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What Are Bloggers Thinking?

“Economic bloggers have a bleak outlook of the U.S. economy,” or so says the Kauffman Foundation in its inaugural quarterly survey. The organization asked many of the top 200 economics bloggers in mid-January for their views.

Many respondents (48%) believe that the U.S. economy is worse than the official government statistics show. (Only 6% thought the economy was performing better than statistics indicate.) Overall, economic conditions were described as “mixed” by the majority of bloggers (59%), though nearly a quarter (23%) said the U.S. was “facing recession.”

Bank lending to businesses, bank lending to individuals, and small businesses were all described as problem areas. Furthermore, bloggers thought that the budget deficit, real interest rates and inflation had the highest prospects for increasing over the next three years.

Despite an even split between Democrats and Republicans (47% claimed to be independent), most respondents (71%) thought the government was too involved in the economy. Given this, it should not be surprising that Congress was given a failing grade for its economic policies. Though government watchdogs (such as the Government Accountability Office and the Congressional Budget Office) and the U.S. business community were assigned the highest marks, their grade point average was only the equivalent of a C+. (Government policy is currently the primary topic for most economic bloggers.)

So what should be done to fix the economy? Human capital, innovation and economic freedom were selected as the three key variables that should be included in a growth policy. The majority of respondents said the federal government should increase high skill immigration and legal immigration. Bloggers also suggested reforming Medicare and Medicaid spending in order to balance the budget. (Reducing spending on Social Security and defense were virtually tied as the second-highest priorities for balancing the budget.)

Source: “Kauffman Economic Outlook: A Quarterly Survey of Leading Economics Bloggers,” First Quarter 2010; www.kauffman.org.

Better Analysts: Men or Women?

Which gender makes for a better stock analyst, male or female? A recent study published in the Financial Analysts Journal sheds light on the issue.

The study’s authors, as part of an attempt to determine if Wall Street firms set a higher hurdle for women, looked into the performance of stock analysts. Specifically, they looked at 11 years of data for both male and female analysts.

The results were decidedly mixed. (Our apologies go to those hoping to settle a disagreement or bet with their spouse.)

Men tended to be more accurate in projecting a company’s earnings. In fact, absolute forecast errors were 1.46% lower for men than they were for women.

Women, conversely, were significantly more likely to be designated as an All-Star Analyst by Institutional Investor magazine. The study’s authors believe that this suggests women are better at other aspects of their jobs such as industry knowledge, integrity, responsiveness and management access.

As far as whether Wall Street firms hold women analysts to higher standards than their male counterparts, the authors did not find this to be the case. Nonetheless, women continue to represent a much smaller proportion of the analyst community than men.

Source: “Gender and Job Performance: Evidence From Wall Street,” by Green, Jegadeesh and Tang, November/December 2009 Financial Analysts Journal.

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New Rules for Tax Preparers

Tax preparers are coming under increased scrutiny due to an initiative announced by the Internal Revenue Service this year. New rules will establish federal standards for the first time.

Starting in 2011, tax preparers will be required to register with the IRS and obtain a preparer tax identification number (PTIN). Competency tests will be administered and ongoing continuing education is mandated. Finally, ethical rules will apply to all paid tax preparers.

Attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies are excluded from the new rules. The rationale is that such professionals are already being held to professional standards. Individuals who volunteer to assist with tax preparation are also exempt.

If you are looking for a tax preparer, the IRS suggests being wary of anybody who claims they can obtain larger refunds than others or bases their preparation fee on the size of the refund. In addition, ensure that the preparer signs the return and provides a copy. Never sign a blank tax form.

The IRS states that reputable preparers will ask to see receipts and will ask multiple questions to determine whether expenses, deductions and other items qualify. The role of a good preparer is not only to limit your tax liability or increase your refund, but also to help you avoid penalties or, worse, an audit.

Regardless of whether assistance is sought or not, the ultimate responsibility for ensuring that accurate returns are filed on time will continue to rest with the taxpayer. It is important to maintain at least a basic understanding of tax regulations, provide all necessary documentation and check the math.

Tax software programs are also excluded from the new rules, though the IRS is looking into setting up standards for such programs. If you prefer to use tax software instead of a tax preparer, the March Computerized Investing Online Exclusive reviews the latest versions of TurboTax and H&R Block At Home (formerly known as TaxCut). A separate subscription is required to access CI articles (www.computerizedinvesting.com).

Source: Internal Revenue Service (www.irs.gov).


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