When I sold the business in the late 1990s, a money manager pitched me a way to live a happy life by making 10% virtually tax-free for the rest of the my life. I give him my money. He invests it. We earn 12% to 15% each year. We “harvest” gains of 10% by selling those stocks that risen, and keep the 5% for reinvestment. Hence never any ordinary income.
There was only one problem. It never happened. There was the dot.com bust in 2001-2002 and by the time the decade of 2000 to 2010 had passed, equities had gone nowhere. Most money managers were staring into the abyss. and my wonderful retirement investment strategy had gone down in flames.
I wasn’t the only dummy who couldn’t predict the future. Every pension and superannuation fund made predictions of at least 8% and made promises to their retirees based on what was then a reasonable prediction.
The brain fights old, comfortable assumptions. I fought the 10% assumption for years. It was such a wonderfully simple, easy life choice. When I saw the money managers couldn’t deliver it, I sought out my own fantastical schemes — real estate syndications to distress debt funds to private equity to leveraged buyout funds to biotech startups that could cure cancer .
Today, Thanksgiving 2011, I’ve reconciled myself to being joyful with my new normal. If I can get 5% from now on. I’ll give thanks. Hence my love for bonds and bond-like thing. Yesterday I talked about two Vanguard funds. One of them actually pays the equivalent of nearly 7% pre-tax.
This morning Credit Suisse issued a report called “Stock Selection for the Long Run.” Their stocks had done well — better than the S&P 500. Then I came across this delicious chart:
I thought to myself: Who knew that August lows were the low point? I certainly didn’t.
I can’t time this. No one can.
I want to give Thanks for peace and quiet. I don’t want to craze over my computer screens, which show crazy movements I can’t predict, or worse understand.
That’s my Thanksgiving Day lecture. I’m taking Susan, Michael and Anne to the Boulders in Carefree, Arizona for Thanksgiving.
The next column you’ll read will be next Monday, November 28. This place better live up to its name as being “care free.”
Whoever expected a committee of politicians to make a decision was smoking something. Even if you call it “super.”Washington had an assumption (aka bug up its ass) about cutting the budget. Robert Reich wrote a piece on what Congress should be doing. It’s very hard to disagree with him.
Budget cuts aren’t the answer.
The biggest question right now on Planet Washington is whether the congressional supercommittee will reach an agreement.
That’s the wrong question. Agreement or not, Washington is on the road to making budget cuts that will slow the economy, increase unemployment and impose additional hardship on millions of Americans.
The real question is how to stop this austerity train wreck, and substitute the following:
FIRST: No cuts before jobs are back – until unemployment is down to 5 percent. Until then, the economy needs a boost, not a cut. Consumers – whose spending is 70 percent of the economy – don’t have the money to boost the economy on their own. Their pay is dropping and they’re losing jobs.
SECOND: Make the boost big enough. 14 million Americans are out of work, and 10 million are working part time who need full-time jobs. The President’s proposed jobs program is a start but it’s tiny relative to what needs to be done. It would create fewer than 2 million jobs. We need a big jobs program – rebuilding America’s crumbling infrastructure, and including a WPA and Civilian Conservation Corps.
THIRD: To pay for this, raise taxes on the super-rich. It’s only fair. Never before has so much income and wealth been concentrated at the very top, and taxes on the top so low. Go back to the 70 percent marginal tax we had before 1980. And include more tax brackets at the top. It doesn’t make sense that any income over $375,000 is taxed at the same 35 percent, even if it’s a billion dollars. And tax all sources of income at the same rate, including capital gains.
FOURTH: Cut the budget where the real bloat is. Military spending and corporate welfare. End weapons systems that don’t work and stop wars we shouldn’t be fighting to begin with, and we save over $300 billion a year. Cut corporate welfare – subsidies and special tax breaks going to big agribusiness, big oil, big pharma, and big insurance – and we save another $100 billion.
Do you hear me, Washington? Do these four things and restore jobs and prosperity. Fail to do these, and you’ll make things much, much worse.
Generally, I don’t like Robert Reich. But he does make sense in this simple article.
Annaly gets slammed and Cramer issues a dire prediction. I’ve never heard Cramer be more pessimistic. The world almost ended last night. He and I both expect a major one-day hit to the stockmarket. Hence, he and I don’t like equities. We both like gold, but it’s taken a huge hit in recent weeks. It takes major faith to be still holding on. It dropped big-time yesterday.
Annaly and the mortgage REITs are coming in for continuing bad press (most of it undeserved in my opinion). Latest: today’s Wall Street report on one analyst’s report. “Scathing Report On Annaly Capital Shocks Some On Wall Street.” Click here.
Currency Wars — an excellent interview on PBS. James Rickards untangles the web of failed paradigms, wishful thinking, and arrogance driving current public policy and points the way toward a more informed and effective course of action. It’s 21 minutes. You can listen to it on your laptop, or download it and listen to it on your iPod. Click here.
For God’s sake. Put a signature block at the bottom of your emails. Include your phone numbers, your address, your web site, your title, the correct spelling of your company, etc. Don’t make your customers and friends search the web for your address.
Latest best New Yorker cartoons:
I miss real family restaurants. At a diner about two hours north of New York City, you’re greeted by two wonderful signs:
+ Above the front door: “We’ll be open until we close.”
+ Above the stove is a sign “I kiss better than I cook.”
Harry Newton who cautions against the explosion of spam. Latest is from “The Electronic Payments Association” telling me that my bank transfer was rejected. If I want more information, I click on the link and bingo my computer will be full of viruses, malware and other nasties. Don’t click on links. Don’t open email attachments. Our 90-year old guest last night was bitching about some “Bulgarian” who stole $150 from his credit card account. I estimate I’m getting five times as many spam emails as I am getting legitimate ones. Most are financial, very few penis enlargement ones. I guess they’ve given up on me.
If your IT department forces you to use “The Cloud,” make sure you save constantly. I lost half today’s column because of an Internet “glitch.” Or was it my typing? It would never have happened in the old, pre-Cloud days.
Reich has been and always will be a total fail. He has zero real world experience..what can you expect from an academic. useless crap. heres why:
FIRST: No cuts before jobs are back – until unemployment is down to 5 percent. To do that we have to print money like rain falling from the sky. so the job 'increase' will be offset by Weimar hyperinflationSECOND: Make the boost big enough. havent we already learned this lesson? The CBO yesterday said the Ofailure stimulus was useless and caused more harm than good.THIRD: To pay for this, raise taxes on the super-rich. It’s only fair.thats a guaranteed way for jobs to leave the country. the 'rich' will go where taxes are minimized and there are lots of places beside here to start jobs. Thanks to our hideous trade policy where we let anything come into the country at zero tarrifs, why not?FOURTH: Cut the budget where the real bloat is. Military spending and corporate welfareif you add cutting personal welfare by the same amount,im good with that. the problem is thereare too many lazy, inbred slackers mooching off the system in this country. Over 50% pay no taxes. how is that fair Reich? Im surprised you were taken in by his hubris, Harry. youre such a down to earth guy. Heres hoping Thanksgiving dinner changes your perspective on this article. As for Reich, nothing can save him from his delusions.
Harry, thanks for the Robert Reich endorsement;
not all your readers are red meat ideologues- a world without Robert Reiches would be like a bird with one wing, flying in circles and crashing to the ground, a scenario that is with us thanks to the “free” market assaults on any common sense/ economic justice safeguards.
Good holiday to you, and my opposite counterparts as well!
Harry — I wish you all the best on your vacation. Your vacation is, however, shorter than that of Congress. Those critters left town for 10 days… obviously because things are going so well!
But, I am so sad to read your support for that anti-capitalist big-government trash written by Reich. Your words “But he does make sense in this simple article.” show that you are still an unrepentant supporter of big government. He is wrong on every point.
1. The federal government is now giving 99 weeks (darn close to 2 years!) of unemployment. So, the incentive is to collect the unemployment, take a cash under-the-table job, and work half days or half weeks. The philosophy in the first paragraphs is exactly the same philosophy as the “War on Poverty.” Lay back, don't be productive, relax and the government will take care of you. And… how well did that work out?
2. Go Back to a 70% marginal tax rate. In New York City what would that be? 110%. And you SUPPORT that? Really, that's crazy talk.
3. Cut the Waste, Fraud, and Abuse in the Pentagon. Good God. As you know, I started in the Pentagon procurement business under Carter. Thankfully, it was just before he left. Every idiot politician inside the Beltway thinks they are going to find and cut Waste, Fraud, and Abuse in the DoD. Bullshit. The DoD procurement is the most transparent and best managed in the world WHEN Congress stays out of it. Waste, fraud, and abuse begins and ends on Capitol hill and within the Executive Branch in the form of the EPA and various “equality and fairness” (SIC) regulatory agencies.
4. Cut Corporate Welfare. Okay. I'm all for that. I'm all for world peace too. Ain't neither one gunna happen!
Reading your support of that article by Reich just makes me shake my head in puzzlement.
Going back and further beating the Reich article with a well-deserved cudgel:
I know you think Matt T. can link subjects and verbs, but Victor Davis Hanson is certainly the best essayist writing today. Here he is on the subject of large government largess and how well it works:
http://pjmedia.com/victordavis…
The Fannie and Freddie University. “I noticed about 1990 that some students in my classes at CSU were both clearly illiterate and yet beneficiaries of lots of federal cash, loans, and university support to ensure their graduation. And when one had to flunk them, an entire apparatus was in place at the university to see that they in fact did not flunk. Just as coaches steered jocks to the right courses, so too counselors did the same with those poorly prepared but on fat federal grants and loans. By the millennium, faculty were conscious that the university was a sort of farm and the students the paying crop that had to be cultivated if it were to make it all the way to harvest and sale — and thus pay for the farmers’ livelihood. How could a Ponzi scheme of such magnitude go on this long? . . . But what cannot go on will not go on — at least for most universities without the billion-dollar plus endowments. The present reckoning is brought on not by introspection, self-critique, or concern for our increasingly poorly educated students, but by money, or rather the lack of it. Higher education is desperately searching for students with cash, loaned or not. And it is, by needs, panicking and will ever so slowly start changing.”
Day trading activates the same “thrill-feel good-reward” area of the brain as amusement park thrill rides, shoplifting, gambling, and alcoholism. It's a tough addiction that's only broken when people run out of money.
The budget “super” committee
has been badly mishandled. From the start they should have been sequestered and
forced to eat public school food. A very few days of two veg (extruded French fries,
cardboard pizza), one meat (grey hockey puck that smells like *&^?@) , and one
carb (baked sawdust, uh bread, really?) they would find the cuts and come out
begging for mercy.
Fourteen million are
unemployed
Nearly Nine million are
underemployed.
Almost Three million have
given up looking
Approximately Twenty-six
million people are Unemployed/underemployed.
Therefore unemployment/underemployment
is closer to 18%, probably higher.
Raising the tax rate to 70%
on the super rich, in my opinion, only removes incentive to aspire to such
monetary heights. For those rich that feel weighted down or guilty of their
wealth may adopt a section of highway and fund the improvement of it. I’ll even
let them put their name on it when they are done.
doesn't it depend on what day of the week it is for kramer to be bull or bear? that guy has cost more people money then obama care. gold is going down to around 1480 then soar for two or three years. i run charts on it all the time and have hardly miss a trade. i will keep you posted. by the way what is doing nly in is the twist. you can not borrow money at the same rate you are lending it and make money. the twist kept shorter rates the same while lowering the long rate.
I checked the numbers: Obamacare is 100x's the cost of Cramer's predictions and still gaining, with the “best” yet to come in 2012-2013. And Cramer is entertaining so we all get something positive out of it.
The core philosophy here, i.e., response to Richard Reich above, is do we still believe the government creates jobs and is in the best position to determine winners from losers, or is private enterprise and entrepreneurship the real job creator. You'd think based on FDR's disastrous economic decisions in 1937-38 and Obama and the current Congress's over the last 3 years, that question would be obvious. It is obvious. Hint: the USPost Office has lost $20B over the last 5 years, while Fed Ex and UPS are doing just fine. Washington and Sacramento, Albany, Chicago, get out of the way!
HARRY WAKE UP..EVEN REICH CAN'T PICTURE THE OCCUPY SOMTHING CROWD GRABBING A SHOVEL AND GOING FOR THE NEW CCC'S. THE ONLY BIG THAT REICH MISSED WAS BIG LABOR AND BIG CONGRESS. HIS FOUR POINTS ARE LIKE A STALIN ERA FIVE YEAR PLAN
I've been a “subscriber” from day 1 Harry, but I'm losing faith. Robert Reich????? Really? This guy never met a government program he didn't like. Yeah, that's what we need, more monstrous government “employment programs”. Fifteen trillion in debt just really isn't enough – let's shoot for 20 trillion!
Get the government the hell out of the way. Start the Keystone pipeline project with Canada TODAY – 7.5 billion investment by Canada with 20,000 American jobs just to start. Virtually wipe out our need for oil from the Middle East. Get the private sector rolling – that's how you create jobs. Not by some bloated waste filled government jobs program.
Enjoy your Thanksgiving. Clear the head. Get your mind back on American ingenuity and the great private sector. That's where the road to recovery lies.
I agree with you about the Keystone Project for all the reasons you mentioned. The administration overestimated the enviromentalists' objections. I don't understand why Obama isn't out there stumping for the project every day , twice a day.
Because he likes money losing green energy projects more than projects which will produce jobs. Besides his green enviro base would crucify him if he approved the project before the next election.
“The administration overestimated the enviromentalists' objections”
Sir, no… they FED the environmentalists objections. The goal is to get out the Green vote. It has nothing to do with benefiting the country OR the environment. It is a maneuver to retain power. That is all.
> This guy never met a government program he didn't like.
Agreed! …but apparently, he doesn't like the military.
Cutting military would be great… except *total* defense spending is under 20% of the total gov't outlays. How'za 'bout cutting something from the 80%. A 5% cut in the 80% would be better than a 10% cut in the 20%…
Cutting corporate 'welfare' or whatever that is – totally agree with. Supporting the Northeast Milk producers, tobacco subsidies (while we promote anti-smoking in other parts of the gov't), corn-as-fuel subsidies (and ALL ag subsidies – these go to large, industrial organizations – not 'family farmers'), sugar tariffs (so we have corn-syrup in our soft drinks instead of sugar, as it was when I grew up).
Good grief the gov't is into everything. I think about this every time I flush the 'low-flow' toilet in my house and I WILL think of this when I run out of genuine 100 watt incandescent light bulbs.
Mikeyancey: Well stated. But, please remember that the “cuts” were never really “cuts” as you and I understand that four letter word. They were and are simply reductions in growth. There were never real zero-base budgeting-style “cuts”.
That's the first sham.
Second: The DoD buys lots of stuff… as opposed to some other branches of government. And so, the DoD (and GSA etc) is facing massive inflation due to the weak dollar policy and expensive oil policy of the administration. BUT, the administration can not admit to high inflation because high inflation kicks off increased costs for social security, military retirement, civil service retirement, etc. That's the second sham.
Be aware that if you are hoarding 100 watt light bulbs (as you should) you might find them a good investment since you will be the only source for the engine in the Easy Bake Ovens stored in basements and garages around the world.
Fderfler……When the liberals talk of cutting military spending keep in mind that what that really means is cutting the salaries and personal found in the engineering departments. The grunts who work on the floor at Boeing, UTC, GE, General Dynamics, Bell, Lockheed, ect. are union and will always get their yoy 5% raise, year end bonus and increased retirement and health care benefits. It is common knowledge inside of any defense contractor that the union workers make more and have better benefits that any staff engineer.
At this time defense contractors are hiring engineers from anywhere they can get them. China, India, South America it doesn't matter. Usually they can't bring these engineers on as full time employees so they hire them through contract agencies and then eventually hire them as direct employees. The state of our engineering talent at U.S. defense contractors is shockingly abysmal. Mark my words, this will become a huge concern for national defense in the coming years. Here's a question for Harry; Why did it take Boeing almost 3 more years than scheduled to complete the new Boeing 787 Dreamliner?……..I have several friends (engineers) who work at Boeing and I know why.
We need to get rid of the unions inside national defense contractors and double the salaries of their talented engineers immediately. We also need to get rid of foolish regulations such as ISO 9000.
Amen, amen.
The link for “Scathing Report On Annaly Capital Shocks Some On Wall Street” does not seem to work. I am interested in reading the report.
Sam
Thanks. I fixed it. Try again. Let me know.
Link still not working for me.. I even reloaded the page.
Would you put the url link into one of these comments? Thanks!
Now it works.
Also
http://blogs.wsj.com/marketbea…