Sunday, July 05, 2009

Weekend wrap-up

Well, the sun finally decided to make a cameo appearance in Upstate NY and everyone's feeling better. While, I'm on the subject of weather, I've got a question that I'd love to have someone clarify. When the local weatherperson says today's high will be 68 degrees, well below our average for this date of 81... do they really mean AVERAGE or do they really mean NORMAL? I suspect that it's really a normal temperature for a given date because our departure from AVERAGE every day is so substantial that eventually our average would start showing some real fluctuations.

On to news....

Swedish Banks now want customers to pay for the privilege of holding their money.

Well, about a year ago I joked that it wouldn't surprise me if we continue along our current path that punishes savers and rewards those that are leveraged to their eyeballs, if banks started charging you for the privilege of holding your money.

"Deep economic downturn
Economic activity abroad is very weak and this hits Sweden hard. Exports have fallen substantially and the situation on the labour market is continuing to deteriorate rapidly. The information received in recent months points to the economic downturn in 2009 being somewhat deeper than the Riksbank forecast in April.

Deposit Rate
The decision on the repo rate will apply with effect from Wednesday, 8 July. The deposit rate is at the same time cut to -0.25 per cent and the lending rate to 0.75 per cent."

That's not a misprint. Instead of paying interest on deposits, Swedish depositors will now PAY their banks 0.25% per year. Those banks might deserve to get a Jimmy Stewart style run on their deposits tomorrow.

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Congress is pushing for another short-selling ban.

Short sellers are not bad people. In fact, they are often the best educated investors in the market because they look through all of the happy, sunshine talk and delve into the reality of a business. Most 401k's would look better today if more short-sellers had been on CNBC in 2007 and 2008. A market without short selling is a rigged game designed to have one outcome. At a time when investors around the globe are getting increasingly nervous about their US holdings this sort of move might push global investors to reallocate assets elsewhere.

Also, it should be noted that short-selling puts a floor in stock prices and often stops rapid stock price swings like the ones we saw last October when a short-selling ban was in effect.

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I've also expected that local assessments were going to start getting appealed on a pretty wide basis and this story seems to back up that theory....

"Officials in some states say their property tax revenue is falling for the first time since World War II.

The recession has already taken a significant toll on states’ budgets, as rising joblessness, a weak business climate and a drop in consumer demand have cut sharply into receipts from taxes on sales, personal income and business earnings.

The pain at the state level is trickling down to county and local governments. To compensate, about 10 percent of large counties are raising the tax rates associated with home values to minimize the revenue loss, the county association said.

Even so, most counties simply have to absorb the lost revenue. Municipalities are laying off workers, renegotiating labor contracts, freezing salaries and cutting services.

The revenue losses are coming as homeowners prod towns for new assessments, and as municipalities conduct regular revaluations of their real estate. While declining residential values weigh heaviest on many governments, the value of commercial real estate is also sliding as businesses shut down and move out of storefronts or shopping malls.

But officials across the country say there is no question that the number of appeals has risen from the usual trickle to a flood."


The most likely scenario is that municipalities will lower assessments and raise tax rates to offset the change. It won't be popular, but once one town cracks and raises taxes it will spread through a county faster than the H1N1 virus.

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If you get a chance to catch a repeat of the Pete Peterson interview on Charlie Rose sometime it's valuable use of your time. Mr. Peterson has embarked on a campaign to change our habit of running perpetual consumer and federal deficit. I hope to be able to stay as informed on the global economy as Mr. Peterson when I grow up.

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