kiplinger connection
The Economy • Taxes • The Mail Pouch

The Economy: Mortgage fed support, but only so far.
Taxes: 2008 IRS mileage rate to go up to 50.5 cents.
The Mail Pouch: USPS increases will finally annualize.

The Economy
Can the White House mortgage plan stop a foreclosure avalanche?
It’s hard to see how, at first glance. The plan is voluntary. Lenders and mortgage servicers have broad discretion on who qualifies.
There are plenty of restrictions: Borrowers can’t be in arrears by more than a month, and they can’t already be in foreclosure. Mortgage holders with credit scores above 660 also aren’t eligible. Nor are any whose incomes suggest that they can’t even pay current rates. The plan also doesn’t seem to fulfill Treasury Sec. Henry Paulson’s goal of turning the foreclosure process into less of a case-by-case slog.
But it should help ease the panic about the housing situation. Prospective buyers and sellers will be happy to see some sort of support provided to the market. They’ll also expect that more aid will be coming.

Odds are for a small interest rate cut by the Federal Reserve on Dec. 11 to help prop up consumers in the challenging months ahead. Look for a quarter percentage point trimming of the federal funds rate. The latest job report argues against the half-point that some analysts are predicting. The report, showing a gain of 94,000 jobs in Nov., portrays an economy that is losing steam but not at an alarming pace.

A dark cloud has parked itself over commercial real estate:
Interest in bonds backed by commercial assets is plummeting. This market, which finances about 25% of new investment, showed few signs of being infected by the general credit market meltdown until last month. But conditions have rapidly worsened, even though commercial real estate doesn't suffer from the reckless lending problems seen in housing.
Issuance will likely fall by half next year, to $110 billion, ensuring that construction will flag. That said, industrial property will fare better than office development, which is feeling the effects from slumping activity in financial and related sectors. Warehouses should continue to get asset-backed funding, thanks to export-led growth.
As for office rents ... figure on an average 3% increase next year, assuming the economy avoids a recession. Rents have gained 7% this year.

OPEC isn’t handing out any holiday presents to oil consumers.
The cartel will instead take a punishing line on crude prices, based on its latest decision to hold members' production quotas steady. OPEC seeks lofty prices to offset the weak dollars it gets for oil.
The upshot: Don't expect crude to fall below $80 a barrel during the usual seasonal swoon in mid- to late winter. In the spring, look for an upswing in the price of oil to the $90-plus range.
Gasoline's winter low in Feb...a still pricey $2.80 a gallon, based on the national average for regular, vs. last winter’s $2.16 low. After Feb., expect a gradual rise to a peak of $3.10 a gallon in June.

We're downgrading our car sales forecast to 15.5 million in 2008, the lowest level since 1998. Consumer unease about housing values, tougher access to credit, and high gasoline prices will brake the market.
Chrysler will manage to hold its market share steady at 12.9%.
General Motors’ share is poised to fall by half a percentage point to 23.2%, and Ford's will probably slide a similar amount to 13.9%.
One big problem for Detroit: A lack of subcompacts for sale. About 600,000 will be sold in 2008, more than double last year’s total. But among the U.S. carmakers, only GM has one to offer, the Chevy Aveo. More foreign competition is coming as Daimler launches the Smart Fortwo.

Taxes
The IRS mileage rate is going up 2¢, to 50¢ in 2008.
But the rate for medical travel and moving drops to 19¢ a mile, down 1¢. Why? This rate doesn't include fixed costs such as depreciation, which is what fueled the rise in the business rate. The allowance for charitable driving, which is set by Congress, will remain 14¢ a mile. Parking fees and tolls are deductible, but fuel and repair costs are not.

The Mail Pouch
Business class postage is on course for a 2.5% increase ...
5% for overnight delivery. These should both take effect in May. Business rate hikes will vary by volume and the level of presorting. First class stamps are going to advance a penny to 42¢ at the same time.
After this move, an era of more predictable pricing will begin. The U.S. Postal Service will announce raises annually, basing them on a formula tied to the rate of inflation over the previous two years. Businesses will no doubt cheer the end of unpredictable, less frequent, but typically large rate hikes that have been the norm until now.