Year: 2002

My heart leapt when I saw Tim Russert put the Kennedy “tax cut” chart up on his screen on yesterday’s ‘Meet the Press.’ This is exactly what American economic policy should be:

1. Fiscal responsibility – low interest rates – economic growth.

2. Protect Social Security and provide some funds for things like prescription drug assistance to the elderly.

3. How? By adopting this tax plan:

FIRST 80% of Americans (those with income up to $72,000 a year): KEEP 100% of the tax cut and make it permanent!

NEXT 15% (those of us with income from $72,000 to $147,000 a year): KEEP 99% of the tax cut and make it permanent. (Average annual ‘cost’ to this group in less than originally expected tax cuts: $17.)

Subtotal: for 95% of Americans, last year’s tax cuts would be 99% or 100% preserved and made permanent.

NEXT 4% (income from $147,000 to $373,000): KEEP 87% of the tax cut (all but, on average, $432 a year) and make that, too, permanent.

TOP 1% (those of us with income above $373,000): KEEP 19% of the tax cut for now (which is not nothing – about $10,000 a year, on average) – and provide a larger break if and as it turns out we can afford it.

Is this cruel to those earning more than $373,000 a year? I don’t think so. In the long run, what group of Americans will benefit more from a sound, prosperous economy than the top 1%?

Tomorrow: What They’re Saying In The Official Arab Press

CHEAP DIGS

I’ve used – and plugged in this space – Priceline.com several times. Most recently got a 4-star hotel room in Los Angeles for $95 a night. But with Priceline, you don’t know which hotel you’ll be getting until after the deal is done.

A very good alternative: expedia.com. It shows you your choice of hotels and prices all in one place. Take your pick. Or, if you have the time, first see how well you can do on Expedia, and then perhaps go to Priceline to see whether you can get a similarly good hotel in the same neighborhood for (say) $30 less. If you can, great; if you can’t, just go back to Expedia and be done with it.

Example: the same Hyatt that cost me $170 with the low ‘group rate’ was listed on Expedia for $99.

Worth a few clicks. Does not bode particularly well for the hotel stocks.

WELL, NOT YOUR SON, BUT MAYBE A FRIEND’S?

Dana Perlman: ‘I don’t know if any of you have come across this website, but it is a wonderful site that was put together by two loving parents who have worked through their fears and anxieties and accepted their gay son. It is a resource and I urge you to share this with anyone who you think might be interested.’

RE: ISRAEL/PALESTINE

Click here.

Coming Soon: The Wisdom of Dick Davis

Englezos: ‘Can I liquidate an IRA to fund a Section 529 Tuition Plan and avoid penalty because it is educational?’

☞ I doubt it, but I don’t know. Let’s ASK LESS!

One rrrrrrring . . .

Two rrrrrrings . . .

‘Hello, Less? I . . .’

‘Say no more – I have Caller ID. Here’s the answer.’

How does he know all this stuff? Anyway, here’s Less’s answer:

The matter isn’t settled in law yet, but it is not something I advise doing, even if there isn’t a penalty, for several reasons:

(1) There will be immediate taxation of all the withdrawn money: it is all ordinary taxation, and only the earnings on the diminished value will be tax-free later on if used for qualified costs.

(2) You must come up with the tax money from other sources, since anything not transferred will DEFINITELY be subject to the 10% federal penalty (and state penalties in most cases).

(3) You are risking your own retirement to finance your child’s college costs. You can virtually always borrow to pay for college, but borrowing to pay for retirement is, for rather obvious reasons, not quite as easy.

On top of all this, there is still the possibility of the penalty on top of the regular taxation, since the IRS has not resolved the matter. The main reason they haven’t resolved it is that, until very recently there would have been no reason whatsoever to try it (since 529 earnings were only tax-deferred, not tax-exempt, until the tax act of 2001, and it was already tax-deferred in the IRA). So somebody will have to be a guinea pig, and I don’t see the point in volunteering.

I suppose if the child is a newborn, there may be enough years of earnings to make the transfer to a 529 plan a potential gainer over time, but I think it would be wiser to simply fund the 529 plan with the money that you were otherwise going to pay in taxes on the transfer this year, letting that compound tax-free while leaving your IRA alone.

By the way, depending on your income, money withdrawn from the IRA in the years of college and used to pay tuition should qualify for the tuition tax credits or deductions, making some of it effectively tax-free anyway, without the transfer.

Thank you, Less.

I don’t know Saul Kramer, but his e-mail was passed on by a friend. Perhaps you’ve seen it, too. He writes:

From: Saul Kramer
Thursday, April 25, 2002 12:55
Subject: Tales from Jenin

Hi all.

I’m writing this email after having returned last night from the emergency army call up that sweetly interrupted my life 3 weeks ago. I’m writing this email for simple reasons, to tell you the truth about what happened in Jenin over the last 2-3 weeks and to share some of the stories and incidents that we had. It’s pretty sad seeing and hearing the lies CNN, BBC and all the others have been feeding the world when you have seen a completely different picture yourself. Feel free to pass this email around and send me any feedback or questions.

Let me just get one thing cleared, there was no massacre in Jenin, I repeat no massacre in Jenin!!! (I’ll get back to this later.)

My reserve battalion was stationed on the northern and eastern border of Jenin with the purpose of ensuring the enclosure of the area during the Defensive Shield Operation took place.

We were divided amongst a number of roadblocks and defensive positions with the main purpose of preventing terrorists leaving Jenin to carry out attacks inside Israel and also from escaping during the operation. We were also responsible for monitoring the entrance of the Press and humanitarian aid going into Jenin, and also Palestinians needing to leave Jenin for humanitarian reasons.

I myself together with eleven other soldiers manned a small roadblock at the northern tip of Jenin, which was one of the main thoroughfares for traffic entering and exiting the area.

Jenin is not a big town. The refugee camp is a small part of Jenin and the pictures repeatedly shown on TV are of a small section (10% -15%) of the refugee camp that was destroyed. The refugee camp is where the terrorists have mainly operated and harboured factories and storage facilities for weapons, explosive belts etc. Many of the recent suicide bombers have strapped themselves up in this refugee camp. What is also very fascinating is that UNWRA (United Nations Work and Relief Agency – part of the UN) has been responsible for the refugee camps over the last 50 years and has allowed terrorist infrastructure to flourish under its nose.

In the fighting that took place in the refugee camp, children were used as human shields by the terrorists. One of the brigade commanders told us this last Saturday night that they were shot at in the small alleys of the camp. They returned fire only to hear the cries of young children to which they immediately stopped shooting and prayed that they had not killed any children. They hadn’t.

The armies respect and consideration for the life’s of innocent civilians is of a high standard. For this reason, 23 of our own boys were killed in the Jenin fighting. If we had no regard for the life’s of innocent civilians, 23 sons, husbands and fathers would be at home with their families now. They were the price we paid for the high moral and ethical standards upheld during the fighting.

During the week of the incursion into Jenin the area was a closed military zone. However contrary to what was reported, humanitarian aid was allowed in and I myself personally checked many of the hundreds of trucks that were allowed in to deliver supplies to the Palestinians. This was carefully coordinated with the army to ensure that innocent civilians would receive the supplies and to minimise the risks of those entering the areas.

For a few days after the fighting had stopped, the area was closed off to the press. This is when the rumours of the massacre began despite the army press giving detailed briefing sessions to the media on the situation. So why was the area closed to the press and what did we seemingly have something to hide? Simply, the refugee camp had been booby trapped by the terrorists and minefields awaited those that entered. Soldiers inside the refugee camp told me of not being able to move 5 meters at a time without having to diffuse another pipe bomb or mine. Many of the houses destroyed were done so by bombs planted by the very residents of the camp. Some of the dead bodies were also booby trapped with grenades and mines awaiting the Israeli soldiers. (The Palestinian death toll stands at below 40 with maybe another 20 or so buried in the rubble of which most has been cleared up. This was also told to us by embarrassed reporters who entered the area eagerly awaiting to report an Israeli massacre of Palestinians only to be disappointed to find minimal destruction.)

The media. Last Sunday while myself and my good friend Ben were on duty at the roadblock at the time when no press were allowed to enter Jenin, we spotted a jeep trying to evade the roadblock through an adjacent field. We managed to stop the jeep and discovered a group of French Journalists who had managed to enter Jenin and were now trying to leave. We followed the normal procedure of questioning them, checking their vehicle and identification. This process sometimes takes a while because we have to phone another army base who then checks the identities with the Israeli authorities which includes the intelligence operations. Anyway, it turned out that one of the supposed French journalists is actually a Palestinian terrorist on Israel’s wanted list. He was taken away by the police together with the other real French journalists. Bet you never heard about that one on TV.

*

Last Thursday, friends of mine on duty at another outpost a few kilometres away from me spotted two young kids walking in the middle of the day with black backpacks on their backs. The two kids entered an abandoned structure about 800 meters away from the outpost and left without the bags.

The kids thought they had gone unnoticed. It was later discovered that the bags contained weapons, explosives, an Israeli army uniform with a red paratrooper beret. The plan was for a terrorist to pick up the loot at night, dress up as an Israeli soldier and attack the outpost.

We had already received intelligence reports 5 days earlier warning of a terrorist dressing up as a soldier and entering one of the outposts.

Avi, a good friend of mine studying together with me at Bar Ilan was stationed in Nablus (Shchem) during this operation and told me the following: They took over a house in Nablus as a stronghold in order for the operation to clear out the terrorist infrastructure there. While in the house, they did not use the electricity to charge their cell phones. They did not touch or eat any food left in the house. They made a concerted effort not to use any furniture in the house. When they left the house a few days ago during the pullout of Nablus, they cleaned the house and left money on the table. I have heard this reported from soldiers that were also in Beit Lechem, Tulkarm, Kalkilya and Jenin.

On Monday morning this week, a UN bus entered Jenin carrying a UN rescue team from Britain. The team included doctors and other rescue personnel who get dispatched around the world to help with rescue operations. Four hours later the bus returned through our roadblock and they stopped and we had a chance to chat a little. The first thing they said is that this was the biggest waste of time for them and they would be catching the next flight out of Israel. One of the doctors told us that one of the “massacred” bodies he examined was that of a man that had been dead for two years.

What a shame that the Palestinians dug him up to add to the death toll. As my friends and I packed up yesterday ready to head for home we joked at how the whole world considers us to be monsters and how one day we might all be charged for war crimes. We felt good for having served our country once again and we hope that something was achieved in this operation. What lies ahead is still uncertain. What became so clear to me is the importance of seeing things in the right context and perspective. If all that happened these last 3 weeks was an Israeli incursion into the Palestinian areas, then yes, maybe we don’t look so good in the world’s eyes. But looking in the context of the history of Israel and our longing to live peacefully side by side with our Arab neighbours, we cannot let terror to exist and destroy our dream. I pray and hope that new Palestinian leadership emerges that will want to make this world a better place for its people.

Have you ever borrowed money from, or loaned money to, a friend or relative? I don’t mean $50 – maybe $2,500 or $10,000? It’s a great way to lose both friends and money.

I’m pretty sure that’s what Shakespeare meant when he had Polonius say, ‘neither a borrower nor a lender be.’ He wasn’t advising against your taking out a mortgage or buying bonds.

Now comes a new service, CircleLending.com, that could conceivably cut down on the damage. Basically, CircleLending makes it easy to be more businesslike, but without offending the borrower.

I haven’t tried it myself – but wish it had been available before I lent $2,000 to [name withheld] on March 11, 1997, or $10,000 to [name withheld] on June 13, 1993, or $5.000 to [name withheld] on October 15, 1987 or $20,000 (!!!) to [name withheld] on June 1, 1997 (but who’s counting?).

Of course, in some cases, the ‘loan’ is a face-saving way to help a friend too proud to ask for a gift, but too poor to pay you back. ‘Hey, man – thanks! I’ll pay you back the minute I’m able.’ There’s nothing necessarily wrong with that at all. But for a loan that’s really meant to be a loan, this service (assuming it stays in business, etc.) could provide the friendly but firm prod needed to get you paid back as agreed – a service, really, to both of you – just as if you were Visa or MasterCard (but, if you have a shred of decency left in your body – and because you are a reader of this column I know you do – at a significantly lower interest rate.)

Back tomorrow.

If some of this seems foreign, just plow through it, because it leads to an anecdote anyone can understand:

Dan Critchett: ‘What do you think the consequences are of the overwhelming incentive in credit markets today to avoid long-term borrowing? REITs are now borrowing zillions at spreads against LIBOR (or swapping their current long mortgages) instead of financing our shopping centers and high-rises with bonds. Corporations opt for credit lines instead of floating 15-year paper. The Federal Government doesn’t even ISSUE some of its formerly-ubiquitous long bonds. And even everyday citizens prefer to borrow at 1.9% on a 6-month credit-card special rather than refinance their 30-year mortgage. All these yield-curve surfers have to come into the shore sometime, no? Where in the world will the SUPPLY of long-term credit come from – or more accurately, at what price will it come – when, one day, everybody wants to borrow long? And what kind of mess will we have gotten ourselves into?’

☞ Let me answer indirectly with an anecdote:

I got an offer from MBNA to sign up for a credit card that would let me borrow up to $100,000 at ZERO interest for the first nine months. So I made the call, as it urged, and had them wire $95,000 to my bank account, which they did. It is now my free money for nine months, which I can put to work any way I want. All I have to pay until next January is $15, the minimum monthly payment. As tickled as I am by this bonanza (if you figure I can earn 2% on the money in 9 months, and I think I may even be able to do better, MBNA just gave me $2,000), it makes me nervous . . . just as the free running shoes that some website gave me made me nervous back during the dot-com bubble.

I hesitated to brag about this – I know I am exceptionally fortunate to be able to get this kind of credit – but I do so because, in the first place, I suppose it will not astonish you to know that I am not entirely poor just because I am entirely cheap (indeed, it may be the cheapness that has spared me from the poorness) . . . and because I think it somehow relates to Dan’s point. One of these days, the low-cost short-term money will be over, to be repaid with higher-cost money. And that could be yet one more reason that the stock market, on average, as anemic as it’s seemed to some, may not be what you’d call a bargain here. Rising interest rates, when they come, will pose a problem.

GLOSSARY

The yield curve is the line your daughter could draw in a graph that shows where interest rates are for different time periods. Usually, short-term money carries a lower rate than long-term rates. Just look in your bank window: a 30-day certificate of deposit might yield (for the sake of the curve I want you to draw in your mind) 1% interest, a 90-day CD might yield 2%, a 1-year CD might be yield 3%, a 2-year CD might yield 4%, and a 5-year CD might yield 5%. These are not real-world numbers, but do you see the ‘curve’ you could draw if you made a graph of that? Sort of like a wave.

REIT = Real estate investment trust.

Libor = London Interbank Overnight Rate (or something like that) – a floating benchmark for very short-term money.

Long bonds were the 30-year bonds the U.S. Treasury used to issue.

Coming soon: The Wisdom of Dick Davis

Yesterday, Bernie said he’d like to leave his broker at Merrill Lynch, but they’ve been friends for 30 years.

John Bercini: ‘One possible solution to Bernie’s problem would be Merrill Lynch’s Consults program, in which Bernie could hire Institutional Money Managers to run a series of private accounts (for diversification) all for around a 2% annual fee which includes custody, transactions reporting, everything. I don’t work for Merrill, I do have money in this program and I do work for a money manager, but we are not in Merrill’s program.’

☞ I appreciate the suggestion but disagree. Two percent is a huge slice of your assets to give up each year. If the stock market can be expected to do maybe 8% a year over the next 20 years (slightly regressing to the mean after 20 phenomenal years), then to pay 2% is to give up 25% of the potential return! Worse, since you probably can’t take the full fee as a tax deduction, if you can take any of it at all. So the 8% you earn might be taxable, while the 2% you pay might not be.

Granted, if Merrill can find managers who reliably beat the market by more than the 2% fee, then this begins to get interesting. But why would Merrill be able to do that?

Merrill Loser: ‘Bernie’s letter about ML could have been mine, except that my money is in ML Funds, which is worse.’

☞ I don’t mean to pile on Merrill specifically. These problems are industry-wide. But I’m sure some of you have been reading about New York Attorney General Eliot Spitzer’s action against Merrill for conflicts of interest. Seems this firm, once renowned for its focus on ‘the little guy,’ was leading more than a few little guys down a primrose path.

BOTH PARTIES ALIKE?

If, for religious or other reasons, you think gay Americans should be denied equal rights, you will probably want to vote Republican. In a forthcoming column, Hastings Wyman compares Republicans and Democrats. He reports that 151 Congressfolk have “perfect” ratings from the bi-partisan Human Rights Campaign – 70% of the Dems and 1.4% of the R’s.

Lowering the bar from a 100 rating down to a 67 rating still brought the Republican tally up only to 8%.

Meanwhile, 63% of the Republicans got a complete zero on the HRC scorecard, meaning that there was not a single place they sided with gays and lesbians.

And in Texas last week, the nine Republican judges who comprise the state’s highest criminal court upheld that state’s sodomy law, under which two men were arrested in 1998 for having sex in the privacy of their own home.

The Bible is clear: women should be subservient to men, slaves should obey their masters ‘with fear and trembling,’ nonvirgin brides should be stoned, and intimate relations between people of the same sex is an abomination. What’s complicated about that?