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Archive for the ‘Economy’ Category

Now that the Trump administration is coming to an end, and Republicans have lost control of the Senate, we can be sure that the political right will all of a sudden start focusing on the national debt, and will blame the Biden administration for spending money like “drunken sailors” every step of the way. I predict that the debt ceiling, a word that never even was uttered in the last four years, will be a continuing battle, and  every time we want to do something for the middle class we’ll be told that we “can’t afford it, look at the debt!”

Here is the reality of the debt:

[Source: ProPublica]

As can be seen from this chart, the debt went from about $10T to $20T under Obama, headed off by the 2008 stimulus bill, and steadily increased over the years.

Then when Trump took over, he promised that he’d eliminate the debt over eight years. That did not happen. The graph, as we can see above, continued right on upward at the same slope as during the Obama years. The Trump tax cut put a little spike into it, but in general, it does not seem to have affected  the slope of the increase much at all.

Of course, then came the pandemic and all bets are off about the long-term result and the slope of that curve.

In summary, Trump did not do anything to reduce the debt, let alone eliminate it. But overall, he didn’t increase it beyond the trajectory that was already underway.

 

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The GOP blocked the current relief bill, since, per McCarthy, it contributes to the ballooning deficit.

I am not one for advocating deficits. However, after eight years of blasting Obama for increasing the deficit, Trump has added more deficit in the last four years than Obama ever did. And Trump did not have to dig out of an economic crisis. No Republicans appeared to even pronounce the word “deficit” during the last four years of profligate spending and tax giveaways to the rich.

But now that Democrats will be in charge again, the deficit is all of a sudden a word again. Obama took over an economy in shambles and rebuilt it. His crime: The recovery was “too slow.” He increased the deficit, and we heard about it every day. Biden now takes over an economy in shambles, as well as a public health catastrophe, all created by the incompetence of Trump, and we’re worried about the deficit again?

Give me a break!

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During the last debate, Trump said he didn’t think the federal government should be involved in the minimum wage. The chart below shows that it hasn’t. No change since 2009. But the rich have almost tripled their net worth.

Do you really think Trump is looking out for the average Americans? Who are these people at Trump rallies? I wonder what their wages are.

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Last weekend we went out to dinner at Vintana’s, one of the best restaurants in Escondido. It has a large outdoor patio, and in the fall sunset of Southern California, it does not get any better than that.

We also have a restaurant “passport” card, which gives us one entrée for free. With prices being in the $30 for $40 per dish, that is not an insignificant discount. After drinks, an appetizer, and two entrées, with the discount applied, the bill still came to about $80.

I want to support our restaurant community, I want to support our service staff who work hard under difficult conditions, so I boosted the normal tip of about 20% much higher, tipping like I would have done for the full-cost dinner, without the discount.

A day later I received the above email from my credit card company, asking whether I really meant to give a 37% tip at Vinana’s. My credit card company is looking out for me. If this had been a mistake, I would have been able to correct it. That was actually impressive to me. On the other hand, it made it clear that I am being watched, and that my activities, including my spending habits, are predictable and are being monitored.

I feel good, and I feel concerned, at the same time.

But the tip stands. Our server did an excellent job.

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It is dumbfounding to me how Trump and his minions must think we’re all stupid.

During the Obama/Biden administration, the stock market went from rock bottom and steadily climbed for eight years, with occasional dips and peaks. Unemployment went down steadily. Now they keep telling us that the Obama years were “the slowest economic recovery.” Maybe it was slower than they would have liked, but at least it was a recovery!

Steve Scalise says that we have the lowest unemployment rate in 50 years. What planet does he live on? Our unemployment rate is 10.2%, which is the worst since the Great Recession, brought on by the last Republican administration in 2008.

  • We didn’t have more than 1,000 people die every day from a pandemic virus with no end in sight. We’re approaching 200,000 dead in a six month period. Remember how upset they were when four people died in Benghazi?
  • We didn’t have racial riots in the streets of the major cities in the country. More people died in riots in the last few days than did in Benghazi.
  • We didn’t have tens of millions of jobs lost with an unemployment rate of 10.2%.
  • We were able to go to restaurants.
  • Our children were able to go to school.
  • There were no vigilantes killing people in the streets.
  • There were no protestors with assault rifles in statehouses and governor’s offices.

Now Trump calls all this the fault of the Democrats?

All this stuff started under Trump’s watch. We’re looking at Trump’s America, and not even Trump likes it.

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Here is a chart in a wealth management newsletter I saw today that focuses on low interest rates and investor response.

It shows the fed rate moves over the last 15 years or so.

Then I noticed something that should give our Republican Party reason to pause:

The red box roughly shows the second term of the Bush presidency, the green the entire eight years under Obama and the purple is Trump.

Doesn’t it look like Republican presidents drive up interest rates until some breaking point happens and it all comes crashing down? While under Obama, the rates were reasonably low and steady as a rock?

We put a lot of blame on Obama for the “Obama recovery” being not fast enough. That may be true, but the Obama recovery had to recover from a Bush calamity, and it was steady, stable and without financial turmoil.

Now we’re in uncharted territory since interest rates are so low, nobody can make money by saving. At 1% interest, if you can get it, it takes 70 years to double your money. And while that is going on, the stock market is surprisingly high. I don’t trust it, and I don’t trust that investors know what is going on right now. Clearly, the stock market is making the investor class rich, but it’s not helping the millions of unemployed citizens who now cannot make ends meet.

I don’t trust the market now.

I don’t know about you, but I don’t have 70 years left.

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Trump has been proclaiming since the day he took office that the market has been the best in the history of the country during his presidency. Looking at the facts, that is just not true.

For every president since we have market indicators, with very few variations,  the latest president had the highest stock market numbers. But looking at relative gains from inauguration day forward for Obama and Trump, we see a different picture.

Obama entered his presidency at the tail end of a market crash of epic proportions. The economy was in free fall at the end of Bush’s term in 2008. The chart below shows the S&P 500 index for Obama in blue and Trump in red, aligned on the left side to the inauguration date.

We can see how the free fall continued for Obama for another few weeks and then the graph started going up steeply and steadily for the next year, before it dipped again.

Trump’s index also rose steadily for about a year and a quarter, before its first dip. Trump’s slope is actually more modest than Obama’s was, and Trump’s S&P gains never went over 50%, while Obama’s were beyond 80% at about 1,000 days.

S&P percentage performance from Inauguration Day, Trump vs. Obama [click to enlarge]

I often hear complaints from the right about how the economy suffered under Obama. It really didn’t. There were several things that were bothersome: The recovery took a long time, probably due to significant regulatory burden. Unemployment improved throughout all 8 years of Obama’s presidency. While the recovery was slower than we would have liked, I would not exactly call this “suffering” and I for one never minded paying more for gas in exchange of cleaner air and water.

Trump’s stock market rose steadily too over the first 3 years, but then, unfortunately tumbled back to the beginning. It has recovered since, but there is no telling where it is going to go next.

I would certainly not make any predictions right now.

Every morning when I get up I look up into the clouds to check if there are any giant alien spaceships floating above our cities ready to laser-beam us to annihilation. I would not be surprised to see those in the second half of 2020.

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Souplantation is no more.

I have visited Souplantation restaurants since 1985. When our children were little we would eat there as a family. I have had many a lunch in the Mission Gorge location in San Diego, their very first store opened in 1978. I used to go there to fill up after getting hungry and thirsty sailing on the San Diego Bay.

In 2016, I even had lunch there with the CEO of the company at the time. Here is my post describing that visit.

The buffet-style restaurant business was already struggling, and the concept was challenging to keep alive in recent years. Here is a link to SanDiegoVille with the article announcing the shutdown.

But after the Covid-19 shutdown, with the great uncertainty of what comes next, the chain has been brought to its knees.

I will miss the chicken noodle soup, with sourdough bread and honey-butter.

I am truly saddened.

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Obama’s stimulus package was largely ridiculed by the right wing for a decade now. I remember seeing Facebook posts about “The Obama stimulus was a disaster” and how we all “suffered in the Obama years.”

There are two big differences between the Obama stimulus and the Trump stimulus.

Obama didn’t crash the economy under his watch. The economy crashed before he took office. Bush initiated the stimulus, and Obama just carried it forward. Then the stock market went from 7949 when Obama took office to 19827 when he passed the baton to Trump. The bull market was steady for eight years and kept going up.

This continued under Trump. But Trump didn’t turn the economy around, Trump just kept it moving where it was already going, and via deregulation and tax cuts put more fuel on the fire. There is fundamentally nothing wrong with that, except that the massive debt we took on to finance these tax cuts will come to hurt us – long after Trump is gone.

Trump then took credit, called the Obama years a failure, which in reality just set him up to win. But now, Trump’s economy crashed, and as I write this we have no idea how bad it will get.

The pattern so far in my adult life:

Republicans drive up the debt and occasionally tank the market. Democrats then dig out, actually reduce the deficit, and rally the market. Both Clinton and Obama left office with the market at all-time highs.

Bush left office in financial catastrophe.

Trump – that’s anyone’s guess. How is your 401k doing right now?

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I support Bernie Sanders, because I think his heart is in the right place. However, I have issues with many of his policies or attitudes. Here is a tweet he posted today:

First of all, I don’t think anyone is saying she is committing a crime by being in debt. Her debt is not punishment.

She is now a medical doctor. In that profession, she is at the very top of the income scale, both for entry-level positions, as well as for long-term employment opportunities. We are short of medical professionals in this country, which means she is not likely to ever be unemployed. Her job won’t ever be outsourced and it won’t very soon be taken over by automation. In addition, her profession is highly esteemed by the public and she will enjoy the prestige that comes with it.

When she entered medical school, she knew exactly what was going to happen. Eight to ten years of college, during which he had to live, eat, pay rent, buy books, and – yes – pay tuition. She knew it was going to take many years and she was going to take on much debt to finance that investment in her future.

She didn’t all of a sudden fall prey to a loan shark who gave her $300,000 at high interest rate. She had to apply and qualify for those student loans over and over again, every semester anew. She picked up $15,000 to $20,000 every semester at a reasonably low interest rate, interest deferred, one grab at a time. Nobody forced her, nobody twisted her arm, nobody made her do that. She didn’t make an impulse buy of a medical degree. She worked at it for a decade, and she took loans out to finance her life for that decade.

She also didn’t decide for a lower-cost option. For instance, she could have joined the United States Marines via the ROTC program. She would have been a cadet in the undergraduate years and drawn a salary. She would have been a commissioned officer during her medical studies, and the military would have paid for all her education. She would now be debt-free, she would be a captain in the Marines, and she would be a medical doctor. The only thing the country would now ask of her is to serve as a medical officer for six years or so. She didn’t choose that option.

She chose to finance her education and be saddled with $300,000 of debt when she got out.

We, the country, owe her nothing. We don’t think she committed any crime, we don’t think she is being punished by her debt, and we don’t think her indebtedness is a horror.

Let’s compare this to a young family who bought their first house in California in 2005, right about the same time our young doctor finished her high school. 2005 was at a peak in the housing market. They found a nice place for $330,000. They had saved $30,000 for a down payment and took on a mortgage of $300,000. However, when the housing crisis hit in 2007, the value of the property they paid $330,000 for dropped to $140,000. They were hugely upside down. It would take more than 12 years before the value came back up to a reasonable level. They were saddled with punishing debt and there was no way they could sell their house.

Should the tax payer now bail out that family that made a perfectly reasonable decision in 2005 to buy their first house? Of course not! They had bad luck with timing of their real estate deal. Millions of Americans, tens of millions actually, experienced exactly that. We don’t think we should bail them out. They took risks, there were potential gains, but they ended up with severe losses.

The tax payer is not responsible for that young family’s mortgage.

The tax payer is not responsible for the medical doctor’s student loans.

Bernie Sanders is flat out wrong when he tries to pin student debt on the public. I know many bright young people who chose not to get a medical degree because they didn’t want to be burdened with crushing debt when they were done.

If the young doctor is not happy with her investment today, she needs to deal with it.

And that’s why I think Bernie will have trouble. Some of his ideas don’t even make sense to his own supporters – like me.

 

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Here is a nice chart that shows how the debt grew under the various presidents. Things started to get nasty with Reagan and just kept doing. Trump is outpacing all that came before him.

Credit: Howmuch.net – click for reference

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We have all been the victims of impulse purchases. Sometimes it was at the checkout stand in the grocery store where we bought a nifty flashlight on a keychain. Or it was at Costco at the entry doors, and we now have a full and shiny new set of BBQ tools complete in a plastic case, even though we already have a totally adequate set at home that we use perhaps once a year.

Along comes Facebook where impulse buying it raised to an entirely new and much higher level.

On November 15, 2019, I saw a “survival tool product” on Facebook. The link went to www.captainswagger.com. I thought it would be a neat Christmas gift for my outdoor enthusiastic son, so I ordered it. I spent $69.00. I received an immediate email that my product was shipped and expected to get the product in the mail within a few days.

Weeks went by and nothing arrived. I contacted the company and got no response. After about a month, I gave up. I contacted PayPal and put in a claim for fraud. Over the next four weeks, the company sent emails to me and PayPal claiming first that the product was shipped with FedEx, but didn’t provide a tracking number. When that failed, a couple of weeks later, it provided a FedEx tracking number. When I checked on the status using that number, I learned that was bogus number that was never shipped and probably used for all claims. On the day the PayPal grace period expired in the middle of January 2020, I received a box via the United States Postal Service (note – not FedEx) with the product. It took them two months to get it to me, and during that time they send several emails with fraudulent claims of shipment that were obviously bogus.

Here are some reviews which echo my experience with Captainswagger.com. I am not the only customer who went through this. Captainswagger is definitely a fraud. I am not sure if I would have ever received the product had I not put in a formal claim with PayPal.

So now I have this “product” that I paid $69 for that never became a Christmas present.

Captainswagger Multifunctional Shovel – banana for scale

It came in a partially crushed box, and it’s not even close to the product being shown in the video above. Many of the pieces are not there, the versatility is not the same, the size seems different, and the carrying case is not included. Instead, it has these thin plastic camouflaged covers. To top it off, the version I bought was the upgraded one for $69.00, not the one for $39.95 on the website.

The real product is much smaller and way chintzier than it looks in the video, and I have absolutely no use for it. In 50 years of hiking and driving I have never come into a situation where I needed this tool, and I certainly won’t be putting it into my backpack when I go on hikes. I suspect my son would not have done so either. So why did I buy something from a company I knew nothing about, which turned out to be borderline fraudulent? Why did I buy “stuff” that is now in my house that I will never use?

It was easy, and it seemed like a neat thing I wanted. It reminds me of the exercise program I bought many years ago for $300 with a pull bar and a bunch of video disks. I had the good sense to send it back unopened when it arrived and I got my money back. That was before PayPal and Facebook.

With this “tool” I stand no chance. It was pulling teeth to get it in the first place. There is no way to get my money back without spending a lot more time and money without a guarantee of success.

Lessons learned:

  1. Never buy impulse products no matter how well they are advertised. You don’t need them.
  2. Never respond to ads on social media, no matter how slick they look. If you really needed the product, you would have googled for it and you would not have been on Facebook to get it. Trust your needs.
  3. Never buy a product from on online vendor that you don’t know. I have vetted Amazon over years for its integrity and good service. If you return a product, their response is rock solid. I am sure there are other online retailers with that quality. However, this was just some website and I gave them my money. The money was gone.
  4. Never buy with PayPal. PayPal is good to send money to a friend in Chile or Australia, or to pay for a product from a company you do business with all the time. However, in this case, PayPal’s mitigation against a fraudulent or even questionable vendor was completely inadequate. If I had paid with a credit card, the company would have refunded the money and come after the vendor. This vendor didn’t accept credit cards – for obvious reasons. Don’t buy online from strangers with PayPal.
  5. Before making any impulse purchase, mark it and wait 24 hours. If the product still looks as good 24 hours later and you still want it, by all means, buy it. Chances are, you won’t bother, since you really didn’t need or want the product in the first place.

And with that advice I swagger away.

 

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KFC Got More Expensive

Occasionally, when I know I am going to be home alone in the evening, I like to go through the drive-through at KFC and pick up a light meal. It’s always the same. A two piece meal, original, with coleslaw and potato wedges.

That’s what I did today. When I got to the window, the clerk told me $8.39. I hesitated. I had eight dollars in my hand, prepared to pay the customary $7.76. Puzzled, I asked him to repeat the order. He did. “Did the prices go up?” I asked. “Yes, minimum wage went up at the beginning of the year.”

I have been a consistent opponent of the minimum wage craze in these pages, and here is a more recent post to that effect.

I don’t mind paying 63 cents more for my two piece meal, not at all. I don’t mind that the worker that serves me my order is making more money now on the minimum wage scale. But look what happened: The price went up. So did the prices of groceries, clothes, utilities, all to offset the additional minimum wages the companies now have to pay to their employees. Those employees now have to spend more on the things they buy, just like I need to spend more. This is called INFLATION.

Wages go up, prices go up, wages go up, prices go up. The fit companies innovate and replace humans with automation. Prices go up more.

The poor worker behind the counter is in the same position he was in before.

Bernie Sanders says that “everyone deserves a living wage!”

Nonsense!

Some people have no skills, no work ethic, no drive, and no education. They do not “deserve” the same wage as those people who work hard in school, get an education, and provide better services in the jobs they have, who do quality work, don’t call in sick every other day, and overall make themselves more useful.

Minimum wage increases are stupid, counterproductive, cause inflation, and do not help the workers at the minimum wage level.

Are you listening, Bernie?

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Today I found this ad in my Facebook feed:

There are several current presidential hopeful front runners who routinely vilify billionaires, most notably Bernie Sanders and Elizabeth Warren. While I am generally aligned with most initiatives of the Democratic platform, I vehemently oppose this notion that “the billionaire class” is the root of our problems in America, and therefore we need to stick it to billionaires to “get even.” I really believe their type of economic extremism makes them unelectable.

This trend is not just American. Britain’s Shadow Chancellor John McDonnell during a protest stated that ““No one needs or deserves to have that much money, it is obscene,” during a protest of McDonald’s workers demanding higher wages.

In August of 2015 I wrote a post titled Musings about Vilifying Billionaires. This post is as valid today as it was when I first wrote it four years ago.

One of the best books about business I have read in a long time was Shoe Dog by Phil Knight, the founder of Nike. Here is my review from April 2018. Phil Knight is now number 16 on the Forbes 400 List with a net worth of $35.9 billion. Phil was a regular guy like you and I in the 1960s when he started selling shoes from the trunk of his car. The story of how he built Nike to what it is today is one of the most powerful stories ever told in business. If you have started and run your own business you will know how incredibly stressful and hard it is it make it work, succeed and survive.

Only somebody who has never had to make payroll, like a politician, will say something stupid like “nobody deserves to be a billionaire.” A statement like that exposes the speaker and is a testament to their ignorance and lack of understanding of basic economics.

Let’s go back to the meme above – Martha Kelly probably thinks it is the responsibility of the billionaires to feed the hungry, clothe the naked and cure the sick. And therefore, we should take the money away from the billionaires and let the government handle giving it to the poor. Yes – good luck with that! The same people that make asinine statements like “nobody deserves to be a billionaire” are the ones whom we’re going to entrust the money they are going to take away from the rich to properly distribute to the poor.

Bill Gates has given away more than $28 billion to charity, and he and his wife have managed how the money is being used. I trust Bill Gates 100 times more that the money is used in the right way and for the right causes than I’d ever trust Bernie Sanders or Elizabeth Warren with the same money. Bill made the money, he knows its value, he understands how money works, and he has an intuitive knack for solving problems. Sanders and Warren do not have any of those skills, and neither do most bureaucrats in government.

When the self-appointed redistributors say they are going to take “a little away” from the rich, who decides who is rich and who is not? Where is the threshold? What’s to stop them from saying that if you make more than $80k in your family you are rich and you have to give your surplus to the poor? Who draws the lines?

I say we need to leave the capitalist system alone.

The workers at McDonald’s can ask about more wages all they want. If they are not contributing more for those more wages, they don’t “deserve” those wages.

If they are envious of the amount of money the CEO makes, why don’t they become the CEO? Problem solved. Oh, it’s hard? Ahh, there lies the rub.

If they want to be rich, why don’t they start a company, like a shoe company (Nike), or a software company (Google, Microsoft), or a rocket company (SpaceX), or a car company (Tesla) or an online retail company (Amazon), or a replacement of all taxis company (Uber), and they can be a billionaires. Hey, any of the people who built the companies I have listed here started from scratch.

Bill Gates was a college student who liked math.

Phil Knight was a jock who liked running and couldn’t find good shoes.

Sergey Brin and Larry Page were math students at Stanford.

Elon Musk came to Canada as a twenty-year-old with no money in his pocket. He shoveled out sewer tanks as one of this first jobs in America, before he started a car company and a rocket company in parallel.

Jeff Bezos started an online bookstore from scratch in 1994.

Read the biographies of these men and then come and tell me they don’t “deserve” to be rich!

The American system works. The tax system should be fair and even for all. But vilifying rich people because they were successful after defying all odds and worked their butts off all their lives does not work and will not get Sanders and Warren elected.

Now I have to get back to work. After all, it’s Sunday night and there is a lot yet to get done.

 

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The traditional meal in Japan for Christmas is KFC – Kentucky Fried Chicken. And not just fried chicken, but the brand, KFC? How did that happen?

メリークリスマス

The above says me-rii-ku-ri-su-ma-su written in katakana, the Japanese alphabet used to spell foreign words.

me-rii-ku-ri-su-ma-su, when you say it out loud, means Merry Christmas.

Japan is a nation where only about 1% of the population is Christian. So Christmas, historically, was fairly meaningless. In the post-war years in Japan, everything western became fashionable, and the country imitated the west wherever it could.

The first Kentucky Fried Chicken store opened in Japan in 1970. Shortly after it opened, the manager, Takeshi Okawara, overheard a couple of foreigners in his store talk about how they missed having turkey for Christmas. KFC didn’t have turkey, but it had chicken. What’s the difference, right? So Okawara thought fried chicken would work just fine and began marketing his Party Barrel as a way to celebrate Christmas.

Within a few years, the Japanese corporate office for KFC started advertising クリスマス に わ ケンタキイ (Kentucky for Christmas) and a tradition was born. Japanese now think that everyone in the west eats KFC for Christmas. It is huge in Japan. One third of the annual sales of any KFC store is done during the Christmas season. 3.6 million Japanese families treat themselves to a KFC meal during the Christmas season. To get a Christmas dinner at KFC, you have to reserve it weeks in advance.

Okawara went on to become the CEO of KFC Japan in 1984 and ran the company through 2002. 

So, as this example proves, if you want to get rich and famous, start a tradition based on a religion.

I wonder what the two customers who mentioned they missed turkey for Christmas in that store in 1970 would think if they knew what they started by that innocuous remark? What if they had been Jewish instead and asked for Gefilte Fish?

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