Swim Upstream to Wealth

It appears that Obama wants to fix the Social Security problem by taxing. He wants to get rid of the Social Security threshold, currently at $102,500, and tax full incomes - even above $250,000. This is a great populist vote grabber, but it is completely unfair. Social Security is not and should not become a traditional tax like income taxes. The reason there is a cap is a person’s benefit is based on this cap. Social Security isn’t a retirement plan, but a person tends to get a higher benefit if they pay more in taxes. So it really isn’t fair to tax “the wealthy” and then not give them a corresponding benefit.
Rather than use the old “evil rich person” argument and redistribute wealth, let’s point the finger at the real culprit for the shortfall of Social Security: Congress and the President. Had our elected leaders actually been diligent and invested the surpluses we had from the 60s through today, we would not have a social security issue. Instead, our representatives raided this surplus for pork barrel spending. How about we force our leaders to cut spending to make up the difference? Rather than take from Americans who are doing well, let’s make the people who screwed up pay for it. Who’s with me!

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I was tooling around looking for parallels between now and the 70s, and I figured who better to put it in perspective than Archie Bunker. Scary how we hear the same rhetoric being used today. If we do experience the 70s again, which it appears we will to some degree, I just hope that disco doesn’t come with it. Here is the video.

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A recent article in Fortune discusses a million dollar bet Warren Buffett has with a hedge fund. Buffett is betting that the hedge fund will not beat the S&P 500 in performance over the next 10 years after all fees and expenses. As many who have read my blog know, I disdain hedge funds. I usually quote the Oracle of Omaha when I chide hedge funds as compensation plans disguised as asset classes. Read more »

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Like most of you, I feel the pain when I go to the pump. I have a 95 Jeep Cherokee that I bought used in 97. It is old, but it still runs great. So I continue to use it despite the high gas prices. After all, it is cheaper to pay for the gas than spend $25,000 on a hybrid. But, it does hurt to throw $70 into the tank every couple weeks. Of course, I only drive 50 miles a week so it isn’t too bad. Read more »

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Here is an article for a trade publication, Financial Advisor, that discusses Gen X as clients for financial planning firms. I am quoted in this article because I have worked with a few Gen Xers in my practice. What I am finding about Gen X is we (since I am a Gen Xer) are either way ahead of the ball game or way behind. There isn’t much middle ground. I have worked with folks making 150K a year who are very diligent and who get the fact that retirement and financial independence are up to them, not for the government to help. On the other end, I see so many GenX folks who are in their late 30s and are strapped with tons of debt. Read more »

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It seems hard to believe that an organization that helped fuel the subprime crisis is now claiming a computer error caused them to mis-rate over $4 Billion of loans. I guess their dog ate their homework too.

I have stated several times that these agencies such as Moody’s, S&P, Fitch, and McGraw Hill have gotten off lightly amidst the subprime finger pointing. While most people point at Alan Greenspan, corrupt mortgage brokers, greedy investment bankers, or incompetent home buyers, the rating agencies could have prevented this entire mess had they properly rated these instruments, rather than giving them AAA ratings.

I smell an SEC investigation in the horizon.

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David Walker, the ex-Comptroller General of the US Government, was on CNBC’s Squak Box today. If you want to ruin your day, check out the video. I comment quite frequently on the impending financial crisis our nation faces. What’s worse is the magnitude is so great that this isn’t something we can deal with when it hits us. It is like trying to save for retirement at age 65. It is too late to have any real impact.

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The Supreme Court ruled this past week that states have the Constitutional authority to tax municipal bonds from other states while exempting munis from their state from taxation. The Court voted 7-2 to overturn a decision by a Kentucky court that the state’s tax breaks violate the Commerce Clause of the U.S. Constitution. The Kentucky court believed that a state did not have the right to exempt its own bonds from taxation while taxing other state’s municipal bonds.

This is welcomed news in the muni bond world. The municipal market has been struggling lately. With the troubles at MBIA and AMBAC leading to a possible downgrade of many munis credit rating, the loss of tax privileges would have really hampered the market. This is also good news for investors. Taxpayers can still shelter money from taxation from federal and state governments. In fact, this is a tri-fecta. It is great news for states as well. They would have been forced to offer higher yields to attract investors if the investor lost the tax benefits.

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Yesterday, we held a garage sale as part of a neighborhood sale. We have done this for three years now. In the past, we have gotten rid of a lot of stuff. There were tons of people at the previous sales.

Since the economy is at least slow, maybe even recessionary, I expected this year to be a big year. I thought the strapped consumer might come out to the garage sale, rather than the shopping malls. Plus, the weather was beautiful. But, it was the worst year yet. We barely sold anything, and we had some really nice items this year.

I am wondering if this is a further sign of a recession or was it just a bad weekend.

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I don’t believe anyone can accurately predict the future of the markets so they shouldn’t invest by market timing. However, I think it is useful to be a historian of the markets so you can anticipate future returns. To merely assume the stock market will provide 10% per year over the coming decade is ludicrous. History has shown the market tends to move in upwards patterns for several years followed by flatlines for years. It is more of a staircase than a straight line up. Read more »

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