The Fantasy of Government Business-Cost Savings

Whenever the government proposes a function that is now done by private industry, the taxpayer will be contributing the necessary capital and operating funds.

And will be taking all the risks that taken on by the stockholders of private industry. As well as responsibility for the losses, which are bound to happen under government operation. Think Post Office and countless other examples.

So be careful of any government attempt to “reduce costs” by competing with private enterprise. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Our Well-Paid Teachers Never Flunk Their Pay Receipts

The National Assessment of Educational Progress has been called the Nation’s Report Card. It reported that only 23% of fourth-graders, 30% of eighth-graders, and 21% of 12th-graders were” proficient” or “advanced” on their national geography exam, given in  2010; educational-testing  results today have sunk even further  I saw one of the simple questions. Only 33% of eight-graders got it right.

With a student body such as this in the U.S. we certainly don’t get our money’s worth when it applies to education cost. But I do notice teachers’ unionized pay and benefits are the highest ever.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Ongoing European Unemployment

Much of Europe is on the edge of bankruptcy amidst its permanent 10%-Plus unemployment. And its experience with younger workers, who do not get counted as unemployed because they give up early on, and are, in fact, permanently on the dole the moment they leave school in their teens.

If they excel at something, it’s in their demand for funds from their neighbors’ taxes. Those neighbors who work.

This is the society many of our left-leaning politicians fail to point to, when they sell us on government-supervised ObamaCare and other services the Europeans get so “cheaply.” (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Government “Experts” and Spending

Americans should always think seriously about politicians who tell them government “experts” know all about spending and deficit control.

Any politician or bureaucrat with a short-term horizon is never reliable on this score.

Especially a politician unfriendly to, or unfamiliar with the true understanding of capitalism.

Our tremendous deficit will spell enormous inflation. Or a loss of currency value. And the certain loss of the eminence of America. As an economic and, therefore, a political and military entity. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

ObamaCare, the Post Office, and Private Competition

Everything the government has done, including its health care under Medicaid, have been inefficient with equally poor service, comparable to that of the Post Office.

Government never fosters competition. It can cut out competition when it is permitted to write rules to have taxpayer money undercut the pricing of products or services of potential private producers. As is the case with ObamaCare.

The Post Office will not give up its first class mail handling privilege. It knows it cannot compete if it has competition.

Other forms of non-first class package shipping are handled by private shippers efficiently and at low cost. While private carriers would love to carry first class mail, the Post Office continues to maintain its monopoly.

The Post Office says it provides service to areas no private carrier will want to service. Not true, as evidenced by cutbacks the Post Office constantly imposes. And destinations to which private carriers now go.

ObamaCare claims to provide everything private medicine can do better and cheaply but government has never allowed interstate competition, tort reform and fraud correction to reduce private insurance costs, (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

All Life Insurance Isn’t the Same

Not all life insurance you can buy is the same. The type you get from a company ad is generally term insurance; that’s  what pays off in death benefits only, with no cash value option.

Before you decide on which policy to buy, go over all the ramifications of ownership. Whether you use a commissioned agent or buy direct from the company, remember: Whole life policies pay more commissions than do term policies. They will have higher termination costs. Whole life policies do have interesting, useful options, once the contracts are in place, with positive possibilities for the insured that most policyholders are not aware of.

In Summary: The usual life insurance available on the market can be whole life (with cash values included) or term. The cash value-included contracts have higher premium charges, so if protection against premature death of the insured is the primary aim, go for the term variety.

Whole life policies offer relatively small investment returns on the portion of the premium set aside for investment. unless a portion is placed in the general stock market in some fashion (universal or variable life. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

   

The Maligned Banks and the Glass-Steagall Act

The Dodd-Frank legislation of 2010 supposedly was enacted, among its many intentions, to prevent big banks from failing. To do so, it helped impose rules on banks, against trading for their own accounts; the Volcker Rules, after Paul Volcker, a former Chairman of the Federal Reserve.

The Glass-Steagall Act, preventing commercial banks from being in the investment banking business, had been around under the Banking Act of 1934 until it was terminated during the Clinton administration.

A similar law could probably have been passed, without all the talk that casts gloom over industry and finance and sees to it that we remain in a deep economic funk. Right now, commercial banks have spun off trading activities for their own accounts but it’s difficult to distinguish activities done on behalf of clients.

The upshot has been confusion and bigger banks than ever because Dodd-Frank is murder on smaller banks. The bigger than ever banks will continue to be too big to fail. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

   

Federal Reserve Policy and Small Investors

The U.S. Federal Reserve has the cost of money within the banking system down to zero. And liquidity is its priority. The rest of the world’s central banks are on the same cheap money craze.

The bottom: It’s hard to call the ongoing central bank objectives successful.

The small U.S. investor is getting the short end of the stick. If he wants minimal risk, he is going to earn 1% or less for a reasonably, minimal-risk investment. This is well below the inflation rate reported by the U.S. government and far, far below the actual rate of inflation that’s never officially disclosed, except at the supermarket checkout counters.

The stock market is always iffy in a stagnating, inflation-prone atmosphere. More sophisticated investors can look to the corporate bond market, provided they are familiar with “duration” principles. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Defending Failed Economist Opinions

    

You may wonder how economists can voice opinions for two diametrically opposed political parties when they look at the same numbers for politicized arguments.

There are two reasons why this happens. One is that a broad classification can be made of Keynesian or government pump-primer economists,  and those opposed to Keynesian principles.

The other reason is that these same economists may overlook certain stated numbers as being unimportant when it doesn’t suit their purpose.They may emphasize data that is actually meaningless.

If you have an economic theory, and it  hasn’t worked for fifty /sixty years, though employed around the world, as is the case with Keynesian theory, there will still be omissions and commissions you may make to hold your politically-sponsored job.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Needed: Genuine Financial Facts

     The reading public has had its financial basics poorly taught by the vast majority of book experts, in addition to Wall Street insiders and often inept financial media.

    Everyone’s always looking for confirmation of investment facts they can use to advantage. But unfortunately with what I find has become dubious input.

And so the public continues to buy into pap. Garbage often sells like proverbial hot cakes. Gobbled up by the same unwary and gullible folks who believe gibberish and fantasy thrown at them every day in the media. (See the Earl J. Weinreb NewsHole® comments.)

Focusing Investors With “Ulysses Contracts” Discipline

Shlomo Benartzi, a household behavioral-finance specialist and professor at the UCLA, Anderson School of Management has used the term “Ulysses Contract.” as a means of keeping investors focused.

Ulysses of ancient Greek literature had resisted the Sirens’ song to avoid shipwreck, by having himself tied to his ship. In the same way, individuals could be under some form of voluntary contract with themselves, not to act unwisely under outside pressure, whenever volatile and erratic events occur.

I have been a researcher and student of the importance of discipline for several decades. I have invesigated about 1,600 strategies, along with their pros and cons. I have found that discipline is far more essential to investment success than strategy itself.   (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Unsolicited Securities Recommendations

You may get a securities recommended to you, often in the mail or by radio, from time to time, advising you of a company stock that’s “hot” along with the reasons why. You may get pages of data by mail, on reasons why what you see may be another Google, Apple or whatever stock is hot at the time.

Be careful.

What you see is a promotion. The outfit who has placed the release may be getting enormously well paid for the report. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

   

Alternative Investments

You may hear of so-called alternative investments from the sharp-pencil boys on Wall Street. This occurs when investors’ interests begin to flag with the plain vanilla types.

The problem is that the alternates are usually too sophisticated for most investors, and are generally too risky.They do, however, generate interest and thus produce articles in the media and more business transactions for Wall Street. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

  The Gold-Buying Dilemma

As with other financial investments, folks learn from experience, often events costly to them.

Gold investors have learned that the price can drop even when there is inflation that promises to become rampant, and the U.S. dollar buys less. Even when the European economies are failing and the American system is closely following a similar disastrous budget-deficit path.

Obviously, all those reasons for buying gold has not always worked for American investors from time to time.Even with the clueless Federal Reserve.

The truth is, gold has never been an inflation hedge, only a bulwark against a cheapening dollar. The latter can get stronger, however, compared to other currencies. Such as the Euro. Or the Indian Rupee. (India is a big factor in gold purchases.) At which time the dollar can get stronger and gold occasionally cheaper. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Actual Cost of a Pension

Most recipients of a pension, and those who pay for it, have little idea of the cost of providing it.

Think: $1 million at 4% yields only $40,000 income a year. How many millions have to be contributed to meet the capital and income required?  

Now you see the shortages for taxpayers to meet in annual pensions for the life of each teacher or government worker. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Unrealistic Government Pensions

In the  states and cities of the U.S. government unions have been able to get pensions and fringe benefits during good economic times at the expense of taxpayers, of which the latter were not fully aware.

When times got bad, taxpayers soon learned government workers were being paid as much as twice they themselves were getting from pensions and benefits. Worse, the payments were unsustainable, despite ever-higher taxpayer loads.

In one example why the burden was onerous: teachers who contributed nothing to their pensions  retired at age 60 at 65% of pay. And their retirement check  increased 3% a year for inflation.  

Not bad when secure investments  earn less than 3% to 4% a year, while such pensions assume earnings as much as 8%.

Yet, little is being done to rectify the problem, owing to government union stone-walling during labor negotiations. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Do We Need “Smarter” Stock Brokers?

There’s been pressure in the past to find out the financial exam marks of stock brokers. But why be so worried about the subject?

Investors shouldn’t be relying on stock brokers for advice anyway. The education they get is essentially on back office procedure and not deep securities analysis. And even if it were, info would be useless.

For instance, most of the more experienced mutual fund managers do a bad job compared to indexed funds or ETFs. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

IPO Disclosures

  

We know when uninformed investors speculate with the purchase of new securities issues, they assume it’s all a one-way street to quick riches.

And when proven wrong, it’s someone else’s fault. They got the wrong information or were lied to; anything but the fact they never bothered to get the facts beforehand.

The company prospectus as a rule does a good job in its SEC filing, describing the risks involved. However, misinformed speculators and the plaintiff lawyers seeking to profit, usually fulminate about insufficient or poor information or disclosure. Or they claim insiders have gotten information that retail customers did not receive.

The fact is, the SEC itself is very strict about the way a company and its underwriters can make disclosures during the period leading to the IPO. What is legal in the eyes of the SEC may be an uneven playing field in the eyes of the public.

Moreover, brokers are now prevented from making comments on soon-to-be-issued securities. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

   

Turned Down For Venture Capital?

In the event you get turned down, as you will often be, when seeking venture capital, keep coming back with follow-ups. Few seekers of venture capital are successful with their early attempts.

You must be consistent and persistent, to get attention. So stick to these basics and keep trying. Good luck counts.

I have found that venture capitalists are not all brighter than most in the financial community. Those who have made fortunes at what they do in this work, mostly have stumbled upon the big winners. They have been taking unmerited bows the way lottery winners do when they pick winners.  (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

  Skilled Workers Are Still Not Being Trained

You constantly hear that manufacturing jobs are being lost to get lower costs overseas.

Could it be that we actually have a shortage of skilled workers? That we are educating too many kids in college with the wrong skills?

The Organization for Economic Cooperation and Development did a study that showed less than 10% of teenagers in the U.S. learned skilled trade careers for jobs with manufacturers and utilities.

We have had this shortage for over twenty years. As a result, there aren’t sufficient qualified workers in many areas of essential work. And the workforce is getting older, so the problem is becoming more acute.

We get more unemployable college grads, more lawyers, and more manufacturing jobs sent overseas where the skills may be. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Arbitration Makes More Sense

There’s a movement afoot to do away with arbitration for many complaints consumers may have where the dollar amounts are relatively small and the legal fees relatively high.

The pressure to do away with arbitration is especially strong in the securities industry where the complaint is about alleged bias towards the industry.

On closer inspection, you will note the complaints arise from the plaintiff lawyers who are financially hurt when legal disputes can be equitably and cheaply adjudicated without the use of expensive legal assistance.

There is little evidence of bias where the consumer or investor has been hurt by the arbitration process. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Venture Capitalists Need a Profitable Business Plan

When making a proposal for venture capital always use reasonable numbers. At the same time, you must show that your business can become big enough to attract enough attention.

Venture capitalists make money by eventually selling their equity interest to the public on a large scale. They think in terms of hundreds of millions and more,  in potential profits. Your business therefore has to grow fast in just a few years, in order to be an interesting investment for them.

There has to also be what venture capitalists call an ”exit strategy.” When that eventual public underwriting or IPO, or a sale to a large corporation can take place. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Farce of European Government Austerity

European governments with financial problems always claim they’re exercising austerity.

But these are all governments who got into trouble in the first place for spending too much money buying votes. They are not going to stop so readily.

The so-called austerity you hear about, when it’s implemented, comes from private industry in these nations. Look closely and you see little if any government layoffs. The politicians themselves get the same salaries and perks and pensions as before. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Banks’ Safety Isn’t Standardized

Banks in Europe and America are always under pressure to add to capital, with stress rests, in order to withstand any potential, future credit problems.

Risk-weighted assets can be assumed to be as high as 70% of total assets in the large U.S. banks. The stress figure in Europe is half that for various accounting reasons; which are not that strong.

In other words, bank safety assessments are pretty much subjective.

Furthermore, it’s all nonsense. As panic-driven problems negate supposed cushions as will a tendency to have mark-to-market accounting.

Much of what goes on is political maneuvering and posturing.  (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Getting More Revenues From Income Tax Decreases

:The best solution for increased tax revenues invariably is from tax rate reduction.

This helps expand business, while total tax revenues eventually increase to help balance budgets.

This has happened whenever tried. But the method is not attractive to liberal politicians who are selling class-warfare. They refuse revenue-increasing tax decreases to the “wealthy” business class, whose taxes, in fact, they politically  target for increase.

Fact: Lower tax rates never sit well with political cant. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

An Economic Fact Of Taxation

Politicians may concede the danger of budget deficits by agreeing to balance their finances with higher taxes to meet enormous outlays.

But they never reduce those expenses sufficiently to get at the root-cause of economic problems. Government spending, by its very nature, along with huge taxation, are taking needed capital and working cash that business must have for operating and expanding business.

Higher tax rates always tend to reduce tax revenues. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

   

Keynesian Free-Spending Has Been a Failure

You have the Keynesian free-spending we are so familiar with in the U.S. and Europe, that creates gigantic budget deficits, in the hope of stimulating economies out of recessions. Experience shows they help foster deep depressions.

Yet, they sound impressive. Put more paper into the pockets of consumers sounds inviting but repetitive experience shows it’s downright self-defeating and becomes a treadmill to meltdown. Budget deficits cannot be sustained for long. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

   

How to Really Stimulate the Economy

You know the U.S. economy and that of Europe’s is in dire need of a boost. And you keep getting two or three main recommendations on how to get the job done.

But mostly you hear the points of view of politicians whose stand is usually wrong. Because it’s the one opinion that appeals best to unknowing voters.

The genuine answer is simple, once you refer to evidence of the near and distant past, to see what has worked and what did not. Simple. But not for vote-seeking politicians to implement.

Monetary policy is important. That has to do, for example with how the Federal Reserve system controls inflation with interest rates, etc. But then you have important fiscal policy that the White House is in charge of. There is where the politicking starts.  (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Clamour Against Genetically Engineered Seed Crops

Whether they’re referred to as genetically engineered seeds or genetically modified, crops produced with seeds produced with the aid of science over the past decade or two have gotten a bad press. And poor reception from those who have stood to benefit the most from the scientific advancement.

Investigations have shown that such crops have expanded by at least a third in volume, to help feed consumers at lower cost. Furthermore, they have shown the commodities to be entirely safe for consumption by humans and livestock.

Still a religious-like fervor exists against the use of such scientific progress despite the overwhelming favorable evidence.  (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Corporation Balance Sheets Don’t Always Reflect Hoarding of Cash

Those who argue U.S. corporations are hoarding cash really are not looking closely at balance sheets.

They are looking at cash deposits only. In other words, they are not aware of business operations or principles, or they simply make it a practice to overlook normal business obligations. The latter may be direct, pending or contingent, but they represent liabilities that companies have. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Success When Offering Citizens Private Property Rights.

Citizens in countries which allow private property rights with the rule of law always prosper in relation to those that do not. That’s not surprising.

Yet, do-gooders try to assist the undernourished and starving in third-world countries without getting to the fundamental problem.. Look closely and you see corruption and the failure of governments to permit basic  private property rights that can help each and every citizen to cope, whether tenant farmer or ordinary laborer.

Those trying to help thus never get at the root cause of poverty.  (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)