Wednesday, May 20, 2009

The Absurdity of Reality

Bank of America is going to sell another 825 million shares of stock at $10 a share. What the Company is doing to the share holder, is about on par with selling a hooker lipstick that prevents VD (you have to be blond to bite on that one). The TARP money is no good? It’s kind of hard to figure that out considering that the banks don’t have to account for it.

Put it another way, Bank of America needs 8 billion dollars to stay in business. So if you are already a stock holder, the added dilution is welcomed. Something added to nothing gives you a few cents in the “Bank.” Both Citi Bank and B of A have a good chance of collapsing sometime this year due to an inability to finance their credit operation.

Congress in their infinite wisdom is passing a law on credit card usury rates. Look for your rates to jump sky high before the law takes effect. The Credit card companies are not interested in future business, they want the money they loaned out, back, and that just isn’t going to happen.

Everyday now, we hear the phrase, “We have hit bottom.” Things are going to get better. California voters just turned down a bunch of bond measures to fund the budget. I guess hitting bottom, means that the Governator is taking bids on recycling the copper plumbing in state offices.

What gets cut first? --- Prisons, welfare, mental asylums, schools, teachers, fire, health services, and police. So if you have less than 5 years to serve in prison, you’ll be released. If you’re under mental treatment, you get to go “home” (find a shopping cart). Less school hours and no jobs, the neighborhood kids will be ransacking your house while you are at work. The police won’t arrest anyone, why bother, they won’t go to jail. So what are they going to do? Write you a traffic violation ticket and generate some revenue. Do you get the feeling that a lot of us are about to become victims in this fall from grace?

The California budget has had to face reality which is a good thing. The reality is that Disneyland is in California, but Congress thinks that Tinker Bell can throw this Fairy Dust (TARP money) everywhere. Governor Schwarzenegger is not asking Congress for fairy dust, he’s asking Congress for real help.

The Grand Old State of Kalifornia could go bankrupt while the banks gorge on Tarp money. Go figure, and they don’t even "want" it!

Thursday, May 14, 2009

US Government Faces Bankruptcy

Our government has spent all of the Social Security and Medicare surpluses. They weren’t spent on what they were allocated for, but they were spent. There is no problem spending money that is allocated further down the road; today you can always cover the amounts with the current budget. That is unless you run into a deep depression (and we know that that could never happen).

So what has happened, we are broke. The only way to fix it is to raise taxes. No one wants new taxes. Let’s propose new benefits for everyone like health care. The idea here, is that it is mostly money coming in with very little going out. The contributors are quite young. There is a 40 year lag time on having to pay out in real dollars.

The idea that Social Security, Medicare and Health benefits are undeniable benefits is absurd. These contributions are taxes. Your W-2 form shows what you paid where. It shows what your employer paid, but you paid that also (your employer figured it into your wage rate). The Supreme Court ruled Social Security taxes are taxes, the government can spend them as it sees fit.

Congress wants to offer us universal health care. Notice it is not free. They didn’t say that. They are going to charge you for it. Right now, you can get free medical care from any emergency room. What makes this different? Your paid wages will be subject to a health tax.

We can probably assume that 90 percent of those paying into the program are probably healthy and in very little need of health care. So from here the money is transferred to our over extended budget. At the same time you have to figure that all of those retired silver foxes on Medicare are relieved that their savings will not be wiped out by health costs. God Bless Congress in their infinite wisdom!

The shift of leadership to the Democratic Party didn’t change the seriousness of the problem, but now there is the chance that health care can be passed as a “benefit.” In actuality, Congress is raising our taxes without really figuring out how to pay these future benefits. The future will take care of itself, that’s what worries me with this Congress.

Obama needs the health care to pass. This benefit will take about $5,000 from each wage earner's yearly paycheck. We will have Universal health care and will probably have to wait 5 hours to see a physician.

We can’t borrow from other nations. Who will loan the government money at zero percent interest? My wife and I have gotten out of T-bills. We are putting our cash in a safety deposit box. We are not the least bit interested in interest rates of .17 percent. Give us a decent rate, and we might loan out our money.

Monday, May 11, 2009

"Free" Healthcare or "Raise Taxes?"

Obama says that 45 million Americans are without health insurance. Just tragic! Right! Is he talking about the 60 million kids under the age of 15? Or the 80 million people between the age of 15 and 34? Then there is another 100 million are between 35 and 59.

This number of people “neglected by our health care system” is probably severely mis stated. I assume that they can’t pay for it themselves. In order to cover them, those of us that pay for health care insurance must pay more since they can’t.

Add it up; there are about 140 million people under the age of 34 that really don’t need health insurance. Why not? They are healthy. Health insurers give them a very good rate on insurance. This is called the gravy boat, money coming in and very little going out. Under Obama’s plan, their rates could triple.

Have you had two heart attacks, want health insurance and wonder what your rate will be? I don’t, we know you can’t pay it.

Just been in a shootout with the police and have critical wounds and no insurance, who pays the bills? By god these people need health insurance, 300K to 400k worth just this week alone.

From an insurance concept, you build up an actuary table and figure out what everyone has to pay to get health care over their lifetime and charge accordingly. Presently it looks as if we need about 200K to 600k just for an elderly person. We are not talking rest home here, that’s extra. So if you work 40 years, that amount to about $5,000 to $15,000 per year in health care taxes. Since we have to cover those already old, double the amount to say $10,000 to $30,000.

Right now, everyone over the age of 65 has a blank check for health care and they never paid a dime for it.

People that end up in the emergency room are also entitled to free health care (they don’t have to pay for it). This concept of free care is about to shut down emergency rooms nation wide.

Then we have people on Medicare. The government pays $2,000 per day in Chemo therapy for people dying of cancer. Price is no object.

Currently we have a budget that needs more tax revenues. The country will not stand for a tax increase. Well, let’s give the masses free health care. That means we can take the 180 million people between the ages of 20 to 59 and charge them for this added benefit. $5,000 per person per year for health insurance would raise about 1.8 trillion dollars per year. And the employer pays half—oh goodie. That way, we can pay for the 48 million people already eligible for Medicare.

The question arises, does government need money for health care or for operating expenses? It’s kind of like hiring a hooker to solicit customers at a blood bank. The bank takes a quart instead of a pint. And you’re now more worried about making it to your car without collapsing, rather than the good time you had in mind. There is a fine line between what a hooker does to you and what the government does to you. The results the same, but only one will leave a smile on your face.

Saturday, May 02, 2009

Going Broke Without a Clue

A notice from the water company arrived yesterday. They are raising their rates because of decreased consumption brought about by the drought. They are selling less water, but their fixed costs remain the same. So we get to pay more for using less.

It is the same story with GM and Chrysler. Selling fewer cars makes the companies financial future questionable. The fixed costs don’t drop. It used to be that the last two months of the year was the car company’s profit. When sales drop 50% those last two months never arrive. The contraction of sales can have the unexpected effect of forcing a company into bankruptcy; the fixed costs just don't go away.

If that is not bad enough, there are 50 state budgets, whose tax collections could fall 30 to 40 percent in the coming year. The state legislatures will select which bills get paid. Usually, Police, Fire and Education get cut. This really irritates the taxpayer to say the least. There are a lot of fixed retirement costs that will not disappear despite the labor cuts. Most states have already spent the money collected for this year. Now with the revenue collections dropping drastically, there is less and less money to fund various state programs into next year.

We have a very good chance of several states declaring bankruptcy before the end of the year. California, Florida, Michigan, Arizona and Nevada are high up on the list. Will the Federal Government step in and save the states in trouble?

What happens in this new era of too big to fail? Does the bankruptcy court take over the powers of the state legislature? Or does the Federal government take over and administrate the bankrupt state?

The government appears to be in a cover up mode. People in charge are losing their jobs for going along with the government’s strong arm persuasions. Government entities are being accused of overstepping their mandate (The Federal Reserve, comes to mind).

The economy in our area doesn't seem to be improving. We went garage sale-ing yesterday and I noticed 6 new commercial retail plazas under construction and two brand new ones that were almost completely vacant. Half of the present plaza malls in this area have many closed shops up for rent. Commercial real estate building is still in a boom stage here and there is really no explanation for it.

Of course the stock market has no clue as to what is going on—yet. Stocks are doing OK only because your IRA money manager refuses to sell. The losses are yours not theirs. This vast pool of money they manage is waiting for the market to rise up and return to the way things were.

What can we interpret from all of this? Conditions are not quite what our leaders are suggesting. The reaction to the possible Swine flu pandemic was blown way out of proportion; the bail out AIG probably accomplished little. The guys in charge rattled our cage and we panicked and accepted their proposed solution, just as we were suppose to. The real problem right now is where do we get the money to fix what we have just "paid" for?

Are we going to die of Swine Flu, or freeze to death while sleeping next to our shopping carts out on the street? Actions speak louder than words. Bawl out car executives for taking private jets to Washington and then take Air Force 1/2 (the short bus) on a low level fly-by of NYC???? It gives you an idea of where we are headed. Greenspan's quote, "Often wrong but never in doubt," seems to sum up the governments approach to solving this mess.