Greetings folks and a warm welcome to the 84TH Edition of Friday Finance Weekly. Let’s get the party started right away.
The US is considering a number of tax reforms in order to address the $17 Trillion deficit and one of the most controversial measures is the Home Mortgage Interest Deduction (HMID). For the benefit of us Canadians, in the US, individuals are able to write off interest paid on their mortgages against personal income taxes to a cap of $1M a year. Let’s give a quick example of how this works. Assume that the monthly mortgage payment is $1,000, amount of that payment due to interest is $800 and 35% is the personal tax rate. So every month, an individual will get a tax credit of $280 ($800*0.35), so while the payment is $1,000 a month the effective cash payment is $720. The HMID provides $100B in tax savings for the American people. One would think that this write off is only for the primary residence, but you would be wrong. The write off is for secondary homes, vacation homes, etc. To add to that HMID mostly benefits households with $75K – $500K in revenue .The median US income is around $50K, so most American’s don’t see a benefit. There is fierce opposition from the National Association of Realtors and they intend to lobby against it. In my view the HMID is effectively a subsidy and thus should be eliminated. I thought the US was moving towards controlling real-estate bubbles and such subsidies inflate property prices. Well at least for the foreseeable future investment bankers can iron 5 shirts on Sunday (you may have to think about that a bit). (Source: Market Oracle)
“Wow.” That summed up a few Twitter reactions to news that billionaire hedge-fund manager John Paulson’s gold fund has lost 65% year-to-date, after tumbling 23% last month. Losses for his PFR Gold Fund came on the heels of the Fed’s effort to prepare the markets last month for the eventuality of a paring-back on stimulus. Gold sank 23%-plus in the second quarter, the steepest quarterly loss since the start of modern trading in the 1970s. Buffet was never a believer in gold and I share that sentiment. Some experts believe that gold may fall to $900/ounce, but given the economic uncertainly it may not go that low. (Source: Market Watch)
Going up against Apple’s iPhone 5S, Samsung’s Galaxy Note III, LG’s G2 and a handful of other flagship phones this fall isn’t going to be easy for the Moto X, the first Motorola smartphone that will be heavily influenced by Google. From the looks of things though, Google is covering nearly all the bases. The phone will feature more customization options than any other handset on the market, it will be built in the U.S., it will reportedly feature a nearly stock version of Android Jelly Bean, it will be packed to the gills with sensors and according to The Wall Street Journal, it will be supported by a $500 million marketing blitz. Google has had a good year so far as it is up 29.82% on a year-to-date basis. Not sure Samsung will feel about this. Time will tell, but as a consumer this is fantastic news. Now when I want to buy a phone I only have to spend 6 months researching it and by the time I pick one, new models will be out. I can repeat the cycle until my old phone stops working and I will forced to pick. This solves the annual ‘need to upgrade’ dilemma. (Source: Boy Genius Report)
Rappers keep taking about their wealth and most of the time its all BS. Pitbull for example states that he is a billionaire but in 2012 he made $9.5. On the other side of the equation, Dr. Dre states he’s worth millions, when net-worth is estimated at $350M. This is all presented in a nice graph (no its not very scientific as it mixes network figures with income figures): http://buswk.co/13zhR6f (Source: Business Week)
About 1,000 hopeful borrowers overran a branch of China’s central bank as a rumor spread that it was handing out zero-interest loans, media said on Thursday, illustrating how Chinese financial know-how badly lags growth in banking products. Police were called in on Tuesday to disperse the crowd, which had gathered for days outside the central bank in Beihai in the southern province of Guangxi, the Global Times said. The rumor had spread that the People’s Bank of China was distributing interest-free loans of between 50,000 yuan ($8,200) and 500,000 yuan. I bet the Chinese saw a Bank of America commercial and got confused. (Source: Reuters)
Have a fantastic weekend and please don’t hesitate to forward this newsletter. Many thanks,