Category: Finance

  • Over $60,000 Spent Per Household in Poverty

    “According to the Census’s American Community Survey, the number of households with incomes below the poverty line in 2011 was 16,807,795,” the Senate Budget Committee notes. “If you divide total federal and state spending by the number of households with incomes below the poverty line, the average spending per household in poverty was $61,194 in 2011.”

    via The Weekly Standard.

    Yes, I know… it’s The Weekly Standard.  It’s biased.  But facts are facts.  It’s just math.  Someone crunch the numbers and prove this wrong.  One should note that the article points out that welfare spending includes money such as Pell Grants which are given to people in households above the poverty line.  So it’s honest that way.

    But it’s just plain staggering to think about.  Where does all this money go?  Certainly a lot of bureaucrats pushing paper is part of the number.  But direct payments to the “poor” much be significant.  Now, I’m not suggesting that it’s fun to be poor… far from.  But we need to acknowledge that America has the richest poor people in the world.

    The following are facts about persons defined as “poor” by the Census Bureau as taken from various government reports:

    • 80 percent of poor households have air conditioning. In 1970, only 36 percent of the entire U.S. population enjoyed air conditioning.
    • 92 percent of poor households have a microwave.
    • Nearly three-fourths have a car or truck, and 31 percent have two or more cars or trucks.
    • Nearly two-thirds have cable or satellite TV.
    • Two-thirds have at least one DVD player, and 70 percent have a VCR.
    • Half have a personal computer, and one in seven have two or more computers.
    • More than half of poor families with children have a video game system, such as an Xbox or PlayStation.
    • 43 percent have Internet access.
    • One-third have a wide-screen plasma or LCD TV.
    • One-fourth have a digital video recorder system, such as a TiVo.

    via Heritage Foundation.
     

    In America the poor receive food, shelter, medical care, even a cell phone.  The reality is a far cry from the perception many on the left would like you to believe whereby tens-of-thousands of starving children are dying in dirty streets because no one would give them a morsel of bread.  That’s just simply not the case.

  • CPD Brass Wasting Money Trying to Track Gunshots

    The Police Department began using gunshot detection technology early last month in two 1.5-square-mile areas to try to better pinpoint the location of gunshots, Superintendent Garry McCarthy disclosed Thursday. The sensors sometimes give officers information before 911 calls are made, he said.

    In the past decade, the city twice installed the devices but ultimately removed them because of their high price tags and ineffectiveness. Since then the technology has improved “dramatically,” McCarthy said.

    “What we can do with this is overwhelming right now,” McCarthy said at a news conference. “It’s gotten a lot better, and obviously as it’s out there longer, it’s a lot cheaper also.”

    The one-year contract for the ShotSpotter system costs about $200,000 — money that will come from drug forfeitures and other property seized by police, authorities said.

    via Chicago Tribune.

    So it didn’t work before and was too expensive.  Boy, that’s not what we were told last time.

    Given the success of the pilot program, in September 2003, Mayor Daley announced that a new phase of PODs would be deployed throughout the City. Subsequently, the number of PODs increased from 30 to 80 by December 2003. Some of the new second generation PODs were also equipped with technology to detect gunfire. Using wireless technology, these units transmitted gunshot alerts, as well as the usual video images, directly to the City’s Emergency Management and Communications Center, thereby providing crucial intelligence on criminal incidents involving guns. Several of the 30 existing PODs were also upgraded with the same technology during that time period.
    CPD Website, dated June 15, 2003

    and

    Chicago police plan to add 50 new remote-controlled cameras in city … The new cameras will be equipped with gunshot detectors….
    Herald & Review, dated April 7, 2004

    and

    Chicago police have installed 30 surveillance units in high-crime locales. The system uses four microphones to zero in on firearm discharges.
    USA Today, dated June 6, 2005

    The USA Today article ends with:

    Adding SENTRI to an existing surveillance camera is not cheap, however. The system costs between $4,000 and $10,000 per unit. In Chicago, money forfeited by criminals is used to pay for both it and the accompanying cameras.

    As a result, Police Superintendent Phil Cline told a recent U.S. Conference of Mayors meeting, “the drug dealers are actually paying to surveil themselves.”

    I guess everything old is new again.

     

  • Pension’s Rate of Return Plummets to 0.76%

    This sounds like a problem:

    The pension fund for most public school teachers in Illinois generated just 0.76 percent in fiscal 2012, a big drop from the 23.6 percent rate of return in the previous fiscal year, the Teachers’ Retirement System reported on Thursday.  …

    It is the long-term results that matter and the system’s 20-year investment return at the end of June was 7.73 percent.”  …

    Last month, the pension fund for teachers in all Illinois school districts with the exception of the Chicago Public Schools, lowered its long-term assumed investment rate of return to 8 percent from 8.5 percent.The move will depress TRS’ funded ratio to 42.5 percent and increase Illinois’ fiscal 2014 payment to the fund to $3.36 billion instead of $3.07 billion under the previous return rate.

    via Crain’s Chicago Business.

    Indeed a problem.  Consider …

    A drop in the assumed rate of return from 8.5% to 8.0% meant that the state (that’s you and me, a/k/a the taxpayers) owed an extra $300,000,000.  Hummm….

    TRS’s board members, appointed by The Machine, like to quote the 20-year ROR because it’s a respectable 7.73%.  That’s true.  But as I wrote about this before, the 10-year ROR is a pathetic 5.7%.

    The fact remains that TRS is in some real trouble.  Everyone knows it.  And the longer we keep our head in the sand the more painful it’s going to be to fix.

  • Illinois Tollway Netting $Billion per Year

    To help pay for these projects, the tollway anticipates raking in $977 million from tolls in 2013 – thanks to the 87.5 percent increase that went into effect Jan. 1.

    via Chicago Tribune.

    Doh!

     

  • 30,000 Unfilled Jobs in Illinois

    Say “skills gap” to any manufacturer, and invariably they’ll respond with the number 600,000. That’s the gaping hole of unfilled jobs at U.S. manufacturers — for Illinois, estimates point to 30,000 unfilled jobs. The talent shortfall carries serious consequences. In a Manufacturing Institute 2011 skills gap report surveying more than 1,100 U.S. manufacturers, 74 percent of respondents said a lack of skilled production workers was harming productivity or hindering their ability to expand operations.

    That skills gap will widen. The Society of Manufacturing Engineers, based in Dearborn, Mich., predicts the number of unfilled manufacturing jobs will reach 3 million by 2015.

    via Crain’s Chicago Business.

    Holy Cow!!

    To be fair, the rest of the article talks about how wages for machinist have not kept pace with inflation; that may be true.  But isn’t taking a job at $13 or $14 an hour better than sitting home watching Judge Judy and playing xbox all day?

    These jobs are fun too.  In a former life I used to work with a lot of machinist and injection molding operators and tool & die guys, and other people who I think had cool jobs.  You get to build things.  You get to play with equipment that costs more than your house.  At the end of the day you can go home and tell your family that you did something with your day.  You didn’t just move paper from one side of the desk to the other (like I do now.)

    What we have here is evidence of the complete failing of our educational system.  Children not only don’t have the most rudimentary math skills necessary to become a machinist or CNC operator but they don’t have the intellectual curiosity and patience to solve complicated puzzles.  That’s what these jobs really are… puzzle solvers.  Figure our how to make something better than it’s being made today, faster, cheaper.

    We have to turn this around.  Show kids that learning is fun and that building (and breaking) stuff can lead to a rewarding job that might not get you a house in Lake Forest but will certainly allow you to put food on the table, gas in the car, and take a decent vacation every year.

    We will not survive as a nation if people will stay home rather than work for a living.

  • IL Finances Heading to Social Unrest

    “I think it’s going to reach a point where there’s either social disorder or bankruptcy before people will act,” he said.

    via Crain’s Chicago Business.

    Ya, that sounds about right.

    But let’s back-up a little.  This is a quote from a story about how back the finances are in Illinois.

    A Blue Ribbon Panel put together a report which was released this morning.  It’s damning in the extreme.  The whole report can be found here.

    I’ll write more about this later… I have to catch a plane.

  • Airlines Fees vs. Fares: Impacting Taxes

    The liberal Washington Post complains:

    There’s a 7.5 percent federal tax on every airline ticket. The money goes into a fund that pays for the air transportation system: airports, capital improvements and the operation of the Federal Aviation Administration.  …

    When the airlines kept ticket prices down by shifting $12.8 billion to baggage fees, they also saved almost $964 million in federal taxes they would have owed if they had hiked ticket prices by that amount.

    via The Washington Post.

    What crap.

    First let’s take a look at the real story when it comes to airline taxes:

    – September 11 Security Fee: A September 11 Security Fee of $2.50 USD applies per flight segment (maximum charge per trip — $5.00 USD one-way, $10.00 USD round-trip). A flight segment is defined as one takeoff and one landing.

    – Passenger Facility Charges: Passenger Facility Charges (PFCs) of up to $18.00 USD may apply, depending upon the itinerary chosen.

    – Federal Excise Tax: A 7.5% domestic tax is applied to the airline base fare. The tax may be pro-rated for flights to/from the 48 contiguous U.S. states and Alaska and Hawaii, and some international destinations. A Travel Facilities Tax of $8.40 USD per direction also applies to flights to/from Alaska and Hawaii and the 48 contiguous U.S. states or between Alaska and Hawaii.

    Federal Domestic Flight Segment Fee: A federal domestic flight segment fee of $3.80 USD applies per flight segment. A flight segment is defined as one takeoff and one landing.

    Looks like the G is getting more than it’s fair share of the airline travelers’ dollar.  The money collected — and wasted — by the TSA and FAA is staggering.  It’s no wonder that back in March the Orlando Sanford Intl. Airport was choosing to opt-out of using the TSA for security screenings.  Regardless of how they spend it, the government is taking plenty of money from the airline traveler.

    Also, let’s take a look at the wording of the story.  The newspaper writes, “When the airlines kept ticket prices down by shifting $12.8 billion to baggage fees, they also saved almost $964 million in federal taxes….”  Wrong!  The airlines didn’t save anything; the consumer saved.  This sentence should be written, “By shifting $12.8 billion to baggage fees airline passengers saved nearly $1 billion in taxes that the federal government would have otherwise imposed.

    The headline of this story should be, “Shifting fares to fees permitted $1 billion in extra air travel last year.”  Air traveler the big winner.

    Further, the baggage fees were NOT paid by everyone.  If you travel light and didn’t check a bag you paid nothing.  If you needed to check a bag, then you paid for the service you received.

    The whole situation seems very fair to me.  That the government is out the money is just icing on the cake.

  • The Fed & Debt Cancelation

    I met a European trader in a bar this week, who brought up the possibility that at some point, the Bank of England might just rip up the UK government debt it has acquired through quantitative easing — just straight up throw it on the fire, and tell the government it no longer owes the money.

    The Bank of England — just like the Fed — has bought a ton of UK government debt as part of its attempt to juice the economy.

    This idea has been going around, and picking up buzz.  …

    As the person I talked to put it: It’s really hard to see what would be so bad about it. Would the entire system of finance collapse? There’s just no reason to think it would.

    Probably the worst thing to come out of it would be inflation. Right now, the Fed or Bank of England “prints” money in QE, but for every $100 injected into the system, $100 in equivalent securities are sucked out and put on the central bank’s balance sheet, so basically it’s a wash. This is why, despite the gigantic expansion of the balance sheet, inflation has been muted and (at least in the US) the trend remains towards disinflation.

    via Business Insider.

    An interesting idea.  Of course the author here, Joe Weisenthal, is absolutely wrong claiming there is disinflation in this country.  Food and energy prices have nearly doubled in the last 4 years.  That cars and machines machines are cheap is only because people simply don’t have the money to buy them.  The government (a/k/a the Obama administration) has so played with the CPI that it’s no longer reflective of how American’s actually spend their money.  Things people need are more expensive today than ever before.

    But what would really happen if the Fed just cancelled the debt?  The truth is that life would go on and the entire financial system would not collapse.  That much is true.

    But there is this thing called inflation that no one, NO ONE, wants to talk about.  Not Obama, not Romney, not Bernanke, not the media.  It’s coming.  Everyone knows it’s coming.  The Fed cannot inject several trillion dollars into the economy and there not be inflation.  The only question is whether we get 4-5% for a few years or we get 9-11%.  The former is desired the latter not so much.

    This is all going to boil down to the velocity of money.  Right now, the Fed has printed so much money that it is still all sitting in the banks.  It has not yet been absorbed into the marketplace.  i.e.  It’s moving rather slowly.  However the banks are the bottleneck when it comes to money.  It takes them a long time to make decisions.  Once the money is clear of the banks it can move much — MUCH — more quickly.

    Right now the Fed is driving with it foot on the gas & the pedal to the floor.  It’s pumping as much money into the system as the system will allow.

    There will come a time when the Fed will have to get off the gas and hit the brakes… hard.

    Cancelling the debt is kinda like cutting the brake line on the car.  I don’t know of any vehicle that is easy to control when driven hard throttle to hard brakes.  It’s certainly going to be much harder to control if you can only downshift because you don’t have any brakes.

     

  • What Drives Corporate Profits?

    In a heady story over the Business Insider today Joe Weisenthal walks us through an analysis as to why corporate profits are so high right now.  It generally all comes down to this chart:

    It shows the various drivers and drags on corporate profitability. So for example, household savings are always a drag on profitability, since that’s money not spent to buy goods. Net investment helps boost corporate profitability, since that investment will flow to the profit line of another corporation. When the government is in a surplus, that reduces corporate profitability, since that means the government is taking in more than it pays out. When the government is in deficit, that boosts profitability.

    As you can see in the chart, what REALLY stands out is the huge explosion of the red area (representing government deficits), helping to drive corporate profits at a time when nothing else is doing the work.

    via Business Insider.

    So what exactly does that mean?  It means that those out there who are complaining about high corp. profits (which by the way drive stock prices up) are not helping the working man should take a look at the root cause of these high profits.  i.e.  Government debt.

    What corporations know is that the current spending levels are unsustainable.  We must stop spending money we don’t have.  As a result of this, government deficits will go down and so will corporate profits.  This is why corporations are trying to save as much cash as they can right now.  Because they know that tough times are coming and today they need to save like they have never saved before.

    Similarly, you should be saving.  We without a doubt have inflation so it makes little sense to hold on to a lot of cash.  But you should be paying down debt and getting your own financial house in order.  Tough times are coming and today you need to save like you have never saved before.

     

  • Obama Illegaly Accepts Foreign Donations

    The Obama re-election campaign has accepted at least one foreign donation in violation of the law — and does nothing to check on the provenance of millions of dollars in other contributions, a watchdog group alleges.

    Chris Walker, a British citizen who lives outside London, told The Post he was able to make two $5 donations to President Obama’s campaign this month through its Web site while a similar attempt to give Mitt Romney cash was rejected. It is illegal to knowingly solicit or accept money from foreign citizens.

    via NYPOST.com.

    This is kinda like Al Gore walking out of the Buddhist temple with a suitcase full of cash and not asking any questions.

    We need an investigation into this.