Monday, December 30, 2013

The Approaching New Year

Can’t quite figure out what is in store for us next year. Interest rates are a joke if you’re going to retire, and very reasonable if you want to buy a home. The Japanese stock market has doubled this last year, which isn’t bad. Our markets seem to be doing OK also. With all of the “Knowledgeable Experts” in the market, there is only one path and that is up.

The Motley Fool has sent me emails this year about the latest and greatest investment ideas. I never finished one of their links to the end. Whatever they are touting, they want about 20 minutes of your time to sell it to you (You are going to get rich and you don’t want to miss the boat on this spiel). Give me a break; if I spot a 100 dollar bill on the floor, I’m not going to point it out to everyone. People everywhere are selling a newsletters promising you unimaginable riches.

Headline today, “1.3 million people to lose their unemployment benefits,” sounds pretty spectacular until you realize that it’s for about 6 days—until Congress extends them. Currently there are 10 million people unemployed, and if you drop Detroit from the count, figure about 8 million. Of course the six million people that lost their health care through no fault of their own are not a news item, that’s just tough luck. And according to government statistics, they also all live in Detroit.

The Federal Reserve looks like it will curb quantitative easing. Interest rates could climb 100 basis points (%1.0). This could affect housing and payday loans more than anything else. It certainly won’t curb the borrowing in the stock or commodity markets. And if you're retired, the increased interest might buy a nice treat for your dog.

Robert Reich of Berkeley has been suggesting that the rich have been getting richer and that there is no trickle down into the rest of the economy. He could Reich/right. This could be a good thing. All of those dollars released into the economy went nowhere, except into the bank accounts of the upper one percent. There was no shotgun blast of new dollars into the economy with massive consumption. There is, however, another problem, kind of a time delay. The rich are mortal and die just like anyone else and the kids inherit. The expression “shirt sleeves to shirt sleeves in three generations” kind of suggests that the kids are going to spend the dollars. Three generations is a long time to wait, so grandpa gets to do some mountain climbing in his wheel chair.

When we talk about the government spending one half a trillion dollars on servicing the national debt each year, that is about 1/3 of tax receipts. To put it bluntly, we spend more on interest payments than we do on running the government. That’s pretty much why a paltry 80 billion in cuts can literally cripple the government. We are running on vapors. If you read the news, we have “emerged” from the “greatest recession” since The Great Depression. The EBT food stamp massacre at Walmart was just a glitch. But you must admit that food stamps have come a long way now and the name has changed to “Electronic Benefit Transfer.” Maybe it’s just my imagination, but it looks like a lot of the food stamp recipients need to go on a diet. Of course their Galaxy3 cell phone and their eight thousand dollars in tattoos make me wonder why they really need the food stamps, but I digress.

I think that people are fed up with government. Eric Snowden has become a national folk hero with his release of classified documents and revealing what NSA is doing to us. The thing most people don’t realize is that there are tremendous volumes of data collected. The government doesn’t even have the man hours needed to process the data. Of course once this is realized, why spend billions of dollars on this spy system just to get one possible terrorist? Why do I think that question will never be asked?

Health care is an issue that has no answer. Where to from here? I’m not really sure. People don’t need health care for their kids; they need it for their parents. Of course with the new program, your dad can go for the triple by-pass and your kids get to pay the bill. It’s not quite the program everyone had in mind, but it will work no matter how much you dislike it—the kids were only going to spend the premiums on drugs and sex anyways.

So, for the coming year what do we have? Whatever we had before, we still have, and Congress can’t take that away. The New Year brings in a suggestion of new consumption. The words “Fat and Fatter” come to mind. Colorado may add to the frenzy of food consumption with the legalization of marijuana— It will be known as "The munchie State." Even Chris Christie is dieting; I think that he realized that he is too fat to be considered a Republican. Look for the stock market to double, it’s the only game left in town; reality has absolutely nothing to do with price valuations. We have been told that the “Great Recession” is over, implying we are close to getting out of the woods. That's a relief, shopping carts don't push too well in the dirt, especially if everything you own is in one.

Since I am not selling a newsletter, I have very little to predict about the coming year that could make us rich. But here's hoping that the new year brings better times to all of us.

Happy New Year from our family to yours and God Bless everyone.

Monday, December 16, 2013

What do We Know about Obamacare?

Those that can’t afford insurance will have it provided to them at no cost. Those currently paying into a health care plan and not consuming health care will probably see rates at least double. Private health insurance covers your kids until the age of 26, which is no real out of pocket cost for insurance companies. It is a selling point to get a customer. Government coverage isn’t going to throw in the kids for free up to the age of 26. Net result kids start paying for health insurance at age 18. So if you’re female, unemployed, single and pregnant, guess what you just won the lottery; you become entitled to all sorts of benefits. Otherwise figure $4,000 a year from the age of 18 to 45 for something you will probably not even need; kiss good-by that 100K not spent on pizza, beer and backpack trips--you don't even get the chance to smoke it, but I digress.

Let’s face it, what sort of government produced product offered to the public is better than what the private sector offers? I can’t even think of one thing. If you are in the military, would you use a government made hand grenade? Private producers go out of business if what they are producing is crap, or if its overpriced.

The whole health care program sounds so neo-Nazi. Everyone has to sign up with the government. Of course, “If you like your present health plan, you can keep it.” The real issue here is how long you get to keep it--for.

The thinking that caught my mind the other day was what someone said, “If you can’t afford health insurance now, you certainly won’t be able to when this program takes effect.” We are not talking about people that need medical treatment that they can’t afford to pay for; we are talking about people who want to protect their family from unforeseen health events.

The real issue isn’t health care for you and me; it’s about health care for those that Congress says can’t afford it. It isn’t a new and cheaper plan, rather a plan where those that bought health insurance, now have to pay more for those that couldn’t afford to pay what was billed or to be billed.

The government needs to get out of health care for several reasons, they are inept, incompetent, and wasteful. The concept that it is cheaper to pay for healthcare as a group through government is a flawed concept. The plans to be put into play are “not for profit plans.” So there is no real incentive to hold down costs to manage the health care system, but there is one to hold down the prices doctors charge.

We will see the statistics over the coming months. How many people will enroll in Obamacare? --I think it will be abysmal. It is a little like the gay marriage thing, great press, but how many people took advantage of those rights 50, 100?? (nobody even cared enough to follow up on it) Those who cannot afford their present health care, need money for treatment (that they don't have) and it has nothing to do with insurance. The people who desire insurance as a protection against future loss need to rethink what they can expect to receive from this new government plan. Anybody who thinks a government plan would be cheaper and better than a private plan has rocks in his head. The incentive to save for retirement is gone, when those that spend everything now expect to get more later for having less.

The net result of Obamacare, is that it has poisoned the political arena. Plus its entire infra-structure is geared to determining who doesn't have to pay for it. Maybe we'd better pass that minimum wage of $15 per hour so the people flipping hamburgers can afford to pay the insurance part of Obamacare, not just enjoy the free entitlement part.

The hundred dollar Big Mac with fries and a coke can't be far away.

Tuesday, December 03, 2013

The Oriental Connection

Here is a little paragraph cut and pasted from Wikipedia:

On October 24, 2013, debt held by the public was approximately $12.122 trillion or about 72.8% of Q2 2013 GDP.[5][6] Intergovernmental holdings stood at $4.9 trillion (29%), giving a combined total public debt of $17.078 trillion.[5] As of January 2013, $5 trillion or approximately 47% of the debt held by the public was owned by foreign investors, the largest of which were the People's Republic of China and Japan at just over $1.1 trillion each.
Japan and China each hold over a trillion in our debt. If you can, picture some large building in each country that holds the notes of debt. That is literally what Joe Six Pack envisions when he read the above quote.

How about if we look at it in a different perspective. We spent a lot of money buying cell phones and other goodies in those countries, and the people we bought it from are coming over here and are buying real estate. So let’s do some back of the envelope math. Figure that we bought two trillion dollars of product made over there. And that everyone in China and Japan that made 10 million dollars wants to buy a home in California. If I’ve done the math right, that’s about 200,000 homes. But if we want a bottom limit, we need to figure the number of homes that could be bought if the Japanese or Chinese entrepreneur only had one million dollars, and we get 2 million homes. So we end up with a range of homes purchased, for cash from 200 thousand to two million. The thing you need to realize, is that the money we spent and can’t pay back to China and Japan,--and we are laughing about it--, has already been safely salted away (they bought US property).

Where is the bottom line? Who gets the last laugh? And the real question, who pays the piper for all of the future inflation from the tremendous cash infusion? Of course, I have to wonder, how our two trillion dollar debt with them, doesn’t drop a tad when everyone from the Orient buys a home in California?

Do you get the feeling that there is a lot of economic information out there that is very insignificant until it suddenly becomes significant? The Federal Reserve balance sheet from financing home loans comes to mind. It’s a little like selling invisible gold fish, nobody complains until they understand that they have been had.

Of course, there is a saying in California, “You can check in, but you can’t check out.” It could be true, I haven’t tried to move since coming here.

I'm waiting for Obama Tax Insurance--you get to keep more for earning more! Why does that seem so absurd?