Thursday, October 27, 2005

Moron Overload

I can’t take it anymore, everywhere I go I run into complete, total whack-job Morons.

A friend of mine just bought a new cell phone for $200 and bought the “insurance” for $6 a month. That is $72 per year for you math illiterates and would only be worth it if she had a 36% chance of losing the phone this year. Actually, over a two year period, the insurance is only worth it if the probability of a lost phone was 72%. Why not just flush your money down a toilet?

I just played golf this damp morning outside of Boston. There were 3 people on the empty course. I was riding a cart and 2 single walkers (players playing solo) were ahead of me. Neither of them would let me play through. I mean how bleepin’ retarded and ignorant can you get? I eventually hit my driver right over their pin-heads and drove right past them. Yeah, it is 47 degrees and raining and I was going to wait behind them for every shot with 16 empty holes ahead of me? I think not. Big deal, I just Marginalized them. But I should have pummeled the one dork who asked me if I was “in a hurry”.

That “in a hurry” remark reminded me of an incident I had a supermarket (Key Food) in Brooklyn. After finishing up my shopping, I was going to check out and just after I got in line, some old guy with a “few” items tried to cut in front of me. So I blocked him off and turned my back to him for a few seconds. I guess he mistakenly thought that I would step back. So I held my ground and then he decided to ASK if he could go ahead of me. I shook my head and derisively told the creep “NO”. I said maybe if you didn’t try to cut me, I would have let you go, but now I have to teach you a lesson. The creep started cussing me out (and another fossil reflexively started chirping at me as well). The meddler said that I had no respect for my elders all the while the original agitator was muttering four-lettered invective at me. I was dying laughing and the old bat cried out in desperation that he was “in a hurry”. To which I responded that I had no plans or urgencies at all. I said my evening was “wide-open”. Wow, was this guy pissed.

I have Marginalized CNBC in past blogs. They are the typical big, stodgy socialist media outlet. They are trying to show their progressivism by running blogs (Squawk Blog and The Morning Blog). All day they promote their blog web addresses, but there is basically nothing on their blogs. The CNBC hosts actually tout "new pics" of themselves on the blog, as if looking at their mugs all day isn’t enough. Do they really think anyone is interested this?

Also, you need a MSN Passport ID to post messages on their blogs. Since no one has one, there is nobody posting comments. I got a MSN ID just so I could criticize them. I figured that I needed an outlet after listening to their crap for 10 years, all day long. But they won’t publish my comments anymore. You can google “CaptiousNut” (click here) to see some of my hardly incendiary comments that some pissant at CNBC has decided to censor. So to sum it up, there is little blog content, a barrier to posting comments, and censorship of criticism. Somebody tell CNBC that “THAT IS NOT A BLOG”.

Thank God for the internet because I keep losing media outlets. I had to cancel Businessweek, I haven’t bought a newspaper in over 4 years, I haven’t watched the local news in years, and now I am muting CNBC practically all day long.

I heard some boob on the radio say today that the recent rain in New Hampshire has cost the state billions in tourism revenue. The first two weeks of October are peak viewing for foliage in the White Mountains. But come on, “billions”? He tried to justify his remark with an anecdote about a family of Londoners that usually comes to see the leaves this time of year. First of all, one “billion” is 1,000 million dollars. It is a lot of stinkin’ money. That would mean that the state would have to have had 1 million tourists, who usually spend $1,000 each in New Hampshire, all cancel their trips. Furthermore, “billions” implies at least twice that amount. I would almost bet my life that foliage viewing is not a multi-billion dollar season. Yo idiot supreme, when it rains, people may just sit in their hotel rooms or go shopping – they don’t cancel trips. Never mind that the boob has no concept of what a “billion dollars” is.

But herein lies the problem. I can’t watch, listen, or read to 90% of media. The content is either factually vacant or outright propaganda.

Last week in Toledo, a handful of Neo-Nazis marched in demonstration of “black crime”. They were attacked, ironically by crowds of African-Americans and disbanded. Hours later, as CNN calls them, “counter-demonstraters” rioted, burned buildings down, looted stores, attacked police, and even attacked paramedics who went in to assist the injured.

So white supremacists marched and ran, hours later “counter-demonstrators” riot and loot and this is the headline ABC News runs.

This is a complete and deliberate mischaracterization of what happened. The videos have been all over the internet. IT WASN”T THE WHITE SUPREMICISTS WHO RIOTED!!!

Those Neo-Nazis must be delirious. Probably not since Al Queda’s 9/11 attack has a plan so wildly surpassed its objectives.

From now on, I may refer to Big Media as the “Apocalypse Now” crowd. What is with all of this Avian Flu hysteria? Does anyone remember the fuss over the “impending” Sars Epidemic? Before that we had anthrax, Y2K hysteria, etc. Today it is Hurricanes, Global Warming, Energy Prices, and the formerly mentioned, panic du jour, Avian Flu.

Does Big Media really think their customers want to be bombarded with doom and gloom 24 hours a day? Seemingly nothing uplifting ever happens.

CNBC is breathlessly worried about “consumer confidence” and how much money people will spend this Christmas. But CNBC lacks any self-consciousness. They have been worrying about consumer spending for the better part of a decade. Every year they think people are going to stop buying stuff, implying that our economy is“over-leveraged”. There is also an undercurrent of paternalistic elitism here - that being the aspersion that the commoners are dumb and recklessly mismanage their budgets.

Capitalists believe in the business cycle while doom and gloom socialists always see misery.

I have said it before, economic illiteracy really scares me. Some Morons in Congress are trying to attack “windfall” profits on oil companies. I have already addressed such folly ad nauseum. They just don’t get it. If you take away (tax) money from oil companies, they have less to invest in production and development. THAT WILL LEAD TO HIGHER OIL PRICES!!!!!!!!

Rapidly escalating oil prices have “drained billions of dollars” from the nation’s economy “in a massive transfer of wealth from average Americans who can’t afford it, to big oil companies who already were experiencing all-time record profits,” Dorgan said.

Hey Dummy, oil companies are owned by "average Americans". This is analogous to when class action lawyers convince stock shareholders to sue their own companies.

North Dakota Senator Byron Dorgan (D) is championing the bill. I know, the “(D)” was superfluous. He has a cute little hitch in his bill that tries to address this “taxes stunt development” conundrum. The bill would allow oil companies to keep their “windfall” profits so long as they reinvest them back into exploration and production. Presumably we will need to create some new regulatory bureaucracy to enforce this and we all know how adept the government is at managing bureaucracies. I have already mentioned how taxing oil "profits" further would hurt pension funds, insurance companies, and investors. Someone needs to tabulate how many shares of Exxon, Chevron, BPAmoco, and other oil companies are owned by North Dakota’s pension funds. The inherent problem with this “exploration and development” exception is that it too is superfluous. Remember, oil companies are not run by old men in Texas, they are run by shareholders and boards of directors who would never let a company just sit on cash. Shareholders always demand the company put the capital to work or “rebate” it via dividends.

See Senator NumbNuts, there already is a "rebate" mechanism. I have put "rebate" in quotes because this bill would take (tax) non-reinvested "windfall" profits and "rebate" them to consumers.

Also, "rebating" consumers prevents the high gasoline price from changing consumptive behavior. So is Senator Dorgan against energy conservation? Here Dorgan's socialism puts him in a bind. He wants to attack evil oil companies, but this "rebate" may end up subsidizing SUVs and Hummers.

I have fired at Bill O'Reilly a few times now for his untrammeled econo-illiteracy but let me just say that he is quite comfortable sticking to his bricolage theories of price gouging, oil cartels, alternative energy science fiction, and evil oil companies. He had Neil Cavuto come on his show to discuss said topics, and Cavuto hammered away at Bill's sophistry. Bill smiled throughout yet was as wrong as he ever was.

On Monday, Bill opened his show with this nonsense:

Talking Points Memo - Gas prices going down?

"For weeks we've been telling you that the five major oil companies have been price gouging - taking advantage of hurricanes and the greed of OPEC to slam the American consumer. Some Americans have sided with the oil companies, citing the free market, supply and demand. Well, what say you now? Worldwide demand for oil is the same today as it was eight weeks ago, but oil prices are declining. So what gives? Oil companies are frightened that the American consumer will begin demanding fuel efficient vehicles and alternative fuels for their homes and cars, so they're pulling back Our pals over at the New York Times are unhappy about falling gas prices, saying 'a bolstered gas tax would raise huge amounts of revenue ? to be used to provide offsetting tax breaks to low income households.' You gotta love the Times. Under the guise of helping the environment, they hammer home their theme of income redistribution. Oil companies have been scared into lowering oil prices. And the far left wants to exploit the situation to redistribute income. That's the cold hard truth in the No Spin Zone."

That above quote was from Bill O' But I watched the show (actually recorded in on my DVR as I do every night) and Bill actually said a lot more than what they posted on his website. He also said:

"Millions of Americans are angry with big oil and are buying less fuel and SUV sales are a disaster..."

"The official explanation is speculators will not pay as much for oil now as they did a few weeks ago… that’s bull." (
official explanation?)

"If speculators are driving the global energy industry, we’re in huge trouble..."

"Oil companies set the price of fuel based on what they think they can get away with..."

"By the way, the price drop again shows the power of the people….Individual consumers, acting together, can bring any industry to its knees..."

Here Bill sounds like a real nutjob. He claims that "worldwide demand for oil is the same" and then in the omitted quote, "Millions are Americans are angry with big oil and are buying less fuel and SUV sales are a disaster..."

So what is it Bill? Is demand the same or have consumers cut back? Logic should retard your effort to have it both ways.

There is no weaseling out of this pickle. Bill has said in the past that since Americans consume 25% of all oil, then Americans control worldwide demand. So Bill claims on one hand that worldwide demand is the same, but Americans, who control it, have cut back.

Is there any mystery why those quotes were omitted from his website?

It is funny because my Bill O'Reilly posts get hit a lot but I can tell that the people that find my blog via "bill oreilly" and search engines, aren't very interested in what I say.

How do I know this? I can tell by the amount of time they spend on the blog and also by exactly what they searched for - typically it is something like "bill oreilly jackass". Unfortunately for these people, my critiques of Bill are mostly on a substantive level (and mostly anti-socialist).

If you read between the lines of Bill's last omitted quote, self-obsessed arrogance rears its Gorgonian head. He definitely thinks gasoline prices dipping since Hurricane Katrina had nothing to do with marketplace had to be due in part to his personal crusade against big oil companies.

If Bill O'Reilly is shaping public opinion on economic issues then truly we are all in "big trouble".

Friday, October 21, 2005

Boston and Alcohol

The other night I went to a Boston Celtics preseason basketball game at the TD Banknorth Garden, formerly known as the FleetCenter which of course replaced the original Boston Garden. I was forewarned that if I wanted to drink beer there I had better bring my passport. This, I think I have to type in bold because it is that outrageous:

You cannot buy a beer at the Garden unless you have a Massachusetts driver’s license.

A woman who had to be almost forty was denied beer right in front of me on Wednesday because she had and out-of-state driver’s license.

I can’t reiterate this enough, but the people in Boston are bleepin’ retarded.

I am not even going to analyze this inane policy. They are like so “WICKED RETARDED” with alcohol up here – I will give a few more examples.

Last summer, en route to a barbeque, I needed to buy a case of beer. I went to the liquor store, hauled the case to the register and was denied the sale. Again, they wouldn’t accept an out-of-state driver’s license. I actually got my 90 year old grandfather to come in the store and buy me the case. At the time I was 30 years old.

Oh, even if you are 21 and have the Massachusetts license, don’t bring your buddies in the store with you. They will card everyone that is with you.

Another example. After a round of golf, I went with a few family members to a local establishment for a few drinks. Well, we never got to a "few". After the second round of draft beer, the bartender told us that we "had had enough". We were sitting there at a table, barely talking at 4pm on a weekday afternoon. I was shocked almost to the point of speechlessness. (We went down the street to another place.)

In another instance, during my sister’s wedding weekend, I went to the "packy" and put $200 worth of liquor and wine on the counter and was refused the sale.

At the Warren Tavern in Charlestown, I was with a group of people and kept going up to the bar to order drinks. I was getting them five at a time, 2 Guinness, 2 gin and tonics, and a Kettle One on the rocks. After my third trip, the wench barmaid said to me, "YOU are drinking an awful lot..." Some regular the bar said to her, "He is not drinking all of those drinks…he is buying for the table..."

The MORONIC barmaid actually thought I had had fifteen drinks. Yeah, there is nothing like alternating between vodka, beer, and gin all in about an hour.

Even when her idiocy was pointed out politely by a regular, she still snapped at me, "Well you still have had a lot." To which I responded that I was staying across the street. Never mind that 3 drinks is very far from most people's notions of "a lot". She was rude and reluctant to serve me the rest of the time.

When the bill came, I looked at it, remembered her rudeness, and left a 14% tip. Five minutes later a bouncer came over and threw the check back at me. He said:

"The bartender wants to know if you are serious about this tip..."

Now I had had a few drinks so I double-checked my math and went up to the bar.

CaptiousNut:"First of all, you have been rude all night. And secondly, 14% is not a bad tip..."

Wench:"You need to tip 25%......I don’t work for less than that……I have two kids at home..."

CaptiousNut: "You want me to fix the tip?"


She brought the pen over and I reduced the tip to zero.

Almost everywhere in Massachusetts, it feels like the bartender is doing you a favor by serving you. The thing is, Bostonians don’t realize how convoluted this is because none of them have ever been anywhere else. I have lived in several cites and traveled a bit so the alcoholic idiocy here is most apparent – as it is to anyone else with some perspective.

But again, this is such an insular and parochial society, the dopes that live here just take it all for granted. It is all they have ever known.

Now these anecdotes don’t represent my complete list. I could go on considerably longer about the Pilgrim-esque alcohol policies up here such as how anal they are with booze at wedding receptions, the paucity of liquor licenses stunting new restaurant development, etc. Remember, Bostonians don’t believe in personal responsibility. It is always someone else’s fault, the bartender’s, the liquor store’s,... Beer, like oil, guns, and SUVs, is a favorite scapegoat.

Remember that Red Sox fan that had an altercation this year with Gary Sheffield of the Yankees? The Boston Globe immediately ran a front page article on how they have increased the number of beer stands at Fenway Park, implying that the beer and Fenway should be held culpable for one idiotic fan’s actions.

From that registration-restricted article:

The new owners of the Boston Red Sox have greatly expanded alcohol sales at Fenway Park, adding at least 16 new stands where beer is sold since taking over in 2001, according to the city licensing board. The team has also increased by a third the size of beer cups, from 12 ounces to 16 ounces.

I think Yankee Stadium should deny beer to everyone that has a Massachusetts license. Maybe that would send a message to the dopes that set policy up here.

Thursday, October 20, 2005

Mortgage Interest Deduction

The average person knows little about the facts of homeownership. President Bush, via a bipartisan Tax Reform Panel, recently had the “audacity” to suggest some changes to the mortgage interest tax deduction.

1) lowering the ceiling on the total amount of mortgage deductibility from $1 million to around $350,000,

2) capping the marginal tax rate of said deductions at 25%.

The anti-Bush crowd yelped in unison upon this announcement. “Now Bush is going to eliminate the mortgage deduction……”, “Bush is going to lower your houses value…”, and Becky Quick this morning on CNBC, “Many people bought their homes expecting this deduction…”

First of all, this is a direct assault on the rich. Anyone who thinks otherwise suffers from bottomless ignorance. It follows that anyone who criticizes these modifications cannot claim to be on the side of the "little guy" in the class warfare of “rich versus poor”.

If you have a 350k mortgage, I am sorry, but you are not middle class. You may be overleveraged but that is a topic for another blog. Before you Manhattanites go apoplectic, screaming about how a 500k mortgage is a small one in your neighborhood, let me correct you. If you live in an 800k two bedroom apartment, you are not middle class….you are poor for New York City. If limiting the interest deduction costs you a couple of hundred dollars per month and you can't afford it, then maybe you should cut back on your $12 martinis and $5 Starbucks lattes. Move to Staten Island perhaps.

Of course, that is one of the central questions a rational person would research before hyperventilating. Who would be affected by these changes and exactly by how much?

In a previous blog, Real Estate Hot Potato…Buy versus Rent & Invest, I have already done most of the math on “how much?”.

Specifically, I studied the costs of home ownership for a 500k mortgage on a 600k home.

We hypothetically borrowed 500k on a 5.75% fixed rate, 30 year mortgage. Below is the calculated monthly mortgage deduction for all thirty 30 years. As I showed in this prior exercise, the mortgage interest tax benefit is, among other things, a function of the borrower’s tax bracket. As I have previously stated:

It is actually one of the few tax laws that favor high income earners.

Total Interest Paid and Monthly Tax Benefits at varying marginal tax rates.

Year 1........$28,582.24........$595.46.....$714.56........$833.65
Year 2........$28,202.49........$587.55.....$705.06........$822.57
Year 3........$27,800.32........$579.17.....$695.01........$810.84
Year 4........$27,374.40........$570.30.....$684.36........$798.42
Year 5........$26,923.34........$560.90.....$673.08........$785.26
Year 6........$26,445.65........$550.95.....$661.14........$771.33
Year 7........$25,939.75........$540.41.....$648.49........$756.58
Year 8........$25,403.99........$529.25.....$635.10........$740.95
Year 9........$24,836.59........$517.23.....$620.91........$724.40
Year 10.......$24,235.70........$504.91.....$605.89........$706.87
Year 11.......$23,599.32........$491.65.....$589.98........$688.31
Year 12.......$22,925.38........$477.61.....$573.13........$668.66
Year 13.......$22,211.65........$462.74.....$555.29........$647.84
Year 14.......$21,455.78........$447.00.....$536.39........$625.79
Year 15.......$20,655.28........$430.32.....$516.38........$602.45
Year 16.......$19,807.52........$412.66.....$495.19........$577.72
Year 17.......$18,909.71........$393.95.....$472.74........$551.53
Year 18.......$17,958.90........$374.14.....$448.97........$523.80
Year 19.......$16,951.95........$353.17.....$423.80........$494.43
Year 20.......$15,885.54........$330.95.....$397.14........$463.33
Year 21.......$14,756.18........$307.42.....$368.90........$430.39
Year 22.......$13,560.14........$282.50.....$339.00........$395.50
Year 23.......$12,293.49........$256.11.....$307.34........$358.56
Year 24.......$10,952.05........$228.17.....$273.80........$319.43
Year 25.......$9,531.41.........$198.57.....$238.29........$278.00
Year 26.......$8,026.90.........$167.23.....$200.67........$234.12
Year 27.......$6,433.57.........$134.03.....$160.84........$187.65
Year 28.......$4,746.16.........$98.88......$118.65........$138.43
Year 29.......$2,959.13.........$61.65......$73.98.........$86.31
Year 30.......$1,066.60.........$22.22......$26.67.........$31.11

If section 2) of Bush’s Tax reform were passed, it would immediately cost this buyer, if they were in the top tax bracket, about $238 a month. (from the difference in the 35% column and the 25% column in Year 1).

A short glance reveals that the difference decreases over time, as would be expected since the loan decreases as well. In Year 10 the added cost to a top bracket earner would be $202 and by Year 20 it would be down to $123.

But this only shows the effects of half of the proposed changes i.e. capping the marginal tax reduction at 25%. Now to see the effects of limiting taxable interest deductions on a maximum of $350,000 borrowed, I simply multiply the chart above by 0.70 (because 350k is 70% of 500k).

Total Interest Paid.........Monthly Tax Benefit
Year 1........$28,582.24........$416.82
Year 2........$28,202.49........$411.29
Year 3........$27,800.32........$405.42
Year 4........$27,374.40........$399.21
Year 5........$26,923.34........$392.63
Year 6........$26,445.65........$385.67
Year 7........$25,939.75........$378.29
Year 8........$25,403.99........$370.47
Year 9........$24,836.59........$362.20
Year 10........$24,235.70........$353.44
Year 11........$23,599.32........$344.16
Year 12........$22,925.38........$334.33
Year 13........$22,211.65........$323.92
Year 14........$21,455.78........$312.90
Year 15........$20,655.28........$301.22
Year 16........$19,807.52........$288.86
Year 17........$18,909.71........$275.77
Year 18........$17,958.90........$261.90
Year 19........$16,951.95........$247.22
Year 20........$15,885.54........$231.66
Year 21........$14,756.18........$215.19
Year 22........$13,560.14........$197.75
Year 23........$12,293.49........$179.28
Year 24........$10,952.05........$159.72
Year 25........$9,531.41.........$139.00
Year 26........$8,026.90.........$117.06
Year 27........$6,433.57.........$93.86
Year 28........$4,746.16.........$69.21
Year 29........$2,959.13.........$43.15
Year 30........$1,066.60.........$15.55

Now remember, that Year 1 number $416.82 represents the value of the first year’s monthly tax benefit. In other words, under this scenario, renting a $3,000 per month apartment would be roughly equivalent to a mortgage payment of $3,416 per month because of the tax deductible mortgage interest. (of course, it doesn’t take into consideration the other costs of home ownership that I discussed in the previous blog).

In effect, this last table would be THE MAXIMUM DEDUCTION table if both reforms were adopted.

As it stands now, a top income bracket earner with a $1,000,000 mortgage today would start out with around a $1,600 per month tax benefit. (Just double the far right column of the first table.) Under the proposed changes they would see it slashed by about $1,200 to that $416.82 amount.

Today the cost of real estate is roughly $600 per month for each $100,000 worth of home. So if say all 1.1 million dollar homes were owned and bought by top income bracket earners……then Bush’s proposal would theoretically lower these home values by 200k (as imputed from the loss of $1,200 per month in tax deductions).

Likewise, if both tax code modifications were made, the 600k house that I live in would theoretically drop by around $67,000 (as imputed by the loss of about $400 per month in tax benefits and assuming only top income bracket earners lived in this house). But if only the marginal tax rate benefit were capped at 25%, the loss would be closer to $30,000.

In all fairness, those numbers are too high. Not everyone in the market for 600k homes is a top bracket earner so the losses in property value would be somewhat less than my projections. Instead say we have losses of $60,000 and $25,000.

Now these are only rough estimates since that is all that is possible with such multivariate scenarios. Nonetheless, I will conclude with:

If deductible mortgage interest is limited to the first $350,000 borrowed and the marginal tax benefit rate is cut to 25%.....

….then a $1 million dollar home will instantly lose 15-20% of its value and a $600,000 home will lose around 10% of its value.

Obviously, the mortgage tax benefits and projected losses of benefits fade over time and I am basing my new property values from the Year 1 tax consequences. Also these numbers are subject to change if interest rates move. As I type this, the 30 year fixed rate is at 6.00%.

So Becky Quick thinks that they shouldn’t roll back mortgage interest benefits because “people” have bought expecting to get them. By her convoluted logic, government couldn’t reform anything because “people” might not have expected it.

She is dead wrong. Government should strive for logical and fair tax policies. It should do what is right, without regard for anything else. This of course begs the forgotten question of why should mortgage interest be deductible in the first place?

The theory was that when people owned their homes, they took better care of the neighborhood, were encouraged to save, etc. and that this was optimal for society. Hence the government pushed tax benefits to spur homeownership - which hit a record high of 69% in 2004.

But like all subsidies, this one was eventually priced into the market and it now borders on eroding its own original objective of helping make homes affordable. Prices are so high, albeit not just from deductible mortgage interest, that low end home buyers are overleveraging themselves with adjustable and interest-only mortgages. At this point, the mortgage interest deduction is not encouraging home ownership, but rather home-indebtedness.

So the Tax Reform Panel proposed changes to reestablish the original goals of the mortgage interest deduction, by targeting the incentives on the lower end of the housing market.

The only way pundits and Bush-haters in the media can bash these reforms, and still claim to be defenders of the “poor”, is by mischaracterizing the reform proposals.

Of course, mischaracterization and obfuscation are the modi operandi of Big Media. They succeeded in thwarting Social Security reform by this tactic and I would quite frankly be surprised if these proposed tax reforms were passed.

But say these reforms were passed and all million dollar homes were suddenly worth 850k. None of these homeowners will have “lost money” because the reforms will have affected all such homes evenly. It kills me when people buy a house for 400k and it appreciates to 600k and they think that they have made $200,000. It is not like they can sell their house, buy a similar 400k one and pocket the money. In most cases this is not possible because all similar homes will be trading for 600k. An across the board price change like these reforms would cause, will not cost homeowners any "profit". They will still be insulated from the nominal price level of the market. They will always be either selling “high” and buying “high” or selling “low” and buying “low”.

Million dollar homes dropping to 850k would only be an issue for someone planning on selling their home and then roaming the streets. Everyone else would parlay that equity into a similarly discounted home. So it is all a wash.

But the reality is, that most people don't understand anything about the value of their house. They paid X for it, and now it is "worth" 3 times X, ergo they are savvy investors no matter how many boats have risen with the current tide. Don't even think of telling them otherwise.

Bush has gotten little credit for a strong housing market, but that doesn't mean he won't bear a heap of blame for its decline - and that will happen whether these tax reforms are passed or not.

There is a lot more in the Tax Reform Panel's proposal, including many offsets to this "attack on the rich" such as the elimination of the Alternative Minimum Tax, a reduction in the tax on long term capital gains (from 15% to about half that), and a slight lowering of all marginal tax brackets.

Such a capital gains reduction would be very bullish for the economy, but it would not be as bullish as a drastic reduction in the top tax brackets.

Although the Tax Reform Panel is bipartisan, President Bush will bear the brunt of the criticism. But anyone with a clue has to conclude that these reform proposals are spot on the money and will spur more real economic growth instead of just housing inflation for higher end homes.

Wednesday, October 12, 2005

NBA Salaries, a Medley of Socialism and Racism

A few years ago, the NBA instituted a rookie salary cap. It was more than a cap, it not only limited how much rookies could be paid, it actually enumerated the amounts, basing them strictly on draft position. This also begs the question of why rookies would hire agents to “negotiate” their first contract and have to pay them a percentage of their first deal.

Why did the NBA institute this? They did it to discourage young players from turning professional. The league thought it would be better served by having more mature rookies. Some people think they did this to depress one end of the pay scale and therefore save the owners some money. After all, their franchises are theoretically worth more if they pay out less of their revenues. On this point I completely disagree. Savings in one area are usually squandered on others: veterans’ salaries, new arenas, a team charter jet, etc. Also, what followed this failed initiative further buffets my claim.

Of course the rookie salary cap failed. It actually opened the floodgate for high school players entering the draft. Prep school stars correctly figured, along with help from their “agents”, that the sooner they got the ridiculously low rookie contract over with, the sooner they could reap the lucre of free agency. In other words, if they entered the NBA at age 18, they could sign a limitless contract by age 22. But if they went to four years of college, they wouldn’t have this opportunity until they were 26.

In 2001, an unprecedented five of the first eight players drafted were high schoolers. This trend continued right through 2005.

So NBA Commissioner David Stern actually achieved the opposite of his goal. But this wasn’t anomalous - this has happened every time a socialist has arrogantly tried to regulate prices (wages) to generate an intended result.

It took Stern five years to realize that the best, and perhaps only, way to keep young players out of the league is to simply ban them. He did that this summer by instituting an "Age Limit" or more accurately an age minimum of 20 years old to play in the NBA.

I have addressed what Stern has tried to do and its failed consequences. But now I want to talk about the virtue, if any, of his goal.

Why limit young players in the NBA? Tennis and golf have no problem with teenage phenoms nor do baseball and hockey. The answer is that the NBA is fighting an image problem. Older white men have been tuning out pro basketball for a decade. Whatever the reason, lower scoring, fewer white players, or negative perceptions of the players, the league is trying to regain these fans. David Stern and his "posse" really believe that if guys come into the league as 20 year olds, it will improve the marketability of NBA players.

So here we have a league that started out by limiting what players could earn and then graduated to banning young players from earning money entirely. The league is 90% black and this has purportedly been done to cater to old white fans. I hate the term racism because it is all too often abused, but this is a clear case of it. One thing I think is worse than overusing the racist label is when real racist elites get away with crap like this.

Hey CaptiousNut, maybe you are going too far. Maybe Stern is just trying to improve the level of play…because young players lack fundamentals and maturity...?

Well then why did the NBA just institute a jacket and tie dress code for players?

My wife told me that they should just say "no jeans" or something. As I told her, if the league tried to explicitly itemize the attire they don’t want players wearing, it would be:

No baggy jeans, no more than 8 gold chains, pants pulled to within 6 inches of the waist, and no throwback jerseys.

…and this would go against the league’s policy of only subtle racism allowed.

Now let me reiterate, I hate the term "racist". The word is so abused as to have lost meaning completely. For instance, I could argue that the public school system is racist. The schools are bad and most black kids go to public schools….therefore public education is a racist institution. After all, if cops pull over more blacks they are deemed racist, so the same oversimplified logic should apply. Yet every politician who pushes for vouchers and school choice is deemed a racist as well. So it is racism to condemn blacks to public schools but it is also racist to move them out.

I don’t really think the NBA is racist. My intention was to illustrate that they are getting away with stuff that would otherwise be labeled such if it were done by the police, George Bush, Mormons, etc.

I think the NBA is stupid to try and woo the old white demographic. My regular blog readers may already know this, but two groups that I Marginalize a lot are old people and young kids. Far too many older people haven’t had an original thought in decades and most young’uns, they just haven’t had any at all. Does the NBA really think they can change the minds of recliner-bound, fixed income, old guys like my father – who spends half of his waking hours dozing off under a vapid newspaper?

The NBA will be fine if the quality of its games improves, i.e. more scoring. The real reason the league hit a rough patch with the fans was another botched socialist attempt at regulating the game.

About twenty five years ago, they instituted the illegal defense rule which basically eliminated zone defenses. The league didn’t want teams double teaming its headline stars. In other words, they wanted to cultivate the superstars in hopes it would drive ticket sales.

But in the real world, actions have reactions. In this case, the elimination of zone defenses forced teams to guard every single player, whether they merited it or not. This misguided rule protected guys who couldn’t shoot because an opposing team couldn’t penalize these non-scorers by leaving them open. Anyway, scoring declined steadily until last year when they eliminated the illegal defense rule. So the points are on the way back, but time will tell whether on not the fans return.

Thursday, October 06, 2005

Bill O’Reilly - Economic Illiteracy and Populism

(a pic of Bill O'Reilly's 10 mpg limousine)

With energy prices so "high" these days, I will no doubt be doing plenty of Marginalizing on this subject.

Bill O’Reilly, econo-illiterate that he is, has proposed that oil companies lower their prices by giving back half of their profits to consumers. That is fine Bill, but you won’t accomplish anything this way and in fact will exacerbate the problem.

If Exxon, Chevron, et al accede to your shameless populist suggestion, then they will have half as much money to reinvest towards more exploration and production. Do you really think cutting such would LOWER energy prices?

Others have suggested "windfall profit" taxes on oil companies. This won’t work for the same reasons. You will be taking away money from oil exploration budgets and you will encourage companies to move business (including oil sales) to lower tax locales. The truly "populist" stance would be a TAX REDUCTION on oil companies to free up more capital and help increase supply. But instead we have to hear about "price gouging" and big business bashing from almost every media outlet.

Back to Bill. If Exxon’s profits were halved, either by taxes or Mr. O’Reilly’s suggestion, its stock price would halve as well.

If you don’t think that is a big deal, then contemplate this. Exxon is a $380 billion market cap company. If its stock declines 50%, then investors, mutual funds, and pension funds will collectively lose $190 billion. Then you would have to halve shareholders’ equity in Chevron, BP Amoco,... Yeah Bill, let’s take a few hundred billion bucks from investors.

Contrary to Big Media agitprop, oil companies aren’t owned by old men in Texas.

O’Reilly won’t shut up about OPEC, "alternative energy", or "SUVs". His poll question last week displayed yet another layer of ignorance. He asked:

"Should we tax vehicles (SUVs) that get less than 15 miles per gallon?"

I sent my pithy email response that of course was ignored.

SUV’s are already taxed more since they are less fuel efficient. Remember, gas taxes accrue on a per gallon basis to the tune of over 30 cents per gallon.

Next week maybe Bill will poll his audience:

"Is the Pope is Catholic?"

Too many idiots think that if everyone simply drives a smaller car, then fuel prices will decrease. But these dolts need to look at Europe. All of their "small" cars haven’t given them cheap gasoline!!!!!!!!!!

The conservationist movement is based largely on economic ignorance and some obtuse sense of moral superiority.

The people who recycle and drive hybrid cars think that they care more about the Earth than SUV drivers and their wasteful brethren. In other words, their environmental agenda is actually peripheral to or more accurately derivative of their egocentricity. It partially explains why there are so many contradictions and logical gaps within environmental propaganda. After all, there are laws of nature and economics but there are no such rules for self-appraisal.

Therein lies the misguided notion that individual people can affect global energy prices. Bill O’Reilly speciously argues that since we (America) represent 25% of oil demand, the largest for any country, that we could stop buying gas on Sunday and both teach the oil companies a lesson and lower the price of oil.

Bill, the rest of the world consumes 75% of oil so "we" don’t determine the price. Enough of this arrogant and misguided self-absorption.

I have covered this before but will reiterate. Red flags should rise whenever you hear a pundit, academic, or politician try to parse the demand component of something’s price, especially something as multivariate as energy prices.

Demand parsing is usually impossible because of imperfect information and the inability to compute price elasticities and whatnot.

Bill really has that wicked combo going on - economic illiteracy and intellectual arrogance.

Given all of the above, I hate to call Bill O’Reilly a capitalist, but at least as a commentator he has successfully maximized his audience. He toes a line, fashionably taking shots at “both sides” and has cemented himself as a modern day populist.

His crusades on Jessica’s Law (stiff penalties for child molesters) and “high” gas prices are designed to appeal to as many people as possible. For those of you that are unaware, his show is easily the most watched show on cable.

The problem with populism is that it binds one to present day sentiments. If O’Reilly gave me his show for tonight I might say:

"First of all, gasoline is still not that high. Second, oil companies are not ripping anyone off. Third, all you greenies can buy hybrids and curse SUVs….but none of this will lower the price of oil. And lastly, all of you old people out there are responsible for today’s energy prices. That’s right y’all elected economically illiterate Congressmen for decades and never demanded that they address the energy needs of the country. You old people in the northeast will especially deserve your $10,000 heating bills this winter."

…..but if I did, my career as a populist would be short.

Populism often puts Bill in a tight spot and when it does, he consistently opts for likeability over accuracy. I guess it is better than the New York Times which eschews both.

Make no mistake, O’Reilly is a force these days and the other networks and shows are subtly trying to ape his rapid-fire and confrontational show. For example, CNBC has tried to get Congressmen to go on air and “defend your pork”. Of course not many pols have taken the bait because CNBC is quite ignorable. But one Ohio Congressman came on and defended a $3 million per year subsidy for a Packard car museum in his district. His argument was simply that many rich people will patronize the museum and help the local economy and that his constituents pay “gas taxes” so why shouldn’t they get some back. I was yelling at the television:

“those gas taxes are for the roads…….and if there are plenty of rich people interested in Packards….then surely they could privately fund the mere $3 million subsidy...”

But all five CNBC anchors were speechless and impotent to mount even the obvious counterarguments. They tried to be confrontational but clearly lack the required skill set.

Hey O’Reilly, remember Al Smith's prescient warning to Robert Moses:

that populism is but a “slender reed to lean on....”

(Moses was the populist exemplar while he crusaded for parks in New York, but has suffered quite the ignominy ever since. The tome on Moses is a must read.)

Monday, October 03, 2005

Tax Cuts for the Rich, Global Warming on Mars, Etc

The Gini coefficient measures wealth inequality in a given society. In this country, it has been rising steadily for 30 years – implying a widening gap between the richest and poorest. Propagandists love to pounce on this stat to show how “unfair” capitalism is, yet countries with narrower gaps (lower Gini coefficients) suffer higher unemployment, lower growth, and lower standards of living. Socialists just can’t comprehend the fact that the existence of very rich people is a good thing for the rest of society.

About the recent “tax cuts for the rich” - the Gini coefficient for America rose the most during the Clinton years. To reiterate, that means the wealth gap widened the most. (if that link requires registration, try "forbesdontbug" for both username and password or go to BugMeNot for another.)

I have mentioned the global warming whackos many times on this site but I have a new angle of attack.

It turns out, there has been “global warming” on Mars the past three years. It must be from all of the Martian SUVs. No?

“Global warming” is one of the many nutjob theories that I can debunk even by assuming many of the nutjob premises.

For instance, these “scientists” concur that the earth has warmed to the tune of one degree over the last several decades. For the sake of argument, I won’t contest that. But even conceding that, how can anyone tell if that is statistically significant?

This reminds me of some old guy who I knew that bought stock in USWest, a Midwestern phone company. He kept touting the “millions of customers” that USWest had. I forget the exact number but I asked him what that meant? How significant was “millions”? How many “millions” of customers did its competitors have? What about it balance sheet and profitablility? Etc.

None of this mattered - he was dazzled by “millions” and quite self-satisfied with his trivial nugget of research.

The same holds true for the “one degree” alarmists. No one knows if this one degree is statistically significant and they certainly don’t know what caused it. The earth is 4.5 billion years old and they have a 50 year sample set. Every time the nutjobs cite “melting polar ice caps”, I can cite last year’s record cold winter in the Northeast, “global warming” on Mars, etc.

Remember, much of environmentalism is a ruse to give government more power (...or money. In NYC, the recycling police roams around on trash day looking for an aluminum can in your trash bag and gladly slaps you, or your landlord, with a $100 ticket. It is quite the revenue raiser.)

In case you haven’t heard, there are new license plate scanners employed by local police in many parts of the country. Set up on major roads or highways this new technology can automatically read and research the license plates of passing cars.

An automatic license-plate reader that can scan 500 license plates an hour looking for stolen vehicles underwent its first field tests by the Los Angeles County Sheriff's Department last week.

Using character-recognition technology developed for the Italian Post Office to read postal addresses, four robot eyes in the course of one night queried more than 12,000 license plates, recovered seven stolen cars and resulted in three arrests.

Of course civil libertarians are leery and want the cops to erase all of this collected info and whatnot.

Another thing, the proponents of this technology naively think that it will be immune to cries of racism and profiling that human eyes are prone to. If they think Jesse Jackson and his ilk won’t still cry racism…...they are more than a little bit stupid. The race hustlers think that hurricanes can be racist!!!!

Another word on profiling. I consider myself an excellent profiler. For instance, when I have rented cars, sometimes I could clearly discern what type of person had that particular car before me just by noting the angle of the driver’s seat and/or the radio station the dial was set to.

Also, when I first moved to Boston two months ago I walked by a guy on my block who looked Arabic. He had darker skin and was very unfriendly (although that is prevalent up here). All I had was a hunch about his ethnicity. But another day I walked by and saw this:

…and my hunch was basically confirmed.

What is that pic? It is of a satellite dish pointing the “wrong” way. DirectTV dishes point southwest and the DISH Network’s point southeast. Most people have DirectTV but if you want to watch Al-Jazeera you need DISH Network. I learned this living amongst the 100,000 Arabs in Brooklyn.