Stock Buybacks A Piece Of "Financial Engineering Game"

In today's market far too much has become based on financial engineering rather than making money. Prior to the Great Depression share buybacks and margin lending was a huge factor in lifting stocks to an unsustainable level. We must remember this today because for years we have seen a slew of stories and articles about how companies buying back their own stock are driving the market higher. I would be amiss not to comment on this and point out the impact and importance of stock buybacks and how they add to both low volatility and at the same time support "crazy high" valuations.

 

For decades stock buybacks were illegal because they were considered to be a form of stock market manipulation. They were legalized in 1982 by the SEC and since then have become a tool for companies and management to boost share prices. Buybacks have been described as "smoke and mirrors," because when a company buys back shares of their own stock they reduce the "share float" and increase earning per share.

Stock Buybacks Just Keep Coming

Buybacks should be viewed as a double-edged sword with great power in that they reduce the number of shares over which earnings are divided at the same time they add to market demand. Buybacks can give the impression the companies earnings are increasing while in reality, overall earnings may be flat or even on the decline. The deregulation of buybacks years ago has returned to haunt us because it tends to create a dangerous illusion that draws less sophisticated investors into a market that is not nearly as strong as it appears. 

 

Orders to buy back stock are insensitive to price and are set to purchase on any weakness. It is important to remember that much of the buyback craze taking place prior to Trump’s tax changes was financed from debt raised by selling corporate bonds. This trend has continued with interest rates at historic lows and the Fed's massive injections of money due to Covid-19. The problem with this is many leveraged companies will not have the money to keep their stock flying if markets fall and stocks get hammered. This situation will be exacerbated when interest rates begin to rise.

 

Buybacks are why we have been hearing so many analysts touting the line that stocks are not overvalued and how earnings are growing. What they are referring to is earnings per share, and how having fewer shares in play creates the illusion that the company is doing better and earning more money. This is where I remind you it is major investors that sit on the board or hold executive positions and the same CEOs and other top managers who have received much of their compensation over the years in stock options. Yes, these are often the shareholders in the company that have reaped the largest benefits of QE over the years and added to inequality.

 

During the Trump era the tax law which lowered corporate taxes also encouraged repatriation of cash that has been stored overseas, this also fed fuel into the share buyback frenzy. We should not forget that buybacks are a tool corporate boards and CEOs use to manipulate the prices of their own shares higher. In effect, insiders can use stock buybacks to create a well-constructed exit strategy allowing them to get out of or hedge their positions before reality sets in and prices fall back to earth.  

Stock Buybacks - Financial Engineering 

Higher debt ratios relative to the underlying value of a corporation can put the firm at greater risk of defaulting on its debt obligations. This means lenders demand higher interest rates. In the game of financial engineering, corporations calculate their optimal level of debt leverage based on that trade-off between the tax benefit of debt and higher costs of more debt. the problem with this is that business was never intended to be based on financial engineering but rather on making money.

 

Instead what we have seen and continue to see is that companies are plowing money into stock buybacks. All this reinforces what I and many others thought regarding the strong tilt of Trump's tax bill towards rewarding America's wealthy. The bill was not about real reform and has only added to the trend of growing inequality. Trump's tax reform may have boosted earnings per share growth by more than twice what U.S. economic growth would have but, has generated little in the way of real or new economic growth.

A combination of factors has led to companies issuing bonds and borrowing money. Whether there is a U.S. corporate bubble is an issue that has been explored for years. Many economic watchers seem to think it exists and the reason it never seems to collapse is because rates have continued to move lower at the same time credit expansion has grown. While credit bulls contend that the U.S. corporate credit remains an attractive place to invest, digging into U.S. corporate credit figures, a different, more concerning picture appears. Credit fundamentals, particularly in U.S. speculative-grade are in a questionable state as lower quality firms have been structurally increasing debt faster than earnings as interest rates fell.

Recently, a Global Macro strategy research note from UBS looked at the thesis that there is a bubble in speculative-grade credit. This hypothesis originates from the fact that easy money policies from central banks have kept 'zombie' firms afloat and QE programs have triggered substantial inflows into credit funds, igniting a material reach for yield since 2012. This has translated into eased credit standards and encouraged the massive issuance that has taken place. Only by accumulating debt have many laggards been able to afford the buybacks necessary to keep stock appreciation stable. 

UBS's analysts go on to speculate that as much as $1 trillion of corporate credit could end up as 'distressed debt' during the next credit cycle. Way back in 2015, just 30 firms accounted for half the profits of all publicly-listed U.S. companies, down from 109 in 1979. The IMF has warned that corporations are at risk of default if interest rates rise. History has provided countless examples of inopportune, if not reckless buybacks when the short-term benefits of buybacks are placed before managing debt. 

Ironically, or as expected like deer caught in the headlights corporations tend to retreat from buybacks at times of market uncertainty. The only year in recent history that big U.S. companies spent less on buybacks than dividends was 2009. Share buybacks proliferate when the market is rising but evaporate when the market collapses. In many ways, the decision way back in 1982 to again allow stock buybacks may highlight the true meaning of the phrase. "Been there, done that, learned nothing."

 

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

America's Political System Leaves Libertarians Homeless

Sadly, in America's two-party political system Libertarians are left Homeless. The libertarian philosophy or ideology has many facets. Running through all of them is the idea that less government is generally a good thing. This reminds me of what President Ronald Reagan, famously said: The nine most terrifying words in the English language are "I'm from the government, and I'm here to help." Such words resonate with most libertarians.

While the government may claim it has good intentions history shows it often finds a way to muck things up. This is due to the fact that "government" is comprised of both corrupt and fallible human beings. This is a toxic combination that tends to create policies that screw things up. This takes a variety of shapes, including costly or unintended consequences.

While some people write a blog for financial gain, others of us do so seeking as wide a base of readership as possible in order to have our opinions heard and share ideas. It is fair to say that on occasion some readers, with opposing opinions refuse to agree to disagree. Below is a comment from one of those fellas taking issue with my claim libertarian views do not align with those of the right, part of what he is saying reflects the confusion surrounding libertarian philosophy.       

Libertarian, or far-right, what's the difference? So many times in the past, I've read blogs and websites from the far-right, in which they love to cloak themselves in the term of "libertarian," but the rest of the Rational world understands your dog-whistle politics and misanthropic social ideals. Do your criticisms flow both ways? Where's your hard-and-fast criticism of the political ideologues on the far right?

In truth, the views of those claiming to be libertarians often conflict with those of other libertarians and even the Libertarian Party. We tend to be an odd lot and that is why the Libertarian Party may be doomed to failure. It seems the elephant in the room is the question of exactly where one person's rights start and where another begins. A libertarian is committed to the principle that freedom and liberty are the most important political values. This means we should be able to make our own choices about our own life, what we do with our body and our property. In short, other people should not forcibly interfere with our liberty, and we should not forcibly interfere with theirs.  

Over the years, you would think the failure of big government to address our problems and woes would have convinced more voters expanding the role of government is not the answer. The cost of big government and the reality Washington seldom accomplishes its goals is beginning to nibble at the theory more government is good for society. While Government may be better at giving people access to services and good at passing popular laws, the private sector is by far more efficient and better at controlling costs.

 

Over the last two centuries the United States government has been steadily moving away from Adam Smith’s idea of limited government and towards the view of Abraham Lincoln that government should do for the people, whatever needed to be done. The Democratic Party has long been thought of as the party of "big government." Filled with believers that more government can make things right they claim they care about the "little guy," women, workers, minorities. They are big supporters of unions, more rules, and more regulations.  

We, libertarians,  looking for a port in any storm often find ourselves in the Republican camp but it is a poor fit. In politics many of the positions people take reek of conflict. The pursuit of an agenda or political advantage often results in people working together who would not otherwise normally socialize with one another, politics makes strange bedfellows. An example of this is how President Obama had the support of business-minded Republicans when pursuing trade deals while his party fought the idea. 

Another example of this is how the mainstay Republican party stabbed Trump in the back on several occasions. Clearly, it was Libertarians and Populists that allowed Trump to get elected. In a piece authored by Tho Bishop via The Mises Institute, he writes, "Since 2016, the role of libertarians in political discourse has tended to devolve away from a relevant political demographic into a weird scapegoat for the Left and Right." Bishop goes on to point out what I contend is a major problem, and that is, while the libertarian electorate may not be valued, it is a very important demographic. This is because during Presidential elections those voting for a Libertarian Presidential candidate can flip enough delegates to give one party an undeserved victory in the electoral college.

Libertarians are often misunderstood, they believe people are basically good and are endowed by their Creator with natural rights, including the rights of life, liberty, and property. In the United States, libertarians often embrace a political philosophy that advocates small government and is culturally liberal and fiscally conservative. This is far different from what is offered up in America's two-dimensional political spectrum mainly made up of conservatives with rigid right-wing social values and liberals that embrace big government and the spending that supports it.

The Trend From 20% To 35% Is Clear And Continues

Big government is not just an American problem and tends to be even worse in countries established long ago. It seems corruption and government both tend to grow in unison over time. The reality of ever-larger government has manifest itself in more scandals as departments overreach their missions. This can be seen in the military, the IRS, NSA, and huge incomprehensible bills being passed by Congress while our government often fails to accomplish the tasks it is given.

Like the Populist, until the system changes, libertarians should expect to remain a small swing group looking for a home. As for the idea of reforming or improving our election system, that is very unlikely to happen as neither major party wants to introduce a change that might benefit the other. The entrenched interest of the elites within the system block change. The small hope for change can be found in shifting demographics that are rapidly shrinking the Republican Party. If they do not adopt a more populist message and a big tent policy they will continue to lose power. This could have a very negative impact on America going forward. 

The polarization we see today may be mild compared to what we see in ten years if a large segment of the population feels its voice is silenced. If the checks and balances in our system fail, expect anger to grow as more Americans begin to feel even more left out in the cold. The saying "be careful what you wish for" may again be proven true as those wanting more government intervention experience the limits of government and bureaucracy while burdened by the financial cost it imposes. We must remember that government is often not constrained by the power of the purse to strive for efficiency, where a business fails when it does not meet its goals of providing a good service or product at a reasonable cost government muddles on.

The open-ended theme of larger Government is generally a mechanism to in some way transfer wealth. Mandates often unfunded are fostered upon business organizations and private citizens.  A new proactive movement of “cuteness” cloaked in a veil of flexibility and diversity has allowed politicians and bureaucrats to use terms like "Private Public Partnership" and "quasi-government entities" that mask just how deep its roots have grown. These terms open a pathway for politicians to tinker without the personal financial risk that a businessman must take. Those within government love being creative especially when they do so on our dime. The use of sun-set legislation is underused when it comes to extending and renewing government bodies. We tend to forget that the best time to kill a monster is while it's small.

It is the nature of bureaucracy to expand. It often takes courage to make difficult and unpopular political and economic decisions that will cause pain but benefit society in the long run. A political system that encourages sidestepping these issues to pander to the masses in exchange for remaining in power pays a tremendous price that can stay hidden for only so long. This is a trap America has slipped into, getting out of this will prove quite difficult. I seriously question whether we have the fortitude to take the necessary steps required.


Footnote; This post dovetails with many of my writings. Some of my solutions may come across as provocative but are food for thought. For more on government's role in our lives, related articles may be found in my blog archive, thanks for reading.

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

The Next Economic Crisis - Will Your Wealth Survive?

The greatest wealth transfer in history has already begun and the next crisis will only accelerate the process. As the printing presses continue cranking out more and more money, looking forward to a time when the markets pause or another economic crisis consumes the world is an issue we all should think about. How much wealth will escape the next large financial reset is very important because it will set the bar that determines the rate of inflation or deflation in coming years. If you believe we did not solve many of our financial problems after 2008 but merely masked them with a huge amount of newly printed money you are likely to embrace this concept.

The Shell Game Of Wealth Transfer

Much like a shell game where wealth is transferred about, in our modern society wealth is always on the move. Wealth and how things are valued is far from constant, it is fungible and constantly changing. While we may try to deny it, wealth is in a constant state of flux and constantly moving. Wealth comes in many forms, it can be held in the form of paper, promises, or as something more tangible and real such as property or goods. 

 

Some items such as a tool hold "utility value" and its value may be based on how much work it can perform or the revenue it can produce. Replacement cost, supply and demand, and factors such as whether something can spoil or might grow obsolete over time also help determine its value as a place wealth can be safely stored. The term, safely stored in this case also includes placing it out of the reach of governments' ability to tax it or make it illegal to own.

 

Defining wealth is one thing but it is important to actually delve into its nature to truly understand just how elusive it can be. Wealth is defined as the abundance of valuable resources or valuable material possessions. An individual, community, region, or country that possesses an abundance of such possessions or resources to the benefit of the common good is known as wealthy. This means it might be preferable to live as a poor person in a very rich and wealthy society versus a rich person in a poor and wretched place. This notion underlines the idea wealth is also relevant and measured by how it compares to that of others.

Don't Be Naive, They Do Not Care

Returning to the subject of various kinds of wealth, today Bitcoin and other crypto-currencies and other "digital assets" designed to work as a medium of exchange also fall into the category of wealth. They have joined pensions, annuities, and even investments in stocks and such as a store of wealth. Many assets fall into the area of paper promises that are often recorded somewhere far from sight or as a digital entry on a computer. These intangible stores of wealth based on faith have grown at a massive rate during the last several decades and were relatively minor players until recently. Currencies, also known as fiat money, are also just IOUs or paper promises. The idea of a currency free-society in my mind tends to break the bonds that link us to wealth but that is for another post.

In the past I have written several pieces about subjects such as, writing off the rising amount of bad debt, how debt is like a mirage moving into the distance, how bad debt is resolved, and how precarious the vessels where we store our wealth can be, however, the crux of this article centers around what will or might be left after stress or war pushes the global economy to the brink or into total collapse. A great deal will depend on how such an event unfolds, this means what kind or type of value and wealth is the first to vanish.

Be Skeptical, Be Cautious, Get Smart!

I will be the first to admit the answer is unknown, still in this "exercise of the mind," I am asking you to consider and think about such a scenario. The ugly truth is that there are many places your wealth could vanish into and multitudes of ways it could seep away. Remember, wealth zips across borders at the click of a button and just because you deposit it with a local institution does not mean it stays in your community. 

 

We witnessed how wealth could be "transferred away" decades ago during the savings and loan crisis when huge beautiful buildings were constructed in certain areas from wealth transferred in from other parts of the country. Needless to say when the dust settled the big winners were the areas with the new buildings and not those forced to pay for them when the loans used to build them went into default.

Today some market watchers claim that the stock market is being held at lofty levels while the smart money is rushing to the exits. Today tens of trillions of dollars are sitting in offshore banking accounts in places such as the Cayman Islands. Today government and businesses are borrowing hundreds of billions of dollars each year by issuing bonds some that will not return investor's money for decades. Today homes, apartments, and buildings are being built, some poorly constructed, with loans guaranteed more or less by the American people. Today America's national debt stands at over 28 trillion dollars and is rising. Today currencies such as the euro and yen are even more fundamentally flawed than the dollar. I could do this a bit longer but I suspect I've made the point.

 

We have all heard about how the Caymans have become a popular tax haven among the American elite and large multinational corporations. This is because there is no corporate or income tax on money earned outside of its territory. This has made the Caymans especially popular among hedge fund managers. I hate to blow a hole in the idea that you can safely tuck their money away in an offshore banking account, the reality is, we have no idea where all the money deposited in the Cayman Islands really is. Banks do not just sit on deposits and keep them safe, they loan them out.

 

We must never forget the world is full of crooks, evil politicians, greedy bankers, and that we have judicial systems that make true justice a rare commodity. Returning to the focus of this article, the thing that is important is what or how much wealth survives an economic crisis and in what form. That is because when that wealth comes out of hibernation it will soak up all the tangible assets on the planet. This will be the determining factor of whether we face inflation, deflation, or some crazy mix of the two. Remember it is the nature of those in charge to throw the masses under the bus when things go sideways. 

 

The average person is foolish and silly if they expect to be protected when the next financial crisis hits. Those counting on a stimulus check for survival will someday most likely find it will not buy them diddly-squat. The shelves will be empty or the value of what they receive will simply not be enough. The economic landscape we face following such an event will without a doubt be shaped and depend on what wealth survives and how much vanishes following a tsunami of defaults and /or a monetization of debt where government debt disappears and inflation takes its place. A word to the wise should be sufficient and cause any person prudent or interested in protecting their wealth to consider the many ways wealth can vanish and that it can without a doubt happen to you.

 

 

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Stimulus And Covid-19 Attitudes Reflect Poor Math Skills

For all the noise made over Covid-19, many people might be surprised to find out that it was not the leading cause of death in the U.S. in 2020. It came in third, behind heart disease and cancer, according to a new CDC study. COVID-19 was listed as the underlying cause of 345,323 deaths during 2020 and was the third leading underlying cause of death, after heart disease (690,882 deaths) and cancer (598,932) That is reality in a nutshell.

So Much For The Idea We Are All Going to Die From Covid

This data kinda puts into focus how warped we have become by the fear-mongering fostered upon us. it is difficult to argue with this data. It was lifted from the Provisional Mortality Data — United States, 2020 | MMWR report. 

Total deaths in America in 2020, according to the U.S. Centers for Disease Control and Prevention (CDC) came in at 2,913,144. Considering that there were 2,845,793 deaths in 2019 and 2,831,836 deaths in 2018, this is not surprising. If you ballpark America's population at 333 million, 1% of that number is 3.3 million people. While many people find it distressing, the fact is people die. Also, this curse tends to descend upon people that are older. One of my favorite lines comes from a great old gal I knew, when she was 98, she informed me she no longer bought green bananas. 

Leave it up to the media to spinning the increase in deaths as proof Covid has devastated our country, such an article appeared on ABC near the end of December. The article hyping the number was titled: "US deaths in 2020 top 3 million, by far most ever counted." (https://abcnews.go.com/Health/wireStory/us-deaths-2020-top-million-counted-74855303) It went on to say, 2020 will go down as the deadliest year in U.S. history, with deaths topping 3 million for the first time.

Stimulus and Covid-19 attitudes reflect declining math skills. The fact the light simply doesn't come on in the minds of the majority of people as to how far off course we have traveled is astounding. Much of this could be attributed to the dumbing down of America. Some people consider this a planned effort by the government and those in charge of our general well-being to make the masses more malleable.

The idea of "dumbing down," is the deliberate oversimplification of intellectual content in education, literature, and cinema, news, video games, and culture. Originated in 1933, the term "dumbing down" was movie-business slang, used by screenplay writers, the idea was to revising things to appeal to those of little education or intelligence". Dumbing-down varies according to the subject matter, but almost always results in the diminishment of critical thought. 

Stupid Much? Yes, It's Kinda Like This!

It could be argued that modern culture has gone off the rails. This is reflected in programs developed to entertain us. One example is the Beavis and Butt-Head Animated MTV series. It is about two teenage heavy-metal music fans who occasionally do idiotic things because they're bored. The problem we face is that it is not just children that while away the hours watching this garbage but bone idle adults also waste a great deal of their time engaged in the same activity rather than looking for more productive things to do. 

Circling back to the crux of this article, we should be viewing Covid-19 and the size of the stimulus packages through mathematics rather than a prism of emotion. When it comes to the pandemic the general dumbing down of America the nation's poor math skills comes front and center. Again, setting America's population at 333 million, 1% of that number is 3.3 million people. It should not come as shocking news that roughly one percent of the population dies each year from old age or disease. As for the cost of this poorly handled pandemic that has led to the devastation of America and caused the national debt to go explode, that is a whole other story. 

Using the same population figure as above, every billion dollars spent by the government represents an outlay of $3 for every man, woman, and child in America. This means each trillion dollars spent is equal to $3,000. To keep things simple let's just go with the six trillion figure, $3,000 times six show a huge $18,000 of new "stimulus" or debt has been created for each of us over the last year. Round this number up by two dollars and multiply it to represent a family of three and we are looking at a mind-blowing $54,000 per family. This is why incomes have risen to an all-time high while tens of millions of workers have sat at home during the lock-downs.  

While many of us argue that COVID-19 should not be called a major public health threat anymore and see it as having reached endemic status (like the seasonal flu), the fearmongers with an agenda continue to warn us of future death and chaos. The big threat now being a new variant of SARS-CoV-2 that is, allegedly, now “causing huge problems” in Europe. In a mid-March 2021 while appearing on MSNBC News, National Institutes of Health director Dr. Francis Collins expressed dismay at something that was beginning to happen across America by pointing at Florida, he said: 

“Oh my God, Florida, stay out of the bars with your masks off! What are you doing? This is exactly      the wrong thing to be doing unless you want to end up where Europe is.”

During the last year, we have lived in a world we could hardly have imagined when all this started. As expected, new variants of this virus are emerging and there will be many new strains in the future. In the same way, the seasonal flu changes and evolves from year to year history indicates as viruses mutate within a population over time, they tend to become more benign. Still, we could ask, why we let things unfold as they have or how this happened? Sadly, most of us know the answer.

While many so-called experts say follow the science, I say, follow the math. Using math as a tool we can shed some logic upon the rather chaotic situation we find ourselves in. It appears much of the world has been blinded by those seeking to implement a "Great Reset" of the global economy, our social structure, and our culture. Entering into this is the squelching of free speech and censorship. All this has gone full tilt and we are under a full-court press to halt any comeback on the part of rational human beings to exert real influence on our future.  

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

America's New Transportation Secretary Is A Turd

While it escaped the notice of many Americans, our new Transportation Secretary was recently caught on video pulling one of those stunts that prove politicians untrustworthy. Riding in an armored Suburban to an area close to his destination, a bike was then unloaded from the rear of the SUV by security staffers and mounted by Pete Buttigieg who continued on his way with the gas-guzzling SUV following behind. 

Arriving at a meeting on a bicycle to give the impression you rode there because you care about the environment is not the same as accurately caring. This is the kind of disingenuous act that would have been vilified by mainstream media in the past but hardly registered a blip on the radar. One commenter on Twitter whose posting of the video quickly attracted more than a million views characterized this as "Pete Buttigieg's dog and pony show."

What Do Voters Need To Know ?

Pretending to save energy in the way he did should make all of us ponder why someone given the responsibility to guide future transportation policy merits our trust. Remember these policies geared at benefiting the environment are controversial and will come at great cost to taxpayers. Over the next few years, the Transportation Secretary will have great sway and influence over how several hundreds of billions of dollars are spent. This is a huge amount of money and how it is spent is critical to the countries future.  

Ironically the book authored by Buttigieg is titled; "TRUST: Americas Best Chance." The book by the 39-year- old Mayor was published on October 6, 2020. This underlines the hypocrisy and importance of knowing that America's new Transportation Secretary is a lying turd. The definition of turd is, a piece of fecal matter and to be labeled such is should be considered very offensive. In this case, being offensive is my intention. It confirms those of us that did not flock to support him during the Presidential primaries while the media was painting him as a fresh new face in the Democratic party were correct in our decision. 

Consider this karma, If good deeds contribute to good karma and happier rebirth while bad intent and bad deeds contribute to bad karma and bad rebirths as some people believe, I would not want to be that guy. I'm only showering him with the admonishment he deserves. The slamming and mocking of Buttigieg for what has been called his "phony Cabinet meeting bike stunt" is not enough. This is because he has been placed in a major position of power and with that should come some accountability. This position which includes overseeing more than 55,000 employees and pays a salary of $221,400 plus a lot of perks is no small thing.

Unbridled Ambition Is A Dangerous Thing

Buttigieg's pathetic propaganda effort merits our attention because it is a clear signal that what he says means may share little in common. On top of all this, we should remember his prior job experience and question just how qualified he is for the position he now holds. Like many political appointees is a bit light when it comes to job experience.  Unfortunately, the youthful qualities of being articulate and charming when combined with unbridled ambition is a dangerous and explosive combination.

But what of his background? It appears he finished college in 2007 at 25 and went on to run unsuccessfully as the Democratic nominee for Indiana state treasure in 2010. He then became Mayor of South Bend, Indiana from 2012-2020, part of that time he spent campaigning for the job of President. He also took a seven-month leave in 2014 during his mayoral term to deploy to Afghanistan. There, Buttigieg was part of a unit assigned to identify and disrupt terrorist finance networks. Part of his work included being an armed driver for his commander. 

Has He Been Projecting An Illusion?

From what my research revealed, Buttigieg's background is loaded with ambition and he leaps from opportunity to opportunity making the most of each by attaching himself to the "shiny parts" that give the impression he is totally dedicated and immersed in everything. Still, little of his short career screams or indicates he knows much about transportation or overseeing a huge operation like the United States Department of Transportation. In this role, he is part of Biden's Cabinet and serves as the principal advisor to the president of the United States on all matters relating to transportation. 

To put into context how a person at this level can affect policy, just the other day, Buttigieg told reporter April Ryan in an interview discussing President Joe Biden’s proposed $2 trillion plus infrastructure plan. He said, “There is racism physically built into some of our highways, and that’s why the jobs plan has specifically committed to reconnect some of the communities that were divided by these dollars,” the former South Bend, Indiana, mayor Buttigieg explained that several major highways in the United States negatively affect minority communities. 

His Kind Tend To Stay Around For Decades

If and when you get the time you can do a search on the incident that inspired this article knowing that before this stunt I had paid little attention to this clown that will most likely be around for decades to come. My point is Americans should remember that many of the policies activists claim are geared at benefiting the environment are controversial and will come at great cost to the taxpayer. 

Anyone who is talking about "Green Policies" that pulls the kind of hypercritical stunt our so-called Transportation Secretary just pulled should be asked to resign. For anyone silly enough to have bought a copy of his book, a refund is in order.

 

 
(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Thoughts On The Latest Jobs Report And Productivity

The Jobs report published last Friday blew through expectations with payrolls booming. Indications are that 916,000 jobs were added in March. Non-farm payrolls show America has now added back nearly 14 million workers into the workforce. This constitutes about 62 percent, of the 22 million jobs lost in the spring of 2020 when COVID-19 and lock-downs shuttered businesses across the country. This has dropped the unemployment rate back to 6%. The goal of this article is to get people to think about productivity and how it relates to unemployment.

It Is Important Workers Be Productive

As noted so often the official unemployment rate of 6.0% is somewhat misleading. It does not count the people who want a job but gave up or all the people with part-time jobs that want a full-time job. It also ignores all the people who dropped off the rolls because their unemployment benefits ran out. To get a clearer picture of the unemployment rate many people look at what is known as the U-6 number which stands at 10.7%. Both numbers would be much higher if not for the millions of workers that have simply dropped out of the labor force for a slew of different reasons.

It will be interesting to see how many of  the remaining 8.4 million jobs lost come back considering many small businesses have closed forever. Obviously, last month’s $1.9 trillion stimulus bill and its potential to create demand has made many employers enthusiastic about better times ahead. While the stock market and other assets have soared with the constant infusion of stimulus from the Fed and Washington, the economy of Main Street has not fared as well.  

Since small businesses employ over 54 million people in America and their importance in the economy should not be underestimated.

• Small businesses contribute 44 percent of all sales in the country.
• Small businesses employ 54.4 million people, about 57.3percent of the private workforce.

In April of 2020, I pointed out in an article that small businesses employ well over half of the nation's private workforce. As predicted, government employees and bureaucrats were taken care of, they continued to get paid but small business, the most productive part of the economy has had a knife to its throat. As a landlord and small business owner, I can tell you the programs structured in Washington to help small businesses was a big fail and what they allowed to happen after that almost criminal. Washington has become so attuned to dealing with lobbyists from mega-companies it has lost sight of the fact small is small, and when this comes to business, this means usually under twenty employees, not hundreds. 

Productivity Is Important

Now that the latest job report is out, here are a few thoughts on productivity, the workforce, and the economy. Covid-19 and the way it has been handled has taken a far greater toll on productivity than these numbers imply. It is difficult to think people donning a mask and busy washing their hands are anywhere as productive as those focused on work. Only a return to more normal practices can neutralize the damage to productivity government mandates have caused. 

The introduction of practices used to halt the spread of the virus including limiting contact during the transfer of goods and services has made it harder to efficiently go through the day. Government offices being closed, schools going to online teaching, increasing the space between tables in restaurants, and more, do little to add to efficiency. I contend, much of what statistically appeared as growth in productivity was merely a number generated by those reporting far fewer employees in the private sector still kicking out about the same number of sales as stimulus money buoyed the economy.

Workers Waste A Great Deal Of Time

While government is seldom efficient and has little incentive to be so, productivity is a factor all businesses strive to keep high. Also playing into the productivity picture is that going into the pandemic, due to the low employment rate, many companies were forced to carry extra employees on their staff never knowing when one leaving would create a huge hole in their company. A great deal is hidden within the employment statistics. Some of the biggest factors feeding into the job situation are the huge number of people leaving the workforce, the type of jobs that are now coming back, and even how jobs are counted. Believe it or not, if you don’t have a job and fail to look for one, you are not considered unemployed, but instead, you are considered to have dropped out of the labor force.

Many of the jobs now coming back are low-paying service jobs, this includes those in leisure and hospitality. Another thing we should consider is that many of those jobs reported as "coming back" never really totally left but rather carried on in the shadows. Another way to say this is many people carried on part of their daily work on the side or in what might be described as the "underground economy." In this case, work was being performed but not accurately reported. This is another reason we should not get overly excited by the news of "base" jobs returning, it was expected and is coming at a great cost and is the result of trillions of dollars being pumped into the system.

All in all, it is difficult to believe that workers are now more productive considering supply chain disruptions and a slew of other roadblocks that have appeared to disrupt our day. Even things like spending more time looking for replacement parts or people working from home has taken a toll and affected our productivity. An example of this is evident when trying to communicate, in the past calls that were often answered now dead-end into voicemail and the recipient never gets back to the caller.   

The fact is productivity is a strange animal and the way we choose to measure it has a great deal to do with the findings. Overall, these numbers are still very "messy." To retain a proper perspective we must factor into the employment numbers that in the household survey if you work as little as one hour a week, you are considered employed. It could be after all the money the government has thrown at workers sitting at home during the pandemic many of these people have grown accustomed to a life of leisure. It would be naive to think all workers will be rushing to return to work willingly and with great enthusiasm. 

How this all flows into an economy floating on a sea of recently promised money that has spiked consumer confidence and spending has yet to be determined. This money is expected to last at least through the summer. With workers wanting big increases in wages, expect to see prices being raised. How much small businesses and productivity will benefit from this spending is still in question. The bar has been moved, this is a far different kind of economy than we have witnessed in the past.  

 

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Mutual Assured Destruction Leaves No Winners

Like many people, I do not find what is known as the concept of Mutual Assured Destruction, or MAD to be reassuring. Today, those most fearful seem to be those people that lived through the tumultuous 1960s and the cold war, to others this may come across as "business as usual." What the world would look like following a nuclear war is very murky, yet today it seems many people consider nuclear weapons as just another tool or option for us to use in our defense if we are attacked. The nuclear deterrent we currently hold is a hundred times larger than needed to stop anyone sane or rational from attacking America, and for anyone else, an arsenal of any size will be insufficient. This is written to help put the issue of nuclear weapons in perspective.

Mutual Assured Destruction Leaves No Winners

As a bit of a history buff, I found myself in deep discussion with a curious young lad of nine. While explaining to him how the airplane developed which included a rather important timetable, I noted that its development was pushed forward because planes could be used as a weapon in wartime. To my surprise, I found he expanded the conversation to include the nuclear bomb and this young lad had a general acceptance of its use. This could indicate people are losing some of the massive fear they had for the use of nuclear weapons. Fear was the "firewall" that kept these weapons from ever being used for many of us growing up during the cold war.                    

While we can only speculate as to what the world would look like following a nuclear war, it is disturbing to think using these weapons is acceptable. More troubling is that some people even view and justify using these weapons as a first strike option. The unintended consequences of bringing nuclear weapons into the world as a usable form of warfare is a dangerous escalation that no sane person wants, but by tweaking and modifying weapons, we are on that path. This acceptance of the "nuclear option" opens a Pandora's box blurring and erasing what many people have in the past seen as taboo. There have been dozens of nuclear false alarms, yet the president has a mere 10 minutes to decide whether to launch an attack when an incoming strike is reported. Something most people are unaware of is just how close on various occasions we have come to annihilation and the end of life as we know it. Below is the description of such an incident;

[In 1995] President Boris Yeltsin was informed that a nuclear missile was speeding towards the heart of Russia. Russian nuclear forces, already on a hair-trigger alert, were put on even higher alert, ready to launch at his command.

The fate of the planet hung in the balance as hundreds of millions of people were going about their daily lives.
Russian policy called for a “launch on warning.” “Use them or lose them.”
Yeltsin wisely waited. And within those fateful moments, the Russians were able to declare a false alarm. An unimaginable nuclear disaster had barely been avoided.

— Innovation In Arms Control: De-Alerting, America’s Defense Monitor, Center for Defense Information, December 26, 1999

It is no secret that at the dawn of the nuclear age, the United States hoped to maintain a monopoly on this new weapon, but the secrets and the technology for making nuclear weapons soon spread. Four years after the United States conducted its first nuclear test explosion in July 1945 and dropped atomic bombs on the cities of Hiroshima and Nagasaki in August 1945, the Soviet Union conducted its first nuclear test explosion. The United Kingdom (1952), France (1960), and China (1964) followed. In an effort to prevent the nuclear weapon ranks from expanding further, the United States and other countries negotiated the nuclear Nonproliferation Treaty (NPT) in 1968 and the Comprehensive Nuclear Test Ban Treaty (CTBT) in 1996.

Since the inception of the NPT, several states have abandoned nuclear weapons programs, but others have defied the treaty. India, Israel, and Pakistan never signed the treaty and now possess nuclear arsenals. Iraq initiated a secret nuclear program under Saddam Hussein before the 1991 Persian Gulf War. North Korea announced its withdrawal from the NPT in January 2003 and has tested nuclear devices since that time. The countries of Iran and Libya have pursued secret nuclear activities in violation of the treaty’s terms. Today the use of nuclear power is fairly widespread, but only nine countries have nuclear weapons and only a few others are suspected of pursuing them.

A Trillion Dollar System To Maintain

The topic of these weapons quickly feeds into questions of where they play into the future of mankind and thoughts of the devastation they might wreak if they are ever used in a war. It is very likely that at some point in time the tiger will be unleashed and the potential of a dreadful result is very high. A large part of the nuclear weapons debate revolves around how many weapons are enough. Another is the costly investment needed to fund existing weapons and the upgrading of America's nuclear triad. The nuclear triad refers to the nuclear weapons delivery of America's strategic nuclear arsenal. It consists of three components, traditionally strategic bombers, intercontinental ballistic missiles (ICBMs), and submarine-launched ballistic missiles (SLBMs).

Ground Based Strategic Deterrent (GBSD) is part of the Pentagon’s mammoth plan to replace all three legs of the nuclear triad. In addition to the roughly $100 billion price tag on the new crop of ICBMs, the U.S. military wants to replace its B-52 and B-2 bombers with Northrop’s new B-21 Raider (estimated cost: $100 billion). It is retiring its Ohio-class “boomer” subs with a new Columbia-class fleet (estimated cost: $128 billion), both of which are outfitted with the Northrop-powered Trident missiles. The cost of buying and operating these weapons is estimated at an eye-watering $1.7 trillion between now and 2046, according to the independent Arms Control Association. 

Cato Institute!s Chris Preble wrote years ago the Pentagon should look elsewhere within the nuclear arsenal for the money it needs. Eliminating two legs of the nuclear triad is his suggestion. Doing away with intercontinental ballistic missiles, or ICBMs and nuclear bombers would save American taxpayers around $20 billion a year that could be put toward replacing the Ohio-class sub. He also claims the sea leg of the nuclear triad by itself is a more powerful deterrent than that possessed by nearly any other nation in the world. After the insane spending recently unleashed by Washington, this may not sound like a great deal of money, but it is.

We Are Ready To Launch

While Russia retains a relatively large arsenal, no other country is capable of deploying more than a few hundred nuclear warheads. A single Ohio-class submarine can carry up to 192, this is enough for one submarine to bring the earth to its knees. Ploughshares Fund, a group dedicated to eliminating the dangers posed by nuclear weapons reports, nine countries in the world possess a total of 13,125 nuclear weapons. The United States and Russia account for 91 percent of them. Since their peak in the mid-1980’s, global arsenals have shrunk by over three-fourths. More countries have given up weapons and programs in the past 30 years than have tried to acquire them. The direction is positive, but when you are fleeing a forest fire it is not just direction but speed that matters.

An important matter is far too many nuclear weapons are actively deployed on missiles, bombers, and submarines, ready to launch at a moment's notice. It is rather ironic to ponder how much we have spent to create and now maintain this massive force of devastating potential that we hang over the heads of others, a force that could kill them many times over but also render the planet unlivable for generations for everyone. Call me silly, but I would feel a lot more comfortable if a lot of the weapons were dismantled and destroyed. 

Many Americans have become desensitized to human misery because of modern society's rather impersonal way of viewing anguish and death on a screen. Couple this with the hundreds of millions of people across the world playing violent video games and watching explosion after explosion in movies and it is little wonder fear of mass devastation has lessened. As noted earlier in this piece with so many nuclear weapons technical failures can and do occur, also systems can be hacked, we are at constant risk and human error exacerbates the problem. William J. Perry, Former Secretary of Defense, said in November 2015, “Far from continuing the nuclear disarmament that has been underway for the last two decades, we are starting a new nuclear arms race.” The possibility of things going "nuclear" is a situation we live with every day and it merits far more of our attention than it is given.

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)