Wednesday, February 14, 2018

Signs of a Disturbed Mind

Do you recall that during the presidential campaign, Donald Trump said, "I could stand on the corner and shoot someone and still get elected?" Everyone dismissed this as a confused moment except the Democrats.
Last week, the day after his first State of the Union speech, he had another confused moment. He told an audience that those Democrats who did not clap during his speech were un-American. He stopped and changed his thought to, "Treasonous." This is UN-AMERICAN! It is a form of freedom of speech for everyone to decide what they favor or oppose. It gets worse.
The next day Trump declared that he wanted a special military parade. He said that he got the idea from France in watching their state parade in his honor when he visited the country. I hate this on many levels.
First, special, big parades cost a fortune. Our national deficit is bad enough. Trump is still fighting to increase the debt level because it is reaching un-repayable levels. He knows that Congress will increase the debt ceiling. So, what does he do? He wants to splurge and spend. He can declare it is a tribute to the veterans. He can rationalize and use his bully pulpit, but this is pure waste.
Secondly, it will appear foolish as there is nothing to celebrate like maybe the end of all the wars in the Middle East. Donald, we celebrate the Fourth of July as proud Americans! We don't need phony pomp, especially from France and Europe-as they dress up like the old aristocratic class. This is stupid following dumb.
Other Signs
He suggested that he won't sign anything unless he gets his funding for the "WALL." He brazen attitude will turn away any democrats who just recently allied themselves to his side. If he thought that he could "play" the Democrats, his pushing and backing of the concealed weapon bill in Congress is stupid off the charts.
This bill would allow anyone to carry a weapon in public. The second amendment allows us to have a weapon in our homes for protection. Society is trying to advance and be truly civilized. Our government ended dueling over a hundred years ago because it was stupid loss of life. Society slowly took guns out of public activity and this action benefitted everyone. However Donald, we still have a violent society with deep prejudices on many levels--faith, color and regional. We have road rage, dysfunctional families, homeless and poverty. Violence will break out and this violence will force everyone to get a gun. The only winners will be the gun producers, lawyers and undertakers. The nightly news will only have time for a quick weather check and the daily body-bag count. Donald, THINK before you tweet and shout!
If this gets signed into law, I predict a rocket surge in gun related deaths. Road rage will someday look like a winter pile-up of cars except the drivers will be shooting at each other. The worst case scenario will be a race war to which we all lose. Donald, THINK before you shout and tweet!
Donald also said a lot of things during his state of the union message and many of those points are issues that his Republican party has a history of not supporting. This outsider is becoming a deep insider. His budget is full of over inflated revenue projections and spending even the Democrats wouldn't attempt. Our national deficit will hit $25 trillion before his term ends. He is guilty of grandstanding, appeasing the military complex like with his excessive budget increase, while cutting clean air initiatives. All this in itself, bodes poorly for the future, especially for peace.  He will alienate support from both parties. His mind indicates when he realizes this turning point, he may do or declare some rash decision. What it is, I do not know, but he needs to step back, catch a breath and THINK before you tweet and shout!

Wednesday, February 7, 2018

State of Union: Independent View

The Republicans control the ball as Trump gave his first state of the union speech. He is becoming more of a politician rather than an outsider. The Democrats gave their response and here, I will offer as what I feel is the independent view. As my readers know, I believe that both of our political parties are corrupt and only by forming a new third party can we hope to save our republic.
Republican View:
Give Donald his do. His corporate tax plan will help American industry, create better paying jobs and it will help the economy. There is still a battle over unionism versus non-union employment. This cannot be dealt with over-night, however the pendulum's positive move will help wage earners with higher wages. Our nation is already seeing some of the positives from the corporate side. Many companies are giving their workers higher pay or bonuses. Apple said it plans to build a US based plant and create 20K jobs. I say, finally! This will be a first by that company. They sell here, but they never offered manufacturing jobs here. We can only hope more will follow.
The only problem with Trump's tax plan is on the individual side. As always, the Republicans lie about spending which they blame on the Democrats. This tax bill increases our national debt as it is really a spending plan. The bill should have raised the tax bracket on the wealthy as they already benefitted from the corporate side. They are the owners of stock, corporate positions of rank and pay as well as other benefits of the upper class. If Trump raised their taxes, the tax bill would have been neutral to our deficits. He didn't. He could have taken some money from the military complex too, but he didn't. In fact, he increases our debt by adding to their budget. He appeased the military complex.
He used phrases like "...steel spine that will pull through together." This implies many things of which one is actually steel. The problem is our steel industry is up against state sponsored companies with little protection. State sponsored is protectionism. Trump implies this understanding, but so far, he is all talk and no action with helping our manufacturers or trade deals. The Republican Party is for these corrupt trade deals. Trump may eventually claim some renegotiated trade deal to save face, but I don't have any faith in the final outcome. I see the same old same old.
His politician side became more apparent when he included the phrase, "In God we trust." He used it in conjunction with the NFL protests during our national anthem. He claims our economy grew $8 trillion in his first year. He said he produced the greatest tax cut in our history and he repealed the Obama medical mandate. I was against Obamacare. I was for First Payer. As for the greatest tax cut, the Federal Reserve has destroyed our currency, so the numbers always grow. One must look at percentages. He did noting on the individual side except increase our national debt. As stated, Trump appeased the military complex by asking more for them. He called for an infrastructure program of $1.5 trillion. The country needs this, but it does not need outside investment. At present, foreign companies build local roads and tax the locals to death with excessive tolls. This needs to be stopped, but Trump favors this approach.
Trump claims that he eliminated the most regulations in history. He is hurting alternative energy in favor of old energy like oil and coal. Drinking water will be a big problem in the future and it will trace the negative tide to Trump's veto pen. He also spoke of the Opioid crisis, and he said that he will continue the "War on Drugs" campaign. This is more money down the drain and bigger deficits. I'm waiting for Sessions to attack the cannabis industry in California and elsewhere. Then, I'm going to buy a weed stock.
He reminded everyone that he recognized Jerusalem as the capitol of Israel. He stated that future foreign aid will be for allies only. In his campaign he said no foreign aid as this is money down the drain. He said he pushed the FDA to approve new drugs with a politician slogan, "The right to try." I can see the late night lawyer TV adds in ten years about compensation over so and so new drug on the market. Drugs should always be tested to ensure all of our safety. If someone wants to risk a new experimental drug, I say okay as long as that person or family agrees that they cannot sue afterwards if things go wrong. Finally, Trump aggravated the Democrats by declaring he favors issues that usually only Democrats suggest. He says he is for family leave and more opportunities for ex-cons, by giving them a real second chance. This is just rhetoric to which no Republicans stand behind. It gets worse. The next day Trump becomes guilty of grand-standing in the worse way by saying Democrats are un-American and even treasonous for not clapping during his speech. This is demigod actions. Nevertheless, I did love his ending thought, "The people dreamed this nation and it is its people that made America great." Note: he never mentioned the "Wall" or its funding unless he considers that infrastructure?
Democrat Reply
Basically, they claimed that the economy recovered thanks to Obama. There is still work to do and that Republicans do not talk about those issues. The emphasis was on that Democrats favor or originated many of the issues that Trump claims domain. Since unemployment is low and the economy is doing better, it was more like, "Me too!" in tone. This speech made the "Wall" a focal point that Democrats oppose. There was no mention of trade deals like NAFTA which Clinton signed into law. It is like I said, the two parties are corrupt and they will say anything for your vote, but they never do what the nation really needs. As for my other points on issues, I stated my belief directly after offering the view of the political party. 

Wednesday, January 31, 2018

Housing Conundrum

Still having computer problems. This has allowed me to "look" over my posts. I noticed a few drafts that I never finished. This one is very interesting. It goes back to June 2015. You can read some of my observations and feelings about the market and economy at that time. To recall, it was a period of super low interest rates and the Fed using QE buying. Take note to the chart on copper. The commodity has risen to the present 3.20 level and it is now in an uptrend from the downtrend back in 2015. That being said, the Baltic Shipping Index is turning down and it has never recovered or sustained an uptrend. This leads one to say that we are now in a period of consolidation.














D.R. Horton(DHI)who sells more homes than any other homebuilder posted earnings for the second-quarter. They sold 22% more houses compared to the same period last year and they made 7% more for similar models. The stock is up 17% for the year. It is even higher now.
Their competition, Lennar(LEN) is also doing well.
Housing Recovery
USG Corporation(USG)thinks so. The largest drywall distributer had huge profits. USG's stock is up 10% this year. It too is even higher.
Another company gaining on home sales is cabinet maker, American Woodmark(AMWD). It's stock has surged 62%. Wow!
All of the above point to the housing recovery except for one little, no, make that a big thorn. According to the Census Bureau, the homeownership percentages has declined to 63.4% from the peak in 2004 of 69.2%. It has fallen every year from the peak and is testing its lows from way back in 1965 when LBJ instituted the "Great Society." This story has not changed. Housing is unaffordable and rents are insufferable!
This is a Conundrum.
Home ownership is at 50 year lows while builders and suppliers are doing well in 2015. Prices in 2018 continue to rise. Why or how can this be?
We know...
that house flippers changed their approach from straight demand to buying distressed properties, repairing them and then, reselling. This is a new segment in our economy.
We also know that large hedge funds entered the fray to capitalize on low, distressed properties and then, renting them. Rents have risen every year from the financial crisis in 2008. Blackstone Group(BX)has purchased over 50K units since 2012 and they were buying selectively even before that time.
We also know that the average medium home price is rising in all parts of the country. Real estate varies by location, however in the Northeast it is over $240K. In the Midwest it is over $163K. In the South it is over $188K and in the West it is beyond $305K. The average new home costs well over $328K. This is a new all-time high. Together, this spells trouble. Why, you ask? Because this is the same type of price action that led to the financial crisis in 2008. Prices are too high in relation to wages which remain stagnant and new revelations are pointing to dark clouds approaching. This cloud is still out there and prices are even higher as we roll into 2018.
Flippers
are losing money on low-end properties and more and more are turning to million dollar investments. This segment has no financing problems, but buyers are demanding and most importantly, are a small percentage of customers. If you can't sell, the flipper has to make a large payment and he has limited resources. Big future problem.
Blackstone is slowly thinning its portfolio because they realize that baby boomers are retiring and downsizing which means more properties on the market. At present, it has been a seller's market, but the ratio is changing, rapidly.
If you like a second opinion, I have Dr. Copper here. Look what his chart is saying along with Mr. Lumber.


 
 
This shows that there is really no demand. The homebuilders are following the example of the airlines who cut flights to fill seats with limited flights scheduled. Homebuilders are barely adding a million units a year and most of that number is skewered toward multi-family which is rental. Back in 2005 and the years prior to that year, builders put up over 5-million units per year. This truth is never discussed in today's media or by economists.
Bottom line: If there are no buyers in the store, you make no sales. You can do tricks like discounts, offering freebees, etc., but declining revenues foretell lean times and if the deflationary attitude sinks
into the conscious of buyers, they will wait for lower prices before they purchase. Warning clouds are forming. Conundrum solved. I was way off in my summation, however the present market faces higher rates and sales will shrink due to interest rates. Builders may take the bite for a period, but not for long. Housing is the most important segment in our economy and the clouds are getting darker. If one were to reread this piece one year from today, the landscape will look very different.
 
 

Wednesday, January 24, 2018

New Form of House Flipping

Remember all those real estate articles on "Flippers?" Well, they're back in a new form and maybe even more dangerous for real estate and our economy.
Entry Level Real Estate
After the housing crisis of 2008, big institutions like BlackStone began buying distressed properties. Their buying power all but eliminated the individual investor who bought the same properties to rehab and offer to the market. These small investors are still out there, but they have turned their attention to the upscale market. Home builders have also left the entry residential market for the upper middle class and high end buyers. There was a vacuum in the market for entry level homes. This space is being filled by a host of firms in a new cottage industry. The leader in the field is HomeUnion.
This company offers the retail investor, individuals like you and me, a way to invest in real estate like institutions. They purchased low end housing, do rehab, find a renter, lease and manage the property. Then, they seek us. In their spiel, they remind you that stocks fluctuate up and down and dividends can be cut. However, a lease guarantees a consistent cash flow that allows you a better return and easier management of your funds. They can perform all these tasks for you with property across the nation - for a fee. They say that they are against home flipping and suggest investors keep the property long term. Dear reader, did you notice that this company offers many services, but all at a cost? Fees. This sent my mind back to the 49ers. No, I know my team stinks, but in 1849, the people who really struck gold were the ones who sold shovels and equipment to miners. They mined the miners and this new cottage industry is mining investors for gold. They are flipping to YOU!
Institutions
are jumping on board too. RentRange provided the same concept as HomeUnion. They are now apart of Altisource as they were acquired. Investability is another firm that is becoming a force in the field. They provide for a fee their contact list of investors so buyers can sell or exchange properties all over the nation. This is a nice caveat for a buyer who in his long term outlook, is thinking of retiring to a state where he has investment property. With that said and at a time in our economy where job security is a thing of the past, this is a dangerous choice for an individual investor. There are a litany of problems with home ownership and with property out of your living district only compounds the risks. First off, tenants, especially young people, fail to pay the rent. They can split in the middle of the night with nothing but a deposit to which you have to pay a fee. In addition, roofs leak, refrigerators go on the blink, grass needs to be cut or walkways shoveled from snow. Do you see what is happening here? You are the prospector that is being mined for gold. These firms are flipping to YOU!
HomeUnion is so successful that they are thinking about going public. They are expanding their mine to include stocks. Hey, it's your choice, and with the Fed about to raise rates, that is another risk to the list.   

Wednesday, January 17, 2018

Into The Poor House

What do the following municipalities have in common?
* Stockton, Ca.
* San Bernardino, Ca.
* Mammoth Lakes, Ca.
* Jefferson County, Alabama
* Central Falls, R. I.
* Harrisburg, Pa.
They all filed for bankruptcy and Stockton had the infamous title of the most indebted until...
Detroit.
The poor "Motor City" can't catch a break and their basketball team can't make a shot. At one time Detroit was the fastest growing city, but it got dethroned. At one time it made the most cars in the world, but it got dethroned. At one time the "Pistons" won the NBA title back-to-back and now, they suck. At one time it filed the highest bankruptcy case, but it got dethroned. So, who is the new infamous king or does it matter?
Puerto Rico
and it does matter and in more ways than meets the eye. The media doesn't even cover it. The government just wants to sweep it under the rug and that is exactly what the leaders of the island want. Al Davis use to say this concept: "I don't care how you do it, 'just win, baby!'" However, a hurricane can overcome any psych job. Even with aid, the debt is off the charts the island's corruption will reveal it is worse because of hidden charges.
The island leaders just want to rollover the debt and continue the game like nothing happened (no harm, no foul). Dear reader, there is serious harm, and technical fouls could be called on the island's government, our government and the cause for these fouls, the Federal Reserve.
Ever since the Fed gave us "funny money" the game stakes keep getting higher and higher. At one time we talked in terms of millions, then billions and now, trillions. This is like the Amtrak train running at full speed into a tight curve. Boom! Don't believe that? Just ask Zimbabwe who actually printed in their currency, a trillion note. Want a second chance? Today, in Venezuela, the president wants a new higher trading note, but the printer won't accept the Venezuelan currency for payment. Our nation will have a debt bill this week. It always passes with a lot of grandstanding. If our leaders really had conviction to keep our nation safe and secure, they should follow through and default. At least this would force a reality check, come up with a plan and activate the plan.
 (See above the spiraling cost with no end in sight.)
Getting back to a truth that cannot be denied.
There is another problem in deficit laden districts, tax flight! That's right. People can move to which only makes the problem almost impossible to correct. Detroit has lost over half of their population. It's spreading! Consider Connecticut. It's top 100 tax paying residents left! It has lost 50% of its taxpayers in 2016. As a result, tax revenue is down $200 million to which gets added to the already projected deficits. It is like a limbo bar, "How low can you go?" Hartford will answer that question as it seeks help in bankruptcy law.
As for the kids in San Juan, they studied LBJ. They have billions off the book, and the gravity of that corruption adds to the Fed's corruption of our gold standard and our currency. The constant printing of money and deficits is setting up dominoes. Just a slight breeze at the end of every month could cause a cascade of collapsing municipalities. As the court files stand, Puerto Rico owes $74b in debt and another $45b off the books in things like underfunded pension liabilities. Sorry, I can't include the hurricane disaster because with no power no one can add up the costs.
Dear reader, it is the last section of that sentence which could become the recurring theme in America during the Trump tenure. We recently heard about the police and fire departments in Dallas. We also know the situation in Chicago to which I predict will soon wear the bankruptcy crown. We will have so many more as the Boomer generation continues to gray. There is no solution that will permanently work except stops on printing money which the gold standard did, accountability in spending which neither party observes and watchdogs for fraud which is running wild. Just like when the stock market goes into a decline, all the fraud cases come to light like Madoff and The Mormon Madoff and many others. Our financial state will be exposed when the next crisis appears.
The situation on the island is no different than Detroit or Chicago. All have excessive government employees and all have underfunded their pensions. In each, there is high taxes, high crime and a lack of jobs. The only solution the present leaders are seeking is to borrow even MORE.
The Puerto Rican contagion will spread due to printing and the consequences of devaluing our dollar. Check this out. The court says the island can only spend $800 million on debt and this year the island has $3.5b due on debt. Can't be done! By the way, if the Fed bails them out, not only will they be setting a bad precedent, but each dollar that is printed, lowers all of our standard of living. This is one crucial aspect in why and how our standard of living keeps falling; Technical, on the Fed! Better yet, EJECTION!

Wednesday, January 10, 2018

What Happened to the Labor Wall?

During his presidential campaign, Trump consistently cried for a Mexican Wall to slow illegal immigration and NAFTA. The other things he said that he would do was end Obamacare and tax relief.
He achieved a tax bill, but it mainly helps the rich. Consider: his idea to lower taxes on our international companies which would spur jobs at home and make our companies more competitive and financially stronger. This is good, however, once this was done, there was no need to help the same wealthy people with individual tax breaks. He should have raised their tax brackets and lowered the rates for the poor and middle class. His plan only makes our national deficit worse. That said, a recent report shows where our jobs, especially in manufacturing, have gone. NAFTA stole them! Anyone who says different is a shill. They should be ignored.
Mexican Auto Report
Keep in mind this report only covers automobile producers. However, it shows the need to end trade deals and remember, all those deals are done behind closed doors because they know that what they are doing is stealing our standard of living.
Mexican officials confirmed in their report the on-going assault on US auto manufacturing. Mexico exported 2.33 million vehicles to the US in 2017. This is up 9.4% in an on-going uptrend.
During his campaign Trump threatened to end or renegotiate the NAFTA trade deal. His attacks were mainly addressed at Ford because Ford had planned to build a new factory in Mexico. Ford scrapped their plan. In fact, only Nissan and Ford were the only producers to export less in 2017 out of Mexico.
By comparison Fiat Chrysler and GM accelerated their production in Mexico. GMs exports surged 26.3% and by the way, this report end in November of 2017. Of course, this means the data will be worse. Fiat Chrysler jumped exports by 35.5% for the same period of January to November.
The loss of jobs in this industry is central why our middle class is disappearing. So, Donald when are you going to do what you said and build a labor wall by taxing imports and protecting jobs that offer a living wage, to which promotes our standard of living. The big corporations got their tax break and now, they need to show some home cooking or get off the pot and out of the kitchen!

Wednesday, January 3, 2018

Tax Money Down the Drain

With the new tax plan as law it would behoove us to see how our taxes are spent. It is a sad truth that our government is too large and misappropriates our dollars. The military complex takes half and has their flunky's complain about entitlements which is close to the other half. The problem with the tax law is that the legislators are living in a fairy land. I agree with the corporate side tax level being reduced, however there was no need to help lower the rich in the individual bracket. They should have raised that level to 42%. But hey, that's just me and this little blog.
Another sad truth about the tax plan it that it does not reduce our national debt. These legislators do not have their feet on the ground. They probably will be going to California for New Year's to keep their "high." What it all means is our government will resort to borrowing and bloating the national debt to cover their stupidity. In addition to these basic mistakes, our tax dollars get taken for useless projects like a bridge to nowhere. The politicians take our money to use as a campaign to get re-elected in their state. It is no wonder that Congress never does anything because its people have no vision other than self. This is the sad meme of our times. Here are a few examples which does not include expenses in the budget for foreign aid, NSA to spy on us or similar. We get deeper in debt to give corrupt nations military hardware, service and technology to be our friend. This is BS!
The following are examples, although some are for flavor and not associated with our taxes.
GAO 
According to the Government Accountability Office, our government shows no improvement in the use of our taxes. In a report just released, it highlights Medicaid payments. It found fraudulent billing claims and it estimates that the cost of the various crimes to be 10% or $36 billion in 2016. Here's an idea: Hire some people to crack down on these crooks.
Infrastructure
President Trump has big plans with our need to rebuild our infrastructure. Sounds great, but this only opens the door for more corruption. These contracts need to be policed. In addition, if the winning company cannot deliver on budget, they take the loss! Of course, the bidding is another problem. It takes years to catch these crooks and the penalties should be similar to individual sentences like three strikes and you're out! If a company commits three felonies, put them out of business! A recent example in the news is Keppel Offshore and Marine. They had to pay $422 million for bribery concerning contracts for Petroleo Brasileliro. Anyway, our nation has a poor history with infrastructure projects. Project Management Institute says around $100 million or 10% of every billion spent goes down the drain. WASTE! This is due to poor bureaucracy. Some day 60 Minutes will also find corruption and bribery.
* Bank Embezzlers: It is not just Wells Fargo. Halifax Bank of Scotland employees stole from clients and from the bank too.
* Online Crooks: They are everywhere. A marketing company, WPP estimates the amount of global rip-offs in 2017 to be $16.4 billion.
* Sex for Sale: Nothing new, but a new twist. Young virgins are offering the first shot online. I can't wait to hear the honeymoon story on how I lost my virginity?
* Crooked Agencies: We know bureaucracies waste and some are down right corrupt like the Navajo Housing Authority. A recent study reveals the agency spent on average $1.1 million to provide housing for needy Indians. The only problem is these are small homes worth much, much less.
* Military Fashion: It is bad enough to buy friendship, but add this. Foreign troops wanted specially design fatigues which cost us an extra $28 million. Then, they received a special plane( ATR4-500) to spy on narcotic fields which cost another $65 million. Keep in mind that these expenses is borrowed money that we owe. Since we spend foolishly, we have less to invest on something positive with our money because they spent it on this crap.  
* Tom Price: taxpayers funded his flights to the tune of $500,000 to live the lifestyle of the rich and famous.
The list goes on-and-on. The Paradise Papers revealed how the rich and famous use various ways to avoid paying taxes. This is a global problem for every government. They resolve it by penalizing their ordinary citizens to cover the shortfalls of their taxation. In addition, many sport stadiums get tax exempt status and even municipal bonds to back their endeavors. There are subsidies for film companies. Here is an idea! Lower the wages of film stars to cover the cost of production. No one is worth $20 million! Let the team owners pay for their arenas. They charge too much for tickets, parking and concessions. In addition, they show no loyalty to the cities that supported them. Every city that helps a professional team should get a piece of the action to which I mean, a slice in the ownership of the team it supports.
I almost forgot, the infamous War on Drugs: State and federal taxes spent $37 billion last year and this has been going on for 40 years with no results. How about the money we give to the UN? A UN report reveals that one-third of the world's food goes to waste. Think about that the next time you go grocery shopping and see how much things cost? I can assure you of this: the bureaucrats never look at price because they don't have to work for their money.