The Privileged Argument – An Evil Cycle Repeats


They say that if you don’t learn from history, you’re doomed to repeat it.  We’re seeing a dark history start to repeat in its newest form, the Privilege Argument.  The cycle goes something like this:

  1.  People are unhappy because they don’t feel they make enough money.
  2. People wanting to gain power tell the unhappy people that the reason they don’t have enough money is that some other group of people are wealthy and keeping them down.
  3. Other people, who think that the people who want to gain power are super cool and really smart with all of the answers, repeat their rhetoric.  The term, “useful idiots,” was coined for this group of people since they have been fooled by the people who want to gain power and are therefore useful for obtaining their aims.
  4. The people who think they don’t have enough money rise up against the group of people who have been demonized, either physically through riots or by electing the ones who want to get power because of their promises to take the money from the demonized group and give it to the poor group.
  5. The demonized people are imprisoned, banished, or killed in gruesome ways and their property stolen.  Much of their wealth is destroyed very quickly, making everyone poorer.
  6. The people who wanted power become dictators, oppress the people, and lots of people are shot or starve.

Examples of this pattern are:

The Bolshevics, Russia, early 20th century:

The Marxists, under Lenin, convince the Russian people that the Czars and Russian Elite are the cause of their problems.  They rise up against the leaders with violence and put the Bolsheviks in power.  Lenin isn’t too bad to start, but eventually Stalin rises to power and kills millions of people.  The Russian people live a sad life with long lines for necessities and scarcities of things like toilet paper.  Eventually, the USSR falls, but the corruption left from the remains of the old Soviet party remain today.

The Nazis, Germany, mid-20th century:

The German people are unhappy after the loss of WW1 and the severe restrictions placed upon them by the nations who conquered them.  Inflation is rampant with wheelbarrows full of cash being needed to buy groceries.  The Nazis, under Adolf Hitler, convince the people that the Jewish people, who run many of the shops and banks, are the cause of their plight.  (Note, the Nazis were Socialists, not right-wingers.) The people put Hitler in charge, who proceeds to try to take over the world.  Millions of Jews, Poles, homosexuals, and Gypsies are put to death in concentration camps.  Millions of people are killed in WW2.  Today some neo-nazi groups remain, still spreading a rhetoric of hate.

Hugo Chavez, Venezuela, Early 21st century:

Hugo Chavez convinces the population of Venezuela that the wealthy white farmers and foreign oil companies are the cause of their problems.  The people rise up and put Hugo Chavez in power.  The farmers are chased off of their land and the farms are given to squatters who have no idea of how to run a farm or have any desire to do so.  The foreign oil companies are chased away and the wells taken over by a corrupt government-owned oil company.  Today the country is starving to death and those who oppose the dictator in charge have their meager food rations withheld.  One of the effects of centralizing distribution of necessities is that those who oppose the leaders can have necessities withheld.  No need to send in troops with guns to control the population when you can just turn off the supplies to them.

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The sad thing is that despite these examples (and there are a lot of other examples), the cycle keeps repeating.  This is because this philosophy, take money from the wealthy (who must have become wealthy by oppressing others) and give it out to people who aren’t wealthy (because it must be that they are being oppressed), sounds good to people.  Often a government is put in between since that insolates the people who are taking the money from the ones that they are robbing:

We need the poor to have food.  Let’s have the government provide food. 

The government is seen as a limitless source of funds that can be used for whatever social good is needed.  This is separated from the other side of the coin, which is required for the “government” to provide the food since the government itself produces nothing:

The government is running out of money.  We need to raise taxes so that the government doesn’t run out of money.  Wealthy people can afford to pay more since they don’t need all of that money.  In fact, the wealthier you are, the greater the percentage of your wealth you should pay since you have obviously done evil to become that wealthy.

Even if the taxes become burdensome to the point where less food (and everything else) is being produced since those who are most productive decide to leave the society or simply do less, taxes are held high because the goal has gone from feeding people to punishing the wealthy.  If you try to cut programs back, you get the argument:

 How dare you not support programs that are providing food to the poor.  You’re taking food away from poor people.

For some reason, these ideas tend to be promoted not by the poor but by individuals who have been successful.  Perhaps this is out of a sense of guilt because they have succeeded while others have not.  They do not feel guilty enough to take on the whole problem by themselves, however, by giving away a good share of their wealth.  Instead, they demand that others give away their wealth and use the force of government to cause this.

There also seems to be a feeling of superiority by this group of do-gooders over the people they want to help.  It is true that many of the do-gooders are highly educated and very intelligent, but they lock themselves into an echo chamber and never allow their idea that “government” can just do it all to be questioned.  (Many of the useful idiots tend to be highly educated and taught by professors who themselves have been isolated from the need to work in a real economy where costs must be balanced by revenues and where raising prices reduces the amount of revenue collected.  Because they have tenure, they are isolated from economics, so they are free to advocate for their theories without any real effects coming to them.)  The do-gooders, because they believe they are superior to those they wish to help, believe that others cannot make a better life for themselves through the path that the do-gooders themselves have taken – education, learning of skills, hard work, seeing to the needs of others – because others are inferior and not capable of taking their path.  Racism also often enters in here, with the do-gooders telling themselves that those of other races can’t make it due to racism by others (even though the do-gooders control most of the necessities for success like at least half of corporate board seats and all of university admissions), but deep-down the do-gooders believe that those of other races cannot make it due to a defect in their race.

Today the argument has resurrected itself in the idea of privilege.  The idea is that certain individuals have privilege, and therefore are able to be successful.  Those who are not privileged cannot improve their lot.  If someone does not have privilege but succeeds anyway, it is chalked up to blind luck that could not be replicated.  White males, in particular, have been singled out as privileged, although virtually anyone whose family has saved and worked to earn money to provide things like a college education or a stable home-life is seen as privileged.  Nevermind that the reason they are “privileged” is usually that their parents sacrificed and worked hard, spending a great deal of time providing things of need to others, to put them in that position.  Those who are seen as privileged are the ones being demonized in this journey through the old cycle of demonize, take, then oppress.  This is the way in which those who want to gain power this time are trying to convince the poor and middle class to put them into power:

People who are privileged have an unfair advantage and there is no way someone who is not privileged can succeed.  Put me in office and I’ll tax and punish the privileged to level the playing field.  If you have succeeded, you must have been successful or lucky, so you should feel guilty and support the righting of this great wrong.

To see an example of this philosophy, read The Funnel of Privilege by Bridget Casey.  Note that she talks first about how some are privileged and her envy of them when she was younger (envy is a powerful tool used by those seeking power), then describes how she was able to make it and get a degree despite not being privileged.  One would think that this would negate her whole argument and she would be advocating for free markets and encouraging others to follow her path.   Instead, she inexplicably concludes that others who are not privileged probably won’t be able to make it without special assistance.  For some reason she thinks that the path she chose is closed to others, either because things have changed or because she was somehow special – maybe she had the privilege of intelligence or just good fortune or something.  Note the arguments that emerge when I challenge her on this on Twitter, suggesting that others could improve their lives and move into the middle class and even the leagues of the wealthy by spending time trying to serve the needs of others through education and work like she did:

Notice that she first demonizes me, saying that my secret goal is to keep those in the middle class and those who are poor working as slaves for the wealthy.  (Somehow I’m part of this secret society trying to keep the poor down because I’m not for large, incentive robbing government programs that encourage people not to produce and thereby make society as a whole poorer.)  Again, the wealthy are seen as oppressors of the poor, only becoming wealthy because they took advantage of the poor.  My personal observations are that those who become wealthy tend to be very giving people who spend a great deal of effort creating businesses and things that greatly improve our lives.  They also make great sacrifices in order to build their businesses and provide for others.  I don’t know of anyone who became wealthy through a business who didn’t spend 12-hour days in the office at least.  (If you want to learn how to become wealthy without starting a business, but through investing, pick up a copy of The SmallIvy Book of Investing where I lay out the game plan needed that anyone with a middle-class income can follow.)

She also can’t understand why those in the middle-class would be against things like universal healthcare.  The reason if you use a little bit of logic is simple:  It is because those who aren’t wealthy can’t afford to pay for other healthcare if the public healthcare is of poor quality, so they lose their ability to choose their healthcare if they are taxed to pay for a public system.  Those who are wealthy can just buy better healthcare, education, etc… if they don’t like the public system.  They are free to travel the world if needed to get better things.  Those in the middle-class and the poor are not.

Certainly, those whose parents worked hard and put money away so that their children could go to college debt-free start out their adult lives on a better footing than those who didn’t and therefore start with a large student loan.  Certainly, those who grew up in a home where their parents made sure they did their homework and helped teach the lessons they didn’t understand from the classroom had an advantage over those who came home to an empty house.  Certainly, those who grew up in a mansion and were given a car when they turned 16 had an advantage.

But the things that will make those who were disadvantaged successful is the same things that will make those who are advantaged successful:  Gaining skills, working hard, choosing a good career path, meeting the needs of others, and spending less money than they make so that they can put money away and invest.  To do otherwise would make those who are advantaged fail just as it will make those who are disadvantaged fail.  If advantage were a guarantee of success, the wealthy families would always be wealthy, but more than half of second-generation wealthy lose their wealth and more than 80% of third-generation wealthy do.  It is behavior, not your starting point, that is the greatest factor in your success or failure.

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The post also draws comments from others who question their own success, thinking that maybe it is only because they are privileged.  (See Krista G’s comment below, where despite her coming from a modest background and working hard for her success, believes now that she somehow must have been privileged or she would not have been successful.)  Note also that they attack my narrative, that people who work to improve themselves and commit themselves to doing useful things for others can better their position in life.  My narrative is seen as keeping us from “making reforms that will make life better for EVERYONE,” where “making reforms” mean they wish to give the government more control and allow them to take money from the wealthy to fund public programs and my ideas are standing in their way.  Again, the demonization of those who object to their plan.  This is the useful idiots pushing the agenda of those who want to seize power by centralizing authority:

Hopefully, people won’t be fooled again this time.  People who are free are able to improve their lives.  There are thousands of people who are first-generation wealthy in free countries like the US.  There are millions of others who have entered the middle class despite a meager start.  The secret is spending time providing for the needs of others, spending less than you make, and investing to increase the rate of your wealth growth.  The way to do this last item is covered in The SmallIvy Book of Investing   for those interested.  The way to stay where you are is to become obsessed over things like privilege to the point where you give up and don’t try to succeed.  People who are successful will tell you, the harder you work the luckier you become.  

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

It’s Time for the Public Sector to Follow the Private in Retirement Plans


Let’s say that you went to a bed and breakfast, checked in, and went up to your room.  The room was a mess with bed-clothes strewn on the floor, breakfast dishes piled up on the table, and a big black ring around the whirlpool tub and soap suds near the drain at the bottom.  You are then told that you owe a $100 cleaning fee to get the room back in shape so that you can enjoy it.  At least, you might get to enjoy it, but then again they may need to raise the rates after you pay the cleaning fee, or maybe they’ll just shut the place down entirely.

You protest, saying that you were not the ones who used the room last and that the ones who did should pay the fee.  The host replies that the last people have gone, that someone needs to pay to have the room cleaned, and that the someone is you.  You try to back out of your reservation, but you’re told that you must pay the fee or they are calling the cops.

How would you feel?  Would you feel that you had a responsibility to pay the fee?  Would you begrudgingly do so, hoping that the next person would pick up the tab for you?  If you paid the fee, would you then feel entitled to having the fee paid for you by the next guest?  A guest who, just like you, hasn’t stayed in the room yet and had nothing to do with any bargain you make with the inn keeper.

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The same thing happens with things like public pension plans and Social Security.  People long ago made agreements with politicians long since gone to receive something far in the future in exchange for their services or tax money.  In the case of public workers, voters and residents forty years ago received services for which they paid some taxes, but salaries were low in exchange for promises of generous retirement pensions, free healthcare for life, and other benefits.  Those benefits were not paid for by the residents who hired the politicians who made those deals.  They only paid for the salaries of the workers and in exchange they received various city, state, and federal services. Now that the workers are retiring or have been retired, the next generation is expected to pay for those retirement benefits.  This next generation is paying for the retirement of workers from which they received no benefit based on agreements they did not make.  Kind of like needing to pay for a room to be cleaned that you did not use.

Social Security is the same way.  Back in the 1930’s, people voted for President Roosevelt and a Congress who created Social Security, originally charging about 2% of pay in exchange for just enough retirement income to avoid starvation and to keep the lights on.  Voters at the time agreed to pay these taxes and pay out benefits to people who were starting their retirement at that point even though those people had paid next to nothing into the system, in exchange for the promise that they would receive a payment in the future.  As it looked like more people were going to retire than the system could sustain, the tax rates were raised in anticipation of needing more money, eventually reaching more than 12% of pay even though benefits remained flat.  This would have helped, but all of the extra money was spent as soon as it was collected, leading to the current situation where benefits will need to be cut in the near future unless taxes are raised further.  Again, people who had no part in the agreement are expected to pay up.

What if they say, “No?”  What if they decide to cancel Social Security, or cancel public pensions?  If they are forced to pay for these items because they are in the minority, what if they just decide to work minimal amounts, or quit work and raise a garden, producing just enough to feed themselves?  What if they move away to other countries or simply stop working and go on the public dole themselves?  What then?  Are you going to try to force them to work?  Isn’t that called, “slavery?”

Sorry, but those in the next generation are no more morally obligated to pay these bills than you would be if you would be obligated to pay for the cleaning of a room if you showed up to a bed and breakfast with a dirty room.  They did not make this agreement.  They did not continue to vote the politicians in who made these arrangements.  They did not look the other way while all of the extra money raised for Social Security was blown on battleships and public rail lines.  It is neither their agreement nor their responsibility.

“But someone needs to pay the bill,” you say.  There is no good answer for this.  Somebody will feel some pain because of bad agreements made years ago.  Perhaps the pain should be spread around a bit, but perhaps those who made the deals should take a greater share of the pain.

Going forward there is a better way.  Public employees and public retirement plans should follow the lead of private employers.  Rather than a future promise, retirement should be paid for as-you-go.  If a politician promises a lavish retirement in the future, the city, state, or Federal government should pay for their share of it right away by putting money away into an account owned by the employee.  Future governments are free to stop putting money into the account, just as the employee is free to leave and find another job if the retirement benefits being funded are not to his/her liking.  When the employee retires, his/her retirement is paid for and there is no need to rely on future taxpayers.

Likewise, money for Social Security should be paid into private accounts.  These could be invested automatically in broad stock and bond market index funds to eliminate the risk of poor personal management.  When individuals are ready to retire, they would have their own account and not need to rely on future workers contributing in order to continue to receive a check.  Isn’t that a better way?

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Become An Owner Instead of a Worker


When we’re young, we trade our health for money.  We work long hours.  We lift heavy things and wear down our tendons. We spend hours typing or doing other repetitive motions that cause carpal tunnel syndrome.  We spend hours on our feet and wear down the disks in our backs and develop heel spurs.

We trade this wonderful gift of youth and health that we’ve been given, the ability to keep pushing it for may hours, to bounce back when we fall down and heal fast when we get cut, for cash by working way too many hours.  We go in before dawn and leave after dark, never getting out to see the sun and the woods and the oceans.  We work hard to go on a vacation, which is then rushed and filled with work thoughts and emails back to the office the whole time.  We buy large, beautiful homes that we spend all of our free time maintaining and cleaning when we aren’t working to pay the mortgage.  We buy things on credit and then spend a quarter to half of our time working to pay interest payments.

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While we’re young we can make extra money by just pushing it a little harder.  We can make that car payment if we work overtime on weekends so we can drive that shiny new car to work and have it sit in the parking lot all day, slowly decaying away.   We can take on that second job and get all of the cable packages and five different web streaming services.  We can keep buying clothes to impress people we don’t like and buying all of the latest gadgets to look good for people we don’t even know.

When we get old, we trade our money for health.  Any money we’ve saved up through those long hours of work goes to treatments, surgeries, and drugs to reduce the pain our weary bodies feel.  We spend money to try to have the ability to walk and run and jump and heal like we did so easily while we were young.  We get surgeries to be able to walk after long hours of carrying heavy loads have destroyed our knees.  We buy prescriptions to lower our blood pressure after years of sitting idle at a desk, eating poorly, and letting our health decay.

Stop.  Stop today.  Stop right this minute and change your life.

Become an owner instead of a worker.  Instead of getting that new car, drive your old one for a few more years and send those car payments you would have made into a stock mutual fund and become an owner in a group of companies.  Buy a smaller house for cash and invest the money you save on interest.  Stop buying things to impress people and just buy what you need so that you can spend time with your family who don’t care what the label on your blouse or jeans says.

Start building a portfolio so that you will be getting dividend payments and capital gains instead of paying interest payments and penalties.  Let others work for you so that you don’t need to work those extra hours.  Expand your lifestyle by waiting a little while to buy things, instead investing the money in mutual funds, then using the distributions from those mutual funds to add to your income.  Direct some of that money back into buy more mutual funds, and your income will expand on its own.

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Everybody can become an owner.  You can start a mutual fund account with Schwab for only $1.  You can start investing through Vanguard funds for only $3,000 ($1,000 if you start a retirement account).  Start an account and start sending a little of your paycheck in each month to build your wealth.  Own things.  Build things.  Stop just using all of your effort to generate entropy.  Stop having your money flow into your back account through direct deposit and then back out again to bills through auto pay without your even seeing it.

The next SmallIvy book, Cash Flow Your Way to Wealth, will be coming out in about a month.  It gives the game plan to go from worker to owner.  Subscribe to this blog to make sure you get your copy when the time comes and don’t miss out.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

How to Save for Retirement with Coffee



Coffee drinks are all the rage ever since Starbucks expanded to every corner and convinced everyone that they should pay $6.00 for a cup of coffee on the way into work.  Being a graduate of UC Berkeley, which I consider to be the center of the coffee-house universe, I can’t stand Starbucks.  You see, a coffee-house is supposed to be an experience.  You go and order coffee drinks made with machinery that you could not afford to possess, get served in fancy glasses and cups, and then sit for an hour or two, sipping your beverage and pondering life.  You can also get together with friends and relax on a nice couch and play a board game or two over a latte and scones.    When Starbucks came along, they doubled the price you would normally pay for coffee, plus everything was suddenly served in paper cups instead of a real glass or mug.  Now the experience is like going and paying for a movie, only to be handed a DVD to take home and watch.  Totally missing the point!  (Starbucks likes to think of themselves as environmental, but now thanks to their influence instead of people reusing glasses and mugs each time they get a cup, everyone is getting a paper cup, a cardboard wrapper so they don’t burn their hands, and a plastic lid.  Not very green!)

Still, everyone around me seems to be stopping off at Starbucks on their way into work.  I’ve also started to see people with bottles of Starbucks iced coffee in the refrigerator or at their desk.  At least in this case Starbucks put the drinks in a nice bottle.  I’m surprised they don’t come in a plastic soda bottle, given how much Starbucks degraded the coffee shop experience.

  

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That got me thinking.  Here is a great way that people could save a lot of money, perhaps so that they could start to contribute to a retirement account, with very little if any sacrifice on their part.  Let’s say you drink 2-3 of those Starbucks iced coffees per day.  The Starbucks website lists their suggested retail price at $4.99 to $5.99 for a pack of four.  That’s about  $3-$4.50 per day if you drink 2-3 of them.  If you do this each work week, that’s $720-$1,080 in coffee per year.  Invested in growth stocks, getting 12% per year from age 22 to age 70, that’s between $1.5 M and $2.3 M for retirement.  (You can check my numbers in the investment calculator here, and play around with your own numbers of you like.  Note the most amazing thing about that calculation is that you only contribute something like $32,000 yourself – it is investing and compounding that takes care of the rest!)

But wait – what about your coffee fix?  Well, those bottles are totally washable and reusable.  Start off by buying a couple of 4-packs, then save and wash out the bottles.  You could even use the dishwasher if you’re lazy.  Then, get some good coffee (check out some of the selections below if you wish).  You can get something like 50 cups of coffee from each pound of coffee, so with a quality coffee selling for about $10 per pound, you can make about 50 iced coffee bottles for about 20 cents each from a pound of coffee beans.

 

The recipe would be something like:

  • While still hot, dissolve 1/2 cup sugar in 4 cups of coffee.  If desired, add a flavoring.
  • Once cool, in a pitcher, add 1 cup milk, or half milk and half cream, and mix.
  • Divide between 4 cleaned bottles, using a funnel.  Add milk to fill bottles as desired.
  • Cap and store in the refrigerator until ready to take to work or drink at home.

Note you could make 8 cups of coffee and make eight bottles by doubling the recipe, or even make more at the start of the week if desired to save time later in the week.  The cost for everything will be something like $0.30-$0.40, depending on whether you use only milk or milk and cream, how strong you make the coffee, and how much sugar you add.  You could also make it lower calorie by using skim milk and less sugar.

      

So there you have it.  You can save for retirement, still have your coffee, and even reduce the amount of waste you generate by reusing bottles over-and-over.  You can have better coffee, be able to reduce the calories you’re consuming if desired, or even make it especially decadent by using more cream and extra sugar and flavorings if desired for a special treat now and then.  It’s really a win-win for everyone except perhaps Starbucks.  If you feel bad for them, you could use Starbucks coffee beans.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

A Failure of Government and the United Airlines Passenger Debacle


There is probably few people who haven’t seen the absurd video of the passenger being forcibly dragged off of a United Airlines flight.  Obviously this was a grave public relations error by United Airlines, and I hope the man in the video gets a lot of money from them.  In business, you put the customer first.  Bumping passengers from the plane so that four employees could take the flight was, in a word, stupid.  United could have:

  1.  Not overbooked the flight.
  2. Offered more money for people to volunteer to wait for the next one. (Someone would have volunteered if enough money were offered.)
  3. In the worst case, rent a car and have your employees drive the four hours to Louisville for the flight the next day.  As it was, they probably took longer to get there than they would have driving.

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The truth is, however, that scene could have been any of the major airlines.  They all overbook, and they all force people to miss their flight if they cannot get volunteers.  United was just the lucky ones who had the right combination of a clueless flight crew, a frustrated passenger, and an over-the-top group of security guards.

         

The real issue isn’t the airlines (or it isn’t just the airlines).  The issue is that the airlines have an effective monopoly on air travel, or at least there is little enough competition that an airline can say, “Gee, I should charge $50 to check a bag,” and there aren’t isn’t enough choice for passengers to tell them where they can stick their baggage fees.  This is one instance where government regulation is needed since there is not enough room for enough competitors to make free enterprise work.  There are only so many spots at the airports, and the air traffic control systems can only handle so many planes, and it is so expensive to start an airline that few people can do so.  This means there is not enough competition, so the airlines can basically abuse customers all they want, because “Where you gonna go?”

Here is where government should be stepping in to protect the consumers.   You would think that the government would be making sure the paying customers, many of whom have very little choice but to fly occasionally, were protected from price gouging and abuse.  They are falling down on their duty, and in many cases making things worse.   Why are airlines able to charge big fees for bags, or food on the plane, or even the ability to have enough leg room to avoid dying of a blood clot?  And why are they allowed to put so many seats on the planes and make it so uncomfortable?  Why are airport food prices so high, and why are they able to charge so much for things like water when every passenger is forced to buy water and drinks since they cannot bring them through security?  Given the monopoly airlines and vendors at the airports have, where is the government regulation protecting the citizens – the ones who elected them?  Instead, governments are conspiring with the airlines and vendors to get more money from the passengers in the form of taxes and fees.

Think of what had happened to that man before the video you saw, as happens to everyone foolish enough to take a flight:

  1.  He left home early, worried that he might hit traffic and be late to check in.  If he was late, he would miss his flight and lose his money.
  2. Once he got to the parking lot, he needed to wind all around to get into the lot, then drag his bags to a shuttle.  Hopefully the shuttle wasn’t full when it got to his stop.  No one helped him drag his bags up the stairs onto the bus, and everyone was impatient with him.
  3. When he got to the terminal, he had to drag his bags down, walk who knows how far into the building, and then drag his bags all along the concourse to the line for his airline.
  4. He had to wait, perhaps a half hour, for a kiosk to open up.  He then had to drag out his itinerary, figure out where the confirmation number was, pull out a credit card to verify his identity, and check himself in.  If he forgot something of had to wait in line too long, he might miss his flight.

                            

5.  After checking in, he had to wait for the airline attendant to print his luggage tags and give them to him.  He probably received no greeting.  He had to worry that his bags weighed too much, or he’d pay a $100 fee, plus he had to pay $50 per bag regardless.  When the airline rep was done, if he was lucky, she dropped the bags, face down so that things in the pouches got smashed, on a conveyor behind her.  If not, he had to drag his bags to another line and wait for them to be inspected by TSA.  He had to wonder as he left them if they would actually make it on the plane.

6.  After checking in the bags, he had to find the security lines for his gate.  He probably got no directions to the gate from the check-in counter and had to look all over his boarding pass to figure out which gate was his.  If he messed up, he would miss his flight.

7.  Once in the security lines, he probably had to wait 20 minutes to reach the first TSA agent, who probably gruffly asked for his ID and looked at him like he was a serial killer.  He may have gotten a nice greeting (the first ones are usually the most professional), but he would be made to feel that if he was lucky and did everything right, he would be allowed to proceed.  Otherwise, he would miss his flight.

8.  After getting his ID checked, he would then wait in an even longer line, wondering if he was going to make it to the gate on time or miss his flight.  Finally he would be told by an agent yelling to the crown that he needed to take off his shoes, belt, hats, coats, and empty his pockets entirely.  He would then need to put his wallet, passport, and everything else of value into the x-ray machine , wondering if someone would steal it on the other side before he got a chance to get to it since his stuff might get through before he cleared the scanners.  He probably hoped that he had not lost his ID in the rush and confusion.

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9.  After waiting for the people in front of him, and having to walk where lots of people who didn’t think to wear socks had trod just before him, an agent would then motion for him to enter the scanner where he would be forced to assume the surrender position – hands up, palms out — while his naked body was revealed to a total stranger in the other room.

10.  If anything was detected in his pockets, or if he was just lucky number 22, he would be made to go to a little cubicle, where he would be patted down all over his body, including his private parts.  Through the whole, humiliating experience, he would be wondering if he would miss his flight.

11.  After finally getting through security and struggling to get dressed again, he would need to stop by a shop to get some water since he couldn’t carry any through.  Rather than paying the $1 or so as he would have seen outside of the airport, the price would be $4 per bottle.  The government has done nothing to protect him from this price gouging.  Instead, the city and state government have probably set the rents really high, basically making the vendor charge a huge price for water.  He is captive in the airport, so he has no choice but to pay the price or go thirsty.

12.  At the gate, he would be required to wait for the flight to board, probably not told that there was a delay until the time at which he was to board had long passed.  If he were late, he’d miss the flight and lose his money.  If the plane was late, too bad.

13.  During boarding, he would need to wait while all of the more important people boarded the plane.  He would finally have his section called, need to wait in a long line to get through the doors, then wait in an even longer line as people slowly pushed their way past the folks in 1st class who were getting their first drinks, and make his way slowly back into the cattle section as people fought to get their bags stowed.  He probably didn’t have any room over his seat for his bag by the time he got there since someone sitting behind him took the space for one of her large bags.

14.  Finally, after all of this, he made his way into his tiny seat with no leg room that was just big enough to wedge himself into.

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Then, he is told he would need to leave so that the airline could have some of their employees fly.  Where is the government to:

  1.   Make parking rates reasonable.
  2.  Prevent baggage fees and other price-gouging fees.
  3.  Provide a smooth, friendly, courteous screening process.
  4. Ensure prices for concessions are reasonable, given the monopoly they have created (or maybe require the airlines give you a $0.25 bottle of water after you’ve paid $400 for a flight).
  5.  Prevent airlines from kicking you off of the plane after you have paid for your ticket and shown up on time.

Where government regulation is needed, they have failed miserably.

What do you think?  Please leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

A Love Letter to the American Press


Mushrooms

Dear American Press,

You have always been an important part of my life.  From a young age I remember sitting at the breakfast bar in our house, reading through the local newspaper.  When I was younger still, I remember that they brightly colored Sunday comics were always anticipated and savored each week.  Through my teens I watched the local and national news each night.  Your anchors and reporters became uncles and aunts to me who would visit each night to tell about things happening around town, around the nation, and around the world.  I particularly remember being impressed by the local weather man, Stu Tracy, who would throw up the suns and rain symbols that would magnetically stick to the map.  I never understood how he would remember just where each symbol would go and was disappointed when he stopped creating the map real-time, instead having it setup before the forecast.

In college I made the decision to spend an hour each day in a particular chair in the student union and pour through the Wall Street Journal, cover-to-cover, as well as Barrons on the day it came out.  I also remember the start of CNN and ’round-the-clock coverage during the first Gulf War.  How amazing it was to be able to be there in Baghdad as the American bombs were falling.  I remember the chill in the air as Saddam Hussein fired scuds at American troops and Israeli cities that could be filled with chemical agents, never knowing where one might land.

              

Yes, I have loved you for all of my life.  But to truly love someone also means to be truthful when that person is making bad decisions that are hurting her.  To act like things were just fine when someone you love it tearing herself apart is not love, but enabling.  Having someone speak up may bring about anger and resentment, sometimes causing an irreconcilable split in the relationship.  It would be far easier to stay silent and not bring up difficult issues, but that would not be love.  God says to treat others as we would like to be treated; that should go doubly for someone we love.  If I were destroying my life, I would want someone to tell me.  So here goes….

Your reporting is full of incomplete and biased information – even some flat-out lies at times – and that is causing people to not trust you anymore.

OK – there it is.  Right out on-the-table.  I know that you think that people are generally ignorant and even dull, such that they would not know that you were trying to manipulate them through the facts you tell and the ones you leave out, the words you choose, and even the stories you choose to cover and those you don’t.  But they are seeing right through you and it is causing them to turn away.   They don’t want to be around you because you’re trying to get them to believe an alternative reality and then to act accordingly.  You want them to think that nationalized health care is a great thing, while they see the premiums rise and their doctor networks shrink.  You want them to believe that higher taxes, government programs, and strong regulations are the road to happiness for the middle and poverty class, but they have seen jobs disappear, wages stagnate or decline, and poverty increase as these things have come to pass.

Bottom line:  They no longer feel like they can trust you.

          

Need a little Honesty?  It’s such a lonely word.

And you see, trust is everything for you.  People don’t buy your papers or watch your newscasts because they like your witty writing and snappy graphics.  They don’t give a couple of hours of their valuable time each day to watch the evening news and read the morning paper because they want to be told what they should think, particularly when there are such clear holes in that thinking.  They do so because they have a need to know the truth about things for which they can not discover the facts themselves.  They cannot go to Iraq or Afghanistan and see the conditions and the interaction between the local people and American troops.  They cannot spend all day in Washington D.C. and see if their representatives are passing laws with which they agree and spending the people’s money wisely.  They cannot go to the police stations across the country and see if laws are being enforced fairly and effectively, if certain cities are safe or dangerous, and if government agencies are being run efficiently.  The desperately need someone to do this for them so that they then have the information that they need to make the right decisions.  

You are supposed to be the one who finds out the truth for them.

This is why your prevarication, equivocation, replacement of opponent viewpoints with straw man arguments, and manipulation of the facts is so damaging in your relationship with them.  If your product is truth, “All the news that is fit to print,” as one of your publications says, then damaging that trust is the worst possible thing that you could do to them.  They can tolerate mistakes, but they cannot tolerate lies and distortion.  There are plenty of more interesting things they could watch on TV for entertainment or tabloids they could find in the checkout line if they want to read great fictional stories.  They go to you for the truth, but you have let them down time and again, and they know it. 

                   

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Right now, I see that you are shaking your head.  You say that you may stretch things from time-to-time, but your overall purpose is to guide people to a bigger truth and the way you see the world, so changing things around once in a while or selectively leaving some things out that would just confuse people is justifiable.  And that is a big part of the problem.

You lack so much diversity of thought, since all of your employees coming from places where only one point-of-view was allowed, that you don’t even know that you are seeing the world through terribly distorting lenses.

People – evil people who want to seize control in America by centralizing power in a large government – have gone into the universities, then even the high school and grade schools, and filled them with people who all have the mindset that big government is good and socialism (and even communism) are better than free enterprise and capitalism.  The education you received did not include all of the facts, plus it included a lot of unverified conjectures.  If anyone questioned what was presented as facts, they were chastised and humiliated by the teacher and their peers.  People who initially didn’t believe in socialism either dropped out of the major or were made to change their minds.  They may have seen the inconsistencies, but they felt it was for the greater good that they just go along.  And so they came out of the classrooms and went into the newsrooms unable to objectively examine the facts.  They were sent with a mission to convince the readers and viewers that the orthodoxy they were taught in their schools is the right one.  

They became propagandists rather than journalists, even if they did not realize it.

Even once your journalists enter their careers, they continue to shelter themselves from other opinions.  Your newsrooms are echo chambers where everyone agrees with what they say, and your employees live in cities where everyone feels the same.  They are so sheltered that they come to think that their opinions are those of the average American.  They also think that they are far smarter than most people.  That everyone else has the intellect of a child compared to them.  Smart people think the way they do – anyone else is either ignorant or trying to take advantage of the foolish.  Hmm….  They are so convinced that they know better that even when they are proven wrong, such as in the last election when they were sure which candidate would win and the other did, they think there must be some sort of mistake.  Or some boogeyman like the Russians changed things.

          

And another thing….

Referring to the land occupying 90% of the United States as “fly over country” and thinking that those who live there are unimportant isn’t a good way to keep readers and viewers.

Now before you say that they watched and they read and they listened just fine before the internet came along and took their attention, let me counter.  You are right that fewer people are reading your newspapers and watching your evening news casts because of the internet, but it is not because the internet is more exciting or convenient.  If that were the case, people would be flocking to your online content as they stopped getting a daily paper.  But they aren’t, are they?  And no, it isn’t because of right-wing propaganda from talk radio and Fox News either, although both of those sources are part of your problem. 

Alternative news sources like the internet, Fox news, and talk radio are providing the facts that you are leaving out.

They are also providing alternative viewpoints and explanations.  They are giving different reasons why things may happen as they do.  They give different predictions about the effects of policies and government actions.  They also provide logical explanations for their predictions and assessments, rather than just focusing on people’s emotions or dictating how people should feel and what they should do.  They don’t just provide conjecture, using a snooty voice to make their listeners think they need to think the same way or they are stupid.  “Obviously, trickle down economics don’t work.”  “Even a fool should know that raising tax rates brings in more money for the government.”    The alternative news sources are resonating with the hearts of people because those who have worked a real job, built something, or had the real experience of trying to raise a family can tell logical explanations and ideas from, well, what they’re stepping in sometimes in fly over country.

So, it is with great sadness that I now need to tell you that I’m leaving. I no longer want you to show up on my doorstep in the morning.  I won’t be there with you before dinner or at night before going to bed.  I won’t waste my time listening to what you have to say, because I cannot trust what you are telling me and I have better things to do.  I also will not be telling you what I have to say, by writing letters to your editors, since doing so only helps you continue on your destructive course and gives you hope that continuing along the same path will eventual lead you to a better place.

No, it is better to step away and let you hit rock bottom, for it is often only by hitting rock bottom that people decide that they need to change.  I wish you best of luck.

Take care of yourself, because I won’t be there until you change your ways.

With great sadness, love,

SI

Got a comment?  Please use the form below to let me know what you think.  Please also leave a comment or contact me via vtsioriginal@yahoo.com if you’ve got an investing question you’d like to see featured.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Sample from the Cash Flow Book: The Cash Flow Diagram.


fig1basiccashflow

As I’m working on the second book, Cash Flow Your Way to Wealth, I thought I would put out some samples from the book.  Here is part of Chapter 1, which presents the basic idea of personal cash flow and the cash flow diagram.  Look for the book to come out in a couple of months.  Enjoy!  SI

Most people mistake income for wealth, but the two are very different things. Income is the amount of money that you have coming into your household – the size of the stream entering your canyon. Wealth is the storage of money that you have – the level of the lake in your canyon. Huge amounts of water flow through the Grand Canyon in the Colorado River each year, yet there is far less water in the Grand Canyon than there is in Lake Mead behind the Hoover Dam. The difference is that in one case the water is allowed to flow right through, where in the second it is stored.

People who have high incomes tend to drive fancy cars, have big houses, eat at expensive restaurants, and wear expensive clothes. People who have large amounts of wealth tend to drive modest cars, have modest houses, eat at home a lot, and wear average clothing. There are a few extremely wealthy individuals who do display their wealth somewhat, but even then the cost of their lifestyles are well within their income level.

Luckily, you don’t need the income of Bill Gates to become wealthy. You just need to start storing some of your income, then invest to increase your income. This is not an overnight process – it takes time. Decades, in fact. But with a bit of persistence and patience, most people can join the ranks of the wealthy. Because most people spend all that they make and then borrow more, it isn’t that difficult to become one of the top 10% or even top 1% of wealthy individuals, currently around $1 M and $8 M, respectively.

Now let’s get to the heart of the matter – the cash flow diagram. A lot of people create budgets. Budgets are fine, but a budget is a flat canyon with no dam – you balance inflows and outflows with nothing saved and stored up when you’re through. A cash flow diagram directs your money into investments, which in turn create more income, increasing the size of the stream entering your canyon. In this chapter we’ll introduce the diagram and give an overview of each of the boxes that comprise it. Then, for the rest of the book we’ll go into each of the boxes in detail and show how to setup your own cash flow to build wealth.

A basic cash flow diagram is shown in Figure 1. Income flows in through Box A, rests briefly in Box B (Cash on Hand), then is distributed to various expenses or savings/investments. Income includes your paycheck, any income you make from side jobs, investment income, alimony, and gifts from uncle Bob. Cash-on-hand is your bank account or checking account – money that you have readily available for use whenever you want. Expenses are money flowing out of your bank account, never to be seen again. Investments are places where you put money at risk in order to generate more income.

Cash flow through your cash-on-hand is required to follow the familiar PISO equation:

Production + Inflow = (Change in) Storage + Outflow.

This says that all money produced by your investments, plus any inflow from salary and other sources, must equal the change in your cash-on-hand plus outflows to expenses. Rearranging we have:

(Change in) Storage = Production + Inflow – Outflow.

In other words, if you want to increase your storage of money (your wealth), you need to make the sum of your production of money (investment returns) plus your income (salaries, etc…) exceed your outflows (expenses). Or, as your grandma used to say,

Spend less than you make.”

What a simple concept: If you want to increase the amount of wealth you have, spend less than you make. And yet few people ever build any real wealth over their lifetimes, so few people follow this principle. In fact, most people spend more than they make, so they are destroying wealth before they ever have the chance to earn it. No wonder the fiscal health of society is so poor!

OK – so this all makes sense, but what does it have to do with Figure 1, the cash flow diagram? Well, your inflows – your income – is given in Box A. Box B is your change in wealth storage. Boxes C, D, and E are expenses, which are outflows of cash. Finally, Boxes F and G are investments, producers of wealth.

Notice that there is an arrow from Box A to Box B. This means that Box A increases Box B – your income increases your cash on hand, just as inflows increase the storage of wealth. There are arrows from Box B to boxes C, D, and E. These are the outflows, which decrease the amount of wealth you have stored. If the cash flowing in from Box A exceeds the cash flowing out through to Boxes C, D, and E, your wealth will increase. If the opposite is true and the flows to Boxes C, D, and E exceed cash flowing in from Box A, your storage of wealth will decrease. When everything is balanced, such that inflows from Box A exactly equal outflows to Boxes C-E, then your wealth will remain constant.

Going back to our vision of the river and the canyon, the canyon is Box B. The water flowing into the canyon is the arrow from Box A into Box B. Water flowing out of the canyon are the arrows to Boxes C-E. If you have a small salary, the money flowing from Box A to Box B will be small – a creek. If you have a large income, it will be substantial – a raging river. It doesn’t matter how much money is coming into Box B from income, however, if the amount flowing out of Box B to C-E is equal to or greater than the amount flowing in – the water in the canyon will never rise, it may  even decline. The amount of wealth stored in Box B will never increase or it will even decrease until there is no more stored wealth.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Hey Republicans – Here’s Your Chance. Don’t Blow It.


McKiosk?

                        McKiosk?

A couple of months ago, it looked like America was going to choose Socialism.  Like the Soviet Union and Venezuela, we would have seen jobs (continue to) stagnate, inflation rise, cronyism and corruption become the only way to become wealthy, and government in every aspect of our lives.  MSNBC was writing the obituary of the Republican party, and deservedly so, given the pitiful performance we saw the last time Republicans were in control of the White House.

Instead, Republicans have gained almost unprecedented control.  Not only do they control both houses of Congress and the White House, but the Governorships and legislatures of 25 states.  They now have the power to get most legislation that they want through and create or do away with all sorts of regulations.  They have gotten here by campaigning against an ever-expanding government, increased government control of virtually every aspect of the economy, and large amounts of government debt.  The question now is, will the Republicans actually do what they promised and replace government control with free enterprise and free markets, or is it all just talk and they’ll continue to use regulation and tax policies to enrich their friends as they’ve done in the past?

The last Republican President that we had who truly believed in the free market was President Reagan, and like President-Elect Trump, those in the Republican establishment hated him.  But President Reagan understood how government policies, in particular tax policies, affected the economy.  As he explained, as a high earning individual paying the highest tax rates on the last dollars of his income, there was a strong incentive for him to limit how many movies he made a year.  With progressive tax rates very high beyond a certain level of earnings, the second, third, and forth movies he made in a year would result in much less of a payday than the first one.  Since he was getting so little, relatively, there was a strong incentive for him to sit at the pool rather than get up and go into the studio, or travel somewhere in live in a trailer for several months, after he had made the first movie or two and had enough income to take care of his needs.

But movies don’t just make money for the stars.  There is a whole movie crew, caterers, set-builders, hotel workers, gas station attendants, restaurant workers, theater workers, and theater supplier network that benefits by more movies being made.  If Ronald Reagan just sat home rather than make more movies, there would be less work for these individuals.  Most of these people were not the wealthy, but the working class and those just starting in the economy.

So President Reagan cut the tax rates in the middle of a dismal recession, ignoring the cries that he would destroy government revenues and hurt the economy.  The terms, “trickle-down economics” and “Reaganomics,” were coined to mock the President and his policies.  What followed was an economic expansion that continued for 19 years until the higher tax rates imposed by Presidents George H.W. Bush and Bill Clinton brought the expansion to an end.  Instead of falling, government revenues actually grew with the economy.

Today, as government has taken control of the healthcare markets, we’ve seen premiums prices and deductibles soar.  More distressing, we’ve seen provider networks shrink and many doctors leave the market.  For the first time in modern American history we’re seeing people having difficulty getting the care they need because there are no providers that take their insurance near them and waiting times are growing to see the few that remain.  Imagine needing a heart surgery immediately and being told that it will be a month or two before you can get into the operating room!

The answers to America’s healthcare costs are simple and based upon free-enterprise principles.  Require everyone to save some of their money so that they’ll be able to pay for their own basic care out-of-pocket.  This will cut costs for everyone who is paying since they won’t need to pay for others’ medical care and since the costs for billing by the doctor’s office will be less.  Require everyone to get a major medical insurance policy so that they’ll be covered should a major health event occur.   Require doctors post their true, no-kidding prices in a way that would allow smart phone apps and websites to direct patients to the low-cost providers in their area.  This will eliminate the inefficient market that currently exists that causes aspirin to cost $10 each at a hospital or the same procedure to be $5000 at one clinic and $700 across town at another.  Get patients to care about the costs they are paying.  Get healthcare providers to compete for patients so they are motivated to improve quality and/or make their practices efficient.  Expand the deductibility of charitable giving to hospitals and clinics that treat those who cannot pay so those who would otherwise fall through the cracks could be covered.

You’ll notice above that I am suggesting the government require people to do things like save for healthcare and buy major medical insurance, which is not a free enterprise principle.  As with auto insurance, there are a lot of irresponsible people who will not save for healthcare or buy major medical insurance unless they are required to do so, so I do believe there is a government role to ensure people do the responsible thing.  This protects both them and society from the burden they will impose when they are not responsible.  True free-enterprise would be to allow those who don’t save to go without healthcare as a motivator to be responsible, but obviously that is not a choice in a compassionate society since there would always be some individuals who would get caught, so the requirement to at least save and buy insurance for major events, while not dictating how that money is saved and having competition among insurance providers, will strike a good balance that protects both society and individual freedom.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Five Economic Reasons to Like a Trump Presidency


Ask SmallIvy

So about half of the country is happy to see Donald Trump as the President Elect, while the other half is freaking out.  At least Donald Trump hasn’t made up a little sign that says “The Office of the President Elect”  for the podium when he speaks like Obama did in 2008.  I’m sure that there will be things that President Trump will do that will be disappointing.  From a purely economic standpoint, however, there are reasons to be happy to see a President Trump, beyond just the huge rally that the stock market has made since the results of the election were announced.  Here are a few:

  1. Full-Time Work.  You may have noticed that there have been a lot of people in part-time work since about 2011.  A big reason for this is that part of the Affordable Care Act, aka “Obamacare,” requires that employers who have 50 or more full-time employees to provide extensive, expensive health insurance for their employees.  And full-time employee was defined as working more than 30 hours per week.  For an employer, following the law might mean that adding just one more employee to your small business would mean a new bill for $500,000 or more added to your expenses.  This has resulted in a lot of businesses keeping most workers at 29 hours per week.  This meant that not only did people still not have health insurance, but they got less pay as well.  If Trump repeals Obamacare as promised, this restriction should go away and employers should start offering full-time work again.
  2.  Lower Corporate Taxes.  Trump has promised to lower corporate taxes to 15% from their current levels in the 30’s.  While you may be upset that these “evil corporations” will now be paying less in taxes than they have been, realize that the corporations don’t really pay the taxes – you do.  Taxes are just a cost of doing business, so if the government charges a corporation more in taxes, they just raise their prices (and/or lower their wages).  Taxes also have no effect on the salaries of the chief executives.  If anything, if a company makes higher revenues because their prices are higher, the CEO may make a higher salary since it is a smaller fraction of the size of the business.  If corporate taxes are cut, expect for prices to fall, and maybe for worker salaries to rise ( a small amount).
  3. Less Regulation.  Trump has also promised to cut regulations on businesses.  And these aren’t regulations like “don’t make products that kill people.”  These are regulations like “fill out all of this paperwork that no one reads.”  This is just a cost which once again results in prices of goods and services being higher, because, once again, the costs just get passed on to the consumer.  Cutting regulations will also mean that fewer people will be generating paperwork that no one reads, which means maybe they’ll be making something useful.  The more people there are making useful things, the richer our society is and the more there is to go around.
  4. Actually Affordable Health Insurance.  A prime issue with the affordable care act is that it requires everyone to pay for insurance that covers everything  (after you pay a huge amount in premiums and a super-high deductible).  You can’t choose to go with a cheaper policy that you can afford that will cover big things, but not the smaller things.  Think of it as being forced to buy auto insurance that covers new tires and oil changes when all you really want is collision.  Repealing Obamacare will allow insurers to sell major medical plans again.  These will allow people to buy coverage for when they’re in the hospital, but not include all of the little things that drive the premiums up.  Combine this with more transparency in health care prices (like requiring hospitals and doctors to post the prices they actually charge like other businesses do) and you’ll see healthcare costs fall to the point where they are affordable.
  5. A Faster-Moving Economy.  After the market crash of 1929, the US stayed in recession until about the time we entered  WWII.  A big reason was that the Roosevelt Administration was passing all sorts of worker regulations like minimum wages and restrictions of lay-offs and firings.  This was great if you had a job, but it made a lot of companies leery to hire anyone.  The Affordable Care Act and Dodd-Frank have caused a slow economy as well ever since the 2008 crash, although not as bad as the 1930’s (because the crash wasn’t as bad as the 1930’s).  More recent Executive Orders and regulations requiring employers to treat salary workers at relatively high pay levels like wage employees, including paying overtime, has resulted in employers restricting the hours of those employees, making it tough for them to advance.  Look for a President Trump to cut these regulations and rescind these Executive Orders, which will result in a hotter economy and more jobs.

So there you have it:  Full-time work, lower prices, less wasted time at work, affordable health insurance, and more jobs with higher salaries if President-Elect Trump actually carries through with his promises.  No wonder the markets are shooting up..

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

A Better Welfare System


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An ever-growing share of US Government spending is going towards welfare programs, including food stamps, child care, housing, medical care, preschool, and even debit cards with a certain amount of spending cash.  And yet there are still children going hungry over the summer and weekends because they aren’t in school and the adults who should care for them don’t, and therefore they don’t get meals provided.  Most schools now offer breakfast and lunch.  Many soon will probably offer dinner and meals during summers and weekends (some are already starting).

The fundamental issue with the current welfare system is the same one that is always seen with any sort of central planning:  It is impossible for a few individuals, no matter how well-intentioned, to do what is best for millions of different people.  As a result, some people abuse the system.   Politician then try to put in safeguards to stop the abuse, usually in the form of additional hoops to jump through. This results in the people who really need help finding it extremely difficult to get the help they need.  And yet those who abuse the system still find a way to do so.

Another issue is that, with central planning, it is just easier to send out a check than it is to do what is needed to make sure the money is spent prudently.  We’re sending money to people, many of whom have already shown that they do not handle money properly and do not make good life choices, and then expect them to somehow take care of their needs in a conscientious manner.  The issue again is that there are too few people to provide the monitoring and personal attention needed.  Sure, a lot of people find ways to turn their food stamp money into cigarettes and alcohol, or maybe buy porterhouse steaks for themselves (and let their kids starve) when people buying their own food are buying ground chuck, but it is too hard to fight the abuse.  So we end up paying for their food and then end up paying again when their children show up at school hungry or when the adults run out of food mid-month and come to the food pantry or the soup kitchen.

We also provide just enough support to let people stay on drugs or make other bad life choices.  At times we even trap people by giving just enough for necessities and to sustain a modest existence, but then take money away if people actually start to work and provide for themselves.  While taking a real job and working your way out is the way to end up in a better place eventually, many people don’t want to go through the temporary pain that such a transition would cause.

The solution is to decentralize welfare.  Imagine how much good local groups could do if they received the money currently spent on welfare and gave it out instead.  Local groups would know about local needs.  They would know who really needs help and who is gaming the system.  They would be able to put in the time to know the community and do things that actually help people.  They would have the time to make sure the help being given actually helped people improve their lives, rather than enable them to stay on a destructive path.

But then there is still the issue of getting the money to these groups.  Just as there is corruption when the government sends out checks to individuals, there would be corruption if the government were sending out checks to aid organizations.  There would be scam artists who create phony charity organizations.  There would also be side deals as politicians sent the money to their friends and donors, who could then use the government money to gain power just as corrupt politicians do.

The answer is simple – cut the government out entirely.  Here’s how:

Create a new tax credit for charitable giving that replaces the need for existing government programs.  Allow individuals to reduce their taxes, dollar-for-dollar, by up to 10% of their income when they give to organizations that provide these services.

Let’s say that you make $80,000 per year and would owe $9600 in taxes.  Assume also that you’ve paid $12,000 in estimated taxes, so normally you would be getting a $2600 refund while the government gets $9600, $8,000 of which would then go to welfare programs.  You decide to donate $8,000 to the local food bank, which would then buy $8,000 worth of food and distribute it to people in your area that needed food.  You would simply indicate on your form that you donated $8,000 to the food bank, which would reduce your taxes by $8,000, and then the food bank could receive an $8,000 check from the IRS while you still received your $2,600 refund.  Alternatively, you could have been making monthly donations of $667 dollars to the food bank, such that you would have given $8,000 throughout the year, and reduced your withholding by the same amount.  In the end, you would have paid $1600 in taxes and donated $8,000 to the food bank.

People who need food would receive $8,000 worth of food.  The only difference is they would get it from the food bank, which would be able to verify need and maybe push those who could provide for themselves into doing so, rather than getting a check from the government.  People at the food bank could also stretch the money and make it go farther than would many of the people who received food stamps.  In addition, if the money had gone to the government and then out through welfare, something like $6,700 might actually make it back to people in need, after various people in the government took their cut along the way rather than the full $8,000.  Note that people in higher-cost areas also make higher salaries, so they would be able to give higher amounts to their local charities, offsetting the higher cost of living.  People in New York City would receive just as much food, clothing, housing, and other services as those in Fargo, ND.

The system would also police itself.  If people thought that a charity was not doing a good job, or if they found that everyone in their area was taken care of and additional money was not needed, they could give to charities in other areas.  They could also give to foreign peoples through charities, just as the government gives foreign aid, or support other things like the arts, scientific research, or other areas.  Again, there would be no loss in income to these institutions since money no longer sent from the government would now be sent directly by the people – in fact overall the causes would get more money since the distribution system would be more efficient.  If a charity or other provider was wasteful, the local individuals would be likely to see this and donate somewhere else.  Just as in free enterprise, the charities that did the best job would receive the most money.

So that’s the plan.  Very simple – just a new line on the tax form.  If you like this idea, please tell your Congressman.

Please contact me via vtsioriginal@yahoo.com or leave a comment.  Check out other ideas by selecting “Small Ivy’s Big Ideas” from the menu at the top under “Commentary.”

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.