Saturday, November 1, 2014

The Ugly Cruelty of the Minimum Wage

Laurence Kudlow has written an excellent piece on the New York Sun website about the need to return to free-market policies.  A key element of the social democrats' increased-state-control thrust has been advocacy of a higher minimum wage, and Kudlow notes that Hillary Clinton is a higher-minimum proponent.  The best defense that the social democrats' organ,  New York Times, produces for the minimum wage is that the need is "obvious." The need for a minimum wage is as obvious as the need to throw millions of young Americans into permanent unemployment. 

 Germany didn't put a federal minimum wage into place until this year. The French minimum wage is 9.53 euros, and the German minimum wage is now 8.5 euros, about $11.91 and $10.65 respectively. The British minimum wage for 18-to-20-year-olds is 5.13 pounds or $8.21. The British rates vary with age. For workers above 21 it is about $10.40.  Let's take a look at the youth unemployment rates versus the minimum wages:
                  '14 Federal Minimum Wage      Youth Unemployment           

Germany                          0                                          8.1

US                               7.25                                        16.5
UK*                              8.21                                        21.3
France                       11.91                                        23.7

*Varies by age; rate for 18-to-20-year-olds shown

The minimum wage is vicious, for the effects of youth unemployment go beyond idleness. By depriving youngsters of formative employment experiences, the advocates of high minimum wages advocate attenuation of the work skills of a large segment of the population; excluded from formative employment experiences, this segment becomes dependent upon the state for its sustenance.  A segment of the population is turned into unemployable serfs who then live on welfare under totalitarian state control. We can add to this segment additional segments under the thumb of totalitarian American-government control: recipients of Social Security; workers and pensioners whose wages the Federal Reserve Bank drives into the ground; victims of America's racist drug laws, often imprisoned for life; victims of American imperialism overseas; and dissident taxpayers, whom the Obama administration has attacked on ideological grounds using oppressive income tax laws.  

The European countries with high minimum wages, having murdered the Jews,  have less diverse populations than the US does, so the harm that their minimum wages do is less than it would be in America, yet the chief victims of the social democrats' self-serving cruelty are the  small minority groups in those countries, especially the Arabs in France. 

Telling someone that because their labor is not worth some arbitrary minimum that they should not have freedom to work or to choose opportunities that might become available to them is among the ugliest and cruelest views of the social democratic movement.

Tuesday, October 14, 2014

One Percenters Dominate Cuomo's Donor List

I submitted this piece to the Lincoln Eagle.
One Percenters Dominate Cuomo's Donor List
Mitchell Langbert, Ph.D.
One-percent, superrich donors, especially real estate developers, bankroll Governor Andrew Cuomo.  The story of Cuomo’s involvement with superrich real estate developers goes back to the early 1990s, when he was secretary of the United States Department of Housing and Urban Development.  As HUD secretary Cuomo issued a decree that led to expanded demand for real estate.  He decreed that all mortgages packaged for repurchase by Fannie Mae must include subprime ones.  Cuomo’s decree led to an explosion in home building and then the financial collapse from which the American economy has yet to recover.  In his book about the financial collapse, former BB&T Bank president John Alison describes Cuomo’s pivotal role in creating the subprime meltdown. 
The New York media, especially the New York Times, avoids discussion of Cuomo’s pivotal role in harming the American economy, and it similarly avoids discussion of Cuomo's incestuous relationship with New York’s real estate billionaires. Proportionally, when compared on a New York-to-national basis, Cuomo has received heavier support from the Forbes 400 than George W. Bush did.  Names like Blavatnik, Simons, and even anti-abortion, Republican Ken Langone, appear on Cuomo’s list of big donors.  Members of the Forbes 400 are motivated by economics, not social issues, which is why the New York Times and the Democrats have been urging New Yorkers to vote for Cuomo on the basis of social issues.
Cuomo’s character veers toward the corrupt, which the Moreland Act commission scandal exemplifies.  Cuomo ran on an anti-corruption platform in 2010, and he appointed a commission to investigate Albany corruption after his election. However, the commission found that Cuomo was involved in the corruption, and he then disbanded the commission.  When Cuomo ran against Zephyr Teachout in the September Democratic primary, the New York Times wrote:
Mr. Cuomo says the purpose of the commission was the leverage it gave him to push an ethics law through the Legislature and that he disbanded the panel when the law, agreed to in March, achieved roughly nine of 10 goals. But the missing goal—a strong public finance system that cut off unlimited donations—was always, by far, the most important method of reducing corruption, a much bigger reform than the strengthened bribery laws he settled for.
Despite the Times’s concern about the need for campaign reform while Cuomo was running in the primary against a fellow Democrat, it has not brought up the ethics issue since Cuomo won the primary—as though ethics were a matter a partisanship—and it has avoided discussing the extensive list of one-percent donors to Cuomo. In other words, the Times considers unlimited donations a problem in the Democratic primary, but in the general election it does not comment on Cuomo’s long list of donations that exceed federal limits (which aren’t applicable at the state level). The Times doesn't seem to mind what it considers to be corruption when the corruption helps Democrats. 
In July, New York State of Politics noted that while Cuomo had received $35 million in contributions, Rob Astorino, his Republican challenger, had received $2.4 million.  Roughly half of Cuomo’s money has come from just 317 donors. Wealthy Republicans like John Catsimatidis, Laurence Rockefeller, and Ken Langone have contributed heavily to Cuomo, despite Cuomo’s pro-abortion philosophy.  In contrast, most of Rob Astorino’s contributors have given small amounts.  The Business Council, which is normally Republican, has also backed Cuomo. Many of its members receive public subsidization. Honest, profit-making businesses have tended to exit the state, leaving businesses that are on public outpatient support.
New York State of Politics ran a follow-up, October 7 article about a more recent NYPIRG study.  NYPIRG finds that Cuomo’s financial support comes from the one percent. At the same time, more small donors have given to Astorino than to Cuomo.  
I took a nonscientific sample of some of the larger Cuomo donors.  I then looked up their occupations on the World Wide Web.  Guess who gives $50,000 or more to a governor who has dissolved an anti-corruption commission when it has found evidence that he was involved in the corruption, but who has a long history of encouraging real estate speculation.
Some of Cuomo’s One Percent Donors
Amount Donated to Cuomo
Leonard Litwin
Real Estate Developer
Gary and Ayala Barnet
Real Estate Developer
Adam Katz
Real Estate Developer
Len Blavatnik
Beneficiary of Soviet breakup; investor
Alvin Benjamin (deceased)
Real Estate Developer
JH Kalikow
Real Estate Developer
Clough Harbour
Engineer of Public Sector Projects
Stephen Ross & the Related Companies
Real Estate Developer
Nixon Peabody
Law firm specializing in financial institutions and public entities. Clients include JetBlu and both New York major league baseball teams.
John Catsimidis
Grocery Store Chain
James Taylor
Solid Waste
Source: NYPIRG and the World Wide Web
The full list includes 331 one-percent donors.  The motivation for these donations is straightforward.  It has little to do with concern for Cuomo’s stance on social issues, which Laurence Rockefeller claims on a televised ad.  The New York Daily News points out that numerous Cuomo donors have been awarded hefty contracts.  These include James Taylor’s Taylor Biomass in Orange County, which received a one-million-dollar contract from Governor Cuomo in 2013.
While Cuomo panders to one-percent real estate tycoons, he spent $200 million on nonsensical Start Up New York ads that he aired around the country. The chief function of these ads was to advertise Cuomo. He did this when the state had not yet reimbursed Hurricane Sandy victims, who were literally homeless. Meanwhile, he has found millions of dollars in public-private partnership money to award to his donors. 

Cuomo's support among the one percent has done little for hardworking property owners. If you pay real estate taxes, you have seen your taxes rise during the Cuomo years.  More than 400,000 New Yorkers have fled the state for economic reasons during Cuomo's administration.  Businesses eyeing public-private partnerships and represented by the Business Council have backed Cuomo, but Cuomo has zero interest in people who work hard, pull their weight, and pay taxes.  His constituencies are welfare recipients, who do well under any Democratic Party regime, businesses on the state's payroll, and billionaires.  The billionaires aren’t tech innovators like Elon Musk.  They are billionaires at the public trough, billionaires looking for handouts, eminent domain privileges, and public contracts. 

If you're middle class, and you vote for Cuomo, you probably have a death wish.

Thursday, October 9, 2014

Bill Gross's Vision and Vanguard Natural Resources

My dad left me a small account with the Janus funds, so Janus invited me to listen to Bill Gross's telecast today. Gross recently left PIMCO, where he had worked for decades, for Janus.  Gross is known as the best bond strategist. He's also a UCLA business school alum. When he left PIMCO for Janus, Janus's stock shot up.
Janus's Stock Shoots Up When Gross Arrives

Gross has a specific vision of the future for markets.  He thinks the Fed has done a good job in stabilizing the economy on behalf of the investment community, although he made an offhand remark that the trickle down effect hasn't worked. (His positive view of the Fed is due to the limited benign effect it has had on himself and on his clients.)

He also believes that there is little more that the Fed can do for the markets, and he believes that the economy will stagnate due to the aging of the Baby Boomers.  He does not think that there will be a market crash because the Fed stands ready to pump more money into banks and financial markets. The Fed will protect the wealthy at the expense of the average American, but it will be unable to produce the double-digit gains that it has over the past 70 years.

Therefore, Gross intends to open an unconstrained fund at Janus, in which he will seek out opportunities that can compensate for the low yields with which Wall Street will otherwise have to be satisfied because, basically, Wall Street has already sucked the economy dry. There is little left for stock-and-bond holders to steal except the low wages of college graduates who can't read or write and who work as waiters and retail salesmen. Americans will become ever poorer, and that's why I like stocks like Wal-Mart, Rent-A-Center, and Dollar General that cater to low-income Americans. There will be plenty of those.  I also like senior housing stocks like HCN and drug stores and hospitals like HCA, Express Scripts, and Walgreens.

Gross did not mention the potentially destabilizing effects of a falling dollar, especially in tandem with military and biological threats--ISIS in Arabia and Ebola in Africa.  Gross may well be right, though.  The Fed has tripled the US money supply since 2008, but the capacity for borrowing is less than it was. The US is the new Japan.  Since 2008 the US has pursued policies similar to those that Japan had followed 20 years earlier.  The ensuing 20 years have been lost decades in Japan, and Gross is expecting the same to happen here.  The similarity extends to demographics.  The Japanese population has been aging even more quickly than the US population. Feminism has reduced birth rates in the developed world, which will contribute to a stagnating economy.

At the same time, the liquidity that the Fed has created over the past six years will cause instability.  A hedge fund-like approach to investing may be wise, but Gross may be overstating the degree of stability we can expect.  His model depends on the assumption that the governance structure that we have known since the 1970s will continue:  The Fed will continue to dictate monetary policy; the world will continue to use the dollar as a reserve-and-exchange currency.  There is no reason to make these assumptions. Continuing American hawkishness in Arabia might lead to the need for further borrowing, which might lead to greater instability.  Chinese and other countries might decide to use yuan instead of dollars in economic exchange. Why use the dollar for reserves when it is unstable?

The recent decline in oil prices makes sense in terms of the monetary cycle.  Following the Burns-Nixon stagflation of the 1970s, G. William Miller and Paul Volcker stopped inflation during the last couple of years of the Carter administration. Then, Volcker and Ronald Reagan reignited the inflationary cycle in 1983, and the second cycle culminated in 2001. Bush and Greenspan began a new cycle in 2002, which ended in 2008.

During the 1983-2001 Volcker-Greenspan expansion, gold and commodities fell, helping to keep inflation in check.  Stimulated exploration for commodities,  which the monetary expansion caused, kept the prices of manufactures low. This was accompanied by exploitation of low labor costs around the world.  Bush, Greenspan, and Bernanke remedied the 2001 crash with a new cycle, which stimulated a new round of exploration.

Gold soared in response to  the first Greenspan cycle, but the new exploration caused by the '02-'08 expansion was already clamping down on the rising prices.  The fourth cycle since 1970, the massive increase in the money supply since 2008, has financed a new round of commodities exploration.

America is becoming the oil capital of the world.  A weak dollar will stimulate our economy because it will make our oil cheaper.  Thus, Americans can expect to become poorer, but employment will rise as America becomes an oil producer.  If the dollar falls sufficiently, manufacturing might return here too. Low-wage jobs will become available to Americans.

America's status as an innovator may end for another reason: the increasing regulation and socialism that Americans favor.  Thus, America will change from Japan into China. America's elite, made wealthy through Federal Reserve subsidization,  will be the world's elite, while the average American, who gleefully marched behind Barack Obama, George Bush, and Nancy Pelosi, will see their standard of living sharply reduced thanks to the political policies of those whom they have supported.

When the Dow fell by 270 points on Monday, Sept. 29, I pulled about one-half of my investments out of the stock market.  With the scenario of falling commodity prices for the coming years in mind, I put sell orders in my portfolio.  I am still invested in midstream MLPS, but I had been holding two upstream MLPs, Vanguard and Eagle Rock, which I had bought recently.  I put a 15% stop on Vanguard, and I got out of Eagle Rock when Vanguard sold. These were mistakes caused by my failure to foresee falling oil prices.Also, I didn't understand that Vanguard would be as sensitive to falling oil prices as it apparently is.

I had understood the commodity cycle with respect to gold, but not oil. A parallel cycle seems to be happening now with respect to oil as has happened between 2011 and now in gold. Oil has greater short-term significance.  The fracking revolution has transformed the oil market, and it may transform the American economy, assuming oil prices don't fall below $75 or $80.

I also took a short position in oil that I will hold until I sense a turnaround in the price.  The stock market is in a general correction, and I am waiting for a bottom, maybe toward the end of the month, to get into stocks again. Overall, my investment portfolio is down about 2% from its peak in September.

It seems to me that America is a failure.  This is a country where every man and woman can prosper if they are speculators or stock market investors.  People who work for a living are chumps.  A country that turns the productive class into chumps is a failure.  America is no longer exceptional. It has a vampire economy like Europe's, only more extreme.

There are many good stocks that will be attractive at somewhat lower prices.  Should I invest with Bill Gross and Janus? I've been thinking about it.  I have one hedge fund investment, Skybridge Capital. Skybridge is a fund of hedge funds. It goes up slowly and steadily, which is fine by me. Gross may have the right idea, but he might not.  It doesn't always pay to put all your eggs in one basket, and an alternative mindset like Gross's makes sense to me.

Monday, October 6, 2014

Cuomo and Rockefeller

I just sent this letter to Lohud: The Journal News.

Dear Mr. Reisman:
Thanks for some needed balance in coverage of the gubernatorial election  (“Spoils System Stays Strong in Westchester,” Oct. 4). I'm curious about the link between Laurence Rockefeller and Andrew Cuomo.  Cuomo is unabashed about his close relationship to this $50,000 contributor to his campaigns. Rockefeller is the doyen of the one percent.
New York State of Politics recently ran a piece showing an ad that Rockefeller narrates on Cuomo's behalf.  I understand that money and politics have become increasingly intertwined, but most candidates aren't quite so unabashed as Cuomo about announcing his links to someone like Laurence Rockefeller. 
As it turns out, Rockefeller began contributing to Cuomo just a few years before Cuomo became HUD secretary.  John Allison of the Cato Institute, and former BB&T Bank president, says in The Financial Crisis and the Free Market Cure that Cuomo instituted the mandatory-subprime-loan rules that led to the financial meltdown in 2008, and it turns out that that occurred just a few years after Rockefeller began backing him. 
Perhaps that's just a coincidence, but the subprime loan market has been a major boon to regional banks that have resold subprime loans to Fannie Mae.  Is Rockefeller involved, or is another Cuomo contributor involved, with regional banks, national banks, or mortgage firms?  Certainly, the Rockefeller family has longstanding links to both Citigroup and Chase Manhattan.
Who are the donors to Cuomo?  The Astorino campaign released a long list. Do I have to analyze it myself, or is there someone in the media who is paid to do this and not on Governor One Percent's payroll?
 Is there a connection between Cuomo's advocacy of federal regulation of local land-use regulation--in his  recent HUD flap with Astorino--and the banking regulation that he has advocated that has proven so profitable to regional banks?  Is anyone researching or even thinking about this, or is the New York media relying on Cuomo’s press releases paid for by a long list of linked-in hedge fund managers?
When Cuomo ran against Teachout last month, the Times thought the Moreland Act commission dissolution was a critical ethical issue. They don't think that ethics matters when Cuomo runs against a Republican.  What other double standards is New York's media engaging in at such a high price to New Yorkers and to the nation?
Mitchell Langbert

West Shokan, NY