Friday, December 30, 2022

Shearing Sheeple

Shearing Sheeple

This isn't a Christmas story for the faint of heart. As the First Family disembarked from Air Force One, the gaggle of 15+ leisurely made their way to a billionaire's residence for the holidays. Though much of the country was "sheltering in place" due to a massive Arctic Bomb, the Bidens slipped off their loafers and Manolo Blahniks into flip-flops. Something, however, just wasn't kosher in the America north of St. Croix.

Yes inflation was raging and the stock market had suffered a Barrackian year; its worst performance since the elder statesman's jefe began his reign in 2008. But that wasn't it. Only capitalist pigs bought companies! Far better to extract value via a Labor Union. Invent something? Everything has already been invented! Yes crime was surging in every major urban area, but that didn't matter. "Hold your tongue and count your blessings," admonished the High Septon. No it was something else. 

Gas at $5? What a deal! That couldn't be it. 10,000+ new *friends* joining our country illegally EVERY DAY? How dare you criticize someone committing an illegal activity! Americans don't want those jobs anyway, especially not American teenagers who have to compete with adults lacking documentation. What is documentation anyway? Paper! The theft of resources at scale only hurts the rich anyways. No, it was a peculiar buzzing sound. Bzzz. Bzzz. Bzzz.

The noise reverberated through the night. A buzzing electric sound constant in application and thorough in design. Why it was the shearing of sheeple! Taxpaying citizens lined up in seemingly endless rows having their hard-earned wool being sheared off their backs during the peak of winter. Brrrr it was cold out there! Many sheeple were shaking. What a foolish thing to shear so deeply, but those in absolute power told us: "ALL must pay their fair shear."

So on it went day after day, until the sheeple had given all that there was to give; here, there, everywhere piles of wool lay. Much was burned to keep the shearers themselves comfortably warm, less THEY too feel the cold. Being in the Shearer's Union meant never being cold. Aye, but they left many sheeple naught enough wool to harbor in the storm! No matter, the rows were endlessly long. There would always be sheeple to shear.

Boy was it hot in St. Croix! Even staying free can be troublesome, now the dear leader would have to grant his favor on some billionaire friend. What a labor of love this job was! Along the boardwalk he pandered around, his crusty feet full of golden sands. Laughter was heard all around, how they had gotten away with it all! Joy was theirs! And if they had gotten this far, why what could be next?

On a silver tray produced was a 4,000 page Omnibus Bill flown fresh in from America to the north totaling $1,650,000,000,000. Why it was even MORE than he asked for! Would the blessings ever end? And even here, far away from America to the north, the sound could be faintly heard. Bzzzz. Bzzzzz. Bzzzzz.

Investors beware, to what you value hold dear! The shears are out and your wool will soon be theirs. Protest and mutton you may become. The tide has turned and socialism is here. America has become a welfare state with open borders. What could possibly go wrong?
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Thursday, December 8, 2022

Speed Brake

Speed Brake

If ever there was a speed brake on the economy, it is the ironically titled "American Rescue Plan." The keystone language in this travesty of a Bill is the issuance of 1099-Ks for "transactions totaling a cumulative of $600 per year." Think about this for a moment. What better way to kill small business, prevent new business, and ramp up the police state than searching for needles in the haystack? Meanwhile, the barn door is wide open out back with government spending giving drunken sailors a good name.

Similar to the laughingly false "Inflation Reduction Act," which promises to reduce inflation by spending more, the "American Rescue Plan" aims to HELP Americans by raising their taxes, lowering taxable thresholds, and adding 87,000 more enforcement agents to "help" them. Cue up the Ronald Reagan quote of the nine most dangerous words in the English language: "I'm from the Government, and I'm here to help."

Let's get serious people! As readers of this blog well know, we are big believers in the Laffer Curve. This economic principle illustrates that there is a strong relationship between taxation and tax returns. As so elegantly illustrated above, when you squeeze the lemon too much you don't get more juice. In fact, you get less juice.

Consider for a moment the contribution of Small Business to the American Economy. Small Businesses account for two-thirds of new jobs and half of all existing jobs. The Small Business sector generates almost HALF of this country's GDP.  So what happens when the jackboot of government is on the throat of Small Business? Well, nothing good happens. Productivity crashes. Output contracts. The lemon shrivels up.

There is little doubt this has been a coordinated effort to reallocate capital. Congressional bills don't write themselves. They are typically written by lobbyists paid by special interests. So if Small Businesses are the losers, who are the winners? Winners would be those who typically don't need or have a Small Business or side hustle. They would be those with local, State, and Federal government jobs, labor unions, and big business executives. Collectively 15% of the population will seemingly reap significant benefits from the other 85%, but there is a flip side to this coin.

To have Government welfare programs and an expansive state, it is first necessary to have a thriving economy. Not many people know JFK passed some of the largest tax cuts in American history. He knew that a thriving economy is based on a free-market with light regulation. Light regulation does not mean no regulation, ie bad actors like Samuel Bank-Fried and the beneficiaries of his largess need to be held to account. The French coined this approach best with the term "Laissez-Faire."

What is an investor to do? Until there is a regime change, investors not plugged into the political gravy train need to stay in their foxholes; consider dividend paying large companies with monopolistic pricing power and brand recognition. If their products are vital or addictive, so much the better. The landscape for startups is barren as the moon, never mind Mars. Raising capital in an increasing interest rate environments during a recession is pointless. Cash in this environment sits in risk-free Treasury Bills.

When the Laffer Curve is ignored, or even mocked, and a turn is taken into a socialist regime then the capitalist must look for safety, income, and muted growth until an opportunity emerges to make a move into pro-growth, low-tax, and economically sound policy. It might be a while.
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Wednesday, December 7, 2022

Zero Legitimacy

Zero Legitimacy

There is zero legitimacy in the House Financial Services Committee after Maxine Waters refused to subpoena Democrat mega-donor Samuel Bankman-Fried, the disgraced formed FTX CEO responsible for the bankruptcy of the $32B company.

Thankfully, Waters will lose her chairmanship when Republicans take control of the House on Jan. 3rd. Waters' decision is long on a list of malfeasance heaped on the American people over the past several years giving rise to the widespread belief that there is rampant corruption inside the halls of Congress and weaponization of the executive branch under Joe Biden against political opponents.

The primal victim of the failure of political leadership has been the citizens of the United States who no longer have faith in the leaders to duly execute their oaths of office; these shenanigans have resulted in serious damage to the rule of law, First Amendment rights, and the value of citizenship itself.

A fine example of this is the attempted deplatforming of this blog! After several articles critical of rampant corruption, previous traffic pattern of several thousand views per day were blocked and views trickled to a handful of views. 

The biggest challenge is speaking the truth in today's society without getting canceled. And getting canceled is easy business when "misleading content" policy basically involves anything tech monopolies find contradicts the narrative being pushed by screening committees. Eisenhower long warned us of the military-industrial complex. Here it is in full fruition:

So we have reached a great rubicon in our country; will tech monopolies dictate what is "misleading" or will elected representatives push back and do their jobs? It doesn't look good for the latter, as tech has lots and lots and lots of money to lobby. Who is lobbying for you? 
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Monday, December 5, 2022

The War on Small Business

The War on Small Business

Kurt Vonnegut once quipped that: "The two real political parties in America are the Winners and the Losers." With the Small Business Index at 62.1, the lowest since the pandemic, which itself was the lowest in a generation, small business owners are the losers. Given that small businesses create two-thirds of new jobs and deliver 43.5% of the United States GDP this is a BIG problem. But your elected leaders don't care. Why? Because small businesses do not have the clout to influence political change.

Case in point, why would a Veteran-owned small business like mine have to pay 50X (you read that correctly, FIFTY times) the Blue Shield healthcare premium as an illegal resident in California for the SAME healthcare plan? Answer: Because somebody has to pay the bills, and the proverbial "last man standing" is the small business owner. Freedom is expensive.

How did we get here? The war on small business has been brewing for decades, but finally the straw that broke the small business owner's back was healthcare. With the passage of the ACA on April Fool's Day 2010, pieces on the chess board started moving around rapidly. Political parties immediately started jockeying for pole position.

Since the majority of politicians never owned a small business, they were easy to influence. The labor unions got to work. Big corporations saw what was happening and they got to work too. Given that small businesses are by nature fragmented without a unifying central leadership they waited to see what happened next. Plus they were busy working trying to make a living. Bad move.

Labor Unions and Big Business effectively gamed the healthcare system so that union members and employees got cut rates on healthcare plans, and to make the deal more palatable, they also negotiated for universal care pools. But of course somebody had to pay unsubsidized premiums, and that of course would be based on income. Who better to sock it to than the silent small business owner?

Reaching out to my elected representative, Jimmy Panetta resulted in the terse reply that "healthcare is complicated." After a decade in place, it is not that complicated; depending on your income you pay different rates. Imagine if McDonald's worked that way! Your "Happy Meal" price would be a direct result of whether you worked for a union, a large company, or your immigration status! Preposterous.

Across the spectrum of wealth distribution, healthcare is the most onerous. But that is just the most glaring example. Inflation is the next one. It hurts the small business owner most, because he has to absorb more of the pricing increases and if he is to survive, passes along less of those increases. The 16% pay increase for rail workers or 10% pay increase to pilots won't decrease rail traffic or flight volume. In fact, the COST to ship freight or park a butt in a seat will simply be adjusted up, up, and away!

For the small business owner it is a death by a thousand cuts, with some "cuts" akin to a sucking chest wound. Like him or despise him, Joe Biden has done one thing really, really well...he has acted as a fine bellhop for the labor unions. When you print the money and sign the contracts to print more, inflation doesn't hurt much. Indeed, most union workers have never had it so good. 

With Labor Unions the winners and small businesses the losers, what will the impact be on larger businesses? The cost of labor is typically the MOST expensive part of creating and delivering a product or service. As we can imagine then, large business are increasing prices and laying off employees (non-union of course, and many expendable H-1B visa holders at that) to cover the cost of inflation.

Net net when the wokescreen clears, this equation balances by the destruction of small businesses, many of which will cease to exist, go heavily into the black market, and/or rapidly innovate by embracing new technology and doing business differently (low odds on the latter.) At the end of Joe Biden's reign, fewer small businesses will remain, more unions will exist, and big business will be thriving (with far fewer employees.) Invest accordingly.
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