Courtesy of KTVB
Micron to use old MPC building in new venture
BOISE — Micron will use one of its now empty buildings in Nampa for their joint venture with solar company Origin.
The announcement of the joint venture with the Australian company came last month.
Micron will use a building on the same campus as MPC.
The company has not started production just yet.
Also, no word on how many jobs this will provide.
Feb 25th
Nampa, Idaho — An Internet giant’s state-of-the-art “fiber wire” is ready for a trial run, and Nampa is trying to make their way on a short list of test sites for the project.
Right now it’s being advertised as an experiment, and the city is ready to play guinea pig.
“We’re really looking at the future of what it’s going to require to bring in big industry and business, as well as attract high technology workers,” said Dennis Elledge, Nampa Information Systems Director.
“We want to get started as soon as possible, and we need to find the right community partner for it to succeed,” said James Kelly, Google Product Manager, in a online video promoting the project.
The city is making a push to partner with Google, as the company puts it, to bring people web speeds 100 times faster than they have now.
Simply put, it’s a re-wiring of a city’s Internet infrastructure.
“We’re doing this because we want to experiment with new ways to make the web better and faster for everyone allowing applications that would be impossible today,” said Kelly.
Elledge said the project is in line with long-term plans for the city and its comprehensive plan.
Local Internet service providers haven’t weighed in yet, but Elledge says Google wouldn’t be taking a bite out of their business.
“An airport doesn’t really compete with an airline. They provide the runway for the airplanes to land on, Google is similarly, instead of trying to compete with the Internet service providers, they’re providing the cables on which the Internet connections will run,” said Elledge.
As the search engine seeks the city or cities to test-run their “Google fiber,” there are still a lot of question marks, like how much it would cost the city, when work might get started, and what affecting would it have on your wallet.
“They said it will be competitive with current high speed Internet access,” said Elledge.
Google wants community leaders to weigh in, but they would also like to hear from the public. You can nominate your community at www.google.com/appserve/fiberrfi.
They’re taking information until March 26 and, according to their website plan, to announce their target communities before the end of the year.
Last weekend the Jones family entertained in-laws from California in McCall for a weekend of skiing. Mr. Jones true to his nature ended up with bruised ribs from the combination of wrestling with his 17 year old nephew and his failed attempt at imitating the flying tomato (Shaun White) on a snowboard. Although I think my little Sean was impressed! Therefore I spent all of Saturday on a couch reading research and watching Olympic Curling. I like many was entranced by the sport, and also like many other viewers found myself thinking. Heh, I can do that! Now, hopefully everybody doesn’t say that about our profession, but in reality I realized there are some distinct parallels between portfolio management and curling.
Three aspects of curling that I found similar to managing portfolios are Teamwork, Communication, and Focus. In Curling no one player can control the game as they rotate through the positions. Communication was obviously required to properly deliver the stone to the intended position. Lastly, given the raucous crowds, intense focus was required. Here at Harmonic, we benefit from these same issues. By working as a team we are stronger than just one plus one. The ability to communicate fluidly allows us to deliver a level of research that is of great value. Lastly, and maybe most importantly we must remain focused on the task at hand. It became apparent in watching the matches that there are times where one should be offensive and times defensive. This is also true in our profession. It is not about always being on the offensive, but also recognizing those times where it is best to be defensive. At the end of the day, maintaining wealth is just as important as growing it.
Feb 25th
Feb 25th
Summary:
A donor-advised fund offers an easy way for a donor to make significant charitable gifts over a long period of time. A donor-advised fund is similar to a private foundation but requires less money, time, legal assistance, and administration to establish and maintain. A donor-advised fund also enjoys greater tax advantages than a private foundation.
What is a donor-advised fund?
Technically, a donor-advised fund is an agreement between a donor and a host organization (the fund) that gives the donor the right to advise the fund on how the donor’s contributions will be invested and how grants to charities (grantees) will be made. Contributions may be tax deductible in the year they are paid to the fund, subject to the usual limitations, if they are structured so they aren’t considered earmarked for a particular grantee. Though they can bear the donor’s name, donor-advised funds are not operated as separate entities like private foundations are, but are merely accounts held by the fund. The fund owns the contributions and has ultimate control over grants.
The community foundation was the first type of host organization to offer donor-advised funds but, today, many financial institutions offer them, and many public charities have funds or will create a fund upon request.
How does a donor-advised fund work?
It’s easy to set up a fund account. The donor first signs a letter of understanding with the fund, establishes an account, names the account, and recommends an investment strategy. Then, the donor makes required minimum contributions of assets, which may include cash, marketable securities, and other types of assets, depending on the fund. The required minimum contributions vary from fund to fund, but are usually less than those required by private foundations.
During life, the donor (or the donor’s designee) can make ongoing, non-binding recommendations to the fund as to how much, when, and to which charities grants from the fund should be made. Additionally, the donor can offer advice to the fund regarding how contributions should be invested. The donor may suggest that, upon death, grants be made to charities named in his or her will or other legal instrument such as a revocable living trust. Or, the donor may designate a surviving family member(s) to recommend grants. However, the fund is not obligated to follow any of the donor’s suggestions–hence the name “donor-advised fund.” As a practical matter, though, the fund will generally follow a donor’s wishes. Distributions to grantees are typically identified as being made from a specific donor’s account, but they can be made anonymously at the donor’s request.
Donor-advised funds vs. private foundations
Both private foundations and donor-advised funds allow a person to take tax deductions now and decide later to whom to give. Both donor-advised funds and private foundations can be named to honor the donor, a family member, or other person.
A donor-advised fund usually receives contributions from many unrelated donors (though donors’ accounts are kept separate), while a private foundation is typically funded by one source (an individual, family, or corporation). While donors to a donor-advised fund may only offer advice regarding grants and investments, private foundations offer the donor exclusive control and direction over grants and investments, an attractive feature to some philanthropists.
However, various legal restrictions imposed on private foundations are not imposed on donor-advised funds, and the federal income tax treatment of a donation to a private foundation is less favorable than that afforded to a donor-advised fund. Because contributions to a donor-advised fund are considered gifts to a “public charity,” they may allow a greater income tax deduction than contributions to a private foundation. Furthermore, private foundations are required to distribute a minimum of 5% of their assets each year. Donor-advised funds have no such minimum distribution requirement (though some funds follow the 5% rule voluntarily), and donors may be allowed to let their accounts build up tax free for many years and be distributed only upon a specified date or upon the occurrence of a specified event.
Also, donor-advised funds do not need to fulfill many of the reporting and filing requirements that are imposed on private foundations. And because the fund handles any legal, administrative, and filing requirements (including tax returns), the donor is completely freed from these responsibilities. In addition, since separate accounts within a donor-advised fund are administered as part of the larger host organization, the administrative costs borne by the donor are generally lower than those incurred by a private foundation.
Endowed funds vs. non-endowed funds
Endowed funds only distribute income, not principal. These funds invest a donor’s assets in perpetuity for potential growth over time. Because they are permanent, endowed funds provide a lasting memory of the donor’s philanthropic nature.
Non-endowed funds permit a donor to make ongoing recommendations for grants up to the entire fund balance (principal and income). Such funds remain non-endowed, unless the donor specifies otherwise, until such time as the donor or the donor’s designees are no longer providing advice to the fund.
Income taxes
A donor can generally take an immediate income tax deduction for contributions of money or property to–or for the use of–a donor-advised fund if the donor itemizes deductions on his or her federal income tax return. The amount of the deduction depends on several factors, including the amount of the contribution, the type of property donated, and the donor’s adjusted gross income (AGI). Generally, deductions are limited to 50 percent of the donor’s AGI. If the donor makes a gift of long-term capital gain property (such as appreciated stock that has been held for longer than one year), the deduction is limited to 30 percent of the donor’s AGI. The fair market value of the property on the date of the donation is used to determine the amount of the charitable deduction. Any amount that cannot be deducted in the current year can be carried over and deducted for up to five succeeding years.
Additionally, donor-advised funds are not subject to the excise taxes levied against private foundations.
Gift and estate taxes
There are no federal gift tax consequences because of the charitable gift tax deduction, and federal estate tax liability is minimized with every contribution since donated funds are removed from the donor’s taxable estate.
Suitable clients
Example
Harry, Wilma, and their children own a business that has enjoyed financial success for many years. Harry and Wilma show their appreciation to their customers by making donations each year to many of their community’s charities. Harry and Wilma would like to continue the family legacy for successive generations, but no longer want the year-end stress of selecting the charities they want to support and distributing checks.
Harry and Wilma set up a donor-advised fund with a community foundation and donate half of their shares in the business along with an investment account. To open the donor-advised fund account, Harry and Wilma simply completed the host community foundation’s 3-page application form. Within a few hours, Harry and Wilma delivered the shares to the fund, and a short time later, their investment account was electronically transferred to the fund. Harry and Wilma incurred no legal or accounting fees for the set up.
Because of the host community foundation’s charitable status, Harry and Wilma can take an immediate income tax deduction for the fair market value of their shares and investment account. If Harry and Wilma had created a private foundation instead, their deduction would have been limited to their cost basis in the donated assets.
The fund subsequently sells the donated shares with no capital gains tax liability. The assets in the fund appreciate tax free, and when Harry and Wilma die, the assets will not be subject to estate taxes.
The fund will handle all the bookkeeping and tax reporting, make the ongoing investment decisions, and assume fiduciary responsibilities. Harry and Wilma can put their time and effort into running their business.
From time to time, Harry and Wilma recommend to the fund that grants be made to their favorite charities. The fund follows their recommendations whenever it is appropriate to do so, and makes the grants in Harry and Wilma’s names, and sometimes in Harry and Wilma’s children’s names.
Harry and Wilma name their children as successor advisors after they die.
Advantages
Disadvantages
Duration of donor’s philanthropy may be limited
Disclosure: Any information provided has been prepared from sources believed to be reliable, but is not assured and is for informational purposes only. This e-mail may be privileged and/or confidential, and the sender does not waive any related right or obligation. Any distribution, use or copying of this e-mail or the information it contains by any person other than an intended recipient is unauthorized. If this e-mail was misdirected or if you have received it in error, please disregard. Information received or sent from this system is subject to review by supervisory personnel, is retained, and may be produced to regulatory authorities or others with a legal right to the information
Prepared by Forefield Inc. Copyright 2010 Forefield Inc
Feb 25th
Another enlightening graphic from VisualEconomics.com.
Feb 20th
Another interesting graphic by VisualEconomics.com using data from Economist Intelligence Unit. According to this data, most countries (at least those for which there’s sufficient information) will see positive GDP growth in 2010. However, as the inset graphic at bottom indicates, unemployment rates remain stubbornly and worryingly high across much of the globe.
The week ending 19 February saw indicators that provided incremental information on housing, the manufacturing sector, inflation and the overall economy. On balance the data was solid if not spectacular, suggesting that economic growth will continue to be lead by the industrial sector rather than households and that inflation is not yet problematic for consumers.
|
RELEASE (leading, coincident or lagging indicator) |
PERIOD | ACTUAL | EXPECTED (consensus) | LAST | HIA COMMENT |
| Housing Starts (leading) | January | 591K | 580K | 557K | Seasonally-adjusted annualized Starts rose 2.8% from December’s rate (11.5% margin of error). Single family Starts were reported to have risen 1.5% (11.3% MoE) over the month. |
| Building Permits (leading) | January (MoM) | 621K | 620K | 653K | Seasonally-adjusted annualized Permits retrenched, declining almost 5% from December. Permits for single family residences rose only 0.4%. |
| Industrial Production (coincident) | January | +0.9% | +0.8% | +0.6% | Manufacturing, which accounts for about 12% of the US economy, moved higher in January, with the manufacturing component of the IP index jumping +1.0% after last month’s -0.1% decline. |
| Capacity Utilization (coincident) | January | 72.6% | 72.6% | 72.0% | CapU moved upward for the seventh consecutive month but remains well below its average since 1972. |
| Leading Economic Indicators (leading) | January | +0.3% | +0.5% | +1.1% | LEI rose for the tenth consecutive month. A sister index, the Coincident Economic Index, has been rising slowly since mid-year 2009. |
|
Consumer Price Index (lagging) |
January (YoY) | +2.6% | +2.8% | +2.7% | The figure softened slightly from December, with a decline in the cost of shelter offsetting continued energy price increases. |
| Consumer Price Index ex-food & energy (lagging) | January (YoY) | +1.6% | +1.8% | +1.8% | In contrast to the energy cost-driven volatility of the “headline” Index, the “core” Index has remained quite stable over the past year. |
HOUSING STARTS / BUILDING PERMITS
Two leading indicators of the housing market once again diverged in January, with permits falling sharply but starts rising. Unsurprisingly each movement is a reversal of last month’s action. Starts of structures with 5 or more units rose 17.6% month-over-month. The divergence between the two indicators highlights the volatility of the housing market in winter, and the lack of follow-through from permit to actual construction.
INDUSTRIAL PRODUCTION
The uptick in January production data supports several months of data suggesting stabilization in the manufacturing sector. The Industrial Production figures rose solidly. January’s gain was supported across industries, most positively by the key manufacturing sector. These figures seem to have a habit of being revised downward after their initial release, so the economy may not be as strong as what’s been suggested by this report.
CAPACITY UTILIZATION
Factory capacity utilization remains low and is especially weak in the manufacturing sector, which had a utilization rate of only 69.2% in January. A look at the utilization for the different stages of production shows clearly where the weakness lies:
However, the trend for each stage of production has been positive since bottoming in mid-2009.
While a high degree of spare capacity means inflation is unlikely in the near-term, it also suggests that companies’ profit margins have not sustained the degree of pressure they have seen in prior recessions, so corporate earnings are better than in prior recoveries.
LEADING ECONOMIC INDICATORS
The Leading Economic Indicators continued their positive trajectory for the tenth consecutive month. The most heavily weighted component, money supply (specifically M2), has exploded as the government has flooded the economy with fiscal and monetary stimulus. Unfortunately, little of that liquidity is being transmitted into the real economy, as bank lending is contracting – total loans and leases at US commercial banks fell by 7.3%, from $7,191B to $6,664B, from last January to this. It is, of course, actual lending to businesses and consumers that fuels the economy, not simply the existence of the funds on bank balance sheets. (See our Economic Insight research entitled “Credit Conditions ‘Improving’” dated 16 February 2010 for a discussion of this topic.) Other LEI components, like the “interest rate spread”, are suspect in their usefulness because this recession, stemming from a banking crisis and fueled by massive consumer deleveraging that has required that short term interest rates be held abnormally low, is quite different than other post-WW2 downturn. And of course, the US stock market, which is also a component of the LEI, is far from a reliable indicator of the quality of economic growth. Long story short, we think the LEI is giving a false signal regarding the strength of economic recovery.
CONSUMER PRICE INDEX
The year-over-year increase in the CPI remains driven by substantial increases in the price of energy. Perhaps unsurprisingly, the shelter component of the Index posted a -0.1% year-over-year decrease; the food component of the Index showed the second full-year decrease since 1961, the first being last month.
In contrast to December’s broad-based price increases, the January month-over-month change in CPI was driven largely by higher energy costs. A 6.1% increase in the price of fuel oil was the month’s largest; gasoline was up +4.4% and natural gas from utilities rose +3.5%. However, these increases were somewhat mitigated by a decline in the index for shelter, which comprises about 40% of the total Index, which fell -0.5% during the month.
While the trend for the “headline” CPI has been higher in recent months, consumer level inflation has yet to become a concern, with the “core” rate remaining stable at a historically moderate level.
Feb 19th
Feb 26th
Weekly Economic Insight: 22 February to 26 February 2010
Author: Kenn Lamson
Comments: 0
The week ending 26 February saw indicators that provided incremental information on housing, the manufacturing sector, inflation and the overall economy. The data confirms our thesis that economic growth will continue to be lead by the industrial sector rather than households.
S&P / CASE-SHILLER HOME PRICE INDEX
The Index fell -0.2% month-over-month. While the overall level of home prices appears to be slowly improving, this report suggests a bifurcation of trends. As noted in the table, 4 of the 20 cities saw month-over-month price increases; also, 6 cities saw year-over-year price improvement. However, 3 cities reported new lows in prices. The Index is down -3.1% year-over-year.
The variance from the price increases reported in the existing and new home sales reports can be explained by the difference in methodology between the measures. As previously noted, the Case-Shiller Index uses only sales of homes in specific markets with two or more transfers; condos and co-ops are excluded. As with other lagging indicators, this data is a bit stale and projections made from it may be suspect.
NEW HOME SALES
The margin of error for New Home Sales month-over-month decrease was 14.0%, so as usual the initial estimate should be taken with a grain of salt. Also, the decline was not distributed evenly across the US, as the Northeast plummeted -35.1% and the Midwest saw a 2.1% increase.
As with existing home sales, the drop in new home sales can in part be attributed to a lull in purchases via the first-time homebuyer tax credit. Also like the existing home sales release, supply was reported to have risen, in this case from 8.1 to 9.1 months, and the NAR reported that median and average home prices fell -5.6% to $203,500 and -8.3% to $254,500 respectively from December.
DURABLE GOODS ORDERS
While the overall orders figure spiked on a surge in aircraft orders, if transportation equipment is excluded orders fell a worse-than-expected -0.6%, reversing December’s jump. Month-over-month growth in new orders was seen in 6 of 9 major industry groups surveyed, including transportation equipment (+15.6%) and primary metals (+1.9%). Weakness was centered in the machinery (-9.7%) and “other durable goods” (-0.4%). New orders rose 3.8% in the important manufacturing sector.
Durable goods inventories continued to fell for the thirteenth consecutive month in January, frustrating those that have for months have predicted increases in production to restock. We expect that this trend will reverse in 2010, however. The tentative resumption of business spending, whether demand originates from overseas or domestic sources, will help underpin broader economic growth, especially when companies begin hiring.
“PRELIMINARY” GDP
This release is a second look into the final quarter of 2009, which once again beat the consensus expectations. The “preliminary” report is based on more complete data than was available at the time of the “advance” estimate last month. The report confirmed that fourth quarter growth was dominated by an enormous inventory adjustment. The upward revision from the “advance” report a month ago was cause by adjustments to spending on inventories, exports and “nonresidential fixed investment.” Imports were revised higher, as was consumer spending.
While one can only infer this conclusion by the consumption trends reported elsewhere in this release (and Thursday’s durable goods orders report), it would appear that most of the restocking was in nondurable goods. The other major categories that comprise GDP also rose:
Accounting for the additional data released in the “preliminary” report the contributions to growth looked like this:
The problem with inventory restocking-driven growth, of course, is that it’s temporary – once the proverbial shelves are full manufacturers will return to lower production levels. In order to create a self-sustained economic growth we need to see demand from domestic consumers and businesses and/or foreign ones. As regular readers know, the downward pressure on demand is why we continue to focus so much of our work on understanding the unemployment trends.
For 2009, this report puts full-year economic growth at -2.4%. We’ll get a third look at 4Q09 GDP, with more complete data, in the “final” report on March 26th.
CONSUMER SENTIMENT
Consumers may be losing faith in the economy’s improvement in recent days; the U of M Consumer Sentiment Index slipped from 74.4 in late January to 73.6. The measure of current conditions, which reflects Americans’ perceptions of their own finances and whether it is a good time to buy big ticket items such as cars and homes, rose to 81.9 in February, the highest reading of this cycle. The index of expectations six months from now, which more closely projects the direction of consumer spending, worsened to 68.4 from 70.1.
As we’ve noted elsewhere, economic improvement appears to be centered in manufacturing, not in housing and employment, two areas much closer to consumers.
EXISTING HOME SALES
According to the National Association of Realtors, sales plummeted once again in January as the initial wave of first-time homebuyers crested in November but the second (assuming there is one) has not yet fully taken hold. Without sharply higher interest rates or other negative factor intervening, we’ll likely see another surge of first-time buyers in March and April.
The housing market continues to be supported through the Federal Reserve’s purchase of mortgage-backed securities, a key mechanism for providing liquidity to lenders and keeping mortgage interest rates down. Those purchases, however, expand the Fed’s balance sheet and exacerbate longer-term inflationary concerns. This program, like many of the other extraordinary liquidity programs in which the government has engaged, is slated to end on March 31, 2010; it’s an easy bet that rates will rise as we approach that date and thereafter if purchases are ceased.
The NAR report also showed that the reported estimate of existing homes for sale rose again, from 7.2 months to 7.8 months of inventory. Also, median and average home prices reversed course from previous months, falling -3.4% to $164,700 and -3.1% to $212,000 respectively from December. Lower prices are a logical outcome of lower demand and increased supply. It must also be kept in mind that the reported figures ignore the massive overhang of foreclosed and delinquent properties that have yet to be officially put on the market. According to one researcher, the actual supply is around 2 years’ worth, a far stronger headwind for the economy to lean against.