Home Buyer Tax Credit

The first time home buyers tax credit has been extended, and some changes have been made. Whilst the tax rebate still targets mainly first time home buyers, the added provisions for those looking to move to a new home are nice. They also bumped the income requirements.

Both of those changes are smart, in my opinion. I never fully understood why the credit excluded higher income ranges. When wealthy people buy houses does it not help the economy? Also why not help people who already own a home? Times are tough right now. In a bad housing market some current home owners deiced now was not the time to buy a new home. Now that current home owners (more than 5yrs in your current home) are included, they may feel now IS the time to buy a new home.

Here is a good article with the basic details and changes to the tax credit:
http://news.yahoo.com/s/usnews/firsttimehomebuyertaxcreditgetsobamanod

BP Beats Earnings

BP climbed 4.8 percent, the highest close since June 2008. Earnings excluding one-time items and inventory changes fell 47 percent to $4.67 billion from a year earlier. That exceeded the $3.25 billion median estimate of 11 analysts compiled by Bloomberg.

BP’s results “obliterated market forecasts, as evidenced by the spike in the share price,” said Richard Hunter, London- based head of U.K. equities at Hargreaves Lansdown Stockbrokers. “BP’s contribution to what is becoming a strong third-quarter earnings season is likely to meet with broker upgrades.”

Dividends and Distributions

Dividends and Distributions
Here is a list of some of my favorite stocks that have high dividend yields. (ones I hold in bold)

Div Yeild
7.60% MO
6.50% VZ
6.50% BP
6.40% T
6.10% DUK
6.00% CNP
5.90% RDS.A
5.80% LLY
5.50% BMY
3.90% MCD

I have not included Canadian Royal Trusts like HTE & PGH. Reason being that the dividends on those trusts, while extremely high, are far more risky than those of the above listing companies.

Two Closed-End fund suggestions:

MIN - MFS Intermediate Income Trust
Distribution Yield (Market): 8.56%

Holdings:
41.10% Corporate Notes/Bonds
22.50% Foreign Long-Term Debt
14.33% Foreign US$ Denominated Notes/Bonds
8.45% FNMA-Mortgage Backed
4.33% Other Govt Bond
2.36% Other Mortgage
2.32% Portfolio Other
1.97% Federal Home Loan Mortgage Corp-Mortgage Backed
1.82% GNMA-Mortgage Backed

Rating:
29.12% AAA
22.50% Foreign Currencies
19.76% A
16.68% BBB
9.54% AA
2.32% Other
0.86% BB

HYB - New America High Income Fund
Distribution Yield (Market): 9.58%

Holdings:
94.07% Corporate Notes/Bonds
2.49% Convertible Bonds

Ratings:
1.85% Short-Term
38.68% B
28.21% BB

RBA Raises Rates

Today in Australia the RBA (Reserve Bank of Australia) made a fairly large statement, it became the first G20 to raise rates. This short article gives a pretty good explanation of why the RBA felt the need to raise the rates.

http://www.cnbc.com/id/33191494

I have been a big investor in the Australian dollar (via FXA), and of course am very happy to see this. Not only does it bump up the distribution of FXA (which has taken a beating as their rates dropped), but it also creates more money-flow to Australia. The 'carry trade' has long been a favorite of the Japanese, mainly because of their near zero interest rate. In this case I think the Australian dollar could stand to be the new beneficiary of a new 'carry trade' that once was a standard Yen to USD.

A few more rate hikes in Australia will bode well for the distributions of FXA, and will likely boost the value of the Australian dollar at the same time. This will be due not only to the rate increases, but a steady flow of currency investors and people seeking high rate CD's. You only have to go back 2-3 years to find a time when Australian banks catered CD's for foreign investors. Their high interest rates attracted funds from all over the globe.

I think this is a very good sign for the Australian market as a whole (EWA), partially because some of the new inflow of money will end up there. I currently hold shares of the Australian mining company Fortescue Metals Group (FMG/FSUMF). The stock has been hit hard by the pull back in commodities prices and lower demand, however I think its positioned to do quite well when the Asian economy fully recovers.