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Are We Financially Spoiled?

January 6th, 2012

I’ve talked about the how I’m not in favor of the “Occupy” Protesters, and lately I am starting to wonder if we are Financially Spoiled in the United States?

Rich Kid

Green with Envy, but Already Rich?

Why I think We Are Financially Spoiled:

First, let’s start with a poster that I recently saw associated with the Occupy Protests, it was titled, “Shut Down the Corporations“.  It showed a bunch of happy people in the poster riding a bike, one with a cane or golf club, another with a teddy bear, and finally a soccer player kicking over the block representation of corporations.  Such statements are incredible short sighted and really kind of naive.

What’s naive is that the bike, cane, teddy bear and the soccer apparel, that the people in the poster had or were wearing all are likely produced by corporations!  In fact, without corporations those representations of the people wouldn’t have most if any of that stuff!  You see, corporation make things (like bikes, teddy bears, and loans) that the average people can afford.  Without corporations mass producing things (yes even loans are made for mass consumption) only the rich and very rich would have those things.  What is also incredible naive is that the web host of the websites that display this or similar posters (or sign, pdf, etc) are corporations.  Again this reminds me of the person trying to get rid of a tree branch, but is sitting on the wrong side of the branch while they are sawing.  It’s much like protesting Starbucks or bottled water companies while drinking them out in the protester groups.  How’s that for irony?

As someone from below the “making over $100,000 a year” middle class, I know and understand the value of the services and products that corporations provide.  It’s too fairytale-like to believe that corporations are the bad guys when in reality, they are a huge part of what makes American great.  Don’t believe me?  Then why have former communist countries converted over to either a capitalist or a hybrid-capitalist (look at China) society?  What country has it better than us?  Certainly not Cuba or North Korea… Why do you think Russia and China changed their economic model?

I hate to say this, but I think the protesters are only looking one move ahead or looking at the trees instead of the forest.  I think if they mentally looked right and left to see how it all works, that they would agree with me.  If they would mentally think out all of possible results of their actions, it’s obvious than any other societal model is not a desired economic or socially beneficial one.  If that’s not enough, go out and interview some business owners, or better yet start a business yourself.  Nothing is preventing you from doing so, and the experience would be incredible educational.

So compared to most people in other countries of the world, we, the people in America, are very financially spoiled, at least in my opinion.  If you don’t agree, try this link: http://www.globalrichlist.com/ and enter your info, or your parents (if you are in college).  Here is my spoiler to the globalrichlist.com link, if you make at or over $50,000, you are in the top 1% vs all the other incomes in the world.  Welcome to the 1%!

We (those in the US) have it very good financially?  Really, we do!

MR

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Reducing The Maximum 401k Contribution Limit To Help The Economy

November 28th, 2011

Okay, yes this title isn’t a preferred route for the government to take, but there is a good chance a small decrease in 401(k) limits would help both the government and the economy.

Currently in 2012, the cap for the 401(k) contributions is set to $17,000.  But what if we reduce the contribution limit down to $15,500?

Such a decrease in the contribution limit would mean that those (like me) that were contributing that extra $1,500 would be a direct impact on tax collection for the government and there is a good chance it would help business too.  With respect to business, it would help because when people get that little extra money per pay period they most likely would spend that money.  After all it’s only about $30 if you are paid weekly ($60 if you are paid biweekly).  It might not seem like a lot, but it would give business a big boost really.  Actually the $30 and $60 figures would need to have taxes taken out of the amount received, so it would be less that those figures, but for simplicity I’m going to keep it as I state above.

And the government would be the biggest boost of all.  Most of the people who are contributing that extra $1,500 are in the 25% or 28% tax bracket.  Most of us will be millionaires some day (or so I hope).  So if we go with the lower percentage bracket (25%), that would mean that the government would get an injection of $375 extra per year per person.  So if there were just a mere million that were in the $1,500 camp, that would mean that the government would receive an extra 375 million injected into the economy.

Now that just a mere $1,500 decrease in the contributions limit.  If the reduction was more, the impact would be greater…  The problem is that the government would also increase their spending too.  They wouldn’t keep their spending in check, and this would mean that in about 5 to 10 years, we would be back in the same condition that we are currently in.

So even though it seems like a good solution to fix some of our problems from a mathematical sense, we would be in the same position in a few short years.  Change need to be in the way that government runs, not in the amount of taxes that they receive.

What are your thoughts on the matter and the idea of reducing the 401(k) contribution limit?  I know personally I’m not in favor of it, even if it would help.  I would rather the government cut out some of their more wasteful programs, but this is an option that should be considered.

Bests,
MR

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Why We Should Not Hate Businesses

November 10th, 2011

One thing about the News stations are that they only tell you the bad news that they know you’ll watch, and this makes sense, the new station is a business trying to make money and not giving the public what they want is a sure way to go out of business.  But to me it seems that fear and guilt are the main news items.  This is sad.

If you think about it, it’s kind of a paradox, when a news station complains about large businesses when they themselves are a large business too!  The problem with news stations is that they need to stay in business, and hating companies and point out the few bad ones keeps viewership high.

So,  it’s up to business and financial bloggers to explain why we should NOT hate businesses!

Global Perspective:  Why We Should Not Hate Businesses:

Historically, businesses are what have made USA a superpower in the world.  It’s the USA capitalism model and the products that enabled America to be the envy of practically all of the other countries.  The lightbulbs, cars, mass production, medical and technological advances were all be created by the capitalism!  This is why both Russia and China have scrapped their old socialism models and have introduced capitalism or a derivation of it in their societies.  After years of problems, both of these powerhouse nations realize they were wrong and adjusted their ideology to reward those that put forth great efforts.  Both countries have learned that personal risk taking and working long hard hours should be rewarded, or else nobody tries and the entire country stagnates and starts to decay.

National Perspective:  Why We Should Not Hate Businesses:

As I watch the 99% protesters complaining about the top  1%, I notice that they all have bottled water, large coffee house lattes, and other things made by the businesses that they are indirectly protesting about.  It’s very ironic and makes them look a bit naïve in my opinion.  Perhaps I’m past the age where I let others influence my thinking (like liberal professors), and instead use my own personal experiences and common sense to influence my opinion on matters.  I guess that old saying “with age comes wisdom”, has some element of true after all.

Local Perspective:  Why We Should Not Hate Businesses:

From a local perspective, large businesses are the ones that pay people money so they can provide for their families and actually have a very decent lifestyle.  The middle class in most other countries aren’t like the middle classes in the USA.  In most other countries, the middle class have just a little money left over to buy luxuries like make up for women, and perhaps something like a cheap radio.  In the United States, the middle class has all of that and goes on trips that would make the middle classes in other countries think that our middle class is rich.

So if businesses  builds our houses, makes medicines for us to overcome illnesses that could kill us, makes our cars, creates cloths for us to wear, and provides food for us to eat cheaply, why do we hate them so?

I think we should be proud of our businesses and that fact that we have such a great lifestyle!  Even when comparing the middle classes in other Developed countries, we come out ahead…  In fact, our middle class (and working class) is the top of the heap…  Why do we want to change from being the best out there to something that isn’t?  Perhaps creating a negative spin on the country helps politician get elected (the slogan Yes We Can comes to mine)

In general, I don’t understand why Socialism and wealth redistribution seems to be the answer from the white house and extreme liberal democratsl… We know from history that such ideas are losers…

Perhaps we bloggers that exist in the business and finance niche should explain the way it really is, in a common sense style.  After all, we have no hidden agenda and the majority of us want everybody to succeed.  We all benefit when our country is successful with great businesses…

What do you think?  If you hate businesses (in general, not the exceptions), state your reasons below.

Cheers,

MR

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Why Companies HAVE To Make Profits

October 20th, 2011

A buddy at work didn’t understand why corporations needed to try to make, what he called  “huge profits“, so I thought I’d share my thoughts on the topic.

Have you ever been to a soccer (or basketball or football) game where the opposing team looked like they were standing still, and the game was a huge mismatch?

Well, that is exactly what would happen if the companies don’t try to make a healthy profit.  Nobody invests in the company, and there is no motivation for the company employees to try. In fact, company can have a better product and still fail to an inferior product from a competing company because of the lack of profits!  The failure of a superior product to an inferior one is why profits and the abilities of the management team (CEO, etc) to achieve them are so important.

Why wouldn’t the company employees try, you might be wondering?
Well if your company isn’t profitable, your company isn’t going to give bonuses and may not even give raises (this is obvious given the past few years).  We go to work to feed our families and make money so we can use the cash to buy stuff to make our lives better.  Without the hope of future raises and bonus, we start to look for other places to get ahead in life! (Note, this doesn’t apply directly to government workers, but indirectly it does.  If companies and their employees don’t make money, governments don’t get taxes, and eventually government workers are affected too).

I think my friend didn’t really understand what happens to the profits after they are declared.  First, the profits that the companies make don’t just disappear…  They are distributed as dividends to the shareholders, used to buyback outstanding company shares or saved and used for future company growth.

Even if the money is just held in cash, that money still belong to the shareholders of the company!  Occasionally, you’ll see a company like Microsoft give a huge cash dividend.  This is because they have enough money in retained earnings to cover their future needs, so the excess is given back to the risk takers (stock owners like us) that invested money in the stock.  Actually dividends are a good wealth distributor and benefit all of us in one way or another, vs private companies like Fidelity. Private companies don’t even have to report their profits publically!

So given the choice been a company that is very profitable and one that doesn’t really care about money and isn’t expected nor even tries to earn a profit, I’m going to pick the one to invest in that cares about a profit!  And I’m betting so would you if you want to be a successful investor!

I’m writing this article today, because sometimes we don’t see all the pieces of a business process.  Just because those pieces are not in the media or communicated out doesn’t mean that they aren’t critical for a given company, and in the end society as a whole!  So yes profits are necessary…

What is your take on company profits?  Do you understand why the are necessary?

MR

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US Sues To Block AT&T Takeover of T-Mobile

September 2nd, 2011

Why Does the US Sue to Block the AT&T’s takeover of T-Mobile?

AT&T is the second largest cellular plan provider (Verizon is number 1).  T-Mobile is the fourth largest provider of cellular plan in the US, and is owned by Deutsche Telekom AG.  The third largest US cellular plan provider is Sprint…

Based on the snippet below from the online site of The Wallstreet Journal, it sounds like T-Mobile needs some help and wasn’t a victim.

Deutsche Telekom, unwilling to keep investing in the U.S. wireless industry, had been seeking ways to offload T-Mobile USA for at least two years before it settled on the sale to AT&T.

So the takeover of T-Mobile by AT&T would have made AT&T the largest cellphone plan provider, and give AT&T a needed shot of newer technology to help them improve their service.  So I see the synergies of such a takeover, but I also understand how it could reduce competition and drive prices up.  In my opinion, the prices of cellphone plans are already too crazy high to begin with!  It’s amazing to me that 10 years ago cell phone plans were cheaper or at least as expensive as they are today.  Usually, when a service or product is first introduced, it get cheaper as the masses jump on board, but this hasn’t been the case with cellphone plan providers.

So based on the previous paragraph, you think I’d be positive on the block by US Department of Justice, but I’m not.  My problem is why wasn’t this entire AT&T proposal nixed at the beginning when AT&T submitted their plans for the merger of the two companies?  It seems wasteful of the Department of Justice to change their mind and later go after AT&T in court.  It makes one wonder if the US is doing this move so to help someone’s career? After all, they could have denied the merger at the very beginning before money and plans for the merger proceeded forward!

Lately, I’ve noticed the US government seems to be suing more than they have ever before.  I have to wonder if other countries sue themselves as much as we do?  I think it makes us look silly when a company gets approval for a merger by the government and then later gets sued by the government.  It’s like telling a kid she can have a snack, then yelling at the kid what she unwraps it so she can eat it.

Doesn’t really instill a lot of confidence in the government huh?  And people wonder why US companies are sitting on the sideline because they are afraid what will come out of the government next.  Such actions don’t help businesses recover, and while I’m not in favor of AT&T takeover, I think it sends a bad message when a company gets attacked after getting approval from government to go ahead with their plans.  Why even have businesses submit merger or takeover plans for review by the government, if shortly there after, the government can just go and sue the company anyway?  Kind of defeats the purpose and expense of having a US review department of the government?

I know everybody is focused on AT&T, but I have to wonder if I’m the only one that thinks that the government suing AT&T makes the US government look a bit less smart than it should be?  Doesn’t flip-flop actions by the government in this case make us all lose confidence in the economic recovery, since business will be frozen until the next elections?  What if the same government stays in power, does that mean that businesses will continue to stay frozen and the possibility of a true economic recovery remains slim?

Confused by the actions of the government,

MR

 

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