yeah i know, clever title.

now i know that i start many of my posts with this, or some version of it: i am really annoyed by (fill in the blank), but here it is yet again.

i am really bugged by some of the debates that are going on regarding our current energy situation. but the one that is most annoying is the proponents of Wind Energy. yeah, the wind is free (as is solar). that is nice that it is free, and it is nice that we have over 6,000 megawatts installed in the US. but it also costs us about $23 in government subsidies vs. 25 cents for the same amount from our petroleum sources of energy. as a Capitalist, that right there makes me not want to support Wind farms. but more than that, lets think a little deeper… 6,000 megawatts Installed is not the same as 6,000 usable. that number is just the potential that we have to produce. it is only produced when the wind blows. and the wind doesn’t always blow strong enough to produce that. what is more, wind energy can’t be stored for future use. this just damns it further in my eyes. as far as i can tell the proponents of wind energy are out for a buck just as much as the big, bad oil companies. except for one thing, wind is has a much higher profit margin.

at some point we all have to talk about politics. i suppose it is ingrained in the American psyche from early on. (less now than with our parents) so lets see…

 Barrack Obama, he is the man! he wants to fix everything. i like that he has vision, that is great, i just wish that vision was less myopic. Sen. Obama wants to create more green-collar jobs (to the tune of an $160 BILLION dollar program), higher minimum wage (have you heard of inflation?), free/affordable health-care for everyone, and tax-free status for pensioners (even though employee pension plans are almost non existent nowadays). ALL great things… umm, one question? check please?!? where does all this money come from? SOMEONE has to pay. so we go back to our lesson on Social Security.

you pay in your whole life and then you get to be supported by the younger crowd when you are older. OK. great. lets look at a country that is arguably a perfect example of this. Germany, has social health-care and a wonderful pension program. which is supported by a 10% MANDATORY contribution to the State Pension fund on ALL income, 7% goes to the health-care system (both with an employer match). in addition to this, have you ever wondered why lots of Europeans ride bikes and walk? do you even know what gasoline costs over there? last time i bothered to do the Euro per liter/ Dollar per gallon exchange it was over $8/gal! still want to whine about our fuel prices?

So i think, maybe, he should explain a little better how he can accomplish all that he has promised, with no tax increase for, what did he say, 95% of Americans?

hmm… i think we should check the price of the meal before we order.

i have been having a fit over Bernake lowering the Fed rate to 2%… but i have been calming myself down and am starting to think a little more calmly.

it seems to me that continuously lowering the Fed makes for a shortsighted solution that is focused on the slowing economy. one that is more like a triage technique. it was good for when we first got in this pickle… but now that we are at the hospital, lets get some surgeons in here! we need to look at the whole picture, not just a slowing economy (imports are down and so are our exports), but the rising risk of inflation. I am in the party that says inflation is going to start causing a serious problem. we need to try to regulate that as best we can! cause as far as i can see we are looking at one of the worst inflation rates in decades if we don’t!

My colleague and i were discussing the problem of the Fed rescue net. it started with the discussion of Bear Sterns. 

As we all know Bear Sterns had a bit of a rough time… oh that’s right they are gone in a fire sale. a spectacular bonfire that consumed one of the biggest firms we had in the US.  it is my opinion that Bear could have actually pulled this gambit off, but just too many people were betting against them. that is ok. that is how risk works. c’est la vie.

my issue is actually with the Fed coming in to bail them out. now that we bailed them out, who do we bail out next? everyone. the Fed has to, they lost the choice to say: you dug this hole, climb out on your own. now every company and financial institution that finds itself exposed to too much sub-prime risk, will feel that it is “entitled” to help from the government.

my problem: what ever happened to personal responsibility? why do we, the tax payers, end up paying for every person that chose to defy logic and buy a home that they couldn’t afford? if they couldn’t pay the debt, it was supposed to reflect on their credit score and hence, how trustworthy they are. now they don’t even have to learn the lesson that is supposed to come from being burned. they don’t learn, because they know that the Fed is the safety net, they will always be bailed out.

This is not to say that someone can’t help them. if another institution wants to help that is fine! that is great. but, the Government can’t do this. it is only prolonging our misery. we are a democracy! not a Socialist regime! WE are the ones paying for all of this, that is the thing to remember when the Fed bails these people out.

just shy of $1000 per ounce. holy crap. i have even used this to hedge some of my portfolio. but you always need to be wary of this commodity, it has an almost completely negative beta.  negative beta means that if the market goes down, it will go up. that is why there are all those commercials on late at night about buying gold coins. when the economy goes to crap (as is the current market trend) the gold goes up.

just remember, as with all other things, sell when it is high. don’t keep it past its “due date.”

i was in my car on my way home last night and heard a commercial on the radio. i immediately begin to change the station, as i always do, but stopped. why? because it is about the housing market in Utah. 

this ad states that “while many markets in the US are dropping, Utah is growing!” because Utah has a “strong” economy, with a high employment rate.  those are the reasons that the Housing market in Utah is still going up, while everywhere else in the US it is dropping like cement boots in the Hudson river?

i am not sure how i feel about that. you see… the US economy was doing well UNTIL the housing market tanked. and we still have an exceptionally high employment rate for the country. so how is it that Utah gets to keep up this charade that they are doing better? is this just the worst kind of self delusion? i think so.

frankly if even California prices are dropping then Utah should follow suit.  when a person can buy a 4200 Sq. ft. house in Houston, TX for $200k, and a similar house in Utah tops $300k there is a serious problem. a problem that needs to be addressed by some people of intelligence.  are the people in Utah so dense that they actually listen to these commercials telling them to buy new homes? on second thought… don’t answer that.

i see it as a very pressing matter for our economy to take into account all of the Baby Boomers that are going to start their retirement in the next few years.  the reason for this concern is this: most defined benefit (pension) plans are going the way of the dinosaurs.  they have been declining for years.  this means that most boomers’ retirement funds are in IRA’s or something similar. where do these accounts really keep the money? in mutual funds, that in turn fund the Market.

why is this a problem? well… i am sure that these retiree’s need to have money to live during these Golden Years. this means that they have to take money out no matter how low the market is. they don’t have the choice, they have to have the money, and make no mistake they are a significant percentage of the market.

so when they start this withdrawal, i am sure that we will be feeling it. so tuck in and hang onto your positions. reverse your thinking. fight against your worries. we will make it through this, just like all the others down times.

since i was filing my taxes today, i thought of this little problem that people have mentioned to me: 

there are many people that think that if the government needs more money they need to increase taxes. logic would dictate taxes are where the government gets all of its funding… and it is… but then again, it isn’t.

income taxes are a tiny part of where our sovereign’s money comes from. a pittance really. the majority of the US citizens are in the middle class that pays what? 15-25% ? that is nothing! 25% of 60k is only like 15k, that will never buy anything that our government needs. but the 34% they tax all corporations in this country? there is some real cash!

so the way that an income tax cut helps the economy is this: we have more money. we spend more on things that the corporations make/provide/etc.  then that corporation makes more money. then they give more of that money to the federal government, who buys more useless crap they don’t need and increase our national deficit. works out splendidly, right?

i just have to say that if you don’t understand how Social Security and pensions work then stop saying that they are broken or ruined.  they aren’t.

First of all Social Security was never really meant to last forever. next, they work sort of like an Annuity, meaning you pay into it for a certain amount of time and then when you retire (annuitise) they begin paying you.  the problem is not that they broke, but that we have to many slacker, lazy, free loaders, that think that they “deserve” this money.  if you aren’t over the age of 65. you shouldn’t get a damn dime! go get a job and stop being a social parasite! as bad as the economy may seem, there are still plenty of jobs. if need be go work at McDonald’s. they pay higher than you might think ($9.50/hour).

i am reconciled to the fact that i will not be receiving any Social Security Benefits. but it is not cause the system is broken it. it is because of too many people taking money out.  in the 50′s and 60′s there were 10 people paying into SS for every person that was withdrawing. now it is 2.5 people paying in per 1 taking a benefit check.

i think that this current generation (my generation, i might add) seems to be the laziest on centuries. please, stop stealing all the money i worked for and go get a job, learn what hard work is. besides, it builds Character.

the tax system of the USA is not that complicated. however, with all the upcoming elections and campaigning that is going on for the coming year, people have been talking about tax cuts.  yet, too many people have the wrong idea about them. so let us clear up the muddy waters and bring you out of the shoals.

here is a little story that i was told one time that i think will clear things up better than i can.

“Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.

The fifth would pay $1.

The sixth would pay $3.

The seventh would pay $7.

The eighth would pay $12.

The ninth would pay $18.

The tenth man (the richest) would pay $59. 

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement until one day the owner threw them a curved ball. “Because you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.” Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so:

The fifth man, like the first four, now paid nothing (100% savings).

The sixth now paid $2 instead of $3 (33% savings).

The seventh now paid $5 instead of $7 (28% savings).

The eighth now paid $9 instead of $12 (25% savings).

The ninth now paid $14 instead of $18 (22% savings).

The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant the men began to compare their savings.

“I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man, “but he got $10!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more than I!”

“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”

The nine men surrounded the tenth man and beat him up. The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our Tax System works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.”

David R Kamerschen, Ph.D.
Professor of Economics
University of Georgia

so next time someone (read politician) tells you that you should be getting something for nothing, (insert free education or health-care, etc.) remember not to whine to the rich person about your plight. cause chances are, they already paid for your welfare check.