The president delivered his budget to lawmakers today and it would be silly to say it was anything but doomed as written. I would say not to base any decisions on what is publicized as being in the budget. What sort of things am I basing this on?

• The Bush Budget proposes that people would get AMT relief for just one more year (conveniently into the next election) and then AMT would be left as it is, likely to hammer millions of Americans with higher tax rates and removed exemptions. Nobody really believes the Democratic majority will give Bush such a bit of free electioneering, or that they would let the AMT go unrepaired. As a yearly AMT victim, I wouldn't mind a major fix, but the chances are that any fix won't effect the somewhat more wealthy readers of this column
  
• The budget also keeps the Bush Tax Cuts, sort of Mr. Bush's signature move of his presidency, and funds it by making cuts to lots of government agencies and raising the interest rates on student loans. This one is sort of a dare to the Democrats to raise taxes and make the Republicans look better. We'll see what happens there.
• Finally and most notably much of the savings come from presumed cuts to sacred programs like Medicare and Medicaid, almost all slated to take place after President Bush is out of office. Yeah, right.

Meanwhile some other tidbits of interest:

• Paul Kedrosky comments on the rising vacancy rate for residential real estate, a figure that has increased to its highest level in four decades. “One way to look at it is that, on average, if you wander around your neighborhood and knock on a random sample of 37 homes, one of them is likely to be empty … all the time,” he writes. “Another, and somewhat more serious way of looking at it, is that vacancies create a kind of pressure-cooker, with people increasingly eager to do something, anything to get a sale given that their home is otherwise sitting empty.” [via wsj.com]
• According to Birinyi Associates, two of the most overbought stocks in the S&P 500 are two of the home builders — D.R. Horton and KB Home, and those two haven’t been more overbought in the last 200 days, a potential warning sign. [I say get out now if you are in these.] [via wsj.com]
  
• Morgan Stanley now believes the Federal Reserve will be on hold throughout 2007, and its next move is as likely to be a rate increase as a rate decrease. “Despite our growing confidence in the sustainability of growth, we must acknowledge downside risks: A sizable jump in bond term premiums could make financial conditions more restrictive,” they write. “A significant backup in rates could weaken housing activity and potentially trigger business caution, stifle job growth and further depress housing prices.”
• John Wasik tells readers how to navigate the unsteady waters of the U.S. real estate market. “Determining whether it’s safe to purchase in any given area is a tough call. Local economic conditions combined with mortgage rates and speculative trading make things complex,” he writes in Bloomberg News. “Yet by collecting information to make a matrix on foreclosures, property-loss risk and sales trends, you can get a reasonably good idea of which markets to avoid.”

Invest well,
FW