State of Union Proposals Cost Taxpayers $70 Billion

Even as he encouraged reforms like a freeze on a small portion of the federal budget and a robust disclosure process for Congressional earmarks, President Obama still called for at least $70.46 billion in new federal spending burdens on taxpayers, according to a line-by-line analysis of his first State of the Union speech by the non-partisan National Taxpayers Union Foundation (NTUF).

Among the findings of NTUF’s analysis:

•President Obama outlined items whose enactment would increase federal spending by a net of $70.46 billion per year. Since 1999, when NTUF began tracking Presidential addresses, the lowest recorded total was President Bush’s address in 2006, coming in under $1 billion in new spending; the highest was President Clinton’s 1999 speech, which proposed $305 billion in new outlays. Obama’s speech last night amounted to $36 billion less than the $106 billion that George W. Bush offered in his first State of the Union speech in 2002.

•Obama outlined 21 proposals with a fiscal impact last night, eight of which would boost spending, three of which would cut them, and 10 of which had costs or savings that could not be pinpointed. The single largest item Obama mentioned was a call to pass cap-and-trade national energy tax legislation, with an outlay cost of $51.5 billion (not including revenue increases or price hikes in energy bills). Other large initiatives included immigration reform ($9.8 billion) and subsidies for retirement savings among low-income Americans. Major undertakings with unquantifiable costs included a student loan forgiveness program and a new round of mortgage refinancing subsidies.

“This analysis doesn’t include huge potential burdens from big-government health care legislation, a new ‘stimulus’ plan, or greater obligations to bailed out entities like auto companies and banks. While it’s clear we face enormous deficits as far as the eye can see, taxpayers seeking specifics on the President’s future direction of federal expenditures likely won’t find a compass in last night’s speech,” Brady concluded.

One in Ten Americans Struggling With Mortgage Payments

One in every ten Americans is struggling to make their mortgage payments, but only 58 percent of Americans said they would call their bank to ask for help if they missed a payment and 15 percent would say nothing and try to get back on track alone, according to a new survey from www.MortgageOutreach.org.

“More than 50 percent of Americans know someone who has been affected by the current mortgage crisis yet nearly half of our survey respondents would still choose ignoring the problem to calling their bank. Consumers are confused and think their banks don’t care but no one wins with foreclosure,” said Steve Ozonian, Executive Chairman of MortgageOutreach.org.

Mortgage brokers are also suffering as a result of foreclosurers, according to market research firm IBISWorld.

“Mortgage brokers are also facing much tighter regulation on the way they conduct their business. Regulatory compliance, consolidation and competition are likely to shape this industry in the future as it attempts to wheel itself out of the subprime pit”, said Toon Van Beeck, senior analyst at IBISWorld.

Stricter Lending Criteria Causing Upswing in Used Vehicle Market

Stricter Lending Means A Shift Towards Used Vehicle Market

A struggling economy and stricter lending criteria have pushed more consumers toward used vehicle loans, according to a quarterly analysis of the automotive credit market released today by Experian Automotive.
Used vehicle loans accounted for 68.13 percent of all automotive loans in the first quarter of 2009, up from 64.3 percent of all automotive loans in the first quarter of 2008. Share of loans for new vehicles fell to 31.87 percent in the first quarter of 2009, compared with 35.7 percent in the first quarter of 2008.
“Banks, credit unions and captive finance companies appear to have tightened their lending criteria as they look to mitigate risk,” said Melinda Zabritski, director of automotive credit for Experian Automotive. “Loans are still available, but lenders are changing terms. This is pushing some consumers out of the new vehicle market and into the used vehicle market. Some finance companies that specialize in subprime loans have seen their share increase as traditional lenders move away from riskier loans.”
Independent used vehicle dealers — those dealers not affiliated with a specific manufacturer — were the biggest winners in the first quarter, seeing their share of used vehicle loans rise from 31.58 percent in the first quarter of 2008 to 34.97 percent in the first quarter of 2009. Independent dealers typically serve customers with lower credit scores and are gaining share as traditional lenders tighten their loan criteria.

Other findings include the following:

 -Loans 30 days past due were up 11.3 percent year over year in the first quarter of 2009, while loans 60 days past due were up 19.5 percent.

 -Currently, 2.48 percent of all automotive loans are 30 days past due, compared with 2.22 percent in the first quarter of 2008. Automotive loans 60 days past due rose to 0.82 percent from 0.69 percent.
-Consumer credit also has worsened in the past year, with the percentage of consumers who are considered prime decreasing by 2.6 percent. Conversely, the percentage of highest-risk consumers grew by 6.03 percent.

-Minnesota, Connecticut, Wisconsin, Iowa and Massachusetts boasted the highest average credit score for new vehicle loans in the first quarter, while New Hampshire, Connecticut, Minnesota, North Dakota and Wisconsin had the highest average credit score for used vehicle loans.

Los Angeles based market research firm IBISWorld estimated that over the last five years, industry revenue  for Used Car Dealers in the US increased at an average annualized real rate of 0.4. Although there has been a decline in the number of used cars and light trucks sold over the five year period, the average selling price has increased, which has led to growth in industry revenue.

Rise In Gas Prices Altering Consumer Behavior

According to research conducted by Kelly Blue Book in May 2009, the leading provider of new and used car information asked what consumers thought will happen with gas prices in the next month. The results? 87 percent of new-car shoppers said they thought gas prices would go much higher, a significant jump from the 66 percent who thought gas prices would increase just a month earlier.

In both April and May, more than 60 percent of in-market new-car shoppers said that rising gas prices have either caused them to change their minds or made them think about vehicles they normally wouldn’t have considered. When asked what they would be most likely to compromise in their next new-vehicle purchase in order to save money they might need to spend on fuel, shoppers cited engine size (for example, a four-cylinder versus a V6 or V8) as the top item likely to be sacrificed, followed closely by vehicle size (for example, a mid-size sedan versus a large sedan).
In addition, 73 percent of those who saw gas prices increasing in May said they plan to change their spending habits if gas prices were to go much higher.
“As summer approaches with household budgets still pinched by the weak economy, car buyers are once again becoming very conscious of rising gas prices,” said Jack R. Nerad, executive editorial director and executive market analyst for Kelley Blue Book and kbb.com. “While we may not see the $5-per-gallon gas experienced in some areas last year, current economic conditions compounded by the pain at the pump may make $3-per-gallon gas a new threshold for car buyers – the point at which they change their mind about what vehicle to buy and how they spend their money.”

Gold Rush

 

 

 

 

Demand for physical gold as a hedge against losses in paper assets, such as stocks and the US dollar, is breaking records.

 

 

Record-Breaking Bank Failures Driving More Investors to Gold

Seven more U.S. banks were seized by regulators on July 2, 2009, pushing this year’s total bank failures to 52 as a result of rising losses on home mortgages, commercial real estate loans, and defaults on consumer credit cards. Even more startling is that bank closures barely make the news these days.

Serious investors, however, are keeping a close watch on the instability of the banking system, according to Capital Gold Group, Inc., a premier provider of precious metals assets in the U.S.

Capital Gold Group reports that investors holding cash in low-yielding bank accounts are turning to the safety and protection of physical gold that they can hold in their own hands and which they control, rather than allowing their money to sit in a bank earning next to nothing or rolling over a low-yielding CD for an additional term.

Gold has traditionally been a safe store of wealth for anyone looking to preserve and protect their long-term savings and retirement, and today more than ever, commercial banks dislike gold because it represents competition for investment dollars and savings, and because they can’t make money without your money on deposit.

Most recently seized were Founders Bank of Worth, IL; Millennium State Bank of Texas, Dallas, TX; First National Bank of Danville, Danville, IL; Elizabeth State Bank, Elizabeth, IL; Rock River Bank, Oregon, IL; First State Bank of Winchester, Winchester, IL; and John Warner Bank, Clinton, IL.

The Federal Deposit Insurance Corp. said its roster of problem financial institutions grew to include 305 banks and thrifts in the first three months of this year. On March 4 of this year, Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures. “A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said.

As of June 30, regulators had seized the most U.S. banks this year since 1933, a total of 45, with six months left to go.

“Banks are making good efforts to deal with the challenges they’re facing, but today’s report says that we’re not out of the woods yet,” FDIC Chairwoman Sheila Bair said in a statement. “As I see it, we’re now in the cleanup phase for the banking industry.”

“Troubled loans continue to accumulate, and the costs associated with impaired assets are weighing heavily on the industry’s performance,” Bair said in a statement.

The names of banks on the watch list are kept secret to prevent runs that could destabilize them further. But at the pace at which failures are happening, it won’t be long before we learn the names of those financial institutions in trouble.

In the meantime, record numbers of investors aren’t waiting around. They are moving their retirement assets out of the banks, the stock market and money markets and into physical gold IRAs, a traditional hedge against volatile markets and returns that can’t keep up with inflation.

Consumers Going For Gold

Total demand for all types of gold – bullion, proof, and numismatic – have doubled year over year and continues to escalate as people realize the full impact of our economic condition. Gold is being viewed as a store of wealth, an essential part of every investment portfolio, and vital for the preservation and protection of one’s assets in very uncertain economic times.

People are reporting huge losses in the market, in their IRAs and 401ks, and are unhappy with low-yielding bank accounts. They realize these types of accounts will never reach their intended goal.

People are also catching on that shares in gold mining companies, gold ETFs, and shares of a gold mutual fund don’t provide the safety and security of the tangible asset because they’re still investing in paper gold. They never actually get to take physical possession of the metal. The safety and security of gold is in taking possession of it. You keep it in your hands, you put it somewhere safe, and you allow it protect the buying power of your money for the long-term.

As for those concerned about whether it is too late to enter the market: Buy gold now, then wait.  

Considering gold’s inverse relationship with the dollar, a shrinking US dollar bodes well for gold. The US Dollar Index has lost over 30% since 2001, and continues to decline, while gold has risen over 300%.

Investors have a much better chance of recovering losses in the market by holding gold instead of stocks.

Louise Yamada, one of the top technical analysts in the business, stated in a recent CNBC interview (March 2, 2009) that the destruction of wealth relative to the crash of 1929, when the market declined 49%, was really in the 3-4 years following 1930, after a secondary rally in the market, which she related to the rally of 2007 within an ongoing bear market.

“In 1930, when the crash support level of 1929 gave way, that was the decline was wiped out the wealth, and that’s what we’re worried about today,” she said.

With the recent rush to buy gold, as well as cash-strapped consumers selling their gold to pay for everyday necessities, complaints against gold dealers have risen. Buyer beware! The biggest offenders, according to a recent tally on the Better Business Bureau’s website, are companies advertising heavily to buy unwanted gold jewelry on cable television channels. One company had 314 complaints in the previous 36 months. Another had 97. The complaints range from pricing discrepancies and misleading advertising to customer service issues and claims for lost shipments.

“Not every internet gold buyer is dishonest,” says Michael Gusky, whose company, GoldFellow.com has no complaints against it. The company was created to provide consumers a safe, competitive and easy method to sell unwanted gold, sterling silver and platinum.
“The owners of GoldFellow are the most honest and ethical dealers I have had the pleasure to do business with,” says Carla Stern who first tried to sell her unwanted jewelry to two other internet gold buyers. “GoldFellow paid me $1800 for the same package I had sent to a highly advertised on TV and Internet dealer, who tried to pay me only $310,” explains Stern.

Gusky strongly recommends reading a company’s Website and comparing policies and pricing before choosing a gold buyer. “Ask how much you will be paid for one pennyweight of 14 karat gold jewelry and compare prices. Ask if you will be notified of your value before you’re paid,” he suggests. “And for goodness sake, never agree to drop your valuables in a regular mailbox. There’s no record or proof that it has been mailed – and it’s not insured although many of our competitors would like you to believe otherwise.”

As for the production side of things, market research firm IBISWorld states that  global mine production of gold decreased by 3.3% to 2,400 tons in 2008. Higher production in China was more than offset by declines in other major producing countries, especially Indonesia.

“China extended its lead as the largest producer over the year, accounting for 12.7% of world production”, said IBISWorld analyst Toon van Beeck. Other major producers of gold include South Africa (10.7%), the US (9.9%), Australia (9.7), Peru (7.5%), and Russia (7.1%). Countries outside of the top eight producers account for 34.2% of production.

In rare public announcement not too long ago, China revealed its gold holdings, which are 1,054 tons — up from 600 tons in 2002. Signs that China is losing confidence in the US dollar as a reserve currency further attest that gold is becoming the world’s de facto currency.