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.

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.

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;
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.”


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.

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.

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?

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.

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."