Archive for the ‘Economics’ Category

How TAX is a Four Letter Word

Economics, Politics | Posted by C.C.Mitchell
Feb 16 2010

Trust me I can count! Of course the kooks in Washington are counting on the contrary. Tax is synonymous with a

Taxes - The Four Letter Word

Taxes - The Four Letter Word

several four letter words that I can think of!

Tax is the grand plan in Washington, the American business owner has been confused with the ATM machine. Politicians will continue to spend and balance it all out with higher taxes on the rich. Taxing the rich means taxing the business owners. Correct me if I’m wrong but that means taxing the job providers. How can any one justify this?

Yeah yeah I know:

The Evil Corporate America dripping with greed; overflowing with apathy; rolling in money filthy. The financial embodiment of the spoils of treachery and oppression. I am familiar with the way the left and the unions view Corporate America.

Increasing taxes on the American economies life’s blood  is not the way to produce jobs in an economic recession rivaled, some say, only by The Great Depression. Nor is it fair or morally sound to expect the haves to pay for the short comings of the have-nots.  That’s Left Washington’s big plan, to increase taxes on the rich to bail out the federal governments entitlement programs and all its other uncontrollable spending.

But it’s not just the Evil Corporate America that will pay the price for Congressional indiscretion. It is becoming more and more evident that Dr.O is planning on increasing taxes on the middle-class as well. No he won’t come out and say it yet but if it’s on the table as he says it is you can bet your bottom dollar that they will.

Think about people, what happens to us if you spend more than you make? You find yourself in debt and struggle to pay off that debt.

Congress doesn’t want to do that! They don’t want to make good on their debts. (I say THEIR debts because they are the ones who over spent, not me). Whats worse Congress hasn’t just racked up debt. They have racked up so much debt that by 2011 that level of debt will be equal to GDP -  Gross Domestic Product. In other words they won’t JUST be spending more than they take in. America’s total amount of debt will be equal to what they take in.

Tax may be a four letter word but it is really they only solution to paying for their irresponsibility. Of course that alone will not solve the problem. They need to STOP spending! Congress seems to increase the debt ceiling with every tax increase. By-the-way what is the point in having a debt ceiling when Congress can raise that ceiling at will? I think I’ll tell my wife that I want a new truck so we are going to overspend some more to cover the expense. NOT!

These people are out of touch. Not just out of touch with we the people but out of touch with reality.

In any balance sheet no matter how big or small incoming is supposed to be equal to outgoing. Money left over in incoming is called a surplus. Now there’s a word they haven’t heard in a long time.

It’s a Cracked World when those who are in charge of the stewardship of our economy don’t understand the most basic concepts of accounting.

  • Share/Bookmark

Tags: , ,
No Comments »

Is Bankruptcy for GM Inevitable?

Economics | Posted by C.C.Mitchell
May 11 2009

Experts say a Chapter 11 bankruptcy filing is all but inevitable for General Motors. To restructure itself and avoid court

General Motors

General Motors

proceedings GM must convince bondholders to accept at trade of $27 billion in debt for 10 percent of its high risk GM stock. Along with that, the automaker must work out deals with the UAW, commit to factory closures, reduce the number of brands by eliminating or selling brands and force hundreds of dealers out of business; all in less than three weeks.

It has been expected for some time now that this would be the case. The long list of unpleasant financial chores to be done by the auto maker hasn’t changed since February, the tasks at hand just become more daunting as time begins to run out.

Although company executives said last week they would still prefer to restructure out of court, experts say all GM is doing now is lining up majorities of stakeholders to make its court-supervised reorganization (a euphemism for bankruptcy) move more quickly. This is evident in remarks by General Motors CEO Fritz Henderson.

“If we need to pursue bankruptcy, we will make sure that we do it in an expeditious fashion. The exact strategies I’m not getting into today, but we’ll be ready to go if that’s required,”

Bankruptcy threats may just be  a bluff to convince bondholders to take the debt for stock swap deal. This strategy didn’t work for Chrysler as a few bondholders held out, refusing to accept what came to roughly 30 cents on the dollar. Most likely GM will be dealing with some of the same bondholders that created roadblocks for  Chrysler. These bond holders constitute the biggest obstacle to avoiding bankruptcy and making the deal will not be easy. Since the government and the UAW will get more stock for debts owed then the bondholders will, they will be reluctant to make such a deal. As with Chrysler the stubborn ones decided to take their chances with bankruptcy hearings.

The president didn’t much like the hold outs in the Chrysler case. He referred to them as selfish, un-american, and said that he, “does not stand with them”. What does he expect? These companies invested billions in the auto industry and its not their money but their constituents’ money. They have an obligation to their share holders to collect as much of the debt owed them as possible. I know I would be upset if I were an investor in one of those companies that took a massive loss because GM wants to pay only pennies on the dollar.

Under Chapter 11, a company can stay in operation under the protection of the court while it sheds it’s debts and unprofitable assets to emerge in a more stable  financial position.

Yet in the event of a bankruptcy filing we the people can kiss goodbye our $15.5 billion GM has already gotten from the government. They most likely would not be forced to pay that money back. As usual the best option will be the most costly to the American people.

What’s your take on the potential Bankruptcy of GM?

Will it happen or are the blowing smoke to blind those to whom they owe money?

If they do file, is that whats best for General Motors overall?

Its a Cracked World, how do we mend it?

Reblog this post [with Zemanta]
  • Share/Bookmark

Tags: ,
No Comments »

Investments Explained - Part 8

Personal Finance | Posted by C.C.Mitchell
Apr 05 2009

In the recent down turn of the economy, many of my co-workers and I have had ongoing discussions on

Mutual Funds and athe Market

Mutual Funds and the Market

investment strategies, and if it is still a good idea to invest our hard earned dollars in an ever declining market. This has prompted me to touch on this topic once again as many of my colleagues display at least some level of confusion and doubt.

Perhaps it would be prudent to explain in more depth some of the investment ideas from my last post on investing. For instance we discussed the 401(k), the IRA and the Roth IRA and the investment options for them like Small Mid and Large Cap funds. Then their are International Funds and Bonds.

First of all, all of these retirement accounts, 401(k)s and IRAs and Roth IRAs, all have one thing in common. They all invest your contributions into various Mutual Funds.

So what is a Mutual Fund?

A Mutual Fund is a collection of stocks purchased by a company that is in the business of trading stocks. It’s simple really, you see McDonald’s sells Hamburgers, Pepsi Cola sells soft drinks, and Ford Motor Company sells cars.

A Mutual Fund is a company that buys stocks in numerous different companies like those listed above  for a profit. By owning stock in these companies the owner makes money when the company makes money. So if McDonald’s turns a profit and you own stock (a share of the company) you make a profit equal to your share of the company. Many companies pay a dividend to the shareholders on a quarterly basis based on the companies success. Mutual Funds are companies that employ a whole staff of people to decide which stocks to buy and sell and make money for the fund. It is called a Mutual Fund because many different people invest money in these companies collectively. The company is therefore Funded Mutually by a mass of contributors. Gee that was tough wasn’t it.

Is it safe Now?

I have gotten an Email or two from readers wondering why I would advise people to invest in such horrible market, one of which was laden with curse words.

While I am not a professional, they will tell you the same thing. A professional will tell you that Stocks are on sale right now. When you buy a share of stock at a price 70% lower than its price last year you will make a 70% profit once that stock returns to its normal price range.

No, there are no guarantees but the market has always recovered from these recessions. These “dips” in the market are essential to overall capital growth.

This is my philosophy and my plan.

Its a Cracked World.

Reblog this post [with Zemanta]
  • Share/Bookmark

Tags: ,
2 Comments »

Auto Industry Isn’t the Only Problem in Michigan

Economics, Politics, State Politics | Posted by C.C.Mitchell
Apr 03 2009

Right now the state of Michigan has what is probably the the worst economy in the nation. The unemployment is the highest at over 12%. That’s right 12% in other words 12 out of every 100 people you know is unemployed if you live in Michigan. This is very bad news especially for people like me who live in Michigan.

The largest of concerns in the state right now is that of the auto industry going under. This Titanic of

General Motors Head Quarters

General Motors Head Quarters

industries is sailing towards disaster but the auto industry is just the tip of the iceberg. The President last week said that bankruptcy is the most likely and probably the best option for General Motors and Chrysler. But these options are considered to be catastrophic to these two troubled companies. Both fear that the consumer will baulk at the idea of buying a car or truck from them if they are in bankruptcy proceedings.

One major problem with Michigan’s economy is that it fails in diversification. Michigan has largely depended on the auto industry for decades, probably closer to 100 years would be a more accurate statement. This has been the flagship of the economy and tens of thousands of jobs hang on the auto industry. Not just those employed by The Big Three but by their suppliers as well, if The Big Three go under so do their suppliers. Not to mention the dealerships that stand to go out of business.

As pointed out by Greta VanSusteren of Foxnews textiles industries in other parts of the country make the textiles that go in the interiors of cars. The arm of the auto industry is far reaching. Think about it; I’m sure you will think of some other industries that feel the pinch of the auto industry.

But the problem runs deeper than the auto makers in Detroit, Michigan 10 or 12 years ago was a state known as a job creator according to Steve Moore of The Wall street Journal who spoke with Greta on the subject.

What’s happened in that state - and, by the way, this is an amazing statistic. About 10 to 12 years ago when John Engler was governor, Michigan was one of the leading job creators. And now it is, of course, losing jobs. I think they lose about one job every six minutes in Michigan.

It is just a tragic story, and I think it is a result of too much regulation, overspending, high taxes, and also, Michigan is not a right to work state. And so a lot of factories have moved out of Michigan to states like Tennessee and Texas and Florida.

Governor Jennifer Granholm is of course a big player in the many other reasons why the state is hurting so badly.

Michigan Governor Jennifer Granholm

Michigan Governor Jennifer Granholm

Many other businesses have left the state to establish their operations in states with lower tax rates and therefore higher profits. You are right about the problems in this state.

“And it is interesting because the governor there, Jennifer Granholm, has been governor for almost eight years now, she has been very much like a Barack Obama in her economic strategy - more spending, higher taxes, we’re going to invest in all these programs.

And it has been a complete catastrophe. And my worry is that Barack Obama wants to make America look like Michigan, not make America look like Texas,” said Moore.

To further expound upon the argument I have found statistics showing that the young talent which Michigan needs to succeed are leaving the state in ever larger numbers. The lack of jobs in the state and higher income and property taxes have chased many graduates out of Michigan.

Here is the article from The Detroit News:

In a nutshell it states in one telling clip, “There are more recent MSU grads in Chicago than in any other metro area — including any community in Michigan. While the Windy City has always been a destination for Spartan grads, the number going there — and other vibrant urban centers such as Minneapolis and New York — is growing.

The number leaving the state has doubled since 2001, from 24 percent to 49 percent, according to a school survey.

Michigan-native grads of the University of Michigan are even more likely to leave — 53 percent left in 2008, according to U-M.

By contrast, a similar survey at North Carolina State, found only 30 percent of graduates left North Carolina.

On average nationally, those earning bachelor’s degrees today can expect to earn $900,000 more over their lifetimes than those with only a high school diploma, according to the Census Bureau.

Multiply that by Michigan’s net loss of 18,000 people with college degrees in 2007 alone, and Michigan faces a devastating future loss in tax revenue.

There are many problems with Michigan’s economy, as I said earlier one of them is diversification. Michigan has all its eggs in one basket (The auto industry), if it is to survive and prosper it needs to spread around its potential.

Granholm has made the effort to do so. But this should have been done decades earlier, she is guilty of what every other governor before her is guilty of; running the state with their heads in the sand. I have seen more and more ads as of late to promote the clean energy industry in Michigan and this is a good idea but its a day late and a dollar short.

Michigan’s economy is suffocating under the the blanket of a heavy tax burden placed on the chest of its citizens and its businesses. As more people leave the state in hopes that the grass is greener on the other side of the state line Michigan’s tax revenues plummet.

To continue  on this course is madness. It’s a Cracked…. State?!

  • Share/Bookmark

Tags: , ,
5 Comments »