Burning Out The Black Man

Lynchings still take place. Chip Flowers is stepping down. It is time to consider his legacy, and boy, what a great legacy it was…

Chip Flowers is the first and only treasurer to take on the Cash Management Board, a select group of appointees who can get their position by donating large amounts of cash to the successful Governor candidates, even when one has a record for making investments on the fly without informing the investors trusting you with their money, of your personal conflict of interest against making money for them. Even if you were fined and had to pay over $976,000 for your illegal activity?

David Marvin of the Cash Management Board did just that. Paid $976,980 in a fine to the SEC. Through his generous PAC donation to Jack Markell, he now sits on the Cash Management Board, and who knows what conflict of interests are in play with Delaware’s Treasury’s monies?

Do you know? Don’t you think we should at least find out? Why then is it against the law for the public to even find out what their conflicts of interests are?

Before anyone diminishes Chip Flowers’ achievement, let us remember the legacies left by those former Treasurers, including our current Governor, Jack Markell..

If you remember, the legacy he touted when running for governor, was that he computerized the Treasury Department. Hell, the entire government was computerized during the 2000’s, as well as the entire corporate world. Former Treasure Markell’s legacy was nothing more than being in the Treasurer’s office at the right time when computers came into being…

Prior to that, former treasure Rzewnicki. Her legacy was her attempt to bash Carper with a domestic abuse case. That is her lasting memory.

And before that, Tom Carper. lucklily happened to be in when Pete Dupont rewired Delaware’s laws and investment environment. Delaware was able to increase the rating of its bonds, but it wasn’t done as a result of decisions made in the Treasury. The decisions were made by the General Assembly and put into practice by Pete duPont.

So when it comes to legacies, the Treasury department by the very low level of duties alloted to it, is hard to make a lasting legacy. But that is what has been done by Flowers. We had an engaged treasurer, who actually made many of our sleep-walking members of the Delaware General Assembly aware there even was even a Cash Management board… There must be something very wrong with having a former guilty procedure breaker, handling the monies of the state in ways no one knows, and who is protected against anyone finding out.

That we know this, will be how the future views Chip’s legacy. This is huge.

Reflecting upon today’s news, it is best that he step down. It is unlikely that any second term could do more to add to what he has accomplished. It is best to “get-‘er-done” and move one, and not let the dilution process that naturally happens when one is in office too long, to occur on one’s second shift minimizing ones accomplishments and action.

At least now for the future, when anyone says “Chip Flowers”, we will always have the image of Delaware’s First Black Treasurer, who ran on the platform that it was the “People’s Treasury”, and was the first treasurer to ever do anything to return the Treasury back to the people whose money it handles. He and all of Delaware can be proud of that.

I agree with his decision. It is smart to move on and it is now up to us, “We, The People”, to arrest and hang the lyncher. David Marvin needs to be pulled off the board, even if it takes a bill originating in the General Assembly, and all the state gets to watch the next Speaker of the House twist in the wind between either supporting his “boss”, or all those thousands of citizens who voted him into office. Secondly, we need to know who and how this sickness ever got so close to Delaware’s people’s Treasury….

Ericka in today’s world, is a distraction. The real problem has always been that crook who was fined over $976,000 and now sits, at the discretion of the governor, where he can pass his hands through the state’s money at will… and no one is even allowed to look over his shoulder.

We need to know why he is still there….

Why Removing Oneself From The Stock Markets Makes Sense

I sometimes forget that people really don’t understand the financial markets as well as they should.  That’s very understandable.  I don’t understand everything it takes to build a road, as much as I should. 

There are so many things to know; we can’t know everything.  When I posted a message about getting out of the markets, I received a comment that reminded me that not everyone was up to par on what is about to happen and how that will affect them.  

Here is why getting out now is a good thing, and why staying in “for the long haul” is a bad thing.

Assume you have $10,000 in stocks.   If the stock market drops 40% as it is prone to do, it will be years before it gets back up to its level.  On the Dow Jones a 40% drop would be like going down to 9000 to give you an idea.  That can happen in a day, and with most IRA’s, you have to put your bid in one day and it comes out the next.  You could do it now, and if it crashes tomorrow still lose it all.

Which is why you should act today, Friday, and take a chance on Monday.

If you don’t.  here is what will happen.   That $10,000 could become $6,000 by next Monday afternoon.  But you are in it for the long haul, right?.  Again after 2 years of  awesome 30% growth,, that money-total of yours has again climbed up to $10,000.  No big deal you shrug. You were in it for the long haul. You lost nothing.

Now, the other side of the story.

You switch the $10,000 right now over to a Treasury bond fund.  There is not much growth, so it stays at $10000 for a while.  Of course, everyone else has lost 40% but you are steady.  

So when the market stops losing and starts bouncing back, you go in at the bottom. with your full $10,000.   After 2 years of 30% growth, you have $16,000.  Had you stayed, you only had $10,000.

That is why, both those who are smart and unsmart should get out of  the stock market now.

In layman’s terms its the equivalent of protecting your property upon notice that Superstorm Sandy is headed for Delaware’s shores.  You can take your chances that it will blow over and do nothing….. you could be right if you are very lucky.  or you could hedge your bets and with little or no expense, and just a tiny bit if effort, protect your assets from any damage that could occur…. 

Just saying that an economic superstorm of gigantic proportions is headed your way.

 

 

You Should Be Afraid, Very Afraid….

Here is what happened the last debt crises… published from the Treasury’s blog…

“The financial market stress that developed in
August of 2011 persisted into 2012 even
though Congress raised the debt ceiling prior
to the exhaustion of extraordinary measures.”

“From June to August 2011, consumer
confidence fell 22 percent and business
confidence fell 3 percent.”

“Financial market conditions have a direct
effect on economic activity. A good deal of
household wealth is held in financial assets,
and much of household and business
spending is funded by borrowing. Thus,
lower asset prices and higher borrowing costs
tend to weigh on private spending ”

Now the clicker….

“So far this year, Treasury yields have
been rising on balance, which means that any
adverse effects from financial market
disruptions caused by a debt ceiling debate
may not be offset as it was in 2011.”

That is why it is unlikely that Boehner will send us over the edge. In fact, the sooner he sells out the Tea Party, the better…

The last 5 days of stocks…
-70 -128 +68 -58 -120

Do you feel poorer already? Better cut back on that spending…..

Ted Cruz; How Sick Is This?

If you got your news from anywhere else but Allan Loudell on WDEL, you probably missed this…

As you know, Ted Cruz is a hater of  Obama-care.

As you know, the House passed a budget bill that defunds Obama-care which Harry Reid said was dead on arrival in the Senate.

As you know, if the debt ceiling is not raised this week, America defaults on its debt and our superior bond rating drops, costing us a lot more to borrow money.

So,  Ted Cruz and Mike Lee ( also of similar persuasion) , are filibustering  the House Bill of which they were previously supportive and helped write.

They are filibustering THEIR OWN BILL?

Here is their thought process.  This bill is a joke and no one took it seriously but the clock is running out.  By filibustering twice,  this bill which would have been voted down 98-2 must now wait three days for the first filibuster to end, then wait three more days for the second filibuster to end,  then get voted down just hours and minutes before the US defaults on its debts, and hopefully too late for anything to jump in and stop the massive default..

Since they can’t do anything else to ruin the economy, they will filibuster their own bill, and by not letting anyone else get their hands on the steering wheel, let the economy drive over the cliff….

Didn’t know this?  So then why are you still listening to CNN?  To ABC?  To NBC?  What in the hell is wrong with you?

Cut Your Losses!

By now it probably goes without saying, but I’m saying just in case you weren’t paying attention.  Get out of the financial markets first thing tomorrow.

Stay out until the US House of Representatives regains their senses.  This uncertainty, coupled with the very disappointing returns over summer by most corporate stock, should cause last Friday’s stock drop to continue indefinitely.   If you haven’t been paying attention, all this summer’s economic signs are in the gutter primarily over a decrease in top line revenues.  Hurt Americans spend less then economically healthy Americans.

Hopefully you are already out.  If not, get started.

We’re Going Off The Finanacial Cliff

If one is driving southbound down the Pacific Coast Highway and comes to the cliff where Jimmy Dean’s character went over, and your passenger grabs the wheel, turns hard to the right, stomps on the gas….. whose fault will it be if the car goes over the proverbial financial cliff?

Exactly, all you Republicans out there.  Exactly.

If the US economy tanks because our ratings get lowered one more time… It won’t be the fault of ANY democrat.

Difficult Times For Delaware 2014

Pushing the data of the Moody’s Analytics regarding Delaware being the only bad risk in the country, some other illuminating factors emerge.  The revenue data taken from our tax receipts over the past two years, portends to ever decreasing departmental budgets state wide in 2013 and 2014.

This problem will be compounded further, by this fourth quarter competing with the largess of last fourth quarter.  If you remember, incomes were very high in December 2012, as a lot of capital gains were cashed in to beat the tax increase beginning in 2013.  There was a huge flood of tax revenue that pushed up estimates, both in personal and corporate income taxes.  The December revenue was 23.3% higher than December 2011.

That largess won’t be coming in this year and we will have to deal with the difference.

Second, due to impingements to our economy, our tax revenue will be under last year.

Delaware employment is growing slowly.  Yet there are only 18 states with a total unemployment (U6) higher.  As a result, personal income tax revenue is down.  This was compounded by a tax decrease recently given to the top 1% of earners. Passage of this tax rate decrease, means those who were the only people actually gaining income, will now, not be paying any of their increases into the treasury, as is being required of everyone else.

Across the nation, total state tax revenues first quarter 2013 rose 6.8%.  Across the nation state income taxes grew 18.4%, state corporate taxes grew 9.4%, and state sales taxes grew 5.5%  ….  Delaware does not have a sales tax.

Only 6 states had declines in personal income tax that same quarter.  Delaware led the pack as having the largest decline at 15.8%. States less shy about raising taxes, California and New York had the highest gains.  $6.3 billion and $1 billion respectively.  Incidentally as correctly predicted by the kavips economic model, both economies are thriving.

Based on withholding data, Delaware’s amount withheld dropped from a 9.3% increase in last quarter 2012, to a 2.0 increase in first quarter 2013, both over the previous year.  At the outset, the potential exists for a loss of that 7.3% difference in fourth quarter 2013.

The wealthy pay in the form of estimated payments.  They don’t use withholding.  The average estimated payment’s percentage increase over 2012, was 12.2%.  However the 4th quarter payment was a jump of 23.3% over the fourth quarter of the previous year.  Meaning the average of the previous 3 quarters was a negative or -3.7% from the year 2011.  Only that windfall of the fourth quarter, driven primarily by federal tax changes, gave Delaware its positive increase in estimated payments for 2012. Bottom line.  We were lucky. First quarter 2013, they are up 7.9% in comparison.

Corporate tax.  Overall across the nation, corporate tax increased by 9,4% this first quarter of 2013 over the same quarter last year. 30 out of the 46 states that have corporate income taxes showed increases. 16 of them were double digit increases.  Virginia suffered the largest decline: $87 million.  New York showed the biggest gain:  $239 million.

Tax Revenue is directly related to economic growth.  Growing economies increase personal income taxes and sales taxes as income gets spent. Delaware’s economy is estimated by the Federal Reserve of Philadelphia for the three months prior to June 2013, to lie between the growth rates of 0.1% and 0.5%.

Take the first quarter of 2013.  It is a harbinger of things to come….  In Delaware, the amounts collected Jan-March.

• Personal income tax:  2012 = $411 million   2013 = $346 million …. drop of $65 million or -15.8%
• Corporate income tax: 2012 = $65 million    2013 = $73 million …. increase of $8 million or 12.3%
• Total with other (fees) included:  2012 = $956 million  2013= $883 million…. drop of $73 million or -7.6%….

Our current state budget is running $73 million in the red based on actual versus revenue projections.  And this does not even include the fourth quarter drop off. Delaware was one of only 5 states capturing less personal income taxes in 2013’s first quarter than in 2012. Rhode Island, Indiana, Utah, West Virginia were its team mates. Delaware lost $65 million (-15.8%); West Virginia was second losing a comparative paltry $21 million. or -5.4%.  The others:  Rhode Island -$13 million (-6.4%); Indiana -$5 million (0.5%); Utah -3 million (0.6%)

It was estimated that over the year Delaware’s tax decrease would cost the state $70-80 million.  if averaged per quarter, that would be $17 to $20 million lost to the state every 65 working days.

One would conclude that a big part of Delaware’s state revenue problem is a direct result of that tax break we handed over to the top percent of Delawareans…. There are 15 states with higher top marginal tax rates than Delaware.  All but one of them (Idaho) are showing better growth than Delaware.  The belief that lower taxes creates jobs and better state economies does not agree with reality experienced by other states on a daily basis.

Again, the national economy as a whole is looking better.  Delaware is looking like the exception.  After the Great Recession the national total of state revenues dropped for 5 consecutive quarters. The national total of all state’s revenues has since grown 13 consecutive quarters…

The same criticism that applied to Obama after the Obamacare vote, applies now to Markell after the SB 165 vote.  Instead of trying to fix something that was working fine, one’s attention should have been spent on all that which isn’t (working fine)….

Recommendations for 2014:

Go to multiple tiered tax rates:

• 10% on $1 million or more
• 9% on $500,000 or more
• 8% on $250,000 or more
• 7% on $125,000 or more
• 6.75% on $60,000 or more

• Spend most of our money on Delaware’s people.  Hire empty positions. Keep the money here in state as much as possible.
• Cut out from budget most consulting fees for out-of-state entities.
• No hiring of outside specialists or corporate buddies.
• Add more teachers, firemen, policemen where needed.
• Push for building an offshore wind farm; override all Pepco’s objections.

Oh Crap! We’re In It Already.

Because Congress has not yet acted to approve normal borrowing authority after
May 18, the Treasury Department will begin implementing the standard set of extraordinary
measures that enable us, on a temporary basis, to protect the full faith and credit of the United
States by continuing to pay the nation’S bills. These measures are the same ones that have been
used in previous debt limit impasses, and are described in detail in an appendix to this letter.

And so it begins again…. Another debt ceiling crises….  Can we ever get rid of this pestilence which afflicts us?

Hope you’ve gotten out of the market?  Remember what happened the last time.  And the effect upon the economy which just like this year, had grown amazingly well the first quarter… and then..  Bam!

Student Loans: Next Financial Crash?

On July 1st the interest rate on student loans rises  from 3.4 percent to 6.8 percent of this year.

One year ago, the trillion dollar mark was crossed for the amount owed and required to be paid back for a student’s education..

3.4 to a 6.8 is a doubling… Just on a gross scale, off a Trillion dollars, the interest per year is jumping from $34 billion to $68 billion.   On a $16 trillion GDP, that is nothing.  But when you look at other figures, that jump has shocking consequences for the world-wide banking system.

The post graduate boom is usually what drives our economy.  New cars, New electronics, New houses.  Dining out. Spontaneous purchases.  A study by the New York Federal Reserve shows that graduates are living austerely to pay of their gigantic debt, most of which are more costly than the mortgages owned by middle America.  Asking someone to buy a house while paying off their educational loan, is equivalent to asking then to buy a second house while still paying off their first,  How rich does one have to be in order to do that? What amount of yearly income is required to do that? +$125,000? Does this mean there will be no net new buyers of houses for 20 years?  Anyways, after July 1st, there will be $34 billion less with which to purchase houses.

The Department of Education predicts a default rate of 13.4%… Off a trillion that means $130.4 billion dollars will be the amount defaulted. $130.4 billion. 

So adding the two together, the upcoming shock on our economy will now cost $198 billion. Poof, right out the door, $198 billion. Gone from our economy. 

Tran Union a credit reporting agency says the data in it’s files show that almost half, or 43.5% of student debt is in deferment.  In dollars off that trillion total, that would amount to $435 billion dollars of debt not being paid in a timely fashion.

Particular concern must be paid here, because more than half of college graduates under the age of 25 are either unemployed or underemployed — the highest rate in 11 years, according to an analysis of government data.

Putting the two together, we have half of those required to pay $435 billion defaulted, who are either under or unemployed.

As we saw with mortgages, when people can’t pay, there is no notice, They just walk away.

A nation depends upon its newest generation to lead them forward with energy and enthusiasm, long after the previous ones are tired and ready for rest.  This generation is coming out on the playing field, weighed down like knights of old, in ancient armor….  The upcoming football game does not look promising…  Their best 100 yard dash is just under 10 minutes.

And Fox News Brings Back The Laughter Curve–Oops– Laffer Curve

Today in order to capitalize upon the fact that the fourth quarter economy sank (even though it was because of the downward pressure due to the threat of sequestration forced upon Congress by the Tea Party), they wheeled out Arthur Laughter Laffer to make a dire predictions….

He is on their short list of who-to-call-when-we(FOX News)-NEED-a-dire-prediction…..

Because….. He is well known for making “dire predictions”..

“Economist Arthur Laffer told his clients on July 26, 1982, that (Ronald Reagan’s) Tax Equity and Fiscal Responsibility Act, which raised taxes by about one percent of GDP, “will stifle economic recovery,” “retard economic growth,” and undercut “the economy’s ability to enter into a period of expansion.” On August 20, 1982, he told his clients that TEFRA, Tax Equity and Fiscal Responsibility Act, “will tend to lengthen and deepen the recession.”

Instead, ….. No one could have been more wrong…

“Looking at real gross domestic product, it grew 4.5 percent in 1983 and 7.2 percent in 1984 – an exceptionally strong performance. The stock market had one of its best years ever in 1983 – both the Dow Jones Industrial Average and the S&P 500 Index rose 35 percent. There was no increase in the rate of inflation, which was exactly the same in 1983 and 1984 as it was in 1982. The unemployment rate fell from 10.6 percent in December 1982 to 8.1 percent by December 1983 and 7.1 percent in December 1984.”

On August 20, 1993, Laffer told his clients, “Clinton’s tax bill will do about as much damage to the U.S. economy as could feasibly be done in the current political environment.” He said that interest rates would rise and the stock market would fall.

Once again, it would be hard to find a forecast that was more completely wrong….

“The unemployment rate fell from 7.1 percent in January 1993 to 5.4 percent by December 1994. Real GDP growth rose from 2.9 percent in 1993 to 4.1 percent in 1994. Stock prices rose and interest rates fell. More importantly, the 1993 tax increase and accompanying spending controls, which were opposed by every Republican in Congress, laid the foundation for the phenomenal growth of the late 1990s that actually produced budget surpluses before Republican tax cuts in the 2000s dissipated them.”

And now! Today,… well, there he goes again….

“You have the whole output of the economy shrinking. Not just expanding more slowly, it`s absolutely shrinking,” (lol, see by how little, below)… Laffer told Fox News’ Eric Bolling…

“That’s catastrophic,” the former adviser to President Ronald Reagan added. (Did anyone else catch the stupendous irony of that? Oh, Wow. You can’t make stuff like that up).

“You can explain some of that by sequestration, and defense spending was down lot and all that. But you still have a rotten economy. And it’s still too bad. We know how to fix it, by the way, a low rate flat tax, spending restraint, sound money, free trade.” (See George Bush’s Economic Record.) Laffer was responding to reports Wednesday that the U.S. economy contracted 0.1 percent in the last quarter of 2012…

Yes. Laffer was responding to reports Wednesday that the U.S. economy contracted 0.1 percent in the last quarter of 2012. Quote: “You have the whole output of the economy shrinking. Not just expanding more slowly, it`s absolutely shrinking,”

Recalling his years as one of Reagan’s top economic advisers, Laffer said Reagan actually cut the highest tax rates (From 70%-50%; they are 35% now) He said “we made a mistake” by phasing in the cuts, which he said caused the 1981-82 recession. But he said the economy took off in 1983* when the cuts (and 1%GDP tax increase) went into full effect. *

“This place just went like a rocket ship,” he said. “I think we had 7.5 percent growth in 1983 and 5.5 growth in 1984, just this boom that lasted for years and years.”* (*lol)

(Conversational excerpts provided by Newsmax)