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Posts Tagged ‘perspective’

by Jill Johnson, Vice President, The Corundum Group

As 2012 rolls on, we continue to watch the economy with rapt attention. This election and the handling of the pending “fiscal cliff” will both be very telling as to where markets and the global economy will head in coming years.

Congress is operating in an almost continual state of gridlock, and one of the most severe impacts of the stalemate will be felt when and if a series of planned tax increases and spending cuts go into effect the first day of 2013.

Few would argue that the shock of going off this fiscal cliff, as it is being called, would be easy for our economy to absorb.  Among the changes are the expiration of the Bush-era tax cuts, the Obama payroll-tax holiday, emergency unemployment benefits, and the reversion of exemption levels for gift and estate taxes.  The New Year will also see the introduction of new taxes to support the recently passed healthcare law.  When you look at all these factors you can’t help but hope for teamwork in Washington. Election outcomes will impact this whole scene as well as the following chart shows.

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The uncertainty around the fiscal cliff causes us to remain wary and has likely contributed to the sluggish pace of recovery we experienced during the second quarter.  According to a survey of small business leaders conducted by the US Chamber of Commerce, 90% are concerned about the impact the fiscal cliff will have on their business growth. Nearly three-fourths of the respondents believe the recent healthcare law makes it harder to hire more employees. Global factors are also contributing to a fear of the unknown, fueled by economic challenges that continue to impair most of Europe and a slowdown in China.

Chart Source: RBC Global Asset Management, CBO, GS, RenMac, BoAML, DB, Eurasia Group, ISI. Note: Figures and scenarios are rough estimates. * Bush tax cuts for households with <$250K in income, Alternative Minimum Tax patch, tax extenders package. ** Original targeted debt ceiling cuts, old stimulus expiration, overseas military draw-down.

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Contributed by Steve Schneider, President, CB Insurance

ImageEntrepreneurs invest their personal capital to start and build businesses. They write personal checks to make payroll, to fund equipment expenditures, and pay operating costs. They put their own money at risk in hopes of an acceptable return on their capital. Historically, investment risk taken by the successful entrepreneur has been rewarded by increased profits and a long-standing business venture. Those who opened businesses were lauded for their propensity and willingness to incur risk and for their commitment to community and growth.  

Not so much today. In this political season, entrepreneurs are painted as greedy or labeled as Wall Street “fat cats” In reality, most entrepreneurs across the USA are Main Streeters, like you and me. They sit across from friends and neighbors in local churches and restaurants. They get up each morning to work another day–to make a product or provide a service, train or manage staff, attempt to smartly grow a business, and to participate in and enrich a community. Each day across our country, entrepreneurs incur risk and employ others with no guaranty; only the hope of their own success.

On January 1, 2013, the financial success these entrepreneurs seek–the economic reward they pursue by putting personal capital at risk—will be severely diminished. Ordinary income tax rates for many small business owners in the highest tax bracket will increase by over 10%. A new 3.8% Medicare Tax (Obamacare) will be applied to certain investment income, such as dividends and interest income. Capital gains on investments will be taxed at a rate 30% higher than in 2012. Income derived from stock dividends will be taxed as ordinary income, rather than the current 15% tax rate – a whopping +400% increase for those in the highest tax bracket.  All this after the company itself has paid up to 35% of its income in corporate taxes. 

So what’s the big deal? Those doing well should “pay their fair share,” right? We can always debate whether tax rates of 40% income, 35% corporate, 23.8% capital gains, 40% dividend income, and 55% estate (death) are “fair.” The question today is: “Would you write a personal check to start a business, knowing that almost half of what you earn over time will go to the federal government in the form of taxes?”  Or stated another way, “Would you invest your own money to grow a business and employ more people and take more risk, knowing that upon the sale of your business the increased value derived from your investment and sweat equity will be substantially taxed, and, to add further insult, that upon your death more than half of the remaining value might also go to Washington, rather than to your heirs?” 

If you are curious why the unemployment rate remains stubbornly high, why GDP growth is anemic, and why many of our best and brightest college graduates remain unemployed, you need only put yourself in the position of an entrepreneur and ask – “Would I write that check?”

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Contributed by Jill Webb, Director of Business Development, Central Bancorp

ImageAs home to a growing defense industry and military presence, Colorado Springs has the honor to host a number of technical conferences each year that discuss the nation’s defense capabilities–present and future.

I had the pleasure this past week to attend one such gathering of minds at the Wide Area Sensing and Communications (WASC) Conference, which brought together some tremendous defense experts and officials including General Michael Hayden, the former director of the CIA; General William Shelton, commander of the Air Force Space Command; Lieutenant Governor Joe Garcia; and several other Department of Defense officials and industry experts.

These professionals from the commercial and military sectors were here in Colorado Springs to share the latest and greatest in communication and technology platforms that our military and government are using and developing to keep this country safe.

While most of what I saw seemed futuristic and unimaginable, the most interesting aspect of the conference, in my opinion, is that a lot of the technology showcased came from local small businesses right here in Colorado Springs, and they should be commended for their achievements in advancing defense technology.

The following companies were at the conference along with their CEO’s, who shared their latest successes:

Navsys Corporation: Provides technical products and services in GPS hardware design, systems engineering, systems analysis, and software design

SkySentry: A national leader in the investigation and development of high altitude operations

Imprimis Inc: Supports government and private organizations in achieving operational excellence with the effective use of technology

Global Near Space Services: Designs and develops unmanned aerospace systems

Colorado Springs is known for its many great industries, outdoor offerings, and quality of life. Through the work of these industries and more, it has also become the second largest defense industry market in the United States. We should be proud of that accomplishment and celebrate these businesses who are making it happen!

For more information on the WASC Conference, CLICK HERE.


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Contributed by Steve Schneider, President, CB Insurance

For the first time in two years, we are seeing some improving trends with the sales and payrolls reported by our clients.  That’s good news after several quarters of severe declines.  While some clients continue their downsize, many we talk with are now planning for at least some growth in their business in 2011, while still keeping a strong eye on expenses.  We think the hiring of new employees on average will be limited, due to continued economic risk (and increasing health care costs), but expect some upward pressure on salaries for key employees who have weathered the storm.

Indeed, Travelers Insurance just reported sales and payroll growth over their small and mid-sized business insurance portfolio for the fourth quarter of 2010.  There is no doubt that chronic high unemployment will continue to be a drag on this recovery, but trends seem to indicate improvement from the low points of late 2009 and early 2010.

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Happy Thanksgiving!

With all the craziness we experience throughout the year, Thanksgiving is the perfect time to bring back what some of us lose in our daily lives. Perspective.

In one way or another, we have all shared in some sort of loss this year. A death of a close friend, the loss of a job, a troubling time due to the economy, or a feeling of loss with one’s self. Thanksgiving reminds us that even through the losses and hardships we have much to be thankful for – our family and friends who are always there to support us, the second chances we get, businesses unwilling to fail, and most importantly the men and women who fight for our country so we can live our lives in freedom.

We asked around and thought we’d share what some of us at Central Bancorp are thankful for this year:

Ron Johnson – The same as all people, family, friends and health.

Scott Yeoman – I am thankful for those businesses and individuals that used debt prudently leading up to 2008; they are our best prospects and will benefit disproportionately during the economic recovery.

Steve Condon –  I am thankful for the many great clients who trust us to manage their financial affairs. (And, I am thankful for Central Bancorp who supplies me with an unlimited number of logo golf balls.)

Jill Webb – I’m thankful for the internet.

Happy Thanksgiving!

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