Sunday, February 23, 2014

The New Obama Work Week

Politicians always have our best interests in mind when they pass new legislation, but they always seem to screw things up and that is why we have the expression, “The road to Hell is paved with good intensions.”

Employers have to cover full time employees with health care insurance. The employer is kind of OK if he can keep his work force under 50 people. There are also other things that have to be covered for full time employee, so as an employer, if you can eliminate the full time employees, you limit your future liability.

For example take a small shop employing two full time employees and one part time employee. It's open 9 hours a day from 11am to 8 pm 7 days a week. In this case,there are two people working 40 hours each and one 32 hours.

Full time employees get benefits like vacation and sick time, where part time employees get zip. With the Obamacare perspective in mind, there is an alternate employer option to reduce having to participate in the plan. Employees who work less than 32 hours are not covered by the new health care plan.

So examine the schedule below, instead of two full time workers at 40 hours and one part time worker at 32 hours, we now have a new work schedule with 4 employees all working 28 hours a week. As far as the government is concerned, we have an additional person to boot, now employed. The trouble is, they don’t qualify for employer mandated health care. Some readers will jump on me claiming that this is such a small operation that the health insurance mandate wouldn’t apply. I will argue that this schedule could be used by Wal-Mart quite effectively. The new work week is only 3 and ½ days long.

Health care sounded like a great idea, but the end results are not the intended ones (full employment doesn't revolve around a 28 hour work week). Then on top of that, Congress wants to raise the minimum wage. It kind of makes sense, if you are getting the minimum wage now, the health insurance is free. Raise wages and the government will collect more taxes and you might not qualify for free medical. The 3 and 1/2 day work week should give everyone that wants a job, a shot at getting one. Problem solved!--- More money for working at a job you hate and less hours to boot.

Wednesday, February 19, 2014

Are We In A Depression?

I guess if you have to ask, the answer is no, but if you look around, things are quite a bit different than they were 5 years ago. The government now controls the banking industry, the bond market, and the real estate market. And of course, if it’s too big to fail, the government will manage that also. Not to mention that world currencies are a real mess getting worse by the day.

Interest rates are extremely low and there is no line of people waiting in line to borrow for new investments. There are a large number of companies and government agency’s floating new bonds at these low rates. And with low interest rates, savers are not flocking to banks to take advantage of the interest rates. In fact, the real question asked by the consumer, “Why save at these paltry rates when I can buy it now and enjoy it?” The concept consume later and enjoy the interest rate return is gone.

Real estate took off for a while when the money market funds realized that 20 percent down in distressed markets had a very high rate of return as a rental. That hole has pretty much been plugged. Rents can rise, but if the unit is not occupied 12 months of the year, the owner faces a decrease in rental income. Owners don’t set rental rates, available supply does ( i.e. the house could rent for 1,000 a month and be rented only 4 months out of the year, where the house renting for 800 a month might be rented for the full 12 months).

The stock market is truly the last game in town, and a very hard one to regulate from a government perspective. The money the Fed has been pouring into the real estate market and the Treasury market eventually ends up in the stock market. You sell a T-bill to the Fed at face and you get investment dollars that you can plunk into the stock market “for a real gain.” Faites vos jeux.

The real question not being faced is the misallocation of resources. Spending too much money producing or harvesting resources that are not needed, eventually leads to bankruptcy; is what can be considered a bubble. Are we talking about something tangible like real estate which every now knows was a bubble? Or are we referring to other things that show all signs of a bubble, like retirement benefits, and health care.

The government uses economists to project what the economy is doing. And from my opinion, an economist can explain why something happened in the past, but doesn’t have the foggiest idea of what it portends for the future.

The precious metals market displays the two sides of owning something. You either hold it in your hand, or somebody else is holding it in theirs. You can own the gold or the certificate, or you have ETF’s or street name stocks. At some point when everything gets marked to market for accountability, investors will find out that there are 1,000,000 ETF’s and only 100 actual items held in trust. I’m not sure how this will set with the investment community when it is realized. Common sense suggests that it is being abused on a large scale.

So from a government perspective, do you inform the public or misinform the public as to the status of the economy? I think most will agree, that misinformation is the best route, otherwise real information makes consumers more aware and more cautious in their spending. And in the end, being negative about the economy can project itself and make things even worse.

The question you need to examine very carefully is; “Do you believe what the government is telling you about the economy is truthful?” It really doesn’t matter what your answer is, you could have cared less about what government thought when times were good. Let’s face it, we haven’t experienced times like this in our lifetime and our government claims the economy is doing fine. Go figure!

Saturday, February 08, 2014

Idiots Are In Control

I’m amazed when grown men sit down trying to end the civil war in Syria and expect Bashard al-Assad to clear out and turn the country over to someone else with a gun. The US had a civil war and there were about a 750,000 deaths. Civil wars end sooner or later, they run out of grave diggers.

We have a President that thinks a minimum wage of 10 dollars per hour will solve the problems food stamps and unemployment insurance couldn’t cure. The people in China building our cell phones get 60 dollars a week. It kind of makes you wonder, if we are paying too much for flipping hamburgers. We certainly have no way to off-shore the restaurant business.

If you’re in Mexico assembling wide screen TV’s at 60 cents an hour, any job in California is a step up. No wonder we have an immigration problem, Mexico has a wage problem. 10 dollars an hour is heaven, Obama has become the patron saint for illegal aliens.

Obama’ wife thinks that modifying the school lunch program to make it healthy will keep kids mean and lean. The only problem, if it doesn’t taste good, you’re not going to sell many school lunches. Net result; satisfy your customer or go out of business. It is irritating to see trash cans filled with perfectly good food in the name of bureaucracy. The kid doesn’t have to eat the apple; it just has to be on his tray for the school to be up to government standards. The supermarket down the street sells lots of greasy chicken. If you do the math, a trash can full of chicken bones weighs a lot less that a trash can full of uneaten fruit.

Obama just praised CVS pharmacy for discontinuing the sale of cigarettes. The government can screw up my animal fat fried French fries (because they are unhealthy) and at the same time tax me to death if I want to smoke cigarettes. If the government was to ban cigarettes, people would be healthier and live longer, which is ultimately bad for the Social Security fund and bad for government programs that depend on the cigarette taxes. My guess is that CVS figured out that at $6 dollars a pack, the kids would rather smoke dope, and the only other people with money were the elderly buying prescription drugs.

"Obamacare" is turning into one of those nightmares with subtitles like, “What voter did you piss off today.” It’s nice to know that the government needs a lot of young people signing up to pay for all of the old farts already sucking money out of the plan. One is buying “insurance,” and the other is receiving “benefits.” My doctor really likes me, I’m 67 and have private health insurance; he mentioned that he doesn't take Medicare patients anymore (and didn’t elaborate why), but he was firm and meant it.

Ben Bernanke’s last week in office, brought up the image in my mind of a teacher passing out stick matches in a day care center, one to each kid. Everyone was happy they got one and that he was leaving.

Janet Yellen and Jack Lew are Obama’s picks for the Fed and Treasury, the new Laurel and Hardy of Wall Street. Why do I get the feeling that neither one has a restroom key?

The national debt is up for a vote in Congress soon. It kind of reminds me of a turkey farm I use to fly over years ago in Greeley Colorado. There were about 6,000 baby turkeys in a huge greenhouse like enclosure about 600 feet in length. It was heated by two gas heaters, one at each end. I had just taken off the runway when one of the greenhouses caught on fire. The wind had extinguished the lit flame on the one burner and over a long length of time,the unlit gas reached the other burner, all hell broke loose. The smell of burnt hair was overwhelming as I flew through it. What it demonstrates, is that under the right conditions the unexpected can be quite disastrous.

There is a fine line between unintended and unexpected consequences. Congress is full of unintended events. Unexpected events are a surprise to everyone. Fortify your nest egg with a little physical Platinum, Gold and Silver.