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| Higher
interest rates in the not-too-distant future. It
is a foregone conclusion that the Federal Reserve will have to
start tightening its monetary policy and raising interest
rates to curtail potential inflationary pressures in the not-too-distant
future. Very strong economic reports have been coming to the forefront,
especially from the labor department. In the 3-month stretch from
March to May the labor department reported nearly 1 million jobs
had been added to the US economy. At the time of this writing,
in mid-June, 2004, the Federal Reserve is expected to increase
short-term interest rates by at least 25 basis points at the end
of June. Some experts think it may be by as much as 50. History
shows that the Federal Reserve changes its monetary policy fairly
slowly and it generally takes several actions before the job is
done. So don't expect this to be the first and only tightening
to occur.
Long-term health care insurance, a necessary evil. Long-term health care insurance has been a highly publicized topic for the last several years. Our population is getting older, we're living longer, and the cost of taking care of our elders is increasing dramatically every year. Although there has been much negative publicity pertaining to long-term health care insurance, this is still a critical component to your long-term financial planning needs and should not be shied away from. The key is to select reputable companies that have been in the business for a long time and do not have a history of randomly raising policy-holders' premiums. Additionally, make sure your policy takes into consideration inflation. Time to dump your home builder and home-related company stocks? This question has been asked many times over the last 24 months as experts have predicted a topping out of the real estate housing boom in the United States. But there are more warning signs on the horizon at this point with interest rates likely to go up from this point forward. Although we have not seen a piling up of inventory in the new housing market in the US, home builders have started to report they are scaling down on production. There has been a huge run-up on these kinds of stocks over the last several years and they may start to become over-valued at this point. Building, as a whole, should stay balanced however, as residential real estate building starts to slow, commercial construction is expected to pick up coming out of a lull over the past 2 or 3 years, with a tightening of the purse strings of many corporations. Speaking of State BudgetsÖ Although California remains in financial difficulty, many state budgets have started to balance and the outlook is very bright going into the fiscal year of 2005. Restoring Medicaid, education, prison funding, state hospitals and law enforcement, will be among the top benefits of many states returning to "the black". In fact, it is expected that as many as 32 states will show a balanced budget for fiscal year 2004. More Audits Full Speed Ahead. The IRS is getting back to its old tricks, especially when it comes to auditing small businesses. If you are a business that generates $25,000 a year in gross receipts or less, you can expect audits to increase by as much as 3% over previous years. Mileage logs for business use of your automobile, receipts for meal and entertainment expenses, and thorough documentation and bookkeeping on business expenses are a must if you want to be successful when your situation is looked at closely by the Federal government. |