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Axiom Strategy Advisors, LLC
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Metairie, La. 70009

Factoid of the Week

Canada had long imposed tough lending standards and high capital requirements on its banks, and those rules have actually helped Canadian banks to survive the financial crisis better than their counterparts. And though the commodity-rich country did not entirely escape the global recession, its economy did remain comparatively strong. Now a number of large U.S. banks are looking more closely at bolstering their presence in Canada. Hoping to...

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AxSA Factoid of the Week

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Canada had long imposed tough lending standards and high capital requirements on its banks, and those rules have actually helped Canadian banks to survive the financial crisis better than their counterparts. And though the commodity-rich country did not entirely escape the global recession, its economy did remain comparatively strong. Now a number of large U.S. banks are looking more closely at bolstering their presence in Canada. Hoping to dodge the Volcker rules expected to be included in pending, financial-reform legislation, banks like Citi, Goldman Sachs, and JP Morgan are exploring ways to save their proprietary-trading and hedge fund operations, even if it means moving them from Wall Street to Bay Street.

We have been tossing out tons of trash everyday, and all of that waste has led to an array of ecological troubles, particular in less privileged parts of the world. To improve its own waste-management efforts, the United Kingdom has embarked on a plan that, in essence, levies new taxes on big trash disposers. Roughly 2.6 million homes and businesses now have trash bins equipped with microchips that weigh the amount of waste being tossed. For every 2,204 pounds of trash tossed out, British households and businesses will pay an extra $12, and to coordinate this “pay-as-you-throw” initiative, the government will pay about $90,000 per annum to have plain-clothed technicians to collect data from the bins.

Ciudad Juarez, Mexico, is a city at war with itself, and the businesses and residents of this one-time boomtown along the U.S. border have been hit hard by the violence. Following the passage of NAFTA, Juarez prospered as a sourcing center for American manufacturers, but along with the benefits of increased trade, there was also the rise of a deadly drug culture that used the city as a trafficking point. At one time, nearly 70% of all cocaine shipments to the U.S. passed through this city. Now with a drug war waging for control of the trade route, thousands of lives have been lost, and nearly 400,000 residents, many of whom had led middle-class lives, have fled. What’s more, upwards of 40% of all businesses in Juarez have been shuttered, as many of them have moved south of the city or even into neighboring El Paso, Texas.

Projections suggest that global investment in clean energy will reach $200 billion in 2010, and monies from the G-20 nations now account for 90% of that. Leading the way in the effort to create practical energy diversity, surprisingly enough, is China. It spent approximately $34.6 billion in 2009, and that was followed by the United States and the United Kingdom, at $18.6 billion and $11.2 billion, respectively. Here, in the U.S., hopes are high that new tax credits and the prospect of stimulus dollars will pique investor interest and ignite the sagging manufacturing base of the clean-energy sector, which has long trailed its research and development base.

The corporate tax rate in the United States is roughly 35%, and that might seem punitive a number of American business owners. However, before anyone considers fleeing to greener pastures on foreign soil, consider the comparisons. Of course, places like Ireland, Germany, and Hong Kong have lower corporate tax rates at 12.5%, 16.5%, and 15%, respectively, but relatively high labor costs, along with the other costs of doing business, make Hong Kong and Germany tough sales. Beyond these, even Australia, which prides itself on a competitive rate, still levies a corporate tax of 30%. And in beautiful, yet crime-infested, South Africa, the standard rate is 28% with an additional 10% dividend tax on businesses.

The corporate tax rate in the United States is roughly 35%, and that might seem punitive a number of American business owners. However, before anyone considers fleeing to greener pastures on foreign soil, consider the comparisons. Of course, places like Ireland, Germany, and Hong Kong have lower corporate tax rates at 12.5%, 16.5%, and 15%, respectively, but relatively high labor costs, along with the other costs of doing business, make Hong Kong and Germany tough sales. Beyond these, even Australia, which prides itself on a competitive rate, still levies a corporate tax of 30%. And in beautiful, yet crime-infested, South Africa, the standard rate is 28% with an additional 10% dividend tax on businesses.

When Ronald Reagan was sworn into office as President of the United States, the national debt was only $1 trillion. Today, nearly thirty years later, it is over $12.5 trillion, with approximately $100,000 in interest accruing every two seconds. In order to repay this colossal sum of borrowed money, every American would have to shell out about $53,000—an unlikely amount, given that the per capita income in the United States, according to the IMF, is only about $46,000 per annum.

When Ronald Reagan was sworn into office as President of the United States, the national debt was only $1 trillion. Today, nearly thirty years later, it is over $12.5 trillion, with approximately $100,000 in interest accruing every two seconds. In order to repay this colossal sum of borrowed money, every American would have to shell out about $53,000—an unlikely amount, given that the per capita income in the United States, according to the IMF, is only about $46,000 per annum.

Most Americans are not aware of this, but buried deeply within the substance of the recent jobs bill is a new rule intended to shed brighter light on Americans sheltering assets abroad. The measure in the Hiring Incentives to Restore Employment (HIRE) Act calls upon foreign financial institutions to identify to the IRS all of their American clients and disclose all payments to, and activities associated with, those clients’ accounts. A failure on the part of any foreign institution to properly report this information to the IRS will result in the penalty of a 30% withholding tax on certain income from U.S. assets held by that institution.

When the month of March comes to an end, the Federal Reserve will own about $1.25 trillion in mortgage-backed securities. That large sum is the result of the acquisition of ten of millions in toxic assets from ailing banks and, at one point in 2009, the ravenous purchases of $3 billion in mortgage-backed securities from GSE’s each day. The overarching effect of these actions by the Fed, when viewed separately from its purchases of Treasury notes, has been a double-edged sword. The action did lower mortgage rates, providing some stability to the housing sector; however, it also pumped hordes of new cash into a recovering marketplace, diminishing its value and stoking inflationary fears. Therefore, to maintain the integrity of sound monetary policies, the Fed will soon need to consider meaningful increases to interest rates and an end to its print-and-spend programs.

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