Friday Financial Five–June 7th, 2013

Friday, June 07, 2013

Dan Forbes, GoLocalProv Financial Expert

 

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Providence’s new budget

The city’s recently passed budget has been presented as a victory for business owners, though commercial tax rates are still among the highest in the nation. The same can’t be said for Providence residential owners, especially landlords and those in the more affluent areas. There has already been upward pressure on rents, and it stands to reason that the extra tax will be passed along. The budget’s focus on revenue increases highlights a legal framework that won’t permit reductions to spending in certain areas.

Bank of America tries to close the Countrywide chapter

The nation’s second largest bank is fervently trying to put Countrywide induced mortgage problems behind it. To do that, Bank of America needs an $8.5 billion settlement with mortgage-bond investors to finally get approved after two years. With possible capital restrictions down the road to contend with, it makes sense for BOA to put this issue in the rearview mirror once and for all. However, there are investors who contend that paying even this hefty sum is letting the bank off easy.

Small business employment ticks up

There is slightly encouraging news on the nation’s employment situation. Both ADP and Intuit reported this week that their small business customers saw higher than anticipated employee gains in the month of May. It’s widely accepted that small businesses are the engine needed to spur job increases and economic recovery, as they account for 99 percent of the nation’s businesses. As a whole, the country needs to start adding over 200,000 jobs per month to return to a desirable employment number.

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The importance of construction numbers

After a decline in March, new construction (residential, commercial, and public) spending reversed course with a 0.4 percent increase in April. While the announced number is not always entirely accurate, the positive trend is important because construction spending constitutes a large part of the nation’s GDP. With a nearly 10 percent increase last year, it’s been instrumental in driving overall growth. The May number that comes out July 1st will be interesting considering the spike in interest rates that occurred.

Fannie Mae’s recent wild run

Fannie Mae (FNMA) bucked conventional wisdom by surging in May from less than a dollar to over five. The stock is back below two dollars, amid wild volatility and heavy trading. The volatility is a by-product of speculators trying to figure out how involved the government will be with the corporation’s survival. Currently, there is legislation in the Senate that could render the company’s stock worthless.

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in Providence, RI and can be reached at [email protected].

 

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