My Blog

Category: Business

  • Streetwise Launches Neighbor Carts

    Rick Jones’ booming voice makes him hard to miss on the corner of Broadway and Wilson Avenue, where he shouts “fresh fruit” to passers-by rushing to and from the nearby Red Line station.

    Neatly displayed apples, bananas, plums and strawberries line the stainless steel cart that sits behind him. Jones, a struggling veteran, was recruited by StreetWise — the ubiquitous street magazine sold by the needy — to help operate the cart as part of its latest program for at-risk Chicagoans.  …

    Jones is one of seven trainees selected for Neighbor Carts, a new program designed to help unemployed, underemployed and other at-risk Chicagoans earn a paycheck while learning entrepreneurial business skills. StreetWise and Neighbor Capital, nonprofit organizations that focus on Chicago’s homeless and at-risk population, launched the program this summer.

    via Chicago Tribune.

    I’ve always liked Streetwise as an idea and as a company.  My understanding is that they are a little top-heavy; that too much money is spend on admin and offices, etc.  But they do good work.

    Kudos to Mr. Jones and the Streetwise team.  Best of luck on your new endeavor.

  • Quick Pension Analysis

    Ok, so I was getting asked about this the other day both in person and in the comments about why the pensions are really in such bad shape and what the latest GASB positions mean to the funds.  GASB first.

    GASB Changes
    I did some poking around and the recent GASB changes really mean nothing.

    After six years of research and about 400 pages of text, GASB’s statements 67 and 68 do little to provide enough meaningful information about the potential retirement costs faced by the taxpayers. The statements will force the worst of the worse, such as Illinois, to recognize a much larger liability.

    That’s like throwing the zombified Walking Dead under the bus to give the appearance of taking a serious step in providing transparency. Zombies are already dead. You can throw them under a bulldozer; it doesn’t make them more dead.  …

    The new standards still allow most pension funds to choose their discount rates when determining their pension liabilities. In other words, the sworn and civilian plans of the City of Los Angeles can wantonly throw caution to the wind and assume a 7.75% earnings assumption going forward, avoiding any consideration of risk.

    via City Watch LA.

    You can read the policy papers.  It’s pages and pages of nonsense summarized nicely with the zombie analogy above.

    But what the lastest GASB changes point out to us is the danger regarding the assumed internal rate of return.

    Interest Rate Issue
    For giggles I found the 2011 annual report of the Chicago Teachers’ Pension Fund.  It’s 116 pages detailing a underfunded, mismanagement, no financial understanding pension time-bomb with some lipstick.

    From page 13:

    As of June 30, 2011, investments at fair value plus cash totaled $10,456,912,118. This reflects a 16.8% increase from the $8,949,590,783 value of June 30, 2010. The Fund’s investment performance rate of return for the year ended June 30, 2011, was 24.8%, exceeding the projected return of 8% and reflecting a 82.3% increase from the 13.6% performance rate of return as of June 30, 2010. The ten-year rate of return posted by the Fund for the period ended June 30, 2011, was 5.7%, and fell short of the actuarial assumption of 8%.

    That’s a lot of information.  I draw your attention to the incredible swings in the rate of return of the fund over the years.  24.8% one year, 13.6% another, however the 10-year average is a mere 5.7%.   On page 25 we learn that the 5-year average is only 4.7%.  Yikes!!  But the fund assumes that over the long term it will average 8%.

    But what does that mean? So what?

    Well, the fund currently has net assets of $10.344 billion.  When invested at the given rate of returns at the end of 5 years we have:

    Year Value @ 4.7% Value @ 5.7% Value @ 8%
    0 $10,344,100,000.00 $10,344,100,000.00 $10,344,100,000.00
    1 $10,830,272,700.00 $10,933,713,700.00 $11,171,628,000.00
    2 $11,339,295,516.90 $11,556,935,380.90 $12,065,358,240.00
    3 $11,872,242,406.19 $12,215,680,697.61 $13,030,586,899.20
    4 $12,430,237,799.29 $12,911,974,497.38 $14,073,033,851.14
    5 $13,014,458,975.85 $13,647,957,043.73 $15,198,876,559.23

    If the next 5 years are like the past 5 years the fund will earn 4.7% on its assets.  So in 5 years it will have $13.014 billion.

    In the next 5 years are like the past 10 years the fund will earn 5.7% on its assets.  So in 5 years it will have $13.646 billion.

    However the plan assumes that over the next 5 years it will follow the 8% column and have $15.1 billion.  History is against them.

    If the fund earns 5.7% over the next 5 years it will be $1.55 billion short of projections.  That’s 10% less money available.

    If the fund earns 4.7% over the next 5 years it will be $2.18 billion short of projections.  That’s 14% less money available.

    If all the assumptions go on for 10 years:

    Year Value @ 4.7% Value @ 5.7% Value @ 8%
    10 $16,374,178,752.54 $18,007,050,537.73 $22,332,136,064.29

    Earning 5.7% the fund is $4.33 billion short or 19.3%.

    Earning 4.7% the fund is $5.95 billion short or 26.6%.

    So if the next 10 years are anything like the past 10 years from an investment standpoint we can expect the all the state pension funds to have about 20% less money than they’re projecting.  That could easily be another $40-50 billion that someone’s going to come looking for.

    – – –

    Now in all fairness, a historic average suggest that a return rate of 8% could be reasonable.  i.e. These funds may be able to earn an 8% return in the next 5 years.  Why?

    Interest Rates & Inflation.  In the last 5 – 10 years there has been very little inflation and interest rates have been low.  That’s generally accepted to be a good thing.  However it messes with the long-term analysis as to what something will be worth in the future.

    Given the amount of debt carried by the Feds, and the quantitative easing (a/k/a money printing) that been happening, it’s safe to say that very soon interest rates are going to start going up… fast and dramatically.

    When interest rates go up, the rate of return on these pension funds should go up as well.  If they get close to the 8%, then we’ll only have to worry about the current short fall of billions and billions and billions.

    Any questions?

  • 100 Days Until Taxmageddon

    Sunday will mark the start of the 100-day countdown to “Taxmageddon” – the date the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2013:

    via Americans for Tax Reform.

    Here’s a list of some of the new and raised taxes coming:

    First Wave: Expiration of 2001 and 2003 Tax Relief

    • Personal income tax rates will rise on January 1, 2013.
    • Higher taxes on marriage and family coming on January 1, 2013.
    • Middle Class Death Tax returns on January 1, 2013.
    • Higher tax rates on savers and investors on January 1, 2013.

    Second Wave: Obamacare Tax Hikes

    • Some Obamacare have already gone into effect: tanning tax, medicine cabinet tax, HSA withdrawal tax, W-2 health insurance reporting, and the “economic substance doctrine”
    • The Obamacare Medical Device Tax
    • The Obamacare Medicare Payroll Tax Hike
    • The Obamacare “Special Needs Kids Tax”
    • The Obamacare “Haircut” for Medical Itemized Deductions

    Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

    • The AMT will ensnare over 31 million families, up from 4 million last year
    • Full business expensing will disappear
    • Taxes will be raised on all types of businesses
    • Tax Benefits for Education and Teaching Reduced
    • Charitable Contributions from IRAs no longer allowed

    … So at least we have that to look forward to.  Right?

     

  • Rahm: Higher Cigarette & Amusement Taxes

    Mayor Rahm Emanuel is considering an increase in city taxes on cigarettes and entertainment to help close an anticipated $369 million gap in next year’s budget, City Hall sources said Wednesday.  …

    It’s unclear how much the cigarette tax might be raised. A city tobacco tax increase would come on the heels of a $1-a-pack state hike that took effect July 1. The city last increased its cigarette tax by 20 cents — to 68 cents a pack — in 2006.

    Taxes on a pack of cigarettes in Chicago total $5.67, the second-highest per-pack tax in the nation, behind New York City’s $5.85 a pack. The city expects to bring in $18.7 million in cigarette taxes this year, compared with $32.9 million just six years ago, according to city financial records.

    via Chicago Tribune.

    Cook County has already proven that when you raise cigarette taxes you lose revenue.  The city’s own numbers are another example of that.

    Does Rahm have any plan to cut ANY spending?  Anything other than police officers?

    Why don’t we shut down the TIFs?  Take fund necessary to pay off the bonds and do so; take the rest of the funds and return them to the general fund.  That would be quick and easy.

    Enough with the !@#$^ taxes.

  • Mitt Romney on the Federal Reserve

    “Yeah, it’s interesting…the former head of Goldman Sachs, John Whitehead, was also the former head of the New York Federal Reserve. And I met with him, and he said as soon as the Fed stops buying all the debt that we’re issuing—which they’ve been doing, the Fed’s buying like three-quarters of the debt that America issues. He said, once that’s over, he said we’re going to have a failed Treasury auction, interest rates are going to have to go up. We’re living in this borrowed fantasy world, where the government keeps on borrowing money. You know, we borrow this extra trillion a year, we wonder who’s loaning us the trillion? The Chinese aren’t loaning us anymore. The Russians aren’t loaning it to us anymore. So who’s giving us the trillion? And the answer is we’re just making it up. The Federal Reserve is just taking it and saying, “Here, we’re giving it.’ It’s just made up money, and this does not augur well for our economic future.

    via Glenn Beck.

    You can only live on borrowed money for so long.  After awhile someone comes looking for what you owe… plus the vig.

    Refi that house now because if you think it’s bad now but wait until we have 9.0% unemployment and 9.0% inflation.

    The wheels are falling of the bus.

  • Illinois Unemployment at 9.1%

    Unemployment across Illinois rose to 9.1 percent in August, the third straight month of increases in the state, the Illinois Department of Employment Security said Thursday. …

    Unemployment in July was 8.9 percent. Increases in the unemployment rate in June, July and August followed nine months of slow but steady declines. The federal government said earlier this month that the national unemployment rate dropped from 8.3 percent to 8.1, but the decrease was thought to primarily be driven by people dropping off unemployment rolls because they stopped looking for work.

    via Crain’s Chicago Business.

    Not a good sign.

    It’s time for Madigan, Rahm, Quinn, and the rest of the cabal to stop lining their own pockets and start balancing budgets and becoming a little more business friendly.

    Do anti-business people understand that  no businesses = no taxpayers.  No taxpayers = no tax revenue.  No tax revenue = no government jobs or services?

    Government in and of itself creates nothing of value.  It’s all done with other people’s money.  What about that is so hard to understand?

  • Chick-fil-A Wavies 1st Amendment Rights

    Chick-fil-A has pledged to stop giving money to anti-gay groups and to back off political and social debates after an executive’s comments this summer landed the fast-food chain smack in the middle of the gay marriage debate.

    The Civil Rights Agenda, which dubs itself the largest lesbian, gay, bisexual and transgender advocacy group in Illinois, said Chick-fil-A agreed in meetings to stop donating to groups such as Focus on the Family and the National Organization for Marriage. Such groups oppose same-sex marriage.

    via Chicago Tribune.

    WT…?!  Why?

    Everyone please note how the Left does not wish to openly discuss issues of public disagreement — No National Discourse will be held.

    Opposing opinions will be silenced by any means necessary.

    I fully support Chick-fil-A giving money to any political cause it likes.  I don’t have to eat there.

    I fully support Progressive Ins. giving money to any leftest cause it likes.  I have have to buy Ins. from them.

    Warren Buffet = Geico.  Don’t have to buy their ins. either.

    Sheldon Adelson runs the Sands Casino group and gives a lot of money to Romney.  You don’t have to gamble at a Sands owned hotel.

    I could go on.

    But badgering people over and over and over and over and over and over until the have to submit to political correctness does not server the public good.  The solution for bad speech is not no speech but MORE speech.

    If you disagree with me, fine.  Be polite, state your case.

    I disagree strongly with what you say,
    but I will defend to the death your right to say it.
    –Voltaire –

    This Civil Rights Agenda stands for anything but.  It’s evil.

  • 400 Richest Americans’ Worth $1.7 Trillion

    The net worth of the richest Americans grew by 13 percent in the past year to $1.7 trillion, Forbes magazine said on Wednesday, and a familiar cast of characters once again populated the top of the magazine’s annual list of the U.S. uber-elite, including Bill Gates, Warren Buffett, Larry Ellison and the Koch brothers.

    The average net worth of the 400 wealthiest Americans rose to a record $4.2 billion, the magazine said.

    via Chicago Tribune.

    I love stories like this.  The Left will go on and on about how its unfair that these people earn this money; it’s terrible that anyone should be allowed to have this much money, and what-have-you.

    So let’s just take.  Let’s just take all of it.  Let’s take these thieving bastards money and redistribute it so everyone benefits.

    $1.7 T / 314,409,835 people = $5,406.96 per person.

    That would be a one time payment by the way.  No one would ever get another nickel from these people ever again.  Hardly seems worth it to me.

    Maybe we should use it to pay off our national debt.  After all every citizen owes the government over $51,000.  Surely we’d all be better off if we just paid down the debt.

    $16T – 1.7T = $14,300,000,000,000

    After that we all now owe about $46,000 to the government, each. … Huh?!   Still seems like we all owe a lot of money.

    And this is the folly — we can Eat the Rich — but it would never be enough to save us from what we’ve already done to ourselves.

    Inflation and austerity are coming.  Plan for it.

  • Crumb & Get It: Baker with Principles

    [youtube http://www.youtube.com/watch?v=_s_CGWKN8Ak]

  • Harvard vs. South Dakota Mine School

    Which Grads make more?

    Harvard University’s graduates are earning less than those from the South Dakota School of Mines & Technology after a decade-long commodity bull market created shortages of workers as well as minerals.

    Those leaving the [SDSMT] college of 2,300 students this year got paid a median salary of $56,700, according to PayScale Inc., which tracks employee compensation data from surveys. At Harvard, where tuition fees are almost four times higher, they got $54,100. Those scheduled to leave the campus in Rapid City, South Dakota, in May are already getting offers, at a time when about one in 10 recent U.S. college graduates is out of work.via Bloomberg.

    Good old fashioned job.

    Man I wish we had some of them around here.