Location, Location, Location, or is it Spin?

I recently received our local yellow rag newspaper.  You know, the one that is simply a delivery vehicle for grocery and other store store ads that allows them to bypass paying the Post Office to deliver them.  They also come with no coupons so they really are a waste of time.

Usually I simply pull it out of the plastic wrapper and then throw it directly into the recycle bin and discard the plastic with the rest of the trash.  I do try to be green about it but definitely come short of letting it substitute for my Charmin.

This time, however, the headline caught my eye.  It simply read, “Building permits surge in Wake Forest.”  According to the crack journalist who compiled the story permits for residential buildings were up 86% in 2010 over 2009.  Wake Forest must be the happenin’ place to be!

Fortunately you only had to read the second paragraph to find out that this 86% increase was over the 14-year low of 2009. Those of you who follow this blog know that statistics can be deceiving.  “Figures never lie but liars figure”, right?  Sadly, you have to get to page 6N, very near the end of the article to see that the almost 400 permits last year was down over 60% from the peak in 2005, so don’t everyone come running here looking for work.

So how do we take this?  86% over continued decreases don’t bring us up out of the water, however an 86% increase is much better than a 10% decrease.  And, if these homes are more reasonable and affordable, they probably will sell well to those who truly can afford them.

If builders, bankers, agents and buyers can work together responsibly, we can all make this local housing upturn successful.  Perhaps the model can be repeated elsewhere.  Jobs and growth without government bailouts.

A Time for …?

Today’s USA Today had a headline that read, “Now what?  Obama, Republicans face choices of compromise or conflict.”  That may be true for Obama but sadly, each time that Republicans have gotten any kind of power in recent times, they took another choice: Cave.

Mainline Republicans want so much to be loved by Democrats and the main stream media that they have been willing to sacrifice values and their political careers to get on their good side.

When will the learn that some people live to hate them?

This new crop of Republicans in congress seem to have heard the message that this election was not an embracing of Republicans but a repudiation of the Obama plan.  The Republicans seem to have heard this but I doubt the President has.

For once the people have had a chance to speak where Obama and Congress were forced to listen, and for many of them, the message was, “Good bye!”

President Obama in his address yesterday essentially said that he lost track of the voters but that we were not smart enough to understand his policies so he should have explained better.  Which pieces of his policies did the voters not understand?

Was it Cap and Trade, which promised to raise energy prices and put coal miners out of work?  This in a time when unemployment is still very high and most families don’t have a lot of extra money to spend on higher energy bills?

Was it treating the Christmas underwear bomber as a criminal which allowed him to “lawyer up” in place of treating him as the terrorist he is?

Was it the give away programs to the labor unions (Harry Reid owes them big time for his re-election)?

Was it the rising debt that will bankrupt our children and grandchildren as it races to $14 Trillion?

Was it the growing government?  During this time of unemployment, the federal payroll continued to grow.

Was it ObamaCare, the unprecedented takeover of the health system?  I don’t think it was just an unfortunate coincidence that the last big Republican take over of the House happened after HillaryCare was soundly rejected by society.

Every one of the problems that these “fixes” were designed to address have  fixes.  Many of the fixes don’t require rampant socialism.

It is doubtful that the new Congress can repeal ObamaCare outright.  Obama still has the veto pen.  They can, however, deny funding for the federal programs and enact legislation that address the real problems without sacrificing liberty and our futures.  If necessary, we can address some of the more rational fixes.

I sincerely hope the new Congress will follow the mandate given to them in this election.  Let’s break with tradition.  It will take some compromise and a lot of conflict.  Let’s not cave this time.  Maybe the Democrats and media won’t like them but “We the People” will.

When your 401(k) becomes a 201(k)

It’s not just the recession that has decimated (six-fold in some cases) your retirement savings.  There is also talk among many policy wonks about making your personal retirement more restricted and restrictive.

US News and Word Report reported in October of 2008 of a plan to nationalize personal retirement plans.  These plans would transfer your money from “shaky”, evil (in their minds) personal accounts into government-controlled annuities.  Of course, those annuities would be funded by Treasury Bills and Bonds.

The plan did not go anywhere at the time but I believe we could see increased pressure to start “encouraging” tax payers and savers to switch to these plans very soon.  “Just look,” the argument will go, “at what your bad decisions did to your retirement funds.  We (the government) can obviously do a better job by guaranteeing growth.”  Of course that growth will in no way even keep up with inflation and to be sure it will be capped for the “richest” among us to help the “poorer” who, for whatever reason, didn’t save enough, or even save at all.

Government sponsored retirement plans, be they IRAs or the various flavors like 401(k)s (such as those for educators and other workers), and whether they are of the traditional or Roth variety, are not always the best choice for all investors.  You have to weigh deferred taxes of ordinary income (will we see 70% or more again? — I think, yes) versus tax rates now with only gains taxed at possibly the long term gains rates, and things like that.  Consult your financial adviser (preferably one that doesn’t advise you to buy one of his or her products) before making any investment decision.

What we are seeing is the potential take over of several trillion dollars in retirement savings.  As I said it didn’t get a lot of traction two years ago but we can expect more now for three big reasons.  There are no doubt more but I want to keep this short.

First of all, we will have an ever-growing national debt that will soon reach $14 trillion by even conservative estimates.  Uncle Obama has to get the money somehow and the way they will continue to fund our debt is by borrowing money.  They can’t borrow from Social Security any more because there is no Social Security surplus to take.  Social Security now pays out more each month than it takes in payroll taxes.  Now the feds have to start feeding the money they took back into the system.  Where better than to get it from you?

Second, to sell the debt, someone has to buy it.  Most foreign countries don’t have the money to do it and those that do have the money, don’t want to carry more of our debt.  They see massive inflation and currency devaluation coming and don’t want to be stuck paying the bill.  So where will that money come from?  From the funds that you can’t touch without massive penalties and taxes until you are 59-1/2 years old.

Third, it simply galls big-government socialists that you have control over any part of your personal economy.  You know Social Security won’t be there to hold you over through retirement.  You will need extra funds.  Your IRA and 401(k) were designed to do that.  Take those away from you and voilà!  You are once again dependent upon (or shall we say “at the mercy of”) the government in your waning years.

As long as President Obama can continue to blame George W. Bush for our financial problems, he and his cronies who rammed ObamaCare down our throats will feel that they can get away with this new retirement takeover scheme.

I’m sure this plan will be voluntary, just like our income tax system is “voluntary”.  You “volunteer” to pay your taxes (you gotta love governmental double-speak), albeit potentially at the point of a gun.  Expect the same kind of encouragement here as well.

Can Businesses Bailout the Government? – Part 2

In Part 1 I discussed what I saw to be why the government cannot get itself out of the economic mess we are all in.  Here I would like to explore some of the warning signs that we are in a you-know-what-load of trouble.  I’ll examine solutions in Part 3.  The solutions are not new.How would your family get out of its debt problems short of declaring bankruptcy?    We talk about “the family of man”.  How will/should our national “family” solve this problem?

There is no way the government can tax its way out of this mess without destroying the very lives and liberties it is supposed to be securing.

The only way to overcome debt is first to stop overspending and then, second, to pay it off.  That having been said, no gutless politician has the you-know-whats to propose cutting spending to the point where we have real surpluses as measured by real revenues and not vaccuous projections.  Historically a surplus has been seen by the politicians simply as more money to spend.  This policy is not only inane but is a sure milestone on the road to national bankruptcy.

How will we as a nation know we are bankrupt?  You personally know when the bank won’t lend you money and your credit cards are suspended.  The Treasury will know it when countries like China stop buying our debt.

Just as you have to show the bank that you are a responsible borrower, government, too, must prove that it is responsible.  Other countries will continue to buy a country’s debt as long as they feel that it will honor its commitments to service that debt and not devalue the currency to wipe out that debt.  When those who buy government debt don’t buy it, regardless of the interest rate, governments have two choices.  They can either go into default or they can print more money.  The first leads to massive tax increases and the second leads to massive inflation.  The only question that remains is: Do you want the rock or the hard place?

The only real solution that won’t make matters worse in the long run is for our government to cut spending down to just the Constitutionally-mandated programs and create a climate where individuals and businesses can produce to grow the economy.  Growth alone won’t get us out of this financial mess.  We must also radically cut spending down to only the programs that the Constitution allows.

Government has stepped way out of bounds.  It’s time to call off-sides and bring it back in.

Obamism – What is it? – More Thoughts

So what is Obamism?  I’m still not ready to say definitively, but others are more sure.  For example, Russian blogger Stanislav Mishin believes it is a form of Marxism (see one of his articles in the English language version of the Russian newspaper Pravda.)

Is Obama a Marxists?  I’m not fully convinced but there are disturbing signs.  Giving a car company to its union and his taking government control over financial institutions and health care are far from capitalistic actions.  Perhaps he thought those were the best options he had to solve some apparent or imagined problems that the free market for some reason could not solve.

Are they the right thing to do?  Everyone makes mistakes.  Maybe this was a mistake but he felt his back was to the wall.  We’ll know more when we see what he does with other distressed companies and institutions as the real economy continues to falter.

I know a lot of this is “old news” but we have to remember history and learn from it.  Otherwise we run the risk of repeating the same mistakes.  Besides, if we are honest, nothing really is fixed.  If this pattern continues then he most likely is some form of Marxist.  Marxist or not, he certainly isn’t be a capitalist, regardless what he says or how he tries to spin his administration as being “business friendly”.

Are these the best options?  I don’t think so.  If giving money is the solution to the so-called crises, why give it to the people who mismanaged these institutions in the first place?  Yes some CEOs were forced out, but they weren’t the only ones making the bad decisions.

For example AIG (and in full disclosure, I do business with one of their subsidiary companies and I lost money due to their stock) got a boatload of money and what did they do?  As we know, they gave a large hunk of it in bonuses to the very people who got them into financial trouble in the first place.  I used to work for a company that claimed it had a “pay for performance” policy.  This to me seems more like a “pay for non performance” policy.  This is hardly a capitalist act.

What was the justification?  The argument AIG gave was that they were “contractually obligated” to give these bonuses and retain employees.  If they didn’t give those bonuses, AIG claimed, these people would leave or they’d not have money to pay for security guards to protect them from their neighbors who (probably rightly) blame them for their mortgage and other financial problems.

Contractually obligated?  Ask the so-called secured creditors of Chrysler about contractual obligations when the Feds stepped in.  The federal government runs purely by the Golden Rule:  The one who holds the gold makes the rules.  And, as we’ve seen, those rules can change at the government’s whim.  Federal law protected secured bond holders until the federal government suspended that law and left the people who tried to help Chrysler if their cash waving in the wind.

Retain employees?  To where would these lack-luster people have gone? To someone else who wants to fail?  I can see the job interview now.  “I left AIG because they didn’t give me a bonus after I ran my division into the ground.”  To which the interviewer replies, “Yes, I see you are uniquely qualified to destroy some of our divisions as well.  You’ll make a great member of our team.”  Hardly.

It is true some of the ones who were being retained were ones running segments that were not failing.  So why give cash?  Give them options whose value is pegged directly to the performance of the company and its stock.  With the stock in the tank, a warrant or option for the then-current price that cannot be cashed for three years is certain incentive to have the company come out of the pit it was in.

What should have been done?  Pundits said that AIG is “too big” to allow it to fail.  OK, then split it up into pieces some of which can stand on their own which are not too big to fail if they deserve to fail.  Let the Free Market decide which pieces are worthy of continuing in business, which pieces should be consumed by other companies and which should outright fail.

If you want to help (and I’m skeptical of most programs as any government giveaway is unconstitutional), get it to the people who will directly benefit.  Do you want more houses sold?  Give a tax credit (along with the mortgage deduction) for people for whom this is their only home.  I cannot in any way think that speculators, housing moguls, or second home buyers should be bailed out; they took their chances fair and square.  Do you want to sell American-made cars?  Give tax breaks to the purchasers of those cars.  Let some of the money trickle-up for a change.  You say you want to help the “average American”, so implement something that benefits him or her and not the corporate bosses and union leaders.

To add insult to injury, the stimulus packages pushed through Congress now appear to be failing and many “free money” (read that “your money”) advocates say the stimulus needs a stimulus in itself.  If history repeats itself, the government will continue to give a lot of money to undeserving people, many of whom are ones who caused the problems in the first place.

Do you know the worst part?  Virtually nothing that the Feds did that we discussed here is even remotely Constitutional.  I take that back.  Borrowing the money is the only power the Constitution allowed.  Sadly, they used it for unconstitutional bailouts and boondoggles .   Every penny was applied directly to our almost $14 Trillion National Debt.  If I’m wrong, please point out the Article and Section that supports this.  I showed you mine in the link above.  You show me yours.

Allowing government to spend whatever it wants on whatever it wants with no regard for the Constitution effectively nullifies the Constitution.  We effectively have a totalitarian oligarchy.  Why not just have a totalitarian dictator?

What I do support, however, is that if you really want the economy to recover then cut both individual and corporate taxes.  Ease the oppressive regulation on small businesses, the true engine of economic growth.  Give people and small companies who will spend the money more money to spend.

History proves that it works every time.