On May 17th, Lenore Hawkins joined Jonathan Hoenig and Rick Ungar on Neil Cavuto’s Fox Business show to discuss Eduardo Saverin, one of the Facebook founders, renouncing his U.S. citizenship.
On March 8th, Lenore joined Neil Cavuto to discuss the latest scandal in which Republicans pushed for Solyndra-like loans for their cronies as well. This should not surprise anyone. Politicians, whether from the left or the right, will always be under pressure to fund their crony’s ventures, putting their incentives at odds with the best interest of taxpayers. On the other end, businesses will always seek to use whatever means possible to give them an advantage. The only way to prevent the abuse is to restrict government’s ability to grant such favors. Our government was designed under the Constitution to have very restrictive powers because the founding fathers respected the limitations and frailties of human nature. These scandals remind us to think twice before granting politicians more power as they too are mere mortals, often less venerable, less responsible, and all too often possessing inferior judgment. These failed investments illustrate how expanding the scope of government invites abuse and the taxpayers foot the bill, regardless of which political party initiates the so-called investments.
On February 8th Lenore Hawkins joined the Freedom Fighters to discuss a new proposal to aid the struggling housing market and the recent push to include Fannie Mae and Freddie Mac in the federal budget.
President Obama wants a sweeping new program to help more struggling homeowners refinance their mortgages at lower interest rates, but there’s an important detail – a fee Uncle Sam will likely charge homeowners for the government’s help. The President proposed lowering monthly payments for millions of homeowners by refinancing their loans through the Federal Housing Administration. The agency provides insurance against default for banks that make riskier loans mainly to borrowers who make small down payments. FHA currently tacks 1.15% on top of the interest rate of new mortgages it guarantees. While the Administration has not yet decided how to structure charges this new refi program, a fee of that size could reduce savings for borrowers and make it less cost effective for the borrower. To help pay for this plan, the President proposed a new fee on big banks. It would raise $5 billion to $10 billion a year to subsidize premiums–”a big chunk of the cost,” the administration official said. The subsidies would help keep the program affordable, he said–and attractive to as many eligible borrowers as possible.
- This is all about trying to boost up the prices of homes to give people the impression that they are better off, but it is yet another example of government getting cause and effect all messed up AND taking money away from one group and giving it to another.
- Keep in mind that this refinancing would harm the owners of mortgage bonds, which are primarily mutual funds, pensions and real estate investment trusts. So in order to try and boost the price of my home, the government is going to raid my savings!
On to the efficacy of the program:
- The price of anything is determined by supply and demand.
- The demand for housing is a function of 3 things: Household income, stability of that income (will you need to move/ will your paychecks keep coming) and interest rates.
- From 1999 to 2007 Median the median home price rose 54% while median household income FELL 1%. Prices skyrocketed while the ability to pay fell? Why?
- Interest rates and the availability of credit expanded. Houses were no longer purchased to become a home, but rather as a fail-safe investment. This drove demand well beyond what it should have been.
- The exploding demand induced a construction boom. Now we have more homes that the economy can support.
- Unemployment may have fallen to 8.3%, but that is a misleading indicator. The employed as a percent of the population bottomed at 58.2% in Dec 2009 and is now only 58.5%. 0.3% increase since the depths of the recession. Meanwhile household income has continued to fall, even after the end of the recession and is now 14.2% below the 2009 peak.
- The housing problem can only be solved by 1, letting the excess supply get worked out and 2, a growing economy in which household income rises. No amount of government manipulation of interest rates and the supply of loans can, over the long run, counter the gravity-like reality of simple supply and demand.
Adding Fannie and Freddie to the National Books
House lawmakers passed legislation Tuesday to put the operations of Fannie Mae and Freddie Mac on the federal budget to more accurately reflect the costs of their rescue. When the government took over Fannie and Freddie through a legal process known as conservatorship, the Bush administration opted against incorporating the companies’ obligations into the federal budget, citing the arrangement’s “temporary nature.” The President’s administration has maintained that policy, accounting for Fannie and Freddie as entities that are independent from the government but receive regular infusions of cash. Critics, however, argue that this arrangement doesn’t reflect reality.
- In 1990, federally backed loans made up roughly 50% of all loan originations. For the past 3 years, they’ve been over 90% of all loan originations.
- Home prices continue to fall, according to a Case-Shiller report prices fell another 3.7% in November (the most recent report).
- Fannie and Freddie simply transfer the risk of mortgage default from the lender to the taxpayer.
- Although the U.S. government needs very much to get out of the home loan business, it is not reasonable for this to happen anytime soon as it would be entirely too disruptive to an already fragile and critical part of the economy.
- The most likely solution for Fannie and Freddie is to have them slowly wind down their loans, which means they will be on the books for a considerable period of time, thus their financials need to be integrated with the rest of the federal government.
- Ultimately taxpayers and the U.S. economy will only be protected from future bailouts by a full withdrawal of the federal government from housing policy. Interventions by the FHA, Fannie, Freddie, Federal Home Loan banks etc continue to push excess capital into the housing markets, making the commercial banking sector overly vulnerable to downturns in the housing market.
- The current tax code is outrageous. In 1913 the Federal Tax code was 400 pages. It is now over 72,000 pages!
- Americans spend over 7.6 billion hours a year preparing their taxes which equates to about 3.8 million skilled workers, making the tax compliance industry SIX TIMES the size of the U.S. auto industry.
- 82% of Americans need help preparing their taxes
- 60% hire a professional tax preparer.
- According to the IRS, “If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.” Thus you are subject to double taxation; tax for the country of residence and a second level of tax from the United States.
- If you decided to give up your U.S. citizenship, you are taxed on all your assets using a mark-to-market regime, which generally means that all property is deemed sold for its “fair market value” on the day before the expatriation date. You will be forced to then pay taxes on those assets as if you had sold them.
On January 26th, Lenore Hawkins joins David Asman and the Power Players to discuss GM’s record earnings this quarter.
On January 25th, Lenore Hawkins joined the Freedom Fighters to talk about Americans giving up their citizenship due to the onerous tax code.
Rather than using a punitive tax code that attempts to bar people from leaving, how about building a legal code, regulations and tax code that attract wealth and high income earners from all over the world? Their assets and innovation will help the economy grow, providing much needed jobs.
On December 6th, Lenore Hawkins joins the Freedom Fighters to discuss the Fed’s censorship of information about GE’s financing division and the SEC’s desire for more power and autonomy.
On November 28th, Lenore Hawkins joins David Asman and the Power and Money team to discuss Christmas shopping trends. A few things to keep in mind:
• Shoppers spent an average of $398 over the weekend, up 9.1% from $365 last year.
• This year it wasn’t so much Black Friday as Freebie Friday, so I’m cautious about extrapolating a few days into the Christmas shopping season.
• A Deloitte survey found that the number of households looking to cut their holiday shopping budget this year rose to 42% from 38% last year.
• We just had a rather large revision for Q3 GDP from 2.5% to 2.0%. At this stage of the business cycle, growth is usually much closer to 5% than 2%.
• The income side of the national accounts shows an economy in distress. Real disposable personal income is now estimated to have decline 0.5% in Q2 (initially reported as a 0.6% gain) and dropped by 0.8%. If we look at personal after-tax income, the recession has arrived.
• More American’s 25 to 34 are living with their parents than ever before – almost 6 million. 26% increase since 2007.
On November 21st Power and Money discusses the Debt Super Committee’s failure to reach an agreement. Lenore’s perspective:
Congress has put themselves into an impossible situation because the majority of them operate with flawed base premises. Most of those in DC believe that government is the only legitimate provider of a vast array of services for Americans and is thus morally obligated to do so. They also believe that the majority of our social and financial problems can only be solved by more government spending. If you hold these premises to be true, then it is impossible to reduce government spending in any meaningful way and no amount of market pressure can fix that.
On November 21st, Lenore Hawkins joins Power and Money to discuss to discuss increasing teacher pay to improve education. Lenore’s perspective:
The problem with education isn’t as simple as training teachers more effectively or paying them more. We spent over $151,000 per student sending the graduating class of 2009 through public schools. That is nearly three times as much as we spent on the graduating class of 1970, adjusting for inflation. Despite that massive real spending increase, overall achievement has stagnated or declined, depending on the subject.
On November 14th, the Freedom Fighters discuss the new proposal to add a service tax on legal and tax services in California.
On November 14th, the Freedom Fighters discuss property rights and internet censorship.
On November 14th, Lenore Hawkins joins Freedom Watch to discuss TSA effectiveness and invasion of privacy.
On November 11th, Lenore Hawkins joined Neil Cavuto to discuss the allegations of sexual harassment aimed at Herman Cain.
On November 7th, Lenore Hawkins, Gary B Smith and Carl Jeffers join Freedom Watch to discuss Ohio’s vote on public sector unions. Lenore’s perspective:
On November 3rd, Lenore Hawkins joined the Freedom Fighters, Sandra Smith and Carl Jeffers with Judge Napolitano to discuss the enormous bonuses given to Fannie executives and the government’s involvement in smoking warnings.
On October 31st, Lenore Hawkins joined Jonathan Hoenig and Jonas Max Ferris to discuss the federal government’s loan to Beacon Power. Is this a repeat of Solyndra?
On October 13th, Lenore Hawkins joined Judge Napolitano and Freedom Fighters Phil Flynn and Christopher Hahn to discuss the Feds’ latest insider crackdown, and why it’s time to end all subsidies for good.
On October 10th, Lenore Hawkins joined America’s Nightly Scorecard with David Asman to discuss outrage over Solyndra and proposed bans on tanning beds in California – a state with clearly nothing else on its plate!
On October 4th, Lenore joined the Cavuto panel to discuss the state of the economy and investment opportunities.
On September 27th, Freedom Fighters Chris Cotter, Nancy Skinner, and Lenore Hawkins discussed the Fed’s plans to monitor the Internet, and why Coca-Cola is choosing China.
A mind boggling $528 billion tax payer dollars was lost when the solar power technology firm Solyndra declared bankruptcy. On September 16th, Lenore Hawkins and Neil Cavuto discussed the implications of this latest scandal.
A politician’s job is to create an environment for success not to pick winning companies because all politicians, whether from the left or the right, are under pressure to fund their crony’s ventures, making them poor fiduciaries. Solyndra just illustrates how this conflict of interest creates political pressures which override good judgment.
On September 15th, Lenore Hawkins joined the Freedom Fighters to discuss the effectiveness of unemployment insurance and the SEC’s destruction of evidence gathered in its investigations of Wall Street banks.
On August 26th, Lenore Hawkins spoke with the Bulls and Bears team on how hurricane Irene could push the economy over the edge into a recession.
On August 19th, Freedom Fighters Charles Payne, Ellis Henican and Lenore Hawkins discuss the case of cancer patient Jan Cline who works to pay down her skyrocketing medical bills by holding weekend garage sales in her backyard. Her town has told her to cease and desist.
On August 8th, Lenore Hawkins joins Judge Napolitano, Amilya Antonetti and Carl Jeffers to discuss how the debt ceiling deal will be implemented and why the European Central Bank is following in Ben Bernanke’s footsteps.
On July 28th, Lenore Hawkins joined the Freedom Fighters (Liz Claman and Ellis Henican) to discuss the government report that Obamacare is going to increase healthcare expenditures and the impact of the debt ceiling debacle on states.
Only July 21st, Lenore Hawkins joined the Freedom Fighters, (Charles Payne, Ellis Henican and Kmele Foster) and on Freedom Watch to discuss the economics of electric cars, Florida selling info on citizens obtained by the DMV, the federal government’s restriction of potatoes in school lunches and the impending FAA shut down.
On July 19th, Lenore Hawkins joined Jonas Max Ferris of MaxFunds.com and Jonathan Hoenig on the Fox All Star Team for the Cavuto Show to discuss the debt ceiling, Apple and Yahoo earnings, lack of job loss in federal workers, and American Express’ use of Facebook to offer customers deals.
On June 8th, one of our Principals, Lenore Hawkins was on a panel on Fox Bulls and Bears with Peter Morici and Gary Kaultbuam discussing how to improve the employment situation and suggestions for investors in the current climate.
On May 24th, Lenore Hawkins spoke with David Asman and Liz Claman on Fox Bulls and Bears about what investors can do when the rate on the 5 year CD is below inflation.
April 12th, Lenore Hawkins spoke with David Asman and Liz Claman on Fox Bulls and Bears about Meritas Advisors’ outlook for the earnings season.
