Ohio Issue 2 Facts: KASICH's Self-Made Mess

John Kasich and his GOP Zombies have painted themselves into a corner.  While Kasich has made it known that "You should get on the bus, or get run over by the bus", I believe the Governor, and his political allies will re-evaluate the way they have handled themselves after 11/8.  No one likes to be pushed around.  No one likes the three yards and a cloud of dust approach to politics.  Check out these special interests.  Click Here

The Ohio Round Table, an ultra-conservative group has filed suit against Governor Kasich for his back-room dealing with racetracks, and their ability to place slot machines inside.  The casino referendum last year only allowed slot machines inside casinos.  The racetrack industry wants the one-armed bandit too; but the Ohio Constitution forbids it.  Unfortunately, it appears the rule of law, and the Ohio Constitution will not stop Kasich from bullying the general public, and looking out for his special interests.  In the story, the Ohio Round Table referred to Kasich as an ANARCHIST who does not follow the rule of law.  Of course, this flies in the face of our democratic ideals as well.  (Click here for the Audio)

Then there is the Issue 2 debate that has become the center stage of his administration.  And a NO VOTE (Which I strongly encourage) really becomes the No Vote on his entire administration. While Ohioans are in the most general terms, a very common sense group, most will agree that Kasich has handled himself in-appropriately in the SB5 debate. His statements and half-truths about the 300 page bill has illuminated his true character.  The latest PP Poll shows that Kasich would lose to former Governor Ted Strickland by a 54-40% Margin...  (Click Here for Link)   

Finally, given the opportunity to close existing tax loopholes, search for creative ways to address the budget, and even negotiate with unions (who have already made tremendous concessions via collective bargaining), Kasich has done permanent damage to the GOP in Ohio.  There were a few brave GOP members who stood against the renegade tactics of a governor gone wild.  But most statewide Republicans will pay dearly in the next election cycle. Not only did Kasich ostracize a very important and traditionally supportive voting block, he ran over them with the bus.  There were a lot of people who thought they were Republicans, only to have the governor and GOP turn on them.  What can you expect out of a guy who refers to a police officer as an idiot? 

At the end of the day, Ohioans will evaluate the governor and his antics.  The people will decide if they are "with" him and on the bus... or whether they are against him and getting run over by the bus.  Regardless of the vote, John Kasich could well be his own worst enemy. 

Half-Truths and Lies: No on Ohio Issue 2

The Truth-O-Meter Says:

"We have asked public employees to pay 10 percent of the costs of their guaranteed pension and 15 percent of the cost of their health care. ... The leadership of those public employees unions don't want to pay anything."

John Kasich on Thursday, August 25th, 2011 in a television interview

Gov. John Kasich says leadership of public unions unwilling to pay share of pension costs

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In a recent appearance on the morning show "Fox & Friends, Gov. John Kasich’s focus was on finances, a month after Standard & Poor's upgraded Ohio's credit outlook from negative to stable.

The governor touted his accomplishments and philosophy to host Steve Doocy.

Then Kasich mentioned the referendum battle over Senate Bill 5, the law passed earlier this year that restricts the collective bargaining power of Ohio’s public unions. (If Issue 2 passes on the November ballot, the law takes effect. If voters reject the issue, SB 5 is repealed.)

"We have asked public employees to pay 10 percent of the costs of their guaranteed pension and 15 percent of the cost of their health care," Kasich said. "Almost everyone in Ohio has sacrificed. The leadership of those public employees unions don't want to pay anything."

PolitiFact Ohio knew that SB 5, among its many provisions, requires public employees to pay at least 15 percent of their health-insurance premiums, and that it prohibits local governments from picking up any portion of an employee's share of his pension contributions.

But we thought it’d be good to check into the governor's assertion that "the leadership of those public employees unions don't want to pay anything" toward health care or pensions. Not any? Not anything?

We called Kasich's office for explanation. Spokesman Rob Nichols quickly provided background on the state's collective bargaining agreements. He also referred us to the continuing budget and labor struggles in Toledo.

First, some background. Many public workers contribute 10 percent of their salary toward their pension while the employer contributes 14 percent. Some unions, however, have negotiated deals where the employer pays a portion of the employee contribution, a practice known as a "pension pickup."

If an employer agreed to pay 2 percent of the worker share, for example, it would pay 16 percent of the worker’s salary and the worker would pay 8 percent. That practice is prohibited by SB 5.

In Toledo, Mayor Mike Bell took office last year facing a $48 million deficit. Deputy Mayor for Operations Steve Herwat told us that the administration tried to balance it through expenditure reductions, revenue increases and contract concessions.

Negotiated agreements called for the city to pick up the full 10 percent employee's pension contribution. Five of the city's six unions agreed to concessions, in which employees would pay a portion of their pension share, after Bell asked Toledo City Council to declare "exigent circumstances" that essentially declared a fiscal emergency.

One unit, the Toledo Police Command Officers Association, representing about 120 sergeants, lieutenants and captains, rejected the concession and has stood fast -- preferring, as Kasich said, not to pay anything.

The dispute has continued. In September, local members of the American Federation of State, County, and Municipal Employees, which represents about 850 non-uniformed Toledo workers, rejected an independent fact finder's report proposing that they pay the full 10 percent share of their pension contributions. (They said the average union member makes $38,000 a year and would lose about $6,000 in take-home pay.)

We looked further and found Toledo was not unique. In Columbus, the Dispatch has reported, city government pays more than 80 percent of the employee pension share, "a benefit unduplicated elsewhere in Ohio on such a large scale," and pays the entire share for almost two-thirds of city workers.

But the story is different for workers for Franklin County, of which Columbus is the county seat. Almost 90 percent of Franklin County workers pay their own entire pension share, the Dispatch found. Columbus schools pick up the superintendent's pension contribution, but not those of teachers and staff members.

According to figures from the Ohio Legislative Service Commission, about 2,500 local government employers -- less than half of the roughly 5,600 units of government -- pay part or all of their employees' contributions into the retirement system, and organized workers are covered by 3,290 collective bargaining contracts.

The Dayton Daily News, citing the state's five public pension systems, reported recently that about 6.6 percent of public employees have union and individual contracts that call for the employer to pick up all or part of the workers’ share.

As in the case of the Columbus schools superintendent, those employees are not all union workers.

State government pays only what is required and does not provide pension pickup.

A report on pension reform last year by the Budget Advisory Task Force of the Ohio Society of CPAs, which recommended phasing out pickups, said the practice "may not be widespread."

One of PolitiFact Ohio’s basic tenets is that words matter.

If Kasich had qualified his statement, he would have been on firmer ground. It is true that some public workers in Ohio receive a full or partial pension pickup. And it is true that at least two bargaining units have so far rejected concessions that would have employees paying all or part of their pension contribution share.

But saying that "the leadership of those public employees unions don't want to pay anything," after an unqualified statement about public employees in general, creates the impression that that union leaders dealing with nearly 3,300 collective bargaining contracts have broadly rejected the idea of paying anything toward the employee's pension contribution.

Because the governor's statement does contain some element of truth, but ignores critical facts that would give a different impression, we rate it Mostly False.

Ohio Issue 2 FACTS (Just Say NO)

MYTH: SB 5 is needed to help balance the budget and stimulate job growth. 

TRUTH: SB 5 destroys jobs and lowers wages. You cannot create jobs by destroying jobs. If SB 5 passes, owners of shops, gas stations and other small businesses across this state will be forced to lay off workers or close their doors. 

MYTH: Public employees are overpaid, and their salaries need to be brought in line with the private sector. TRUTH: A recent Rutgers University study found Ohio public employees earn 6 percent less on a yearly basis than their peers in the private sector. They earn 3.5% less on an hourly basis. The average OAPSE (Ohio Association of Public School Employee) makes $24,000 a year and retires with an average pension of $900 a month. Public employees do not pay into or receive Social Security. 

MYTH: Public employees need to make a sacrifice to reduce the state's projected $8 billion budget shortfall. 

TRUTH: Ohio is 44th of 50 states in per capita spending on government workers. State employees have taken a pay freeze five times in 9 years. In the last contract, state employees voluntarily took furloughs and made other financial sacrifices that saved $250 million and an additional $100 million in health care costs. MYTH: Public employees have too much power and the public agrees. 

TRUTH: A recent Gallup poll found the 61% of the public oppose taking away some collective bargaining rights of most public employee unions. A recent Quinnipiac Poll found that only 34 percent of the people in Ohio support this proposal. 

MYTH: Rolling back collective bargaining rights is needed to help managers do their jobs. 

TRUTH: Ohio passed a law in 1983 to establish collective bargaining for state workers. The 1983 law has reduced labor strife, and increased professional training and productivity. 

MYTH: SB 5 is nothing more than a reasonable set of reforms needed to bring public employee salaries and benefits more in line with their private sector counterparts. 

TRUTH: There is nothing reasonable about SB 5. It takes away the rights and voices of hardworking Ohioans who serve our state and local communities. It unfairly shifts the balance and all the power to management. 

MYTH: SB 5 just asks public employees to pay their fair share for healthcare benefits and pension costs. TRUTH: SB 5 fundamentally changes collective bargaining and is a flawed bill with unintended consequences. All state employees already pay 15% of their healthcare and 10% of their pension costs. Many workers in local communities also pay at least these levels or more. School employees in Grove City pay 35% of their healthcare costs. 

MYTH: SB 5 will save jobs. 

TRUTH: SB 5 will not create one job. Between the devastating state budget cuts to local communities and SB 5, the state could lose 51,000 jobs. The truth is, due to more than one billion dollars in state budget cuts, local communities will be forced to fire and layoff vital safety services like police officers and firefighters. MYTH: All of Ohio’s business community supports SB 5. 

TRUTH: More than 700 businesses in Ohio are part of the Proud Ohio Workers program which shows support for public and private sector workers who shop in their businesses. Local 

MYTH: Unions never came to the table to discuss their concerns with SB 5 during the legislative debate and when given the chance to compromise they refused. 

TRUTH: Thousands of people were locked out of the Ohio Statehouse during the legislative debate and were unable to testify or let their voices be heard. We Are Ohio stood firmly with the 1.3 million Ohioans who signed petitions to repeal SB 5 and told legislative leaders they should come back to Columbus and repeal the whole bill. 

A Labor Day Tea Party and Cookies: No on Issue 2

Tea and Cookies aren't for everyone!!!

Last week at Open House, a Case Western Reserve Professor and out-spoken critic of Governor Kasich tried to explain the political landscape in Ohio, as well as other states where public unions are under attack.

"Pretend you are sitting down at a table with a CEO, Tea Party Member, and Union Employee.  There are 15 cookies to be split among the three of them.  The CEO takes 14 cookies and stuffs them in his pocket.  The CEO then tells the Tea Party Member that the Union Employee is try to steal his cookie."  

The analogy makes pretty good sense.  After all, tax structures are made to benefit the well-to-do, and the corporations.  And I do believe that those who run companies, create wealth, and employee fellow Americans should have a favorable tax environment. The question is how much is enough?  

Likewise, we can appreciate any politician who is careful with public monies.  The goal is not to squander or be a careless steward with tax money.  For instance the is trying to figure out what happened to $30 billion dollars in unaccounted funds between Iraq and Afghanistan.  Or you could be a hypocrite like GOP Senator Neihaus champions cuts to the public sector, then gives his office staffers a retroactive pay-raise.  Even some of the most ardent Rush Limbaugh supporters think this Ohio Senator has lost his mind.

So on Labor Day rest, but do not rest too comfortably.  There is a collective effort to undermine the public workers of this great state. And if this succeeds, who will be next?

Stock Watch

Opened a position in PQ when a limit order was filled two weeks ago @ $6.10.

Looked at GLD Options which are completely OUT of SIGHT!!!  Maybe will add a limit order and hope for a sell-off.  Methinks Europe's debt, and soverign debt issues will not be solved anytime soon!!!

Investment Watch

Formed an LLC which will handle both speculative and non-speculative business ventures.  Will write more on this subject next blog.

Credit is Available... But Confidence is Not!!!

Doom and gloom has rarely served anyone well.  But reality is a tough pill to swallow at times.  Revisiting a time when the stock market's "floor" was put in somewhere in 2008, I never really bought it.  After all, while the pundits blew the "All clear call" from the beach most of us understood that the waters were still shark infested. 

Unlike the Great Depression, credit is readily available in this economy.  That is the biggest lesson that was learned from the Great Depression...  our economy runs on credit.  Unfortunately, this time around we too will realize that our economy runs on employment.  And the persistence of long-term unemployment will not only cause a continual ripple effect through the economy, but also destroy one of the things the entire world economic system has taken for granted; the U.S. consumer's disposable income.

Splinter groups like the Tea Party call for less government, less taxes, less regulation, and an end to all entitlements, most agree that the Republican's meant everybody else's pork not their own.  But the Tea Party would suggest they meant EVERYBODY's pork.  Democrats are slowly realizing that this means structural changes to entitlements that both parties have long favored namely Medicare and Social Security.  It is my belief that the Tea Party will eventually become a third party, as neither Democrats or Republicans have the wearwithall to stomach some of the proposed cuts.

Stock Watch

D  held since 2006

20% Gain (Plus approximately 2.00 per share dividend)

Janzen's Short Play LULU

-20% Loss (From recommended peak)

Silver Coins

Purchased July 2007

Buffet on Taxes

(Reuters) - Billionaire Warren Buffett urged lawmakers to raise taxes on the country's super-rich to help cut the budget deficit, saying such a move will not hurt investments.

"My friends and I have been coddled long enough by a billionaire-friendly Congress. It's time for our government to get serious about shared sacrifice," The 80-year-old "Oracle of Omaha" wrote in an opinion article in The New York Times.

Buffett, one of the world's richest men and chairman of conglomerate Berkshire Hathaway Inc , said his federal tax bill last year was $6,938,744.

"That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income - and that's actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent," he said.

Lawmakers engaged in a partisan battle over spending and taxes for more than three months before agreeing on August 2 to raise the $14.3 trillion U.S. debt ceiling, avoiding a U.S. default.

"Americans are rapidly losing faith in the ability of Congress to deal with our country's fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness," Buffett said.

Buffett said higher taxes for the rich will not discourage investment.

"I have worked with investors for 60 years and I have yet to see anyone - not even when capital gains rates were 39.9 percent in 1976-77 - shy away from a sensible investment because of the tax rate on the potential gain," he said

"People invest to make money, and potential taxes have never scared them off."

(Reporting by Santosh Nadgir; Editing by David Holmes)

All the King's Horses and All the King's Men...

At U.S. Megatrends, we have never completely bought into the illusion that the U.S. or world economies were completely on solid footing.  Quite contrary, we have speculated before that government intervention has in many regards only temporarily averted market meltdowns, and more importantly contagion. In 2008 and 2009 several of us including the Axman and myself had placed short positions as a hedge on a market that we both understood to be fundamentally flawed.  

Personally, I am thankful that the government has tools in the toolbox of the Department of Treasury and Federal Reserve to address these issues.  The good of our country, and the economic recovery that had ensued to this point has had less to do with market fundamentals and more to do with intervention.  And many of us understood the intervention to be a temporary fix, not a true solution to the problem. ITulip's Eric Janszen explained (paraphrased)  That attempting to re-inflate the F.I.R.E. Economy (Finance, Insurance, and Real Estate) would only prolong the pain by treating the symptoms, not addressing the cause of our true economic problems.

Now what once appeared to be a small crack in the world economy has now become a deeper rift not only played out in financial markets, but also in the streets of places like Athens, Tel Aviv, Damascus, Tripoli and of all places London. London should be a city of particular interest as what was once a spark over a police shooting (Click Here) , has erupted into a maelstrom of looting a pillaging.  A darker shadow has reared its head, one that has revolutionary overtones.  Not one particular ethnic group or social class is to blame for the riots, but a generation of youths who have a bleak outlook on their future.  (Click Here)  This is by no means defense of the youths, but more  it clearly identifies a group with at explanation behind their behavior.

I do not believe the riots will continue in London. But there is a reasonable chance that the conditions are right throughout the world for riots in other locations. Every country has populations like this. In difficult economic times their presence is more pronounced.

We realize that globalization will take a few steps backward during this next decade... and it will take at least a decade to straighten this mess out...  And whatever emerges as the economic and political order, we must understand that it will be new and different from the old one.  For now financial markets will continue to reel under the weights of fear and more importantly a deeper mistrust of financial institutions and sovereign debt.

In the United States, we have seen a group of anti-tax free market capitalists known as the Tea Party who are willing to shut down the government in order to save it.  And whether the Tea Party is right or wrong in their actions, they have clearly helped move the political football down the field. The Republican Party to a degree has been radicalized by this movement.  And the movement tends to be based on economics as well as a table-turning political as well as social agenda.  Many Americans thought they were Tea Party members until they learned that the Tea Party was going to cut their favorite government programs as well.

Investments will center around a few simple themes.  I do not believe the stock market is broken.  I do believe it will not continue to be business as usual.  A more aggressive effort must be made to win back the confidence of the people.  The term bankster was a term given to bankers during the 1930s.  And it will be more difficult to erase the image this time around.

Investment Watch

Long Positions in Silver and Gold (both physical and silver).

Long Positions in stocks that pay dividends (particularly those with stable balance sheets).

Sector Specific Plays  (As some sectors do see tangible growth in spite of economic conditions).

Shorts Specific Plays (Stocks that rely on discretionary spending and middle class income).

A renewed belief that the best money invested is a product or service that you have direct control of.  Just throwing money into the wind, and hoping that it grows does not work long-term on Wall Street.  Rely more in your own abilities to develop a cash flow system, and less on the good will of Wall Street.