The Need for Balance

"A word to the wise isn't necessary, it's the stupid ones that need the advice." - Bill Cosby

It Is All About Balance

In light of Mitt Romney's "47 percent" comments last week, was thinking about all the ways I have depended on the government in my life.  First, I received a public school education through high school, courtesy of the taxpayers.  Second, I have received Social Security survivor benefits for the past 13 years, courtesy of the American taxpayer.  Of course, I have also received other benefits such as roads (some obviously better than others!), national defense and others that I cannot think of at this moment.  And I am one of the 53% of income tax filers that pays an income tax.  It is not just the 47% of filers that do not pay taxes that are dependent upon the taxpayer.

Surely, we do need a safety net for the most unfortunate in our society.  However, there is a balance to all things.  President Obama says we need to strengthen the middle class.  I agree with this statement.  We create a stronger middle class by creating a favorable business environment, so that employers will be inclined to hire more workers.  We need a strong private sector that creates wealth so that we can provide for the "47 percent" and more.  We need a strong private sector that incentivizes innovation and entrepreneurship.  Business start-ups have fallen dramatically in the last five years, and this needs to change.

Breaking down the economy to its most basic element, nothing happens in our economy until someone sells something to someone else.  Until something gets sold to someone else, there is no revenue out of which to pay an employee (who then pays his/her own income tax), a supplier or to pay for basic business services.  Until something gets sold to someone else there is no profit to tax for streets, roads, bridges, police and fire protection.  And this all emanates from the private sector.  Yes, we need to provide for the "47 percent", but we must also have a strong private sector, one with a favorable business environment. 

As an aside, my guess is that many of the "1%" have no problem paying a higher tax.  It is those that aspire to the 1% that are most likely to oppose it, since their growth opportunities are the ones most likely to get shut down.  Just an educated guess.

Washington DC versus United States?

Interesting article from Ross Douthat from the New York Times asking if it is good for the rest of us when Washington DC booms.  Washington has had quite the boom in the last 10 years, thanks largely to a larger government complete with the army of lobbyists and other sharks that come with it.  Seven of the ten richest counties in the country now surround DC, according to this article.  This article is a good read.

Jobs, Jobs, Jobs

Last week I saw a commercial for Barack Obama that touts the 4.6 million private sector jobs created over the past 30 months.  The number is factually correct and it is definitely a good thing.  So, why does this still feel like a recession?  Total employment is still 3 million below the employment peak in December 2007.  Incomes have fallen by over $4,000 per household since then.  Much of the job loss occurred on George Bush's watch (I would blame much of the first year of Obama's presidency on Bush).  But overall job creation remains weak.  To put some perspective on this, in 1984, President Reagan stood before the Republican Convention and bragged about his policies had created 6.5 million private sector jobs in the previous 19 months.  With an employment base that was 40% smaller than today's employment base (85 million versus 140 million).  If you applied Reagan's results to today's economy (controlling for the size of the employment base and the amount of time), we would be talking about 16 million new private sector jobs in the last 30 months, not 4.6 million.  Just something to think about.

Football Results

Overall, not bad.  I called Kansas, Kansas State, and the Kansas City Chiefs.  I whiffed on Missouri, California and Michigan.  Maybe I should stick to the local teams!

Until next time...take care!

Redistribution, Apple and more...

Lessons on Redistribution

 

"If you give the employer the freedom to fire his workers, chances are he will hire more of them.  If a government subsidizes something, chances are you will get more of it than you ever counted on."

Dr. Edward Yardeni, President, Yardeni Research

I remember this quote above from a luncheon I attended sometime in the mid 1990's that was hosted by Dr. Yardeni.  I have always remembered, likely due to its simplicity, and also because of the profound truths that lie behind the quote.  I was reminded of this again as news headlines announced a video had been found in which President Obama, back in 1998, announced that he "believed in redistrubution."  Redistrubtion of wealth sounds great in theory.  Take excess wealth from those who do not need it, and use it to lift the fortunes of those who are trapped in poverty.  I only have a minor quibble with redistribution of wealth:  It does not work.  A terrific analysis on the actual consequences of redistribution came out earlier this week from Thomas Sowell.  I thought of the Dr. Yardeni's quote, because redistribution of wealth is actually subsidizing poverty.  If the government ever subsidizes poverty, through redistribution of wealth, I believe the inevitable result is poverty beyond anything we ever imagined.

Dr.  Yardeni's website (www.yardeni.com) is a treasure trove of economic information, although his commentary and analysis are only available to institutional investors at a hefty price.

Trivial Pursuit
In 1896, Charles Dow first published an index of companies that he thought were a good representation of the overall stock market.  This index, which had 30 companies in it, came to be known as the Dow Jones Industrial Average.  Of the 30 original companies in this index, only one of the originals remain.  Which original company is still in the Dow Jones Industrial Average today?

Answer:  General Electric, which was originally founded by Thomas Edison.

Continual Amazement
I continue to be amazed at Apple.  With today's release of the iPhone 5, once again we see long lines of people waiting to be among the first to have the phone.  I admit, I do not get it.  What is the appeal of getting the phone on the very first day it is released?  I applaud Apple as they are truly a great American success story.  They continue to command premium prices for their products, even with a struggling economy.  I remember being an analyst who followed this stock, thinking that when Steve Jobs temporarily left the company in 2007, that was the end of Apple's run.  Earlier this year, Apple became the highest market capitalization stock in US history.  Hard to believe this company was on the verge of extinction in 1999.  Microsoft had eaten their lunch in operating systems, capturing over 90% of the market, with MSFT domination in the corporate market.  I still look back to that time and remember that Sun Microsystems attempted a "takeover" of Apple by offering less than market value for the stock (more like a "take-under"!).  Where is Sun Microsystems today?  Oracle rescued it from the scrap heap.

Weekend Predictions
If you are a gambling person, this looks like a great weekend to bet on the underdogs.  It started last night with the Giants win over Carolina, after being a 2 1/2 point underdog.  Other underdogs I like to cover this weekend include Michigan, California, and closer to home...the KC Chiefs, the Missouri Tigers and the Kansas Jayhawks!  So just take all my predictions for what you paid for them.

Finally, congratulations to the Shawnee Mission East Lancers varsity football team, which defeated defending state champion Olathe South last night 3-0.  Lancers are now 4-0 and have served notice that they are a real contender this year in the Sunflower League, and perhaps the state!

Until next time...take care!

The Week That Was

I know that you, my beloved readers, have anxiously been awaiting another installment from my blog. Without further ado, here it is:

Surprise of the Week
The biggest surprise of my week happened Wednesday night in Independence, Missouri. I attended the Kelly Clarkson concert at the (strong) urging of my wife. She really rocked it! Ms. Clarkson, that is (although my wife knows how to rock it too!). The lady can clearly sing, and the whole atmosphere was positive and uplifting. Ms. Clarkson was not up there urging the audience to defy authority, or slamming politicians or other public servants. Kudos to Ms. Clarkson and her band for putting on a good show. Especially awesome for my wife and daughter was when Ms. Clarkson wandered out into the audience, giving my wife and daughter an opportunity to see Ms. Clarkson up very close.

Tablet or Reader?

I have decided that I need to upgrade my technology a bit and have been looking at readers. Do I want to go with a reader like the Kindle or Nook? How versatile are these machines? Or a tablet such as the iPad? I figure I just want to read books. I have a laptop and a desktop to surf the Internet, email, etc... I have an iPod to listen to music, either on walks or in the car. Seems like I want the reader, but looking for other perspectives that I might be missing. Also, as an aside, are 4G phones worth it yet? And if so, which one is the best?

Home Opener

This week is the home opener for the SM East freshman team against the Olathe Northwest Ravens. I know that high school freshman football does not even begin to compare to the NFL or D-1 college ball. But there is little else I enjoy more than watching my kids play their sports and seeing their talent develop. Few things in life are more rewarding than watching your child take up a passion, whether it is dance, theater, music, athletics, etc..., and watching their talent grow. I want so much to see my children's dreams come true. I think this may be why I enjoy his games so much. And perhaps the dawning realization that this is a chapter in my life where the sun is setting. So, this week, I get to see Jeff wear his black jersey (which he says looks much cooler than the white jersey) to school for the first time on Wednesday. Go Lancers! And Go #18!

Until next time...take care!

A Fine Labor Day Stew

Labor Day Salute to Labor
It is the first weekend in September so that must mean it is Labor Day, which for many of us means a long weekend of R&R (rather ironic for Labor Day), family gatherings, picnics or cookouts, and one last summer fling, whether at the lake or around the house. But I do want to take the time to salute those who labor for the labor movement. I look at the workplace benefits I have enjoyed through the years, as many of us have. Perks such as paid vacations, paid sick leave, pensions, employer paid health insurance, and safer working conditions are all brought to us courtesy of labor unions, whether we belong to one or not. Ironically, labor unions may have done their jobs too well, which may account for only seven percent of private sector workers beloning to unions today. But, I lift a salute to those who risked their jobs, and more, esp on those days when I can take advantage of my perks without fear of losing my job.

Could Not Say It Better Myself
Here is a link to an interesting article by Janet Daley about the future role of government. She contrasts what is happening in Europe with what is happening in America. Read the article! I could not say it better myself.

College Football Season Opens
This weekend was the opening weekend for college football, which I truly enjoy. Being in Big XII country, and having graduated from a Big XII school, I will follow that particular conference most closely. Looks like newcomer West Virginia is the team to beat after Week 1. Things could change, but the Mountaineers were easily the most impressive Big XII team this weekend. Baylor might be the most under rated (picked to finish 7th), as their offense picked up where it left off last season, even without RGIII.

On the national scene, no team was more impressive than Alabama, which made mincemeat out of Michigan. There is no better big game coach in America than Nick Saban. Alabama in my book is better than #1 ranked USC. I see the championship staying in Tuscaloosa. Roll Tide!

Questions of the Week
When President Obama addresses the Democratic National Convention this week, will he do so from an empty chair? The President has taken Clint Eastwood's silly stunt in stride.

Will the "fact checkers" be as vigorous this week as they were last week?