[livinincali]

9 more days for the Mayan Apocolypsers

[livinincali]

[quote=CA renter]Ditto what BG said about public and private employment and the opportunity to move up or increase your compensation.

More anecdotal stuff, but when I worked in the private sector, I quickly advanced from an entry level position to management, and was able to multiply my compensation many times over within a few years. That’s VERY difficult to do in the public sector.
[/quote]

Well of course. The public sector rarely rewards performance and instead rewards time served. How do you expect to move up quickly in the public sector when various work rules established by unions prevent you from doing so. Wait until you earn seniority rather than performing to earn seniority.

The bottom line for the public sector is their wages and benefits as a whole cannot grow faster than the tax base. The tax base is heavily dependent on economic growth so when you have weak growth and recessions over the past decade the public sector needs to slow down wage/benefit growth and yet they haven’t. If the tax base is growing at 2% per year than public sector wages and benefits as a whole can only grow at 2% per year and probably should grow slower than that considering the budget difficulties.

They way they’ve avoided realizing that fact is by increasing the percentage of department budgets towards wages and benefits and deferred maintenance/discretionary hoping the budget would catch up. It unfortunately didn’t and now there’s a fight to increase taxes because those plans for growth didn’t materialize.

When you work for a private company it has the ability to growth at a rate faster than GDP, i.e. AAPL growing 50%+ per year, so employees have a chance to reap the reward of that growth. The worker bees may not reap enough of that growth, but they do have the opportunity to. If your company is growing at 10 or 20% per year than maybe you can get 5%+ raises. If you aren’t growing then you probably aren’t getting anything and perhaps a pay cut. The GDP isn’t growing and the public sector employees demand their raises so we must raise taxes.

[livinincali]

[quote=EconProf]
I’ve heard that the public sector workers almost never quit, suggesting that they know they have a good deal. But that’s only anecdotal. Any Piggs have any statistics?[/quote]

Teachers are a pretty decent place to look. The NCTAF says that about 50% of teacher turn over in the first 5 years, but the total turn over is only 16.8%. So once you get past that first 5 years the turnout must get really low to balance out the stats. Here’s an article that talks about public school vs charter school turnover http://latimesblogs.latimes.com/lanow/2011/07/los-angeles-charter-schools-have-high-teacher-turnover.html

My thought is that once you get to about year 5 the benefit package becomes too good to give up. In addition your pay is probably competitive for the skill set you have. Honestly where is a 10 year veteran teacher going to make $50K+ plus generous benefits in the private sector for their skill set. Charter schools aren’t paying that, tutoring services aren’t paying that and most entry level jobs in other fields aren’t paying that. The only competition is another school district.

I think that’s true for a lot of public sector jobs. Most public sector jobs have a skill set that is not in competition with a private sector job. The competition is with another public sector job.

[livinincali]

[quote=ocrenter]
Low hanging fruit does not mean high yielding fruit. The truly high yielding fruit is that top one percent. But the gov certainly has its work cut out for it to go after that.[/quote]

The top 1% took home 1.5 trillion income in year 2010. Of that they paid 354 billion in taxes. For an effective tax rate of 23.39

The top 10% took home 3.6 trillion in income and paid 670 billion in taxes. For an effective tax rate of 18.46

The top 25% took home 5.4 trillion and paid 827 billion for an effective tax rate of 15.22.

The thing is that the top 1% takes home about 20% of the income while the top 10% takes home about 50% of the income while the top 25% takes home about 67% of the total income.

With a 1.3 trillion dollar deficit each year the numbers say that if your going to fix the problem with revenue you probably need to go after the top 10% and more likely the top 25%. It’s just a numbers game where the super rich don’t have enough to take to fix everything. I think that’s the biggest problem that people don’t understand. They think the rich have enough to tax to keep all the spending programs they are in favor of in tact, but the rich don’t actually have that much.

[livinincali]

If services for your child is of the utmost importance it might be best to rent until you find a school situation that you like for your child. It’s a lot easier to pick up and move if things aren’t working in the school district. I assume your already involved with the regional center. If you are talk to your case worker and see if they have any recommendations. They know which school districts are better to work with than others. with the budget difficulties in CA it’s pretty likely special needs services are going to face cuts and those cuts will be handled differently by each school district.

[livinincali]

There’s no AMT fix for 2012 yet, so you could get hit by AMT.

[livinincali]

[quote=flu]I think people (with funds to invest) are looking for better returns, and with your traditonal “safe” investment being pidly 1,2,3%…People are just itching to take on slightly more risk for slightly more return.

And for that, some people think it’s RE..

For most people, putting money into the stock market is still to risky and volatile and while we were seeing decent returns this year on boring indexes (11-13% ), it’s not something that necessarily is sustainable each year…

So I don’t see this changing…People are saying once rates go up on mortgages, home prices will crater. I’m not so sure…So many factors….My gut tells me it depends on how RE performs relative to other things… For instance, if the equity markets tank, people will probably still be looking at RE as good bet. Risk/return for most people on stock market is still too high I think…[/quote]

It’s pretty obvious that single family housing is becoming a target for investment by non-traditional sources. The two biggest issues I see with that is #1 they don’t really want to be there. They’d much rather have a nice safe CD or Bonds that yields 5% but since they can’t find that return they are being forced into what is perceived to be a safe yield investment in RE. Is is safe to assume vacancy will remain low and rents will remain sticky? Probably but who knows.

The second is they lack experience being landlords. They think I’ll get a management company and collect checks in the mail every month. The problem is that landlording tends to be more complicated than that and involves actual work. Getting a 8-9% cap rate requires you to do some work to earn it.

I think the biggest key for the long term appreciation in housing is the wherewithal of all these freshly minted real estate investors. Will they stick it out until their tenants can afford to buy them out at a profit, or will they grow frustrated and liquidate.

[livinincali]

I’ve always thought Artificial Neural Networks would be the way to go once processing power caught up. Looks like that might be happening now.

http://research.microsoft.com/en-us/news/features/speechrecognition-082911.aspx

[livinincali]

[quote=CA renter]Well said, Daniel.

As you’ve said: the wealth/income gap was much smaller then than it is now.

Want to “broaden the tax base” and “make more people pay”? Then reduce the income/wealth inequality and bring back the jobs that paid a living wage and provided benefits for the workers. That way, more people will be pushed up into the higher tax brackets. This isn’t rocket science, folks.[/quote]

So let’s see how the income gap has been going. The IRS data makes this really simple. So in 1986 total income was about 2.5 trillion and the top 1% made 285 billion of that. About 12.5% of total income. In 2008 total income was 8.4 trillion and the rich made 1.6 trillion of that so about 19% of total income now. If you straight line the average increase in wages (I didn’t adjust for population) it’s about 5% per year for everybody and 9.25% for the top 1%. If you assume the rich grew at the same rate as everybody else (i.e. take the 5% growth rate) you end up with a number that is about half of the current number I.e. 800 or so vs 1.6 trillion. Presume this gets distributed to the middle class and it’s about a 10% increase in wages.

Even you assumed that you currently don’t tax this money at all because the rich hide it from the irs and giving it to the middle class means you could tax it at 25% only gets you $200 billion in revenue. Of course these are wildly incorrect assumptions. The difference in tax rate for the rich vs the middle class might be more like 10% so you might get $80 billion more in revenue by putting this money into the middle class and broadening the base.

[livinincali]

[quote=flu]
Get use to it… I’d say CA spending problems are gonna get much much worse…..[/quote]

I’m used too it and for that reason I don’t think I’ll ever buy any property in this state. The freedom to get up and leave is more valuable than the potential protection from inflation. Obviously one could leave and rent property out but how long does it take for the out of state landlord tax debate to begin, or rent control, or some other typical CA nonsense about taking stuff away from those evil rich people that invested in CA property.

[livinincali]

[quote=CA renter]

Seems to me that the Bush tax cuts and war spending is what largely got us into trouble. If we had kept revenues/taxes at their previous rates (maybe even raised rates in order to make up for the additional costs associated with the wars), we would not have had such large deficits. Without such large deficits, we wouldn’t have had to borrow so much money. Without having to borrow so much money, we wouldn’t have such a large debt service burden.

You’re right about interest rates having the potential to blow us out of the water. I just think that in the absence of the Bush tax cuts and wars, we would be in a much better place today. It’s not always about “spending,” but about making sure that revenues match (or exceed) spending. It really is that simple.[/quote]

Let’s look at the data and see. Straight from the IRS web site http://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-Rates-and-Tax-Shares. In 2000 which was before the bush tax cuts and the best year for tax collections in terms of total percentage collected vs total income you have income of 6.423 trillion and total taxes of $980 billion for a 15.2% rate. In 2010 which is the most recent data you have 8.039 trillion and $949 billion in taxes for a 11.8% rate. If we use the 15.2% against the 8.039 trillion number we get $1.22 trillion so a increase of roughly $300 billion in taxes.

What was our deficit last year again? Oh that’s right 1.3 trillion Looks like tax increase are only going to solve about 25% of our problem we still need to cut $1 trillion. Cut military you say which I completely agree with in half $900 to $450 billion and I still have another $550 billion to cut from medicare, medicaid, welfare or social security.

When you look at total wages and total spending you quickly realize it’s a spending problem not a revenue problem. I can agree to increasing revenue but you need to cut probably $3-4 dollars in spending for every new dollar of revenue to realistically balance the budget and that means government services like medicare have to be reduced in cost. How you make that reduction is debatable, but it must and will happen.

[livinincali]

The problem with college in my eyes is that the educational content hasn’t changed much yet the cost has soared. Calculus hasn’t changed, Basic Chemistry hasn’t changed, nothing short of bleeding edge PhD level research has changed yet college costs 3 times as much as it did 10 years ago. It might cost 8 times as much at UC schools by 2015.

Social aspects certainly are helpful but with social media do you really need to live in a dorm with other 18 year olds to establish future business contacts. Research is good use of money, it actually can produce a good return on investment in many cases.

College costs are a function of supply and demand. Give unlimited money in college loans and the demand for a “college experience” soars. Cut off those loans and the demand for education will still be there but the demand will be for efficient eduction opportunities like online classes. We don’t need fancy facilities to teach kids math, science, and history we just need kids with a computer and a desire to work hard on learning the material.

[livinincali]

[quote=dumbrenter]
You have paraphrased my question accurately. I used to believe in the serious consequences theory of monetizing huge debt but just had a serious rethink, hence my question.
[/quote]

It’s really as simple as understanding a balance sheet. For every debt there is a corresponding credit. Most of the credits correspond to somebody’s wealth, whether it’s a pension fund holding bonds or a banks balance sheet. By replacing a promise of future productivity with the equivalent of paper with numbers on it you removed the real wealth. The thing of value is the future productivity not the paper bill.

The flaw in the monetize the debt argument is that people feel like with proper management of money you can remove the debt but still preserve the wealth. Reserve currency status just means you have a higher natural demand for dollars which allows them to preserve their value better than other counter parts. That demand isn’t infinite or guaranteed. It’s just want people happen to value right now.

[livinincali]

[quote=Hobie]So true. What troubles me is that financial prudence is not taught ( or understood) at home. High school should fill this gap and really prepare kids in daily life skills including the value of compounding interest.[/quote]

It’s really as simple as understanding exponential functions and how they end in a finite world. The problem with exponential functions is that for each doubling time you expand equal to all the previous production combined. Of course our problem is we fail to see the problem until we’re into the last doubling time. For instance medicare spending has gone from 80 billion to 800 billion in the last 30 years. We think we have time to deal with the problem but based on the doubling time we have 8 years until medicare expands to 1.6 trillion and 16 years until in expands to 3.2 trillion which is more than the entire federal budget.

The sad reality is that everybody can’t live a long comfortable retirement. Retirement for the masses that we’ve seen over the past 30 years is abnormal. It was a result of a huge population explosion where there were numerous children born that would eventually be able to support the adults. We just don’t have that dynamic going forward. Essentially the top 20% by some measure will get to retire comfortably, the rest will scrap by.

[livinincali]

[quote=AN][quote=livinincali]AGNC got hit hard by resistance today. Gaped up to overhead resistance and got sold pretty hard. Definitely could be a case of the bounce is over, but we’ll see. It’s days like these in stocks that make it hard to time a bounce. How much do you let it pull back before you decide to sell.[/quote]4 days after hitting this resistance, it’s up another 2%. So, I guess the resistance wasn’t that strong, since it was up everyday since. It’s up ~9% from it’s recent month bottom on 11/14, but it’s still down ~2.5% from a month earlier. It’s down ~7% in the last 3 months and down ~1.5% in the last 6 months. But it’s up almost 13% YTD.

Also, it seems like CEL is back with a vengeance. Should have bought back in when it hit mid 8s.[/quote]

Huh. It’s trading off resistance levels again today. Basically it needs to trade and stay above 31.75-32 before I would call resistance broken. Today is the second time it’s taken a run at those levels and failed.

It could trade sideways for awhile and then take on those resistance levels or it might just end making a double top at resistance and resume a downward trend. I don’t know what’s going to happen. Seasonality is good for the market right now, so I’m inclined to believe the market will head higher until the end of the year but capital gains tax rates might be a significant hurdle.

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