economics

CA Price Controls

California will be enacting price controls on gasoline within the next 4 months, with the expressed purpose of eliminating gas and oil from the state.

As I predicted this moths ago, communists always start by going after landlords before enacting price controls elsewhere. Price controls always fail. California is headed for disaster. If you are an oil company, there is only one way to beat this, but I don’t think that they have the balls to do it. The stated goal is to put the oil companies out of business, so Californians will switch to wind power. OK. Let’s do it:

This important legislation should be part of an all-out push to move the state to clean, renewable energy and off oil and gas

Stop selling all gasoline in the state immediately. Within 72 hours, there won’t be a cop car, city bus, fire truck, or National Guard vehicle moving in that state. No more food deliveries. No more goods moving anywhere in California. Give them what they want. Now they are dependent on wind and solar.

The law will be gone in less than a week.

But the oil companies won’t do it, and will participate in their own destruction.

By Divemedic, ago

Biden’s War on Banks

So the Biden administration has just guaranteed all depositors of the SVB bank. Now that he has taken this step, this has effectively nationalized all of the deposits of all banks in the country. Now banks are free to take all of the risks that they want, because they aren’t risking their own, or even their depositors’ money. It’s more free money from Uncle Sugar’s printing press.

The thing is, those who owned stock in the bank are getting screwed out of their money. The bank has declared bankruptcy, and anyone who owned stock in the bank can’t even sell it. In fact, those who were selling the bank short have also lost all of their money. The billionaire depositors are being bailed out, but the bank’s stockholders are not.

The government has removed risk from the banking sector, now it doesn’t matter if you are a good bank manager or not, you are gonna get paid by the taxpayers. There are those calling this a failure of capitalism, but they are wrong. In a free market system, well run businesses are rewarded, poorly run businesses fail. That is how the market stays healthy- the poorly run businesses are eliminated.

Not so in our system. In this system, poorly run businesses that are favored by government are continually bailed out, thus avoiding all consequences of their poor decision making. This is the government picking winners and losers. So let’s look ahead and see the consequences:

Stocks in small banks just became a whole lot riskier, while keeping huge balances in them are now without risk. Banks will have gigantic pools of money that they are now able to use to make risky loans and investments. If the risks don’t pan out, the depositors will be made whole, and the stockholders left holding the bag. A larger bank will then buy out those risky investments for pennies on the dollar. It’s a system begging for abuse and fraud. The ultimate consequence is the destruction of small banks, concentrating all banking in the realm of banks that the government has deemed “too big to fail.”

I wonder who paid one of the Biden clan to make this happen, and how much did it cost?

By Divemedic, ago

Insurance as an Inflation Indicator

I closed the books on 2022 and got our taxes filed this past weekend, a full month early. I didn’t do too bad with the projections from last year. We only owed $400 this year. It’s the smallest check to the IRS I’ve written in quite a few years. With that, the financial merry go round never stops. It’s time to start on 2023’s projections.

Our insurance costs went up significantly this year. We just got our insurance bills for the year. Homeowner’s insurance is up 35%, auto insurance up 11%, and our umbrella policy is up 10%. Overall, insurance costs are 16% higher than last year.

The stunning increase came from our rental. Expenses for running our rental were up 27% year over year (2021 to 2022). We only raised rent by 11%, so we lost ground, making our margins smaller. We made a profit of about 7.4% on our investment. Our target is 8%, so we were a little under what we want to see.

This is being caused by increasing expenses. It’s going to be just as bad for 2023, and we only raised rent by 12%. For our rental, insurance is up by 56%, 2022 to 2023. In fact, we are seeing big increases across the board:

  • Insurance is up 56%
  • Pest Control up 7%
  • Termite treatments up 12%
  • Lawn Service up 10%

I do all repairs, and that is dependent on how many problems there are. Still, we are looking overall at a 20% increase in expenses there. That will mean another rent increase next year, and we may see a loss for 2023. That will mean a minimum of a 10% increase in rent for 2024, perhaps as high as 20%. I would love to hold it to less than 15%, but that depends on how the rest of 2023 goes.

There are regulatory filings with the state that are due in April. Required annual reports, fees paid to registered agents, those sorts of thing. Those remained unchanged from last year.

The next big expense will be coming in July when we get the TRIM notice of expected property taxes from the county. Since our largest expenses are insurance and taxes, that largely sets the rental rates for the coming year.

I imagine that many households are seeing similar increases in their budgets. I am guessing that inflation’s true number is somewhere around 15%, all things considered.

By Divemedic, ago

Taxes Are Racist

It’s tax season, and now we have an article claiming that taxes are racist: “Black married couples face heavier tax penalties than white couples,” and it’s pure BS. This is the logic:

When a Black or white couple have the same income, deductions and family structure, they will have the same tax liability, Gale said. But given the average economic differences between white and Black couples, according to the report, Black married couples are still more likely to face penalties and smaller bonuses.

Before tearing into the faulty logic here, I want to point out that “white” is not capitalized once in the article, while “Black” is capitalized every time. A bit of subtle “othering” that happens in journalism today.

So the taxes aren’t racist, it’s just that black married couples have more children than their white counterparts and taxpayers with children generally tend to face larger penalties under our current tax code. So it would be more accurate to say that the tax code discriminates against those with children.

I call bullshit on that, too. If a couple has a child, they get additional personal exemptions, they also get:

  • child tax credit
  • dependent care credit
  • earned income credit
  • adoption credit
  • education credit

Let’s look at two married couples: they have the same income, same jobs, same financial situation. Each couple earns a combined $68,000 a year. Their employers withheld $5,000 from their paychecks for Federal taxes. The only difference is that couple one has no children, and couple two has two children.

Couple one is in the 12 percent tax bracket, with an effective tax rate of 11.03%. They will pay $4,644 in Federal income taxes this year, so they will get a $356 refund.

Couple two has two children. They are both latchkey children, so there are no childcare expenses to deduct. They are also in the 12 % bracket, and had the same effective tax rate as couple two. However, they get more credits, so only wind up paying a net $644 in Federal income tax, and will wind up with a refund of $4,356.

So if in fact black couples have more children that whites, blacks pay LESS in taxes.

By Divemedic, ago

Value of Employees

The left is complaining about a company that is laying off 8,000 employees while it continues to pay Matthew McConaughey $10 million a year. The article complains that CEOs aren’t making sane financial decisions. This attitude comes from a complete lack of comprehension of how employees add value to a company.

Let’s look at the numbers. Salesforce has about $31 billion a year in annual sales, earning about $200 million in profit. That’s a profit margin of less than one percent. The company employs about 80,000, meaning that 8,000 workers are about ten percent of the workforce, and cost the company somewhere around half a billion a year in salary and other HR costs. McConaughey costs the company $10 million. Since he is a contract employee, there are no real HR costs.

So how much value do those employees bring? That is, McConaughey may cost $10 million, but if him being the spokesman brings $800 million in sales, it’s a good investment. That’s why companies have celebrity spokesmen. It’s why Michael Jordan was the single best shoe salesman in Nike history.

Then consider the 8,000 employees. How much do they bring in? That’s the question that needs to be answered, which is what the CEO does. It’s a value computation, not just a cost computation. Companies are not there to be a jobs program. Companies exist to make a profit for their investors. If there is not enough profit, there are no investors. If there are no investors, there is no operating capital. If there is no operating capital, there is no business. It’s not that difficult.

If you want to make more money, make yourself more valuable as an employee. You do that by showing your employer that you can help them make more in profits. Learn a skill that your employer finds valuable. If all you know how to do is flip a burger, pick boxes before putting them down over there, or pushing an idiot stick (a broom), then you are worth very little and can be replaced by nearly anyone. Or no one.

The real minimum wage is zero.

By Divemedic, ago

Get Woke, Go Broke

The collapse of SVB bank is the second largest bank collapse in US history. It’s stock price lost 90% of its value in less than 48 hours. Most of the depositors and their deposits are uninsured. People are going to lose billions. Just who was in charge of this place?

The CFO was Joseph Gentile. He was the CFO of Lehman Brothers when they failed.

The Board of Directors is filled with diversity hires who are there because of their woke credentials. They all have pronouns in their bios, which are filled with corporate newspeak. The Head of Financial Risk and Model Risk Management was this nutbag:

This is what happens when you allow people to manage your money based on woke principles instead of on their actual skill and competence. I hope the depositors at this failed bank enjoy all of that diversity, because diversity is your strength, eh?

Get woke, go broke.

By Divemedic, ago

War on Math

If you think that 32% of $71,456 a year is $6,000 a month, it explains why you still rent and don’t own a house. You can’t do simple arithmetic.

In Massachusetts, Florida and New York, Americans spend 32.9%, 32.6% and 31.2% of their income respectively on rent. Assuming you make $71,456 (the mean American income as of 2022), if you live in the Sunshine State, you’re actually sitting under a dark cloud: paying close to $6,000 a month in rent, based on those income and 32.9% figures.

I really don’t know where they are getting these “average” numbers from. Florida has a median household income of $61,777. (source: US Census bureau) When you want to borrow money for a home purchase, lenders want you to have a Debt to Mortgage ratio of no more than 35%, and a total Debt to Income ratio of no more than 50%. So that equates to a payment of $1650 per month for housing (35%) and all monthly debts that are no more than $2,575 per month. (including housing)

In most places, that gets you a pretty decent place to live. There are places claiming that the median one bedroom apartment in Florida costs are higher than they really are. Rent.com claims that renting a one bedroom in Miami costs an average of $3,250 a month. That’s about average in places like South Beach, but South Beach is a VERY expensive area where oceanfront condos regularly rent out for $25,000 a month. But if you don’t make a pile of money, don’t live in Miami Beach.

Closer to my home, there is the Orlando area. There are over 900 one bedroom apartments there for less than $1,600 a month. Go out to the suburbs, and the rents are even less. You can rent houses that are a short commute away, and pay $1,600 a month for a three bedroom house.

The problem is that people want luxury living in the most desirable areas and think it should be free. IF you are living on minimum wage, expect a minimum standard of living. My mom used to call that “Having a champagne and caviar taste on a beer and crackers budget.”

By Divemedic, ago