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Archive for the ‘Economy’ Category

I for one do not agree with your military spending, and the need for increasing it. We spend way too much on the military, and from THAT program, we’re not getting the results we expect. Taking meals from seniors and school children to pay for another fighter jet is ludicrous, despicable, and immoral.

It was immoral under Reagan, under Bush, under Clinton, under Bush, and under Obama.

It is still immoral under Trump.

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Back in June of 2011 I predicted that the once popular Todai Sushi Restaurant in Mission Valley would go out of business. Here is the blog entry I wrote then.

This is what it looks like today:

todai-graffiti todai-graffiti

It has obviously been out of business for a few years. I read that someone recently bought the property, is cleaning it up now in order to launch a new restaurant venture.

It was Lehr’s Greenhouse Restaurant and Florist between 1980 and 1987, and I remember going there once for a Sunday brunch sometime in 1986 for some memorable event, like a birthday or Mother’s Day.

Ruins now but memories remain.

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social-security-trust-fund

Ok, I disagree with Bernie. This makes no sense to me.

We have talked about income taxes. I agree that taxes should be proportional. A person with $10 million salary a year should pay the same proportion in taxes as a person making $50,000. Well, if you take away loopholes, and shelters, and tricky accounting, and fraud, the person with the $10 million salary is likely paying a higher rate than the person making $50,000 already.

Social Security is not a tax. It’s meant to be a fund you pay into during your working life to get a pension later. It makes sense. The only argument conservatives often have is that people should be allowed to save their own money and then use that later. Why trust the government with it?

Well, I can honestly say that if I hadn’t had to pay Social Security all my life, I would not likely have saved the same amount. So I think, at least in my case, it worked. I paid in.

When I reach the correct age, I can start withdrawing based on what I paid in. If I had made $10 million a year, and paid in $1 million every year, would I get out several million a year in “Social Security” now? Of course not.

What Bernie is suggesting here is making Social Security just another tax.

That makes no sense to me. I don’t want rich guys to pay so I can have Social Security benefits. I paid in all my life, and entrusted the government with my money. The government now owes me that money. It is my money. It is not an entitlement. The government has no right to touch it — even though I know it did, and that’s why it wants to play shenanigans with it now.

No, Bernie, I am not with you.

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Here is a breakdown of the California economy by sector:

california-economy-2008

A lot of people trash California for its liberal values, and they trash the governor. The fact is, the economy is doing great. It’s a model to the rest of the country. California is a thriving, exciting state to live in. Yes, it had its ups and down, just like other states, but it always comes back. Business and people love California.

There is this conception that most of its income is from agriculture. That’s not true at all. Only 2% of the GDP is from agriculture. Mind you, 80% of its water use goes to agriculture. But that’s a subject for another post.

Smaller than expected, with 9% of the GDP, is the Professional and Technical Services sector. That’s where my company has contributed over the last 30 years.

And now you know more about the segments of the 7th largest economy with its $2.31 trillion GDP in 2014.

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Job Growth Numbers

Our rambler-in-chief said this about jobs a few months ago:

“Don’t believe those phony numbers when you hear 4.9 and 5 percent unemployment,” Trump said at a rally nearly a year ago. “The number is probably 28, 29, as high as 35. In fact, I even heard recently 42 percent.”

— Donald Trump

Definition of Unemployment Rate:

The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force.

Here is a chart of the unemployment rate published by the Bureau of Labor Statistics:

chart-of-unemployment-rate

As you can see, it was fairly low at the beginning of 2007, under Bush, but it the final Bush years it skyrocketed. This was accompanied with the real estate crash. The economy was in free-fall. That’s what Obama inherited.

Through a series of measured steps, with the assistance of Congress, Obama was able to pull the world economy out of the dive and avert disaster. It worked.

We never gave Obama the credit he deserved for that. Instead, the Republicans always blasted him for the growth being too slow or too small. But still, I say it was growth, which is way better than what had happened during the Bush years.

On the flip side, we increased the debt by another $10 trillion or so. That’s what it cost. And we blame Obama for the debt.

There is no denying that the unemployment rate dropped steadily during the Obama years. But his critics would always say that the numbers were “fake” and the “real unemployment rate” was much higher. Just glance back up to the Trump quote to see an example.

I never did understand that criticism. The Bureau of Labor Statistics has done this for decades. They didn’t just start faking numbers in 2011 when the Republicans didn’t like that a Democrat’s policies actually reversed their disastrous economic results. If there were “hidden unemployed” in the public, are they saying they really were not there before but when Obama came along, suddenly they all stopped looking for work and became closet unemployed?

Trump’s statement seems to indicate that. Until now.

Since Trump has been president since January 20th, he is quick to take credit for the January numbers, which could possibly only be attributable to him by about 34 percent. 66 percent of January Obama was still president.

breitbart-unemployment-tweet

Funny how Breitbart suddenly likes the numbers of the Bureau of Labor Statistics. The numbers grew like that under Obama for 8 years, but Trump takes credit after 10 days. Here are his own words:

“A couple of things happened this morning,” Trump said referring to the report. “So we are very happy about that. I think that it’s really big league. We’re bringing jobs back, we’re bringing down your taxes. We are going to get rid of your regulations.”

— Donald Trump

 

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Market is not Looking Good

market

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I am sure if I tried hard enough I could find twenty statements by Trump about what he was going to do on his first day, sometimes his first hour, in office. Here is just one such statement:

He said he would move criminal illegal immigrants out of the country:

Day 1, my first hour in office, those people are gone

— at a rally in Arizona

Well, it’s Day 2 now. Are they gone?

Here is an entire post that discusses Trump’s speech.

Obviously, Trump will tell us that statement was not to be taken literally. That leads me to conclude that most of his statements are not to be taken literally. But then let’s reflect on one action he actually took on Day 1.

In one of his very first official acts of his presidency, Donald Trump has increased taxes on a million middle-class homebuyers by reversing a scheduled cut of 0.25 percent in mortgage insurance. This action undid a last-minute Obama order.

Chuck Schumer:

“It took only an hour after his positive words on the inaugural platform for his actions to ring hollow,” Schumer said. “One hour after talking about helping working people and ending the cabal in Washington that hurts people, he signs a regulation that makes it more expensive for new homeowners to buy mortgages.”

I am assuming this act has less to do with HUD or homebuyers, but with a symbolic reversal of an Obama order. However, let’s get the facts straight: Trump told the middle class of America he had their backs in the inaugural speech, and then an hour later he acted to cause middle-class families a financial burden.

His action facilitated redistribution of wealth from the middle class to corporation.

 

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We will live by two rules now: Buy American and Hire American.

— Donald Trump – Inaugural Address, Jan 20, 2017

trump-buy-american-1

Inside of a Trump Make America Great Again Hat

 

Trump China 1

Looks like the rules that apply to all of us in America do not apply for the Trumps.

I wonder if Trump has been to Sears lately, or Wal-Mart, or JC Penney, places where non-billionaire Americans shop. Try to buy one piece of clothing that’s NOT made in China. I went to look for some shirts recently, and Made-in-Jordan was the only non-China label I found. I could not buy American, I could only buy non-China.

Of course, that is Trump’s argument. For the last 20 years, our trade policies have contributed to allowing this to happen. He is right on that, but it’s not the only reason. The fact that transportation costs have gone down and manufacturing costs in the United States have gone up is another main factor. It’s a complicated world, and simple popular slogans like Buy American and Hire American at an inaugural address do not solve the problem.

We have work to do. And if Trump wanted our respect, he should have bought hats that were made in America.

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sigmar-gabriel

Germany’s Deputy Chancellor, Sigmar Gabriel – Photo Credit: Sascha Steinbach/EPA

In an interview with the German papers Bild and The Times, Trump complained that the car trade was “out of balance” with Germany.

“If you go down Fifth Avenue everyone has a Mercedes Benz in front of his house, isn’t that the case?” he said. “How many Chevrolets do you see in Germany? Not very many, maybe none at all … it’s a one-way street.”

— Donald Trump

First of all, I just walked down Fifth Avenue a couple of days ago, and there are no houses, and there are no cars parked in front of houses. It’s midtown Manhattan. But that’s beside the point.

Asked what Trump could do to make sure German customers bought more American cars, the German deputy chancellor Sigmar Gabriel said:

“Build better cars.”

It appears that Trump does not realize or know that BMW is already employing directly and indirectly nearly 70,000 people in the United States. Seriously, Trump really thinks our relationship with Germany is a problem for the United States?

Starting a trade war with Germany does not seem a smart move to me.

 

 

 

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Below a must-read article by Bill Gross, the King of Bonds. The key words:

His tenure will be a short four years but is likely to be a damaging one for jobless and low-wage American voters.

Populism Takes a Wrong Turn – by Bill Gross

The Trumpian Fox has entered the Populist Henhouse, not so much by stealth but as a result of Middle America’s misinterpretation of what will make America great again. Not having voted for either establishment party’s candidate, I write in amazed, almost amused bewilderment at what American voters have done to themselves. An Election Day Survey (Reuters/Ipsos) of 10,000 voters revealed the extraordinary fury of the American populist movement. Almost 72% agreed that “the American economy is rigged to the advantage of the rich and powerful”. Count me among them, yet in voting to deny Hillary Clinton the Henhouse, they “unwittingly” (lack of wit), let Donald Trump sneak in the side door. His tenure will be a short four years but is likely to be a damaging one for jobless and low-wage American voters. They were the force for Trump’s flipping the Midwest into a Republican Electoral College victory. But while the Fox promised jobs and to make America great again, his policies of greater defense and infrastructure spending combined with lower corporate taxes to invigorate the private sector continue to favor capital versus labor, markets versus wages, and is a continuation of the status quo.

For example, Republican pleas for tax reform are centered around the argument that America has one of the highest corporate tax rates in the world at 35%. Not so. Of the S&P 500’s largest 50 corporations, the average tax rate (including state, local and foreign regulations) is 24%. U.S. corporations rank among the world’s most lightly, as opposed to heavily, taxed. Trump policies also appear to favor the repatriation of trillions of dollars of foreign profits at extremely low cost under the logic that the money will be spent for investment here in the U.S. Doubtful. The last time such a “pardon” was put into law in 2004, no noticeable pickup in investment took place. Of the $362 billion that earned a “tax holiday”, most went to dividends, corporate bonuses, and stock buybacks. Apple or any other large U.S. corporation can borrow the money they need here in the U.S. at historically low interest rates to fund investment. A few have, but over $500 billion annually in recent years has gone to the repurchase of corporate stock and the increase of earnings per share, instead of earnings and GDP growth. Why would they need to repatriate anything for investment in the real economy?

Could a Clinton Administration have done much better? Probably not. Both the Clinton Democrats and almost all Republicans represent the corporate status quo that favors markets versus wages; Wall Street versus Main Street. That’s why the American public and indeed global citizens will continually take a wrong turn in their efforts to neuter the establishment and to regain several decades’ lost momentum in real wages versus real profits. Neither party as they now stand has bold policies beyond the reach of K Street Lobbyists. To my mind, there are better solutions than either party’s election platform, such as a Keynesian/FDR job corps or a Kennedyesque AmeriCorps that puts people to work helping other people. Such programs were never emphasized by either candidate. Let’s supplement welfare with a patriotic “Help America” jobs program, even if government organized. Would it be as efficient as a corporate-led effort? Of course not, but corporations are fighting structural headwinds, such as demographic aging, technological displacement of jobs (robotization), deglobalization, and overleveraged balance sheets. They focus on the bottom line as opposed to the public welfare. Government must step in, not by reducing taxes, which will only increase profits at the expense of labor, but by being the employer of last resort in hopefully a productive way.

Populism is on the march and a Trump victory will do little to halt its advance in future decades. If anything, it is demographically baked in the cake. Investors, as The Economist astutely pointed out, face a possible no-win situation. Unless the worker’s share of GDP reverses its downward trend, and capital’s share peaks, then populists worldwide will reject establishment parties in almost every future election – initiating in some cases growth-negative policies revolving around trade, immigration, and yes, in Trump’s case, lower taxation that may lower GDP growth, not raise it. Global populism is the wave of the future, but it has taken a wrong turn in America. Investors must drive with caution, understanding that higher deficits resulting from lower taxes raise interest rates and inflation, which in turn have the potential to produce lower earnings and P/E ratios. There is no new Trump bull market in the offing. Be satisfied with 3-5% globally diversified returns. The Wall Street, finance-led hegemon is fading. The Populist sunrise has barely broken the horizon.

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The founder of the Chobani yoghurt company is Hamdi Ulukaya, a Muslim immigrant from Turkey. He came to upstate New York 10 years ago with nothing, bought an empty Kraft plant using an SBA loan, and started hiring employees. Ulukaya is now a billionaire. He just made some headlines recently:

The clip below shows how he got started:

This man is not even a United States citizen yet, but he has created jobs for over 2,000 people in the United States already, and growing. Yes, he is a Muslim immigrant.

When the interviewer asks him about how Obamacare affects his business, she is obviously expecting complaints. However, he says “I have bigger problems. I need to make more yoghurt.” I have to agree. Most business people are way less worried about their employees’ healthcare costs than they are about running the business. If the business is run well and is successful, healthcare costs are a footnote at best.

So here is an amazing success story created by an immigrant. To my dismay, I then saw somebody commenting with this under the YouTube video:

chobani-comments

This kind of sentiment in our country makes me sick and embarrassed about my countrymen. Let’s just get this straight:

A guy comes from Turkey 10 years ago, a son of a farmer, penniless. He decides to start a yoghurt company. He goes to the SBA and borrows $800,000 and with that he rescues a factory in upstate New York that was being shut down by Kraft, and he proceeds to turn that $800,000 loan into a billion-dollar company, creates 2,000 jobs, then gives away 10% of his company to his employees, worth hundreds of thousands of dollars EACH, and Jim Allen III, Col. Richard Hunter and Lauri DEAGUIAR have a problem with that?

One complains about veterans dying in the streets. Why, if an immigrant farm boy from Turkey can start a yoghurt company and create American jobs, why don’t the veterans in the streets start some companies?

Another complains that he is a lying pig because, presumably there was a Turkish refugee in Idaho who raped a poor 5-year-old girl? I don’t get the connection. Sorry.

Here we have a self-made billionaire, who used the system, and borrowed $800,000 from the SBA, and built a great company. That’s Ulukaya. He is demonized by comments like this because he is an immigrant, and he is a Muslim.

I know of another self-made billionaire, who used the system (his words), and borrowed a small loan of $14,000,000 from his father, and built a great company. That’s Trump.

Both created thousands of jobs. Both are billionaires. Both “used the system.” One has never filed bankruptcy. Since he never had a billion-dollar loss, he presumably pays federal income tax.

But one is an immigrant, a Muslim and a not yet a citizen.

And the other is Donald Trump. He is running for president.

A tale of two billionaires.

You choose!

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Minimum Wage 1

I do not believe that raising the minimum wage solves the problem. I have outlined my thoughts on this subject in many blog entries, including this one. For more, just search “Minimum Wage” in the search box above. There are three main thoughts that this Facebook Meme triggered:

Raising the minimum wage artificially by government action does not work in the end. It tries to solve a problem with a short-term solution. At the end, unforeseen consequences just move the problem around to another area. Let me give you an example in California. We have had a system where low-income families have been receiving assistance for their childcare from the government for decades. A single mom working at Walmart for minimum wage does not make enough money to pay to have her children in childcare while she works. The government has been assisting that mom with subsidized childcare programs. Philosophically you may ask how that is the public’s problem? If mom has children and not enough education to get a job that pays a decent wage, that’s her problem. Why should taxpayers assist her? The answer is a moral one: The government is there to protect the children. Why do we make a child pay for the mistakes of a parent? What fault of the child is it that their parents do not know how to arrange their lives? So we provide quality education by putting them into quality childcare, while the parent finds a way out of this situation. This has been proven overall successful. You may differ with me, but that’s the argument. However, here is how this relates to this minimum wage discussion:

When the minimum wage was raised, and these parents made more money all of a sudden, they no longer qualified for subsidized childcare. So now they have to pay for their own childcare. But their raises were not enough to cover them. So now parents on that fringe had to quit their jobs, stay home with their children, draw on other welfare (food stamps, etc.) while they are not working productively, and the children lost the quality care and education. The children pay. And the public pays – just through a different channel.

States like Idaho, Oklahoma and Alabama, as quoted in the meme, that banned their cities from raising the minimum wage, are acting out of protectionist fear. The governments of these states obviously buy into my argument above that raising the minimum wage does not work in the end. So they don’t do it. However, then they muck with the system in their own way by preventing their cities to act on their own. This is protectionist behavior, and it also will have its own unintended consequences.

The real solution to this is to let the people, the market decide. If the wage that Walmart pays is too little, just DON’T WORK THERE. Find another job that pays more. If Walmart can’t find people willing to work for what they pay, they will raise their pay all on their own. That’s how the market works. This argument is easily made but difficult to put into practice. The problem is that many people who take these jobs simply do not have the education needed for higher-paying-jobs. That may be because their parents could not afford better care and education for them when they were children.

And that brings us right back to education, which starts at birth. The better we educate our people, the better off our society. China has about 60 more school days a year than the U.S. does. More is not always better, but you can see the intent. Early education for our children is paramount to the success of our society in the long run. It’s not about jobs today, it’s about jobs 20 years from now.

And that’s what I have to say about raising the minimum wage today.

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I love using Uber.

When you get into a taxi in Germany, it’s almost always a new Mercedes, BMW or Audi, generally the large model, and spotless. The driver is well-dressed. The ride is superb. And then you pay a LOT OF MONEY.

When you get into a taxi in the United States, say New York City, the car is usually beat up, no more shocks left, the seat is often torn and the cushions disintegrated. The cab is filthy. The barrier separating the driver from me is too close and my legs bump against it. There is less leg room than in a Spirit Airlines flight. The driver speaks no English. He can’t take a credit card, because “the machine no works” and I am still expected to tip. Since I deal with cash, the tip is too much in the end. The receipt is usually a dirty business card where I have to fill in my own data. All that, if I can FIND and HAIL a cab in New York City in the first place.

Enter Uber.

I go to my app, and within a few seconds a driver accepts my hail. I see the map and the car coming. I know the name of the driver, the type of car, and the license number ahead of time, so I can look out for him. Within minutes he pulls up. I get in, and the driver greets me by name, and he already knows where I am going. The car is clean, he hands me a bottle of water, we chat pleasantly, if I want to, and he drops me off. I see the fare pop up on my phone, and it’s very reasonable. I love that I don’t have to hassle with a tip. The driver is his own contractor/boss/service business. I rate the driver 5 stars. Within minutes, I have an easy-to-read receipt in my email that I can use for my expense report if I am on a business trip. It does not get any slicker than that.

From the consumer’s point of view, the business model makes perfect sense. Here is a service industry that is putting the taxi business out of business.

The way I see it, Uber should not exist. The taxi companies should have created the app years ago and streamlined their business to be consumer oriented. There should be a checkered-cab-app. But there isn’t.

  • Just like Google should not exist, because the dominant search engine at the time was Yahoo!
  • Just like Amazon should not exist, since Barnes & Noble, Borders, and Waldenbooks owned the market and should have gone online.
  • Just like Instagram should not exist because Kodak could have created it 10 years earlier.
  • Just like FedEx should not exist, because the U.S. Postal Service owned the mail and shipping market.
  • Just like Apple should not exist, because IBM was the behemoth of computing, and DEC was the upstart minicomputer giant.

But, alas, Uber exists because the taxi business sucks so badly and they created a much better mousetrap for a huge demand.

If you have ever wondered about the inner workings of Uber, how much money (or how little) the drivers make, and how it all works, read this superb article by Emily Guendelsberger in the Philadelphia Citypaper. It’s very long, but it’s exhaustive and serves as a great exposé.

After reading this article, it is clear to me that Uber is meeting a phenomenal demand left by the crappy taxi industry, that, with its bad business model, trashy service, inconvenient hailing system, and poor financial management, not to mention the outdated protectionist medallion system, is not able to cope very well with competition that is focused — what a novel concept — on the consumer.

Uber has to deal with the issue of commercial licensing and insurance. Uber has to deal with unionization efforts of their drivers. Uber has to take better care of its drivers, or some other company like it that does will gobble up those drivers eventually. But Uber definitely is focused on the customer, the consumer.

In summary, Uber (and its competitors) are an American service industry addition that was not there some years ago and has become a huge business because there was a gaping need. Its drivers are not making a living wage for the most part, but its customers are happy and well-served. Regulatory agencies and insurance companies need to catch up with “the problem” this industry created, but they eventually will.

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The last time a billionaire ran for president in the United States it was Ross Perot, both in 1992 and then again in 1996. I voted for him each time, and certainly helped get Clinton elected the first time around.

Listen to the short clip in one of  the 1992 debates. Perot warns us that we HAVE TO STOP shipping jobs into other countries.

What has changed?

The Giant Sucking Sound started in 1992, and 24 years later it’s still echoing in the empty factories in Detroit, and Cleveland, and Buffalo, and Rochester, and Syracuse and Toledo.

The billionaires, both Perot and Trump, I must admit, do understand the immense damage this is doing to our nation.

We have got to stop the sucking.

 

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Senator Arthur Orr from Alabama introduced legislation to not allow food stamps to be given to recipients who have cars. Among other things:

It also adds an entirely new level of bureaucracy, including a requirement that aid recipients sign a contract vowing to strictly adhere to the program’s rules or face jail time.

This is crazy. He wants to put people in jail for not following the food stamps rules? Jail is more expensive than food stamps.

The entire U.S. food stamp program costs about $72 billion a year. That’s how much the Iraq war cost us every year while it was going on. Did you know that 77% of all food stamp recipients are children?

Is it the children’s fault that their parents can’t find a job that pays enough of a wage that they can live on?

Walmart is the country’s most profitable corporation and one of the biggest in the world. An average employee at Walmart makes $8.81 per hour or $15,500 per year, which is well below the federal poverty line for a family of four.

Therefore, people who work at Walmart are forced to enroll in the taxpayer-funded food stamp program to feed their children.

Looking at this another way, Walmart is keeping their wages low so the public takes care of their employees using food stamps which they again use to purchase goods at Walmart. The company profits on both sides of the deal, and the American taxpayer pays the bill.

Studies have shown that a single Walmart can cost taxpayers over $1 million per year.

Now Senator Orr says we can’t give them food stamps if they have a car. So what happens? The parents need a job at Walmart because they can’t find any other decent manufacturing job in many of America’s small towns. Of course they need a car to get to work. They need food stamps to feed their children, but they can’t have a car to have food stamps?

What does he want to do? Let them starve? Euthanize them?

Being poor in our country is “being bad.”

 

 

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