WHERE DID MY TAX REFUND GO?

Seems a lot of people, around this time of year, find themselves asking where the money went from their tax refunds. If they were lucky enough to get a nice refund, chances are good that it's gone before they know it and they have little or nothing to show for it. I know because I used to do the same thing. I used to look at a tax refund as an opportunity to go on a spending spree. Then I'd suddenly find myself out of money and wondering where it all went.

This year I invested one quarter of my tax refund in Altria Group (MO:NYSE). With their dividend close to 7% and their price per share a little over $20 I think it will make another good source of dividend income for my portfolio. While I still believe that the Obama Administrations tax hike on tobacco products earlier this year has created an unfriendly environment for tobacco companies, I expect the Democrats to lose a great deal of power in the fall elections. With a recent NBC/WSJ poll showing Congress with only a 17% approval rating, it's most likely the Democratic party will lose congressional seats come election day. With their tax and spend approach to solving the nations problems it's my opinion that we'd be much better off with a more balanced, or even a Republican led congress, than the current Democratic majority.

Anyway, back to the tax refund. After investing 25% of the money, I took another 30% and paid off some high interest credit card debt. The remaining 45% I deposited in my savings account at my bank. I'm using that as a cash reserve for work I'll be needing to have done on my car soon.

While most of this may be of no interest to anyone other than myself, the point I'm trying to make is you should know exactly where your money is going all the time. Tax refunds, inheritances, rebates, lottery winnings or any type of windfall should be put to good use building future income and reducing debt, so you won't find yourself asking, "Where did the money go?"

Opinion Post

I'm glad to see that the leaders of the house are finally turning their attentions toward creating jobs, although I think they need to be very careful about trying to buy the nations way out of recession with taxpayer dollars. Better to give tax breaks and incentives to businesses who add jobs than to spend more money on recovery. At any rate, it's about time!

Just another note to those misguided individuals who think that the Democrats are for the poor. Out of the top 15 wealthiest members of Congress, the majority are Democrats. Does it even make sense to expect them to pass legislation to increase their own taxes? If you think so, you're only kidding yourself.

I've noticed a lot of market "experts" are now saying there may be no correction. I tend to agree with them, though I do think we're still in for a rough ride in to the new year. Most of my current positions are for the long-term, so good or bad I'll be riding it out. I take great comfort in the fact that I'll be drawing a nice stream of dividends in the mean time.

Job Losses Bad News For Democrats

U.S. service industries may be recovering, stocks are up, banks are lending again and home prices are holding. But with no improvement in employment, a major part of the recovery is still missing. And that is bad new for Obama and the Democratic party.

According to the Labor Department, if you add in people who have stopped looking for work, or who are underemployed instead of working full time, the effective unemployment rate is a staggering 17%. With such outrageously high unemployment, it's hard for workers to understand how the recession can be deemed over.

It's an important political dynamic as 2010 midterm elections approach. At some point, continued job losses could easily push the economy back into negative territory, for a "double-dip" recession. Rob Shapiro, an economist who was a top official in President Bill Clinton's Commerce Department, sees "substantial, continued job losses" for some time if the government doesn't take more aggressive steps to foster job growth. In the meantime, the Obama administration should "prepare the American people to wait a while for real results," said Shapiro. White House aides concede they missed the mark with their January estimate that the stimulus package would keep unemployment from rising above 8 percent. In a letter to Obama and House Speaker Nancy Pelosi, House GOP leaders asked, "Where are the jobs?"

That is the same question I'm asking, along with a lot of other unemployed voters. "Where are the jobs?" Obama and Pelosi may well be asking, "Where are the Democrats," after midterm elections.

Obamanomics--Our Tax Dollars At Work

From the Associated Press:

"NEW YORK - Even when their profits dried up and they turned to taxpayers to stay afloat, the nation's biggest banks kept paying huge bonuses. But much of the money went not to top executives, but to star traders and salesmen, even as the economy battled through the worst recession in a generation.

The bonuses — including $1 million or more for each of nearly 4,800 bankers at nine of the largest firms — were paid for 2008, along with scores of smaller checks to thousands of rank-and-file employees. But their revelation this week has renewed criticism of companies relying on government aid."

Millions of Americans are out of work, yet the Obama team has sent our tax dollars to the very people who orchestrated the collapse of our economy, so they in turn can pay out billions of dollars in bonuses to their workers. Their excuse is that these people are the "producers", the ones generating the profits for their banks. Even if this is true, why are they being paid bonuses with our tax dollars? Shouldn't any bonuses be paid from the "profits" they produce?

http://www.cnbc.com/id/32243314/for/cnbc/

More Obamanomics:

With so many people out of work in the U.S. and the economy still in such bad shape, the administration is considering extending unemployment benefits. Not a bad thing in itself, but how do they plan to pay for it?

Again, from the Associated Press:

"Top U.S. officials said on Sunday more steps may be needed to firm up economic recovery -- including extended jobless benefits -- and declined to rule out future tax increases to tame massive budget deficits.

Treasury Secretary Timothy Geithner

U.S. Treasury Secretary Timothy Geithner said the government needed to show the will to reverse deficits after the recovery, and would have to make some "hard choices" about whether this may include increasing tax revenues."

http://www.cnbc.com/id/32259702

But wait, that's not all you get, still more of our tax dollars at work:

"The House approved on Friday a $2 billion extension of the "Cash-for-Clunkers" automobile sales incentive program.

The Democratic proposal would run through Sept. 30, 2010, and tap funds from an Energy Department loan guarantee program included in the economic stimulus package enacted in February.

An initial $1 billion in funding approved this summer to boost stagnant industry sales has already been exhausted, officials said."

http://www.cnbc.com/id/32235069

So under Obamanomics and the Democrats, the taxpayers loaned the auto industry billions of dollars to help pay their debts, then subsidize the sale of their cars with another $3 billion. I'm just guessing, but I'd be willing to bet that some of the bankers, who collected million dollar bonuses, are driving taxpayer subsidized cars about now. It's a sure bet the millions of unemployed could not afford to take advantage of this program. Let's not forget Mr. Geitner's comment about the government making some, "hard choices" in regards to increasing tax revenues. If anyone believes they will really tax "the rich" to make up for budget shortfalls, then they're only fooling themselves. After all, these people are "the rich". Businesses that are overtaxed simply go out of business or move to another country with lower taxes. So who will pay increased taxes? The only ones left to tax. You and me.

I've read articles comparing Obama's handling of the economic crisis with Reagan's handling of the Savings and Loan crisis and the weak economy during his administration. Reagan had the "trickle down" theory and I was definitely better off after his first four years in office. With Obamanomics, even if through some miracle I am better off after his first four years, I'm pretty sure he and his band of merry men in congress will tax it all away. Obama campaigned on a platform of "change", to help the poor and "yes we can!". I can't help but wonder, before his four years are up, if instead of "yes we can", we might be saying, "Oh no you didn't.".

As a final thought, I'll leave you with this piece from the Weekly Standard, titled "Obamanomics Renders Economy Inefficient":

"Two thoughts pierce the gloom. The first is that the American economy might be large enough, and resilient enough, to remain competitive even bearing the weight of the new inefficiencies. The second is that voters will demand a change of course before Obamanomics is permanently embedded in our system. Voters worry that they are leaving their children a mountain of debt. Already Obama's approval rating among independent voters, whom Wall Street Journal analyst Gerald Seib calls "the canaries in the coal mine of American politics", has fallen from 60 percent to 45 percent. Even if the president doesn't get the message, Congress, faced with an election next year, just might."

http://www.cbsnews.com/stories/2009/06/29/opinion/main5122778.shtml

Let's hope someone in Washington is still paying attention.

A Second Stimulus?

While talk is circulating among top Democratic leaders about the possible need for a second stimulus plan, the Republicans are wasting no time putting Obama and the Democrats in the hot seat for lack of results from the original stimulus package. Personally, I've seen no improvements in the economy other than some stabilization in financials and the auto industry. I tend to agree with some who think that any further stimulus package should include payouts to taxpayers, legal citizens of the United States. If they want to get the economy moving, give the money to the people who will put it back in to the economy, i.e. consumers. The banks have horded stimulus money, while at the same time increasing the burden on the taxpayers through fee and interest rate increases. If you're not helping the cause, then you're hurting the cause. Charging more fees and higher interest rates while cutting charge limits is not going to get consumers spending again. I personally have stopped using credit cards entirely.

The real bottom line is, we are not going to see the economy improve until people go back to work. An unemployment rate of 9.5 % will continue to drag the economy down and now experts are saying it could go as high as 11 %. That's a great deal above the what Democrats predicted with the passage of the economic stimulus, so I think the Republicans and the American taxpayers are right to be throwing some hard questions towards the current administration.

Given all this, I think the stock market will remain down for the better part of this year and in to 2010. It does present some great buying opportunities, the price of good companies being down along with the bad. But it does call for investors to be very selective. As I mentioned in an earlier post, I've recently invested in Proshares TWQ fund, which shorts the Russell 3000 index, as a hedge against falling stock prices. I'm doing this on an experimental basis and while it is too soon judge overall effectiveness of this strategy, the price per share did go up as the overall market fell earlier this week. The real test will be its' effectiveness over a longer period of time. I'll keep the readers posted on how it's working out.