My Blog

Category: Business

  • Labor Force Participation Rate Lowest Since 1981

    This story is actually over a month old.  It’s been sitting in the “drafts” folder.  Still just as relevant as the day it was published.

    In April the number of people not in the labor force rose by a whopping 522,000 from 87,897,000 to 88,419,000. This is the highest on record. The flip side, and the reason why the unemployment dropped to 8.1% is that the labor force participation rate just dipped to a new 30 year low of 64.3%.

    via ZeroHedge.

    Whenever you see anything about the “unemployment” rate always keep in mind that number only tells part of the story.  The bottom line is that things are really really bad out there.  Well that and the MSM doesn’t want to tell you about it.  Which is why you have to go to site like ZeroHedge to find out what’s really going on.

  • Your Home’s Router is Spying on You

    It must be spy on American’s week given posts on law enforcement asking for your cell data and how the NSA is going to expand its spying on Americans on a massive scale.  Now we have this:

    Cisco Systems told users of its new high-end home routers — in a roundabout way — they couldn’t use their routers for porn or to send certain types of e-mail and a whole list of other things.  …

    Last week, Cisco sent out an upgrade to the software that makes its routers work, called firmware. The upgrade affected two models, the EA4500 and the EA2700. Without asking, Cisco moved them to its “Cisco Connect Cloud” service.  …

    [T]he Cisco Connect Cloud Terms of Service forbids a whole bunch of things including porn, sending advertising e-mails — it won’t even allow you to “encourage any conduct” that would violate the law.

    Wait, there’s more. Cisco reportedly [also] deleted a portion of [its] privacy statement that said Cisco would keep track of Connect Cloud customers’ “network traffic” and “Internet history,” ExtremeTech reported.

    via Business Insider.

    Does anyone think any company could have gotten away with this in the 1960’s or 1970’s?  The outrage would have been tremendous.

    We’re failing as a society to realize that it’s not polite to air our collective and individual dirty laundry.  And we should be especially wary of sharing our family business with corporations that usually have a cozy relationship with the government.

    This is very very very bad.

    In addition to establishing Internet Freedoms and Net Neutrality we need to start a national discussion on Internet Privacy.

  • Gotta Love American Ingenuity (& Tax Avoidance)

    So I’m reading two stories (here and here) about a new law that will effectively outlaw Roll-Your-Own tobacco stores.  It’s something I kinda follow because I always thought it was a decent business model (until the government outlaws your business) and another fine example of what steps people will go through to avoid taxes.

    In short:

    A tiny amendment buried in the federal transportation bill to be signed today by President Barack Obama will put operators of roll-your-own cigarette operations in Las Vegas and nationwide out of business at midnight.  …

    The machines are used by customers who buy loose tobacco and paper tubes from the shop and then turn out a carton of finished cigarettes in as little as 10 minutes, often varying the blend to suit their taste. Savings are substantial – at $23 per carton, half the cost of a name-brand smoke – in part because loose tobacco is taxed at a lower rate.

    via ReviewJournal.com.

    And I was thinking about how sad this was for all the people who work in this industry: the store owners, their employees, the folks who manufacture the RYO machines, their families, the companies who make the cigarette tubes, and the loose pipe tobacco makers, and all of the folks who work in packaging all of these things.

    And then… in the comment section of the Law Vegas article I read this:

    James Fliess Jul. 6, 2012 | 2:47 p.m.

    Just a thought. My understanding, and maybe I’m wrong, is that cigarettes manufactured by these machines must cost (via taxes) as much as other cigarettes. How about this arrangement. The store sells the tobacco and supplies as they always have, but they do not have a rolling machine. A buisness next door does not sell tobacco or supplies, but it rents time on their rolling machine. Does it work?

    Kudos to you Mr. James Fliess!!

  • More And More Americans Are Leaving

    Last year, nearly 1,800 Americans surrendered their citizenship. In a nation of 300 million folks, 1,800 émigrés is hardly a rush for the exits. But the recent trend is, nevertheless, intriguing.  …

    Who knows the exact reason why 1,800 Americans chose to leave last year — nine times as many as left four years earlier. Certainly, each one of them had their reasons. But like a corporate insider that sells his own stock, there’s one thing you know for certain about his motives: he is not selling because he believes the stock will go up. Maybe he doesn’t believe the stock will go down, but no one sells a stock they believe will go up.

    via Business Insider.

    I wrote about this before.  Still no mainstream press on this issue.

  • Bankrupt Stockton Chicago

    Yesterday’s news:

    Officials in Stockton said Tuesday that mediation with creditors has failed, meaning the Central California city is set to become the largest American city ever to declare bankruptcy.  …

    The river port city of 290,000 in Central California has seen its property taxes and other revenues decline, while expensive investments and generous retiree benefits drained city coffers.

    via NY Daily News.

    Tell me something I don’t know, right?

    Stockton, with 300,000 residents and $700 million in debt, would be one of the largest cities ever to file for Chapter 9 protection, according to municipal finance experts and bankruptcy officials.

    via WSJ.com.

    Humm…. ok.  Let’s compare that to Chicago.

    Calling local government debt “staggering,” Cook County Treasurer Maria Pappas announced Tuesday that the $108 billion debt tab across various governing bodies in the county translates to $63,525 per Chicago household and nearly $33,000 per suburban household.

    via Chicago Sun-Times. (Sept 29, 2011 — we now know the number to be higher.)

    Math (not new math, the old fashioned kinda math.)

    Stockton:
    $700M / 290,000 residents = $2,413.80 of debt for every man woman and child in Stockton.

    Chicago:
    $63,525 * 1,033,022 households = $65,622,722,550 in total debt;
    $65,622,722,550 / 2,695,598 people in the city = $24,344.40 of debt for every man woman and child in Chicago.

    In order for the situation to be comparable, the dazzling urbanites of Chicago would have to earn 10 x as much as the poor downtrodden folks of Stockton.

    Back to the Census:

    Chicago Per Capita Money Income in Past 12 Months — $27,148

    Stockton Per Capita Money Income in Past 12 Months — $20,176

    So the average joker in Stockton has to work for about a month and a half (2413 / 20176 *365 = 44 days) to pay off their portion of the debt.

    The average joker in Chicago has to work for nearly a year (24344 / 27148 * 365 = 327 days) to pay off their portion of the debt.

    And so I ask you which one of these municipalities should really be filing for bankruptcy?  Which is in worse financial shape?  Who’s employee’s should be more worried about their pensions?  Who’s politicians are doing the right thing by dealing with the issue square-on and not trying to pawn it off on future generations?

    I’m just asking.

    Hat Tip to Anthony Curran for the concept of this post.

  • More Bad News on the Pension Crisis

    If I was Rahm I would so totally throw Daley under the bus on this issue.

    The debt from 10 Chicago-area pension plans swelled more than 600 percent to $27.4 billion between 2001 and 2010, according to a study released Monday by the nonpartisan Civic Federation. That’s $8,993 for each man, woman and child in Chicago, according to the report.

    The shortfall comes on top of more than $83 billion in unfunded pension liabilities at the state level, driving the cost up to nearly $15,000 per Chicagoan, the report shows.

    via chicagotribune.com.

    Shear insanity.

     

  • Illinois lags in science, tech, engineering, math grads

    Bad News:

    Illinois is producing fewer graduates with degrees in science, technology, engineering and math than the national average, according to the June release of the Illinois Innovation Index. …

    According to the Illinois Innovation Index, the number of STEM degrees granted to Illinois graduates hit a high-water mark of 20,248 in 2003 before dropping through 2007. The number rose by nearly 5 percent between 2009 and 2010, the most recent year for which data are available. But the 2010 number, 18,400, is well below the 2003 peak. Furthermore, STEM degrees represented 11 percent of all 2010 Illinois degrees, lower than the national average of 14 percent.

    via Chicago Tribune.com.

    This is a problem.

    Illinois generally and Chicago specifically cannot grow out of debt without high tech jobs. Our manufacturing businesses are dying and the city’s not helping. We live in a global economy and on the manufacturing front Chicago’s losing.

    Tech is the future. If you don’t have tech, you’re future’s not very bright. It’s really just that simple.

    CTU looks like it’s going to strike CPS because teachers making $80,000+ for 189 days of work say it’s not enough. I’d be happy to give the teachers more money… when Illinois’ in first place nationally for math and science scores.

     

  • Google and the Merchandise Mart

    Good News!!

    Crain’s Chicago Business reports: Google is in talks to lease some 500,000 square feet in the Merchandise Mart, sources say.  The deal would include a rooftop deck.  The Internet search giant, looking to move employees from the Libertyville headquarters of its recently acquired Motorola Mobility, has an office for tech workers near the Mart.

    via Chicago Tribune.com.

    Chicago is ripe for a tech explosion.  Of course we have a serious debt problem in this city, and state.  That will make some companies too scarred to move/expand here.  But if we can get that under control Chicago can become a major player in the tech space.

    If Rahm and Quinn can get our pension issues under control companies will relocate here from California.  Our taxes in Illinois are way too high and complicated — a/k/a suck — but the situation is far worse in California.  It’s freakishly expensive to do business there.

    This could just be the beginning of hope.  Now we just need to fix race relations, balance the budget, improve our schools, hire more police, find a State’s Attorney who will actually ask that criminals be placed in prison, find an Attorney General who’s not related to the most corrupt politician in the state, and fix an aging infrastructure.

  • Illinois’ Pensions are the Worst

    A new report being issued today — see the bottom of this post — from the Pew Center on the States says that Illinois once again ranks 50th of the 50 states in assets relative to liabilities.

    But while Illinois’ absolute position did not sink — a mathematical impossibility — its relative position did erode, as the shortfall in terms of dollars here worsened faster than it did on average in other, better-positioned states.  …

    Illinois “is on an unsustainable course,” said David Draine, the chief author of the report by the Washington, D.C.-based public policy and research group.  …

    According to the report, Illinois as of the end of fiscal 2010, the latest year for which national figures are available, ranked dead last of the 50 states, having on hand only 45 percent of the assets needed to pay $139 billion in accrued pension liabilities.

    The report concerns the state’s five retirement funds, covering state workers, teachers who work outside of Chicago, professors in the University of Illinois system, judges and members of the General Assembly.

    The total unfunded liability as of the end of fiscal 2010 — that was June 30, 2010 — was $75.73 billion, somewhat less than the current $83 billion figure cited earlier this year by the Legislature’s economic watchdog unit.

    via Crain’s Chicago Business.

    Public sector unions need to understand the reality.  Retirees are in serious danger of not getting paid what they are owed.  Default is becoming a more and more real possibility.

    Heck!  These numbers don’t even include the Chicago Teacher’s Union.  So the situation is even worse.

  • JP Morgan: Public Employee Pension’s Set to Explode

    But they wanted to keep the story to themselves:

    JPMorgan recently circulated a “strictly confidential” report among leaders at the bank and with trusted hedge fund allies outside of the bank which details an impending public pension crisis. And we mean big time nastiness.

    Massive cuts in services will have to happen, or massive tax increases will have to happen, or both, to keep many pensions and municipalities from going over a cliff. The politicians know that disaster is coming. JPMorgan and their hedge fund buddies know that it’s coming. The public, though it has a sense of impending doom, still doesn’t grasp the avalanche that is headed toward states and cities in the very near future.

    Charlie Gasparino details in the attached article that JPMorgan did not want the information in the report to become public because it feared angering the politicians in the municipalities and states where default due to public pensions is a very real possibility. Many local politicians are lying when they tell their fire fighters and teachers that pensions are in good shape. According to what the report supposedly says these workers should probably start making alternative plans for retirement. But to say that is very messy politically.

    JPMorgan didn’t want to lose its very profitable muni bond underwriting business in these same localities, which is determined to a large degree by these same lying local politicians, so this information was kept quiet.

    via AgainstCronyCapitalism.org.

    To the actual article:

    OK, it’s no secret that nation’s public pension funds are in big trouble, holding large “unfunded” liabilities owed to public workers once they retire. But most politicians (New Jersey Gov. Chris Christie is an exception) will tell you the problem is fairly containable, that there are simple fixes — such as raising taxes on the rich or pruning benefits. …

    Not so, warns a “strictly confidential” report JP Morgan issued last year. It describes in straightforward, frightening detail how underfunded pensions are huge ticking timebombs for many of the nation’s big cities and states.  …

    Nationwide, the actual size of unfunded public pension liabilities is four times larger than the $900-plus billion that officials are ’fessing up to. That’s right, the bank sees a $3.9 trillion hole; to plug that, states and cities will need large tax hikes, massive budget cuts or both. Plus, public-sector unions will have to accept smaller retirement packages, and later retirement ages, to keep the pension systems going.  …

    In New York, for example, JP Morgan said state officials would have to immediately cut spending by 12.3 percent or raise taxes on everyone by 7.4 percent. And they’d need to make these tax hikes and budget cuts permanent for the next two decades to fully fund public-employee pensions.

    New Jersey faces an even bigger hole. Even after Christie’s reforms, it would still have to cut spending 30.8 percent or raise taxes another 17.2 percent, keeping them in place for two decades, to solve the problem.
    via NY Post.

    No word on how Illinois fares.  But as we are the #1 unfunded pension state in the union it’s no doubt a bad, bad, bad situation.