Author: haroldblackphd

No toys for you!

What happens if we start seeing empty shelves in the stores? Eighty percent of our toys are made in China. Walking through Walmart looking for a new jigsaw puzzle, I was amazed at all the toys. Walmart sells over 1,000 different brands of toys. What will the shelves look like in a couple of months? Will they be empty or will they just be higher priced? With tariffs on China over 100% how much of that price will Walmart pass on to its customers? Well the president in his infinite wisdom sees the empty shelves as a good thing. All US ports have seen a sharp drop in shipping volumes. Trump was ecstatic saying “That means we lose less money. When you say it (shipping traffic) slowed down, that’s a good thing.” Commenting on the deficit with China, the president said “Frankly if we didn’t do business we would’ve been better off.” 

Trump still loves tariffs and says “They’re a beautiful thing for us. It’s going to make us very rich. And we’ll be paying off debt, we’ll be lowering your taxes very substantially because so much money will be taken in that we’ll be able to lower your taxes even beyond the tax cut that you’re going to be getting.” Of course, he is delusional – but who with any input has the guts to tell him? Is this a Saturday Night Live skit or has Boris Badenov sprayed the president with goof gas?

Contrary to the president’s wishes, an electric bicycle company in California is putting the Trump tariff on its price tag. The owner is a republican but he says that he has to keep importing his bikes from China or else he is out of business. So on his floor, he has identical bikes priced differently. The one imported before the tariffs has a lower price tag.

Another bicycle shop – one that you have to pedal – buys components from China and assembles the bikes in the US. The owner said that he once made his own handlebars but the ones from China were just as good and were cheaper. He said that he could buy US made components but his bikes would cost $1,000 rather than $100.

The president just called Fed chair Jay Powell a “fool” for keeping the fed funds target rate steady rather than lowing it. Trump tweeted “Oil and Energy way down, almost all costs (groceries and ‘eggs’) down, virtually NO INFLATION, Tariff Money Pouring Into the U.S. — THE EXACT OPPOSITE OF ‘TOO LATE!’ ENJOY!.” However, inflation was 2.4%, still above the Fed’s target of 2 percent. Trump is miffed by the Brits lowering their bank rate and wants the Fed to follow suit. However, the president of the St Louis Fed, Alberto Musalem who is a member of the Fed’s Open Market Committee, put the blame back on the present saying that the Fed will commit to further interest rate cuts until it is clear whether the Trump’s tariffs lead to persistent inflation or a one-time adjustment in prices. So take that Mr President! Anyway, Trump is making it more difficult for the Fed to cut rates. If and when it does, it will appear to all that the Fed’s independence has been compromised and it is bowing to political pressures. My advice to the president is simple – stop tweeting!

Another impact of Trump’s tariffs is that American corporations are stopping hiring. Polaris says that it is now in recession mode. BTW I have a Polaris 570 ATV and it is a wonderful machine. Highly recommended. Polaris now also makes Indian motorcycles. I had an Indian Scout and loved it. I hated selling it when I went through my end-of-life crisis moving to a three wheel Can Am. Other companies are freezing hiring until the full impact of the tariffs are felt. I know much has been made about 177,000 jobs being added in April, but much of that was in healthcare and finance. Recruiters who help companies find job candidates say hiring has been falling at a steep rate for two months. One company’s revenue from hiring activities is down 50%.

All of this is ominous but Trump seemingly has blinders on. He insists that his 10% tariff is universal and permanent. No matter if we had a surplus with a country. No matter if their tariffs are lower than ours. All will have a 10% tariff. 

But what of the deals? Aren’t there supposed to be 75 or so countries wanting to make a deal? But didn’t Trump just pause his “reciprocal” tariffs for only 90 days? How he can “negotiate” that many deals in so few days will be impossible. Mark Carney, the new Canadian prime minister, just visited the White House and no deal was reached. The White House is doing high fives touting a tariff deal with the UK – a country with which we have a surplus – that amounts to a nothingburger. The 10% tariff is still in place. The Brits will allow the import of some American beef and chicken. But hormone-treated beef and chlorine-washed chicken are still not allowed. The Brits will no longer put a tariff on American ethanol up to 1.4 billion litres (British spelling). This is in effect a quota. The same is true for the US importing of British autos, with the tariff set at 10% until a quota of 100,000 vehicles is reached. This is beyond absurd. Now the tariff on British cars will be lower than the tariffs on American cars made in Canada and in Mexico. Maybe the Americans can shift manufacturing to England. 

Perhaps more importantly to the British is their trade deal with India which significantly lowers both country’s tariffs. Donald Trump is credited with prompting the agreement. In fact, the UK’s deal with India is its third biggest after its agreements with Australia and Japan. Now, the UK has signed trade deals and agreements in principle with about 70 countries and one with the EU. Trump unites the world!

But what about the “negotiations”? One observer says “But so far it is pretty clear that countries coming in and wanting a ‘normal’ trade negotiation with both sides making substantive concessions are being rebuffed.” Apparently the administration is not really negotiating. It seems more like a take it or leave it with the 10% tariff being non-negotiable. Also, can Trump be trusted? Didn’t he just violate his own trade agreement with Canada and Mexico? 

Mom

On this Mothers’ Day we all pay tribute to our mothers. My mother’s reach was well beyond our household. We had to share her with hundreds of her other children. I remember when we were at a luncheon with some Atlanta school officials and the area superintendent had been one of her second graders. He told me that when he once visited her school and addressed her as “Harriet”. Mom immediately scolded him, saying “You are never old enough or big enough to call me “Harriet.” He said that he never made that mistake again. Mom was the first four year graduate of Fort Valley State University. In the school’s tribute to her upon her death, it was noted that she made a contribution to the university from her graduation in 1941 to her death at 101. What was not said was that she did not have the funds to complete her senior year. The university then waived all her costs to have her work in the registrar’s office that last year. Mother never forgot that generosity.

Here is her tribute from her alma mater, Fort Valley State University.

“Harriet Barfield Black, the first Fort Valley State College graduate, died Tuesday, April 14, 2020, following a life highlighted by her steadfast support for Fort Valley State University. The Atlanta resident was 101.

Mrs. Black loved most things passionately. However, her most important loves were (in no particular order) her family, her Atlanta church Friendship Baptist Church, her home church in Gray, Ga – St Paul AME Church, her students over a 52 year career as an educator and her alma mater, Fort Valley State University. She was an avid Wildcat and contributed to Fort Valley every year since her graduation as its first four year student in 1941. She celebrated her 101^st birthday on the Fort Valley campus where she was awarded the key to the city. Mrs. Black had an eidetic memory and could recall the names and personal information of all members of her graduating class of 1941. She loved Fort Valley and attended homecoming games well into her nineties. 

Prior to her death, Mrs. Black became widely known around campus for having made a gift to FVSU every year since 1941, the year she made history by becoming the first student to walk across the stage to receive her bachelor’s degree from FVSC.

Before becoming FVSC’s first graduate, Mrs. Black had earned her teaching certification in 1939 from then Fort Valley Normal and Industrial School only to be called back by the registrar two years later when the State of Georgia designated FVNIS as a college.

After graduating, Mrs. Black would go on to become a second-grade teacher in Atlanta Public Schools, a role she treasured. She would jokingly tell others she stayed in the post for decades because she never got “promoted” to a higher-grade level. During those years, she helped nurture thousands of students and developed a reputation for being a kind-hearted educator.

Family members recalled a story the perfectly illustrated her impact on her students. In her early days of teaching, students didn’t have access to federally funded lunches and had to bring their lunch from home. One student could only bring one biscuit for lunch, and, at lunchtime, she noticed him embarrassedly holding his lunch bag under his desk and eating his biscuit sheepishly so as not to be seen by the other students. She said nothing to the student, but for one week, she brought a single biscuit for her lunch. She elaborately spread a place setting for herself on her desk, placed her biscuit proudly in full display, and made a big show out of eating it and enjoying it. That show mitigated the student’s embarrassment and helped him feel more confidently part of the class. That was important to her, and why her former students have constantly stopped her, thanked her, and updated her on their life’s progress over the years.

Mrs. Black’s name became so synonymous with consistent alumni giving at Fort Valley State that the FVSU Foundation established a society in her honor. Members of the Harriet Barfield Black Society have made the solemn promise of an annual and ongoing charitable commitment to the University. The first members of the HBBS were installed during homecoming 2008.

“We are deeply saddened by the passing of Ms. Harriet Barfield Black,” said Fort Valley State President Paul Jones. “Ms. Black was a dear friend to FVSU and represented the spirit, dedication and loyalty that has allowed this institution to endure and prosper for 125 years. We are forever grateful for the outstanding example of service and giving that she provided and the opportunities she created for generations of Wildcats through her generosity.”

For her 101st birthday last year, she made the trip back to her alma mater to personally visit the institution that had empowered her life’s journey. Dozens of family members joined her and the City of Fort Valley, Georgia’s Pro-Tempore Mayor Lemario Brown, an FVSU alum, presented her with a key to the city. To honor her commitment and dedication to the University and others, President Jones declared that day as “Harriet Barfield Black” day on FVSU’s campus and throughout Wildcat Nation.

President Jones ordered the FVSU flags be lowered to half-staff in recognition of Black’s remarkable legacy at this institution and across the nation.”

RIP Mom. I love you.

Do mothers still say “potty-mouth”?

President Trump gave the commencement address at the University of Alabama. The speech was noteworthy for two things. First, the president did not wear an academic gown at Alabama. I know of no other commencement speaker so unattired. Second, in his speech, the president said that the internet people once hated him but now they ”kiss his ass”. I was shocked at the language and offended. Talk like that would have been unthinkable (and unspeakable) in such a public forum only few years ago. Yes I know that presidents in the past have been foul-mouthed, Richard Nixon and especially Lyndon Johnson come to mind. But that language was usually uttered in private. What was once private is now out in the open.

Our speech has coarsened and I wonder if I am the only one offended by it. Scatological speech seems to be accepted in today’s “culture”. I reported earlier on how the democrats have taken to cursing with aplomb. In stump speeches, in television interviews, on the floor of congress and even in hearings they are swearing like the proverbial sailor. I am sure that the republicans are doing so too but the only one frequently publicized as  using vulgarities is Donald Trump with a few f-bombs scattered here and there. Remember the president referring to some countries as “s-tholes”?

Even Kamala Harris has dropped an f-bomb. Jasmine Crockett would probably have been expelled from the congress in an earlier era and especially likes to spice up her language. How about“Somebody slap me and wake me the f-k up because I’m ready to get on with it.” Or when she told Elon Musk to “F-k off.” Ilhan Omar also told a reporter to “f-k off”.  Remember Rashida Tlaib when she said about Trump, “We’re gonna go in and impeach the motherf—er?” And this before a crowd that had plenty of children.

There is actually a website called Govpredict that listed 1,722 instances of politicians swearing last year. Also disturbingly is the florid use of s -t. The media is complicit by actually printing the words for all to see. This is the Chinese year of the snake but it is also the year of the f-bomb. Cory Booker said in reference to the president, “Listening to the president. Such a bulls-t soup of ineffective words.” Why, that maybe the world’s shortest word salad. Booker has also said “We are not going to give thoughts and prayers, which to me is just bulls-t. I’m sorry to say that as a man of faith, but I was taught that faith without works is dead.” Eh, Cory, what faith is that which you are a man of? Booker’s fellow democrat senators posted social media videos fact checking the president, each of them calling his claims “s-t that ain’t true.” It seems that the democrats all read (and apparently curse) from the same playbook. I guess their polling told them that the best way to connect with the American public is to curse. WTF.

I wonder what their mothers might said to their potty-mouth children?

I admit to being somewhat old-fashioned. I never heard my parents curse- except for that time that Dad dropped a bag of concrete mix on his foot. I have never cursed my children or used that language in there presence. Only on rare occasions do I curse. But that’s me. It is noteworthy that none of my friends curse either. Maybe I am living in a cocoon.

Yes I know that for a few years now we have been subjected to verbal abuse from loud foul mouth rappers. I am still amazed at all the vulgarities that blast out of cars these days. But it saddens me that this coarseness is now so acceptable and seems to be a natural partner of our moral decay. I guess that we should now accept all the coarseness, vulgarities and cursing of our modern “culture.” But pardon me if I don’t participate.

“Saving” Social Security

Pardon me for posting the penultimate lecture to my Financial Markets and Institutions class.

People are saying that Social Security is running out of funds and will go bankrupt. Those people that are clamoring to save Social Security seem to be under the impression that Social Security is going bankrupt and taking their benefits with it. Excuse me but this is crazy talk. Social Security cannot go bankrupt. What is confusing people is that the Social Security Trust Funds will be depleted in 2033. That means that retirees would receive 76% of their promised benefits not zero. The trust funds might be depleted but the only way Social Security will go away is if the sun goes super nova and wipes us all out. That is because Social Security is a pay-as-you-go system where the payroll taxes of current workers contribute to the payment to current recipients. As long as there are people working and paying Social Security taxes, benefits will be paid albeit reduced from current levels. Since most people prefer to receive 100% of the promised benefits rather than 76%, then how can Social Security be “saved”?

Here are some ways. Let’s do the easy ones first:

 Increase Payroll Taxes

Currently Social Security taxes are 12.4% on the first $168,000 of income. Yes I know they tell you that you pay 6.2% and your employer pays the other 6.2 percent, but who is fooling who (to quote Aretha Franklin). You pay the entire 12.4 percent. The 6.2% that your employer supposedly pays is coming out of your pay. So you can raise payroll taxes say to 15%. This will decrease your income today but will keep Social Security payments in the future from falling.

 Increase Income Levels Subject to Social Security Taxes

Just the first $168,000 of earned income is subject to Social Security taxation. There are proposals to raise if above $200,000 and some to remove the limit entirely. This would be accompanied with a proposal to have a maximum cap on the amount of benefits paid to the retiree.

Change the COLA from wage indexing to price indexing

By Instituting this change Social Security would have run surpluses every year from 1982 to 2023 except for 2021.

Now the more difficult ones:

Increase the Full Benefit Age

The full benefit age for those born after 1960 is 67. The earliest you can claim Social Security is at age 62. When Social Security was first implemented the full benefit age was four years past the life expectancy of the population. For example, my father was born in 1913 and had a life expectancy of 58 years. Now an individual who reaches age 65 is expected to live to 85. But when Social Security was enacted in 1935 the full retirement age was 65 and the life expectancy for men was 61 years and 65 for women. This means that Social Security was intended as a safety net rather than a retirement plan. Now men are expected to live to 74 and women to 80. Of course, it is less for blacks. Some estimates are that raising the full benefit age to 70 would make the system solvent for an additional 75 years. But I bet that the AARP would fiercely resist raising it because Social Security has moved from being a safety net to being a retirement pension fund.

Means test Social Security

Here Social Security benefits are determined by one’s income, instead of benefits being determined by what one has contributed. Also benefits can be determined by one’s income stream post- retirement. So if one has a 401(k) or 403(b), a pension or other benefits post-retirement, then their Social Security benefits would be reduced. This proposal is controversial because some recipients will be receiving less than their total contributions. My attitude is that I was forced to pay into this dog of a “pension “plan with its dismal rate of return and it is my money and I want it back.

Have more babies

Americans are getting older and living longer causing fewer and fewer workers to support an ever growing number of retirees. The declining ratio of workers to beneficiaries creates financial difficulties for Social Security. In 1960, the Social Security program had revenues of $12 billion and outlays just shy of $12 billion. However, by 2021, the smaller ratio led to outlays ($1,145 billion) exceeding revenues ($1,088 billion). The gap between outlays and income will continue to grow. By 2034, the last year before funds are expected to become depleted, the Social Security Trustees expect that costs will exceed income by $437 billion. When the trust funds are depleted, benefits will be limited by the income assigned to the program and absent changes to law, benefits would be reduced by 20 percent.

Is the solution to have more babies? That is not likely since birth rates are declining among all races and cultures. Although Hispanic birthrates are above those of white and black women, those birthrates are also declining. The rates in the countries in Latin America where most Hispanic immigrants are from are all below replacement (2.1).  Moreover, the birthrates of Hispanics in the United States are also falling. In countries that have offered economic inducements to have more babies, those inducements have failed to stop the declining birthrates. So it does not appear that trying to induce having more babies is going to work to “save” Social Security.

Privatize Social Security

Being a free market laissez-faire thinker, one would think that this should be my favorite. George Bush II tried to advance such a notion in 2005 but it failed. Why? Well the spectre of old gray-haired women picketing the congress is unseemly. Social Security funds are not invested per se so there are no significant returns coming to the recipients. Bush wanted to take part of the contribution to Social Security and have individuals put them in their own retirement accounts. Those account returns would be tied to the market and the accounts privately managed in equity index funds. The problem with such a proposal is that because Social Security is a pay-as-you-go program with current benefits being paid from current receipts, the program would suffer an instant shortfall. Would the government have to step in to make up that shortfall? That would be doubtful given the size of the existing government debt. 

If when first enacted, Social Security had been privatized, it would have been viable and would have produced greater returns than the current system. Consider that assuming historical rates of return, if individuals born in 1970 were allowed to invest in a stock market index fund what they pay in the Social Security taxes, those individuals could receive nearly six times the benefits that they receive under Social Security, around $11,000 per month rather than the $1,913 that Social Security would pay. Even a low-wage earner would receive nearly three times the return on Social Security. 

And a frivolous one

Since women live longer, they will receive more payments than men. In the spirit of fairness, delay their payments but not the men’s.

A Modest Proposal

My suggestion is to keep the current regime of Social Security in place and let it gradually fade away. Over time the 76 percent figure will continue to fall as the ratio of workers to retirees continues to fall. Social Security will eventually cease to be a viable source of retirement funds. Instead, remove the contribution limits on IRA accounts. There will be no need to try to privatize Social Security which would meet resistance from all the democrats and the AARP. Let IRA accounts be the alternative if donation restrictions were removed. The IRA contribution limits for 2025 are $7,000 for those under age 50, and $8,000 for those age 50 or older. Why not eliminate those limits? The reason is that the IRA contributions are tax deferred. Money contributed to an IRA is on a pretax basis. When the money is withdrawn is when they are taxed and then presumably at a lower tax bracket. The opponents will say that the increase in the IRAs will be at the expense of current tax receipts which are required to pay for government expenditures causing the debt to rise. Now that is a fairly easy solution – reduce government spending.

BTW, since none of my ideas seem to find traction, I don’t expect this one to do so either.

Pandering, illegals get paid and Ferraris

I guess President Trump’s campaign pandering to make overtime paytax exempt is going to become a reality. There is a bill to enact the exemption and cap it at $10,000 for individuals and $20,000 for married couples. I wonder if there will follow bills to exempt tips and Social Security payments, two other pandering proposals? Of course, the one exemption that Trump has ignored is the only one that I have suggested for the last 20 years – to exempt from all taxes the pay and purchases by active duty service personnel. I wonder why I can’t get any traction on this?

Did you see where the Administration is bribing illegals to self-deport? Illegals would use a mobile app and would receive $1,000 once they confirm that they have arrived in their home country. One illegal has already received payment after self-deporting from Chicago to Honduras. I wonder how many times an individual could collect? Couldn’t one just come back into the country and self-deport any number of times?

Can you explain to me the new 100 percent tariff on foreign movies? I guess Trump didn’t like Ingmar Bergman. Is he trying to cut off foreign movies made by foreigners or American movies made on foreign soil? I guess they could make a replica of London in south Georgia to film a James Bond movie. Or a replica of the Sahara desert in Death Valley for an Indiana Jones movie. If there are tariffs on foreign made movies, will other countries retaliate by putting tariffs on movies from American studios? Didn’t China ban American movies? Don’t the bulk of movie sales by American studios come from abroad? But like many things Trump, it just seems silly to me.

Some have called Trump’s tariff policy “uneven.” That is kind at best. Better call it chaotic, undisciplined and ad hoc. The president unilaterally imposed a tariff of 25% on imported automobiles. Never mind that the tariffs were on automobiles of US companies. Since the factories were in Mexico or Canada they got hit with the tariffs. He also imposed tariffs on automobile parts. As noted before, some parts cross borders eleven times and are tariffed each time. Since in the initial round of tariffs, aluminum and steel were hit with 25%, Trump then exempted them if they were used in automobile production, thereby avoiding a double tariffation (if there is such a word). Then the Administration said that manufacturers of U.S.-assembled cars could have a rebate equal to 3.75% of their retail price for one year and 2.5% the next year to offset their tariff costs for parts. Whew! This is getting complicated. But if the car is not assembled in the US, then the full tariff would apply. Since Ford’s electric Mustang is assembled in Mexico, it pays the full tariff and will see a price increase of around $12,000.

The impact on the automobile companies is predictable. GM says its costs will increase by $5 billion. Ford, which assembles most of its vehicles in the US (save the Mustang) saw its first quarter profits fall by 64 percent saying that tariffs will decrease its adjusted pretax earnings by $1.5 billion. Like many firms Ford has stopped giving forward guidance. “While Ford’s tariff bill will be lower than many competitors, the impact still amounts to “huge numbers,” said Ford’s Chief Executive Jim Farley. By the way, Ford is still losing about $1 billion a year on its EVs. How long can that be sustained?

Even Rivian, the EV maker, which is produced 100 percent in the US is telling investors that it too will be negatively impacted by the tariffs. It expects over $200 million will be added to its costs, presumably in increased costs for some parts. It will be interesting to watch how the sales of US vehicles are impacted by Trump’s tariffs.

One bright spot is that Ferrari is continuing forward guidance as its earnings beat forecasts. Ferrari reported net earnings of $466 million in the first quarter as its deliveries increased from a year earlier. Ferrari’s CEO said “Another year is off to a great start,” he said. “All key metrics recorded double-digit growth, underscoring a strong profitability driven by our product mix and continued demand for personalizations.” The company said that it was going to increase its prices for US deliveries due to the tariffs. Despite that, US deliveries were up 3 percent. I guess Ferrari’s price elasticity is fairly inelastic. Its owners seem to pooh pooh the increase in price. Ah, life in the fast lane. Ciao!

Is this your next pickup?

Have you heard of the Slate truck? It is a bare bones, minimalist tiny electric pick up truck. It is priced at $27,000 and if the federal tax credit hangs around, it will set you back $19,500. What do you get for that price? Not much. It has roll up windows, no info system, no touch screen, no radio and no paint. So I guess it is a blank Slate. However, you can pay extra and get those things and a bunch more. It does have a smartphone holder so you can still talk to Siri or use Waze. It is being backed by Jeff Bezos who seems to be the Elon Musk me too guy. “So you have Space X well I have Blue Origin! You have Tesla well I put a few million into Rivian and now I have Slate!”

Incredibly some writers are asking if Slate will be a Tesla killer. Huh? Was Yugo a Porsche killer? Was the Chevy Volt a threat to the Tesla Model S? The people that I know who buy Teslas are attracted to its technology. Slate is the anti-Tesla with no technology. They will appeal to completely different markets. Tesla offers the cybertruck which starts at $70,000 and goes up north of $100,000. Do you really think a teeny EV pickup with a 150 mile range and no gizmos will endanger Tesla? Not likely. However there will be a market for a cheap EV pickup. Given the high tariffs on Chinese EVs, it is impossible to get a cheap EV (there they start around $15,000). Toyota even makes a $15,000 EV for the Chinese market. Let’s just say that those who are wishing that the Slate will be a threat to Tesla are just Elon Musk haters who are hoping for Tesla’s demise which may happen but not because of Slate.

I have always wondered why all the US EV startups have started with high priced vehicles. Rivian which continues to have a look of surprise on it starts at $70,000 and go up towards $100,000. Every time I see one I say “Does that look like $70,000 to you?” Not to me. Lucids also start around $70,000 and go past $100,000. Of course the Big Three have their own EVs, Ford has the EV Mustang and the F-150 Lighting. General Motors has the Lyric, Blazer EV, Equinox EV and the Silverado EV. All are cheaper than the startups but no one thinks that they endanger Tesla. Do they? Well if they don’t then why would Slate?

So the F-150 Lightning and Silverado EVs aren’t considered a Tesla killers but a $20,000 pint-sized EV is? This makes no sense to me. Musk has promised but failed to deliver a $25,000 EV, there will be certainly market for the Slate. I would not mind having one at the farm. My first pickup was a bare bones F-150. It too had roll up windows. It had air conditioning and four wheel drive – an essential at the farm. If the Slate is available with four wheel drive, I could use it to haul stuff around the farm and take dead deer to the processor during deer season. I would not need my F-250 diesel for farm work and could use it for heavy loads and with my fifth wheel. I think America needs cheap EVs. But these will be no threat to Elon Musk and Tesla. 

Are American’s going to demand a vehicle with no auto light dimmer, no touch screen, no power windows and no backup camera. That remains to be seen. Yes all those are available as accessories and will they be so often demanded that Slate will start offering an upgrade with those niceties standard? Whereas I would never have a cybertruck, I might buy a Slate. On the other hand, I have no need or desire for an EV auto, regardless of price. 

It is noteworthy that the Slate will be built in Indiana which has 2 republican senators and 7 of nine representatives are also republican. It is probably a mere coincidence that since Trump is talking about getting rid of the $7,000 federal tax credit on US made EVs that Slate will be made in republican country. Want to bet that the Indiana republicans are already lobbying to keep that tax credit?

Crypto 101

Do you understand cryptocurrencies? I don’t but as a professor teaching a class on financial markets, I feel obligated to make intelligent clucking sounding noises to the students even on subjects that I know little about. Here is my lecture on cryptocurrencies.

I cannot understand why anyone would want to buy and hold cryptos. When they first came on the scene I thought they were just a vehicle for money laundering. Of course, I was right but apparently they are useful for something else – but what? Some have touted crypto as the new gold and would act as a store of value and would protect against inflated government money. But crypto has proven to be no store of money. Its price is volatile and recently has been moving in the opposite direction as gold. 

But what is crypto? It is a digital or virtual currency secured by cryptography, which supposedly makes it nearly impossible to counterfeit or double-spend. Most cryptocurrencies exist on decentralized networks using blockchain technology—a distributed ledger enforced by a disparate network of computers.

Cryptos at first were not issued by governments making them free from government control, interference or manipulation. However, governments soon started attempting to regulate cryptos, to adopt them and even to issue them.

There is now a digital yuan – the digital renminbi. Will there soon be a digital dollar? Some countries like Argentina, Brazil and Vietnam have high holdings of cryptocurrencies among their populations. Over a third of the citizens in those countries use crypto in day to day transactions. Countries that do are mostly ones with high economic instability. Argentina instituted a new cryptocurrency touted by its president which later crashed resulting in millions of dollars in losses and charges that the president somehow profited from the crash. The Trump Administration has created a strategic Bitcoin Reserve that will treat bitcoin as a reserve asset and a Digital Asset Stockpile, consisting of digital assets other than bitcoin owned by the Department of Treasury that was forfeited in criminal or civil asset forfeiture proceedings. Why? Again, I haven’t a clue. By the way, the market is clueless as well. However, the government will not buy crypto and will only hold (hoard?) what it only seizes.

What are the advantages of cryptocurrencies? You can’t hide them from the government. Governments monitor blockchains which are cryptos’ public ledgers. Crypto exchanges are regulated by the SEC. You have to pay taxes on them because the federal government treats them as property for tax purposes.  The IRS considers them either as capital gains or ordinary income depending on how long you hold the cryptocurrency. Cryptocurrencies are price volatile, have high energy consumption for mining activities and are used in criminal activities. They also have been hacked and stolen – most notably by the North Koreans.

In finance we associate volatility with risk. The more volatile is the price of an asset, the more risk associated with it. Bitcoin, the most popular crypto, has had over 15 major corrections (extreme movements in price) over the past 15 years but each time recovered with an even higher price with a beginning to end gain of over 40,000 percent! Remember when it was $105,000 per coin before falling to $84,000 and then surging to $94,000? Perhaps the volatility has to do with the nascent nature of crypto. It only has been around 15 years or so. All new markets tend to be volatile as new products enter and new participants enter. Maybe when the market matures, that the price volatility will lessen. Finance calls this type of risk “idiosyncratic” or “unsystematic” which is risk unique to the asset and not to the market (which is called systematic risk).

Central to the appeal and functionality of Bitcoin and other cryptocurrencies is blockchain technology. As its name indicates, a blockchain is essentially a set of connected blocks of information on an online ledger. Each block contains a set of transactions that have been independently verified by each validator on a network. Every new block generated must be verified before being confirmed.

What about “mining?” First off, crypto mining is not environmentally friendly. Bitcoin mining exposes millions to harmful air pollution each year. There is significant greenhouse gas emissions from Bitcoin mining, which requires vast amounts of electricity. The noise levels of the cryptocurrency mines has reached 72 decibels — well above the 55 dB limit beyond which the World Health Organization (WHO) deems to be dangerous for human health.  China banned cryptomining in 2021 causing the amount of mining operations to explode worldwide. In the United States crypto mining consumed an estimated 36 billion kilowatt-hours (kWh) of electricity, as much as all of the electricity consumed in Maine, New Hampshire, Vermont, and Rhode Island put together. 

Using powerful computers, crypto miners solve complex mathematical problems that are required to validate transactions on the blockchain. Blockchain networks serve as a public ledger for all transactions, promoting transparency. One expert says “This competitive process rewards successful participants with newly generated tokens while maintaining the integrity of the decentralized system. Essentially, mining combines network security with financial incentives in a technological ecosystem designed to operate without central authority.” The upfront capital needed for mining equipment, access to cheap electricity, and reliable internet infrastructure can be prohibitive and the mining ecosystem is increasingly dominated by industrial-scale operations established in regions with lower electricity costs. But what of the costs?  Mining for cryptocurrency may no longer worth it. According to a recent study, the cost of electricity and computational power needed to mine for Bitcoin now often exceeds the actual value of the coin. 

That is interesting. Some have said that one of the positive features of Bitcoin was that its supply is limited unlike that of government fiat currencies. For Bitcoin it is 21 million coins. However, this only limits Bitcoin because other coins can easily be created and most do not have limits on supply. New coins are added to the Bitcoin supply approximately every 10 minutes, which is the average amount of time that it takes to create a new block on the Bitcoin blockchain. By design, the number of bitcoins minted per block is reduced by 50% after every 210,000 blocks, or about once every four years. Whew! If the supply of bitcoin ever reached 21 million then no more can be generated meaning that bitcoin miners could only earn income from transaction fees.

Although bitcoin is the most famous cryptocurrency there are many others. At https://coinmarketcap.com/coins/ you can find the top 100 cryptocurrencies. However, missing from that list are the memecoins which point to the absurdity of cryptocurrencies. A meme coin is a cryptocurrency arising from a joke or some humorous characteristic. The first memecoin was s–tcoin (I kid you not) which has a market cap of $116,000 https://coinmarketcap.com/currencies/shitcoin/

There is the Doge coin (sound familiar?) and the ever popular Fartcoin (again I kid you not), Some memecoins have high market capitalizations. Ask yourself, why would anyone buy a Fartcoin? Dogecoin was released after being created as a joke. But then Elon Musk tweeted that Tesla-branded merchandise could be purchased with Dogecoin. Is this where the name “Department of Government Efficiency originated? Both the president and the first lady have their own memecoins. The meme coin $Trump has a market value of $2.5 billion. First lady Melania Trump also has a meme coin with a market value of $224 million. Recently, the president tweeted “Whichever 220 users hold the most Trump tokens between now and May 12 will get an exclusive invitation to a dinner attended by the President”. The result was that the president netted $900,000 in trading fees over a two day period. Georgia senator Ossoff says that this is grounds for impeachment. But for this president, what isn’t?

Replace the income tax with tariffs? 

Peter Earle at AIER has written an article commenting on President Trump’s saying that tariffs can replace federal income taxes for those earning under $200,000. https://thedailyeconomy.org/article/tariffs-instead-of-taxes-a-back-of-envelope-estimate/ I have written before that whoever thought this us obviously could not do math. Earle agrees.

Here is the president’s tweet:

“When Tariffs cut in, many people’s Income Taxes will be substantially reduced, maybe even completely eliminated. Focus will be on people making less than $200,000 a year. Also, massive numbers of jobs are already being created, with new plants and factories currently being built or planned. It will be a BONANZA FOR AMERICA!!! THE EXTERNAL REVENUE SERVICE IS HAPPENING!!!”

On April 8^th the president crowed that we were already raking in $2 billion a day from the tariffs. Of course the president is notable for his hyperbole. He just misplaced a few zeros. The actual amount was $200 million a day. But hey, what’s a few zeros among friends? Yet, even when all of the tariffs are being collected, will it be sufficient to eliminate the income tax for those earning less that $200,000? 

Actually, it is economically and mathematically impossible.

Earle points out the difficulties that arise from such a suggestion. First, 54% of income taxes are paid by those earning under $200,000. This amounts to $1.19 trillion that would need to be replaced by tariffs. Ceteris paribus (all things equal), on all imported goods in 2023 this would mean a tariff of 39 percent on everything imported. This is a marked increase from the average rate of 2.5% in 2023. The question is whether a universal tariff of 39 percent would collect $1.19 trillion? The answer is no. Trump is assuming that Americans will purchase the same amount of goods when the tariffs are imposed. Where did he learn his economics?

Tariffs translate to higher consumer prices. Higher prices translate to lower quantities demanded and lower quantities demanded translate to lower revenues. So $1.19 trillion will not be collected. How much less depends on the elasticity of demand for the imported goods. We do know that higher prices mean lower real incomes. We also know that higher prices on imported goods will cause increased demand for domestic substitutes further decreasing the amount raised from tariffs. That means for each decrease in revenues from the tariffs, the tariffs would have to increase even more in order to try to reach the $1.19 trillion needed. Earle states that if the amount of imported goods purchased shrank by 50 percent then the tariffs would have to rise to 77 percent. But if those tariffs increase prices even more – which they will – then the tariffs would have to go up even more. It would be a never ending cycle. 

The bottom line being that trying to replace the income tax with tariffs will result in a net economic loss accompanied by price inflation. It will also mean fewer imports leading to less tariff revenue. There will be less choice for the American consumer, inefficient industires, fewers goods and higher prices. This is the rebirth of mercantilism and will result in Trump’s Fortress America. The president says that we don’t need their cars, we don’t need their energy, we don’t need their lumber. I guess we also do not need their toys, clothes, hats, belts, textiles, electronics and agriculture products either. But I am in trouble. My jeans are from Mexico. My shoes from Cambodia. My pants from Bangladesh. My belt and socks from China. My shirt from India. My underwear from Kenya. Kenya? Yes Kenya. My Georgia bulldog cap is from China – Go Dawgs! ! (包括 的例句)!

Trump may not need foreign made stuff but apparently I do.

I presume this idea emanated from Trump’s two advisors who have PhDs from Harvard. Further evidence that Harvard is not “elite”. These guys obviously can’t do math and need to go back and take Harvard’s remedial math course. Earle calls the notion of tariff substitution for income taxes untenable. I call it foolish.

She’s Back!

Did all of a sudden we missed Joe Biden and Kamala Harris? First they lead Biden on to a stage to talk to the disabled. Then Harris shows up to talk to a bunch of leftists in San Francisco – is there any other kind? Somewhere I read that Biden wants a fee of $300,000 to slur – er to speak. Who would pay that? Harris is “only” charging $50,000. But she needs to do something about her persona. She left me shaking my head saying “and this person could have been president of the United States?” One report described the speech as lurching from “cacophonous shouting to saccharine sing-song.” I don’t know if she did one of her famous word salads but in her speech was a rather powerful message that had to appeal to both the Trump haters and the rest of us.

“We all know President Trump and his administration and their allies are counting on the notion that fear can be contagious. But what they’re overlooking, what they have overlooked, is that fear is not the only thing that is contagious. Courage is contagious.” She then referenced a video of a herd of African elephants instinctively formed an “alert circle,” intended to protect the younger elephants at the San Diego Zoo Safari Park this morning, as a 5.2 magnitude earthquake shook southern California. Harris said:

“In the video, for those who haven’t seen it, those elephants were there, and as soon as they felt the earth shaking beneath their feet, they got in a circle and stood next to each other to protect the most vulnerable. 

Think about it. What a powerful metaphor. Because we know those who try to incite fear are most effective when they divide and conquer, when they separate the herd, when they try to make everyone think they are alone. But in the face of crisis, the lesson is: don’t scatter. The instinct has to be to immediately find and connect with each other and to know that the circle will be strong.”

Isn’t it interesting that she picked a video featuring elephants? But this is a message that should be heeded by all. It applies to all of those who the left tried to intimidate under the yoke of the Biden Administration. Remember the FBI raiding the homes of abortion protestors? Remember the raid on Mar-a-Lago? Remember the FBI raiding 35 MAGA allies of Trump? Recall the terrorist activities of the CFPB? The debanking of conservative organizations? Recall Biden’s abuse of power? And don’t forget the persecution of the South Dakota ranchers who were grazing their cattle on some national land.

Harris may have meant her illustration as a cautionary tale against the abuses of Donald Trump but it applies to the abuse of power, period. Her silence during the Biden years speaks volumes.

Harris needs to ditch the cackles. She needs to quit all the gesturing. She needs to hire speech consultants to try to turn her into a serious person free from ridicule. Right now she is a sad caricature. But can she be saved?

Just never forget the words of T. S. Elliot

Half of the harm that is done in this world

Is due to people who want to feel important.

They don’t mean to do harm – but the harm does not interest them.

Or they do not see it, or they justify it

Because they are absorbed in the endless struggle

To think well of themselves.

– T. S. Eliot, The Cocktail Party (1949)

Pardon me but here are some more random thoughts.

Why do baseball managers wear baseball uniforms? Can you imagine coaches having to wear football or basketball uniforms? Rick Barnes in shorts?

The fact that fans support teams that have no chance of winning a championship shows the love for the game. Realistically only a few teams in baseball and football have a chance for a championship. I thought the same about basketball. Then I saw that the top seeded teams were Cleveland and Oklahoma City. I thought it was a misprint.

Can you imagine having season tickets for the Miami Marlins, the Oakland (Sacramento) Athletics, the Chicago White Sox, the Cleveland Browns (sorry Jimmy Haslam) or the New York Jets/Giants? Those are true fans.

I saw a white cybertruck. It was white with custom wheels and in the foundation series. I talked to the owner and told him – truthfully – that his truck was stunning. He beamed. I meant it. Usually when I see a cybertruck I think there goes someone with more money than brains. I still think that unless it is a white foundation truck with trick wheels.

The fans at major league baseball games during the beginning of the season look like they are at a football game sitting in freezing temperatures and driving snow. Opening day was March 27. When did they start playing baseball in March? The season is too long and should start in mid-April.

Harvard is now offering a remedial math course. Harvard? It rejects 97 percent of its applicants. Obviously it should reject a few more. Harvard says its due to the pandemic. That’s like saying the dog ate my homework. 

That the democrats are still in disarray only shows how badly Biden screwed up everything. I thought the border crisis could only be solved with new legislation? What was a flood is now a trickle. It has gotten so boring that Fox has taken its imbedded reporter out of Eagle Pass, Texas.

Did you see that Joe Biden resurfaced and gave a speech to a group of advocates for the disabled? Someone has a sense of humor. Maybe it takes one to know one.

Instead of having a message other than hating Trump there is no coherent positive message coming out of the democrat party. Then why its vice chairman is fermenting even more discord by threatening to primary incumbents is puzzling.

Equally puzzling is the talk of the democrats running AOC for president. Huh? And you thought Harris was verbally challenged? More realistically is her running against Schumer for his senate seat.  Well if Adam Schiff, Mazie Hirono and Ruben Gallego can be senators I guess that AOC can be one too. Who is the dumbest republican senator? MSNBC says its Tommy (Coach) Tuberville who will give up that honor to run for governor of Alabama.

Remember all those hate filled sarcastic Trump tweets about Mitch McConnell? He even ridiculed Elaine Chao, McConnell’s wife calling her “Coco Chow.” Trump has called McConnell a “sullen unsmiling political hack.” Trump said “I feel sorry for Mitch. He wanted to go to the end and he wanted to stay leader. He’s not equipped mentally, he wasn’t equipped 10 years ago mentally in my opinion.” Of course McConnell reportedly has called Trump “stupid” and ” ill-tempered,” a “despicable human being” and a “narcissist.” Apparently there is no love lost between the two. 

Curiously, Trump has not attacked the other senator from Kentucky, Rand Paul who opposes Trump’s budget plan, is opposed to the tariffs and co-sponsored a bill to strip Trump of the power to unilaterally impose tariffs. Paul says “Congress needs to grow a spine, and Congress needs to stand up for its prerogatives.” Paul didn’t even endorse Trump for president. It is interesting that over in the House, the most vocal republican opposing Trump’s policies is also from Kentucky, Thomas Massie for whom Trump has tweeted “HE SHOULD BE PRIMARIED. I will lead the charge against him. He’s just another GRANDSTANDER, who’s too much trouble, and not worth the fight.” Massie responded “POTUS is spending his day attacking me and Canada. The difference is Canada will eventually cave.”

Paul must have been reading my blog when he ridiculed Trump’s tariffs saying “I have a deficit at my grocery store.” So why has Trump not attacked Paul with his avalanche of caps and exclamation points?

Trump wants Europe to buy more American agriculture, cars and get rid of their value added taxes. Both the Europeans and the Brits have told him to pound sand saying that those items are off the table and are nonnegotiable. How will Trump respond? Maybe he will threaten to double their tariffs but so far, silence.

Halleluiah! The president signed an order to rescind the Biden rule governing the flow of water through showerheads proclaiming that he was making showers great again. The rule was stupid as evidenced by it taking 13,000 words to define “showerhead.” The rule was supposed to conserve water but usage increased as people took longer showers. However, Trump’s order did not get rid of the restriction, it only reverted to the one set in 1992 that mandates a 2.5 gallon per minute standard. The 1992 law also mandated a maximum flush volume for toilets at 1.8 gallons.  Previously toilets flushed at 3 gallons or more. 

Those early 1.8 gallon toilets had to be flushed multiple times to get rid of heavy loads – if you know what I mean. I still have one toilet that can be vexing. I am tempted to replace it. I did replace an older toilet with one that advertises being able to flush a bucket of golf balls with a single flush. That should enough power to flush down anything that might come out of me. Maybe.