Posts for category ‘Economic’

Bill Gatet rank as richest men in the world went down as global crisis; Lehman and WaMu were collapsed, Major Wordwide Industries housed their employers, cut their production and went to debt problems. Central Banks tried to help with lowering interest rate to recover the crisis and to refresh market. FED were third time to cut their interest rate, but so far so good. Government tried to recover with debt help, injection fund, restructurization and to buy back any bankrupts and bad financial reported.

Both Governments and Central Banks fight force to recover the crisis before too late or getting worst with their stimulations. Like a doctor and patient. If patient didn’t check their health, there was no cancer but once doctor analyzed the patient, the cancer will be worst. The same case happened on Economic. Time lag took long period with crucial problems on companies. Lower demand forced companies to reduce their production as over stocks. this crisis took very long time lag to recover. Estimated more than million people were housed and the number will increase in near if fundamental economic doesn’t resolve, To increase Purchasing Power Parity.

There is one tool we dont hear so far. Economists believe that Invisible Hand will born to solve this situation. Does the battle of Israel and Hamas play the insivible hand? or the lowering oil price is invisible hand? or both of them?

Keynes, the Invisible Hand Hater believed Government and Central Bank are two main points of the solution. Keynes also put investors as the third to make one economic goes bad or good. As the example, the battle of Hamas and Israel has been increase the gold price in stock market. Many companies stocks were depreciated and appreciated by their financial reports in crisis. Investors make it worst in crisis.

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Retailers in the United States during this year are beginning complicated in big problems. Starting next month, they faced a problem in the closing outlets, bankruptcy, and corporate takeovers due the significantly decline on their sales during the holiday season is the worst figure in the last 40 years.

Based on data from the International Council of Shopping Centers (ICSC), estimated, the Retailers will close retail outlets around 73,000 in the first quarter 2009. Talbot’s Inc. and Sears Holdings Corp. are a few companies will close some stores in several locations with lowest sales rate. In addition, more than dozen retailers, including the Circuit City Stores Inc., Linens N Things Inc., Sharper Image Corp., and Steve & Barry’s LLC are in bankruptcy protection (bankruptcy protection) in this year as the restriction on credit from FED and the companies become more careful agaisnt profit loss as impact on their low sales.

According to Burt Flickinger, Manager Director of Strategic Resource Group, investors will see retailers whom seeking bankruptcy protection in February when financial reported is launched. “You will see many department stores, specialty stores, discount stores, wholesale stores, drug store, and others, both national and multinational companies, will be out of business. The amount will rise to new concerns,” said Flickinger. By using data from the Bureau of Labor Statistics, ICSC also predicts, 148,000 stores already closed in 2008. Largest since 2001 where 151,000 stores were closed. According to the ICSC Chief Economist Michael Niemira, percentage of store growth will decrease 3 percent this year. In addition,  total outlets spread in any locations have the same conditions. Niemira says, about 73,000 locations also will be closed in the first quarter 2009. However, difficulties conditions by the retailers to provide benefits to the consumers. “If you shop, you may find discounts on many products,” said Patrick McKeever, a senior equity Analyst MKM Partners LLC. This strategy- to discount any goods is to increase their sales but so far the result showed the bad results. Read more »

Indonesian Reserve Bank did nothing in Money Market after rupiah declined 200 points or down to Rp.12.300/Rp.12.500 per USD from previous day set around Rp12.100/Rp12.300 per USD. Although Indonesian Reserve Banks attempt to save the rupiah, Domestic Demand for Rupiah is still higher-makes Bank Indonesia Experiment doesn’t result anything. High of Domestic Demand pains Bank Indonesia to provide (supply) USD stock for market to prevent the worst.

Bank Indonesia is expected to consolidation with foreign Reserve Banks to prevent enough Supply for Domestics Market in order to reduce any push against Rupiah. These days and future, Bank Indonesia takes some solutions to prevent the deeper declining. In domestic money market, investors still put on hold their USD, to analyze crucial factor, especially American Economic and the FED planning to launch Treasury bill (obligation). Holding Action on USD impacts the scaring of USD supply in market.
Bank Indonesia asked to USD Holder to sell their Dollar in order to prevent pushing on Rupiah, unfortunately the suggestion doesn’t work till today. Analysts predict that Demand on USD rises in the end of the year for many purposes.

Global Economic attack at least twelve months to go, Indonesian Minister Finance said
Sri Mulyani, Indonesian Minister of Finance said that Global crisis impact on Indonesia will go through and take at least 1 year to pass climax. “The impact of Global Crisis on Indonesian Economic will go on and take at least 12 months”. Sri Mulyani advised that people must do more care against their financial condition. Read more »

After running high, Oil crude price now is lower than $80 per barrel. Amazing right! Why Oil crude price decline very significantly? Why? Congress had question to American Giant Oil Company about how much the real price for oil crude price, How much US to produce 1 barrel? And the answer was very surprising, lower than $50 required for one 1 barrel. So why the price is too high (upper $100 per barrel)? The answer is very simple, Broker, Investor and speculator make it. They have power to increase or decrease oil crude price based on economic indicator. (Middle East Politic Situation, America Financial Condition, Others Legal data from Biggest Countries-rich countries).

Americans are still down with their biggest problem; Credit Crunch-Mortgage Crisis and now after the very long time lag, they enjoy the bad impact. Many employers are fired, Lower Demand on Import, Credit Crisis, Many Home owners have lost and more.
Is this case has positive correlation with decrease on Oil Price? Yup! For every economic situation has impact to global economic. When Americans down with their crisis, Our Local TV said, Which countries then buy Chinese Product and which countries will buy our products (Indonesian Product)??
Crisis in America has multidimensional effect. European, Japanese, Chinese and development countries also get the impact, the big impact. Many Central Bank fight force to cut their interest rate to avoid the worst. Russian and Indonesia suspended their stock market to avoid naughty investor and broker to do illegal transaction or to make it worst.

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Taxes

Taxes are a levy imposed upon people or legal entities by a governmental entity. There are many forms of taxes including income taxes, property taxes, capital gains taxes, consumption taxes, excise taxes, retirement taxes, sales taxes, tariffs, toll taxes and transfer taxes. This article focuses on reducing income taxes for real estate owners.

Income taxes often seemed unavoidable. However, real estate investors have multiple opportunities to defer and reduce federal income taxes. Real estate owners receive income tax breaks not available to investors for many other asset classes. These include depreciation, income tax rate reduction, and the like-kind exchange. This article discusses how real estate owners can reduce income taxes by increasing the level of depreciation, using tax-deferred changes, casualty losses, maximizing expenses and planning to minimize estate taxes.

Depreciation is a non-cash expense which can both defer and reduce the level of federal income taxes. In some cases, depreciation actually eliminates federal income taxes. When an owner claims depreciation, and does not sell the property before it passes into his estate, the income deferred by the depreciation is never taxed.

Most real estate owners know depreciation defers federal income taxes. Few know real estate depreciation also reduces federal income taxes. The common perception is that depreciation simply shifts payment of income taxes from when income is earned until property is sold. However, depreciation often changes the character of income from ordinary income to capital gains income.

Consider the following example: George purchased an apartment complex in 2005. After obtaining a cost segregation study, approximately 20% of the cost basis of the improvements was allocated to 15 year property, such as landscaping, paving, sidewalks, parking lot striping and exterior signs. If George sells the property in five years, one-third of the cost basis of the 15 year property will have depreciated. Isn’t it also reasonable the market value of this property will be one- third less than when the property was purchased?

More often than not, tax preparers believe the market value of short-life property is similar to the remaining basis when property is sold. This means there is no gain upon sale. Hence, additional depreciation was taken for short-life property (which could be used to reduce income taxable as ordinary income rates) while George owned the property. At time of sale, the portion of the gain equal to the short-life depreciation is taxed at the capital gains rate. This is how cost segregation reduces federal income taxes. Hence, federal income taxes are both deferred from the time income is earned until a sale occurs and the tax rate is reduced from the ordinary income tax rates to the capital gains rate.

Cost segregation can lead to meaningful deferral of federal income taxes. However, its most significant power is its ability to convert income taxed at the ordinary income rates to income taxed at the capital gains rate.
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Last two week, when closing weekend, Rupiah was around Rp.9250 per USD. But last weekend closing time, Rupiah had fallen into Rp.9600 per USD. And now Rupiah is 9450 per USD (taken from KlikBca.com).

Not only Rupiah declined significantly against USD, major currencies EURO, POUND, YEN Japan and Swiss Franc also declined against USD. Let us see the fact. Why USD flies the flag. What’s going on with USD?

We look the past, 4 months before when Credit Crunch attacked American Financial Market and Hot Money from Japan attacked Indonesia and Pound, and USD had fallen to the worst and makes its new record low against EURO and Pound.

Economic Theory can explain this situation. Trade-off between two countries to make economic theory goes well. If Japan YEN won against Dollar, it means Japanese spend less YEN to get $1. In International trade (between Japan and America), Japanese prefer American Product because of cheaper, so Japanese will consume (import) American products.

In other hand, declined on YEN makes American gets more YEN for Trade. American gets surplus (because Japanese products is expensive) and Japanese gets deficit. If the condition goes in long term, Americans will hold Many YEN and Japanese has loss their YEN.

Inside America, Americans have more money and as result Inflation raises there. Inflation rises because of Higher of money supply. To avoid it problems, construction money supply from FED is taken, Producer cut their Product and Surplus (Over supply) must be used to buy foreign products, so Americans start to buy Japanese product to put the inflation down.

In my opinion, the theory works well so far if there are no external error destroys the theory. Economic theory comes from assumption so people (even the economists) believe that Economic theory is very restrict and far from realize. But generally we will get some information from the theory that Declined USD in the past and the rise USD in present tries to inform us that Appreciation or Depreciation, Inflation or Deflation, Recession or Growth is a cycle of life. Sometimes you are down and sometimes you are the top.

The economic theory is disturbed by external error, let us say them Broker or Investor in Stock and Money Market. They are destroyer. Declined on USD in generally is a process, but Brokers making it run faster and the panic is spread to all sectors.

Indonesian Reserve Bank (Bank Indonesia) had taken some necessary actions to keep the Rupiah around upper than Rp.9500 per USD. But Bank Indonesia couldn’t win against the panic cause by Brokers. When Rupiah declined on USD, who (which) people gain the benefits? Declined on Foreign Currencies makes Exporters gain more Rupiahs, especially Oil and Gas, Local product (higher than 75 percent importer material) such as faming, wood, handicraft and more. But in modern world, Many people are depended on importation products so when Rupiah declines on USD, Cities people go to crazy. Real money also decline.

 To Be Continued……………..