2007 earned income credit tax table

What recovery? What economic downturn?

In early November were the Talking Heads breath presentation Report of the economy "grew" by 3.5% in the third quarter … quarter that the economy is recovering. The end of the economic downturn has also marked the end of the recession that began in the fourth quarter of 2007. He attributes much of this increase in absorption in auto sales. To read the full government report, go to www.bea.gov .

The index of leading indicators economic, which was positive for seven months, also suggests that the economy is in recovery.

Therefore, it is true? About Us on a growth path now sustainable? "This latest version of the Government on the economy means the worst is behind us?" The index leading economic indicators we say the same thing?

Well, look at the reports and see where the growth is coming. Perhaps what we give some answers.

For starters, growth in Q3 has since been revised downward to 2.8%. And the following table shows the contribution to growth from the various sources of our economy.

The contributions to growth were:

Thank you for this data table is a bit busy, but it is important to understand the true nature of what some call a recovery. He noted the major contribution economic growth in the third quarter was restocking inventory. In my opinion, this will be the difference in growth is not empty. It is simply the inverse of the stocks that we have seen massive and aggressive in the fourth quarter of 2008.

So if we take the storage growth rate slips to 1.9%. We will also remove defense spending and health care that are not growth factors. After all, support our troops in Iraq, Afghanistan and around the world should not be regarded as economic growth. And more health for an aging population should not be regarded as a new growth.

If we eliminate the defense and health care, growth was reduced only represent only 1.1%. But growth remains is the sale of vehicles. Let us now look deeper into this subject.

Month month car sales are very volatile and seasonal. Thus, while the idiot was "scrapping bonus gift from the government" that some programs kick started the Sales in the third quarter, two other factors are more important. pent-up demand has been growing and the money was simply the case catalyst.

pent-up demand is the increase in the average age of cars on the road, now more than nine years. In addition, a loan Auto interest rates are about half what they were in early 2007. The average car now has over 100,000 miles on it and interest rates on new car loans low. underwriting standards, 10% down payment, have not changed in recent years and average prices have not changed much and are a little less than 30,000.

Most of us are accustomed to see the total number of vehicles owned, shown in the table below. But remember, many of the cars we buy are imported and do not add to economic growth U.S.. This table gives an overview of consumer purchases of automobiles during the last decade.

As you can see, car sales have been stable for a long period of about 16 million per year. As car buyers went on strike last fall, car sales fell below 10 million per year sales level not seen since the eighties.

But the pent-up demand from the aging fleet of vehicles and low loan rates will increase demand for cars from levels current.

There is another factor that we provide information on car sales in the future. Currently, there are 1.2 vehicles per owners permit. This means that only 83% of the cars we buy are needed for transportation. The remaining 17% are discretionary and are purchased to support our lifestyle. So whenever there and we should decrease, recessions, we can easily cut on cars purchased.

Clearly is what we saw last fall and during the first half of 2009. We can delay the purchase of cars, and have. Eliminating discretionary demand, car sales will stabilize at about 13 million per year.

Now look at the car sales which affect our growth economy. The following table shows the file sold each month that were manufactured in the United States.

Department Source: U.S. Department of Commerce

Areas shaded pink table are periods of recession. As you can see car sales have been on a steady decline During the past decade, recession or not. We have seen a dramatic drop earlier this year, and sales have increased slightly during the third quarter. However, this recovery is very much a part of long-term pattern is not unique to this recession.

The result of pent-up demand and low borrowing costs by sales of cars will be higher than the low level of monthly sales this year. I hope that car sales will resume its long-standing trend of seasonality and volatility.

Now back to our "growth" history. As we have seen, the only significant contributor to sales growth was 3 rd quarter of the car. Many analysts attribute this to the government's stimulus program. It makes no sense.

Aging, high mileage cars, and low interest rates are more durable and more powerful influence on car sales than any government can be a gift. Offsetting these positive factors is negative discretionary decisions Buying a car 17% of total demand. car purchase can be delayed or canceled … at least for a while.

Oil trade imbalance =

And before we all too pleased with this explosive growth, we must remind ourselves of the negative impact on trade growth of 0.8% less. This is mainly due to our oil imports. More growth This trade deficit will be worse than we import more oil to make way for increased economic activity.

The Congressional Service Research, the body Investigation of Congress recently published a report on the hydrocarbon reserves of the United States showing the U.S. to organize more large reserves of fossil fuels in the world, more even Russia. The report is entitled "U.S. fossil fuel resources: terminology, reports and summaries "and was released October 28, 2009. Go to www.opencrs.com to download report.

We have the largest endowment of fossil fuels of all countries and we import large quantities of oil. This is the result of a bad policy and political pressures and the environment. Unfortunately, the exploitation of our own resources and reduce our economic growth has pressure falling dollar continued.

Key Economic Indicators

The Conference Board's Index Economic Leading Indicators has been said since April that the economy is in recovery. The index has been positive every month since then. We will look more closely at the components of this index. The main factors of positive performance was the performance of suppliers (stocking shelves) and bond markets and equity. As I said before putting things on shelves empty should not be considered sustainable growth.

Stock markets and bonds have widened more. The bag is 62% of its low in March. Corporate bond prices rose and, especially, the high yield market up 56% as low in March. These price increases have come without the benefit of rising income, which extends at nosebleed valuations.

Other elements, such as consumer expectations (low and so long), UI (Bad, but the stabilization), average workweek (stable at least 45 years) and building permits (which increased from a low base and remains low unbearable) tell a very different story. Therefore, I think that the index of economic leading indicators lead us astray, for the sole indicator of Growth is an unjustified increase in prices of capital market.

Some 'The growth' story, eh? Investors must be cautious extremely cautious in this environment.

What about the next quarter?

I think it is important see this highly touted "growth" story of the economic results of the third quarter as a unique event.

After all, in which this quarter and next quarter's growth is coming … more war? More bands and ducks? More cars do not really need? I do not think not.

A long-term sustainable economic growth comes from entrepreneurship that provide goods and services demanded by consumers. These companies hire more workers and expand, because its products are sold at a profit. The reader's interest all of us to ensure that this happens …. A Unless our government prevents and hinders the growth of this natural phenomenon and the high taxes and regulations expensive.

And here we are. No employer in their right senses will start a business today. Barriers to success and growth are too large, so that the business too risky. The prospects for sustained high economic growth is not good until the government removes these obstacles.

What are the possibilities of our socialist President radical Muslim and a spirit of understanding that Congress the real sources of growth? The measures taken by this administration and Congress to date ensure economic recovery and limited short-term. Economy underperformed significantly its potential.

What recession?

Now that we have determined that there was very little growth in the number of growth in the third quarter and growth prospects over the coming quarters is not good, let's take a look at the recession and see how it is.

Is there a recession? Absolutely. But we have to look a little more to get their ideas about gravity, dispersion, and duration. You just have to accept the government's revelation that the real GDP for two consecutive quarters is not very useful for investors.

We must understand the parts of the economy is healthy and safe and the parties extended and vulnerable. In fact, I find it useful to think of the recent economic developments in terms of both economies.

Two economies

Is there a recession or two economies? I think that the recent economic developments are best explained not regarded as a monolithic economy goes up or down together and unity, but rather to consider two economies which operate somewhat independently of each other.

An economy is stable and in good health and another is wrong, sick and had no business underway in the first place. But they are linked … so that the performance of good or bad, it can appear in the performance of another.

The first concerns the provision of goods and services for all needs, including housing, food, clothing and other necessities of normal American families. This includes education, entertainment and lifestyle. You see, this economy is vital, important, health and functioning.

The second economy is one that should never have existed in the first place. It is an economy based on the liars and losers buy homes they were not home. This economy is sick and eventually die and cease to exist.

Watching the endless stream of data economic context in the two economies give us information on investment opportunities and dangers.

Economy real

The main figures are often on unemployment. And it is true, unemployment is already above 10% and shows little sign of slowing. Underemployment is 18%. It seems like a lot of political pressure to do something high and rising unemployment and the government will certainly try. But as always, it will be too late and follow evil deeds. The recent Summit of employment is a giant joke.

The table below compares the total paid employment (not unemployment) with a total income and personal consumption expenditures. Wage employment includes most part of us. It does not include agricultural workers and independent.

Normally, unemployment is the figure commonly reported, but a number of confusion. Contains the unemployed to report every week, but not those who do not report or whose benefits have expired, or those who have stopped looking for work. There are millions of people and number of unemployed has completely ignored. It seems more important to consider how many we are busy and how it has changed. Therefore the use of employment rather than unemployment.

Employment (Blue line) has decreased considerably since the end of 2007. Nearly 8 million people have lost their jobs work in the last two years. Both economies were affected. For example, 1.6 million construction workers have been dismissed because of any construction. But economics Real also lost jobs. Manufacturing employment fell by 2.1 million people. This reflects the long-term trend in manufacturing U.S. and reductions related acute emergency stop in the supply chain last fall.

Employment List behaves as it has in past recessions. During the 2001-2002 recession, employment has declined and declined after the recession ended. We expect the same of the recession … a continued decline in employment.

The graph also shows the income (green line) and Personal consumption expenditures (red line). Although employment has fallen from a cliff, both income and personal consumption has not changed. In the pre-recession income and consumption continued to increase employment has declined.

Revenue declined slightly and personal consumption has not decreased at all during this recession. average compensation has increased. The same thing happened in the last recession. Stabilized income and private consumption continued to increase.

There are several parts of personal income. It includes pay employees, most investment income and government revenue in the form of transfer payments. Examples are government payments to social security, the welfare payments and health insurance.

No recession in personal consumption. 70% of personal consumption is services and industry has increased each quarter. In fact, charges have never fallen by a quarter, recession or not.

The following table compares total revenue has not fallen into recession compensation to employees. In fact, you will notice an extension of two lines does, especially since 2005. wage income is important because it is the main driver of total revenue. And is the source of government payments through taxes.

Given the large number of unemployed could be expected wage incomes falling, and it has, but not significantly. Indeed, revenue per employee increased in this period of recession.

employment service is virtually the same thing. The decline in employment in the sector has been offset by rising employment and the use of federal health workers.

Health and Government Employees Federal ask, "What recession?"

Reserve Source: Federal Reserve Bank of St. Louis

Although income levels have remained virtually unchanged during this recession, the point of concern in this table is the average wage is declining. If wage income continues to decline, our economic system "recall" is to be of short duration.

Examine some empirical indicators examine the recession from a different perspective that the only indicators of the government. We will see in entertainment, charitable donations, living expenses, and others to obtain a better understanding of this recession. "

'S animals Domestic U.S.

Consider love of America with our pets. According to the National Survey of pet owners, 62% of U.S. households have a pet. The property has increased over time, over 56% of households when the first survey was taken in 1988.

The following program shows the total cost of pet ownership in During the decade.

The annual cost of pets

(Billion $)

As you can see, to cherish Pet increased both in the last two recessions. Both the property and the amount has been expanded. New products, such as palliative care and airline carries more than pets are just two examples of how to pamper our pets, no recession.

Our pets are asking "What recession?"

Garbage

Then we review our waste. In particular, the quantity of food produced by households in the U.S. waste and restaurants.

U.S. Food Waste

Source: Agency for Environmental Protection

Tonnage produced was slightly reduced in the last recession in 2001, but rose again the following year. Despite this down 2%, the percentage of food waste to all solid waste has increased to 11.4%. In 2008, one year recession, the amount and the percentage has increased. America has produced a record 32 million tonnes of food waste into the worst recession since the early seventies.

Transporters refuse to ask: "What recession?"

College Football

Asking the U.S. college football fans. We will check your response to this recession watch National College Athletic Association football records present Division I for the last six years. This does not include every college football game attendance, but Division I is the high level competition in college football and has the following. The following table shows the annual attendance records, including 119 schools in Division I.

Source: National College Athletic Association.

As you can see, attendance increases every year, recession or not. In the most severe recession since at least mid-70s, the presence of college football continues to grow.

football fans of College American are asking: "What recession?"

New Business

As we all know, small businesses are an essential and significant for our economy and overall employment. There are about 6 million U.S. businesses that employed people. Difference between small and large firms is the number of employees. Large companies are defined as employing 500 or more. But there are 18,000 large companies in the United States. Small businesses, those with fewer than 500 employees, 64% or 14.5 million of 22.5 million new jobs added to economy from 1993 to 2008. third of these new jobs came from a new company.

The following table shows the total number of companies involved cons the number of businesses closed, and the relationship begins to close. Approximately one percent of new companies join each year to six million companies existing. The failure rate of new businesses in the first five years of existence has always been high, around 80%. Table following does not follow that, it only shows the number of businesses open and close each year, its longevity.

As you can see, the closures amounted to about 85% of start-ups used from 2004 to 2007. But the relationship grew to 95% in 2008, which clearly reflects the difficult economic climate.

Business Formations and failures

Source: Small Business Administration

the formation of new businesses is a key element in employment and economic growth. When starting new ones are remained fundamentally unchanged, the failures have increased dramatically. The recession is just one reason. Regulation Federal is another. Here the cost of federal regulations on businesses each year.

Annual cost of regulations Federal

(Cost per employee)

Source: Small Business Administration

As you can see, Economy of the best engines of growth, small businesses, has the greatest burden of regulation. Costs of Federal Regulation Small businesses are 45% higher than the costs for large companies. This tends to discourage economic growth corporate failures strong and most likely small. High taxes and regulations to punish ensure economic growth over coming quarters will be warm and vulnerable.

Charitable

One might expect charitable giving to decrease when times are tough. And it fell in 2008, but not significantly. Interestingly, contributions to churches and charities national and international in fact increased. The decrease was based on "social service organizations and education.

The following table describes the charitable donations during This recession, showing the source, which is the main individuals, and recipients, who are mainly churches.

Donations charity

Source: Giving USA Report 2008

Most donors are saying, "We do not want it there is a recession. "And many churches and charity organizations, saying:" Thank God for the generosity of the American people, even in difficult times.

Cuts

All up? No, of course not. discretionary spending has been reduced. We are buying fewer cars, as we have discussed, and our summer vacations are less expensive and extravagant. We reduced restoration, particularly in exclusive restaurants. The days of lunches ice sculpture of more than $ 50,000 … least for the moment. And no miss, except the ice sculptor.

For most families go through life as they always have. But fifteen million unemployed will an impact on us all. You and I may have a job, but a relative, friend or someone we know that is probably outside of work.

Recession because of unemployment and economic hardship. But we must remember the recessions are a natural and necessary part of the economic cycle. This is why we call it a cycle … has up and down phases. Economic cycles are in good health. The above cycle goes too far. At its peak, that encourages investment are not marginal. These failures cause economic disruption, including unemployment, but also pave the way for the next round begin.

Solomon, the wisest man who ever lived, tells us that there will always exist as long cycles and that the earth exists. Thus instead of trying to ban, because governments are desperately trying to do, then we include in our investment planning, as normal and recurring.

false economy

It is an economy that should never have existed in the first place. Could not exist without the liars and losers. I speak for millions of homes we build houses that were not. Liars and losers bought at prices still higher all facilitated by government requirements for banks to make loans to unworthy borrowers and unconditional. This was the triumph of hope over experience and was inevitably end badly. Liars are not worthy of the loans and the losers can not afford.

The housing bubble took the time leads to how the table below shows.

Source: U.S. Census Bureau S.

The blue line shows the steady increase of total housing in the United States. The sharp decline in 2002 is only a change in how the Census Bureau tracks this information and not a real fall.

From 2002-2008 the United States has added to its inventory of homes. In 2002, our housing stock was 117 Housing million in 2008, our housing inventory was 130 million households. At the end of the third quarter of 2009 we had 130,302,000 units. This includes housing invaluable. The number of households has stagnated over the last six years averaged about $ 110 million. The current number is 111612000.

About one million new households are formed each year. And they need housing. A good rule of thumb is that America needs to build new houses equality training new homes each year.

The number of dwellings and the number of households should keep together. In the past, these two lines (blue and red lines) were very close. In 2002, the blue line and red line began to diverge. From 2002 to 2008, we built 13 million households that do not need that were not occupied. It's a bubble!

The graph also shows the average house price green (right scale), which began to rise sharply out of the recession of 2001-2002.

As home prices rose, they built more houses. The difference between the houses and families are empty houses, continues to grow, even as we build more houses.

This model improvement of higher prices and there are empty houses deteriorate, creating a massive real estate bubble. This summer allowed all the idiots in Washington that he wanted every voter is a homeowner, even if it is temporary, and rash.

The music stops when property prices could rise further and began to fall in mid-2007. After a delay, start a new home began to diminish from the unsustainable pace of 2.2 million per year.

As you can see in the table below, starts increased rapidly after the recession of 2001-202, despite the lack of increase in households. And now, the construction of new homes fell well below the level of new household formations. As the excess inventory is absorbed, the new housing starts will resume a more normal level and lasting about 1 million years.

Source: U.S. Census Bureau S.

Add another dimension to this picture, I 'm sorry; funding. If all these houses were built with 100% capital would not have been built. The reason it was built because 100% or near 100% financing was available to worthy borrowers. Congress has passed laws requiring banks to lend to liars and losers. This has created a recipe for evil that has built the biggest bubble that market forces would have.

The following table shows the total amount of all households in the United States (blue line). They are mainly mortgages, but also includes $ 2.5 billion of consumer debt such as car loans and credit cards. Also I have included two sources of funding for mortgage finance housing bubble became much worse than what was necessary.

The first source was mortgage pools (red line), organized by Hundreds of small mortgage lenders and sold to investors by Wall Street firms. The second was swimming Government Agency argued, as Freddie Mac and Fannie Mae (Green Line).

Source: Federal Reserve

After rising rapidly since 2002-2008, Total household debt has stabilized and is beginning to decline. mortgage pools decreased dramatically. Essentially, no new deposits have been formed and existing pools are regulated or OOF. The saddest thing is that the government-sponsored loans continued to increase. All apparently includes a housing bubble, with the exception of government.

housing funded loans did not need that could not pay millions of employees. Many are now unemployed.

The following table shows the levels employment of both the construction and financial services. As expected, the construction industry is more volatile than in the bank. Even so, both industries have dumped millions of employees over the past two years.

Reserve Source: Federal Reserve Bank of St. Louis

One million six hundred thousand construction workers and almost 500,000 financial services workers have been laid off since the beginning of the recession.

According to the American Bankers Association, 14.1% of homes were in default or foreclosure status. This is the highest since the American Bankers Association. has been collecting data in 1972. This amounts to slightly more than 4 million homes.

As mortgage lenders Also, banks suffered heavy losses and writedowns. Up until this year, 129 banks failed and were closed by the FDIC. This compares with 26 bank failures in 2008 and only three in 2007.

Unfortunately, the real economy and numerous banks and normal cautious and borrowers caught up in this housing bubble. Rising house prices have hit all the family who moved for business or professional reasons. They had to pay more and demand more of their new home. And the bursting of the bubble has left them with less capital than when they bought the house. In Indeed, they are trapped, at least for the next few years, households with loans exceeding the value of the house.

Loans Limited

Banks have become much more cautious in their lending to the housing crisis and the freezing of credit markets. The following table shows which are now investing. This is certainly not in the business and consumer loans.

As you can see, Loans companies (known as C & I loans) have been reduced by $ 250 million last year. And consumer loans have slightly decreased. The eyes are open banks hold excess deposits with the Bank of the Federal Reserve.

All Banks are required to have a minimum amount of reserves held on deposit with the Federal Reserve. The minimum is listed on the Green Line 2000 to October 2008. Much of the $ 700 billion in rescue money from the government that came to support the sharp drop was immediately resubmitted banks forwarded to the Federal Reserve. As you can see, excess reserves increased from almost zero to a billion dollars a year last.

Conclusion

The limited availability of bank credit, declining employment, declining home prices, bank failures, foreclosures, housing starts and new technologies are very low in all the clear evidence of this false economy endangered.

The false economy is not very large compared to our national economic engine, is still causing much pain. Unfortunately, it like this … bubble finally pain and loss.

Ok, so let's add this:

Most of our economy is strong, functioning healthy.

"The outlook for growth is slow until the risk / return in the best balance

"The housing bubble deflates and the false economy endangered

Portfolio Strategy

My analysis is that there was no recession for much of our economy, and it was certainly not been recovered.

The forecast is for us to spray along, drawn by over-regulation, taxation confiscatory, and the gradual abandonment of economic principles that made us the strongest economy on earth.

In this context, it is essential strict adherence to our investment disciplines to high and sustainable income. We will continue to avoid investments in false economy, the residential housing and finance.

May you live long and prosper

Mike Williams, CFA

About the Author

Mike Williams is a professional money manager and Chief Investment Officer for Panhandle Portfolios, Inc. He has a BBA from the University of Massachusetts, an MBA from Southern Illinois University, and has held the Chartered Financial Analyst (CFA) certification since 1990, Certificate #13376.

He has been a credit analyst, a foreign exchange exposure analyst, an international pension expert, an international equity portfolio manager, a Japanese stock analyst, and the founder and chief executive officer of several companies engaged in a variety of business ranging from commercial real estate in New England to recycling electronics in China.

[mage lang="en|es|fr|en" source="answers"]2007 earned income credit tax table[/mage]
House Session 2010-04-14 (10:03:38-10:45:26)