The Trump Blog

Have you noticed the ridiculous price of diesel fuel lately? It’s more than $4/ gallon at my gas station and I am frankly baffled as to why. It is cheaper to manufacture than any of the other grades of auto gasoline and I am predicting additional potentially severe macroeconomic effects this will have on the goods we buy. 

At first glance you may not pay attention to the price tag but I assure you, it is affecting you more than you realize. The reason is because of how our goods are distributed. We know all those big trucks carry the vital consumer commodities necessary to sustain our economy. Since the distribution costs of these goods have doubled in a short period of time, it only makes sense that we are going to feel the pinch at the retail levels. I see that upward pressures to raise prices have already begun at the grocery stores and travel industries. Airlines have been “surcharging” for soaring jet fuel costs for the past couple of years I look for similar trickle down in the stores. 

So what can we do about it? I think increasing production in some of the other areas such as Canada and S. America could help the fears of “lack of supply” and drive prices back to reasonable levels. Also, a continued push for alternative fuel sources should be near the top of the list so we can reduce our dependence on foreign oil. 

What are some other measures we can take to curb fuel prices thus keeping inflation from getting out of control?

I never like to assume that consumers know the best strategies when it comes to structuring their real estate holdings, so when publishing a generic blog article I will assume that my readers have no knowledge. It’s no news flash that one can itemize expenses associated with owning a second home such as interest, taxes, PMI etc. 

There are a few gray areas, however, that the IRS wants to be sure you are clear of before filing that return. Are you perfectly clear on what is considered a second home and what is an investment property? If you have tenants renting this property for a year at a time, it is not considered a second home. To qualify, you must “reside” at this property for at least 2 weeks a year or at least 10% of the amount of time the property is rented out.   Also, before you itemize in this way, you might want to make sure that the standard deduction isn’t a better route to go. In some cases involving smaller units or fractional ownership, it is more advantageous to take the “standard”.

Just last week, another of my clients and I were talking and I casually mentioned about the second home deduction also applying to their new boat! That’s correct. Since they purchased a boat that has a kitchen, bathroom and bed, it can be designated as their second home and the interest, taxes and marina storage charges can be itemized deductions used for their benefit. If you have more than one second home, remember that you can only select one to use for scheduling deductions each year.

Make sure to check with a qualified CPA or tax preparer each year to make sure you are in compliance with the current allowable deductions to avoid trouble with the IRS.

 I do respond to your blog questions, so feel free to comment.

With the current state of the market, everyone keeps asking me what to do with their money.

My biggest advice is to do nothing if you can. If you don’t need money from your investments over the next couple of years, then don’t sell anything right now. Sit tight and wait it out. If you leave every time things get bad, you miss the point of owning stocks in the first place. The market goes up and it goes down. Right now it’s not looking very pretty, but it’ll get better. The point is to ride out the bad times so you can be there for the good times.

Likewise, don’t mess with your 401(k) or your IRA. If you have a well-diversified portfolio, it doesn’t make sense to bail out now. IN fact, at a certain level, this is the time to start investing. When the market eventually rebounds, having more shares means you’ll make more money.

If you find that you just don’t know what to do and end up panicking, hire professional help. Yes, you’ll pay some fees, but if they’re the right people, it’ll really help you out. And, psychologically, you’ll feel better.

Finally, don’t ignore your debts. When people see their investments lose value, some people worry so much about money that they stop paying their debts. Never ignore your credit cards or your mortgage in the wake of investment issues. But remember, your banker is there for a reason. Go back, talk to him and maybe you can make a better deal. In these times, they expect people to talk to them. Just don’t let your money problems get worse. Then you’ll have a lot more to worry about than the stock market.

Today I got to hear Fed Reserve chairman Bernanke tell Congress the hard truth about our economy and the direction things could be heading. With GNP being virtually flat and consumer confidence at tremendously low levels, that lovely 3 syllable word called “recession” was uttered as a distinct possibility as to what could be in store. The definition of a recession is two or more consecutive quarters of zero to negative economic growth and I think we just banked the first one. 

Bernanke further explained that until the effects of the economic stimulus package could be felt and measured, we could possibly have a second quarter commensurate with the first. On a positive note, he thinks the government’s approach to intervention of a recession should prove effective by later in this year. The tax rebates, in addition to the slashing of interest rates and a generous multi-billion dollar gift to the banking industry, should produce the kind of measured results the Fed is hoping for. Mr. Bernanke spoke of a moderation of the skyrocketing oil prices and therefore keeping fuel prices and food transports at a steady level. He wouldn’t comment on the possibility of another rate cut later this April.

What I didn’t hear was how we were going to have to pay for this later. We are adding to an already seemingly insurmountable budget deficit. Where is all of this money going to come from? If we had all of this extra money lying around, perhaps we should have returned it back to the American people a long time ago or applied it to our massive and growing debt. Would that have prevented some of the problems we are now facing?

One thing is clear about our economy we can’t simply sit back and pretend blue skies will always return. As Mr. Trump would tell you now is not the time to convert all your assets to cash and head for the hills, however, it may be time to make some adjustments. Such as starting to invest in real estate, with hard work and creativity some of the best deals ever are available right now. Perhaps now is the time to really start working on that great entrepreneurial initiative you have been kicking around in your head for a while. 

My question is what are you doing to prepare for what we must call uncertain times? How are you improving your knowledge, position and budget to take advantage of what will be a hard time for some and an opportunity for others? Do you see opportunity or do you see tough times? Remember perception is reality.

Unless you live under a rock, by now you are aware that “lower and middle class” Americans will soon be receiving some free money in the mail after filing their 2007 returns.  The amount of the checks will vary depending on marital status, number of dependents and current income level.  (exact parameters can be found at http://www.house.gov/fossella/Constituent/stimulus.htm).  What I want to address today are some of the macro-economic effects associated with this type of “stimulus”.

The purpose of this move proposed by the Bush administration and approved by Congress is to give consumers some spending money in hopes they will do what they usually do when they get extra money...spend it!  To accomplish this every single tax payer that earns less then 75,000 dollars annually can expect a rebate check of 600 dollars.  Married couples filing jointly can expect a 1200 dollar rebate check if their combined income is less then 150,000 dollars a year.

This will create an increase in demand and the “multiplier effect” of each dollar spent can create anywhere from a $2-4 economic benefit to our economy.   When consumers buy “domestic” goods and services, this creates jobs (or saves jobs from being lost), promotes production and manufacturing which helps the wealthy and creates tax revenue on the local and state government level.  It’s a win-win-win for all parties involved but is it enough?

What happens if Americans buy imported goods such as new foreign cars or travel abroad?  What if they save this money rather than spend it?  A stimulus is by design a catalyst to give a boost to the economy within a short amount of time.  What is the government doing to increase demand for our products both domestically and abroad?  We need to figure out how we can sustain this surge in demand, increase employment within our borders and do so without the government having to hand out money to facilitate.  What are you thoughts on both the long term economic issues we currently face and the Tax Rebate stimulus package?

It wasn’t that long ago that parents pushed their kids out of the nest and watched them live their lives on their own.

But today’s tough job market has changed everything. These days, nine out of ten parents give money to their grown kids for major expenses such as credit card balances, car insurance, and student loans. Plus, there’s been a huge increase in the number of adult children who move back in with their parents when the real world gets too tough.

Have today’s parents raised a generation of spoiled young people who don’t know how to live within their means? Or is today’s world just too hard to navigate without help?

Whatever the answer, if you have kids, it’s great to help them financially if you can, but you have to look out for yourself too. When retirement comes along, there’s no doubt you could use the money you’re giving to your children today.

Besides that, how much are you helping your adult children by keeping them dependent on you? If they know they can always come to you for a handout, they’ll never learn to deal with financial setbacks or money management.

So, here’s my advice. If they desperately must have the money for a legitimate need - and you can afford to help - then give them a loan. If you want to make sure they learn financial responsibility, then make sure there are strings attached and know you expect them to stand on their feet eventually.

Remember, you brought your kids into this world. It’s only fair you help them navigate it.

As of the close of business on Friday last week, the price of gold had risen to a record high $1015 per ounce! A look at the chart of this commodities 5 year history and you might wish you bought some bullion bricks for yourself back then. Gold has more than tripled in value in the past 60 months and it may be all by accident. 

It seems that since banks quit using gold to back up their monetary supply, the uses and demand for gold has greatly diminished. It’s not used all that much for jewelry either as other metals such as silver and platinum have pushed their way to the front of the line in terms of demand. One reason for this “run” on gold has less to do with a demand for it’s use and more to do with investor’s fears of the financial markets and the difficulties of our economy.  

Investors are shifting their attentions to more tangible and fungible commodities so that as the “Bear Stearns” of Wall Street stumble and fumble, they can feel a little safer in the fact that their investments are more secure than paper stocks.   They have a true asset that won’t “tarnish” their portfolios as our nation continues to inch closer to recession.  After all the government may not always step in and bail our companies like Bear Stearns with 30 Billion Dollars.

Demand for this precious metal is on the rise, but seemingly only to give investors piece of mind and something to store under their mattress and not for any great plan or use. I am not sure how long this run will continue and personally feel that profit taking will occur as soon as prices begin to level off or drop.

What do you think about the current market turmoil and gold in general? Does it have a solid place in your financial planning? What about the Bear Stearns bail out, should our government be in that business?