Showing you the world that has been pulled over your eyes to blind you from the truth - one post at a time

At the Ron Paul Rally

So I received an email yesterday saying that Ron Paul would be speaking at Southeastern LA University.  I just got back from attending and am adequately enthused.  Of course, given the reality of the times, Ron Paul has very little chance of being elected president.  It seems that we are destined to have the choice between a big government-liberal Republican versus a big government-liberal Democrat, but the Ron Paul candidacy has always been more of a movement than anything else.

Having followed him for sometime, I was surprised to hear his focus on the middle class.  His presumption is that the middle class has really been screwed in the last 100 years.  And really, we have taken a beating.  The middle class is attacked by a double whammy - taxation and devaluation of their currency.  All to often, our vote is for someone who has already been purchased by special interest.

He then extolled the virtues of personal freedom saying that at one time we were the most freest, most wealthy people in the world.  Our liberties are being taken away from us at all sides.  Recently, the Congress has passed laws that make it legal for the military to arrest American citizens and the patriot act makes it much easier to spy on Americans.  Dr. Paul stated that this was the very reason that the American revolution was fought - that a British soldier should not be able to come in the home of an American and arrest him without cause.

Of course, one of the important planks of the freedom movement is the end of the fed's control of the currency.  He said that 1913 was a really bad year for Americans.  The 16th amendment was passed which made the income tax legal and the federal reserve was created to promote a sound currency.  A dollar in 1913 is now worth 3 cents.  His response was that they are doing a horrible job and should be fired.  This brought raucous chanting of "End the Fed".  I like the way Jack Spirko puts it.  In 1960 a quarter would by a gallon of gas and today a 1960 quarter (in the early 1960's quarters were made of silver and copper; the last time the American coinage had intrinsic value - thanks JFK) and today that same quarter would buy a gallon of gas today.

Now one of Paul's main positions is that America should not be involved in foreign entanglements while maintaining a strong national defense.  He made an assertive point that wars are just another way for the government to steal American's wealth, freedom, and lives. 

He ended with the notion that this movement does not have to obtain a majority to win.  He quoted Samuel Adams who said "It does not take a majority to prevail but rather an irate, tireless minority keen on setting brushfires of freedom in the minds of men".  While we are no doubt left with the choice of the lesser of two evils in November (or not if you vote third party), I urge you to make a stand and vote for individual freedom, sound currency, and small government.

 

 

 

 

Silly Rabbit, Tricks are for Kids

Rabbits have been much on my mind lately.  Recently, I planted my small garden area with spinach, mustard greens, kale, etc.  While I am already anticipating the succulent salads and slow cooked greens that I will reap in a few weeks,  I am haunted by little furry animals.  Yes, these conniving maruaders attack my garden almost every night and I wake every morning with damaged plants and rabbit droppings (come to think of it; they look like gray Trix).

Of course, I know what you are thinking "John, why don't you get a dog."  Well, the sad fact is that I have a dog.  Even worse, Cooper is a hunting dog so chasing furry mammals should be right up his alley.  Not exactly.  Despite my urging, I think Cooper actually doubts the existence of the rabbits.  He would rather come in at night (prime-time for rabbit feeding) when the temperature drops than chase rabbits.  I keep telling him that I'm going to trade him in on a beagle.

In Louisiana, there are another species of tricksters that you have to keep your eyes on.  On the ballot on November 19th is a constitutional amendment that could institute a new form of taxation.  This would be a tax on certain real estate transfers.  You would pay this tax when you sell your home.  Here is the catch.  At your normal tax election, you vote yes if you support the tax and no if you don't.  That's where the Louisiana legislature devised this little trick.  This tax, if you vote yes, the tax is prohibited; but if you vote no, the tax could be levied.  So, be warned and keep a clear eye.  Tell our politicians, "Silly rabbits, tricks are for kids.

 

It's all about the jobs; or is it?

As I am now off of my media diet, I have been taking a look at the new Obama jobs proposal or Stimulus #14, if you prefer.  By the way, I strongly recommend that you take a media diet from time to time.  It has a detox effect and you will find that you really don't miss anything.  In some ways it's like The Bold and The Beautiful, no matter when you check in, one of the Foresters is sleeping with Brook and most everybody else on the show is very angry about it.

Now that ARRA and QE2's effect on the economy has waned.  Obama took an extended Martha's Vineyard vacation and has come back with the solution to all that ails the economy - another $450 billion in spending and tax cuts that he assures us will eventually be paid by budget cuts.

Really, after 800 billion in ARRA spending, the various Bush stimuli (at least when W did a stimulus, everybody got a check), all of the bailouts, cash for clunkers and caulkers, homebuyers credit, and untold trillions that Ben Bernanke spread across the globe, $450 billion is going to fix everything?  I'm not buying it and neither should you.  This is all just another political football for the Washington ideologues to play with and look like they are doing something while Rome burns to the ground.

 

 

 

 

Market Paradoxes or How I Learned to Stop Worrying and Love the Credit Downgrade

I would just like to warn you at the start of this blogpost that you probably will not learn anything from me today. 

Okay, so S&P downgrades US treasuries last Friday afternoon. I'm still not quite sure what message S&P was trying to send.  If it was that the U.S. could never retire its national debt, well their right.  I told you so at  http://johnmurraycpa.typepad.com/blog/2010/06/index.html   If it was that the U.S. is likely to pay its obligations back with an ever decreasing value of the dollar, well their right on that score as well.

So I wait with some excitement about what will happen when the market opens Monday.  For your information, my portfolio includes a mutual fund that shorts the treasuries and several gold and silver mining companies.  Well, what happens, all of the major indices turn sharply down while the yield on the treasuries go down.  Now when a debt obligation's yield goes down, that is pretty much the same thing as a stock's value rising.  Monday was followed with two more days of strength for Treasuries which is somewhat inexplicable since we were just downgraded.

A final rant on gas prices, oil went down from its April high of around $118 down all the way to $80 a barrel.  I feel like the mule who's carrot has been taken away.  I drive a Nissan Titan, so let's just leave it at this - near $4 gas is "effecting" me.  I took some solace that with the disappearance of so many trillions of American's collective wealth, at least gas prices would be going down (maybe even to the valhalla of $2.5, one can hope) 

Of course gas prices have not really went down at all.  I've heard it all before - "the gas that stations are selling are actually last weeks pricier gas and they cannot lower prices just because the oil price goes down.  But let me tell you, should a major hurricane form in the gulf or some conflict begin in the Middle East, gas prices are gleefully raised the next morning. 

As I stated earlier, this post was more about me expressing some angst than trying to impart some nugget of wisdom.

 

"Like Crabs in a Bucket" or How Much Freedom Have We Lost

 Local bluesman Kipori Woods has a song that goes like this "Like Crabs in a Bucket; Just can't get to the top.  I don't recall the rest of the lyrics and could not find them on the internet.  To me, It reminds me of the Matrix, particularly, "You are a slave, Neo"

All of this got me thinking, how much freedom have we lost?  I know as Americans that we have much more freedom than many in repressed societies such as some countries in the Middle East, China and North Korea and thank God for that. 

However, if we draw some comparisons to earlier Americans and to our founders, how would we score on the freedom scale.  Those earlier Americans were in many way more self sufficient (out of necessity) than we are today.   Most of them grew quite a bit of there own food whereas most of our food today comes in shrink wrap containers and was just flown in or shipped from somewhere a long way from where we live.  In fact, when Thomas Jefferson was not drafting the Declaration of Independence, he was back at his homestead farming and writing about vegetables and the like.

I would imagine that busybodies or bureaucrats could not tell those earlier Americans what they could or could not do to their own property.  You never saw the episode where Ned Olsen told Charles Ingalls that he could not build a new barn without the proper permit and without the blessing of the planning and zoning committee.  I can imagine that land was not taken by imminent domain to build condos that often.  As the EPA had not even been conceived (back then we still governed based on the Constitution), those earlier Americans were never stopped from irrigating their farms because of a snail darter.  Most of those early Americans carried firearms and would not put up with such nonsense.

Early Americans were, as a whole, more devout and Christian than our society today.  As a result, they prayed whenever and wherever they liked.  They were not "plugged in" to the world system as many of us Christians are today.

As I resolve to live a life of increased freedom, I urge you to do so as well.  To quote my brother "It's all about freedom.

Finally remember the words of Jesus Christ: "So if the Son sets you free, you will be free indeed".  (John 8:36)

State and Local Bondholders - A Word of Warning

Bonds of state and local governments used to be a slam dunk.  You park your investment and receive a regular semiannual interest payment.  Of course, the big advantage is that the interest was tax exempt from federal taxes and from state if you held the bond in the same state of your residence.  In fact, I've heard that many baby boomers have fled equities for the perceived safety of all sorts of bonds.

The only problem is that the economic downturn has hit state and local governments quite hard.  For instance, the City of Vallejo, CA filed for bankruptcy protection due to their inability to renegotiate salaries and benfits for union workers.  Of course, the state of California is not doing that well either.  However, states are not allowed to file for bankruptcy due the their sovereign status granted by the Constitution

So what signs are there that a bond you hold might have credit issues.  First of all, you should identify what type of bond do you have.  General obligation bonds are ones that are collateralized by a tax of some form.  Revenue bonds are ones that are secured by the excess revenues of the government.

1.    Read the latest audit report.  Auditors are required to disclose if they have determined that there might be substantial doubt about the entity continuing as a going concern.

2.    Pension obligations.  Many governments have their own retirement system which can become underfunded resulting in a net liability.  Other governments participate in state plans which are subject to increases in rates due to poor investment returns.

3.    Other Post Employment Benefits - These are liabilities for the present value of future retiree benefits.  Of course, the cost of healthcare is ever increasing and retirees are living longer and longer.

4.    Union shop - Does the government have substantial number of union workers who may have contracts that could limit a government's ability to make budget cuts.  Think of Wisconsin.

5.    Declining revenues - What the states cut to balance their budgets is passed down to local governments.  Most local governments rely on state funding for large % of their budget.

Their is a wealth of information at www.msrb.org.   Should you have concerns and would like some assistance, please email me at jmurray@laporte.com or call me at (985) 892-5850.  

 

On flag burning - a personal story from my childhood

The recent incident at LSU brought back memories of my childhood, when your author himself burned the American flag.

During the summer my friend Phillip and I were consigned to roaming the campus of St. Patricks while our mothers worked in their classrooms.   It was boring but fun.  We had the gym to ourself (i would say average temp was 92).  Mrs. Marron, the principal, had just opened a package with a brand new flag in it.  She told Phillip and I that as loyal Cub Scouts we were charged with properly disposing of the old flag.  We consulted our scout handbook to find that a flag could be retired either by burning or burying. 

I know that does not sound right; but that's what it said.  Of course, you can only guess at the euphoria we both felt as our principal had just given us express authority to burn something on the school grounds.  So, when Mrs. Marron reentered the school, the burning began in earnest.  I still can't remember where we got the matches or lighter.

In the good old days of Betsy Ross, flags were made of natural fibers and would really go up in flames.  Not so in the 70's.  The 70's was the polyester decade and that's what the flag was made of.  It was more of a melting effect.  In fact, Phillip got burnt and yelled an obsenity.

On to option 2;  We would have to bury that glob of melted unnatural fabric.  Now, the melted part was like maybe the lower half of the bars.  It had been a really hot summer and had not rained in weeks.  The ground in the school yard behind the cafeteria was hard as a rock.  I'm embarrassed to say that we gave Old Glory a shallow grave with a couple of layers of mulch (oak leaves).  Well, what can I say, it was obvious that neither Phillip or me were destined to eagle scout. 

Well, the school year was progressing.  I think it was in October.  I blame it on some kids digging a hole to play marbles.  They dug up our flag and proceeded carry it around the playground.  In fact, they took the flag into one of the teachers, exclaiming "There must have been a battle fought here"  I think the teacher was buying it until Mrs. Marron rolled her eyes and stared through me and Phillip.  I think the 50 stars must have given it away.

 

 

 

My cap and trade plan - It would work!

The goal would have nothing to do with CO2.  The goal would be fairness, energy independence and jobs.  A formula would be used to calculate each state's energy contribution (deficit).  My home state of Louisiana which has a 16 refineries and massive offshore drilling would get a reduction in its gas tax.  California and Florida who are so ecologically concerned would pay additional taxes.  The taxes would only be reduced by them drilling an oil well, constructing a nuclear plant, etc.

Look at California.  They were going to build a solar array in the desert but it would harm a mouse and they stopped the project.  Same thing with wind; it would kill too many birds.  I think its time these greenies bear the burden of their beliefs.

 

I see a little silohette of a Conservative

I don't know about you, but its hard to stay upbeat about our present situation.  Only 4 months ago, the Republicans took back the house putting an end to our country's fiscal slide to oblivion - Not!

The Republicans have cut the budget by an extraordinary 61 billion.  That's 3% of the deficit - not the budget.  Its about like a family with both parents unemployed canceling HBO but keeping Showtime.  Then, you have the Dem's talking about the cuts being draconian.  Obama has pledged to keep the budget at the same level as last year (oh wait, when was the last time they passed a budget)  This after he tripled it after Bush doubling it (or is it visa versa)  I decided to help them out -

1.  110 billion - end all wars and bring all the troops back home (the border may be a good place to station them)  I think 10 years is long enough to be in a war.  What are we trying to displace the war of the roses record?

2.  Close down the ATF.  Why do we have a federal agency that regulates non prohibited items (guns and alcahol are protected by constitution. 

3.  End the DEA and take 50% of budget and give it to the sheriff's of the country.

4.  Embassies - Why do we need a target in every little hodunk country.  We should consolidate and put one in only the more important countries (luxemberg, Monaco and San Mareno need not apply)

5.  Obama has exploded the federal workforce and they are all highpaying jobs.  I think we need a hiring freeze for 10 or 15 years.

6.  PLEASE, end ethanol subsidies today. 

I could go on all night.

Meanwhile, Commander Bernanke has said that the 61 billion in cuts could stall the recovery.  Ben, multiple choice, what what have a more profound effect on the economy:

A.  the collapse of the dollar

B.  $5 a gallon gas

c.  double digit inflation,

d.  four more years of obama

e.  61 billion in budget cuts

I go with D

 

 

 

 

 

 

 

 

 

Bill Gates, Warren Buffet, George Soros, etc. or Effective Tax Rate

Well, it happened again. I broke my news fast and watched about 20 minutes of MSNBC and caught Chris Matthews discussing the tax cut. Chris was flabbergasted ( as he often is) that the President and Congress were going to give billionaires such as Buffet and Gates this huge tax cut and hell, they don’t even want it. "In fact, they think they are not paying enough in taxes"

 

Of course this is maddening. Bill, George, and Warren don’t pay the same effective tax rate that most middle to upper middle class citizens pays. Their effective tax rate is much lower.

 

How can this be? First, let’s define the effective tax rate. It’s a simple equation - Total tax paid (including what is stolen from your check every week) divided by income. Currently, the highest income tax bracket is 35%. These billionaires don’t pay that. Most only draw a marginal salary from their Companies. Their income is measured in the increase in their wealth. For instance, Warren’s company, Berkshire Hathaway is currently trading at $120,658 a share whereas it was $99,600 on 1/1/2010. As stocks are taxed on a capital gain basis, Warren pays no income taxes on that increase if he does not sell his shares. Even if he was to sell, he would only pay a rate of 15%. George has structured most of his income so that it is oversees and not subject to US taxes. That’s not even considering all the sales taxes, gas taxes, etc. that we pay that is a much higher % of our income then it is for these billionaires. .

 

Let’s compare the threesome to your average cardiologist. All of his earnings are earned income which is subject o federal income tax. His highest rate would be 35%. In addition he is subject to FICA and Medicare taxes up to the maximums. So, the Republicans have the right of it in this instance. It’s the upper income small businesses who are actually generating jobs that are subject to the highest tax burden.

 

Of course it’s not really a tax cut. If I think about stealing your wallet with $100 in it, but decide not to. You don’t gain $100; you just have what you had to start with.