Home About Archives RSS Feed

The Independent Investor: What They Didn't Tell You About the Cliff Deal

By Bill SchmickiBerkshires Columnist

Now that the country has avoided the Fiscal Cliff, everyone is breathing a sigh of relief. However, there have been some changes in the tax code that many of us have missed in the last-minute negotiations. For starters: your tax bill will be going up in 2013.

Although 99 percent of Americans avoided paying a higher tax rate thanks to Congress, we will all see a 2 percentage point rise in our payroll taxes. That is because neither party had the stomach to extend the tax cut President Obama had enacted in 2011. It means that households making between $50,000 and $75,000, for example, will see a tax increase of about $822 this year, while those making less ($40,000-$50,000) will see a $579 tax hike.

The headline that most Americans understood after the 11th-hour American Taxpayer Relief Act was passed was that those individuals earnings $400,000 and families earning $450,000 would see their tax rates jump from 35 to 39.6 percent. In addition, as part of the law, a new 3.8 percent tax is being levied on investment income for individuals making $200,000 and couples earning $250,000. High-income families will also have to pay higher taxes as part of Obama's health care law.

However, beneath those headline numbers lurks even greater tax increases as a result of the loss of personal tax exemptions for many middle-class income families. Most Americans recognize that $250,000 is a lot of money - if you reside in certain locales — but not much at all if you happen to live in Manhattan, Boston, Chicago or any other high-cost, urban center. Prior to the Tax Relief Act, a family of four, earning $250,000, were benefiting from $3,800 tax exemptions per family member.  

Those advantages have now been erased, effectively raising taxes 4.4 percent for every dollar that family earns over $250,000. If you have six kids, your marginal tax rate jumps to 6 percent and so on.

Higher-income Americans that make more than $1 million could lose up to 80 percent of their itemized deductions for everything from health care, home mortgage deductions, charities and even state and local taxes. When all is said and done, if you add in the loss of exemptions, health-care tax increases, etc., the effective tax rate for the highest earners could be as high as 45 percent.

Unfortunately, taxpayers in many Northeastern states, as well as those on the West Coast, will be hit the most since they normally use itemized tax deductions much more than the national average.

Some real estate-related deductions were preserved, such as allowing taxpayers to exclude income from the discharge of debt on their principal residence. This especially helps those who are considering a short sale or a lender-approved sale for less than the principal mortgage balance. It also allows a deduction for mortgage insurance payments for those making less than $100,000.

Another tax advantage for most Americans is the increase in contribution limits for retirement plans. You can now contribute $500 more to your Individual Traditional or Roth IRA for 2013, bringing the total to $5,500 with a $1,000 "catch-up" contribution for those over age 50.

The same $500 increase in contributions will also apply to 401(k), 403(b) and 457 Plans as well as for SIMPLE IRA plans for small businesses. Obviously, everyone should be contributing the maximum amount to these tax-deferred plans or as much money as you can reasonably afford to save toward retirement.

So it seems that none of us were able to dodge some increase in our taxes this year. Given the dire straits of the government's finances, I guess we should be grateful it wasn't worse.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
     

The Independent Investor: Round Two

By Bill SchmickiBerkshires Columnist

The ink is still drying on the Fiscal Cliff compromise and already the focus has shifted from preventing tax hikes to what promises to be a battle royal over spending cuts. At stake could be the future health of the economy.

The mood among lawmakers after the bruising cliff battle is downright sour. Republicans are fuming that no spending cuts were included in the compromise while those who make above $400,000 will see their taxes hiked. Democrats, on the other hand, are unhappy that President Obama didn't stick to his guns on hiking taxes for those making $250,000 or more. What both parties' radicals fail to grasp is that neither side gets all that they want in a compromise. And without compromise nothing gets done in Washington.

This week, a new Congress will be sworn in. Time will tell whether that new body of legislators, which is still controlled by Republicans, will be more amenable to compromise than the last Congress. Less legislation was passed over the last two years then just about any time in our nation's history. We can't really afford two more years of that kind of inertia.

As part of the cliff compromise, the so-called 10-year plan of sequestered spending cuts in defense and entitlements, agreed upon in August of last year, were delayed for two months. That gives the new Congress time (until March 1) to work out a more focused plan of spending cuts than the across-the-board first installment of $88 billion in cuts that no one wants to make.

Adding even more drama to these difficult negotiations is the looming threat of another debt ceiling in our nation's borrowing abilities. That ceiling, which now stands at $16.394 trillion, will expire at the end of February. The president has already said he won't make the same mistake he did last year by allowing Congress to use that ceiling as leverage to force further cuts in spending. But Congress is bound and determined to do just that.

In addition, the credit rating agencies were disappointed by the cliff compromise. The deal did little to alleviate their concerns over the burgeoning deficit. Moody's, which still maintains a triple-A rating on U.S. debt, could join Standard & Poor's in reducing their credit rating on U.S. government debt unless more cuts are made and soon.

Beyond the rhetoric and posturing of this debate that most assuredly will be with us through most of this first quarter, there are some very real consequences for our economy, employment and our nation's future. At long last, the U.S. economy is beginning to grow at a sustained rate, thanks to the efforts by the Federal Reserve Bank. Its QE 1-2-3 appears to be working and the economy is gaining momentum. Fed Chairman Ben Bernanke, however, has cautioned that without simulative fiscal policy out of Washington lawmakers there is not much more he can do.

Yet, Republican lawmakers are insisting that the government do the exact opposite — cut spending, not increase it. They demand austerity now and a reduction of the deficit now. It is similar to the stance of Germany and its Chancellor Angela Merkel two years ago. Their misguided policy drove half of Europe into a recession and unemployment rates, in some countries, as high as 24 percent. Why do they think it won't happen here?

I do not condone this country's out-of-control spending, or the deficit, or our addictive need to borrow and borrow. I think it is despicable, dangerous and has gone on far too long. But there is a time and place for everything. Now is not the time to find fiscal religion.

Let the economy continue to grow, gather strength and then cut spending and even raise taxes again if necessary. Give growth another year to work its magic. That will give the economy enough staying power to weather a bout of austerity. My bet is that if we do, tax revenues will explode, the deficit will flip to a surplus by 2016-2017 and we won't need to hike taxes for anyone. It has happened many times in our nation's history and I believe it could happen again.

In the past, the problem has been that when the good times begin to roll, the notion of austerity and spending cuts are conveniently forgotten in Washington. That's the time we will need the tea party and its devotion to fiscal discipline. Let's hope they are still around and stay true to their economic goals by that time. In the meantime, let us grow.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
     

The Independent Investor: Can American Workers Handle a Manufacturing Renaissance?

By Bill SchmickiBerkshires Columnist

The rate of unemployment and the lack of jobs have bedeviled Americans for over four years now. Although under 8 percent, the jobless rate remains stubbornly high and yet, there appears to be plenty of work - if you have the skills to qualify.

"There is a mismatch between the jobs that are available and the people that we are interviewing," explained the chief executive of a huge German engineering firm, looking to hire skilled manufacturing workers.

It is the same story wherever you go. If you can believe the Bureau of Labor Statistics, there was a shortage of 7 million skilled workers in America as of two years ago and that number is increasing. They are forecasting that shortage will balloon to 21 million skilled workers by 2020.

Most scholars will tell you that the lack of education within the American work force is behind these depressing numbers. To make matters worse, the average education of U.S. workers is expected to decline over the next 10 years, which will further widen the gap between supply and demand for skilled help.

Readers who have been reading my columns understand that the rising cost of higher education is now beyond the means of more and more Americans. At the same time, the vast majority of the work force is making less in 2012 dollars than their fathers did. One major reason for this trend is that low-wage work constitutes a growing share of the jobs produced by the U.S. economy.

The Labor Department forecasts that among the top 30 occupations that will add the greatest number of jobs between 2010 and 2020, 24 typically require only a high school degree or less. Only six occupations, among them registered nurses, elementary teachers and accountants, require more.

Yet scholars, politicians and pundits alike keep pointing to increased education as the answer to reducing unemployment. Many workers have dutifully followed that advice only to discover that many would-be employers now consider them overqualified. The jobs available for the most part are in openings for cashiers, home health aides, retail sales persons and the like.

Other jobs, such as long-haul truck drivers or manufacturing jobs demand a certain combination of skills that blend both technical as well as academic training. I believe as more and more college-educated workers realize that they must also incorporate some technical training in their resumes, those jobs will be filled. Many corporations are also realizing that fact and are providing training in those technical skills to new workers.

Most recent estimates indicate that the U.S. manufacturing sector is short roughly 80,000 to 100,000 highly skilled workers. That sounds like a lot but it is actually only one percent of the manufacturing sector's work force, according to the Boston Consulting Group. But it does represent almost 8 percent of the skilled workers in that sector.

When you delve into the figures behind the shortages, one realizes that only seven states show a real gap in skilled manufacturing labor know-how. Therefore, the skills gap is largely a local and not a national shortage. Much of the so-called shortage is of some corporations' own making. It is natural when planning a factory or plant in a new location to seek an area where the lowest cost wages and tax structure prevail. It was one of the reasons that foreign auto manufacturers selected the Deep South to establish their U.S. operations.

What companies fail to recognize is that a major reason for a region or state's low labor costs are the lack of skills and education provided by that work force. You can't deliberately locate your plant in an area that abounds with unskilled labor and then bemoan that same lack of skills.

Don't get me wrong, there is a gap in skilled labor in this country but it is not as large as some would have you believe. Hopefully, as time goes by, more and more manufacturing jobs will return to this country and as they do, those jobs will be filled by Americans. There may be a time lag, such as the one we are experiencing today, but the gaps will be filled and quickly.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
     

The Independent Investor: The Business of Guns

By Bill SchmickiBerkshires Columnist

 

The firearm industry has a lot going for it. It is responsible for a piece of this country's economic recovery including job growth as well as providing a hefty contribution to the tax base. It also sold the weapons that recently cut down 26 people, including 20 children, in a Connecticut elementary school. 
 
Gun manufacturers employ roughly 200,000 Americans in well-paid jobs. They contribute about $31 billion to the economy and $4.5 billion in federal and state taxes. There were 50,812 retail gun shops in America and gun sales were at a historical record high as of last month. Without them, this country's 13 million hunters (present company included) would be reduced to throwing rocks at this season's white tail deer herds.
 
In addition, we have the mega-trillion dollar global aerospace and defense industry. When we think of that sector, we usually talk about aircraft carriers, the next generation of fighter planes and things like tanks, armored personnel carriers and such. Yet, there is a thriving business in manufacturing assault rifles and military hand guns that continue to turn up in civilian society.
 
I live in the Berkshires. It is a rural community, similar to other areas in Maine, New Hampshire, New York, Connecticut and Vermont where most of my readers live. I am a deer hunter (although I haven't hunted since I got Titus, my 4-year-old Lab). I still own two high-powered hunting rifles and a turkey shotgun. Every weekend in Hillsdale, over the last month, I would dun my old orange hunting jacket when I walk Titus because I know hunters are in the woods. I am not afraid because hunters are a responsible, safety-conscious lot. It is a way of life and I appreciate the sport.
 
An acquaintance of mine, on the other hand, is a retired IT programmer, who lives in Delaware. He is not a hunter and yet he owns dozens of rifles and handguns. Most weekends you will find him on a special rifle range, along with several off-duty state troopers, pulverizing old trucks and cars for fun. They fire every type of assault rifle imaginable. It is his hobby. They are a big business for gun shops and shows but there are far fewer gun enthusiasts like my brother than there are hunters in America.
 
In my opinion, the guns this retired IT guy collects are quite different from those I have in my gun cases. The difference: his weapons were manufactured by some nation's defense industry for the express purpose of killing human beings. Mine were designed and manufactured to hunt wild animals, specifically deer. I was relieved back in 1994 when the sale of the assault rifle was banned in America, but the ban expired during the Bush era. It was never reinstated and since then sales have exploded.
 
The political clout of the National Rifle Association (NRA) in league with the Republican Party is largely responsible for this present state of affairs. The NRA spent $9 million trying to defeat President Obama and other Democrats during this last campaign to no avail. But after last week's horrible tragedy in Sandy Hook, even the NRA sounds like it is willing to re-think its blanket support of all guns for anyone.
 
My own opinion is that the hunters of America hold the key to getting these kids- killing firearms off the streets. We hunters, of all people, know the difference between the guns that are necessary for sport and those used for some neo-Nazi target practice in the back woods. 
 
If you are a hunter and are reading this, do yourself and your sport a big favor and let your voices be heard. Assault weapons have no business in our sport or on the streets of America.
 
Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
     

The Independent Investor: Cheap Doesn't Cut It Anymore

By Bill SchmickiBerkshires Columnist

In this brave new world of ours, it is no longer enough to simply offer the lowest cost product. Product innovation is now critical to a company's success. U.S. companies are discovering it is becoming harder to innovate when their manufacturing plants are half a world away.

Just look at the competition in hand-held devices, medical technology, and a plethora of other high-tech products, the highest sales go to the innovators with the most dependable products. But innovation doesn't stop there. Increasingly, even basic manufacturing products from wing nuts to autos are experiencing a transformation. Corporate teams of designers, engineers and workers on the assembly line find themselves collaborating like never before to produce a smaller, sleeker and more energy-efficient mouse trap, just like they did in the days of Henry Ford.

In order to do that, many companies are realizing that they need their manufacturing processes and factories closer to home. That realization is fueling an "insourcing" of jobs and manufacturing back to America. That's good news for the future of this country and its workforce.

Readers may recall my column, "Made in America Returns" back in June of this year. In that article, I attributed the renaissance in American manufacturing to lower energy and transportation costs here at home as well as the narrowing of labor costs between American workers and those unskilled workers of China and other emerging economies.

But that is not the entire story. A recent article in The Atlantic by Charles Fishman, titled "The Insourcing Boom," caught my eye. He chronicled the recent experiences of General Electric in transforming its defunct Appliance Park, Ky., manufacturing headquarters into today's cutting-edge producer of basic products like water heaters, refrigerators and dishwashers.

As a resident of Pittsfield, anything "GE" is of interest to me and my clients. Back in the day, Pittsfield was the headquarters of this red, white and blue manufacturing juggernaut. That is until Jack Welch, its former CEO, got it into his mind to ship most of our manufacturing jobs off to China and other cheap labor centers 30-some years ago. The same thing happened to Appliance Park. Both towns were devastated. Pittsfield is only now beginning to recover.

Appliance Park, on the other hand, is actually undergoing a revival of its original purpose, manufacturing American-made appliances, thanks to some recent discoveries by present GE management and its current CEO Jeffrey Immelt. After failing to sell the facility in 2008, management resolved to "make it work" at the huge six-factory complex. It soon realized that they could make highly efficient, higher-quality appliances here at home at a lower cost than could be produced elsewhere.

The key, as more and more companies are beginning to understand, to creating truly innovative products, regardless of their nature, at a reasonable price, is having all the pieces of the product creation puzzle in the same place. Over the past few decades that principle was lost and forgotten as U.S. companies rushed overseas to take advantage of cheap labor. In today's marketplace, however, cost is taking a back seat over quality and innovation; something more and more consumers are demanding and willing to pay for.

Input from those in the manufacturing process is becoming integral to engineering and designing a better, more competitive product. You can’t do that when your widget is being made on a Chinese or Indian factory floor in a different time zone, by workers who can't speak English. Although this trend should benefit our own workers, the question to ask is:

Is our workforce prepared for that challenge and opportunity?  In my next column we will address the issue of skilled workers, or the lack thereof, in America.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

 

     
Page 67 of 90... 62  63  64  65  66  67  68  69  70  71  72 ... 90  

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Clarksburg Gets 3 Years of Free Cash Certified
Pittsfield CPA Committee Funds Half of FY24 Requests
MCLA Men's Lacrosse Falls in League Opener
Letter: Vote for Someone Other Than Trump
Berkshire Art Center's Dance Party Returns
Dalton Committee Seeks Funding for Invasive Species
Dog Daycare Planned for Former Williamstown Restaurant Site
Simon's Rock Awarded Freedom to Read Grant
American Legion National Commander To Visit Dalton Post 155
Chamber Music by Local Composers to be Premiered at Simon's Rock
 
 


Categories:
@theMarket (480)
Independent Investor (451)
Retired Investor (183)
Archives:
March 2024 (5)
March 2023 (2)
February 2024 (8)
January 2024 (8)
December 2023 (9)
November 2023 (5)
October 2023 (7)
September 2023 (8)
August 2023 (7)
July 2023 (7)
June 2023 (8)
May 2023 (8)
April 2023 (8)
Tags:
Japan Currency Recession Election Crisis Oil Jobs Congress Interest Rates Europe Debt Ceiling Banking Stock Market Fiscal Cliff Pullback Bailout Commodities Stocks Selloff Banks Taxes Europe Federal Reserve Markets Economy Deficit Greece Retirement Debt Euro Rally Employment Stimulus Metals Energy
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: Let the Good Times Roll
The Independent Investor: Japan — The Sun Is Beginning to Rise
Independent Investor: Enough Already!
@theMarket: Let Silver Be A Lesson
Independent Investor: What To Expect After a Waterfall Decline
@theMarket: One Down, One to Go
@theMarket: 707 Days
The Independent Investor: And Now For That Deficit
Recent Entries:
@theMarket: Sticky Inflation Slows Market Advance
The Retired Investor: Eating Out Not What It Used to Be
@theMarket: Markets March to New Highs (Again)
The Retired Investor: Companies Dropping Degree Requirements
@theMarket: Tech Takes Break as Other Sectors Play Catch-up
The Retired Investor: The Economics of Taylor Swift
@theMarket: Nvidia Leads Markets to Record Highs
The Retired Investor: The Chocolate Crisis, or Where Is Willie Wonka When You Need Him
The Retired Investor: Auto Insurance Premiums Keep Rising
@theMarket: Melt-up in Markets Fueled by Momentum