Category: Personal Finance

Personal Finance

Did Nature Punish Humanity With Corona?

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The empowered conservative blogosphere was recently alight with outrage over Papa Frank’s suggestion that the coronavirus might be one of nature’s responses to climate change. Breitbart commenter John Truman Jr. received over a thousand upvotes for responding as follows:

“Francis preaches the anti-gospel of Karl Marx. He is a leftist activist when we need a spiritual leader. Worst. FakePope. Ever.”

Laying petty politics aside, the Supreme Catholic Diversity Warrior might have a point, although he reaches poor conclusions elsewhere. Frank’s opinion harkens back to the George Carlin bit where the comedian predicted that nature would eventually get rid of humans and then proceed to “heal and cleanse itself.” He added that the planet might use VIRUSES to eliminate the human population, referencing HIV.

Sure, coronavirus hasn’t been all that devastating yet, but some peculiar data did emerge concerning pollution. In Venice, a drop in canal boat traffic left the waterways looking clear and beautiful when compared to before. Across the Atlantic, reports suggest a 30 percent decline in air pollution for the Northeastern United States, attributed in large part to the lower flight totals caused by the outbreak. Similar information has emerged in India due to less airline usage.

What’s interesting is that prior to these developments, suggesting policies to avoid sharp population growth in the West (and the accompanied pollution it entails) was responded to with the “Ecofascism” or “EcoNazism” slurs. Now we see how much of a toll globalization, mass immigration, and liberal transport policy have had on the environment, all because of a pandemic.

Will attitudes change for the good of the planet, or are we destined for a Carlinist judgment day?

Federal Government · Personal Finance

Why A Balanced Budget May Not Work

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Ever since at least the 1990s, conservative Americans have been fixated on the importance of a constitutional amendment to ensure federal revenues do not fall short of expenditures. The idea picked up a lot of steam during the rise of the Tea Party movement in 2010, and now some Democrats are even advocating for such a reform.

At its base, the notion is attractive. By placing legal limits on spending, we might prevent the runaway inflation and financial ruin likely to be foisted upon ours or future generations. In his book The Liberty Amendments, Mark Levin expanded the concept by suggesting a cap on the size of government spending at 17.5 percent of GDP, and a mandatory 5 percent cut in overall spending if Congress fails to adopt a budget.

This all sounds great, but several problems remain. First off, most plans include exceptions for emergencies and times of war. The obvious fail point would be politicians declaring a health crisis like coronavirus to be indefinite, or using the so-called “War On Terror” as justification to spend without limit.

An equally significant issue is the risk of “off-the-books budgeting,” which has been practiced for years by government officials. In Nazi Germany, it was employed to get around the Versailles Treaty restrictions concerning maximum outlays on military buildup projects. During the years leading up to the 2008 financial crisis, the Greek government acted with related malevolence, only in their case it was to complete corrupt real estate deals and hide inflated salaries that violated EU standards.

Believe it or not, America is hardly free of these unethical strategies. The Central Intelligence Agency has been allowed to evade federal budgetary restrictions for decades, and a recent audit of the DOD revealed the agency is incapable of accounting for billions – if not trillions—of taxpayer money spent on a variety of projects.

The upshot is that while a balanced budget amendment might improve the nation’s solvency on paper, it fails to prevent the eternal scheming of the political class to bankrupt our treasury in pursuit of their own interests.    

investing · Personal Finance

Why You Should Work For The Government

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Some years ago I was party to a conversation about various career fields. One participant noted they hoped to get hired by the federal government, which another dismissed as “under-achieving.” This did not seem to faze the first chap, who just shrugged and gave off a satisfied smile.

Looking at some recent stats, we can see why. As private sector industries such as hospitality and leisure bleed jobs like the hemorrhoid circus, government is one of the few examples with a net positive rating, and the highest performer among the winners.

Even as the economy goes bad, the government continues to operate, paying out salaries to workers who might be deemed “non-essential” and laid off if they were in the private sector. This gives state employees a tremendous economic advantage over those who are losing their jobs (or getting less hours). They will not face the disruption native to other industries, and therefore can more easily buy into the discounted stock market or real estate.

Beyond this, government workers aren’t treated all that badly. The current federal model of FERS, which has been replicated by many state and local governments, provides a far more stable benefits package than the vaunted private sector. Participants get access to a Thrift Savings Plan (basically a 401k) with up to 4 percent matching, and a pension that comes to around 33 percent of their highest three-year salary, along with Social Security. Healthcare plans are decent as well.

The skeptics among you might point to the recent government shutdown as an example of disadvantages, but government workers ultimately received back pay, while most of the workers affected by coronavirus will not.

So if you have a child someday, recommending a career in the civil service isn’t necessarily a bad idea.

Culturalism · investing · Personal Finance

The Federal PRESERVE of Wall Street

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Some people ask me how I’m able to stay sane as an investor during times like these. The answer is quite simple: just pay attention to the federal government.

As most already know, the Congress approved a $2 trillion monstrosity by voice vote yesterday, with the only visible opposition coming in the form of representatives AOC and Thomas Massie. Beyond its inclusion of various stimulus programs, the legislation creates a fat bailout fund for larger companies, and allows the Federal Reserve to leverage up to $4 trillion in support of the economy (Read: Wall Street ).

In the words of Powell the Owl:

“Effectively one dollar of loss absorption of backstop from Treasury is enough to support $10 worth of loans. When it comes to this lending we’re not going to run out of ammunition.”

Some Democrats openly demanded oversight for $500 billion in assistance that corporations will have partial access to through the bill, and succeeded in establishing an inspector general to monitor disbursement of the money. In response, Republicans began to weep miserably.

Just kidding. In reality, El Orangelo was several steps ahead of them, placing his ink on the bill accompanied by a fancy signing statement, which effectively allows him to ignore parts he doesn’t like. According to the man himself:

“I do not understand, and my Administration will not treat, this provision as permitting the [inspector general] to issue reports to the Congress without the presidential supervision required.”

In relation to congressional oversight requirements for specific funds he added:

“These provisions are impermissible forms of congressional aggrandizement with respect to the execution of the laws.”

In other words, the money is already compromised. If that wasn’t enough, the legislation also shrouds Federal Reserve meetings in deeper secrecy, establishing an effective wall against FOIA requests.

So Wall Street will be fine, although your currency is another question. But don’t worry, you can forget all that and just rage against Thomas Massie.

Culturalism · Personal Finance

Paranoia Nation

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We have already considered the negative impacts of Corona Derangement Syndrome (CDS) on the economy and the world. But even all that pales in comparison to a new story on the block.

On Hufflepuff.net, an article was published with the title “My Grandma Isn’t Taking Coronavirus Seriously Enough And It’s Terrifying.”

At first glance, the piece might come off as a touching tribute to an elderly relative at risk from the advancing virus. That is, until the reader reaches sentence two:

“In New Jersey, a quick 18 miles and two river crossings from where I am in Brooklyn, my 88-year-old nana is probably sleeping after another long, semi-quarantined day of watching the news, chain-smoking cigarettes and worrying about me.”  

Yes my economic chickens, our author is petrified over an octogenarian who apparently partakes in multiple cigarettes daily. God bless the grandma for her old age, and I wish her 88 more, but doesn’t the granddaughter’s reaction seem a bit odd? Her nana was presumably warned of the risks of smoking at some point, yet continues on regardless. She has lived longer than most people, and still appears tough as a cookie. Coronavirus would probably die trying to make her sneeze even once.

As it has been said, what makes a crisis devastating is less the cause, and more the reaction.  

Culturalism · investing · Personal Finance

Goldman Takes Third Blood

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In my last video, I warned folks about Wall Street’s likely attempt to weaponize the Coronavirus panic in service of their financial interests. I also noted that Goldman Sachs has cultivated such a close relationship with the federal government that it managed to completely destroy a competitor (Lehman Brothers) during the bailout negotiations of 2008.

But there is more. As markets reel from the virus’ impact, our lovely friends have released an updated report on U.S. GDP for the second quarter, suggesting an upcoming 24 percent drop.

How convenient. Sounds like a great way to further tank the economy, allowing the Goldmanites freedom to make a killing on shorting strategies, plus accumulate dirt cheap shares.

Now hold on, the skeptic might say, what happens if the market declines so Goldman Sachs is also in trouble?

It’s quite simple. They just give a ring to the Treasury Department, led by none other than Steven Mnuchin, the retired Chief Information Officer for Goldman.

If you watch your 401k undergo further decline in the following weeks, just remember who is walking in “Fields of Gold.”

investing · Personal Finance

The Best Books On Economics

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A lot of folks complain to me about the dense nature of economics and government policy, something that deters them from getting involved with the market or reading the subject matter. As a result, I decided to drop the following list here, with the intent of providing a shortcut to the volumes that help simplify issues for the average American goober.

On Stock Market Investing

The Intelligent investor by Benjamin Graham

Stocks for the Long Run by Jeremy Siegel

A Random Walk Down Wall Street by Burton Malkiel

The Little Book of Common Sense Investing  by John C. Bogle

How a Second Grader Beats Wall Street  by Allan Roth

On Real Estate Investing

How To Be a Capitalist Without Any Capital by Nathan Latka

On Economic History

Socialism and Human Action by Ludwig von Mises

The Global Minotaur by Yanis Varoufakis

Capitalism and Freedom by Milton Friedman

Capitalism In America by Alan Greenspan

An Empire of Wealth by John Steele Gordon

On Economic Policy

Who Stole the American Dream? by Hedrick Smith

Retirement Heist  by Ellen Schultz

Temp by Louis Hyman

Maxed Out  by James Scurlock

investing · Personal Finance

Siegel: The 60/40 Split Is Outdated

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The 60/40 portfolio divide between stocks and fixed income is old news.

That’s the word from Jeremy Siegel, the Wharton professor and renowned author of Stocks For The Long Run. He made the point on CNBC that our enduring low interest rate environment means you need a higher concentration of equities in an investment portfolio. What’s the new ratio? It swings in at 75/25 percent, stocks to fixed income.

Here’s the video:

As a side note, the author of How a Second Grader Beats Wall Street uses the 60/40 split for his son’s portfolio, but the 40 percent is actually made to include an international equity fund. He puts 60 percent in VTSMX, 30 percent in VGTSX, and 10 percent in VBMFX. While the regular stock fund (VTSMX) performed well for the period discussed in the book, the VGTSX lagged dramatically.

The ultimate decision on allocation should relate to the investor’s age and specific time frame. Unfortunately, ultra-low rates will make it harder for older folks to adjust because their fixed income returns stand to get decimated by the inflation figures.

But that’s ok, as long as we have good GDP.

investing · Personal Finance

We Can’t Take Rate Cuts Back

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Josh Brown said something on CNBC today that I’ve believed for a long time under the Trump Economy: it’s now impossible to walk-back rate cuts.

We all remember the debacle of December 2018, when the Federal Reserve raised rates by a quarter point, from 2.25 percent to 2.5 percent. The result was a devastating market drop of 20 percent.

After the last seven days of Coronavirus fear and loathing, the Fed made an emergency rate CUT to stave off concerns, and the Dow fell by almost 3 percent. I guess it wasn’t enough, but just imagine if they had attempted to RAISE rates.

Much as Religious Investor thinking may help quench queasy market appetites by feeding the “There’s no limit!” mentality of millennial dreamers, fueled by the likes of Tesla and Virgin Galactic, at a certain point the ties which bind may horribly snap.

In that moment, will rates be cut or raised? Will it even begin to matter?

Culturalism · investing · Personal Finance

How China Got Away With Murder

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We have already established that China is untrustworthy and corrupt. But the story gets a lot worse, and it goes back years.

In 1874, the Treaty of Bern was signed, establishing the Universal Postal Union, which served to set international carrier rates for mail and shipping. Because China was considered a “developing country,” then, and explicable still is today, it got a sweetheart deal on shipping to the United States. Although less of a problem intially, the growth of China’s exports resulted in a system where the USPS was paying between $300-500 million annually subsidizing foreign imports.

The bizarre impact of the old policy meant that a New Jersey-based company like Mighty Mugs had to spend $6.30 to deliver a single mug, while a counterfeit version could be sent from China for only $1.40. According to Mighty Mugs owner Jayme Smaldone, it gets worse with heavier packages:

“We pay up to $17.61 to mail a four-pound package, but a shipper in China pays $3.67.”

It should come as no surprise that Chinese knockoff sellers can easily undercut American products by offering significantly lower prices.

Thankfully, things are changing. Under a new agreement that goes into effect in July 2020, the United States will be permitted to self-declare shipping rates, hopefully leveling the playing field for struggling small businesses within its borders. As Pete Navarro said:

“China is certainly going to pay more for the privilege of shipping to our market.”

And it only look over 100 years.