December 8, 2009
A Better Kind of Crash
While many economists are pointing to last week’s better than expected unemployment numbers and companies’ improving balance sheets as signs that the economy is turning up, I am finding my inspiration elsewhere. The way I gauge whether our economy is turning around is by focusing not only on economic headlines and data, but by monitoring what general print and online media are focusing on.
Last year at this time the focus of the general media was almost entirely on our failing economy, major financial institutions in freefall, and a crashing stock market. I was receiving daily calls not only from clients, but also from general media outlets for comments and quotes about the global financial crisis. The types of reporters reaching out to me even included entertainment writers, political commentators, etc. It almost seemed as though the media dropped everything else to focus solely on our global financial panic. Every story had to have a financial angle.
Fast-forward to December 2009 and what do we see? As I write to you today, the public and media are captivated by the misdeeds of Tiger Woods and Tareq and Michaele Salahi. The Salahi’s have created their own brand of crash, by becoming the notorious Whitehouse gatecrashers. How did they get by the secret service? Where can one buy that gold-accented red sari worn by Mrs. Salahi? Was it appropriate attire or a fashion faux pas, as some protocol experts have suggested. Those are the concerns of the day. As far as Tiger (newly nicknamed “Cheetah” by the NY Post), is concerned, I would rather not go there. The gatecrashers fit my theme better. The economic crash of 2008 versus the gate crash of 2009; that’s the juicier story for a sardonic financial columnist such as myself.
We have come a long way since the prospect of total financial Armageddon was being covered ad nauseum by every media outlet, affecting our every thought and move. We are beginning to focus on more mundane matters once again--which suits me just fine. I am also beginning to see signs of improvement in the businesses of our clients—not in all of them, but in the majority. I believe we are, at long last finally seeing some indication that the economic recovery is spreading over to Main Street.
So let’s look at the bright side. Go ahead, indulge yourselves in the guilty pleasure of Googling the latest developments in the Tiger and the Salahi stories; they are after all, economic “canaries in the coal mines, ” signs that better times are ahead.
AND A HAPPY E-HOLIDAY TO YOU TOO
Thanksgiving has passed and I hope it was a special time for you and your families. One of the things that caught my eye this holiday season was the plethora and the quality of the E-cards I received. A case in point was one particular e-card that I received from a downtown Fort Lauderdale Law Firm. This impressive E-card video, complete with a sentimental soundtrack, and scenic slides of Florida was supposed to be a retrospective view of the year 2009. The video cut from scenes of the ocean to the city, to palm trees, back to downtown, to the Everglades, to the ocean again and finally to a beautiful Florida sunset. It was spectacular! And as I listened to the music and soaked in all the beautiful pictures, I welled up inside and felt the “warm and fuzzies” washing over me. At that moment, had I not owned my own law firm, I would have immediately hired this wonderful Fort Lauderdale law firm to handle all my legal matters. I would have hired this firm even if I had no current legal needs whatsoever. In fact, even with my own firm, I was still considering calling them up with a hypothetical legal issue, for the sole purpose of staying on their e-card list. Imagine the e-card they send out for Christmas!
But, hello downtown Fort Lauderdale Law Firm, which economy did you and your clients participate in over the last year? Perhaps, none of your clients participate in the real estate, construction, mortgage or related industry businesses? Perhaps your clients didn’t have to lay-off employees, cut benefits, shorten work schedules, etc.? Perhaps you are located in that other South Florida, you know the one that was completely unaffected by the recession.
(Note: coming soon our firm’s reality check email/holiday card featuring Bernie Madoff, Scott Rothstein and friends…heavy metal soundtrack…but of course, with our signature optimistic ending!)
YOU CAN CALL OFF YOUR BODYGUARDS
There is good new for those fearing mortal danger in 2010. You see, 2010 was supposed to be the year that the Federal estate tax was to be eliminated and under the tax reduction bill passed in 2001, the elimination of the death tax was a one-year deal. Because of the convoluted way our political system functions, the death tax would have come roaring back in 2011, with a much higher rate than the tax rates in the immediate prior years.
The running joke has been that the elderly great uncle with all the wealth would need to hire bodyguards during 2010, as greedy heirs would have great economic incentive to see him meet his maker in that year.
Well suddenly things are beginning to look much better for the great uncle and much worse for the greedy heirs. The House of Representatives just passed a bill that permanently extends the estate tax and exemption levels at current levels. The scuttlebutt is that the Senate will pass a one-year extension of the current tax structure and that a new tax structure will be debated and enacted during 2010.
To recap, the likelihood is that for 2010, the estate tax rate will remain at 45% of assets in excess of $3.5 million for individuals. Married couples may be able to pass on $7 million to heirs before the 45% tax kicks in, but not automatically. Without proper estate planning, it would be highly unlikely that would occur; and the more likely number that a married couple would pass on to heirs free of death taxes would be closer to $3.5 million.
The bottom line here is that the estate tax lives on and gets a stay of execution…and so does your great uncle Charlie.
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