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. 

Charter Schools and the Lack of Accountability

Charter School Company Told to Open the Books

***  Did you know that charter school conglomerate, White Hat Management, had refused to open their books and accounting to state officials?  A judge has ruled that the state and the public has the right to know what happens to our tax dollars.

ConnecticutPost:

A judge in Ohio has ruled that a private management company that operates a group of publicly funded charter schools must turn over financial records requested by the schools' governing boards.

The Wednesday ruling in Columbus comes in a lawsuit in which the boards of Hope Academies and Life Skills Centers in Cleveland and Akron asked to break their contracts with Akron-based White Hat Management LLC.......

.......Among records the boards seek are those related to school operations as well as money spent on lobbying for the 2007 law. The judge says White Hat must only turn over records related to the use of public funds.

Here is the story from the Dispatch:

....Common Pleas Judge John F. Bender ruled that White Hat Management Co. is required to disclose the financial information under Ohio law.

State law “clearly and unambiguously requires operators of community schools to provide their governing authorities with a detailed accounting of how public funds are spent,” Bender wrote in a 12-page decision on a request by several charter schools in their ongoing lawsuit against White Hat....

.....Under contracts with the schools, White Hat receives 96 percent of the state aid they receive.....

OMG!  White Hat Management only gave 4% of their total state money to the actual charter schools for salaries, supplies, etc.??????  4%????  There are two things that are clearer now:

(1) This explains why David Brennan is able to give millions of dollars to Republican candidates because he is using your state money for his political objectives.

(2) This also helps provide information on why the White Hat charter schools performs so poorly--- the students are not getting the materials and support they need.

from the Stubborn Liberal

Sherrod Brown is at Least Sincere... at the Most a Champion of the Little Guy...

Thank you for getting in touch with me about the corporate tax code.

 

According to recent reports, certain companies have been able to operate within the law and take advantage of various loopholes and deductions to reduce their U.S. tax obligations and send jobs overseas.  It is frustrating to learn that companies making multi-billion dollar profits pay a lower tax rate than families earning $17,000 a year.

 

However, it is important to remember that what these companies are doing is legal under the tax code. That is why we need to reform the corporate tax code in a manner that simplifies the system and incentivizes the creation of jobs here at home.  If done right, corporate tax reform would broaden the tax base, increase government revenues, and reduce the deficit.

 

American workers can compete with people around the world if the federal government makes the needs of working families its priority.  However, if we fail to improve the tax code, corporations will continue to exploit the tax loopholes that help ship jobs overseas and exacerbate our nation’s fiscal situation.  

 

As the Senate considers reforms to the corporate tax code, I will be sure to keep your views in mind.  

 

Thank you for also getting in touch with me regarding proposals to reform Medicare.

    

Since the enactment of Medicare in 1965, Ohio’s seniors have no longer lived in fear of losing affordable, comprehensive health insurance when they retire.  Unfortunately, some in Congress want to dismantle Medicare in order to help offset the costs of tax cuts for the very wealthiest in our country.  I strongly oppose this proposal which is why I authored a letter (http://1.usa.gov/ka14UT)  signed by 49 of my Senate colleagues expressing our strong opposition of this plan.

 

House Budget Chairman Paul Ryan recently unveiled his chamber’s 2012 budget proposal.  This proposal would end Medicare as we know it and throw seniors into the private market with nothing more than an insufficient voucher to offset the rising cost of private health insurance.  So-called “premium support” — giving  seniors a voucher of approximately $8,000, as proposed by the Ryan budget — is a reckless and irresponsible way to address the health care needs of older Americans.  And it is an unacceptable means by which to finance tax cuts for those who are earning ten times or more than the retirement income of the average Medicare recipient.  

 

According to the Congressional Budget Office (CBO), in the first year of the voucher program under the Ryan budget, out-of-pocket expenses for seniors would double under the plan adopted by the House majority to more than $12,500 annually.  For seniors on a fixed income, a doubling of out-of-pocket expenses is simply unaffordable, particularly when the average Social Security benefit inOhio is only $14,000 per year.  Worse yet, under the proposal, the annual increase for the vouchers will fall short of the actual rate of inflation for health care — meaning out-of-pocket expenses for seniors will continue to soar.

 

To make matters worse, this budget would repeal the health care reform law that will save $1.3 trillion dollars over the next 20 years according to the CBO.   Such a repeal would also stop in its tracks the effort to close the Medicare Part D coverage gap know as the “donut hole.”  This year, seniors in the “donut hole” are receiving half off brand name prescription medication and will receive increases in the discount each year until the “donut hole” is closed in 2020.  The Ryan Budget ends this fix and would leave seniors in the “donut hole” footing the bill.  The average senior in the “donut hole” would incur an additional $11,794 between 2012 and 2020 in prescription drug costs.  Now is not the time to be adding to seniors’ financial burden.

 

While deficit reduction is essential, balancing the budget by dismantling Medicare is both unfair to hard-working Americans and counterproductive.  If Medicare is turned into a voucher system and the health reform law is dismantled, millions of seniors will be left underinsured or uninsured.  This will add to the burden on our nation’s already overwhelmed emergency rooms and result in increased demands on Medicaid as seniors exhaust their life savings.  

 

Before the passage of Medicare, only half of America’s seniors had health insurance, and most of those with insurance only had coverage for inpatient hospital costs.  Now, only 1.8 percent lack health coverage and less than 9 percent live below the poverty line. We cannot afford to reverse these gains through the ultimate form of rationing health care for seniors: the replacement of Medicare as we know it.  The cost of these “savings” — for seniors and their families and taxpayers who will have the costs shifted on to them — is far too high.   Thank you again for sharing your thoughts with me.

 

Finally, thank you for getting in touch with me about Social Security reform.

 

While I understand concerns regarding the future of the program, I believe it is imperative that Social Security continues to remain strong for the well-being of our nation’s middle-class.

 

Social Security provides a vital safety net for approximately 55 million Americans, including more than 2 million Ohioans.  Reducing benefit levels or raising the retirement age for Social Security eligibility would pull the rug out from under Americans who have shaped their retirement planning around their earned Social Security benefits.  

 

The Social Security Trust Fund faces a long-term fiscal challenge that will require bipartisan dialogue.  Rather than reducing benefit levels that would cause undue financial hardship on hardworking men and women, we should seek alternatives to ensuring the solvency of the Trust Fund such as reviewing the level of the cap on taxable income.  It is also important to place Social Security in the context of our economic recovery and subsequent economic goals.  Job creation in the U.S. is crucial to stabilizing the Social Security the trust fund, which is one of many reasons our nation must review its trade and manufacturing policies to ensure we are positioned for success in the 21st century global economy.

 

I appreciate your concerns regarding this issue, and should Congress undertake legislation relating to Social Security I will certainly keep your views in mind.  

 

Thank you again for being in touch with me.

 

                         Sincerely,

              

                         Sherrod Brown

                         United States Senator

A Voice of Reason: Letter from Steve LaTourette

Thank you for contacting me about the debt ceiling debate. As you can imagine, little else is being worked on by the Congress and the President as we approach August 2nd, the date the Treasury tells us the United States will run out of cash.

The ongoing discussions have both great promise and great peril: peril, due to the impact that default by the U.S. would have on the cost of money in the future; promise because this crisis has created a once-in-a-generation chance to put the country’s economic future on a stable path. I apologize for the length of this response, however, there are a number of misconceptions about this issue and I want to be as clear as I can be.

I have recently been briefed by a number of experts about what happens if we take no action on the debt ceiling. The most informative one, to my mind, was prepared by the Bipartisan Policy Center and can be found at www.bipartisanpolicy.org. That analysis reveals that the date the U.S. runs out of cash and will be required to pay bills as money comes in is August 2nd (slides 5-6). There is no precedent for what would happen next but slide 11 indicates that the government would have to prioritize among 80 million payments. Slide 13 shows that income for August would be $172B and bills $306B for a deficit of $134B.

The severity of that situation is clearly illustrated in slides 14-19, where the Bipartisan Center lays out 2 proposed scenarios of what could be paid and what wouldn’t be paid. In addition, the credit rating agencies, Standard & Poors, et al., have indicated that a failure to pay all of our bills would result in an increase in the cost of financing the debt we already owe. Many of us who bought our first house in the 1980’s can vividly recall 15% interest rates and even a modest rise in what the U.S. pays as an interest rate can wipe out trillions in any savings a deal would achieve(slide 36).

All of which brings us to what should we do about it. Obviously, a default by the U.S. cannot be permitted. That being said, the magnitude of the debt crisis demands that a transformational solution be crafted that puts the country on a path to financial health. Some have suggested that the President simply be given an additional authority to borrow another $2Trillion without any spending cuts or revenue increases. I reject that approach.

The Speaker, John Boehner, is working with the Administration to craft what is being called the ‘big deal’. That deal would only allow additional borrowing if spending is reduced in an amount greater than the new debt. Further, through eliminating loopholes, tax simplification and broadening the base of taxpayers, revenue would be increased without the class warfare demagoguery. I support the Speaker’s work to achieve this bigger agreement, as it represents our best hope to not, again, kick this problem down the road to our kids and grandkids. Obviously, my support of any proposal will depend on the details of that proposal.

I very much appreciate you contacting me regarding this matter and as events continue to develop please feel free to share your thoughts on what you see and hear. Thankfully, the new rules of the House require that any ‘deal’ be available for 72 hours online before it comes to a vote and I welcome your thoughts when that occurs.

 

Very truly yours,

 

 

Steven C. LaTourette

Member of Congress