Perry Glasser

Posts Tagged ‘Economics’

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

MILLENNIAL WHINING

In Economics, Economy, Millenials, Political Economy, Politics, SOCIAL MEDIA on June 2, 2018 at 10:45 am

The jobless rate ticked own in May to a seasonally adjusted 3.8%, the lowest since April 2000…The last time the rate was lower was in 1969.
–Wall Street Journal, June 2, 2018

Since 1969?

Dollar$ turned 21 in 1969.

The good news reported by the Labor Department includes rising wages among all classes of workers irrespective of race, gender, or education, but Dollar$ could not help to think of Millennium friends who periodically flood social media with bitter attacks against those Baby Boomers who came of age when life was so easy, and who then spoiled everything for everyone ever after.

Dollar$ as a matter of disclosure is happy to reveal he is one of those Baby Boomers, and Dollar$ freely admits the rise in price to thrive in in the American economy has not always been even—the rise in cost of housing, education, and healthcare as percentages of incomes is staggering—but Dollar$ takes perverse pleasure in noting that there is simply no longer any contemporary rationalization for staying at home and whining about it.

Whining most often to each other about the unfairness of life is accomplished by cell phone (A Boomer Innovation) is, how there is never enough time to compete on the Internet (ABI) with video games (ABI) on their flat screen hi-def TV (ABI) and which leaves not much else to do except participate in Hook-Up culture enabled by easily obtained and easily used birth control (ABI). Leave alone the more significant cultural changes in Civil Rights, Women’s Rights, Voter Registration, Marriage Equality, and a half-dozen other causes, all essentially accomplished but under perpetual attack by troglodytes who long for an America that never was.

The price of social freedom and progress has always been vigilance.

But the good news means there is no excuse not to go forward. Sorry we did not get to it, but it is time to roll up your sleeves, kids. C’mon, my grandchildren are counting on you for:

  • Silent jet planes,
  • Genetic cures.
  • Economically viable renewable energy,
  • Relief from America’s oil, concrete, and rubber infrastructure.

And, yeah, like Captain Jean-Luc Picard, after some time on the holodeck, Dollar$ wants to kick back with refreshment prepared by voice-recog: “Computer, Earl Gray, hot.”

tea3

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.

 

THE GOOD NEWS

In Business, Economics, Economy, Political Economy, ROBERT REICH, SOCIAL MEDIA, TAXES on January 6, 2018 at 1:10 pm

SOCIAL MEDIA STARS -TWOFER

Dollar$ like to imagine the column is the counterpoint to the tsunami of illogic and disinformation that rises in the far off muddled oceans and then inundates us all. Good news rarely makes it into major media. Social media is more iffy, but the War for Clicks devolves into imagery of Fluffy the Cat or Adolph Hitler because as long as there is no middle ground, panic, disgust, and self-pity rules the day.

Good News

  • Though legions of the self-righteous were quick to announce they had to leave the country because of The Orange One’s election, they are still here. Yes, that is good news. This is America, and in America when an election result does not confirm your convictions you are obliged to learn something and, if so inclined, try again. (Go Joe!  Joe Biden that is.)
  • Urban murder rates in the US are the lowest they have been since 1990. That’s hard to notice on the Left where shrill accusations of American racism serve as a touchpoint for activism no matter how distant the cry lies from Truth.
  • The stock market is at an all-time high. Again, the Left wants you to believe that lives are being crushed by corporate America when, in fact, more than half of all American workers have 401-k accounts whose returns have been staggering in the past 2 years. Will there be a correction?  Of course. So what? Stay the course; grow rich sloooooowly.
  • Unemployment rates are so low that wages are rising. If employers want hands, eyes, or brains, they have to bid for them. Cynics question the motives of organizations that have perceived the 2018 tax cut as an occasion to raise minimum wage and to give low-level workers raises.   No one, however, has yet demanded that workers scorn the new money in their wallets. Dollar$ suggests the true cause is a worldwide growing economy.
  • Your take-home pay starting in February will be higher. If you are on salary, You get to keep more or what you earn. Robert Reich* and other progressives who lack a program beyond, “I’m against it!”  are at pains to remind us that this is really a profound plot to transfer wealth from your pocket to the pockets of the rich. Dollar$, however, suggests you buy a better Pinot. Should the tax law need to be adjusted, it will be. After all, if tax law were shaped in brittle concrete, how did it get changed this year?

* Professor Reich continues to redefine chutzpah by not only telling citizens his work is vital to the program-free Resistance, but by asking us to pay to see that vital message on Netflix. This is akin to expecting members of the maquis before they were strangled with piano wire to have passed a hat to continue their vital anti-Nazi work and expecting the SS to look on benignly before beginning any torture.
All right, maybe they’d pass a beret.

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.

WHINING – A HOW-TO FOR MILLENNIALS

In Business, Economy, Political Economy, Politics on December 9, 2017 at 2:26 pm

One of the more frequent themes Dollar$ reads on social media is the ongoing complaint that the generation born between 1945 and 1970, those rotten Baby Boomers, are a bunch of louts who deliberately loused up the economy for everyone who came after them. Selfishness is something you develop by smoking weed through a bhang and

HENDRIX

SELFISH BABY BOOMER

listening to Jimi Hendrix. If they would all only die, housing would be cheap and jobs would open, easy, high-paying jobs with benefits that require no experience.

This theory explains why that kid who lives in your basement on a three-legged couch incessantly watches pornography on his cellphone. All the jobs out there are soul-sucking crushes, fruitless and stupid wastes of time. Even looking for that job is a waste of time. Fixing the couch isn’t worth the trouble, either. Glue? Nails? It’s all too complicated.

Facts

Facts only obstruct a good theory, but Dollar$ is not yet of the party that deems feelings should be the basis of policy because facts are no more than the legacy of the dying culture called Western Civilization, but our hearts never err and can only lead us to a better world. As Donald Trump and deconstructionist professors have taught us, facts are relative.

However, some facts are numbers.

  • In November 2017, the US economy created 228,000 new jobs
  • The jobless rate for non-high school graduates is 5.2%
  • The jobless rate for the overall US economy is 4.1%, the lowest it has been since the dot-com bubble burst in 2000.
  • After years of lackluster growth of 2%, the economy is now growing at nearly 3%, a pace that means business expansion will require ever more new employees and—gasp—will need to pay entry-level employees well to compete for their heads and hands.
(figures from The Wall Street Journal, Dec 9, 2017)

By the way, Dollar$ also notes that the economic expansion these figures suggest is worldwide. The stock market is soaring because that confidence in the future is shared most everywhere. If Finance Buccaneers don’t screw it up by inventing products that have no basis in reality and then leverage that fantasy 100-fold before selling those vehicles to municipal retirement accounts, regional banks, and other suckers, your BitCoin Futures, for example, we are in for some good years.

Good news upsets ideologues who prefer to complain about their ongoing, constant anxiety even though that anxiety, at least in the economic sphere, is misplaced. Sure, things can go wrong, and eventually will, but the quality of life has never grown in a straight line. When things suck, wait a while. They will turn around. You don’t really need to check under the bed each night.

For example, Robert Reich, the Beserkely professor, former Secretary of Labor, and Facebook columnist, checks under the bed three to four times each day with columns and videos. His trauma at not being reintroduced to the corridors of power when Hillary Clinton failed to be elected must have been acute. Instead of running the world, he is on the sidelines where he generates a tsunami of media whose final point is that whomever is doing whatever, Professor Reich could do it better. He has the time to do this because California pays him in excess of $400,000 per year, requires him to teach no more than one or two classes, pays the salaries of a cadre of graduate students to assist him with his onerous work, collects $40,000 for speaking engagements, and has published a book called Saving Capitalism, which, if Dr. Reich’s situation were typical, would seem to need no saving at all.

At least not for him.

Baby Boomer Failures

  • The safe and cheaply available birth control that makes hook-up culture possible on that basement couch, thus eroding the moral fiber of our culture.
  • The internet that delivers porn directly to the basement couch.
  • The virtual elimination of several diseases, such as polio and smallpox.
  • The virtual elimination of famine because of advances in agriculture and the successful world distribution of crops like winter wheat.
  • The Civil Rights Movement of the 1960s.
  • The Women’s Rights Movement that began again in the 1970s.
  • Passenger jets. How else can a Millennial go backpacking in Nepal before taking residence on the sofa?
  • Cell phones, that device that permits Millennials to snap selfies, cat photos, and up-to-the minute data on any Millennial’s location should they venture from the basement, all forms of narcissism previously never seen on our planet.
  • Digital special effects that bring believable visions of world apocalypse and intergalactic warfare to that cell phone or the game box beside the couch facing the flat screen TV on which HD pornography plays most of the day.
  • The rising preponderance of women in higher education as students, teachers, and administrators.
  • Automobiles that cost more because they are built to new standards of safety, airbags, seatbelts, and the like for passengers who strangely wish to live through collisions. Those doodads are constructed with materials other than steel to keep vehicles lightweight enough to conserve fuel. slow global warming, preserve energy, and keep that basement comfy.

Why are These Failures?

Dollar$ is glad you asked.

The work, you see, is not yet done. Those damn Boomers selfishly left the world imperfect. Some kids may have to get off the couch and build better infrastructure, get us renewable energy sources, find better batteries, silence jet engines, create hologram entertainment, and take the US out of rubber, concrete, and petroleum logistics.

You know, work and innovate.

Effort sucks.

Totally.
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Tulips and BitCoins

In Business, Economics, Economy, EDUCATION, Finance on December 7, 2017 at 9:00 pm

Tulips

In 1636, Holland discovered the tulip. They were imported. People went crazy for them. Everybody wanted them. No one could get enough of them, and the more rare they seemed, the more valuable they became. The cost of tulip futures for some bulbs rose to prices worth more than 20 acres of land. I am not making this up.

It’s easy to laugh, but open your closet and count your Beanie Bag Babies stash. How many collectibles have you bought recently? Holy bananas, have you been buying fake money and stamps with baseball players on them from small Caribbean states as family heirlooms?!?

But God forbid, have you considered BitCoins?

The Wizards on Wall Street are fainting. They notice that Bitcoin rose above $15,000 this week, and is up from $800 a year ago.  Remember, always that Wall Street Wizards invest in nothing, but they want a piece of every transaction. They earn profits when money changes hands, and if that is when your kid’s college education turns to dust, well, that’s a shame.

BitCoins are an imaginary currency backed by the full faith and credit of nothing, not nobody, not nohow.  The dollar, on the other hand, is a currency backed by the full faith and credit of the United States, which Dollars$ admits may not be all that much more, but has to be worth more than a few beeps and blips on some kid’s garage in a Tokyo sub-basement. Sorry, Binky, but the gold in Fort Knox has not been seen for decades. Every bill in your American wallet is a promise to pay–later.

The US dollar is also the standard for several other currencies, small countries, mostly, that cannot risk having speculators manipulate their money. In  the currency markets where money floats, the US dollar is relatively stable.  On the other hand, people who invest in Bitcoins either live too far from a decent casino or think Monopoly money is tricky stuff. They plan on being the last person through the exit when the inevitable collapse occurs, but do you know what happens when all the elephants try to get through the door at the same time?

BitCoin is the preferred currency among drug dealers and computer hijackers, those rascals who are the cousins to that Nigerian prince who offer you millions if you’ll send just a few thousand. The Prince makes that offer by email; the BitCoin pirates fly the Jolly Roger  while sailing through cyberspace.

You get your choice.

bitcoin

look that them digits!

jolly roger

WEALTH INEQUALITY

In Business, Economics, Economy, EDUCATION, Finance, Political Economy, Politics, TAXES on December 5, 2017 at 10:40 pm

bossy sisterWhenever my big sister played Monopoly, if the game was going against her she would toss the playing board in the air. My hotels and houses would scatter across the living room carpet as she shouted, “Salugi!” (a New York-ism pronounced “suh-LOO-gee”)and lunged across the table to confiscate most of my deeds, especially Boardwalk and Park Place.

When I was able to read the rules of the game, I learned there was no allowance for tossing the game in the air or confiscating my property. My sister was cheating! But since I was 8 and she was 14, she was able to meet my accusation by beating me up.

The History of Wealth Redistribution

My sister was a revolutionary.

To be sure, Dollar$ reminds readers that rebels object to rules, but revolutionaries rewrite them. Rebellions are common; revolutions are rare.

The folks who threw the board in the air in the past have cried, “Justice!” not “Salugi!” They had names like Washington, Lenin, Mao, and Castro.

Note that political persuasion—Left or Right—has nothing to do with revolutionary status. Mao and Washington might have discussed military tactics, but Dollar$ suggests they would have come to no agreement about economic systems or the function of government.

The Function of Governmentpreamble-20532-20120118-55

It’s less complicated than Monopoly.

We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

Washington (the dude on the $1) believed that the function of government was primarily to protect the rights of the individual, rights that most often needed protection from government itself. If no military personnel have been billeted in your living room, thank Washington.

Washington may have noted that to promote the general welfare required some redistribution of wealth to insure equal opportunity and to insure domestic tranquility, but that does not guarantee equality of status among citizens.

Washington’s pal was the first Secretary of the Treasury, Hamilton (the dude on the $10). Hamilton understood that wealth concentration in institution like banks were a social good, provided the bank used that concentration of wealth to fund the visions of a greater society, lending money to visionaries and giving stability to the economic infrastructure by protecting wealth from being squandered by a ruling class on personal indulgences. Hamilton, an orphan at 11 and the illegitimate son a British West Indies plantation owner, would likely not endorse a notion that the function of government was to protect the rights of the filthy rich to become obscenely rich.

The Situation Today

Some of Dollar$’s best friends sink into fuzzy thinking when talk comes around to how wealth is created and distributed in the United States. They lose sleep fearful that someone, somehow, somewhere, is leveraging assets to optimize profit.  They simple-mindedly believe that economics is a zero-sum game and cannot imagine economic growth. If an organization makes a dollar, someone must be a dollar poorer.

No. That simply is untrue. If it were so, you and I would enjoy the same standard of living as Washington and Hamilton. But the fact is that economies grow.  At issue is how they grow, not whether they should grow at all, though there are indeed some who think that a good idea, too.

The deluded friends of Dollar$ from time to time propose bold programs to redistribute wealth, programs they understand as pursuing Justice.

There two reasons those cannot and should not work.

1. Nowhere in the US Constitution will one find the word corporation. True, we reserve the right to free assembly, but that does not elevate any assembly of citizens devoted to profit a guaranteed right to speak lies in its advertising or compensate its directors and executive officers so rapaciously that shareholders who hope to partake of the boons of the system see their profit participation reduced by rapacious Buccaneers.

Oliver-Wendell-Jr-Holmes-9342405-1-402
Not Sherlock; not Mycroft, just Oliver

2. Oliver Wendell Holmes, Jr. noted Taxes are the price we pay for a civilized society. The idea is carved in stone on the IRS building in DC., but let’s note that corporations do not pay taxes, they collect them.  If you think they do not, you are submitting to a distraction. Dollar$ hastens to explain that citizens are consumers. Tax us, and we bleed money. Bleeding, we consume or save less, neither of which are good things, though it does not follow consumers should not be taxed. Civilization is messy, but must be purchased. But to a corporation, taxes are a cost of doing business, like labor, supplies, and logistics.

Raise corporate tax rates, and corporations will only raise their prices.

Guess who pays the difference?

Today’s  Lesson

Remember, friends, we cannot pursue social justice by confiscating wealth. We can, however:

  • Limit executive compensation by law to some multiple of the lowest worker in an organization;
  • Create progressive income tax brackets that limit the shift of American wealth to the rich from the poor;
  • Lower repatriation taxes so that companies that keep their money off-shore are encouraged to bring it home where they can invest in more factories and create jobs here–better to collect 15 percent of something than 30 percent of nothing;
  • Demand that higher education is a matter of national security, and so to insure the blessings of liberty are  free to all;
  • To insure the blessings of liberty on ourselves and our posterity, give tax breaks to organizations that train employees instead of demanding that future employees borrow so much money to gain perceived needed skills that students have no choice except a life of indentured servitude;
  • Regulate publicly traded corporations by disallowing aggregation of profits as cash without paying shareholder dividends, a means to share in that profit. Can we stop the nonsense that hoarding cash is good corporate financial strategy when all it does is spike share prices that are subsequently used to calculate executive performance compensation? (Are you listening Apple Computer?)
  • Return to personal income tax rates that  reflect the needs of our society. Under Eisenhower, we built the interstate highway system and taxed marginal income as much as 92 percent.

We don’t have to throw the game board in the air to start over again: all we need to do is play by the rules.