50 years ago, when you picked up a newspaper, you got a report of tragedy’s, deaths, assassinations, wars and weather reports along with the sports and business pages.
In today’s world, we have people writing the news before it happens. The US Presidential election comes to mind. The problem is, it didn’t happen as written.
What is not appreciated here, is that the manipulation did not go as planned. Journalism failed the common reader by interpreting too many facts and arriving at a conclusion that the reader was expected to reach after reading the article.
The Great Depression of 2006 is now being referred to as the Great Recession of 2006. My point that I made in the past, was that the people of the 1929 Great Depression had no idea that they were in great depression. Something was drastically wrong and they had no idea what it was. It was only when you picked up a history book in the 1950’s that you discovered the Great Depression. It was only when things started to get very noticeably better did people look back and see what they had been in.
I used the newspaper example of how Hillary had the election won to show how the truth about the economy has been stretched a tad. We are being told the economy is just great. 95 million people no longer looking for work and 45 million on food stamps. The fact you can earn more money from an interest perspective, spending money, rather than saving money turns every rule about financing upside down.
The stock market hits new highs. Most all stocks are divorced from the company they represent, the only thing that connects the buyer to the stock value is the dividend. Every stock has an owner and it is not the company (from a technical aspect). The price is determined by what another person is willing to pay for it. So a drop in the price of IBM of say $100 would revalue the net worth of shares issued, but not reflect in one bit the real assets of the actual company.
Right now, the world of journalism says everything is just great. Kind of reminds me of the many newspapers that flat out stated that “Donald Trump could never be elected President.” A reality check seems to indicate that whose ever opinions are available to us right now, these pundits don’t know any more than we do.
Admitting that we know nothing, gives us the ability to discard common sense if we feel it necessary. We all want to be comforted thinking we made the right decision by looking for company that shares our views, and that leads to problems. The herd is often wrong when it really matters.
The problems that we are about to face have been around 6 to 8 years. My only advice, if you have a job, keep it for the next two years and see how things progress in the immediate future. I get my first Social Security paycheck in two weeks at the age of 70 and I am still working.
We do have to realize that whatever solutions are proposed to fix the current problems will be solved by people who have saved money in the system (you can't tax people that are broke). The most visible taxable assets are wages, real estate and bank savings. What we need to understand is, the whole population is the target for any solution to the problem, not some sort of spend until we drop, financial boondoggle by Congress. We could end up with a Value Added Tax for manufacturing and production. In the future, for Congress, it should be, "Real money in, Real money out."
Remember when you buy a newspaper, they give you what you want to hear, otherwise you select another news source. So, in today’s world you get to pick your own perceived reality. The trouble is, there is no feedback until it is too late, if you are wrong.
Sunday, December 04, 2016
Saturday, November 12, 2016
The Democrats Cannot Believe the Results
Mr. Trump won the election and we have Democrats protesting out in the street even before he takes office. I remember when Obama won, and I sucked it in and said he’s our President now. What he did over the next 8 years irritated the hell out of me! To say the least.
I get the feeling from these protestors that Democracy is great, only if your candidate wins. And the sad thing is that most of the losers in this race were one issue voters; global warming or the woman President fulfilment goal. I get the feeling that the protestors are either incredibly stupid or have been brainwashed by all of the nonsensical ads about Trump. Many are students that were confused as to why they can’t get a job after spending big bucks on college.
The issue we have here, is that the present protests are over a candidate that has never held a political office and has not yet taken the oath as the next President. He has no political record to censure but yet these disrupters of our Democracy, do not give a damn. They want him out before he has even been in.
What we really need to look at, is that we have Donald Trump, a dyed in the wool Democrat, elected as a Republican to be President. He did not fit into the liberal establishment of being politically correct. If you say something that the establishment doesn’t want to hear, you are labeled racist, homophobic, sexist, misogynist and so on. Most people in this situation, shut up and keep quiet. Donald in this case, said bring it on, it won’t stick.
We have come to a point now, where this politically correct police force is visible. Tell a black joke and you are a racist. Tell a religious joke and you’re anti-Semitic. You’re not graded on how funny the joke is.
The real joke is on the political system. It was too corrupt to select real people to run for office. The Democrats had morphed into socialists. Trump was considered harmless. He beat all the Republicans in the Republican primary, got on their white horse and then slayed the Hillary dragon.
The one thing that really stands out, is that the news media failed us and showed everyone how manipulative they are as a group. The misinformation they fed us during this election, calling it news, was deplorable. Everyone thought The Donald was exaggerating and bashing the media unfairly.
The Democrats became the party of the rich with socialism for the poor, while the party ignored the middle class. The socialistic Democrats that voted for Hillary, didn’t see Trump as a Democrat. The Republicans were wondering what made Trump a Republican; they were satisfied with the fact that he wasn’t a “damn Socialist” and liked the second amendment. Sooner or later the people of this country will come to realize that the Republicans, without knowing it, put a Democrat into the Oval office.
The good thing is, we have elected a President with a lot of common sense that will speak his mind and is not beholding to the lobbyists in Washington D.C. Obama the politician can probably take credit for the Trump Presidency. He pissed off the wrong person one to many times. Obama, your fired!!
The neat thing is that both parties won. The Republicans got the man they voted for and the Democrats are too stupid to recognize a Democrat, unless he's holding his hand out for a bribe. "Draining the swamp" just might cure that.
Editors note:
I define a true Democrat as representing the middle class
I get the feeling from these protestors that Democracy is great, only if your candidate wins. And the sad thing is that most of the losers in this race were one issue voters; global warming or the woman President fulfilment goal. I get the feeling that the protestors are either incredibly stupid or have been brainwashed by all of the nonsensical ads about Trump. Many are students that were confused as to why they can’t get a job after spending big bucks on college.
The issue we have here, is that the present protests are over a candidate that has never held a political office and has not yet taken the oath as the next President. He has no political record to censure but yet these disrupters of our Democracy, do not give a damn. They want him out before he has even been in.
What we really need to look at, is that we have Donald Trump, a dyed in the wool Democrat, elected as a Republican to be President. He did not fit into the liberal establishment of being politically correct. If you say something that the establishment doesn’t want to hear, you are labeled racist, homophobic, sexist, misogynist and so on. Most people in this situation, shut up and keep quiet. Donald in this case, said bring it on, it won’t stick.
We have come to a point now, where this politically correct police force is visible. Tell a black joke and you are a racist. Tell a religious joke and you’re anti-Semitic. You’re not graded on how funny the joke is.
The real joke is on the political system. It was too corrupt to select real people to run for office. The Democrats had morphed into socialists. Trump was considered harmless. He beat all the Republicans in the Republican primary, got on their white horse and then slayed the Hillary dragon.
The one thing that really stands out, is that the news media failed us and showed everyone how manipulative they are as a group. The misinformation they fed us during this election, calling it news, was deplorable. Everyone thought The Donald was exaggerating and bashing the media unfairly.
The Democrats became the party of the rich with socialism for the poor, while the party ignored the middle class. The socialistic Democrats that voted for Hillary, didn’t see Trump as a Democrat. The Republicans were wondering what made Trump a Republican; they were satisfied with the fact that he wasn’t a “damn Socialist” and liked the second amendment. Sooner or later the people of this country will come to realize that the Republicans, without knowing it, put a Democrat into the Oval office.
The good thing is, we have elected a President with a lot of common sense that will speak his mind and is not beholding to the lobbyists in Washington D.C. Obama the politician can probably take credit for the Trump Presidency. He pissed off the wrong person one to many times. Obama, your fired!!
The neat thing is that both parties won. The Republicans got the man they voted for and the Democrats are too stupid to recognize a Democrat, unless he's holding his hand out for a bribe. "Draining the swamp" just might cure that.
Editors note:
I define a true Democrat as representing the middle class
Monday, November 07, 2016
The Election
If you look at the polls, the split is 44 to 45 between Hillary and Trump. Add them together, and what do you get? 89%
The people that will determine this election are the undecided, the invisible 11%. I am not sure how tomorrow turns out. I'm hoping for a Trump victory.
Faites vos jeux
The people that will determine this election are the undecided, the invisible 11%. I am not sure how tomorrow turns out. I'm hoping for a Trump victory.
Faites vos jeux
Tuesday, October 25, 2016
The Democrats won’t raise taxes on the middle class—don’t believe it
Just how true is the statement that the taxes for the middle class will not be raised? —They will only tax the rich? Believe that and buy the Brooklyn bridge while your at it.
If we examine your pay check stub, you will see the full amount paid to you with the Federal and state taxes deducted. Notice that there are other deductions, that are called payroll taxes for Social Security and Medicare. Technically you get them back some time way in the future, so they are not really taxes. The employee pays 6.2 percent Social Security tax and also a 1.45 percent Medicare tax which ad up to a total of 7.65 percent. And naturally your employer matches those amounts. In reality, the employee pays the full 14.3 percent, the employer anticipates this as part of your salary before he even hires you.
It sounds great that the employer pays half, but if you think about it, wages are a business expense. When you look at your paystub, you see Social Security and Medicare deductions at 7.65 percent. You’d look at your paystub a little different if it reflected 14.3 percent in payroll deductions.
If the administration decides to raise Social Security and Medicare rates, they can do it and this is not considered raising your taxes. It is only deducted from the first 127K of earnings. I would guess that people earning more than 127K a year have progressed beyond the middle class.
So if you are like me, with all of my 401k deductions to reduce my taxes, I still get hit with 20% income tax. Add on to that the 14.3 percent for SS and Medicare, and we arrive at about 35 percent of my paycheck is eaten up by government deductions and income tax.
Let’s throw in some health insurance, my employer contributes $11,000 a year and I contribute $5,000. I’m not even sick and if I was to get coverage privately, it would be rather pricey. Now if your employer doesn’t offer insurance, guess what? You now have to purchase it on your own by law. Ask yourself one question, are health insurance premiums in the private sector based on how much you earn, or are they the same for everyone? And the government has a plan for you called Obamacare. If you are too poor to afford insurance, you get full coverage. If you make some decent wages, you can only afford the plans with the high deductible that render them worthless.
Now a couple of weeks before the election, the state insurance boards are announcing new increases in rates for insurers in the following states because of Obamacare. Here are a few of them; Tennessee: 44% to 62%, Pennsylvania: 33%, Oklahoma: 76%, Nebraska: 35%, Minnesota: 50% to 67%, Illinois: 44%, Georgia: 32%, Alabama: 36%, Colorado: 20% and Iowa: 43%.
So let me get this straight, employers don’t have to pay health insurance for workers working under 30 hours. And by God they deserve $15 dollars and hour. So, you end up working two jobs to get 40 hours and are forced to purchase government health care insurance at your own expense.
How do you raise taxes on the middle class when you move them to a lower class? Donald Trump can end some of this miss direction on the middle class by getting rid of Obamacare. Raising the minimum wage just insures that corporations move overseas. The minimum wage has never been a wage to elevate people above the poverty level; It has been an entry level wage for employers to train new employees.
Where too from here? I hope we end up with Donald Trump as President. He isn’t a politician, and this is what has Washington DC worried. IMHO he is what the country needs to get back into the groove of being a major power. Obama was nothing more than a tourist with an unlimited expense account for visiting foreign countries. The era of “ Obama the tourist,” needs to be retired.
Editors Note:
Normally this blog doesn't take political positions and I don't apologize for not being politically correct. But I feel it necessary to take a stand. The news organizations of this country have selectively decided to hide "The Great Depression" that we are in, and sugar coat the present economic conditions to sway the election.
If we examine your pay check stub, you will see the full amount paid to you with the Federal and state taxes deducted. Notice that there are other deductions, that are called payroll taxes for Social Security and Medicare. Technically you get them back some time way in the future, so they are not really taxes. The employee pays 6.2 percent Social Security tax and also a 1.45 percent Medicare tax which ad up to a total of 7.65 percent. And naturally your employer matches those amounts. In reality, the employee pays the full 14.3 percent, the employer anticipates this as part of your salary before he even hires you.
It sounds great that the employer pays half, but if you think about it, wages are a business expense. When you look at your paystub, you see Social Security and Medicare deductions at 7.65 percent. You’d look at your paystub a little different if it reflected 14.3 percent in payroll deductions.
If the administration decides to raise Social Security and Medicare rates, they can do it and this is not considered raising your taxes. It is only deducted from the first 127K of earnings. I would guess that people earning more than 127K a year have progressed beyond the middle class.
So if you are like me, with all of my 401k deductions to reduce my taxes, I still get hit with 20% income tax. Add on to that the 14.3 percent for SS and Medicare, and we arrive at about 35 percent of my paycheck is eaten up by government deductions and income tax.
Let’s throw in some health insurance, my employer contributes $11,000 a year and I contribute $5,000. I’m not even sick and if I was to get coverage privately, it would be rather pricey. Now if your employer doesn’t offer insurance, guess what? You now have to purchase it on your own by law. Ask yourself one question, are health insurance premiums in the private sector based on how much you earn, or are they the same for everyone? And the government has a plan for you called Obamacare. If you are too poor to afford insurance, you get full coverage. If you make some decent wages, you can only afford the plans with the high deductible that render them worthless.
Now a couple of weeks before the election, the state insurance boards are announcing new increases in rates for insurers in the following states because of Obamacare. Here are a few of them; Tennessee: 44% to 62%, Pennsylvania: 33%, Oklahoma: 76%, Nebraska: 35%, Minnesota: 50% to 67%, Illinois: 44%, Georgia: 32%, Alabama: 36%, Colorado: 20% and Iowa: 43%.
So let me get this straight, employers don’t have to pay health insurance for workers working under 30 hours. And by God they deserve $15 dollars and hour. So, you end up working two jobs to get 40 hours and are forced to purchase government health care insurance at your own expense.
How do you raise taxes on the middle class when you move them to a lower class? Donald Trump can end some of this miss direction on the middle class by getting rid of Obamacare. Raising the minimum wage just insures that corporations move overseas. The minimum wage has never been a wage to elevate people above the poverty level; It has been an entry level wage for employers to train new employees.
Where too from here? I hope we end up with Donald Trump as President. He isn’t a politician, and this is what has Washington DC worried. IMHO he is what the country needs to get back into the groove of being a major power. Obama was nothing more than a tourist with an unlimited expense account for visiting foreign countries. The era of “ Obama the tourist,” needs to be retired.
Editors Note:
Normally this blog doesn't take political positions and I don't apologize for not being politically correct. But I feel it necessary to take a stand. The news organizations of this country have selectively decided to hide "The Great Depression" that we are in, and sugar coat the present economic conditions to sway the election.
Sunday, October 02, 2016
The Rush to Buy Investment Rentals.
Consider this, landlords do not set rent rates, renters do. The rent paid is the amount paid per month times the months rented in a year. For example, if you rent out a house for $5,000 a month and only get rent for two months out of that year, the effective rental rate is $10,000/12 or $833 per month.
Right now if you want a decent return on your savings, you have to commit to rental real-estate. It is paying about 6 to 8 percent. Notice the banks are paying .05 percent interest. Real estate prices are determined by what the monthly payment is and supply on the market. So at low interest rates, buyers can afford to pay higher prices.
For example, a 300K nest egg in the bank returns a retirement income is .05 percent which is $1,500 per year, a pretty paltry amount. Take the same money and buy a 3-bedroom home, and rent it out for $1,500 a month. Generated income over a year is $18,000. $18,000/300K equals 6% interest. An investment in rental real estate multiplies your retirement income by 10 times. Historically a 6 percent return on rental property was considered the break-even point on rental returns. Most successful landlord’s years back, were generating about 20 percent return on investment. From this you can deduce that present purchase prices of real estate are double or better of what they should be. In other words, house prices are artificially high because of very low government financing for rental real estate.
Equilibrium in the past, was when house payments per month was lower than the monthly rental rates. Renters paid more for the freedom to pick up and move when they wanted. Today our governmental is forcing a misallocation of resources into rental real estate because of the abnormally low bank interest rates. Notice that the sales price of a home determines the owner’s monthly payment and supply determines monthly rental rates. So in essence, the consumption of real estate for rental use has created a shortage of homes at reasonable prices for future home owners
Presently three things are true. Interest rates do not reflect the rate of risk; they are abnormally low. Second massive amounts of money have been redirected into real estate investment rentals. Third housing prices do not reflect the true utility value of the asset; they are excessively overpriced due to an artificial lack of supply. The economy is adjusting to these new conditions being true. The only thing that has really happened is that there has been a massive misallocation of resources into rental income property. The REITS purchased the real estate bubble of 2007 and saved the banks. Our government is now the new piggy bank writing home loans through Fannie and Freddie. Real banks won’t even touch the very low interest rate loans; you just can’t loan money at 4% for 30 years when your depositors can withdraw their fund in 3 months and move to a better interest rate.
Once people start moving home or doubling up on apartment rentals, this creates an unanticipated surplus of rentals. Most rentals were bought on the projection of real anticipated dollars that other investments couldn’t offer. A surplus of rentals means that the lower priced unit gets rented for 12 months. The trouble is, most of these real estate trusts, bought on the assumption that rents could go no lower than X amount and now their projected cash flow assumptions are beginning to be way off of the mark. The idea that they could set rental rates was wrong. Their rates only determined the number of months the unit would remain vacant.
Another thing that is not in the REITS investment model, is wear and tear. Put 3 families in a two-bedroom rental and it is trashed after a year. From there, it is only downhill. This is far different that the REITS profit projection model suggested. Plus, your investors were happy with 3% returns when the market paid .05% but when rates rise, investors will want to withdraw their funds from the REITS.
What we are looking at here, are home prices that are absurdly out of whack in relation to rental returns. We are also looking at interest rates that are absurdly out of whack in relation to risk
We have gone from a housing bubble that collapsed in 2007. The government assumed all financing after the fiasco. What followed was a misallocation of resources with the low interest rates that sponsored the new rental real estate investment boom.
So if you can find a rental property that will rent for 100 times the sales price, buy it. All you need is 20 percent down. The property will pay for itself in 20 years. From there, your rent checks are your retirement nest egg.
The only other game in play, is the stock market. Faites vos jeux!
Interest rates reflect that there is no risk in the world and everyone is entitled to purchase whatever they want no matter how little cash they have. Do you get the feeling that this is not going to end well?
Of course there are the old standbys; gold, silver and platinum. With .005 percent interest rates, they seem to be very good friends.
Right now if you want a decent return on your savings, you have to commit to rental real-estate. It is paying about 6 to 8 percent. Notice the banks are paying .05 percent interest. Real estate prices are determined by what the monthly payment is and supply on the market. So at low interest rates, buyers can afford to pay higher prices.
For example, a 300K nest egg in the bank returns a retirement income is .05 percent which is $1,500 per year, a pretty paltry amount. Take the same money and buy a 3-bedroom home, and rent it out for $1,500 a month. Generated income over a year is $18,000. $18,000/300K equals 6% interest. An investment in rental real estate multiplies your retirement income by 10 times. Historically a 6 percent return on rental property was considered the break-even point on rental returns. Most successful landlord’s years back, were generating about 20 percent return on investment. From this you can deduce that present purchase prices of real estate are double or better of what they should be. In other words, house prices are artificially high because of very low government financing for rental real estate.
Equilibrium in the past, was when house payments per month was lower than the monthly rental rates. Renters paid more for the freedom to pick up and move when they wanted. Today our governmental is forcing a misallocation of resources into rental real estate because of the abnormally low bank interest rates. Notice that the sales price of a home determines the owner’s monthly payment and supply determines monthly rental rates. So in essence, the consumption of real estate for rental use has created a shortage of homes at reasonable prices for future home owners
Presently three things are true. Interest rates do not reflect the rate of risk; they are abnormally low. Second massive amounts of money have been redirected into real estate investment rentals. Third housing prices do not reflect the true utility value of the asset; they are excessively overpriced due to an artificial lack of supply. The economy is adjusting to these new conditions being true. The only thing that has really happened is that there has been a massive misallocation of resources into rental income property. The REITS purchased the real estate bubble of 2007 and saved the banks. Our government is now the new piggy bank writing home loans through Fannie and Freddie. Real banks won’t even touch the very low interest rate loans; you just can’t loan money at 4% for 30 years when your depositors can withdraw their fund in 3 months and move to a better interest rate.
Once people start moving home or doubling up on apartment rentals, this creates an unanticipated surplus of rentals. Most rentals were bought on the projection of real anticipated dollars that other investments couldn’t offer. A surplus of rentals means that the lower priced unit gets rented for 12 months. The trouble is, most of these real estate trusts, bought on the assumption that rents could go no lower than X amount and now their projected cash flow assumptions are beginning to be way off of the mark. The idea that they could set rental rates was wrong. Their rates only determined the number of months the unit would remain vacant.
Another thing that is not in the REITS investment model, is wear and tear. Put 3 families in a two-bedroom rental and it is trashed after a year. From there, it is only downhill. This is far different that the REITS profit projection model suggested. Plus, your investors were happy with 3% returns when the market paid .05% but when rates rise, investors will want to withdraw their funds from the REITS.
What we are looking at here, are home prices that are absurdly out of whack in relation to rental returns. We are also looking at interest rates that are absurdly out of whack in relation to risk
We have gone from a housing bubble that collapsed in 2007. The government assumed all financing after the fiasco. What followed was a misallocation of resources with the low interest rates that sponsored the new rental real estate investment boom.
So if you can find a rental property that will rent for 100 times the sales price, buy it. All you need is 20 percent down. The property will pay for itself in 20 years. From there, your rent checks are your retirement nest egg.
The only other game in play, is the stock market. Faites vos jeux!
Interest rates reflect that there is no risk in the world and everyone is entitled to purchase whatever they want no matter how little cash they have. Do you get the feeling that this is not going to end well?
Of course there are the old standbys; gold, silver and platinum. With .005 percent interest rates, they seem to be very good friends.
Tuesday, September 20, 2016
Air is Free
Just thought I would throw this out there. An individual consumes 19 cubic feet of oxygen every day. And when you put that in pounds, that’s about 1.69 pounds.
When you burn a gallon of gasoline, it consumes 23.22 pounds of oxygen and you get water and a lot of CO2.
I burn about a gallon and a half of gasoline every day going to and from work. That is about 34.83 pounds plus the air I breathe 1.69 pounds = 36.52 pounds of oxygen every day that I consume.
So if we take my total consumption per day (36.52 lbs.) and divide it by what I need to exist (1.69lbs) we get 21.61. From that we can conclude that the “average” person consumes 20 times the oxygen he needs to sustain life. Each additional person is accelerating the CO2 rate accumulation rate in the atmosphere, by a factor of 20 (I didn’t even include factory production in the calculation so it is on the low side).
The General import of the above is that global warming is a reality. Historically we can probably attribute the fall of many ancient major cities in South America from a lack of firewood. All the trees could have been consumed for fuel within a 100-mile radius. After exhausting their ability to heat and cook the inhabitants would move to where energy resources (wood) were more abundant. This would have been a logistics failure that made life economically unfeasible. Net result, they moved.
Now let’s look at US government financing of the national debt. The current interest on 21 trillion at one percent is about 210 billion. If it went to 8 percent, the interest charge would be $1,680,000,000,000. And that is about what we take in, in taxes each year. Do you get the feeling that we have run out of firewood? Common sense suggests that our financial problems, just like firewood in the above example, have solutions that are very much removed from reality, but not from the follies of man.
When you burn a gallon of gasoline, it consumes 23.22 pounds of oxygen and you get water and a lot of CO2.
I burn about a gallon and a half of gasoline every day going to and from work. That is about 34.83 pounds plus the air I breathe 1.69 pounds = 36.52 pounds of oxygen every day that I consume.
So if we take my total consumption per day (36.52 lbs.) and divide it by what I need to exist (1.69lbs) we get 21.61. From that we can conclude that the “average” person consumes 20 times the oxygen he needs to sustain life. Each additional person is accelerating the CO2 rate accumulation rate in the atmosphere, by a factor of 20 (I didn’t even include factory production in the calculation so it is on the low side).
The General import of the above is that global warming is a reality. Historically we can probably attribute the fall of many ancient major cities in South America from a lack of firewood. All the trees could have been consumed for fuel within a 100-mile radius. After exhausting their ability to heat and cook the inhabitants would move to where energy resources (wood) were more abundant. This would have been a logistics failure that made life economically unfeasible. Net result, they moved.
Now let’s look at US government financing of the national debt. The current interest on 21 trillion at one percent is about 210 billion. If it went to 8 percent, the interest charge would be $1,680,000,000,000. And that is about what we take in, in taxes each year. Do you get the feeling that we have run out of firewood? Common sense suggests that our financial problems, just like firewood in the above example, have solutions that are very much removed from reality, but not from the follies of man.
Monday, September 05, 2016
What’s in your Wallet?
The credit card ads on TV amaze me. Credit card companies are giving card holders 2 to 4 percent back on their purchases. The new concept of money is that, you get nothing for saving it in the bank, buy yet you get money back for spending it.
Ever wonder where that 2 to 4 percent rebate came from? It has to come from the retailer. Kind of takes me back 30 years ago when you asked the store for a cash discount and if they said, no, you gave them your credit card. And you could stick it to them in varying degrees. Master Card charged the retailers more than Visa did.
If you can repay the credit card charges at the end of the month, you get a little cash back. Realistically if you made 120k a year, that’s about 10K a month to spend—$200 to $400 dollars in cash back if you put everything on a credit card.
The question you need to ask is, “Where does the credit card company make its money?” And it certainly not by giving you cash back for each purchase. If you screw up, you get to pay 16% interest on your balance. Not a bad deal for the bank.
So in today’s world, the phrase “What’s in your wallet?” has a good ring to it. I have trouble with the concept of spending money to get money back. It smacks of a snake oil salesman.
Of course, todays grads get the student loan and then the 250K home at 4% and everything else on their credit card at plus 16%. Sounds a little like the company store routine. We know what’s in your wallet, absolutely nothing, for the rest of your life.
You wanted it now, and decided to pay for it over time. The trouble is, forever is a little longer than you had in mind. Compound interest is still the 8th wonder of the world.
Ever wonder where that 2 to 4 percent rebate came from? It has to come from the retailer. Kind of takes me back 30 years ago when you asked the store for a cash discount and if they said, no, you gave them your credit card. And you could stick it to them in varying degrees. Master Card charged the retailers more than Visa did.
If you can repay the credit card charges at the end of the month, you get a little cash back. Realistically if you made 120k a year, that’s about 10K a month to spend—$200 to $400 dollars in cash back if you put everything on a credit card.
The question you need to ask is, “Where does the credit card company make its money?” And it certainly not by giving you cash back for each purchase. If you screw up, you get to pay 16% interest on your balance. Not a bad deal for the bank.
So in today’s world, the phrase “What’s in your wallet?” has a good ring to it. I have trouble with the concept of spending money to get money back. It smacks of a snake oil salesman.
Of course, todays grads get the student loan and then the 250K home at 4% and everything else on their credit card at plus 16%. Sounds a little like the company store routine. We know what’s in your wallet, absolutely nothing, for the rest of your life.
You wanted it now, and decided to pay for it over time. The trouble is, forever is a little longer than you had in mind. Compound interest is still the 8th wonder of the world.
Wednesday, August 24, 2016
Obama-care Obfuscates Health Care Coverage With Insurance
You want insurance, you don’t buy it when your house is burning down. If you’re sick with health care issues, this would not be the time to shop for health insurance, there is none that you can afford. A majority of the people are in tune with how health insurance works, you buy coverage before you need it. If you are sick and can’t pay your bills, whatever the government gives you is not health insurance, is government medical coverage. Insurance is for people who are not sick. Get sick and you can wish you had insurance; the trouble is you’re a day late and a dollar short.
Obamacare is called “insurance,” but it is really government subsidized health care. The insurance aspect is not there. You want the coverage after the fact. Fire Insurance is not sold the day after the fire. So in essence, the people responsible enough to want coverage before they have a problem, now have to pay for those that were too cheap to pay for what they may have needed later in life.
How long can this work? My grown son has to have insurance, and he doesn’t need it, most kids will pay a doctor $300 total in a time span of 30 years, not $2,000 a year. Trump can kill this albatross. Obamacare is not health insurance; it is health care program destine to destroy private plans by destroying them with unfair government practices that make it unprofitable for the private sector to operate. You cannot sell insurance if someone else says that you have to cover those that didn’t buy before they needed it. The governments plan of redefining insurance does not make the concept better, it destroys it.
Of course we will never figure this out until the last health care insurer goes out of business. The neat thing about it is that it is a way for government to double each taxpayers tax assessment without raising taxes. And you can bet that the extra money collected isn't going for health care.
Obamacare is called “insurance,” but it is really government subsidized health care. The insurance aspect is not there. You want the coverage after the fact. Fire Insurance is not sold the day after the fire. So in essence, the people responsible enough to want coverage before they have a problem, now have to pay for those that were too cheap to pay for what they may have needed later in life.
How long can this work? My grown son has to have insurance, and he doesn’t need it, most kids will pay a doctor $300 total in a time span of 30 years, not $2,000 a year. Trump can kill this albatross. Obamacare is not health insurance; it is health care program destine to destroy private plans by destroying them with unfair government practices that make it unprofitable for the private sector to operate. You cannot sell insurance if someone else says that you have to cover those that didn’t buy before they needed it. The governments plan of redefining insurance does not make the concept better, it destroys it.
Of course we will never figure this out until the last health care insurer goes out of business. The neat thing about it is that it is a way for government to double each taxpayers tax assessment without raising taxes. And you can bet that the extra money collected isn't going for health care.
Monday, August 15, 2016
Lunatic Congressional Financing
The average citizen thinks that Congressmen have an intimate knowledge of government financing. That’s a totally wrong assumption. Picture a black box with an opening on the left and one on the right. Insert one tax dollar into the left slot and low and behold two dollars drop out of the right hand side. Nobody in Congress knows what the internal machinery of the box includes, but it works. The amount they can spend on the budget is twice what they get in tax collections.
There is a not so small black box called the national debt. It doubles in size every 10 years, but it’s no big deal, there has never been a problem with it. Since it’s just a bunch of numbers, it’s size lies in the virtual world of mathematics. You couldn’t trip over it even if you wanted to.
Then remember the archaic banking practice of saving money for retirement? You’d give the bank a dollar and 12 years later get back your dollar and another one as interest. There was no black box, you doubled your money in 12 years. It was called “Compound Interest,” the Eighth Wonder of the World.
In today’s world, you put a dollar in the bank and in some countries, you’ll get back 95 cents a year later. So if you examine the basics of banks loaning depositor’s dollars, that is fading into oblivion. All the bank does anymore is regulate transactions between different parties.
The thing to remember during the Congressional emergency of 2008 that lead to all of the quantitative easing, if the banks had failed, the US Government would have had no financial infrastructure to borrow from.
The problem today is this, there is absolutely no reason to save money, there is every reason to spend it. With that reasoning, there is no new money left in the banks for the government to borrow. Plus those retiring, are withdrawing the money deposited into the banks over the last 50 years. What the government is losing on the national debt on the back end from redemptions, is not being made up for on the front end.
Of course the financial markets seem to think everything is just great. You can draw all sorts of graphs on the bond market, but when interest rates approach zero you enter an undefined world that changes the perspective of how people view money.
What we do know is this. The government borrowed about 24 trillion dollars and has spent every penny of it. Congress knows they can’t pay the interest on the amount borrowed (the national debt) if rates were to rise to 8%. The banks have no more real money for the government to borrow. The Treasury and the Federal Reserve are printing dollars. T-bills are being presented for redemption and the Federal Reserve is purchasing every bill presented. This is what keeps the interest rates low. If there is no buyer, rates go up until there is a buyer.
What we have here is a situation that is artificial. As rates approach zero, the definition of a bond deteriorates. At zero it has no meaning. You can borrow for free. Low rates imply low risk, when in actuality, most of these new government homeowner borrowers couldn’t come up with 5 percent down, to close the deal. Loan qualification tests are now meaningless. Negative interest rate bonds are laughable. The trouble is, there are many people out there that think we are in a viable market. At some point people will realize that the emperor has no clothes, and then the game will then be over.
Carry the logic a step further. Scenario one, when people realize they are worthless, they will try to sell them for half price. On a one-year bond, that implies an interest rate of 50 percent. Of course that will never happen, the Fed will buy all bonds. Scenario two, the government will print 17 trillion dollars (electronically) and pay off the debt. That would be the effect, but in reality, they would print dollars to pay for all government payments to the citizens (Social Security, Welfare, etc). This would allow them to continue to “borrow” (Print) and kick the can down the road. The sad thing is, we are already there.
My only question, can we ever get back to a reasonable interest rate for savings? I am afraid the answer is no. Hyperinflation solves all of these problems by making new ones you wish you’d never met.
The great thing about credit cards, if a Starbucks Latte is $4,000 you don't have to plunk down or count out 40 100 dollar bills just for a cup of coffee. Kind of makes you smile for all the wrong reasons, go figure.
There is a not so small black box called the national debt. It doubles in size every 10 years, but it’s no big deal, there has never been a problem with it. Since it’s just a bunch of numbers, it’s size lies in the virtual world of mathematics. You couldn’t trip over it even if you wanted to.
Then remember the archaic banking practice of saving money for retirement? You’d give the bank a dollar and 12 years later get back your dollar and another one as interest. There was no black box, you doubled your money in 12 years. It was called “Compound Interest,” the Eighth Wonder of the World.
In today’s world, you put a dollar in the bank and in some countries, you’ll get back 95 cents a year later. So if you examine the basics of banks loaning depositor’s dollars, that is fading into oblivion. All the bank does anymore is regulate transactions between different parties.
The thing to remember during the Congressional emergency of 2008 that lead to all of the quantitative easing, if the banks had failed, the US Government would have had no financial infrastructure to borrow from.
The problem today is this, there is absolutely no reason to save money, there is every reason to spend it. With that reasoning, there is no new money left in the banks for the government to borrow. Plus those retiring, are withdrawing the money deposited into the banks over the last 50 years. What the government is losing on the national debt on the back end from redemptions, is not being made up for on the front end.
Of course the financial markets seem to think everything is just great. You can draw all sorts of graphs on the bond market, but when interest rates approach zero you enter an undefined world that changes the perspective of how people view money.
What we do know is this. The government borrowed about 24 trillion dollars and has spent every penny of it. Congress knows they can’t pay the interest on the amount borrowed (the national debt) if rates were to rise to 8%. The banks have no more real money for the government to borrow. The Treasury and the Federal Reserve are printing dollars. T-bills are being presented for redemption and the Federal Reserve is purchasing every bill presented. This is what keeps the interest rates low. If there is no buyer, rates go up until there is a buyer.
What we have here is a situation that is artificial. As rates approach zero, the definition of a bond deteriorates. At zero it has no meaning. You can borrow for free. Low rates imply low risk, when in actuality, most of these new government homeowner borrowers couldn’t come up with 5 percent down, to close the deal. Loan qualification tests are now meaningless. Negative interest rate bonds are laughable. The trouble is, there are many people out there that think we are in a viable market. At some point people will realize that the emperor has no clothes, and then the game will then be over.
Carry the logic a step further. Scenario one, when people realize they are worthless, they will try to sell them for half price. On a one-year bond, that implies an interest rate of 50 percent. Of course that will never happen, the Fed will buy all bonds. Scenario two, the government will print 17 trillion dollars (electronically) and pay off the debt. That would be the effect, but in reality, they would print dollars to pay for all government payments to the citizens (Social Security, Welfare, etc). This would allow them to continue to “borrow” (Print) and kick the can down the road. The sad thing is, we are already there.
My only question, can we ever get back to a reasonable interest rate for savings? I am afraid the answer is no. Hyperinflation solves all of these problems by making new ones you wish you’d never met.
The great thing about credit cards, if a Starbucks Latte is $4,000 you don't have to plunk down or count out 40 100 dollar bills just for a cup of coffee. Kind of makes you smile for all the wrong reasons, go figure.
Tuesday, August 09, 2016
The Great Depression 2006 vs Doom and Gloom
I've been writing this blog for quite a while. People in the remarks section tend to think that I am hunkered down in a basement investing in nothing, while waiting for the Great Depression to pass and then make a killing.
If that is what you think, you are sadly mistaken. This blog is about pointing out the misinformation out there. Especially from government. There was no great recession of 2007 until just recently, Obama verified it, 9 years after the fact.
If you can comprehend that we are in a Great Depression, we have the financial information to make a killing. We have some stocks paying over 4 percent dividends. We have rental real estate in some parts of the country that will return 20% with a lot of hard work. Precious metals are a good place to park spare cash. The investor can make just as much money in a rising stock market as in a falling one. The trouble is, it is against human nature to short a stock.
There are stock and bond options out there that are thinly traded. A $100 option contract in the last crash on October 20 1987 returned $86,000. I was greedy and had to settle for $43,000 two days later. You have to purchase options when nobody thinks it has a snowballs chance in hell, that is when the price is right. If I was to tell another person my option strategy, it would double my cost of options. Most options expire worthless, so I don’t need to throw away twice as much money for being your friend. The real key is to establish a position in good times waiting for the inevitable.
The only real place my wife and I have stopped investing in, is the Treasury Bill market. We use to make $10,000 a year on rolling over 3-month T-Bills. Why would you give our government $140k and savor your chops over $700 in interest income? I don’t know anyone who is dumb enough to invest in Treasuries, but whoever they are, they deserve to lose every penny invested. The thing that bothers me on this point, is that I don’t think I have ever met anyone that stupid. The government is covering something up here. Of course we could call it the greatest robbery of the elderly's interest savings to have every been conceived.
So what do we have here? A Great Depression. Am I in a hole waiting for it to blow over? Hell no. If you know where you are, financially, you have options; if you don’t know where you are at, you have none.
Is this blog about doom and gloom? My answer, no. It’s about knowing what is happening and making money off of it. Money is a tool, used wisely, you can carpenter many things. The real question that time will tell, are you a good carpenter? May you have the time to become a good one, remember that experience is not a one day class,.
If that is what you think, you are sadly mistaken. This blog is about pointing out the misinformation out there. Especially from government. There was no great recession of 2007 until just recently, Obama verified it, 9 years after the fact.
If you can comprehend that we are in a Great Depression, we have the financial information to make a killing. We have some stocks paying over 4 percent dividends. We have rental real estate in some parts of the country that will return 20% with a lot of hard work. Precious metals are a good place to park spare cash. The investor can make just as much money in a rising stock market as in a falling one. The trouble is, it is against human nature to short a stock.
There are stock and bond options out there that are thinly traded. A $100 option contract in the last crash on October 20 1987 returned $86,000. I was greedy and had to settle for $43,000 two days later. You have to purchase options when nobody thinks it has a snowballs chance in hell, that is when the price is right. If I was to tell another person my option strategy, it would double my cost of options. Most options expire worthless, so I don’t need to throw away twice as much money for being your friend. The real key is to establish a position in good times waiting for the inevitable.
The only real place my wife and I have stopped investing in, is the Treasury Bill market. We use to make $10,000 a year on rolling over 3-month T-Bills. Why would you give our government $140k and savor your chops over $700 in interest income? I don’t know anyone who is dumb enough to invest in Treasuries, but whoever they are, they deserve to lose every penny invested. The thing that bothers me on this point, is that I don’t think I have ever met anyone that stupid. The government is covering something up here. Of course we could call it the greatest robbery of the elderly's interest savings to have every been conceived.
So what do we have here? A Great Depression. Am I in a hole waiting for it to blow over? Hell no. If you know where you are, financially, you have options; if you don’t know where you are at, you have none.
Is this blog about doom and gloom? My answer, no. It’s about knowing what is happening and making money off of it. Money is a tool, used wisely, you can carpenter many things. The real question that time will tell, are you a good carpenter? May you have the time to become a good one, remember that experience is not a one day class,.
Sunday, July 24, 2016
The Coming Election and Reality
Obama says that the economy is hunky dory. And Donald Trump thinks that we are going to hell in a hand basket.
Let’s address the issue. We are in a World Depression that is beyond anything experienced by man in world history. You can get 6 percent back on a credit card purchase, but you get zip back for money in the bank. 60 million people have stopped looking for work and 43 million people are on food stamps. The government message is this, "Don’t acknowledge the depression, if you do so, it becomes self-fulfilling." We do not have to worry about it becoming self-fulfilling we are there.
The options we have from here are several, we need to rebuild our infrastructure. We can afford to spend trillions on roads, water and electrical. We cannot afford to spend any more on Government Quantitative Easing programs. The odd thing is that the money borrowed from savers got us to where we are now. The government cannot pay back what it has borrowed or even pay the interest on what was borrowed at a fair market rate. Government is ripping off retired people of their interest income, that they expected to be generated from their savings.
From a realistic point of view, 20 to 30 cents on the dollar is about all the government is going to pay on its debts. Just what does that mean? It means if you have savings in the bank, you are about to lose 70 percent of your purchasing power through inflation, government taxation or a new currency. The neat thing, if you are broke, it is totally painless, you have nothing to lose.
What you have to realize is, the Federal Reserve, the Treasury and Congress have turned our financial markets upside down. The expected outcome is unknown. The people in charge of this financial economic experiment, have no historical guidelines to gauge what is happening. The only thing that can be deduced is that this is not going to end well, when it ends.
We didn’t build this country spending money to get 6 percent back, we built it saving money for a rainy day. We haven’t saved anything and now we have a rainy day. It’s a little like going camping and using the toilet paper to start the fire. You’ll enjoy the meal and then discover that there is no toilet paper. It was not a problem until it became a problem.
Let’s address the issue. We are in a World Depression that is beyond anything experienced by man in world history. You can get 6 percent back on a credit card purchase, but you get zip back for money in the bank. 60 million people have stopped looking for work and 43 million people are on food stamps. The government message is this, "Don’t acknowledge the depression, if you do so, it becomes self-fulfilling." We do not have to worry about it becoming self-fulfilling we are there.
The options we have from here are several, we need to rebuild our infrastructure. We can afford to spend trillions on roads, water and electrical. We cannot afford to spend any more on Government Quantitative Easing programs. The odd thing is that the money borrowed from savers got us to where we are now. The government cannot pay back what it has borrowed or even pay the interest on what was borrowed at a fair market rate. Government is ripping off retired people of their interest income, that they expected to be generated from their savings.
From a realistic point of view, 20 to 30 cents on the dollar is about all the government is going to pay on its debts. Just what does that mean? It means if you have savings in the bank, you are about to lose 70 percent of your purchasing power through inflation, government taxation or a new currency. The neat thing, if you are broke, it is totally painless, you have nothing to lose.
What you have to realize is, the Federal Reserve, the Treasury and Congress have turned our financial markets upside down. The expected outcome is unknown. The people in charge of this financial economic experiment, have no historical guidelines to gauge what is happening. The only thing that can be deduced is that this is not going to end well, when it ends.
We didn’t build this country spending money to get 6 percent back, we built it saving money for a rainy day. We haven’t saved anything and now we have a rainy day. It’s a little like going camping and using the toilet paper to start the fire. You’ll enjoy the meal and then discover that there is no toilet paper. It was not a problem until it became a problem.
Friday, July 22, 2016
Congress and Laws
Some Congressman by the name of Elijah Cummings is screaming that we need to pass more laws to control guns and violence. He doesn’t even impress me as an adult, he’s one of those that could panic theater viewers if the rest room lines were too long
Think about it for a minute, have the laws against handguns eliminated murder? People have killed others since the beginning of time. Everyone in this country is entitled to buy a gun before they commit their first felony. What we need to realize is that laws are there to prosecute people that violate the written law. They do not prevent people from trying to kill you. I remember back 30 years ago, a man in Cheyenne Wyoming, kicked in the restroom door on a women’s restroom and took pictures of the girl in there. The police arrested him, but he had violated no laws that could send him to jail. So they released him. Later, Wyoming fixed that by passing a law making it a crime. Of course, a week later, they found the gentleman tied to a fence post with his testicals removed.
Laws do not curb behavior; they only threaten to you with jail or prison if you get caught. If the driver next to you cuts you off and you get mad and kill him with a hand gun, you’ll get 5 years if you are caught, and with good behavior you’ll be out in 2 ½. Your odds of getting caught, about 1 in 5.
Hand guns, when mixed with alcohol and drugs, become a lethal combination. Many will go to jail for doing something very stupid they would have never done sober, like rob a store.
Believe it or not, forbidding the sale of fully automatic weapons, enabled the terrorist to kill more people. Pull the trigger on a fully automatic weapon, the clip is gone in one second and you have probably missed everyone or cut one person in half, but I digress.
The urge for Congress to act every time there is a problem is probably what has put us in this mess. We cannot regulate behavior with laws, we regulate behavior with financial rewards. You don’t shoot a Congressman; you bribe him or her. So in most cases, passing a law restricting the flow or sale of something only raises the price to the consumer. The wholesaler can charge more for illegal items. The laws created by the legislatures only change the mode of delivery and cost.
Let’s back off of the idiots in Congress. Most voters when confronted with a problem, demand an immediate government solution. Common sense suggests that if a government solution was available, it would have been applied a long time ago.
Maybe that is why most new business' start out of a garage, there are no government restrictions.
Think about it for a minute, have the laws against handguns eliminated murder? People have killed others since the beginning of time. Everyone in this country is entitled to buy a gun before they commit their first felony. What we need to realize is that laws are there to prosecute people that violate the written law. They do not prevent people from trying to kill you. I remember back 30 years ago, a man in Cheyenne Wyoming, kicked in the restroom door on a women’s restroom and took pictures of the girl in there. The police arrested him, but he had violated no laws that could send him to jail. So they released him. Later, Wyoming fixed that by passing a law making it a crime. Of course, a week later, they found the gentleman tied to a fence post with his testicals removed.
Laws do not curb behavior; they only threaten to you with jail or prison if you get caught. If the driver next to you cuts you off and you get mad and kill him with a hand gun, you’ll get 5 years if you are caught, and with good behavior you’ll be out in 2 ½. Your odds of getting caught, about 1 in 5.
Hand guns, when mixed with alcohol and drugs, become a lethal combination. Many will go to jail for doing something very stupid they would have never done sober, like rob a store.
Believe it or not, forbidding the sale of fully automatic weapons, enabled the terrorist to kill more people. Pull the trigger on a fully automatic weapon, the clip is gone in one second and you have probably missed everyone or cut one person in half, but I digress.
The urge for Congress to act every time there is a problem is probably what has put us in this mess. We cannot regulate behavior with laws, we regulate behavior with financial rewards. You don’t shoot a Congressman; you bribe him or her. So in most cases, passing a law restricting the flow or sale of something only raises the price to the consumer. The wholesaler can charge more for illegal items. The laws created by the legislatures only change the mode of delivery and cost.
Let’s back off of the idiots in Congress. Most voters when confronted with a problem, demand an immediate government solution. Common sense suggests that if a government solution was available, it would have been applied a long time ago.
Maybe that is why most new business' start out of a garage, there are no government restrictions.
Thursday, June 30, 2016
Everyone Has a Different Right Answer
Just listening to the news about Brexit. One side says were doomed if we go down this path and the other side says this will correct all of the wrongs.
Then in the US, a vote for Hillary will continue the government in place, while the other side is fed up with all the socialism.
If you notice, we have a 50/50 split. At one time everyone was in agreement. Over time, things have changed. Once you disillusionize enough people, they begin to march to a different drummer. Not to mention the fact that people everywhere are beginning to realize that the world is in a global Depression.
The real trouble with these political arguments, both sides have an opposing solution to the problem, that will solve everything. My only concern is that both sides are adamant over what the final outcome will be if the other solution is applied instead. Common sense suggests that neither side has any idea of what real results lie ahead for either path. But both sides imply that an improper vote will set the country on a path to doom.
I’m not sure how this line of thinking turns out. Almost everything is in an evolving state. In nature, the inability to evolve and adapt to new and different conditions, means you get eaten. It nice to know that all of these individuals running amuck have a solution to all of our problems, if only they could get us to listen. I've always held, that "the people with a solution to all of our problems, are a part of the problem."
Either way, it a news media feeding frenzy. Someone will print what you want to read. It's only a matter of selecting the right TV station or newspaper. The final truth?---there are no wrong answers--go figure!
Then in the US, a vote for Hillary will continue the government in place, while the other side is fed up with all the socialism.
If you notice, we have a 50/50 split. At one time everyone was in agreement. Over time, things have changed. Once you disillusionize enough people, they begin to march to a different drummer. Not to mention the fact that people everywhere are beginning to realize that the world is in a global Depression.
The real trouble with these political arguments, both sides have an opposing solution to the problem, that will solve everything. My only concern is that both sides are adamant over what the final outcome will be if the other solution is applied instead. Common sense suggests that neither side has any idea of what real results lie ahead for either path. But both sides imply that an improper vote will set the country on a path to doom.
I’m not sure how this line of thinking turns out. Almost everything is in an evolving state. In nature, the inability to evolve and adapt to new and different conditions, means you get eaten. It nice to know that all of these individuals running amuck have a solution to all of our problems, if only they could get us to listen. I've always held, that "the people with a solution to all of our problems, are a part of the problem."
Either way, it a news media feeding frenzy. Someone will print what you want to read. It's only a matter of selecting the right TV station or newspaper. The final truth?---there are no wrong answers--go figure!
Sunday, June 12, 2016
Faux Government Investment Reality and Retirement Income
Short term interest rates all over the world are about to go negative. Which means, you’ll have to pay more now for a T- bill that will mature with a value less than the original investment. Common sense suggests that lead poisoning is rampant in world financial markets.
Let’s suppose that there is a different reason for lowering Treasury rates that allows us to arrive to the same conclusion. What if the governments don’t have enough money to pay the interest on the debt and declared a moratorium on interest payments? Hmmmm. Notice doing it this way affects both government and private debt. By just lowering the interest rates to zero for government obligations leaves private debt untouched.
Either way, nobody is going to add any additional money to their savings, you mise well go for immediate gratification of your desires. Notice that those who have saved over 40 years are in a different boat. The money that they have saved for retirement is no longer generating investment income.
If we reasonalbly assume that the average retired couple can save 200K in their lifetime, at 8% interest, that would return about $16,000 a year in retirement income. Or about $1,333 per month for perputitiy. The average monthly social Security pension is about $1,335. So with a married couple, net benefits would be about $4,000 a month with everything added in. Change the interest rate to 1% and the story changes. Their savings are depleted in 13 years. And then when they really might need additional funds, they do not have them.
Unfortunately, the retiree’s kids will never even comprehend what the government did to their parents. The kids usually have no idea as to their parent’s money management skills. All they may be able to surmise is that they ran out of savings. The kids would never guess that the government ripped their parents off of about 300K in interest. This is money that they would have inherited. This is the Ultimate government coup de grace, of people that saved for retirement. The neat thing is that it is invisible. Old people are considered inept and incompetent by the young. So complaining about what the government is doing to them falls on deaf ears. Of course without schooling in economics, the elderly have a pretty good idea that they have been ripped off but don’t understand how it was accomplished.
The Federal Reserve has removed compound interest from the retirement community’s reach. This step eliminates the cost of government borrowing. With this spread between government borrowing and private sector borrowing, it is possible to generate a new income stream for Congress to spend. The vehicle of choice, student loans. Here is how it works; Congress borrows one trillion dollars of old folk’s money at 1 percent interest and loans it to students at 8%. The interest generated using the rule of 72, says that the government will double their money in 10 years. Then they return the money borrowed to the seniors while still having the 1 trillion of student loan debt still on the books. The neat thing about this income stream is that the government can gouge the young for a lifetime, not just their retirement years.
I’d never accuse the people in government of being intelligent enough to formulate the above plan, but it does illustrate the idea that “The road to hell is paved with good intensions.” The young are not saving because they can’t afford to and the old are dying off, broke and destitute. Kind of makes you wonder, is it time to avoid government retirement programs? I think so, gold and silver keep the politicians honest only because they can’t print either one of them.
An added bonus, the rest home cannot see the assets in your bank deposit box. The Gold and Silver can dance until you want the cows come home.
Let’s suppose that there is a different reason for lowering Treasury rates that allows us to arrive to the same conclusion. What if the governments don’t have enough money to pay the interest on the debt and declared a moratorium on interest payments? Hmmmm. Notice doing it this way affects both government and private debt. By just lowering the interest rates to zero for government obligations leaves private debt untouched.
Either way, nobody is going to add any additional money to their savings, you mise well go for immediate gratification of your desires. Notice that those who have saved over 40 years are in a different boat. The money that they have saved for retirement is no longer generating investment income.
If we reasonalbly assume that the average retired couple can save 200K in their lifetime, at 8% interest, that would return about $16,000 a year in retirement income. Or about $1,333 per month for perputitiy. The average monthly social Security pension is about $1,335. So with a married couple, net benefits would be about $4,000 a month with everything added in. Change the interest rate to 1% and the story changes. Their savings are depleted in 13 years. And then when they really might need additional funds, they do not have them.
Unfortunately, the retiree’s kids will never even comprehend what the government did to their parents. The kids usually have no idea as to their parent’s money management skills. All they may be able to surmise is that they ran out of savings. The kids would never guess that the government ripped their parents off of about 300K in interest. This is money that they would have inherited. This is the Ultimate government coup de grace, of people that saved for retirement. The neat thing is that it is invisible. Old people are considered inept and incompetent by the young. So complaining about what the government is doing to them falls on deaf ears. Of course without schooling in economics, the elderly have a pretty good idea that they have been ripped off but don’t understand how it was accomplished.
The Federal Reserve has removed compound interest from the retirement community’s reach. This step eliminates the cost of government borrowing. With this spread between government borrowing and private sector borrowing, it is possible to generate a new income stream for Congress to spend. The vehicle of choice, student loans. Here is how it works; Congress borrows one trillion dollars of old folk’s money at 1 percent interest and loans it to students at 8%. The interest generated using the rule of 72, says that the government will double their money in 10 years. Then they return the money borrowed to the seniors while still having the 1 trillion of student loan debt still on the books. The neat thing about this income stream is that the government can gouge the young for a lifetime, not just their retirement years.
I’d never accuse the people in government of being intelligent enough to formulate the above plan, but it does illustrate the idea that “The road to hell is paved with good intensions.” The young are not saving because they can’t afford to and the old are dying off, broke and destitute. Kind of makes you wonder, is it time to avoid government retirement programs? I think so, gold and silver keep the politicians honest only because they can’t print either one of them.
An added bonus, the rest home cannot see the assets in your bank deposit box. The Gold and Silver can dance until you want the cows come home.
Saturday, June 04, 2016
Unemployment An Invisible Problem Of This Great Depression
The jobs report came out and it looks as if the country as a whole only created 38,000 jobs for the month of May and I believe they readjusted the figures for April down to 123,000 from 160.000.
The good news is that the unemployment rate went from 5% down to 4.7%. Of course the news that 500,000 people stopped looking for work kind of makes you wonder about the idiots cranking out the figures. It’s a little bit like an expert hunter talking about taking “sound shots” while hunting. That’s where you hear a noise in the bush and take a shot at it. You know what he’s doing, and your only question is why?
Obama asked at a town meeting if he would have done anything different in his Presidency, said that he wished that he had advised the people of the severity of the recession we were in at the time it was happening.
The economic consensus of our present mess, is that we walked by the graveyard whistling and got to the other side without a scratch. The trouble is, the demons know you have to come back the other way sooner or later.
Some other news source stated that half of the US population can’t come up with $400 cash for an emergency, they need to use a credit card. That scares me.
Blue Shield in Texas has announced that they will increase premium rates by 60% November 1st. If you are paying $400 now, it’s not rocket science to calculate the new monthly payment; but you’d have to be a rocket scientist to cover the increased premium for a family of 3. Obama Care will destroy the private insurance industry. No profit, they are gone. Government programs are like public restrooms, abused just as much as they are used and always underfunded.
46 million households are on food stamps. That’s out of 134 million households. It’s not like anybody is starving, they ought to pass a law against wearing stretch pants in Walmart if you weigh over 200 pounds.
But I digress. Where do we go from here with 14 to 20 percent unemployment? Does raising the minimum wage to $15 create jobs? I can see the logic in wanting to start out at $15 an hour as an employee. We need to ask the question, are the people protesting unemployed? If so, raising the minimum wage is not going to help them get a job. Millions of people were unemployed during the Great Depression. It took government work programs on infrastructure to open up the jobs market. Obama couldn't figure that out, maybe Trump can.
Of course the government claims that unemployment is about 4.7 percent and inflation is almost negative. Then we have the banks paying interest of about 1 percent. Toilet paper use to have 1000 sheets per roll. It’s a buck a roll now and smaller, it has about 200 sheets and the rolls are 2 inches less wide. So a toilet paper inflation calculator suggests that inflation is about 15 percent a year.
The irritating thing is you feel like throwing a roll of toilet paper at a politician, but when times are tough, you have to reconsider, use it where it is really needed.
The good news is that the unemployment rate went from 5% down to 4.7%. Of course the news that 500,000 people stopped looking for work kind of makes you wonder about the idiots cranking out the figures. It’s a little bit like an expert hunter talking about taking “sound shots” while hunting. That’s where you hear a noise in the bush and take a shot at it. You know what he’s doing, and your only question is why?
Obama asked at a town meeting if he would have done anything different in his Presidency, said that he wished that he had advised the people of the severity of the recession we were in at the time it was happening.
The economic consensus of our present mess, is that we walked by the graveyard whistling and got to the other side without a scratch. The trouble is, the demons know you have to come back the other way sooner or later.
Some other news source stated that half of the US population can’t come up with $400 cash for an emergency, they need to use a credit card. That scares me.
Blue Shield in Texas has announced that they will increase premium rates by 60% November 1st. If you are paying $400 now, it’s not rocket science to calculate the new monthly payment; but you’d have to be a rocket scientist to cover the increased premium for a family of 3. Obama Care will destroy the private insurance industry. No profit, they are gone. Government programs are like public restrooms, abused just as much as they are used and always underfunded.
46 million households are on food stamps. That’s out of 134 million households. It’s not like anybody is starving, they ought to pass a law against wearing stretch pants in Walmart if you weigh over 200 pounds.
But I digress. Where do we go from here with 14 to 20 percent unemployment? Does raising the minimum wage to $15 create jobs? I can see the logic in wanting to start out at $15 an hour as an employee. We need to ask the question, are the people protesting unemployed? If so, raising the minimum wage is not going to help them get a job. Millions of people were unemployed during the Great Depression. It took government work programs on infrastructure to open up the jobs market. Obama couldn't figure that out, maybe Trump can.
Of course the government claims that unemployment is about 4.7 percent and inflation is almost negative. Then we have the banks paying interest of about 1 percent. Toilet paper use to have 1000 sheets per roll. It’s a buck a roll now and smaller, it has about 200 sheets and the rolls are 2 inches less wide. So a toilet paper inflation calculator suggests that inflation is about 15 percent a year.
The irritating thing is you feel like throwing a roll of toilet paper at a politician, but when times are tough, you have to reconsider, use it where it is really needed.
Tuesday, May 31, 2016
Idiots in the News Media
Trump while campaigning, raised about 6 million dollars in pledges for our veterans. Some of the pledgers might have had a bit too much to drink or were absorbed in their own self-importance and over pledged what they were willing to deliver. So the totals don’t quite match up. But realistically that’s the way it goes in most pledge drives. The heart is willing but the wallet or wife isn’t.
ABC news announcer got labeled a sleaze by Trump for pressing the issue of who received checks and the Washington Post was demanding a list of recipients. Here is a guy that raises 6 million dollars while running for President in the Republican primary. He’s not fund raising for himself. Why would you accuse him of not distributing the funds considering what he accomplished for the same organization in 2015?
And then we have Hillary Clinton saying;
This woman leaves a bad taste in my mouth, and I’ll bet she has the same complaint with "Blowjob" Bill her husband.
What ever happened to giving credit to someone who does something great for others? What is the incentive to do it again if the media accuses you of false promises and skepticism for what you have accomplished?
Something is wrong with the news media, they expect us to be trained monkeys programed to their mindset. They are the fools, I'm tired of listening to their impression of what they think reality is.
Their perceptions don't fit into the real world. Of course I'm just one person, but someone that can raise 6 million while he's doing something else, is better than any politician.
Maybe the news sources are treating Trump like every other politician that they have covered. They are not worth a damn, maybe that's what makes Trump DIFFERENT.
ABC news announcer got labeled a sleaze by Trump for pressing the issue of who received checks and the Washington Post was demanding a list of recipients. Here is a guy that raises 6 million dollars while running for President in the Republican primary. He’s not fund raising for himself. Why would you accuse him of not distributing the funds considering what he accomplished for the same organization in 2015?
And then we have Hillary Clinton saying;
she was glad that Trump had given out the promised money.
"The problem here is the difference between what Donald Trump says and what Donald Trump does," Clinton said. "He's bragged for months about raising $6 million for vets and donating $1 million himself, but it took a reporter to shame him into actually making the contribution."
This woman leaves a bad taste in my mouth, and I’ll bet she has the same complaint with "Blowjob" Bill her husband.
What ever happened to giving credit to someone who does something great for others? What is the incentive to do it again if the media accuses you of false promises and skepticism for what you have accomplished?
Something is wrong with the news media, they expect us to be trained monkeys programed to their mindset. They are the fools, I'm tired of listening to their impression of what they think reality is.
Their perceptions don't fit into the real world. Of course I'm just one person, but someone that can raise 6 million while he's doing something else, is better than any politician.
Maybe the news sources are treating Trump like every other politician that they have covered. They are not worth a damn, maybe that's what makes Trump DIFFERENT.
Wednesday, May 25, 2016
The Venezuelan Solution to Bankruptcy
Just reading a bit of news about the dire predicament Venezuela is in. Their currency is in shambles and there are riots in the streets. Somebody suggested that the country adopt the US dollar as currency of the realm. The reason being, their government and the politicians can't print American dollars. It kind of works for all the wrong reasons.
Maybe there is a lesson for us in there somewhere. Socialism fails when you run out of “Other people’s money.”
Maybe there is a lesson for us in there somewhere. Socialism fails when you run out of “Other people’s money.”
Saturday, May 14, 2016
Federal Bureaucracy "Writes our laws"
After a government edict, bathrooms will have to cater to the sexes differently. Notice there was no law passed, some bureaucrat in some part of government decided to change the way we run our lives with a new directive, with the power of federal government backing it up. There could be significate costs associated with complying with this law. Bathrooms could run about $150K to construct for each institution so cited and naturally the dollars are not forthcoming from the Federal Government.
Now you know why ranchers were so fed up with the Bureau of Land Management when they told farmers they couldn't graze where they were grazing or they had to pay fees. No law was passed, some bureaucrat wrote a directive and it became the law of the land.
Resort spas all over the country had to install lifts for quad and paraplegics to use the swimming pools at a very significant cost. No mention was made that they probably don’t have control of their bodily functions. The "law" was written by some Federal bureaucrat and so shall it be.
Many land owners have not been able to enjoy their purchase of land because of environmental regulations like the snail darter or some other endangered species, which are directives created by some person with a “Save the whales” mentality.
We are beginning to notice that Federal agency’s can write directives that are enforceable in all 50 states. The justness of these directives is never in question; it is your violation of them that is in question. You need about 200K to fight one of these disagreements in court, and the trouble is, you might not live long enough to see your docket date in court.
North Carolina wrote a state law to countermand the issued directive of a federal agency. The protestors think that the law is directed to discriminate against trans gender’s. Wrong the law is directed at the Federal agency that thinks that it can dictate its will on the people. Some federal agency wants the states to spend hundreds of millions of dollars to provide separate bathrooms for 10,000 people, this is crazy! Who gets to pay for it?
We have to wake up and realize that these federal agencies are writing directives on a federal level that are considered laws of the land. They have completely screwed up the food menus at high schools in California. The food they demand be provided may be healthy but it gets thrown in the trash. Ever eat a whole wheat burrito? Each meal has to have a fruit and that goes in the trash.
The big teaser with the Federal Government directives, if the state does not follow them, the Federal subsidy money will not go to the state.
There are a lot of people that want to enforce on others their “justifiable" righteous thinking on the issue. We need to stop this snowballing bureaucracy from layering us with more directives that make absolutely no sense. We should be a government of laws, not government directives. Being against bathrooms for trans genders is not anti anything issue. This is a non perfect world and there is no perfection in a non perfect world especially if someone needs to pay for it.
Why do we need to punish a state for saying no to a government directive? State's rights is the real issue. Less government intervention is the key. If the Federal Government wanted to make a real impression about bathrooms, how about a directive to keep them clean and stocked with toilet paper? How about rest rooms for the homeless?-- that's a far bigger group than the trans genders. But I digress--- Just give me back my McDonald's French fries deep fried in animal fat.
Now you know why ranchers were so fed up with the Bureau of Land Management when they told farmers they couldn't graze where they were grazing or they had to pay fees. No law was passed, some bureaucrat wrote a directive and it became the law of the land.
Resort spas all over the country had to install lifts for quad and paraplegics to use the swimming pools at a very significant cost. No mention was made that they probably don’t have control of their bodily functions. The "law" was written by some Federal bureaucrat and so shall it be.
Many land owners have not been able to enjoy their purchase of land because of environmental regulations like the snail darter or some other endangered species, which are directives created by some person with a “Save the whales” mentality.
We are beginning to notice that Federal agency’s can write directives that are enforceable in all 50 states. The justness of these directives is never in question; it is your violation of them that is in question. You need about 200K to fight one of these disagreements in court, and the trouble is, you might not live long enough to see your docket date in court.
North Carolina wrote a state law to countermand the issued directive of a federal agency. The protestors think that the law is directed to discriminate against trans gender’s. Wrong the law is directed at the Federal agency that thinks that it can dictate its will on the people. Some federal agency wants the states to spend hundreds of millions of dollars to provide separate bathrooms for 10,000 people, this is crazy! Who gets to pay for it?
We have to wake up and realize that these federal agencies are writing directives on a federal level that are considered laws of the land. They have completely screwed up the food menus at high schools in California. The food they demand be provided may be healthy but it gets thrown in the trash. Ever eat a whole wheat burrito? Each meal has to have a fruit and that goes in the trash.
The big teaser with the Federal Government directives, if the state does not follow them, the Federal subsidy money will not go to the state.
There are a lot of people that want to enforce on others their “justifiable" righteous thinking on the issue. We need to stop this snowballing bureaucracy from layering us with more directives that make absolutely no sense. We should be a government of laws, not government directives. Being against bathrooms for trans genders is not anti anything issue. This is a non perfect world and there is no perfection in a non perfect world especially if someone needs to pay for it.
Why do we need to punish a state for saying no to a government directive? State's rights is the real issue. Less government intervention is the key. If the Federal Government wanted to make a real impression about bathrooms, how about a directive to keep them clean and stocked with toilet paper? How about rest rooms for the homeless?-- that's a far bigger group than the trans genders. But I digress--- Just give me back my McDonald's French fries deep fried in animal fat.
Saturday, April 30, 2016
The Coming Storm
When you turn on the news, you can tell the difference between a Democrat and a Republican just as easy as you can discern a woman’s voice from that of a man. 99 percent of the people speaking think that by some stroke of luck, what they say will change someone’s vote. My grandfather use to say, if you want to waste some time, talk about religion or politics. People are willing to die for their beliefs. You are not going to change their mind, no matter how long you talk.
I’m not sure how the Presidential election will go, but I do know that the economy is in a horrible mess. We have learned how to produce more with 20 percent less labor using computers. Raising the minimum wage to $15 per hour didn’t create any more jobs but it did raise the pay of those working for 2 dollars more than minimum wage. Everyone got a pay raise, not just the entry level worker.
We are getting one percent interest on our savings. It doesn’t look like the Democrats have our best interests at heart with this very low rate. The savers are being taxed at 5 to 7 percent minimum with these rates if you consider the “lost” interest from the lack of a realistic interest rate.
Stock markets and real estate are the real booming markets to make money in. The economy kind of offers up a question of “How is this possible?” The world credit orgy party could be ending soon.
The thing that could really start a financial meltdown is the exit of Great Britain from the European Union on June 23rd. Financial leaders talk about negative interest rates as if it is some tried and tested method of fixing the economy.
How dare people save money all their life and become rich—go figure. The funny thing is that most of the poor people spend all of their earnings trying to appear rich. Governments depend on banks for loans. And the banks loan their savers' deposits. Now you see why the banks were not allowed to fail. The government needs them, in order to juggle 21 trillion of borrowed debt. Common sense would suggest that a government cannot spend its way from bankruptcy back into prosperity.
At some point this house of cards will collapse. In 1929 individual investors panicked and brought the market down quite suddenly. In today’s market, there are investment advisors, they get paid to keep you in the market. If they sell everything, they are out of a job. So they are going to ride your 401k into the ground.
We have been here before in the Great Depression of 1929 and the pundits are right, it will be different this time. The people of 1929 were stupid and didn’t know what they were doing (believe that and I will tell you another). The people in charge right now are holding on by their fingertips. A straight face and a little hyperbole and they come across as financial wizards.
Turn on your TV and listen to the ads. Retirement is going to be fun. You’ll have gobs of money from your 401k. The new “Rule of 72” for interest rates has been changed. You work until you are 72 and then hope you don’t outlive your savings. The eighth wonder of the world is no longer “Compound Interest,” but “Unlimited Government Benefits.”
The one thing that should stand out, is that putting money in the bank and saving it, is an act of futility. If you have savings, convert it to cash and put it in a safety deposit box or buy some gold and silver. There is no reason to allow the bank to use your deposits at this low interest rate. If enough people do it, interest rates have to rise.
I think Bernie Sanders, Donald Trump and I are looking for the wheels to fall off of this Obama agenda band wagon before the election. Common sense, has value, but it's discovery, is often times late to the table.
I’m not sure how the Presidential election will go, but I do know that the economy is in a horrible mess. We have learned how to produce more with 20 percent less labor using computers. Raising the minimum wage to $15 per hour didn’t create any more jobs but it did raise the pay of those working for 2 dollars more than minimum wage. Everyone got a pay raise, not just the entry level worker.
We are getting one percent interest on our savings. It doesn’t look like the Democrats have our best interests at heart with this very low rate. The savers are being taxed at 5 to 7 percent minimum with these rates if you consider the “lost” interest from the lack of a realistic interest rate.
Stock markets and real estate are the real booming markets to make money in. The economy kind of offers up a question of “How is this possible?” The world credit orgy party could be ending soon.
The thing that could really start a financial meltdown is the exit of Great Britain from the European Union on June 23rd. Financial leaders talk about negative interest rates as if it is some tried and tested method of fixing the economy.
How dare people save money all their life and become rich—go figure. The funny thing is that most of the poor people spend all of their earnings trying to appear rich. Governments depend on banks for loans. And the banks loan their savers' deposits. Now you see why the banks were not allowed to fail. The government needs them, in order to juggle 21 trillion of borrowed debt. Common sense would suggest that a government cannot spend its way from bankruptcy back into prosperity.
At some point this house of cards will collapse. In 1929 individual investors panicked and brought the market down quite suddenly. In today’s market, there are investment advisors, they get paid to keep you in the market. If they sell everything, they are out of a job. So they are going to ride your 401k into the ground.
We have been here before in the Great Depression of 1929 and the pundits are right, it will be different this time. The people of 1929 were stupid and didn’t know what they were doing (believe that and I will tell you another). The people in charge right now are holding on by their fingertips. A straight face and a little hyperbole and they come across as financial wizards.
Turn on your TV and listen to the ads. Retirement is going to be fun. You’ll have gobs of money from your 401k. The new “Rule of 72” for interest rates has been changed. You work until you are 72 and then hope you don’t outlive your savings. The eighth wonder of the world is no longer “Compound Interest,” but “Unlimited Government Benefits.”
The one thing that should stand out, is that putting money in the bank and saving it, is an act of futility. If you have savings, convert it to cash and put it in a safety deposit box or buy some gold and silver. There is no reason to allow the bank to use your deposits at this low interest rate. If enough people do it, interest rates have to rise.
I think Bernie Sanders, Donald Trump and I are looking for the wheels to fall off of this Obama agenda band wagon before the election. Common sense, has value, but it's discovery, is often times late to the table.
Sunday, April 10, 2016
Jobs Leaving the Country, a Public Joke
Ford Announced plans to move a plant to Mexico and create 2,800 jobs. You have to wonder if they are paying $15 an hour. Who is getting to full employment first? the hamburger flippers in this country or the people of Mexico?
Then I hear that companies have evaded 100’s of billions of dollars in US taxes by moving overseas. Don’t get me wrong, but do corporations belong to countries like people do? They are machines that make money. By all means move if it increases the bottom line. Dividends is what the game is all about.
Then in Kalifornia people are outraged that the state colleges are taking more out of state students at the expense of in state students. They pay a lot higher tuition. It kind of lends to the opinion that the outraged were economically challenged, they might have to pay for their kid to go to college
Clinton got elected president in 1992 only because Ross Perot ran as an independent. Ross saw the jobs being sucked out of our economy. He was right, but it is a little too late to do much about it now. We could get some of it back over 20 years with the right policy, but it won’t happen overnight. Don’t hold your breath on this one, the word “Never,” comes to mind.
June seems like the month that everything will hit the fan. The primary election process in the US comes to a head, and the vote for Great Britain to stay in the Euro comes to a vote on June 23. And let’s face it, the European Union has flooded the countries in it, with minority populations that they didn’t want and now they have a way of saying “No more immigrants.”
As things get worse, expect more of the unexpected. We could invade Mexico and make it the 51'st state. That way we wouldn't have to worry about jobs leaving the country or the illegal immigrants; they would no longer be illegal.
In the US, the UAW had pushed for higher wages in its contract talks with the automaker last year, and Tuesday's announcement prompted a swift reaction. "Today’s announcement...is a disappointment and very troubling," UAW President Dennis Williams said in a statement. "For every investment in Mexico it means jobs that could have and should have been available right here in the USA."This guy from the UAW is the first guy I know that can pull a rug out from underneath himself, while standing on it.
Then I hear that companies have evaded 100’s of billions of dollars in US taxes by moving overseas. Don’t get me wrong, but do corporations belong to countries like people do? They are machines that make money. By all means move if it increases the bottom line. Dividends is what the game is all about.
Then in Kalifornia people are outraged that the state colleges are taking more out of state students at the expense of in state students. They pay a lot higher tuition. It kind of lends to the opinion that the outraged were economically challenged, they might have to pay for their kid to go to college
Clinton got elected president in 1992 only because Ross Perot ran as an independent. Ross saw the jobs being sucked out of our economy. He was right, but it is a little too late to do much about it now. We could get some of it back over 20 years with the right policy, but it won’t happen overnight. Don’t hold your breath on this one, the word “Never,” comes to mind.
June seems like the month that everything will hit the fan. The primary election process in the US comes to a head, and the vote for Great Britain to stay in the Euro comes to a vote on June 23. And let’s face it, the European Union has flooded the countries in it, with minority populations that they didn’t want and now they have a way of saying “No more immigrants.”
As things get worse, expect more of the unexpected. We could invade Mexico and make it the 51'st state. That way we wouldn't have to worry about jobs leaving the country or the illegal immigrants; they would no longer be illegal.
Sunday, March 27, 2016
Government Stealing from the Elderly
Since I am getting close to the age of 70, I have to take money out of my IRA or I will be penalized. So I cranked up an IRA withdrawal calculator and went about figuring out what I have to withdraw. I used 100k for the illustration, I started late and I'm a couple of thousand short. Didn't think much of it. I used an interest rate of 1/2 of a percent. I Wrote down what I needed to withdraw in order to not get penalized. Then I decided to try different interest rates. You can double click on the pics for a better view. Anyone remember the saying, "Compound interest is the 8th wonder of the world?" And then there is the rule of 72. Divide the interest rate into 72 to calculate the number of years it would take for your investment to double without adding any money to it. A half a percent divided into 72 is 144 years. You kind of have to wonder "Do I have the time to wait for it to double?" The return on investment is totally meaningless. I'm hoping to live to 90 and I can't even afford age 80. Kinda sucks and it isn't even my fault.
Here is where it started to grab my attention, I plugged in 3 percent interest and generated the second printout. The amount I had to withdraw each year was more than the year before.
When a person enters retirement age, Their savings are the "worker" that they will depend on for their benefits. It is the interest rate earned on those savings that will determine their comfort level in retirement. The Federal Reserve by lowering interest rates to zero, has stripped the elderly of their full retirement income. Retires can have back what they put in, but no more than that. The Federal Reserve has changed the rules after the card game started.
Notice that the withdrawal amounts of $4,000 a year on my account, even at a 3% return is not a real game changer. And nobody is paying 3 percent.
Then when I typed in 8 percent interest, I realized that the politicians had found a way to rip off the elderly by manipulating the interest rates through Federal Reserve policy. We are in the middle of a Great Depression and how do they fix it? They rob me of the interest on my hard earned savings. 8 percent would have been a reasonable return on my savings, not 1/2 of one percent. If I'd have known that I was going to get such a lousy rate of return, I would have put my money elsewhere 20 years ago.
I have observed that a zero drops off of our purchasing power every 20 years. What cost a penny in 1964 cost 10 cents in 1984 and now a dollar in 2004 and probably $10 in 2024. The trouble is, my example is a linear progression and government spending and inflation is more of a logarithmic progression. Common sense suggests that precious metals will more than hold their value over the next twenty years. At todays interest rates, it could become the only game in town.
Half the world is looking at 30% unemployment and the stock market is roaring to absurd new highs. Housing is back to the highs of the bubble year of 2007, totally unaffordable. The present interest rate so low that there is no reason to save, even for retirement. Once you realize what the government has done to our retirement financing, you'll be too old to do anything about it. Real compound interest is a thing of the past. Its still a wonder; you just get to wonder where it went.
Friday, March 18, 2016
The Great Depression, We Have Arrived!
I was reading about Janet Yellen the other day and unfortunately didn’t note the article. It referred to our present economic place in time as that akin to 1937. I’ve read from several sources that the Great Recession of 2007 ended years back and that people are afraid we might sink into a new recession. I’m of the opinion that we have never left the last recession.
There’s an election coming up and a person by the name of Donald Trump is upsetting Congress to no end. They are worried that this guy is not into smoke and mirrors and all their hard work sweeping the mess under the rug will be exposed. They are claiming he is unqualified to be President. The only requirements I know of; are to be over the age of 35 and be a US citizen. Whereas the minimum requirements to qualify for a job to clean toilets on a school campus might be greater than those needed to run for the political office of President--go figure.
When will this house of cards fall down? With interest rates at zero, the only investments that make sense are real estate rentals, credit card loans, and student loans.
On the books, a 6 % return on rental real estate looks good, but if you have ever been a landlord, you would demand 15 %. Until the reality sets in as to how a renter can destroy rental property, housing prices will stay artificially high. There is a place a few blocks down from us with three story condos, maybe about 400 of them. Asking rental is about $2,500 for a two bedroom. Detached houses in this area are renting for about $2,200, I can’t quite figure that out, on a cash flow basis for the condos. The loud parties, music and crying babies, I don’t see anyone moving into them.
Student loans are still a big draw, but most now recognize them as sucker loans. I expect this institutional program to be ripped from ear to ear with fraud. You can probably register for Cocaine University and get 40K a year from the government if you can sober up enough to fill out the forms correctly.
Credit card debt is a real walk in the dark. During our working years most people are a good risk on credit cards. What happens when you get to be 75 years old and a card holder with great credit? I’ve heard of people 30 years old being told they have a terminal condition and go and rack up 200K in bills. only to be told later, they were misdiagnosed and weren't going to die any time soon. 75 going on 80, go ahead max it out on all 10 cards, they can’t garnish your wages.
We need to realize that zero percent interest rates is an upside down process. Low rates imply there is very little risk (how does that reasoning work?). We see all of these companies moving out of the US and at the same time the unemployment figures get better? The newspapers report, what they are fed. I get a little irate with people that quote print without reading between the lines.
The stock market is the key; will it collapse before the election or after it? At some point Congress is going to have to acknowledge the Great Depression we are in. FDR did it after the election in 1933. Only then did Congress begin to march to a different drum beat.
That will be the turning point, where we move from Wall Street for our earnings, to Main Street for our paychecks and the construction of badly needed infrastructure. It sound rather innocuous, but when Wall Street's hypothecation hits a brick wall, we are talking about a financial Train Wreck. If you have no savings it will be painless. Otherwise your massive heart attack is only one bank statement away.
There’s an election coming up and a person by the name of Donald Trump is upsetting Congress to no end. They are worried that this guy is not into smoke and mirrors and all their hard work sweeping the mess under the rug will be exposed. They are claiming he is unqualified to be President. The only requirements I know of; are to be over the age of 35 and be a US citizen. Whereas the minimum requirements to qualify for a job to clean toilets on a school campus might be greater than those needed to run for the political office of President--go figure.
When will this house of cards fall down? With interest rates at zero, the only investments that make sense are real estate rentals, credit card loans, and student loans.
On the books, a 6 % return on rental real estate looks good, but if you have ever been a landlord, you would demand 15 %. Until the reality sets in as to how a renter can destroy rental property, housing prices will stay artificially high. There is a place a few blocks down from us with three story condos, maybe about 400 of them. Asking rental is about $2,500 for a two bedroom. Detached houses in this area are renting for about $2,200, I can’t quite figure that out, on a cash flow basis for the condos. The loud parties, music and crying babies, I don’t see anyone moving into them.
Student loans are still a big draw, but most now recognize them as sucker loans. I expect this institutional program to be ripped from ear to ear with fraud. You can probably register for Cocaine University and get 40K a year from the government if you can sober up enough to fill out the forms correctly.
Credit card debt is a real walk in the dark. During our working years most people are a good risk on credit cards. What happens when you get to be 75 years old and a card holder with great credit? I’ve heard of people 30 years old being told they have a terminal condition and go and rack up 200K in bills. only to be told later, they were misdiagnosed and weren't going to die any time soon. 75 going on 80, go ahead max it out on all 10 cards, they can’t garnish your wages.
We need to realize that zero percent interest rates is an upside down process. Low rates imply there is very little risk (how does that reasoning work?). We see all of these companies moving out of the US and at the same time the unemployment figures get better? The newspapers report, what they are fed. I get a little irate with people that quote print without reading between the lines.
The stock market is the key; will it collapse before the election or after it? At some point Congress is going to have to acknowledge the Great Depression we are in. FDR did it after the election in 1933. Only then did Congress begin to march to a different drum beat.
That will be the turning point, where we move from Wall Street for our earnings, to Main Street for our paychecks and the construction of badly needed infrastructure. It sound rather innocuous, but when Wall Street's hypothecation hits a brick wall, we are talking about a financial Train Wreck. If you have no savings it will be painless. Otherwise your massive heart attack is only one bank statement away.
Wednesday, February 24, 2016
The Dumbing Down of America
I know it’s an election year, but the statements get more ridiculous. “Everyone needs the right to have a college education.” A college education will not in a lot of cases get you a better paying job. It may make you overqualified for the job you’re applying for. Probably at least 70 percent of the jobs in this country don’t require a college education, trade school training maybe. A college degree comes with the automatic assumption of higher wages. That’s not necessarily true.
Congress created a new form of serfdom with the promise of easy money loans for education. Student loan debt is not an issue of irresponsibility with the students, they had no idea of what they were getting into. It was a trap fashioned in Congress that the banks could not say no to. Credit cards and student loans are about the only moneymakers for banks since the Federal Reserve went into the mortgage loan business.
You can’t support a family on $10 an hour, so that justifies $15 an hour? In California, you better be living at home with your mother if you only make $10 hour. Have a kid or two and see what that does to your take home party money-- diapers instead of a 12 pack.
They do have one thing right; the middle class is shrinking. Why? The jobs are being moved offshore. Or worse yet the people with jobs are being replaced by immigrants with H-1B visas. The workers at Disney Studios were shown the door but they had to first train their replacements from India, irritating to say the least. How do you get the jobs back?-- make it more expensive to produce it over there than here. So you put a tariff on every cell phone of $300 and one on shirts and shoes of about $8. Will it be done? Probably not.
The real problems are created by government policies, lawyers and laws. A US company making red plastic gas cans, got sued several times and went out of business. The rest of the worlds labor pool doesn’t have to worry about social security, unemployment insurance, health insurance and worker’s compensation. Overseas production limits the owner’s liability.
Some businesses are trapped and can’t move off shore like food, shelter and services. Many companies that produce a product can successfully make the move. The real trouble is; people earn a living producing product for consumption. If the production moves off shore, the job moves with it. Will you move to Mexico to get your job back at half the price and no benefits? The rest of the world knows how this works, no job in your country, move to one that has jobs. The new people at Disney Studios know that quite well. And computer tech support goes one better. With the phone, the employer can farm out tech support to various companies located in India 24-7.
Current unemployment rate is listed at around 5% here in the US. Estimates place the real figure from 15% on up to 20%. Obama has even referred to the great recession of 2007 to 2010 as being a bad one. So if you carry that one step forward, he is implying that we are no longer in a recession that didn’t exist until after the fact.
To listen to Obama, I’m tired of “We’re not out of the woods yet,” for 8 years running. We are not blaming this disaster on any President. It has its roots back when FDR was president and the advent of Social Security. But the call to bring jobs back to the USA is a little hollow. Very few things that I have purchased in our home have “Made in America” stamped on them. Everything with a made somewhere else tag is a job lost in the US. These jobs could come back, but it would be gradual over decades of time.
The rich people from other countries will silently move here to retire and enjoy our way of life semi-tax free. Of course they will need servants at $15 per hour. And then Drugs, Sex and health care. Retirees’ here do the same thing when they move to Mexico to enjoy their Social Security retirement on a lower income level. Peculiarly if you are a foreigner reaching retirement age here in this country legally, you qualify for Supplemental Security Income and Medicare. So this road to citizenship for illegals could be the real road to hell for Social Security. I complained about the disparity to Social Security and they were very indignant pointing out that SS and SSI were two different programs. To me it’s kind of like the wife buying the new TV instead of the husband, it’s the same bank account.
Congress increased our unemployment numbers by cutting the military budget by 20%. Of course Congress will argue that, they only cut the military budget; the commanders had to figure out what they could cut and it wasn’t the weapons Congress forced them to buy, it was men. Budgets determine what you can do next year. So when the VA falls short on promises to veterans, it's the Congress you need to blame, they have the checkbook.
Congress tells private employers what they have to pay to employees and dictates their benefits. Any wonder why businessmen move their factories off shore?
The real problem is not the promise to fix, but rather the will to provide the funds necessary for these government institutions to perform as expected. And if you want to stem the flow of production overseas, read the writing on the wall; am I going to pay you $5 for something that I can get for $2 somewhere else. The minimum wage is set by laborers in Asia, not by the US Congress.
What we need to realize is, we have a bunch of old farts in Congress using a 20th century mindset that used to work well, but is severely outdated today. The laws no longer fit the times. It’s kind of like the right to bear arms. You wouldn’t rob a bank today with a flint lock pistol made in 1792. IMHO we need younger people at the helm, that can think outside of the "outdated box."
Congress created a new form of serfdom with the promise of easy money loans for education. Student loan debt is not an issue of irresponsibility with the students, they had no idea of what they were getting into. It was a trap fashioned in Congress that the banks could not say no to. Credit cards and student loans are about the only moneymakers for banks since the Federal Reserve went into the mortgage loan business.
You can’t support a family on $10 an hour, so that justifies $15 an hour? In California, you better be living at home with your mother if you only make $10 hour. Have a kid or two and see what that does to your take home party money-- diapers instead of a 12 pack.
They do have one thing right; the middle class is shrinking. Why? The jobs are being moved offshore. Or worse yet the people with jobs are being replaced by immigrants with H-1B visas. The workers at Disney Studios were shown the door but they had to first train their replacements from India, irritating to say the least. How do you get the jobs back?-- make it more expensive to produce it over there than here. So you put a tariff on every cell phone of $300 and one on shirts and shoes of about $8. Will it be done? Probably not.
The real problems are created by government policies, lawyers and laws. A US company making red plastic gas cans, got sued several times and went out of business. The rest of the worlds labor pool doesn’t have to worry about social security, unemployment insurance, health insurance and worker’s compensation. Overseas production limits the owner’s liability.
Some businesses are trapped and can’t move off shore like food, shelter and services. Many companies that produce a product can successfully make the move. The real trouble is; people earn a living producing product for consumption. If the production moves off shore, the job moves with it. Will you move to Mexico to get your job back at half the price and no benefits? The rest of the world knows how this works, no job in your country, move to one that has jobs. The new people at Disney Studios know that quite well. And computer tech support goes one better. With the phone, the employer can farm out tech support to various companies located in India 24-7.
Current unemployment rate is listed at around 5% here in the US. Estimates place the real figure from 15% on up to 20%. Obama has even referred to the great recession of 2007 to 2010 as being a bad one. So if you carry that one step forward, he is implying that we are no longer in a recession that didn’t exist until after the fact.
To listen to Obama, I’m tired of “We’re not out of the woods yet,” for 8 years running. We are not blaming this disaster on any President. It has its roots back when FDR was president and the advent of Social Security. But the call to bring jobs back to the USA is a little hollow. Very few things that I have purchased in our home have “Made in America” stamped on them. Everything with a made somewhere else tag is a job lost in the US. These jobs could come back, but it would be gradual over decades of time.
The rich people from other countries will silently move here to retire and enjoy our way of life semi-tax free. Of course they will need servants at $15 per hour. And then Drugs, Sex and health care. Retirees’ here do the same thing when they move to Mexico to enjoy their Social Security retirement on a lower income level. Peculiarly if you are a foreigner reaching retirement age here in this country legally, you qualify for Supplemental Security Income and Medicare. So this road to citizenship for illegals could be the real road to hell for Social Security. I complained about the disparity to Social Security and they were very indignant pointing out that SS and SSI were two different programs. To me it’s kind of like the wife buying the new TV instead of the husband, it’s the same bank account.
Congress increased our unemployment numbers by cutting the military budget by 20%. Of course Congress will argue that, they only cut the military budget; the commanders had to figure out what they could cut and it wasn’t the weapons Congress forced them to buy, it was men. Budgets determine what you can do next year. So when the VA falls short on promises to veterans, it's the Congress you need to blame, they have the checkbook.
Congress tells private employers what they have to pay to employees and dictates their benefits. Any wonder why businessmen move their factories off shore?
The real problem is not the promise to fix, but rather the will to provide the funds necessary for these government institutions to perform as expected. And if you want to stem the flow of production overseas, read the writing on the wall; am I going to pay you $5 for something that I can get for $2 somewhere else. The minimum wage is set by laborers in Asia, not by the US Congress.
What we need to realize is, we have a bunch of old farts in Congress using a 20th century mindset that used to work well, but is severely outdated today. The laws no longer fit the times. It’s kind of like the right to bear arms. You wouldn’t rob a bank today with a flint lock pistol made in 1792. IMHO we need younger people at the helm, that can think outside of the "outdated box."
Thursday, February 18, 2016
The Golden Age of Mankind Is Behind Us
Here is a comment written by Anthony Tan to my last article, his words are well thought out and deserve review. Not everyone reads the comments section of this blog.The golden age of mankind is behind us. We live in a finite world with finite resources, man kind should be looking at sustainability instead of growth and GDP. Our current financial system (usury and debt based money) is simply not in line with reality. It's also why all governments are so obsessed with growth, the moment you can't have growth, it all collapses.
Throughout the world, you'll hardly find a nice, humble and wise ruler/government. Nice people work behind the scene to better the lives of people, they are not interested in the limelight and power. Psychopaths crave it, and will do anything to get into power. For democracy to work, you'll need a well educated, wise and hardworking citizenry. This is not in the interest of the psychopath and they would rather have a dumb down and distracted citizenry and reduce the society to bread and circuses.
Technology will improve, but we've already reaped most of the benefits years ago. An inkjet printer and a car is a good example. After thousands of new improved models, it is still essentially the same as a decade ago. Technology has reached the point of diminishing returns and you won't probably see any major changes unless you are part of the elites.
I recall seeing a sci-fi show called "Space 1999" in the 70s about a moon base, this is 2016 and a moon base is still a distant dream. At the rate we've burning and wasting resources, I doubt if humankind can ever get their act together to go beyond Earth and spread out to other planets. Hopefully it'll be a slow crash and I'll be long dead before we reach the Max Mad scenario.
Sunday, February 14, 2016
Unintended Consequences
About 50 years ago, the UN showed farmers in northern Africa how to more effectively farm the land and use fertilizer. It worked great. Farm production doubled and because of the abundant food, the population doubled overnight. There was one little thing that no one noticed. Each family needed firewood to warn their huts and cook their meals. It doesn’t seem like a very big thing, to be concerned about, but the area was running out of trees. Then the rains came. With no trees to control the runoff, the farmland washed away. Starvation ensued.
A solution to one problem can create unforeseen problems. Raise the minimum wage to $15 per hour and you bump into the term “Shadow Labor,” like self-serve checkouts where you ring it up yourself and bag it. I was at Ralphs supermarket a while back waiting for the cashier to ring me up and a store clerk told the gentleman behind me that the self-serve island was open. He must have been a union man because he cracked me up when he said, “No thanks, I already have a job.”
The 15 dollar an hour wage increase was to give the worker a better standard of living, the net result, less employees. Even worse, with mandatory health care, most jobs went to a 30-hour work week. And of course, the employer could move the factory overseas, and not worry about all of the government restrictions and taxes. Last Thursday, Carrier Air Conditioner announced that it is moving to Mexico and 2,100 jobs go with it. I guess moving “overseas,” is a misnomer. Mexico and Canada are right next door.
The newest thing is negative interest rate policy that is being pushed worldwide on the banks. It’s a little like telling hookers that they have to pay guys to have sex with them. The concept doesn’t float at that level for the simple reason, there is nothing in it for them (naturally I’m referring to the banks ;>)).
We have a drought out here and everyone has been asked to cut down on water usage. Our area in San Diego cut their water usage by 25 %. Net result the water company sold less water and their fixed costs did not go down, so our water bills increased as a reward for using less water.
We tried to bomb the dictators out of the Middle East, and give them Democracy. What did we get? Anarchy! Democracy is not something you can pass out at a pep rally.
Changing the school lunch program to be more healthy and force every student to eat whole wheat, and have a fruit with each meal, created incredible waste. Not to mention kids left the school to get something "Real" to eat. People don’t get fat eating food that doesn’t taste good. If it doesn’t taste good, don’t eat it (and that advice is a couple of million years old).
Oil prices have dropped dramatically and we are still adding 10% ethanol to each gallon. Ethanol gives lousy gas mileage, eats the hell out of the fuel system, and makes our beef steaks cost more. You can’t take a well fed car down to a slaughter house and get prime rib or steaks out of it, only easy monthly payments; miss one and pay the rest of your life. Some of our biggest ethanol producers are family of some well know Congressmen. The irritating thing is that everyone whines about gas prices, but most people have no idea of what they pay for steak, they just drop it in the shopping cart.
The great government program to help our kids get a college education has given a lot of them a financial education that will last their entire lifetimes.
Then we have the new health insurance for everyone. If you can’t afford it, the government will want to know everything about you for you to get it free. And when you file your taxes this year, you have a new form to show the IRS, your 1095-B proof of health care coverage.
The national debt is approaching 20 trillion. The average American thinks, government budgets have worked ok so far, the people in charge must know what they are doing. I guess, if you have that sort of faith in government, you don’t need to go to church every Sunday. What you save in church tithes, will make up for the interest lost on your 401k.
Do you get the feeling, that if big government left us alone, we could manage just fine? Of course listening to the election debates, the last thing anyone of them wants to do, is leave us alone, they want to give us something. The only thing that worries me, is that we may get everything we ask for and something we didn't, a Banana Republic.
A solution to one problem can create unforeseen problems. Raise the minimum wage to $15 per hour and you bump into the term “Shadow Labor,” like self-serve checkouts where you ring it up yourself and bag it. I was at Ralphs supermarket a while back waiting for the cashier to ring me up and a store clerk told the gentleman behind me that the self-serve island was open. He must have been a union man because he cracked me up when he said, “No thanks, I already have a job.”
The 15 dollar an hour wage increase was to give the worker a better standard of living, the net result, less employees. Even worse, with mandatory health care, most jobs went to a 30-hour work week. And of course, the employer could move the factory overseas, and not worry about all of the government restrictions and taxes. Last Thursday, Carrier Air Conditioner announced that it is moving to Mexico and 2,100 jobs go with it. I guess moving “overseas,” is a misnomer. Mexico and Canada are right next door.
The newest thing is negative interest rate policy that is being pushed worldwide on the banks. It’s a little like telling hookers that they have to pay guys to have sex with them. The concept doesn’t float at that level for the simple reason, there is nothing in it for them (naturally I’m referring to the banks ;>)).
We have a drought out here and everyone has been asked to cut down on water usage. Our area in San Diego cut their water usage by 25 %. Net result the water company sold less water and their fixed costs did not go down, so our water bills increased as a reward for using less water.
We tried to bomb the dictators out of the Middle East, and give them Democracy. What did we get? Anarchy! Democracy is not something you can pass out at a pep rally.
Changing the school lunch program to be more healthy and force every student to eat whole wheat, and have a fruit with each meal, created incredible waste. Not to mention kids left the school to get something "Real" to eat. People don’t get fat eating food that doesn’t taste good. If it doesn’t taste good, don’t eat it (and that advice is a couple of million years old).
Oil prices have dropped dramatically and we are still adding 10% ethanol to each gallon. Ethanol gives lousy gas mileage, eats the hell out of the fuel system, and makes our beef steaks cost more. You can’t take a well fed car down to a slaughter house and get prime rib or steaks out of it, only easy monthly payments; miss one and pay the rest of your life. Some of our biggest ethanol producers are family of some well know Congressmen. The irritating thing is that everyone whines about gas prices, but most people have no idea of what they pay for steak, they just drop it in the shopping cart.
The great government program to help our kids get a college education has given a lot of them a financial education that will last their entire lifetimes.
Then we have the new health insurance for everyone. If you can’t afford it, the government will want to know everything about you for you to get it free. And when you file your taxes this year, you have a new form to show the IRS, your 1095-B proof of health care coverage.
The national debt is approaching 20 trillion. The average American thinks, government budgets have worked ok so far, the people in charge must know what they are doing. I guess, if you have that sort of faith in government, you don’t need to go to church every Sunday. What you save in church tithes, will make up for the interest lost on your 401k.
Do you get the feeling, that if big government left us alone, we could manage just fine? Of course listening to the election debates, the last thing anyone of them wants to do, is leave us alone, they want to give us something. The only thing that worries me, is that we may get everything we ask for and something we didn't, a Banana Republic.
Sunday, February 07, 2016
Investment Returns vs Homeownership
The average person thinks that when they pay off the mortgage, they live in their home for free. This is semi correct. Sell the house and put the money in the bank and in the past, the interest was what you would pay to rent the house. So with a half million-dollar home today, the money in the bank pays about .05 percent. That comes out to $2500 a year or $250 a month. Something is wrong here. If you buy the same property as an investment, you will probably get a rental investment return of $2,500 a month which is $30,000. That’s a 6% return on your investment. So being a paid off home owner gives you a better return on your savings than what the bank could offer by a mile.
The statement hidden behind the data is that if interest rates remain low, the average blue collar worker can ill afford the house payments for a very overpriced home. If bank interest rates were to reach 8%, the monthly payment would be $3,660 a month, whereas at 5% they would be $2680 a month. The neat thing about the high sales price, is that it locks in the property tax assessment which is 1% in California. Even at the lower amount, the buyer with no money down needs about 50K a year just for the house payment, taxes and utilities
What is missed here, is that retirement funds or people with cash, can buy a home with an expected rental return of 6%. This in turn puts stress on the starter home prices. They go up in price to a level to where, starter homes are no longer starters.
There is a conundrum here; low bank interest rates, high rental return rates, and unrealistic house valuations. The real loser here is the homebuyer with very little down. He will be broke the rest of his life paying off the home. If you think about it for a few minutes, you will realize that everyone rents the home they live in. Your lifespan determines the rental length. A man in Oxnard made millions leasing 100 acres of land from the city for 100 years. He built rental condominiums on the acreage. After 20 years, he had them paid off and I think he lived to realize another 40 years of income off of them. So after another 40 years, when the lease expires, the relatives will give the land back to the city of Oxnard.
So until the cost of money gets back to more realistic levels. Everyone will be forced to park their savings in real estate investments, not home ownership, there is a difference. This is the definition of a bubble, the miss allocation of resources. The investment return, not the value of the asset, justifies the price paid.
The real reality of the situation is that when the housing prices double, you pretty much double the number of people occupying the house. And it is only noticeable when you come home late and can’t find a parking space for your car. Go figure.
The statement hidden behind the data is that if interest rates remain low, the average blue collar worker can ill afford the house payments for a very overpriced home. If bank interest rates were to reach 8%, the monthly payment would be $3,660 a month, whereas at 5% they would be $2680 a month. The neat thing about the high sales price, is that it locks in the property tax assessment which is 1% in California. Even at the lower amount, the buyer with no money down needs about 50K a year just for the house payment, taxes and utilities
What is missed here, is that retirement funds or people with cash, can buy a home with an expected rental return of 6%. This in turn puts stress on the starter home prices. They go up in price to a level to where, starter homes are no longer starters.
There is a conundrum here; low bank interest rates, high rental return rates, and unrealistic house valuations. The real loser here is the homebuyer with very little down. He will be broke the rest of his life paying off the home. If you think about it for a few minutes, you will realize that everyone rents the home they live in. Your lifespan determines the rental length. A man in Oxnard made millions leasing 100 acres of land from the city for 100 years. He built rental condominiums on the acreage. After 20 years, he had them paid off and I think he lived to realize another 40 years of income off of them. So after another 40 years, when the lease expires, the relatives will give the land back to the city of Oxnard.
So until the cost of money gets back to more realistic levels. Everyone will be forced to park their savings in real estate investments, not home ownership, there is a difference. This is the definition of a bubble, the miss allocation of resources. The investment return, not the value of the asset, justifies the price paid.
The real reality of the situation is that when the housing prices double, you pretty much double the number of people occupying the house. And it is only noticeable when you come home late and can’t find a parking space for your car. Go figure.
Wednesday, January 20, 2016
Everything’s GREAT!
Did you ever notice, people that wake up with a feeling of gloom seem to spread it to others? Now imagine if the country was in a major depression. Do you think government is going to point out the fact?
Depressions are self-fulfilling. The acceptance of the fact that you are in one, tends to exacerbate it. One tends to save more and spend less in anticipation of bad times that may lie ahead. Most politicians are doing the correct thing by not acknowledging the economic mess, it would only make things worse.
Obama in Detroit today shown in a car plant, said sales were up and things were getting better. Detroit is a city where they are tearing down so many houses that they want to rezone 60 acre portions into farm land. I not sure how true that is, but the Paul Bunyan folklore story tellers are known to be from around there and they tend to stretch the truth a bit.
So, everything is just great. The only problem is that the rest of the world is on life support. And it is getting worse. Europe could barely afford to finance their health care plans for their populations. Now they have 20 million immigrants that have no place to go. The support institutions of Europe will not be able to meet the demands put upon them. And nobody will believe that until it happens.
We have unrest in several Middle Eastern countries and with the price of oil falling out of bed, there is no support for the poor. Farmers can’t plant in war torn areas. People are fleeing to areas where there are so many refugees that there is a guaranteed impossibility of employment.
The only part of the global economy that governments cannot really control is the stock market. This world market has kind of taken on a mind of its own lately. We are not sure of where it is going tomorrow, but it doesn’t look good for the long run. We do know one thing, in 1929 most of the investors were individuals. In today’s market, most of the investors are fund managers. They need to keep in the market, to have a reason to keep their job, as a fund manager. For that reason, I don’t see a panic, just a very continuous steep sell off into oblivion. Plus, your stock fund manager isn't old enough to have ever experienced a bear market. And naturally, there will be one or two spectacular "recoveries" on the way to the bottom. Where to from here? Not sure. We have been here before in history, I’m sure of it. The only trouble is; you can only see the outcome from the rear view mirror.
I think we have time to go back to the snack bar and get a refill on the popcorn, you won't miss much of the movie even if you really wanted to watch it.
Depressions are self-fulfilling. The acceptance of the fact that you are in one, tends to exacerbate it. One tends to save more and spend less in anticipation of bad times that may lie ahead. Most politicians are doing the correct thing by not acknowledging the economic mess, it would only make things worse.
Obama in Detroit today shown in a car plant, said sales were up and things were getting better. Detroit is a city where they are tearing down so many houses that they want to rezone 60 acre portions into farm land. I not sure how true that is, but the Paul Bunyan folklore story tellers are known to be from around there and they tend to stretch the truth a bit.
So, everything is just great. The only problem is that the rest of the world is on life support. And it is getting worse. Europe could barely afford to finance their health care plans for their populations. Now they have 20 million immigrants that have no place to go. The support institutions of Europe will not be able to meet the demands put upon them. And nobody will believe that until it happens.
We have unrest in several Middle Eastern countries and with the price of oil falling out of bed, there is no support for the poor. Farmers can’t plant in war torn areas. People are fleeing to areas where there are so many refugees that there is a guaranteed impossibility of employment.
The only part of the global economy that governments cannot really control is the stock market. This world market has kind of taken on a mind of its own lately. We are not sure of where it is going tomorrow, but it doesn’t look good for the long run. We do know one thing, in 1929 most of the investors were individuals. In today’s market, most of the investors are fund managers. They need to keep in the market, to have a reason to keep their job, as a fund manager. For that reason, I don’t see a panic, just a very continuous steep sell off into oblivion. Plus, your stock fund manager isn't old enough to have ever experienced a bear market. And naturally, there will be one or two spectacular "recoveries" on the way to the bottom. Where to from here? Not sure. We have been here before in history, I’m sure of it. The only trouble is; you can only see the outcome from the rear view mirror.
I think we have time to go back to the snack bar and get a refill on the popcorn, you won't miss much of the movie even if you really wanted to watch it.
Wednesday, January 13, 2016
Who Is Financing Real Estate Loans?
The question arises, what bank is nuts enough to write home loans at even 4% for 30 years. The answer absolutely none. The savings and loan fiasco of the 1990’s was caused by Savings institutions loaning long and paying short term depositors interest. They loaned money for 30 years at 5%. When short term rates went to 6% their depositors move their funds to a bank paying higher rates and we had massive failures of Savings and Loans.
The banks could do 4% loans, but why bother with the potential risk, when you can make 12% to 36% on credit card loans.
The invisible banker in this whole mess is the Federal Reserve. They are financing the current real estate bubble. It’s kind of a peculiar arrangement. The Federal Reserve can keep a loan on the books for 30 years at zero percent interest and when it gets paid off, they get their money. Now if an investor has a 100k 30-year Treasury at 1% interest and rates go to 8% the current value of that bond is reduced to about $12,500. If they need cash, they will be eaten alive. If they can wait like the government can, they get every penny back in 30 years. Receiving interests on a loan is a human gratification, not a governmental expectation.
Most home loans end up being for about 5 years, the buyer sells (moves gets divorced, etc). So a loan written for 30 years, ends up being a 5 year loan after the home is sold and repurchased by a new owner. The Federal Reserve has amassed about 3 to 6 trillion dollars’ worth of real estate debt. The interest rate is really irrelevant to the Federal Reserve, they are not a bank, and do not have to show a profit. Time is an option that they don’t have to bother with. But the financing pool of money has to be very large. So when a bank writes a loan, they farm it out to a buyer like the Federal Reserve. The Fed has to buy all loans offered in order to keep interest rates low, just like what they are doing with T-Bills. If they don’t, prices rise until a buyer appears and purchases the note.
If you are following retirement funds and other investment operations, many are becoming involved in rental real estate. Notice the zero overhead of purchasing renting real estate for the Investment funds. They have the purchase money and need an investment return, plus they get to depreciate the investment. The base line return can be as high as 15% and most appear to be around 8%. In bad economic times projecting an 8% return just might not float the boat. But right now, the investment funds have a 4 percent hedge on potential home buyers; whose cost of funds is at 4 percent and no depreciation.
If we reduce it down to a personal level, for every dollar the Fed loans out, it will get one dollar back (if it waits long enough). Where you and I depend on the interest generated on loaning out dollars to create investment income for our retirement.
The real problem starts when the Federal Reserve stops buying real estate loans. The question now being asked, “Do they dare?” The questions of a lot of bystanders, is, “How can these crap shacks be worth so much?” Zero interest rates have distorted real estate values.
Just maybe, the Feds will be forced to take possession of the bad crap shack loans--- If this real estate bubble pops, they own it all, the only problem is the "they" bit; its you and me, AKA Taxpayer.
Reality might have “left the building” 20 years ago, but it will return. Stocks, bonds and real estate will return to historic norms. Once government influence drops from the equation, the mis-allocation of resources will stop. Just how this will happen is up for debate, but the drop in the world stock markets and the fall of oil prices seem to point to an uncertainty that could speed up the process a bit.
The banks could do 4% loans, but why bother with the potential risk, when you can make 12% to 36% on credit card loans.
The invisible banker in this whole mess is the Federal Reserve. They are financing the current real estate bubble. It’s kind of a peculiar arrangement. The Federal Reserve can keep a loan on the books for 30 years at zero percent interest and when it gets paid off, they get their money. Now if an investor has a 100k 30-year Treasury at 1% interest and rates go to 8% the current value of that bond is reduced to about $12,500. If they need cash, they will be eaten alive. If they can wait like the government can, they get every penny back in 30 years. Receiving interests on a loan is a human gratification, not a governmental expectation.
Most home loans end up being for about 5 years, the buyer sells (moves gets divorced, etc). So a loan written for 30 years, ends up being a 5 year loan after the home is sold and repurchased by a new owner. The Federal Reserve has amassed about 3 to 6 trillion dollars’ worth of real estate debt. The interest rate is really irrelevant to the Federal Reserve, they are not a bank, and do not have to show a profit. Time is an option that they don’t have to bother with. But the financing pool of money has to be very large. So when a bank writes a loan, they farm it out to a buyer like the Federal Reserve. The Fed has to buy all loans offered in order to keep interest rates low, just like what they are doing with T-Bills. If they don’t, prices rise until a buyer appears and purchases the note.
If you are following retirement funds and other investment operations, many are becoming involved in rental real estate. Notice the zero overhead of purchasing renting real estate for the Investment funds. They have the purchase money and need an investment return, plus they get to depreciate the investment. The base line return can be as high as 15% and most appear to be around 8%. In bad economic times projecting an 8% return just might not float the boat. But right now, the investment funds have a 4 percent hedge on potential home buyers; whose cost of funds is at 4 percent and no depreciation.
If we reduce it down to a personal level, for every dollar the Fed loans out, it will get one dollar back (if it waits long enough). Where you and I depend on the interest generated on loaning out dollars to create investment income for our retirement.
The real problem starts when the Federal Reserve stops buying real estate loans. The question now being asked, “Do they dare?” The questions of a lot of bystanders, is, “How can these crap shacks be worth so much?” Zero interest rates have distorted real estate values.
Just maybe, the Feds will be forced to take possession of the bad crap shack loans--- If this real estate bubble pops, they own it all, the only problem is the "they" bit; its you and me, AKA Taxpayer.
Reality might have “left the building” 20 years ago, but it will return. Stocks, bonds and real estate will return to historic norms. Once government influence drops from the equation, the mis-allocation of resources will stop. Just how this will happen is up for debate, but the drop in the world stock markets and the fall of oil prices seem to point to an uncertainty that could speed up the process a bit.
Sunday, January 10, 2016
A Readers Perspective
"The Mortgage Guy” put this letter in the remarks section of my last post. He spent some effort writing it, and it may be a refreshing break to my murder of English grammar and punctuation. Here is his letter:
Jim I've been a lurker here since 2008. I stumbled upon your site while searching for truth in a desert of deliberate media obfuscation at the least and out right propaganda at worst. Your site was one of the many oases of veracity that I came upon both back in 08 and presently.
I had a front line seat to the financial devastation of that time, these times, and early on I might add. I owned a mortgage origination company back then having migrated from the financial planning field. The earliest signs of things to come became apparent shortly after 9/11, a time that witnessed unwarranted easy monetary policy that helped inflate the ill-fated bubble. The initial easing was warranted in light of the terrorists attacks. There was no reason however not reverse that easy policy a couple of years later.
It was around 2003 when we started to see our wholesalers buying ridiculous mortgage paper. Our wholesalers wanted to buy loans that didn't require proof of a job, proof of income or proof of assets. The only things required was a 620ish credit score and a solid appraisal. We also saw demand for 100% loan to value loans, on both a first and second mortgage basis. Purchase money mortgages were equally ridiculous with 103% loan to value loans as well as a plethora of similar offerings.
On a number of occasions, I would come right out and ask my wholesalers "what are you guys doing buying this garbage paper?" The most common answer was "we're not holding it" or "we sell the loans to Wall Street" (Bear, Lehman, etc.). It became apparent that the proliferation of these toxic time bombs was due not to consumer demand necessarily but due to Wall Street's ravenous appetite to securitize debt. It's interesting to note, that had Glass Steagall not been repealed by the signature of Bill Clinton, these toxic loans could not exist and what is erroneously referred to as the Bush recession, would not have happened. It is equally interesting that these loans could not have proliferated without their fraudulent securitization, which is the second biggest reason after Clinton, for the economic meltdown of 2008/09.
Having provided some background, let me state that not only has "depression grade" financial devastation been inflicted all along, very little if anything has changed. That is because nothing has been done to address the problems at hand, rather all efforts taken were to paper over the damage.
The mirage of economic expansion is primarily due to a leftist media meme that brainwashed masses to believe the stock market is the economy as is the unemployment rate. Anyone with any financial acumen will tell you that the stock is one of the poorest economic indicators in existence. They will also tell you that the stock market's precipitous rise isn't due to economic or business fundamentals but to an unprecedented printing of trillions that were funneled into the market via insolvent banks. Thus benefiting the very entities that created the economic woe while starving Main Street of any trickle down.
As for the unemployment rate, that is a statistic rendered useless by its historically skewed shrinkage in the labor force. By some estimates, 80% to 85% of the unemployment rate drop isn't due to job creation but rather labor force shrinkage. This phenomenon is due to the way the unemployment rate formula works. Based on the way the formula works, it is possible to lower the unemployment rate to zero without creating a single job. This is accomplished through the labor participation rate falling to the necessary degree. One can duplicate this phenomenon with the jobs calculator on the Federal Reserve of Atlanta website. https://www.frbatlanta.org/chcs/calculator.aspx?panel=1
Taking away the two most used economic indicators used by the media to present a false sense of prosperity, we are faced with a majority of indicators that present are more sobering view of the economy. Even the highly touted 298,000 jobs (supposedly) created in the latest jobs report is a sham. All of the jobs were created by the BLS through voodoo seasonal adjustments; and not by actual businesses. The raw numbers show a loss of in excess of 60,000 jobs.
Since the end of Clinton's great recession, job creation has failed to keep up with population growth, an important metric that only lost its importance since the advent of the state owned media. The jobs that have been created are part time and low paying. The kind of jobs you can't buy a house with, as evidenced by the historically low home ownership rate. Not only are these jobs so bad that people cannot afford to buy homes, over half of all U.S. twenty-five years olds live in their parent's basement.
For the first time in history, the middle class is a minority in America. For the first time in history business failures out number new business creation. Half of the working people in the United States earn less than $30,000. Not only are incomes down on a purchasing power basis but wealth is down as well. 62% of Americans have less than $1,000 in savings.
Add to this that one in five children are on food stamps and UNICEF ranks the U.S. 35 out of 41 wealthy countries for percentage of children living below poverty. One in three children do. In 1950 80% of American men held jobs. Today only 62% hold jobs.
We still have the QE time bombs to deal with, bank solvency (papered over now but not in the impending meltdown) as well as the pension plan deficiencies. All of which will rumble through the economy on the days of reckoning.
What you/our detractors fail to realize is that the absence of bread lines (due to ebt and mail) and the lack of tanks in the streets doesn't mean we have not and are not in a depression. Even in Greece, there are no tanks in the street.
Jim, you and I were right all along. Take comfort in former Federal Reserve Governor, Richard Fischer's confession as to what they did to paper over the apocalyptic destruction to our economy. http://globaleconomicanalysis.blogspot.com/2016/01/former-dallas-fed-governor-richard.html#RjxLAsdKayftg64C99. Please keep your sanity when encountering the masses that have been brainwashed with a concerted media effort in order to hide our sad reality and please keep up the fine work.
A Happy and Prosperous New Year to you and your readers.
Jim I've been a lurker here since 2008. I stumbled upon your site while searching for truth in a desert of deliberate media obfuscation at the least and out right propaganda at worst. Your site was one of the many oases of veracity that I came upon both back in 08 and presently.
I had a front line seat to the financial devastation of that time, these times, and early on I might add. I owned a mortgage origination company back then having migrated from the financial planning field. The earliest signs of things to come became apparent shortly after 9/11, a time that witnessed unwarranted easy monetary policy that helped inflate the ill-fated bubble. The initial easing was warranted in light of the terrorists attacks. There was no reason however not reverse that easy policy a couple of years later.
It was around 2003 when we started to see our wholesalers buying ridiculous mortgage paper. Our wholesalers wanted to buy loans that didn't require proof of a job, proof of income or proof of assets. The only things required was a 620ish credit score and a solid appraisal. We also saw demand for 100% loan to value loans, on both a first and second mortgage basis. Purchase money mortgages were equally ridiculous with 103% loan to value loans as well as a plethora of similar offerings.
On a number of occasions, I would come right out and ask my wholesalers "what are you guys doing buying this garbage paper?" The most common answer was "we're not holding it" or "we sell the loans to Wall Street" (Bear, Lehman, etc.). It became apparent that the proliferation of these toxic time bombs was due not to consumer demand necessarily but due to Wall Street's ravenous appetite to securitize debt. It's interesting to note, that had Glass Steagall not been repealed by the signature of Bill Clinton, these toxic loans could not exist and what is erroneously referred to as the Bush recession, would not have happened. It is equally interesting that these loans could not have proliferated without their fraudulent securitization, which is the second biggest reason after Clinton, for the economic meltdown of 2008/09.
Having provided some background, let me state that not only has "depression grade" financial devastation been inflicted all along, very little if anything has changed. That is because nothing has been done to address the problems at hand, rather all efforts taken were to paper over the damage.
The mirage of economic expansion is primarily due to a leftist media meme that brainwashed masses to believe the stock market is the economy as is the unemployment rate. Anyone with any financial acumen will tell you that the stock is one of the poorest economic indicators in existence. They will also tell you that the stock market's precipitous rise isn't due to economic or business fundamentals but to an unprecedented printing of trillions that were funneled into the market via insolvent banks. Thus benefiting the very entities that created the economic woe while starving Main Street of any trickle down.
As for the unemployment rate, that is a statistic rendered useless by its historically skewed shrinkage in the labor force. By some estimates, 80% to 85% of the unemployment rate drop isn't due to job creation but rather labor force shrinkage. This phenomenon is due to the way the unemployment rate formula works. Based on the way the formula works, it is possible to lower the unemployment rate to zero without creating a single job. This is accomplished through the labor participation rate falling to the necessary degree. One can duplicate this phenomenon with the jobs calculator on the Federal Reserve of Atlanta website. https://www.frbatlanta.org/chcs/calculator.aspx?panel=1
Taking away the two most used economic indicators used by the media to present a false sense of prosperity, we are faced with a majority of indicators that present are more sobering view of the economy. Even the highly touted 298,000 jobs (supposedly) created in the latest jobs report is a sham. All of the jobs were created by the BLS through voodoo seasonal adjustments; and not by actual businesses. The raw numbers show a loss of in excess of 60,000 jobs.
Since the end of Clinton's great recession, job creation has failed to keep up with population growth, an important metric that only lost its importance since the advent of the state owned media. The jobs that have been created are part time and low paying. The kind of jobs you can't buy a house with, as evidenced by the historically low home ownership rate. Not only are these jobs so bad that people cannot afford to buy homes, over half of all U.S. twenty-five years olds live in their parent's basement.
For the first time in history, the middle class is a minority in America. For the first time in history business failures out number new business creation. Half of the working people in the United States earn less than $30,000. Not only are incomes down on a purchasing power basis but wealth is down as well. 62% of Americans have less than $1,000 in savings.
Add to this that one in five children are on food stamps and UNICEF ranks the U.S. 35 out of 41 wealthy countries for percentage of children living below poverty. One in three children do. In 1950 80% of American men held jobs. Today only 62% hold jobs.
We still have the QE time bombs to deal with, bank solvency (papered over now but not in the impending meltdown) as well as the pension plan deficiencies. All of which will rumble through the economy on the days of reckoning.
What you/our detractors fail to realize is that the absence of bread lines (due to ebt and mail) and the lack of tanks in the streets doesn't mean we have not and are not in a depression. Even in Greece, there are no tanks in the street.
Jim, you and I were right all along. Take comfort in former Federal Reserve Governor, Richard Fischer's confession as to what they did to paper over the apocalyptic destruction to our economy. http://globaleconomicanalysis.blogspot.com/2016/01/former-dallas-fed-governor-richard.html#RjxLAsdKayftg64C99. Please keep your sanity when encountering the masses that have been brainwashed with a concerted media effort in order to hide our sad reality and please keep up the fine work.
A Happy and Prosperous New Year to you and your readers.
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