America is a nation of optimists. Just two years after declaring this the worst financial urgency since the age of Busby Berkeley and speakeasies, it now appears that we are beginning to ante up again by releasing our cash. Maybe spending is part of what makes us American--our founding fathers, who were products of the Enlightenment, taught us to reject the old-world notions of asceticism and praying for a better day in favor of enjoying the spoils of our labor and securing our rewards in this life. And now, here we are. Regularly depressions are followed by extended periods of hoarding cash and sinking money into only safe investments, but modern events seem to advise we're curious in an additional one direction.
Take the banking industry, which declared combination profits in the third quarter totaling .5 billion, more than seven times greater than last year during the same period, agreeing to the Fdic's regular Banking Profile (Qbp) for the third quarter of 2010. Part of the imagine for these buoyant numbers is that banks released their rainy day provisions into earnings, causing Fdic chief Sheila Bair to warn bankers that they may be reducing their loan loss reserves too early. Provisions for loan losses dropped to their bottom level in three years--reserves against time to come slid to 63.9% of noncurrent loans from 65% in the second quarter--even as "troubled loans remain near historic high levels," Bair said. This is the first time that loan-loss reserves have fallen since late 2006. To be sure, most of Bair's comments are aimed primarily at mid-sized and smaller banks that have yet to show consistent credit ability improvement unlike the bigger banks. And, no doubt, we need liquidity in the cheaper and the banks need to supply it, but it behooves the manufactures to be true to cover the bets at a time when the amount of troubled banks is at 860, the most since 1993.
Science Current Event Articles
In the real estate industry, some of the largest companies, including Simon property Group Inc., Kimco Realty Corp. And Nationwide health Properties Inc., raised their regular dividends in November and more fellowships are improbable to succeed suit in the months ahead. The higher payouts reflect the higher rents and better occupancy levels, which are boosting the earnings pool for dividends. This a serious about face from the past 36 months, when Reits, along with other collective companies, were slashing or suspending dividends to withhold cash. In 2010, 37 Reits have raised dividends; seven have cut them. To compare, 61 fellowships either cut or cancelled dividends in 2009.
Reits aren't alone in raising dividends. Many large-cap and cash-flushed fellowships are improbable to do the same. A modern description by Markit, a financial data services firm, expects a 50% jump in dividend increases for S&P 500 fellowships in the fourth quarter from last year. Currently, there is an estimated .0 trillion in net cash sitting in non-financial corporate treasuries. The payout enthusiasm has affected even some of the holdouts: Cisco Systems announced plans to pay a stock dividend for the first time in its more than quarter of a century in business. Apple is sticking to its guns by sitting on its nearly billion. One imagine for paying dividends, surface of magnanimity, could be the tax rates. Under current federal individual earnings tax law, both capital gains and corporate dividends are taxed at a reduced 15% rate. However, those reduced rates are scheduled to expire at the end of 2010, raising the hit on dividends to increase to as much as 39.6%.
And finally, there's us, the consumer. Our national savings rate was 5.7 percent in October -- still strong when you consider that it was at 0% in 2004. An description in the Christian Science Monitor in 2004 summed it up this way: "Americans have stopped recovery for a rainy day. Instead, they are living paycheck to paycheck, depending on credit cards to get them through emergencies, and hoping that the rising value of their homes will give them a retirement nest egg." However, that 5.7% looks meager when you consider that Europeans hover colse to a 14% savings rate in the Eurozone. The 5.7% also is a discrepancy with some of the other recessionary periods, for example the the early 1980s when American savings levels were in the 9% to 10% range. It's worth noting that this comes at a time when, the government reports, consumer spending rose 2.6% in the third quarter, the fastest pace since the fourth quarter of 2006. Clearly, we're feeling the same optimism as our corporate and financial counterparts. "One today is worth two tomorrows," Benjamin Franklin once said. What could be more American?
my latest blog post The Great American Payout
No comments:
Post a Comment