the modest rate of job growth and other data helped ease concerns about wages and prices spiraling upward. The report, analysts said, should thus be particularly heartening for the Federal Reserve, which is hoping to engineer a "soft landing" in which economic growth falls just enough to keep inflationary pressures in check.

Core Inflation Eases to 0.1% in July - Real Consumer Spending up 0.5%, Most in 2006 - 9/1/06 MarketWatch
Consumer prices excluding food and energy rose at a slower pace in July, while real consumer spending grew at the fastest pace this year, the Commerce Department reported Thursday. Core consumer inflation rose 0.1% in July, the smallest gain since December. Economists were expecting a 0.2% gain. In the past year, core prices are up 2.4%, matching the biggest gain in 11 years and well above the Federal Reserve's implied comfort zone of 1% to 2% for core inflation.

U.S. July Construction Spending Falls 1.2% - 9/1/06 MarketWatch
Spending on U.S. construction projects fell by 1.2% in July, dragged down by a drop in private residential construction, the Commerce Department said Friday. Spending on home-building fell by 2.0% in July, the lowest rate since March 2005, another sign of the slowing housing market that has cooled the pace of the overall economy. Wall Street economists surveyed by MarketWatch were expecting construction spending to be flat in July. Spending on construction projects was down in four of six categories tracked by the government.

Closely Watched ISM Index Rises Above Expectations; Prices Paid up as Well - 9/1/06 CNN Money
Manufacturing growth showed surprising strength in July, even as prices paid jumped, according to a closely watched survey of industry executives released Tuesday. The Institute of Supply Management said its manufacturing index rose to 54.7 from 53.8 in June. Economists surveyed by Briefing.com were expecting the index to slip to 53.5. Any reading above 50 in the ISM manufacturing index indicates growth in the sector. The report's prices paid index - which measures inflationary pressures within the sector - rose to its highest since October 2005. It jumped to 78.5 from 76.5 in June, largely due to rising metal prices.

U.S. Aug. Payrolls Up 128,000, In Line With Expectations - 9/1/06 MarketWatch
U.S. firms continued to hire workers at a steady, but moderate pace in August, as wage growth moderated, the Labor Department said Friday. U.S. nonfarm payrolls grew by 128,000 jobs in August, in line with expectations and with the recent trend. The unemployment rate inched lower to 4.7% in August from 4.8% in July. Economists said the report would keep the Federal Reserve on track to hold interest rates steady again later this month.

Factory Orders Tumble 0.6% in July - 8/31/06 MarketWatch
Demand for U.S.-made factory goods fell 0.6% in July on a large drop in orders for transportation goods, the Commerce Department said Thursday. Excluding the 10.1% decline in transportation orders, factory orders rose 1.1% in July, the government said. The 0.6% decline was slightly stronger than the 0.9% drop expected by economists surveyed by MarketWatch. In addition, June's increase was revised higher to 1.5% from 1.2%.

U.S. Q2 GDP Revised Up to 2.9% - 8/30/06 MarketWatch and NY Times

The U.S. economy was stronger than first believed in the first half of the year, with growth in wages and salaries nearly a third higher than the previous estimates. The revisions to the second-quarter GDP were largely due to higher investments in nonresidential structures, more inventory building and higher exports, offset by lower investments in housing. Growth in wages and salaries was revised nearly a third higher than the previous estimates. Key inflation data were revised marginally lower. The upward revision, though, didn't change the big picture of the economy: In the spring, it slowed sharply from the first quarter's 5.6 percent pace, the strongest growth spurt in 2 1/2 years, as consumers and businesses tightened the belt.

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