-- Posted Wednesday, 2 May 2012 | | Disqus
The following are some snippets from the most recent issue of the International Forecaster. For the full 24 page issue, please see subscription information below.
US MARKETS
Real estate investors competing to buy Manhattan apartment buildings have sent prices to record highs as rental demand surges, reducing yields on the properties to the lowest in more than six years. The capitalization rate, a measure of investment return that declines as prices rise, averaged 4.4% for Manhattan multifamily buildings in first three months of this year… ‘It’s the strongest of all asset classes,’ said Doug Harmon, senior managing director at Eastdil Secured LLC… ‘There is still plenty of room to run on rents, and I see absolutely no reason why this action will or should stop anytime soon.’”
“Illinois residents, whose income taxes rose by a record last year to help close a budget deficit, are paying the price again for the state’s fiscal mismanagement. With its pile of unpaid bills growing about 30% this year, the weakest pension-funding ratio among states and falling federal aid, Illinois and its municipalities are paying a penalty above AAA debt that’s twice their five-year average. Illinois plans to issue $1.8 billion of debt as soon as next week…”
“U.S. municipalities from California to Florida are selling the most debt in three years to pay for their workers’ retirements in a bet that investment returns will exceed borrowing costs. Fort Lauderdale, Florida, is among issuers considering a sale this year, following an offer by Pasadena, California, last month. Illinois borrowed a combined $7.2 billion in 2010 and 2011. The governments are placing taxpayers at risk by papering over pension deficits with taxable securities. The strategy can backfire if the proceeds don’t earn enough to pay off the bonds.
Business activity in the U.S. expanded in April at the slowest pace since November 2009, a sign that manufacturing may be cooling as business investment eases.
The Institute for Supply Management-Chicago Inc. said today its barometer decreased to 56.2 during the month, lower than the most pessimistic forecast in a Bloomberg News survey, from 62.2 in March. Readings greater than 50 signal growth. Economists projected the gauge would fall to 60, according to the median of 55 estimates in the survey.
A slowdown in demand may prompt companies in the U.S. to limit the rate of inventory accumulation, while exports to Europe and Asia may cool. At the same time, auto purchases may prevent a prolonged deterioration in the industry that spurred the recovery that began almost three years ago.
“We could see manufacturing slow a notch,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. Fewer inventories “will likely cause production to slow,” he said.
A published report says Apple Inc. uses subsidiaries in Ireland, the Netherlands and other low-tax nations as part of a strategy that enables the technology giant to cut its global tax bill by billions of dollars every year.
The New York Times on Sunday outlined legal methods used by Cupertino, California-based Apple to avoid paying billions of dollars in federal and state taxes.
One approach highlighted in the report: Even though the company is based in California, Apple has set up a small office in Reno, Nevada, to collect and invest its profits. The corporate tax rate in Nevada is zero. In California, it's 8.84 per cent.
While many major corporations try to reduce their tax bills, technology companies like Apple, Google Inc., Microsoft Corp. and others have more options to do so.
That's because some of their revenue comes from digital products or royalties on patents, which makes it easier for them to move profits to tax-friendly states or countries, the Times said.
In contrast, it's tougher to shift the collection of profits from the sale of a physical product — like groceries or a car — to a tax-friendly haven.
The 71 technology companies in the S&P 500, including Apple, Google, Yahoo Inc. and Dell Inc., reported paying global cash taxes over the past two years at a rate that's, on average, one-third less than other S&P 500 companies, the Times said.
Apple has legally allocated about 70 per cent of its profits overseas, where tax rates are often much lower than in the U.S., according to company filings.
The Times cites a study by former Treasury Department economist Martin A. Sullivan that estimates Apple's federal tax bill would have been $2.4 billion higher last year without such tactics.
The newspaper says Apple paid $3.3 billion in cash taxes globally on $34.2 billion in profits last year. That's a tax rate of 9.8 per cent.
In a statement, Apple told the Times that it has complied with all laws and accounting rules, and says that its U.S. operations generated nearly $5 billion in federal and state income taxes in the first half of fiscal 2012.
Wall Street analysts predict Apple could earn up to $46.9 billion in its current fiscal year, according to FactSet.
The Yale economics professor…“Squawk Box Europe” that the world is in a “new age of austerity.”
“Quantitative easing is not as prominent a policy as austerity ... the effect of austerity is not crystal clear because it depends how people react to it,” Shiller said.
“It might help, but I don’t know if it’s going to overwhelm the general mood of austerity which is affecting the housing market.”
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THE INTERNATIONAL FORECASTER
WEDNESDAY, MAY 2, 2012
05/02/12 (1) IF
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