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Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses Politics And The Market, IMF Cutting Outlook For Global Growth and Taxpayer Rights You Need To Know On ESPN Radio – January 22, 2016 Show

January 22, 2016/0 Comments/in Podcast/by Tax Attorney

Topics Covered:

1. Politics And The Market: Where are the U.S. and global markets are headed, when we begin the New Year in a slump and the Presidential election is right around the corner.

2. Recap from last week, as the International Monetary Fund once again cuts it outlook for the world economy, warning Tuesday that economic turmoil in China and financial contagion throughout emerging markets threaten to curb global growth.

3. Valuable rights you have as a taxpayer when interacting with the IRS.

4. Questions from our listeners:

a. If emerging markets are unstable and oil and commodities are tanking, which market segments should I be looking at for more stable growth when investing for retirement?

b. Will calling the IRS help me get my refund any faster?

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Jeff states: Yes sometimes we just have to take the money and run!

Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.
This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.

Windus states:

And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.

You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

Jeff states:

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Windus states:

And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Jeff states:

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.

Jeff states:

For today’s show we have coming up:

Segment 2 material: What could be in store for the global financial markets in 2016 now that the IMF once again cut the outlook for the world economy?

Windus states:

Also coming up is:
Segment 3 material: The second part to our series on getting to know your Taxpayer Bill of Rights.
And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Windus.

Jeff states: So for today’s top story:

Politics and the Market: Where are the US and global markets are headed, when we begin the New Year in a slump and the Presidential election is right around the corner.

Several recent articles in the Wall Street Journal and The Week, review recent market analysis and the presidential campaign trail. http://www.theweek.com/articles/599573/hillary-clinton-biggest-glass-jaw-politics http://www.theweek.com/articles/599576/donald-trump-right-pick-trade-war-china-just-wrong-strategy http://blogs.wsj.com/washwire/2016/01/20/john-mccain-stocks-plunge-will-hurt-democrats-in-november/# http://nyti.ms/1OGtcTz

Jeff states: The hits just keep coming, don’t they? The U.S. stock market had a turbulent day of trading mid-week as economic growth and the decline in oil prices continues to worry investors. During the peak of trading on Wednesday, the Dow Jones Industrial average was down a whopping 500+ points before redeeming itself to a near 250 point down for the day, or 1.5%. At market close, the S&P 500-stock index was down roughly 1% after fluctuating as much as 3.7%, while the NASDAQ, mostly tech-heavy, was left relatively unaltered.

Windus replies: Yes, Jeff. Wall Street had a fairly volatile day right off the bat on Wednesday, in response to the announcement after market close on Tuesday that IBM had seen a drop in its fourth quarter profit. This only adds to the heavy losses we’ve been seeing all month, with enormous amounts of selling reportedly amounting to more than $3.6 trillion globally, according to Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices.

Jeff continues: The early morning sell-off affected a broad range of global investments with the European stocks sinking severely, the Euro Stoxx 50 index down 3.3% and London’s FTSE 100 dropping 3.46% for the day. While Japan closed down 3.7%, showing a decline of more than 20% in the Nikkei 225 since its near-term high in June.

Windus states: With the state of the market in what it is, let’s reflect on how this might affect the upcoming election, this November. An article in the Wall Street Journal from the perspective of John McCain sheds light on the effects of a market plunge during an election year, with consideration to what the previous market crash did to his 2008 bid for presidency.

Jeff replies: On Wednesday in a brief interview, Mr. McCain stated that he bore the brunt of public outrage since voters blamed the Republicans, as Republican George W Bush then occupied the Oval Office. His speculation is that, this election year, the Democrats will suffer, as we now have President Barack Obama occupying the White House. “People hold presidents responsible,” he articulates.

Windus continues: Now the one big difference is, in 2008, the market plunge corresponded to the banking fiasco as many of the country’s financial institutions went under, taking the economy down the tubes with it. This time around, the slump is tied to economic slowdown in China.

Jeff replies: Also, the 2008 market collapse came just weeks before the November election, whereas we now have close to ten months to see the market turn around and have the economy recover. Therefore, it’s really too early to start speculating on government involvement, as Senate Minority Leader Harry Reid confirms that it is premature to conclude that the decline in the stock market reflects broader problems in the economy.

Windus states: In which case, let’s look at the Democratic candidates and see what else will be weighing against them. In the weeks beginning the New Year, Hillary Clinton’s national polling lead over her primary opponent, Bernie Sanders, has plummeted much like the market. All things considered, it’s astonishing that Sanders has gotten within striking distance.

Jeff replies: Let’s break this down to explain. The Democratic Party has long been enthusiastic for more diverse representation, and let’s face it, Sanders is a 74 year old white male, who is not particularly a great orator, and without any roots amongst minority groups. In 2008, Obama gained a significant amount of his support for potentially being the first black president. Now in 2016, Clinton would be the first woman commander-in-chief, thus claiming representational value as the first female president.

Windus continues: That being said, odds were firmly stacked against the Vermont Senator’s campaign. But what he lacks in prominence, he sincerely makes up for in credibility. His “root-and-branch” analysis of the American political and economic structure have been corroborated in the post-recession market, according to The Week. They continue by stating, ”The good old Bernie Sanders had been right there the whole time, railing against both conservatives and Clintonite neoliberal compromises”, when commenting on inequality nearing a record high, a decades old stagnant median wage and Wall Street basically owning Congress.

Jeff replies: So how do you beat a contender like Sander’s? Strategists lay it out simply, “acknowledge the basic truths of his perspective, but insist that Clinton is the more experienced, electable, pragmatic candidate….and run out the clock.” See if that will dampen Sanders unpretentious gusto, gaining on Clinton, as Obama before him.

Windus states: Clinton in turn has made a series of incoherent tactical mistakes, including over the past week, an obviously strategized attack on Sanders’ health care plan, drawing Republican speaking points. Let’s face it, if she continues to attack liberal goals, more leftist supporters will be willing to bet on someone who won’t betray them. Let’s take this moment to discuss the last GOP debate.

Jeff states: I’m sure everyone heard of the exchange between Donald Trump, Ted Cruz, and Marco Rubio last week. I’m talking about the one that started when host Neil Cavuto brought up an article by the New York Times that confirmed Trump supporting a 45% tariff levied on imports from China. Trump acknowledging a misquoting on the amount of the tariff, went on to defend the broader policy.

Windus continues: His reasoning behind supporting a plan for raising taxes on imports from a specified country, i.e. China, is to make those imports more expensive domestically. Bringing their price into balance with comparable American goods, providing Americans with a greater tendency to buy the latter. Considering the U.S. trade deficit with China was a monstrous $342.6 billion in 2014, Trump isn’t exactly mistaken here.

Jeff replies: Let’s look at it this way. As you said Windus, U.S. was indebted $342.6 billion in goods in 2014. That means that the demand for those products didn’t generate jobs in the U.S., but in China. In 2013, the Economic Policy Institute estimated that since 2001, we’ve lost 2.8 million jobs to China, primarily in manufacturing. This hurts the working class since these lost jobs are predominantly held by lower-income Americans.

Windus continues: However, where Trump is flawed is endorsing tariffs as a solution when the core problem is currency manipulation by the Chinese government. They are buying up U.S. dollar denominated assets in immense magnitude, driving up demand for the dollar, which increases its value. What do you get? American exports are more expensive and Chinese imports are cheaper. Tariffs would only affect imports. We need to make American exports cheaper to revive jobs at home.

Jeff replies: Now China may not be the only currency manipulator in the world, but it’s definitely the biggest. Since currency manipulation by China and other countries took off in the 1990’s, the annual totals for America’s trade deficit have exploded, according to The Week. Good news is that the Chinese are trying to “mend their ways and been seen as a reasonable player”, says Robert Scott, EPI’s expert.

Windus states: The good news is that the United States already has the legal implements to rebalance the holdings of assets in the two countries. According to Scott, “The Treasury and the Federal Reserve have the authority to buy Chinese assets to offset their purchase of U.S. assets, if they’re destabilizing our economy.” One way to put it would be a proposal called, “countervailing currency intervention,” that basically neutralizes the effect with strategic purchasing of assets.

Jeff replies: This would still be a trade war of sorts, but it creates a balancing effect with a long-term goal of convincing the offending country to lessen its holdings with an agreement for the U.S. to follow suit in a rewarding equal measure. This would essentially keep China from continuing to export its unemployment problem to the States.

Windus finishes: That’s right, Jeff. Unlike the Chinese, the U.S. hasn’t devaluated our currency to increase demand for our goods, ending up with more jobs being sent oversees creating an increase in inequality and a decrease in enough jobs to keep everyone employed.

Well it’s time for a break but stay tuned because we are going to tell you what could be in store for the global financial markets in 2016 now that the IMF once again cut the outlook for the world economy.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Recap from last week, as the International Monetary Fund once again cuts the outlook for the world economy, warning Tuesday that economic turmoil in China and financial contagion throughout emerging markets threaten to curb global growth.

Jeff states: Considering the last few weeks in the market, Windus and I think it would be good to discuss how the economic outlook for the world economy is shaping global growth.

Jeff continues: But before we do Windus would like to remind you of her offer …

Windus Plug: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169. Or visit www.guideyourstory.com.

Jeff states: Some recent articles in The Wall Street Journal have looked at what we could expect in the way global growth decline and its effect on the world economy, given the instability on Wall Street with a lack luster start to 2016. This, in conjunction to a widening trade deficit and what looks like a full blown financial crisis in China. http://on.wsj.com/1RQez6r http://on.wsj.com/1RQbpPW http://on.wsj.com/1V4nXkq http://on.wsj.com/1RR3jqr

Windus states: That’s right, Jeff. According to International Monetary Fund (IMF) chief economist Maurice Obstfeld, “it’s going to be a year of great challenges, unless the key transitions in the world economy are successfully navigated, global growth could be derailed.” This is expanded upon in the fund’s recent update in its World Economic Outlook.

Jeff states: A large part of the current stumble seen in global markets is concern of the world’s second largest economy, China. Investors have been pulling a lot of their capital out resulting in a surge in borrowing costs and suppression of currency. With commodities prices taking a nose dive as seen with oil prices and weak global demand, prospects of growth across emerging markets is questionable.

Windus continues: When it comes down to it, exporters have received the brunt of this effect. The IMFs forecast for Brazil diminished by 2.5 percentage points down to 3.5%, as the scandal of government corruption is compounding growth problems. Russia’s growth will contracted by 1%, a 0.4 percentage point under the previous outlook, while the Eurozone and Japan are struggling to recuperate growth amidst lofty debt loads and weakened demand, providing little expansion by 1.7% and 1%, respectfully.

Jeff replies: Here in the U.S., a strong dollar is crippling exports, therefor softening the acceleration of the world’s largest economic engine. The IMF has given the American economy a growth rate of 2.6% his year, up just a 0.1 percentage point from last year, but a 0.2 percentage point down from their previous predictions.

Windus states: As far as China is concerned, the IMF left its forecast to settle at 6.3% this year, with a projected 6% for next year, falling from 6.9% in 2015. While these rates are lower than Beijing’s official estimates, the effect of monetary and fiscal policy growth being extracted by authorities will steadily deflate the financial sector.

Jeff replies: This is where investors begin to worry. Beijing’s ability to implement economic shift from a credit based model to a more consumption based one, is uncertain. As stated in the Wall Street Journal, “the country’s debt burdens, excess manufacturing capacity, questionable data and a series of recent policy missteps are all raising concerns.”

Windus continues: The fact is China’s pending economic doom is fanning the flame of market volatility. Or more generally speaking, emerging markets are vulnerable to a financial crisis the IMF warns. Over the past year, emerging market bonds, currencies and equities have taken a beating as investors have withdrawn hundreds of billions of dollars. The concern of an accelerated, plummeting China or even the U.S. Federal Reserve alluding to a more aggressive interest rate, could potentially turn the seeping outflow of money into a torrent flood.

Jeff replies: In order to offset these risks, the IMF has sounded its familiar “call to arms” of additional government stimulus and a revamp of economic policy. “A mix of demand support and structural reforms is even more urgent,” says the world’s premier economic counselor. Obstfeld caution’s not stumble into a deflationary trap, as weak demand risks pushing the global economy over the edge.

Windus replies: Now what does the IMF have in mind as far as a plan of attack? Well, the fund advises the Feds to hold tight for signs of more solid growth before taking on higher interest rates, whereas central banks in Europe and Japan should floor the “easy-money gas pedal”. Countries with a little more wiggle room in their budgets, like Germany for instance, should throw taxpayers funds into the economy, with an emphasis on spending. In addition, requiring emerging markets to focus on credible economic reforms that would result in boosted economic growth, would in turn bolster investors.

Jeff states: So when should we see global growth pick up? The IMF predicts growth rates to remain fairly flat next year for many of the world’s largest economies, and given that China’s economy is due to slow, the slight increase in global growth in 2017 is expected to come from Brazil and Russia recovering from their two-year recessions.

Windus states: Focusing more on the China factor, the world’s second largest economy is, in fact, signaling weakening economic momentum. According to Nomura Group economist Yang Zhao, “the real economy basically hasn’t picked up very well”, as China forecasting choppier seas ahead of them with growing debt and excessive housing and factory capacity.

Jeff replies: Any gains from the recovery of the summertime crash have been depleted, as stocks fall into the New Year. That, and any tools the government has traditionally used recover growth are proving progressively ineffectual, i.e. infrastructure spending, easy money and ramped-up exports. Not to mention, as we alluded to earlier, the reliability of China’s economic data flashes concern that growth is declining at a higher rate than the government is actually reporting.

Windus replies: These fears of unreliable data combined with concerns over the nose-dive of oil and commodities prices, are said to be the cause of the 2016 stock market slump, according to the Wall Street Journal. Don’t get me wrong, companies like Delta Air Lines are profiting off of the dive in oil prices. The recently named, No. 2 carrier, even showed a little 1.4% recovery in the market once confirming final quarter profits. This was after a rough 12% loss into the 2016 tumble.

Jeff states: Let’s continue to bring it home a little more. Saying at the same time that there are weak spots in the economy, the Federal Reserve continues to endorse the strength in the job markets signally positivity. The December jobs report of 292,000 added jobs in the U.S., exceeded analyst expectations, while unemployment remained a low 5% and steady core inflation, despite declines in oil prices.

Windus replies: Standing behind their decision to raise interest rates this past December, the Feds new target from short-term rates, of 0.25%-0.50%, is still well below the long-term average, and is still supportive of economic growth and financial markets. Not to worry, they won’t automatically continue to raise rates, but will consider any changes in the economy.

Jeff states: Contrary, Peter Boockvar, chief market analyst at the economic and market research firm called the Lindsey Group, argues the Federal Reserve should raise rates this year on the basis of driving the U.S. economy on a more beneficial long-term trajectory, regardless of the risk of pushing us into another recession. He continues by saying, “there will never be a good time to raise interest rates after being easy for so long, but we can either turn into Japan(which has had low rates and low growth for many years), or break out of the trap” by jump starting interest rates.

Windus states: Well it sounds like 2016 will be a challenging year for investors which is another reason why …

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169. Or visit www.guideyourstory.com.

Jeff states: Stay tuned because after the break we are going to tell you valuable rights you have as a taxpayer when interacting with the IRS.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

Getting to Know Your Taxpayer Bill of Rights

Jeff states: Did you know that every taxpayer has a set of fundamental rights. The Taxpayer Bill of Rights takes the many existing rights in the tax code and groups them into 10 categories.

But before we start, we want to remind you that … PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff continues: Every taxpayer should be aware of these rights before interacting with the IRS. We covered the first five in last week’s show so today we will cover the remaining five and grade how the IRS is doing on preserving each right for taxpayers.

[Windus to read off each “right” followed by comment by Amy and then by Jeff. Windus to end each one asking Amy and Jeff what grade they give from IRS on a scale of A to F. OK for Jeff and Amy to give different grades. Windus can ask why the difference.]

Windus states: It’s great that I have not one but two tax attorneys that I can bounce these rights on.

Number Six … The Right to Finality. Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.