Perry Glasser

Archive for the ‘Finance’ Category

THE CRUSH IS ON US – PART 3 of 3

In Business, Economics, Economy, EDUCATION, Finance, Millenials, TAXES on June 13, 2018 at 12:16 pm

THE CRUSH is not a youth problem; it’s a shared disaster.

Titanic_sinking_stu_w1Being on the upper decks of the Titanic did little to protect wealthier passengers from flood below. Passengers in steerage just drowned sooner, but eventually the entire ship lay at the sea bottom and all passengers were in the drink, a few alive but many more dead.

In Part 1 and Part 2 of THE CRUSH, Dollar$ explored the dimensions and culpability for the coming student debt crisis. But THE CRUSH is with us now. We have struck the iceberg and are taking on water. Never mind the moral bankruptcy of blaming victims, rejoinders to “Suck it up, kid,’ and “Pay your dues, punk” are not only insulting, they ignore the economic realities.

This is the rising tide that sinks all boats.

Seeking better loan programs are merely fuzzy thinking that Dollar$ will risk beating a metaphor to death by calling it the equivalent of moving deck chairs. Better loan programs remain loan programs, that is, they continue to tax the poor for being poor.

Instead, Dollar$ puts forward some substantive changes.

  1. All existing and future loans should be 50% the responsibility of the associated colleges and universities – institutions need skin in the game if they are to have incentive to stop soaring tuition and fees.
  2. Free tuition and fees at state schools through 14th grade. Naysayers will scoff at this “giveaway,” doubtlessly the same naysayers who opposed mandatory free education through 12th grade when everyone was certain a 6th grade education was peachy.
  3. Tax private university endowments. Yale and Harvard don’t need tax shelters for accumulated wealth.
  4. Eliminate tax deductions for education donations. Existing tax structures enable the rich to get richer while dumping the burden of social advancement on the rest of us.
  5. Initiate federal tax credits for tuition and fees to all schools — that’s a credit, not a deduction. If education is the key to our society’s future, why can’t all of us lift some of the burden undertaken by a few of us?
  6. In schools with more than 2500 students, cap university administration at 1/300 students by taxing the payrolls of schools with higher ratios. Someone has to step up and squeeze costs: let’s start with non-classroom personnel.

Why?

Well. . .

ECONOMIC RED FLAGS

Autos.

The auto industry is a mainstay pillar of the US economy. Rubber, glass, steel, plastics, aluminum—there is no element of car manufacture that does not support tens of thousands of people. Subsequent to sales, there is an entire service industry, everything from car washes to oil changes to mechanics employing hundreds of thousands more.

Yet the average age of the person buying a new car is up to 51.7 years; that Boomer earns $80,000 per year. “It takes four millennials to replace one boomer” in terms of economic impact,” observed Steven Szakaly, the National Automobile Dealers Association’s chief economist in 2015.

Dollar$ notes for the less financially sophisticated that auto sales on the secondary market, trading your older hunk of junk for a slightly newer pile of junk, has all the national economic impact of opening a lemonade stand in your driveway.

Sure, Whiners will eventually buy new cars. They will have to in order to get from here to there when the supply of jalopies have all turned to rust. But they will delay joining the auto market—the definitions of a demographic market slowdown. They are barred because they carry too much debt. Buying a new car either has to be postponed or requires even higher interest rates.

That, readers, is THE CRUSH that is visited on us all.

Houses.

c20_currHousing starts in the past 20 years have dipped precipitously, most during the Great Recession of 2006-07, but have never recovered. This, Dollar$ hastens to add, is a fact in the teeth of the lowest mortgage rates ever, the reason housing prices and rents are soaring.

It’s our old friend, the fact that cheap borrowed money always inflates prices.  So it is with tuition; so it is with housing.

Cheap borrowed money does little for the Whiner who can’t enter the market because mortgage qualification is out of reach—too much debt already on the books. Qualifying for a mortgage grows more and more difficult, a task like a donkey running on a treadmill for a carrot.

So what, you ask?

“During the first two years after closing on the house, a typical buyer of a newly built single-family detached home tends to spend on average $4,500 more than a similar non-moving home owner. Likewise, a buyer of an existing single-family detached home tends to spend over $4,000 more than a similar non-moving home owner, including close to $3,700 during the first year.” National Association of Home Builders

Every year a Whiner postpones or is barred from entering the housing market is another year that $4,000 of spending on appliances, carpeting, lawn care, furniture, window dressing, pots, pans, wallpaper and paint is withheld from the general economy. With millions of Whiners forced to stay on the sidelines, billions and billions of dollars are withdrawn from economic activity.

That, readers, is THE CRUSH that is visited on us all

Social Life.

We are hard-wired to like babies. We are hard-wired to enjoy creating babies.

Religious imperatives implore us to be fruitful and multiply, but even if you are of the less religiously minded who believe the problems of our planet stem from the ugly fact that people (gasp!) live here, a problem best cured by having us quietly vanish in favor of a planetary legacy of dolphins, daisies and roaches, Dollar$ notes that for most of us the purpose of life is to create ever more life.

Dollar$ also notes that however unpopular the fact may be, in general, the age of women has a biological shut-off date beyond the shut-off date of men.

Yet the median age for marriage and childbirth are rising.

Women are waiting.

 

Dollar$ endorses the idea that technological and social advances have made much of that delay possible, and Dollar$  celebrates that technology has gifted women with freedoms and choices never seen before.

Nevertheless, among the Whiners, student debt diminishes those choices. Dollar$ suggests no one has children until that want to, and Dollar$ fervently hopes people will be able to afford children when they make that decision, but Dollar$ also notes the delay of expenditures associated with childrearing siphons billions from the economy.

Involuntarily delayed childrearing holds costs for many that cannot be measured because unhappiness is not quantifiable on any balance sheet.

That, readers, is THE CRUSH that is visited on us all.

Dollar$ believes that most things worth doing are worth doing to excess. No so with student debt, however. Enough, in this case is too much.

READ

PART 1 – THE CRUSH: THE COMING STUDENT DEBT CRISIS

PART 2 – THE CRUSH: WHY DOES EDUCATION COST SO DAMN MUCH?

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THE CRUSH – PART 2 of 3: WHY DOES EDUCATION COST SO DAMN MUCH?

In Business, Economics, Economy, EDUCATION, Finance, Millenials, Political Economy on June 8, 2018 at 10:58 pm

The Whiners can’t win for losing. In the education stakes they are damned if they take on education debt, damned if they do not, and have no third option, at least not as long as anyone wants a comfortable middle-class life. You know, a car, a family, maybe a house, a pet, food in the panty, and a place to put books that isn’t bricks and boards purloined from a construction site.

Why does it cost an arm, leg, foot, your mother’s wig and a promise of your first-born? A Baby Boomer could sell ice cream on the beach all July and August, take another two weeks to goof off, and pretty much have education fully covered. No such luck for the Whiners.

WTF is going on?

The cost of an education soars because unrestrained lending and unrestrained spending is the cocaine of finance.

UNRESTRAINED LENDING

Not long ago, the world learned there ain’t so such thing as a free lunch. Global markets became grossly inflated because of easy credit. No lender had any incentive to say, “No.” After all, if the price of everything will go sky high in the very near future, even your Uncle Pete’s lamebrain kid if he borrows money can pretty much do nothing but clean his toes, wait for profits, sell, and pay off everyone.

But if markets head south, the Uncle Pete’s lamebrain kid shrugs and walks away from a soured investment. When a million knuckleheads all walk away at once, and the financial community is left holding worthless paper.

That was the story of The Great Recession, the worldwide economic slowdown that had national economies shrinking anywhere from 6 months to 6 years after 2006.

It’s not as though a few speculators took it on the chin. When nations’ economies shrink, angry crowds that see their futures and the futures of their children evaporate, carrying pitchforks, torches, and ropes fill the streets.  They want blood.

The similarities between the Great Recession and The Crush are scary.

THE GREAT RECESSION THE  CRUSH
EASY CREDIT BORROWERS Sub-prime mortgages Any 18-year old who can sign his name—or get a parent to sign in his stead.
MARKET CONSEQUENCE The price of housing soars since no one is paying their own money. Why not? Let’s buy 3 properties and in a year sell them to reap huge profits. At 3% down, our returns will be stratospheric! 3? Piker–let’s go for 10! The price of education soars, since no one is paying their own money. Why not? Let’s take three degrees, take our time in school, and figure out what to do after a year or two abroad. We can’t lose! We have a diploma and a bunch of letters after our name! Mom will be proud!
UNDERLYING ASSUMPTION Housing prices will always rise. A return is sure. What can go wrong? College grads will always earn more, a guaranteed return. What can go wrong?
THE CREDIT ENGINE In the US, Federal National Mortgage (FNMA) and Federal Home Loan Mortgage Company (Freddie Mac) guarantee loans made by banks and other agencies.  The Fed is our safety net! How can we lose when the US taxpayer is on the hook to cover all bets in the event of defaults? In the US, Sallie Mae guarantees Federal student loans made by banks and other agencies. How can lenders lose when the US taxpayer is on the hook for defaults if some slacker Whiner refuses a decent job?  Never mind defaults:  the only way to discharge a student loan is for the borrower to drop dead!
THE TOP In 2008 just as the subprime crisis was coming to a head, Americans had $12.68 trillion in debt outstanding, of which housing debt made up $10 trillion.
With collateral like a standing house whose value rises every six months, we’ll make out like bandits!
In 2014, there was approximately $1.3 trillion of outstanding student loan debt in the U.S. that affected 44 million borrowers who had an average outstanding loan balance of $37,172.

With collateral as sound as a college degree, there’s just no way the kid can’t pay it back—and if he doesn’t, we’ve got Mom and Dad on the hook, too!

THE BUST The rise in housing prices proves unsustainable as supply outstrips demand. Financial organizations “too big to fail” do just that. It’s hard to stay solvent when there is not money coming through the front door. Individual savings and investments evaporate like piss on a hot rock. Municipalities holding “guaranteed” mortgage paper can’t pay retirees; whole countries flirt with bankruptcy. Political unrest endangers the developed world Just wait, Bunky.

The Crush is coming.

UNRESTRAINED SPENDING

Unrestrained spending for colleges and universities siphons money from the paying customers–students–into rat-holes that have little to do with their own educations. What incentive does any school have to contain expenditures?  The kids have to pay, and with  a generation coerced into attending, and lending institution falling over each other in haste to lend to kids who can’t resolve debt except by paying or dying, why would a school say to a student, “Nothing doing”?

Living and working on a campus is a nice life. There are shows, sporting events, a lot of trees; pleasant company, all in a landscape that is a joy to the eyes. Bird songs. Fountains. Statues.

Of course it’s not the school’s money that pays for that lovely life. It’s the students. Schools just spend their students’ money. If there is some project near and dear to an administrator’s cold dark heart (assuming administrators have hearts at all) if there isn’t enough in the cash box just raise tuition and fees.

Administrative passions vary, but all have a few things in common:

  1. Administrative bloat has outstripped the pace of student growth. Every dean needs a secretary and an assistant dean who also needs a secretary. Worse, student growth is now reversing itself, but don’t expect college layoffs any time soon.
  2. Administrative services to students allegedly about insuring a safe and healthy environment create the “snowflake” mentality and in fact infantilizes young men and women. Here’s an idea: instead of crumbling with anxiety and accessing expensive college support services, drop out of school and come back when you are ready. Yes, it is possible to live in a world where people disagree. Keep your cash, have another latte, ponder your future.
  3. Whole curricula that have little or nothing to do with traditional scholastic concerns in the Liberal Arts and Humanities or real-world studies such as Math and Science are now lavishly funded. Professors are passionate about educating students about the smallest social segments anyone can identify. Instead of seeking our commonalities, find our differences. A professor’s fantasies of revolutionizing society must be indulged. Identity politics can and perhaps should be stressed on campuses as an engine of social change, but never forget that students pay cash money for a political indoctrination that is available for free 5 yards beyond the ivy-covered walls.
  4. Colleges and universities compete for students by offering amenities usually reserved for cruise ships or mental hospitals: health clubs, guidance counselor, swimming pools, lounges, architecture that wins awards, teams that win championships. The world’s greatest teachers, Siddhārtha Gautama, the Buddha, taught under a banyan tree; Jesus of Nazareth did his best work lecturing in the open air on a hill. They managed to change the world by talking about common humanity, not by demanding their student spay heed to their difference.
Almamater

Please pay at the door.

  1. Colleges and universities have no financial skin in the game. How this point eludes legislators mystifies Dollar$. Thanks for borrowing cash, kid, thanks for giving it to us, don’t let the door slam you in the ass on your way out where you will soon discover that your profound knowledge of a contemporary gay Asian poet has less market value than the dude’s poetry.
  2. Legislatures have cut aid to state education, off-loading what was once understood to be a public good to what now constitutes a use tax. Never mind that all of us benefit from youth ready, willing, and able to make the innovations in products and processes that will benefit us all, let’s charge only the kids.

But is there a costs to us all?

You betcha.

We are every one of us at risk. The Crush will come for us all.

READ:
Part 1 – THE CRUSH – THE COMING STUDENT DEBT CRISIS
Part 3 – THE CRUSH – THE CRUSH IS ON US

THE CRUSH: THE COMING STUDENT DEBT CRISIS — PART 1 OF 3

In Economics, Economy, EDUCATION, Finance, Millenials, Personal Finance on June 7, 2018 at 5:58 pm

When it comes to student debt, because of the coercive necessity for advanced education and its the rising cost, the perennial Millennial and Gen-X complaint about how their parents, those self-centered Boomers,  screwed up everything, Dollar$ concedes the issue.

Millennials are, for once, correct.

Call them The Whiners, but call our system to fund education The Crush.

whiner

Dollar$ despises the reductio ad absurdum that dumps entire populations into convenient rhetorical buckets. Gross generalizations about millions of people can never be accurate. Any thinking person (a Dollar$ reader, for example,) can point to dozens of exceptions, but in the grand scheme of things it is now long overdue that we grapple with the out of hand system for funding education.

The Crush will soon crush us all.

So this column will not be about how Whiners need to man-up, knuckle down, and work. Look, a kid borrowing money for education is accepting debt precisely because the kid wants to get ahead. The Crush does not allow it.

This Dollar$ series will be about

  • our coercive culture,
  • risk-free lending from banks and The Fed,
  • educational institutions that have no incentive to manage costs.

The Crush allows  no escape, no free market options, no serious choice to not participate, and no institutions with any incentive to carry the weight, though plenty offer lip service as they add bricks to the load.

COERCIVE CULTURE

Citizens in America with advanced degrees earn considerably more than citizens without a parchment.

graph

Of course, free spirits may always choose to abandon The System and be poor, but the gap between having a Bachelor’s Degree and not having one in a nation where medical care, housing, and being reasonably fed depends on income, makes the Poverty Option the choice of living with a gun to one’s head or not.

Trapeze artists who fly with no net all eventually fall to earth.

What is a Whiner to do?

RISK-FREE LENDING

Bankruptcy laws are the enlightened replacement to debtor’s prisons. Nor do we allow people any longer to become indentured servants to pay their debt. Slavery is simply evil; holding debtors behind prison walls disables their ability to pay their creditors.

Besides, in our corporate state, to be fair, where corporations are legally people, you can’t jail a business no matter how badly it manages its affairs (though Dollar$ ardently wishes we could).

Bankruptcy laws humanely offer a Citizen a new start. To be sure, as a strategy to manage personal finances, declaring bankruptcy should always be a last resort; it cuts an individual off from future credit for many years, and the process of bankruptcy debt relief is managed by courts that apportion remaining assets to grumpy creditors who must accept something instead of nothing.

Yet debt incurred for education whether it be from the Fed or a private loan from a bank cannot be settled by bankruptcy. Businesses leverage their assets with debt all the time. Who would argue that leveraging oneself as an asset that can and will earn more is a bad idea? That debt follows the borrower forever, even through bankruptcy. Short of paying it off, the sole means of settling student loans is Death.

death

THE ONLY WAY TO ESCAPE STUDENT DEBT

Like Fat Harry, who in my Brooklyn childhood was all too happy to lend money for a quick plunge on a horse at Aqueduct, some education loans grow through compounding any unpaid balance. Harry called that the vig. Harry might apply a baseball bat to the knees of a derelict borrower to encourage compliance, though Harry never preferred a payoff when he could keep his money on the street earning ever more. An outstanding balance was far better than some Citizen … uh make that Sucker….trying to settle.

With educational loans, just because you’ve made the stupid decision borrow a fortune against future earning when you are in your teens (something like betting on the wrong horse), the banks and Fed will forgive several payments. No problem! Like Harry, they are delighted to fold what you did not pay into your outstanding balance and add it to your total debt! When you start paying the vig again, YOU’LL OWE EVEN MORE and if you don’t pay, they’ll take it through the IRS.

It’s not a baseball bat to the knees, it just feels like one.

THE RISING TIDE WILL SINKS ALL SHIPS

The cost of that required education at public and private schools has soared at twice to three times the rate of inflation, a rate that HMOs, hospitals, and medical insurance envy. Baby Boomers who earned a year’s tuition and fees with a decent summer job, if they needed it, worked during the school year for a few hours per week for incidental expenses, inexpensive textbooks and dormitory space that was less than luxurious, but kept rain off their heads.

Whiners caught in The Crush have no such option.

The average tuition and fees for a degree program at a state institution in 2017 is just under $10,000. Now add books and mad crazy things like food and a roof. Boy, those college kids are scamps!  The eat food! They wear clothing! Such frivolity!

There’s not enough ice cream to scoop to meet those expenses.

Of course, they might work their way through school, attending fewer hours while they work somewhere at minimum wage–except that winds up making the cost of their education go up by another year or two…

The Crush has no mercy.

**********************

COMING SOON

PART 2—WHY DOES EDUCATION COST SO MUCH?

PART 3—THE CRUSH

Why CEOs Are Worth Every Dime

In Business, Economy, Finance, Political Economy on May 10, 2018 at 11:29 am

 

 

 

 

 

 

 

 

 

 

 

(this space deliberately blank)

 

 

 

 

 

 

buccaneer1

WALL STREET PERVERSITY

In Business, Economy, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Politics, Wall Street on February 9, 2018 at 5:26 pm

Dollar$ notes again that the financial community seems to be insane. Buccaneers and Wizards confound the simple Citizen who needs a money harbor other than a pillowcase. Until someone invents bedding that pays interest or dividends, that is likely to be a bad idea.

screwed1

Citizen

You may have read that the markets are down because of too much good news.

It’s true.

January 2018 saw a market run-up of breathtaking scope. The Weasel-in-Chief was smugly taking credit and taking Olympic Gold for World’s Worst Comb-over (Orange Division). Kids on the street were selling their bicycles and holding bake sales to pick up some bitcoin, wait a day or two, and then cash in expecting in a day or two to have enough money to buy a private Caribbean island that would be closed to those short-sighted ever-selfish Baby Boomers who ruined the Earth by inventing cell phones, expanding civil rights, and creating cheap birth control that begat Hook-Up culture, all while stupidly neglecting to shape a world where no one would have to work.

Mean or what?

WHEN GOOD NEWS IS BAD NEWS

The good news that rattled the markets is that more people are working and that the people working are earning more money. Wall Street, naturally, near soiled its underwear.

The bad news was that many people persist in believing that economies are a zero-sum game. If the notion of I win, you lose! rules the markets, what could be more awful than Citizens getting a bigger piece of the pie?

More people, more jobs, more money, that’s bad.

R-i-i-i-i-i-ight.

 

CITIZENS & TUMBLING STOCKS

In Business, Economics, Economy, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance, Politics, ROBERT REICH, SOCIAL MEDIA, Wall Street on February 5, 2018 at 7:27 pm
jimmy-stewart

investor

Dollar$ readers have asked for a comment on the recent path of stocks falling off a cliff. Though Dollar$ seldom references perturbations in the market, in this case he will make an exception because any number of people with brains of tapioca or in possession of advanced degrees will point to this event to declare it political, a referendum of sorts on Donald Trump for whom they hold unsustainable rage.

 

THE AXE OF RAGE 

Rage as a political stance is unsustainable because it consumes its object as well as those who revel in it. We grind that axe at our own peril.

That won’t bother pundits such as Robert Reich at Berserkely. Expect his gloating to surface in a day or two while his cadre of unsalaried graduate student do his work for him.

After all, Reich persuaded thousands of Facebook followers that Spring rain, the demotion of Pluto from planet to rock and back again, and your most recent dose of athlete’s foot, were all ploys by the rich to separate you from your money because there is no bottom to the depth of their greed. (Except for St. George Soros, who sends wheelbarrows of Canadian cash to political causes in the United States out of simple generosity, something that most of us would find curious if the cash came from Outer Slobbovia or Russia.) The Professor has yet to mention the President’s promise to go after Big Pharma or his championing “the right to try” to give the sick access to medications stalled in the FDA’s long system for approval. How could Reich do so? His followers might dial back their rage, and then who’d buy the Professor’s books, subscribe to his videos on Netflix, or line up to enroll in his one class per year in a lecture hall packed with the beneficiaries of privilege, those students at Berserkeley who on cue wildly applaud before marching to deny free speech to someone else?

To be sure, Professor Reich will neglect to mention that the trillions lost on world markets in the past few business days have mostly been lost by the rich. Who did you think owned the shares of companies? Your barber?

Also, make certain you know, that Dollar$ believes our President to be at base a lout, a racist, sexist, and probably a compulsive adulterer who happened to revolutionize American politics by seizing on social media as a means to create a bridge between himself and voters when his own party and the American press gave him all the chances of a balloon in a pin factory.

Benjamin-Franklin-U.S.-$100-bill

Chastity?

None of that, by the way, makes him unfit to join the ranks of John Kennedy, Franklin Roosevelt, Dwight Eisenhower, or Bill Clinton. There were many others; the folks who brag about zero tolerance for white male sin remain eager to rewrite history by expunging ordinary men from the presidential rolls. God help us if they figure out what the Founders did with their time when separated from spouses for months, and that rascal, Benjamin Franklin, was not know for his chastity.

Fortunately, The Donald did not run for Pope.

STOCKS

Dollar$ is happy to report the sky has not fallen, at least not in my neighborhood. If Jemima Puddleduck races past your front door, Dollar$ urges you to unwrap that shotgun you received as a gift from Grandpa. Go bag yourself an inexpensive cheap chicken dinner.

Responsible financial advisers will tell you to do nothing: Dollar$ agrees, unless you have a working crystal ball in which case Dollar$ would appreciate a call. All the elephants could not get through the door without the house collapsing. That’s what happened today.elephants

DECISIONS

What now? Better to ask: Where would your money be better off?

The world economy is peachy.

The American economy is also peachy, showing healthy signs of continued growth.

Do not confuse the economy with the stock markets. After a run-up of 21% in a year, market algorithms were bound to get nervous.  (Algorithms don’t properly get nervous, but the notion of market sentiment is a joke when upwards of 90 percent of all market transactions are conducted by computers.)

The American economy is in danger of suffering wage-inflation. Prices will rise because Joe Doakes, his cousin Joe Six-Pack, and their cousin, Jane Doe, are earning more.

O, the Horror! What will Reich say if people are earning more?  What fraud is being perpetrated that will need a decade to play out?

RELAX

The past week has seen a drop of 5 percent. More is coming.

Bear in mind that historically, a 7 percent gain in a year is good news. If after the carnage we saw today and can expect for a few more days your 401-k, your kids’ 509, and your savings ratchet back to a “mere” 12% annual gain, try not to swoon.

Stay  the course. There are bulls, there are bears, and there are pigs. People who try to time the market—that is, sell now with the hope and expectation of buying it all back when things have settled—are pigs , and like pigs will be slaughtered.

BITCOIN & SAD MILLENIALS

In Business, Economics, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance on February 3, 2018 at 1:18 pm

It’s hard to be sympathetic.

Several years ago, Dollar$ started plainmoneytalk to offer explanation and instruction about financial matters to the naïve and young. Someone had to.

Big honkin’ financial websites and advisory services run by Wizards have a vested interest in making what is basic seem complicated, the better to charge for magical advice no one should need.

buzzard

Credit Card Company

Personal Finance instruction at high schools is abandoned after explaining checkbooks, possibly because teachers themselves are uncertain of how banks, credit cards, car insurance and all the rest fit together. Young Citizens are left baking in the sun along the roadside, tasty meals strewn meal for carrion credit card companies who feast on the dead.

Dollar$ refrains from specific investment advice, the realm of Buccaneers and Wizards who cover their asses by couching advice in subjunctive mood: If XYZ Corp does not go up, it might go down!  Yes, well, other than standing still, there is no third alternative. There is, however, lots of deniability, and the advice applies not only to investments but to hydrogen airships navigating through lightning storms. If it does not go up like the Hindenburg, it will do just peachy.

hith-hindenburg-

Financial adviser: “But look how well they are doing at the front of the ship!”

The four personal financial functions – Saving, Investing, Spending, Insuring (SISI) — have been explained by Dollar$ in the past. Underlying the advice are a few principles, the hallmark of which is Get Rich Slowly.

BITCOIN TODAY

So it is with a heavy heart but some smug self-justification that Dollar$ observes that in the past two months, the eager sweaty Get Rich NOW! Millennials, nurtured on tales of college drop-outs making billions in weeks and because of weak toilet training remain puzzled by the concept of delayed gratification, have gotten kicks in the head and keister. (Why do we never read of the legions of Ivy League dropouts who lost Mom and Dad’s fortune by investing in systems to convert lead into gold?)

Bitcoin and other “digital currencies” took a beating, dropping a bruising 60 percent from a high of $19,783 in December 2017 to (gulp) as low as $7,700 last week. That’s 60 percent, and the fun is not yet over.bitcoin

Someone will offer a postmortem—increasing regulation around the world? invisible North Koreans getting out of the game until after the Winter Olympics?—but the fact is that at any time  they could have read Dollar$. With any luck, we have seen the last of this worldwide swindle put together for the greater glory of sex traffickers, arms dealers, dope runners, and terrorists.

Dollar$ does not like saying, “I told you so” because it is like kicking  corpse, but in this case will make an exception.

 

BITCOIN IN WONDERLAND

In Business, Economics, EDUCATION, Finance, Personal Finance, Political Economy, Wall Street, Wall Street Journal on December 22, 2017 at 2:52 pm

“Curiouser and curiouser!’ cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English); ‘now I’m opening out like the largest telescope that ever was!”

Bitcoin Speculator

Bitcoin Speculator

Whenever Dollar$ believes the Bitcoin mania is safely dead, someone nibbles a few crumbs of Bitcoin Cake and we hauled back to Looking Glass Land where mad creatures believe strongly that “Jam yesterday, and jam tomorrow, but never jam today,” is an economic promise and not an explanation the White Queen offers Alice.

The Queen said. ‘The rule is, jam to-morrow and jam yesterday – but never jam to-day.’
‘It MUST come sometimes to “jam to-day,”‘ Alice objected.
‘No, it can’t,’ said the Queen. ‘It’s jam every OTHER day: to-day isn’t any OTHER day, you know.’

Beware of strange substances that are labeled Eat Me.

A Silicon Valley startup called Xapo is the White Queen of BitcoinLand.

If you think gains like these are sustainable or represent some sort of value, you must have been eating Alice’s cakes. Maybe you’ve got some of that jam from yesterday. You might also wish to contact Dollar$ who just happens to have shares in the Brooklyn Bridge he can be persuaded to sell to you, a once in a lifetime opportunity.

BTC-2010-lin

 

Xapo is headquartered in Hong Kong, safely away from pesky US regulatory agencies. Sure, they’ve got offices in California, but so does every other financial firm in the world. The Board of Directors boasts former bankers from Argentina and Brazil, not exactly world beaters for stable currencies.

Magic Beans

The bitcoin business proposition is like the story Jack and the Beanstalk. (When it comes to bitcoins, metaphors from fantasy and fairytales are unavoidable.) Give us your real cow, and we will give you magic beans! Overnight they will grow to the sky! When you get up there, you’ll probably encounter a voracious giant ! To survive the giant, you’ll need to be a thief and run like Hell! All you need is the heart of a thief!

The Xapo Proposition

Xapo claims to have constructed physical vaults, “the company says are in mountainous regions.” There are no physical coins, of course. What will be down there will be computers Xapo promises will never be connected to the Internet–you know, like your laptop with no wifi.  If so, that means an army of people doing data entry on a army of disconnected laptops, in mountainous regions that cannot be approached easily. The mountain locations are, naturally, top secret.

If this does not strike you as the premise of a James Bond plot to bring down the world currency markets, what does?

goldeneye_oddjob007_reloade

Bitcoin Security

Liquidity

The bottomless credulity of the cyber-community originates with vitamin deficiencies caused by a steady diet of cold pizza and Red Bull for breakfast, watching Goldfinger too many times, the conviction being that one can get rich without ever getting out of a chair, if armed with an unshakeable libertarian belief that the arms merchants, sex traffickers, and drug dealers MUST have an untraceable non-government issued currency for money laundering.

Bitcoin Banker

Bitcoin Banker

 

TAXE$ AND COMMON CENT$

In Business, Economics, Economy, Finance, Personal Finance, Political Economy, Politics, TAXES on December 21, 2017 at 4:24 pm
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SCHOLAR OF THE SUBJUNCTIVE

Dollar$ resents and excoriates finance writers who write in the subjunctive mood. For readers who stopped paying attention to their English teachers in the 8th grade, that means a statement that is conditional. Correctly constructed, the sentiment expresses and a condition that is either not yet true, will never be true, or the speaker wishes were true followed by an outcome that is also not true.

 

If this be treason, make the most of it! – Patrick Henry

In our times, the greatest use of the subjunctive mood is for Romance, handy for lovers unwilling to commit but nevertheless compelled to express what resides in their hearts. Is there a better love song than If I Loved You?

Many speakers flummox the niceties of this important use of mood, and while it is not Dollar$ purpose today to deliver a grammar lesson, he earnestly hopes readers will be afflicted with the dry heaves should they come across ersatz prophets who preserve deniability and protect their alleged expertise by abusing the subjunctive mood. Yes, the stock market may go up, a bold prediction that allows deniability. It may also go down. Dollar$ also notes in passing that Patrick Henry was not speaking archaic English when he addressed the Virginia House of Burgesses, but was properly employing the subjunctive mood of the verb to be. If you still don’t get it, consider that the Cowardly Lion of Oz fame sings “If I were King of the Forest.” Now you know why Bert Lahr never sang was.

THE 2017 TAX BILL

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SOCIAL MEDIA EXPERT

Dollar$ has until now said zero about the proposed tax bill because it was proposed. Details were open to negotiation. That, however, did not prevent the doyens of social media to claim the sky was falling and suggest that passage of the tax bill would end civilization as we know it.

FACTS IS FACTS

The corporate tax rate has dropped from 35% to 21%. Lest you read Robert Reich, the former Secretary of Labor so startled he is not advising Hillary Clinton in the White House that he has taken to Facebook to lead “The Resistance,” let’s note that despite Professor Reich this tax cut is does not pick the pockets of the poor to give money to the rich. After all, 35% of nothing remains nothing, not coincidentally the amount of taxes paid by Apple Computer and many other multinational American-based companies that have disincentives to bring their profits back to American shores.  The new tax law is a hope to repatriate funds, an overdue program first called for by John F. Kennedy. Short version: US corporate taxes now align with the rest of the industrialized world.

Apple and other corporations can bring billions back to our shores and suffer no financial penalty for doing so. The Tax Policy Center noted in 2014, “Despite its relatively high corporate tax rate, the United States raises slightly less revenue from corporate income taxes as a share of GDP than the average of other countries.”

TRICKLING.4.19.1-figure2_0
Facebook economists who took time from photographing their cats and their breakfast (or cats having breakfast) have been told repeatedly that Trickle-Down Economics does not trickle.  Dollar$, however, notes that several organizations have as of this morning announced raises for line workers and hikes in their minimum wage. Dollar$ is certain those responses are due to more than a rosy picture of future profits precipitated by a tax cut. Fact is, labor is getting scarce; like other valued assets, if you want to keep trained and skilled workers, you have to pay for them. That’s how markets work.

The Koch brothers may have a social agenda, but Facebook economists smugly predicting that the new tax codes will so reduce revenue that Social Security and Medicare will have to be sharply reduced may want to note that neither of those programs is funded out of general revenues but from separate trusts funds. That’s why your annual pay stub has separate boxes for Medicare and Social Security, Binky. They ain’t general revenues. Dollar$ bids good luck to any weasel who lays a hand on those monies, but since the first rule of weasel life is to remain a weasel, Dollar$ is losing no sleep over that possibility.

Similar dire predictions about how the poor will suffer because so many itemized deductions are now disallowed stagger Dollar$ for the hypocrisy or ignorance of how taxes work.

Itemized deductions are

  • also known as loopholes
  • seldom used by citizen taxpayers who do not own a home

LITTLE OLD LADY WHO LIVED IN A SHOE

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TAX PLAN BENEFICIARY

The Little Old Lady who lived in a Shoe had so many children she did not know what to do will, if she itemizes, will get $2,000 per kid where she used to get $1,000. Unless her shoe is worth more than $750,000, her mortgage interest will remain a deduction. Chances are, however, since more than 60% of all taxpayers already use the Standard Deduction, the Little Old Lady will avail herself of that tax simplification because the SD has near doubled. That is, should she choose to itemize, she’d be a damned fool to do so unless he has more than $24,000 in deductions, something highly unlikely for any who works for wages.Look, that redoubtable working family never paid taxes anyway, and at year’s end looked forward to cashing a tax refund check, the sum of all that withholding tax. Under the new tax plan, her refund will indeed be less because week to week and month to month the Fed will be withholding less of her money. Maybe she can build an addition on the shoe, a playroom in the heel, perhaps.

If any of her kids are planning college, despite the dire warnings of Facebook economists, the deductibility of tuition remains untouched.

So do her medical costs above a certain level—the same as the way things are now.

FLIES IN THE OINTMENT

Okay, Dollar$, a few of you still awake might ask what happens by 2028? Don’t these individual tax breaks phase out? That’s when we’ll be screwed, right?

Dollar$ asks the professional pessimists where it is written that a Congress controlled by Democrats in, say 2024, can’t tweak or change tax law? We change appropriations annually (it’s called a budget).

That is to say, Binky, if you think it is in your best interest, vote your convictions, but stop screaming like Chicken Little. Dollar$, you pestiferous fool, this tax law will raise the deficit!! We are going to hell in a handcart!” (Be careful though, you may start to sound like a Republican advocating fiscal responsibility.)

We have for a decade endured GDP growth in the 2% range, and we hunger for greater. Three percent is not unreasonable; up around 4% you can get a nosebleed and bet we are losing ground to inflation. But should the economy grow more quickly than it has, the deficit goes down. Bill Clinton demonstrated that by riding out Ronald Reagan’s tax cuts.

A country near 100% employment can afford a few risks, and if for a few years we put money in the hands of citizens, should we sweat it?

 

 

$$$

TREES DON’T GROW TO THE SKY or WHY RHETORIC WILL LEAVE YOU BANKRUPT

In Business, Economy, Finance, FINANCE FOR THE CLUELESS, Personal Finance, Wall Street on December 17, 2017 at 2:11 pm

Simple Truths

  • The stock market neither advances nor retreats–though prices indeed go up and down.
  • For every buyer, there is a seller.
  • When buyers and sellers agree to prices, they set asset values.
  • Buyers buy with the expectation of future profit; sellers sell when they believe continued ownership of an asset constitutes a risk no longer commensurate with possible reward.
  • No one in a free market is under compulsion.
  • Wall Street is neither a battleground for territory, nor  an adversarial contest.
  • It’s a market.

Wizards require small investors to believe that generals understand the battlefield and so deserve your trust and your fees because they otherwise have nothing to sell.  Internet access to mutual funds, closed-end funds (CEF) and  exchanged traded fund (ETF) has made giving professional advice a media game.

Sell newsletters, attract viewers, collect advertising dollars.  You need not be wise or even right. Scare the piss out of customers, and they come back anyway, thrilled that you were wrong. If God-forbid the doom-saying prognosticators prove to be right, customers will come back chastened and ready to listen.

Market Sentiment

Basically, after getting in the game buy buying 3 to 5 broadly diversified vehicles, you should do nothing. In 2017, if you followed that strategy, so far you are making a mere 20%. Since the vast majority of investing operations on Wall Street are performed by networked machines that monitor every price tick and move great mountains of capital for millions of worldwide financial vehicles, there is no human sentiment involved.

When you as a small investor get the news of sharp price movement, it is too late to act, unless you think and make decisions at light speed and are plugged directly into markets.

  • Machines do not agonize over decisions such as Buy, Sell or Hold.
  • Machines have no hearts. Machines do not succumb to sentiment. Machines do not read the newspapers.
  • Machines do not hold on to send their kids to college.
  • Machines do not save pennies to accrue the down payment on a house.

Nevertheless modern Wizards want us to believe market sentiment exists and that t hey are plugged into that sentiment.

Yeah. Sure. Right. Got it. Roger that.

How do TV Wizards get away with recommending buying or selling new assets every day?

kramer7

Sells perpetual panic and urgency

The fact is that while our money trickles into pension funds, 401ks, college funds, health insurance funds, and all the rest of the vehicles invented by Wizards to lure us with illusions of safety in an uncertain world, machines–owned assets are being sold.  There’s a buyer for every seller, Binky. Remember that.

Machines sell in torrents. We pray for 7 to 10 percent each year, are happy to get 3%, but when the algorithms indicate “Sell,” prices drop 20 to 50 percent in minutes.
Sentiment? Level playing field?

A Warning

Dollar$ is aware that sharp price moves can be precipitated by events and non-events such as national elections. If you think the US is going to hell in a handcart, do you also believe that after crap hits the fan that the money you buried in the backyard will buy a can of tuna?

This is why reasoned investors await blood on the floor before buying, and unless you are within 5 years of a financial goal–retirement, your kid’s first year of college, that down payment on your house–sit tight, never sell.

  • Buy and hold.
  • Ignore alleged “corrections.”
  • Sleep at night.