Reinke Faces Life

http://www.bc.edu/centers/crr/facts/jtf_11.pdf

How Can the Actuarial Reduction for Social Security Early Retirement Be Right?
Natalia A. Jivan, July 2004
JTF# 11

***Begin Quote***

Traditionally Social Security’s Normal Retirement Age has been 65, but for the last 45 years both men and women have had the option to claim benefits at the Early Eligibility Age (EEA) of 62. In exchange for claiming early, individuals receive a smaller monthly benefit. The legislation that established the EEA reduced benefits by 5/9 of 1 percent for each month before age 65, so that a person claiming at age 62 would face a 20 percent [(5/9)*36] reduction. This publication explains the factor of 5/9 and why it has remained constant since the establishment of the EEA.

***End Quote***

Now we know the gubamint has a motivation to have a low inflation rate. It keeps the SSI COLA low. That means that it artificially makes a sick system look healthier.

It’s also, like inflation, a hidden tax on the fixed income elderly.

So if they haven’t reexamined the discount rate in light of interest rates, then we have discovered another proverbial “thumb” on the “butcher’s scale” when servicing the old people’s “guaranteed” program.

As I always say, if insurance company executives did what the gubamint as the social security administration does, then they’d all be in jail faster than the Road Runner.

<beep beep>

I does make you wonder how to play the “62.5” versus “65” versus the “full retirement age” versus the “wait til your older and hope you don’t get hit by a bus”?

Beats me!?!

MONEY: Buy gold, euro collapse?

buy gold, euro – Money Week
http://www.moneyweek.com/file/3095/buy-gold-to-cash-in-on-unstable-euro.htm

***Begin Quote***

The euro, like any other paper currency, is an illusion. For a currency to work, people must suspend any belief that notes are worthless pieces of paper and have faith that these pieces of paper can be exchanged for valuable goods and services. That belief in turn rests on the faith that the value of paper money will be upheld by a government.

***End Quote***

And, we have this illusion here as well.

What happens when the nice Japanese workers stop sending us Toyotas for the little green pieces of paper? We really stuck it to them when they bought lots of US landmarks like Rockefeller Plaza (i.e.: home of radio city music all and the rockettes) last time.

We have seen hyper-inflation, stagflation, and the Japanese malaise. These are economic tsunamis destroying individual lives, nation states of varous sizes, and societies.

If it is truly a global economy … and I’m not sure that is so … consider that these economic epidemics often stop at the water’s edge … global outsourcing is coming home to roost as stuff is being brought back … then if the euro fiction falls, will the American version go with it? And, exactly what gets swept away with it?

So, if we are postulating the potential for a financial collapse, then what do we do about it. Like Y2K, it is easy to take some steps to prepare. There are two type of expenses in taking out “insurance”. We can divide the protective actions we are considering into (a) the things that are total losses (i.e., people who planned to hide out in rural retreats losing every thing spent on it) and (b) those things that can have other uses or are recoverable. To what extent the things we do make sense regardless of the financial weather.

What worked in the German hyper-inflation? What worked in the Carter stagflation? What worked in the Japanese malaise?

So we have some homework to do.

Wal-Mart to offer $4 generic prescription drugs

By ALISON BERT THE JOURNAL NEWS
Powered by Topix.net
(Original publication: September 21, 2006)

***Begin Quote***

Wal-Mart and Sam’s Club pharmacies will offer 291 generic prescription medicines for $4, the company announced this morning.

The program, which begins in Tampa, Fla., today and in the rest of Florida in January, is slated to be rolled out nationwide next year, said Bill Simon, executive vice president for the professional service divisions at Wal-Mart Stores Inc.

The price is for a 30-day supply.

***End Quote***

Perhaps the American voter should put WalMart in charge of Medicare, as opposed to the gubamint?

http://www.harvard-magazine.com/on-line/010682.html

The Middle Class on the Precipice
Rising financial risks for American families
by Elizabeth Warren
***Begin Quote***

So where did their money go? It went to the basics. The real increases in family spending are for the items that make a family middle class and keep them safe (housing, health insurance), that educate their children (pre-school and college), and that let them earn a living (transportation, childcare, and taxes).

***End Quote***

It’s interesting that the author in this summary includes taxes as part of the basics.  It’s also interesting that there is no action plan for how to get out of this mess.

I’d suggest to those at risk:

(1) Increased awareness of the risks. Having been caught unaware in my life, I know that wake up call is a real slap in hte face.

(2) Knowledge is power. Know where every dime goes. Put every nickle to work. Cash management will be rewarded. Do people have any idea what their current run rate is? What is the minimum cash burn if nothing was coming in? What is the life boat run rate? It’s amazing how many people don’t even have these concepts in their vocabulary.

(3) An emergency fund suitable for your risk level. A year’s worth of run rate, invested in short term certificates, is probably the minimum. The size of the fund has to be adjusted for age. Over forty? Getting a job is twice as hard as under. Over fifty? Four times as hard. Over sixty? Forget it. Corporate Amerika doesn’t want you.

(4)  Cut expenses to the bone like the ww2 generation did. Manage long term mortgage debt like an investment portfolio. Minimize the amount you’re paying. Notice – I didn’t say take cash and pay it off like some radio talk show hosts advise. One raving looney said sell the house to pay it off. That might be correct in SPECIFIC cases, but not as a general rule. A home mortgage is like sleeping in your bank. Following his strategy, you might wind up paying more in taxes and have nothing to fall back on. To be free and clear and debt free? not sure tht’s the best advice for everyone. But also, if you have an adjustable, then you have a problem.

(5) Simplify.

(6) Develop alternate earning streams, skills, and investments. (An investment is something that gives you a return.)

http://www.boston.com/business/personalfinance/articles/2006/09/14/insurance_biz_urges_hard_coverage_look?mode=PF

Insurance biz urges hard coverage look
By Eileen Alt Powell, AP Business Writer  |  September 14, 2006

***Begin Quote***

NEW YORK –Insurance agent Clif Rosenberry knows firsthand what can happen when a family’s breadwinner dies without life insurance: His brother was killed at the age of 39 in a work accident, and he didn’t have his own policy.

“He had a wife, two kids, a brand new house … and not one speck of life insurance,” Rosenberry said. “The family wound up having to sell the house, having to move. It was an absolute mess.”

***End Quote***

This I never understood.

To this day, I don’t understand it.

I remember someone saying “A man, who dies without insurance for his family, doesn’t die; he absconds!”

Now an insurance salesman ranks down there just above politician, lawyer, and used car salesman. With apologies to the used car salesmen. And, it’s akin to going to the dentist. Or, getting a will.

I’m not talking about any kind of insurance — anything other than low cost term life insurance.

Not what you get at work, cause if you lose your job, then you lose the insurance.

I’m talking a minimum of 2M$ of 20 year level premium term life insurance.

No annuities. No whole life. No babies or infants insurance from Gerber pitched by some dumb celebrity. No geriatric insurance to bury you when you die, or to leave 10k for your final expenses, or leave a little something for the kids.

Get it.

Ask at your credit union. If you don’t have a credit union, ask me I think you can join “mine”. It is as exclusive as rain anymore.

Ever heard of SBLIC savings bank life insurance. Cheap. Easy.

Get it! Today! Don’t drive home without getting a binder.

Please!

http://www.boston.com/business/personalfinance/articles/2006/09/08/having_different_accounts_for_different_purposes_can_make_sense?rss_id=Boston.com+%2F+Business+%2F+Personal+Finance+-+Money+Management+-+Financial+Management+-+Boston.com

***Begin Quote***

Q. I have a checking account that earns 5 percent and is used solely for mortgage payments. How much must I have in the account so that I’d need to make no further deposits to pay off a mortgage with a $58,497 balance and $905.14 monthly payment?

*** AND ***

But if he has that much, why not just pay off the $58,497 balance and get free of the mortgage right now? After all, by making 75 more monthly payments, he’d end up paying nearly $68,000, including interest.

***End Quote***

It’s a little more complicated. You forgot everyone’s favorite uncle! Samuel.

TAXES!!!!   :-(

So the correct solution depends on facts not yet in evidence, judge.

Project the taxable income over the problem time domain. Figure that the checking account’s 5% is reduced by as much as a third and as little as zero depending upon the marginal tax rate. The home mortgage interest deduction and property taxes MAY be available depending if there is enough deductions and the AMT isn’t triggered.

Now I’m an ingineer by training and an IT geek by vocation, I am neither an economist, accountant, nor lawyer. Nor do I play one on TV! So I have nothing but some math skills, a few advanced tax courses from my mba, and some common sense. In the absence of some overpowering rationale, I’m a Dave Ramsey fan, and say pay the thing off under almost any circumstance. IMHO.

Get a HELOC for an emergency fund, if you really need that cash for a emergency fund. Get it from a credit union for the best deal.

imho, fwiw, faiwwypfi!

I’m the administrator of an estate. Lucky me! So I went and had the will admitted to probate. The clerk and I was chatting and she told me about an entertaining barely-legal scam going on in the poorer section of Middlesex County.

Nearby the clerk’s satellite office, a lawyer has a sign offering a $25 simple will. She didn’t go into details as to what constituted simple. But the scam was that wills in nj can be written with what is called a “self-affirming affidavit”.

Basically the lawyer and witness all state under oath at the time the will is made that these are their signatures and that of the person making the will. It’s not required to be a valid will. The catch is that if it’s not there than after the person dies, the witnesses have to affirm that it is their signature on the will.

Back to our 25$ will lawyer. He writes the will for $25 but doesn’t make it “self affirming”. The when the poor family tried to probate the will, for which no lawyer is needed, especially on small estates, with simple wills, they need his affidavit affirming his signature. They gotta have it.

You can guess what happens now … … right.

Yup, that signature costs them $350!

So much for a cheap will!

HE must be politically connected, because if he wasn’t, he’d be disbarred.

Makes me wish I went to law school so that when I retire I could go “compete” with him. I do wills for $25 just to meet people. Oh well! Arghh!!

… a friend dies with an estate, and the NJ state grave robbers will take 15%. When will people realize that this is grave side robbery. Proper estate planning should result in the deceased leaving nothing for the state to tax. Arghh, give it away, spend it, buy gold coins, whatever!

http://www.usatoday.com/money/companies/regulation/2006-08-17-pension-overhaul_x.htm

Bush signs massive pension overhaul
Updated 8/17/2006 1:51 PM ET

***Begin Quote***

With its hundreds of pages, the bill seeks to strengthen traditional defined-benefit plans and requires companies to tell workers more about the health of their pension programs. It also nudges workers into putting more money away for their own retirement.

It aims to boost the 30,000 defined-benefit plans run by employers that are now underfunded by an estimated $450 billion. Those plans must reach 100% funding, up from the current 90% requirement, in seven years.
***End Quote***

Hey sounds good right?

Now let’s look behind the curtain.

Defense contractors, exception.  Two big airlines, big exception. Shortfallers get 7 years to catch up (or go bankrupt!). A little pork project to make it palatable and worthwhile for one representative to vote for it! Automatic 401k enrollments because your too stupid to make your own decisions. And, plans with over 120% funding can fund retiree healthcare (a little relief to Medicare?).

Whatta bunch of Barbara Streisand!

This is about helping out their friends in the Airline industry, Defense Contractors, and making sure that the federal Pension Guarantee doesn’t have to pay out too much.

It’s not about rectifying the mistake made in WW2 when the Federal Government winked so that Companies could pay more than the government’s published wage and price controls allowed. We’ve been paying for that mistake ever since.

Here’s a novel idea. Let people make their own decisions.

Pension plans should be “spun out”. Take the assets and divide it among the recipients. Allow them to decide what to do next. I am sure that the Insurance Companies, Stockbrokers, and Mutual Funds can help them with plans that they won’t have to worry about.

(Look up a Vangard Guaranteed Annuity, and see how little one has to pay in fees for that! Then see how everyone is being ripped off by the collusion of the politicians and the companies.)

Bet the airline pilots would have like to have that before those tow special airlines welshed on them!

Unintended consequences.

When the government “protects” me from something, why should I be afraid? I should just be terrified!

I received a “long time” customer offer from Verizon. It said that I was paying 80 bucks for my two lines and 400 minutes. For the same money, I could have 700 minutes. So I called. In fact, I am paying 60 bucks. So, if I don’t want to pay more, (and who does?) I could have 500 minutes but have to commit for 2 years more. Arghh, waste of fifteen minutes of my life. Just goes to show, there’s no free lunch. And, marketing lies!

http://www.eons.com/money/feature/644?section=growthenestegg

***Begin Quote***

If you know either the interest rate or the time period desired to achieve a financial goal, the Rule of 72 will help to estimate the unknown element. For example, if the interest rate is known, say 9 percent, the time period to double our investment is estimated by dividing 72 by the rate (72/9). It would take about 8 years to double our investment at 9 percent.

***End Quote***

I use 4% for the rate of return assumption, and 6% for the rate of inflation (that hidden tax increase). So that means that every dollar I’m holding is worht 2% next year UNLESS I do something with it. Arghhhh!

http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=51320

>You can use them to scrape the frost off your windshield in winter …

True the best use for them.

>No, there’s NEVER a good reason to hold a credit card! Get a debit card. You can use it for virtually anything a credit card
>will do like get a hotel room, buy stuff online or rent a car almost anywhere. A few rental car companies do have pretty silly
>requirements for debit card use or only accept them in certain parts of the country, but those guys are too expensive, anyway!

Now don’t get me wrong, I am not a fan of credit cards. They are the “crack cocaine” equivalent for the financially naive.

BUT I do think they have a place and use.

FIRST, legally, there is a distinct difference between debit and credit cards. You have rights under the various state and federal laws, statutes, regulations, and policies. They treat a credit card differently than a debit card.

SECOND, financially, with DEBIT, you’re money is gone and you are arguing from a position of weakness.  With a CREDIT card, the bank’s money is gone and you are arguing from a position of strength about accepting the bank’s opinion.

Not that I want to depend on either to protect me, but, there is anecdotal evidence that it can come in handy.

Assuming that a credit card is Zero Fee AND that it is paid off at the end of month, (you can still get these IF you shop wisely), then you have a tool.

I personally have three such cards. Obviously all zero balance. One I use for household expenses. One I use for computer related expenses corresponding to a budget of 1% of my net for this purpose. One I use for books and learning materials, and such corresponding to a budget of 1% of my net for this purpose.

By using these cards in this way, it makes the accounting simple. BUT, were they to change the terms and charge a fee, over the side they go.

Again, I think you may have underestimated the value of having one no-fee zero-balance card in one’s wallet. A debit card is not as good for the above reasons.

IMHO,
Keep up the good work of bringing sanity back to American money management,
Now, can you convince the gubamint to do the same?

http://www.moneyweek.com/file/15985/the-five-major-trends-reshaping-the-world-economy.html

energy costs, the world’s reserve currency, business cycle, west 2 east, end of the American empire

All things that should be considered in financial planning.

http://money.cnn.com/2006/07/27/news/funny/monopoly/index.htm?section=money_latest

Monopoly ditches cash for Visa
New British version of classic board game will replace traditional paper dollars with a debit card to reflect modern lifestyles.
July 27 2006: 2:01 PM EDT

***Begin Quote***

NEW YORK (CNNMoney.com) — The days of spending cash are over, if a British version of Monopoly has anything to say about it.
Parker Brothers said a new edition of the board game released this week in the United Kingdom and Australia switches to a Visa debit card and electronic transaction calculator from its traditional paper money.

***End Quote***

I recently heard that the average consumer has 19.5 credit cards. The average credit card debt sounds like a minimum wage job’s annual earnings.

Maybe it was my depression era grandparents and their children, my aunt and uncles, particular love of zero debt, a full savings account, and a “never spend more money than is in your pocket” ethic. I learned those lessons later in life. But I marvel at people’s thinking.

Unfortunately, Parker Brothers is not living in the real world.

(1) It doesn’t charge 21% interest for loans. While it may eliminate cheating by the Banker player, it doesn’t reflect the real world where the  politicians, non-regulating insider regulators, the fat cat insiders, and the Federal Reserve (a private corporation that is no more “federal” than I am) ARE cheating us. They are robbing us blind!

(2) It doesn’t take 35% of your $200 when you pass go to waste. There should be one player representing the gubamint that just takes from everyone.

(3) It doesn’t, if one circuit around the board is a year, take an inflation tax of all you cash. That’s real life.

(4) It doesn’t take the opportunity to teach us that cash is better than credit and cash ain’t a store of value.

http://www.mises.org/story/2254

***Begin Quote***

Of course, with the continuing possibility of inflation with fiat money, we will one day find “give a nickel, take a nickel” trays, and perhaps even “give a dollar, take a dollar” trays, at the convenience store.
***End Quote***

Remember when pennies would buy something? I do. The joke of the penny is on us. We have allowed the gubamint to institutionalize their theft of our money. Prior to FDR’s gold grab, money was a “store of value” as we were taught in economics class. Now it’s a depreciating good that silently and transparently rots. At least you can see a sinking ship, you can’t see the gubamint “clipping coins”, like the kings and prices of old. They’ve automated the process. The dollar bill in your wallet shrinks in value 5% to 10% every year and you don’t realize it. Inflation sticks it to the savers, the old folks on fixed incomes, and the not-rich (i.e., the poor and middle class). Wonder why there’s a real estate boom? Cause they can’t print any more of it. And, when the Japanese get tired of sending us Toyotas for little green pieces of paper, when the Chinese get tired of that trade imbalance, and when the Arabs get their gold dinar, what do you think happens to all those pretty green pieces of paper? Yup, the chickens come home to roost. Read about what you can do with a Confederate dollar or the hyper inflation in post WWI Germany. It’s coming here sooner rather than later.

http://www.kk.org/cooltools/archives/001308.php

When I’ve been outside the USA, I’ve always have normal copies of the passport on white paper. Always afraid of it getting lost or stolen. This seemed like a good idea.

It’s like the throw away wallet that I carry. (An old NYC trick. A wallet that is a real wallet, has some money in in it, old expired drivers license, expired credit cards, and “stuff”. The real one is not a wallet but a billfold, or an envelope, or an altoids box, or an empty card deck or cigarette pack! Really doesn’t matter what it looks like as all long as it doesn’t look like a wallet.)

http://financialplan.about.com/od/personalfinancebasics/a/TopMoneyTips.htm

http://tinyurl.com/owqrc

Bills aim to keep big retailers out of banking
Sun Jul 9, 2006 11:47am ET
By John Poirier

***Begin Quote***

WASHINGTON (Reuters) – U.S. House of Representatives lawmakers this week will propose restricting ownership of banks by commercial companies in a legislative push to derail the efforts of retailing giants to move into financial services.

***End Quote***

Yeah, it’d be terrible if WalMart came in and competed with the banks! WalMart might “cheat”. Imagine the WalMart credit card that charged 12% interest instead of the 24% that some Visa cards do. Imagine that WalMart could immediately give a customer a 6% discount if you use their card as opposed them giving the 6% fee to Visa. Imagine that WalMart Certificates of Deposits paying more so that they didn’t have to borrow money from banks and Wall Street to finance tehir operations. Yup, just imagine the possibilities.

And, who would make all those campaign contributions to the politicians?

So, I am sure “our” politicians are just “protecting” us from the evil WalMart.

Message to the politicans, please don’t protect us any more. I can’t afford it!

http://www.resourceshelf.com/2006/07/05/statistics-retirement-savings-by-the-numbers/

Statistics: Retirement Savings: by the Numbers
July 5, 2006 at 12:01 am · Filed under Business and economics, Social and cultural issues, Statistics, United States
New Research Report: Retirement Savings: by the Numbers
52 pages; PDF. From a summary:

Source: Securities Industry Association (SIA)

***Begin Quote***

Reports of how poorly Americans are preparing for retirement have understated this looming problem — and the situation is getting worse, according to a research report released today by the Securities Industry Association (SIA). Nearly half of American households are not saving at all; and two thirds are not saving enough to retire adequately. The SIA study, Retirement Savings: By The Numbers, examines both the causes for the decline in saving and the consequences.

***End Quote***

It’s a PDF so you can’t quote from it.

I r an injineer who worked in Wall Street’s IT. So, my interest is like a Renaissance Man, with some exposure to underside of Wall Street. I’m not an economics major, but I do have an MBA.

With those caveats, I would respectfully point out two, what are to me, glaring oversights.

Inflation! and, Taxes!

There is no doubt that they are correct that the US savings rate is nothing like it was for my parent’s and grandparent’s generation. They saved prodigiously. The question is that bad. Given that inflation robs 95% of the value of savings over 30 years, then one has to wonder if saving like that makes sense. Further, the tax bias against savings versus debt also begs the same question.

SO!

What options does the average Joe six pack have for retirement?

Depends upon your age?

There are really only two ages — prior to SoSick going broke and after it.

For the prior to age group, plan for it (the Social Security Insurance Ponzi scheme) and whine to the politicians if the even hint of reneging.
For the after age group, plan accordingly.

SO how does one preserve value in this economic scenario. Buy things that would retain value in financial catastrophe.

• Buy Real Estate! They ain’t printing no more of it.
• Buy real education that allows you to earn “more”! They can’t take what you learn away from you.
• Save prodigiously. Invest wisely. Maximize income. Minimize expenses. Reduce complexity. Shed things.
• Think outside of the box in savings. Not everything shows up in a traditional financial balance sheet. For example, a good car, well maintained, driven gently, while it financially depreciates, can be a store of value. For example, the Mormons stockpile a year’s food for the Rapture! That’s a store of value.
• Buy bullion coins.
• Buy collectibles, bearing in mind that this is very very tricky!
• Develop “side lines”. My example is Public School Principal who runs an eBay business. Combine a white collar education and blue collar skill.
• Surf the financial markets. Ride the waves up and try to avoid the down turns.
• Study history because it does repeat itself. Specifically, the German pre-WWII hyper inflation cause by the WWI reparations, the Great Depression caused by the Smoot Hawley tariff, and the American Dust Bowl migrations. Plan for a financial catastrophe and be pleasantly surprised if it doesn’t happen.

I think that people are rational in their responses. The failure to save for retirement, in a manner measurable by the Securities Industry Association, may only mean that people, adapting to the twin monsters of inflation and taxes, are “saving for retirement” in non-traditional fashion.

http://tinyurl.com/mzbxm

***Begin Quote***

Still, retirement experts agree that women won’t be able to improve their fate in old age entirely on their own. They’ll need changes in Social Security, employer-sponsored retirement plans, and labor laws.

***End Quote***

What a bunch of liberal Barbara Streisand!

It’s well known that the “social security insurance” ponzi scheme favors rich white women over poor minority men.

Anecdotal evidence aside. The gubamint ponzi scheme is bad for everyone. It also doesn’t factor in the gubamint’s inflation, which is also concealed by their phony stats. (Do you think that energy is excluded from the COLA calculations so that they don’t have to give all the ssi seniors more? And, you probably believe them when they say they stopped publishing M3 to save your money! Not that it would show just how much fiat money the fed was creating!)

If Chile could shift from a socialist social security ponzi scheme, why can’t we? It was led by a fellow educated in USA!

Perhaps, the gubamint skools don’t do a very good job larning these individuals to take care of themselves.

Perhaps we should help all of the Ponzi scheme victims by shutting down social security insurance.

Perhaps we can just put all levels of gubamint out of messing in employment. Kill the minimum wage. End the rules. Wage and hour. And, anything else. It’s a free market. If you don’t like how an employer treats you, leave. Or, better yet, start a competing business.

Perhaps we can finally unwind the nonsense that was created by the wage and price controls of ww2 by eliminating company paid pension and medical insurance plans. During the wage and price controls of ww2, companies created these programs to attract the talent they wanted. The powers that be allowed it because it wasn’t a wage. AND, it gave the gubamints the excuse to create similar plans for the politically connected. So, end pensions; the private sector has done that already for the most part. Put the companies out of the medical insurance business. Make people buy their own medical insurance out of their own pockets.

Perhaps we can just tell people that “sorry, you are on your own” because when the gubamint is involved, you really are on your own. Depending upon the gubamint, as we learned from Katrina, can get you killed.

Women … to weak? Needing the gubamint to change ssi, pension rules, and working conditions.

Please, don’t make me laugh. My paternal grandmother traveled the Oregon Trail, raised 13 kids without a husband, and canned stuff until she went to a nursing home for her last six months of her 97 year life. She was proud “poor” woman who never took “nuthing from nobody and certain wasn’t taking any shit from anyone”.  My maternal granmother raised an extended family during the Great Depression, worked for in hotel nights while her husband worked days, and again never took anythign from anyone. Weak! Can’t do anything! You have to be joshing me.
Most women I know can take lemons and make lemonade. Maybe if the gubamint didn’t take literally everything, then everyone would have more in their “golden years”.

When you look at the tax load, I think it is truly incalcuable. The men over at Free talk Live http://freetalklive.com even get it wrong.

(1) All taxes paid by businesses are really paid by the individuals who buy their stuff. That tax burden is hidden.

(2) Sales taxes are paid with after earnings are taxed by the various income taxes.

(3) Interest and dividends are taxed as well.

(4) “Capital Gains” are taxed even when they are nothing more than “inflation gains”.
(5) Gasoline and energy, which are factored in everything, get special added taxes.

(6) Wages are taxed by “social security insurance” which is nothing more than a Ponzi scheme. There is a hidden component, the “employer’s portion” which directly reduces what an employer will pay an employee. There are other hidden taxes for unemployment, and anything else the polictians can sneak by.

(7) Other employer benefits get a tax treatment like “excess life insurance”. Some benefits are made much more expensive by government action and regulation.

(8) Gubamint at all levels regulate things that cost, but are not recognizable as a tax.

(9) If you do manage to save something, inflation (i.e., the gubamint counterfeiting scheme) steals the value of your savings.

(10) AND, if you actually die with some assets, then the gubamint reaches in to the grave to pick you pocket.

That’s why we need to take up the pitchforks and torches!

Interesting conversation with the car wash lady yesterday. Obviously a J&J retiree. Worried about the FED rate increase. And, tells me her portfolio is heavy into J&J. I gently remind her of the FIVE PERCENT RULE (i.e., never more than 5% in ANYTHING ever). She tells me that the capital gains taxes would kill her!

Now there’s a “cognitive bias” in action. I have seen it before in my own family.

One can focus so much on the impact of taxes that one loses sight of the objective reality.

I have seen an elderly relative take a million bucks and make it into zip in less than five years. AND, not for lack of me trying to “help” them.

It was an 80 $ per share stock. 100k+ shares! Virtually all gain.  So the proceeds would have been 680k. She was frozen by the thought of paying 120k in taxes. Instead, she rode it as spun crashed and burned into the countryside.

Arghh.

I tried sell half, sell quarter, or options.  I drew pictures. I cited experts. I vcred an executive of the company talking about the fundamental change of the company from “widow & orphans” to a “high flying tech stock”. (What an idiot!)

The lesson is that 5% rule is for your own sanity.

The poor person cited above was offered an option strategy that would have preserved the gain at a modest cost. Like Fire Insurance for stock certificates. I paid attention during my time on the Street. Don’t fall in love with any thing!

Arghhh arghh

Our self-imposed limits are the most devastating.

Young elephants are captured. A large rope secured to a huge treevis attached to one of the animal’s legs. Over time, the elephant learns it can’t break free and begins to struggle less. As the elephant becomes more docile, the massive rope around its leg is replaced with a dog’s leash. The elephant learned to be weak!

So, we can “train” ourselves into weakness.

When that weak muscle is our brain, we are in big trouble.

http://tinyurl.com/f9tyj

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He acknowledges that the way he invests isn’t right for everyone. In fact, that’s what he tells people—including his four children—who ask him how they should invest.

“Most who ask don’t really know much about investing, and even though I actively manage my investments and own actively managed funds, I recommend they buy index funds and use dollar-cost averaging,” he said.

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Not bad advice for a Bull Market. In a Secular Bear, I’m not sure if that’s good advice.

There has to be some recognition of the Secular and Cyclical trends.

Auto-piloting your money is a good way to fly into the mountain. I have paid tuition at that “school”. Lots of tuition!

http://www.mises.org/story/2221&nbsp;

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Over the past ninety-three years, since the founding of the Federal Reserve, the dollar has depreciated by over 95%. With money no longer being a stable repository of value – thanks to inflation –  a predictable shift in the American character has occurred. Gone are the low-time-preference days where hard work and savings paved the road to a better life for parents and children.

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This means that you MUST seek to put your "money" into things that appreciate in value. Or, at least, don't depreciate. Or, depreciate too quickly. Real estate (i.e., they ain't printing no more land!). Gold (i.e., mining is hard work and it has a long track record!) Stocks (i.e., they float, but buy low sell hi, and put the dif in gold). Tools that allow you to earn and save more.

Become wise in the ways of beating inflation. Spend wisely and quickly. Take value "off the gambling table" buy buying things that will retain their value. Bullion coins are my personal favorite right now! 

from an ezine I read:

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Our policymakers will follow the example of the Japanese, because it is the only model they can reasonably be expected to follow. And, as in Japan, the policies used will ease the pain a little but will certainly not cure the disease. Americans, long scolded by the rest of the world as being spendthrifts, will suddenly start to resemble their Asian counterparts in their saving habits. Consumer spending will drop, and the economy will scratch and claw frantically just to avoid falling into the abyss of deflation, the likes of which haven't been seen on American shores since the 1930s.
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So, we have to prepare for the Great Depression Version Two Point Oh! Interesting since we have exemplars of what happens when politicians run their countries off the economic road. If they inflate their fiat currency too much, hyperinflation a la Germany in the 1920s. If they inflate it too little, they miss an opportunity to profit from their counterfeiting. If they don't inflate, then they get deflation a la the 29 Crash which was caused by the Smoot Hawley tariffs. If they have the pension ponzi, then the old folks WILL be eating dogfood. And, if anyone gets wise to the crisis, a la the Japanese people and shift from spend to save, the economy goes in the dumpster.

My response: cutback on spending, save, avoid extravegence, invest, and horde. 

http://www.vanguard.com/VGApp/hnw/VanguardViewsArticle?ArticleJSP=/freshness/News_and_Views/news_ALL_whosaves_06142006_ALL.jsp&SYND=RSS&Channel=AN

June 14, 2006
Who saves for retirement—and who doesn't?
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If you're saving for retirement in an employer-sponsored investment plan, you're in good company. According to How America Saves, an annual report published by the Vanguard Center for Retirement Research, about two-thirds of eligible employees join their workplace 401(k) plan.

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Our old friend / enemy is the time value of money! There's a numerical example that regularly kicks around Wall Street that demonstrates a few years of maximum saving early outdistances lots of years later. For the later boomers and all that come after them had best prepare for the "years of lean" coming soon to a country near you.

Carter style inflation, dramatically higher prices, a lot of bickering squabling and hard luck stories on the horizon. 

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B691283FD%2D6169%2D455E%2D8401%2D0BEE157D16BF%7D&siteid=mktw&dist=nwhpf

LIFE SAVINGS
Show me the employee-buyout money
How to determine if a one-time or annual payment is your best option
By Jonathan Burton, MarketWatch
Last Update: 8:03 PM ET Jun 11, 2006

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SAN FRANCISCO (MarketWatch) — It isn't easy to decide whether to accept an employer's offer of a job-buyout package. Forfeiting your livelihood often means downsizing your own lifestyle, and if you need to keep working, you may face a tight job market.

Moreover, accepting an early-retirement or severance package sometimes calls for a crucial but baffling choice: whether to collect one big payout or a stream of income over time — usually several years at most, to usher you into retirement. While the regular payments do offer security, people more often are drawn to the large lump sum. But be warned: If you choose the one-time payout, make sure you handle it wisely. 

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Having received each one of those, I agree it easy to:

(1) forget your silent partners Uncle Sam (Federal Income Tax), Father State (the People's Republics of New York and New Jersey — yes both got their hooks into one), Mommy Government (the Social Security "Insurance" ponzi scam), and the Nanny State (the Inflation makes savings worthless).

(2) that it really isn't a lot of money, if you have nothing coming in. When you're young, it's a "no brainer". When you're an old fogy, it's a hard decision.

(3) "they" are out to screw you. If it's severance, count your change and your fingers. (Don't be cheap; use a labor attorney to review the document, they want you to sign! It was drafted by THEIR lawyers.) If it's a buy out, make sure you don't leave a nickle behind. (Don't be cheap; use a CPA to explain it to you in small words. Remember their CPA planned it.) If it's a windfall, be smart about taking it. (Don't be cheap; have a lawyer AND an accountant advise you. You may be able to or need to shelter it.)

I can tell you FIRST hand that I paid tuition at these three "schools". Expensive lessons!