economics

In December, I did a post about rent control. I explained that there are all sorts of steps that property owners can take when the state attempts to control what they can charge in rent. It turns out that landlords in Los Angeles have done exactly that.

During the pandemic, LA passed an ordinance prohibiting landlords from raising rent from one lease period to the next. The definition of increase specifically excluded discounts when calculating base rent. The property owners used that. Let me explain:

The lease says that you can rent my property for $4,000 a month, but I will give you 4 month’s free rent per year, with the free rent being spread across the 1 year term of the lease. So the rent you actually pay is about $2,670 a month. The lease comes to an end, and you want to renew. When you do so, I tell you that I am only going to give you 3 months of free rent this year. That means you will pay me $3,000 a month. Even though you are paying me $330 more a month, I didn’t increase your rent, at least as far as the law is concerned. All I did was reduce your discount.

The tenants say that this is unfair, but I don’t see it as any more unfair than telling a property owner what they can charge for the use of their property. A landlord and a tenant agree to a lease for a one year term. The following year is a completely separate sale. Once the first year’s lease is concluded, that deal is complete. Now we are here to negotiate a completely different agreement.

Imagine if there were a law telling supermarkets that they cannot raise prices. Or a gas station that it can’t raise the price of gas. Or even a car dealership. It’s all been tried before, and price controls always fail in the end.

Two days ago, ADP released their monthly payroll report, saying that the economy lost 301,000 jobs during the month of January. Conservative Treehouse wrote a long article about this.

Reuters reported that U.S. private payrolls fell for the first time in a year in January as soaring COVID-19 infections disrupted business operations, raising the risk of a sharp decline in employment that would deal a temporary setback to the labor market.

Now keep in mind that the ADP report counts all active workers as employed regardless of whether they are paid or not during the survey week. In the government report, people who are out sick or in quarantine and do not get paid during the survey period are counted as unemployed in the survey, even if they still have a job with their companies. This means that if there were a pandemic causing large numbers of otherwise employed workers to be out sick, you would expect that the government job numbers would be significantly lower than the ADP number, but that isn’t what happened.

Two days later, just this morning, the US government claimed that there were 467,000 jobs added to the economy in January, even though the unemployment rate increased from 3.9 to 4.0 percent. The government is claiming that the economy is growing at a rate of 6.9% per year.

So which report is to be believed?

There is quite the discussion in comments over at Peter’s place about the role of gold versus investments. It appears as though at least one user doesn’t understand that precious metals are a store of value, but not an investment.

What the Federal government has done (and is doing) with our fortune is a disgrace, but governments have done that since, well, ever. Nothing new. Inflation isn’t an increase in prices. Inflation is a currency becoming worth less. Sometimes a currency is tied to a physical asset like gold, silver, or salt. Sometimes it isn’t. To say that gold is money and dollars are currency makes you sound like an idiot.

If currency is not tied to a physical asset, then its worth is not set in stone, pun intended. Because it does not in and of itself have value, currency will inevitably and eventually become worth less. That is called inflation.

To protect yourself from inflation, you are better off holding something that has intrinsic value. That can be food, oil, livestock, or precious metals. Over the long term, precious metals are a great way to own an asset with intrinsic value. This is because food spoils, livestock dies (and needs to be fed), oil is bulky and difficult to store. Even non-precious metals are difficult to store. An quantity of gold takes up far less room than an amount of lead of similar value.

Because they have intrinsic value, assets like precious metals don’t increase OR decrease in value. They just are. In 1920, an ounce of gold could buy a nice Colt handgun. The same holds true today. The problem is that your asset (the gold) won’t appreciate in value. It is therefore a nonperforming asset, and not an investment.

An investment is an asset that will not just hold its value, it will increase in value. Things like real estate, stocks, bonds, and the like will change in value. Sometimes for the better, sometimes not. If I had bought a new Ford Mustang in 1964, I would be doing far better than if I had bought a 1964 Ford Anglia. Picking winners and losers is how fortunes are made and lost.

Even though it can seem like it, the stock market is not the same as a casino. As both an investor and a gambler, I will tell you that they are fundamentally different. Where the ball lands on the Roulette wheel is a random event, that is, the ball is just as likely to land on the ‘4’ as it is on the ’30’.

Not so in the stock market. Companies are managed by people. Management teams. Some are good at what they do, some are not. Companies that are well run tend to do well. Companies that are poorly run tend to not do well. But how to tell the difference? The same way that you judge people. Look at how they have performed in the past.

The problem here is that random events can ruin even the best companies. A big fire in a key factory. An executive gets caught embezzling. A government contract is awarded to a competitor. The best defense to this is to diversify. Own shares in many companies across many segments of the economy. That way, if one company fails, the rest can carry you through.

That is why I am a huge fan of index funds. I buy shares in managed funds that are filled with large companies. The S&P500 is the 500 largest companies in the nation. They are large because they are successful. Even though there are bad days and good days, the good days outnumber the bad. That is why the S&P500 tends to increase.

You don’t have to know about business or stocks or get involved in the day to day workings of the market. Buy into an index fund and let the money compound. There are many to choose from. You can get a fund that buys shares of S&P500 companies. You can get a fund that buys companies that pay dividends.

Once you are comfortable with index funds and want to pick a couple of individual stocks to experiment with, do it. Just be careful. Don’t put all of your eggs in one basket. Just a small purchase at first. Leave most of your invested money in those index funds, and just buy a few shares of the individual stock you want to play with.

In March of 2020, I saw the price of cruise line stock nosedive. I figured that it was an opportunity. I started by buying $5K worth of Royal Caribbean in March. By May, we wound up buying about $50K worth of Royal Caribbean at an average price of $30 a share. I began selling it off in December of 2020, at an average of $90 a share. I tripled my money in less than 6 months. During the same time period, gold went from $1500 to $1800 an ounce- a 20% increase.

That doesn’t mean that you avoid gold. Remember, diversify. Gold should be PART of your savings, not ALL of your savings. Entire books are written on this. If gold were the answer, then billionaires would all have a vault filled with coins that they swim in like Scrooge McDuck. They don’t. You shouldn’t, either.

The bottom fell out of Facebook’s stock price this morning, down 24% for the day, and 38% from its 52 week high. In fact, its current price of 241.33 is the lowest it has been since July 2020. Wow Mark, that’s gotta sting.

Meta missed on earnings, saw Facebook’s daily active users dip for the first time ever as a public company (DAUs down by 1 million) and cited headwinds from inflation, foreign exchange, and an app tracking transparency feature Apple.

Remember when Facebook knocked MySpace out as the new Social Media hotness? Now TikTok is doing the same to Facebook. Social media is driven by teenagers and their fads. They come and go. TikTok has a shelf life, too.

Zuckerberg made the mistake of thinking his money train would last forever. I hope this is the beginning of the end for that asshole and his political money machine.

Local governments are offering to pay for legal representation for any tenant being evicted. This will greatly increase the costs for eviction of a tenant, especially since you are fighting the bottomless pockets of government.

So how do you avoid that? Well, if you pay attention, you will see that the program is income restricted to $25k a year for singles, and $51.5k for a family of four.

So make sure that your rental is not in the hood. Using a 3 bedroom rental as an example, make sure it is nice enough to charge a rent of $1450 a month, then require that household income be at least three times the rent in order to be eligible. Make it a criteria with no exceptions.

Then they won’t meet the income level for a free lawyer, and will also be unlikely to stiff you on the rent.

That is the secret to being a successful landlord: don’t rent to people in the lower quartile of income. It just isn’t worth the financial risk.

A married couple with ordinary jobs like teachers or electricians should make enough to have a combined income of $80k to $100k, which is enough for $2200 a month in rent. If you own a rental in that price range, you are unlikely to have to worry about eviction.

A single mom working as a bartender is not going to make enough money for that kind of rent, and won’t be stable. So owning a rental that rents for $900 a month is asking for an eviction.

Twitter restricts a person’s ability to post something that the company disagrees with, so Twitter censors it. A company sells a product that Amazon web hosting doesn’t like, so the company finds out that its webhosting has been shut down. Many companies take punitive actions against their customers because they CAN. This can be done as a form of political or social engineering, or it can be done as a form of manipulating the marketplace to maximize profitability. No matter why it is done, one thing that you always hear is “If you don’t like it, you can start your own company. That’s capitalism.”

No it isn’t. Let me explain why. What a person means when they say “that’s capitalism” is actually referring to a free market where private parties own the means of production and commerce, and market forces dictate what happens in the marketplace. That isn’t what we have here.

Let me use my recent experience with my LGS as an example. Let’s say that I decide that I am so unhappy with how they do business that I want to open my own gun store with a shooting range. What would it take to make that happen?

• I need to get a license from the Federal Government to sell firearms
• I need to get a permit from the state to collect sales tax
• I need to get zoning approval
• I need to get building permits
• In order to have an indoor range, I need special ventilation in order to meet indoor air quality regulations
• I need a business license.

In all, I need permission from more than 10 Federal, state, and local government entities in order to run my business. On top of that, I have banks, credit card processors, shipping companies, and other suppliers of services to deal with. All it takes is for your competitor (that existing LGS) to have friends at one of those entities, and your quest to open your own gun range just got exponentially harder and more expensive.

That isn’t a free market. This is why someone can’t simply “Start their own YouTube” or go out and build whatever business they want. I own three different businesses. The regulatory hoops are incredible, and don’t just come from government. You can’t be a lawyer without being a member of the bar association, for instance. (The bar isn’t a government agency, but they decide who can be a lawyer, and by extension, a judge.)

An example: One business that I own is a travel agency. I have memberships in industry organizations like CLIA, ATA, and IATA. Many hotels, cruise lines, resorts, and other entities that I do business with won’t talk to you unless you are a member of one or more of these organizations at a cost of thousands of dollars per year. If you don’t kiss their rings, you won’t have a travel business. They decide who sells travel and who doesn’t. That isn’t free market.

Amazon is another example. Amazon is the 800 pound gorilla in the room when it comes to Internet commerce. As many conservative businesses are discovering, it is difficult to have a significant Internet presence if Amazon is opposed to it. That is one reason why I started this blog on its own server, a server that is located outside of the country. It’s why I share that server with other blogs. For being an entity that makes no money, it’s expensive, but it is the only way to be free to say what we want.

One thing I have learned from running a business- this country isn’t even close to having a free market.

On a side note- donations are always appreciated to keep the lights on here. I pay out of pocket to keep this place open, and any help is appreciated. I have a Patreon, the link is below.

I keep hearing about how the 90% have tired of playing a losing economic game while watching the top 10% get rich at their expense, so those 90% are quitting their jobs and refusing to pay. I don’t understand how.

How are they paying for housing? Food? Utilities? I understand wanting to quit your job and lie about with no job. What I don’t understand is how they can afford to. Can anyone explain this? Are the government handouts really that great?