Using Social Security for Immigrant Coercion is Illegal

Homeland Security had the Social Security Administration place over 6000 social security numbers of immigrants, which are normally issued under authorization of Homeland Security, who are living in the United States in the Death File.   The intent is to force the immigrants to leave the United States.

This is an illegal act of coercion which also results in providing inaccurate consumer information under the Fair Credit Reporting Act and could result in civil liability actions.

Obviously, despite Homeland Security undocumented assertions to the contrary, these are not criminals, since they would be involved in Constitutional due process legal actions, but immigrants who have or had work authorization.

Undocumented immigrants, who work and who cannot collect Social Security or retirement benefits, have an ITIN number rather than a Social Security number, which facilitates the employer in making payments of Social Security taxes which amount to roughly $20 billion dollars a year in cash flow which helps finance Social Security.

While coercion is a fundamental tool of organized crime, Homeland Security has created an illegal multi-billion dollar No-Win with substantially negative immediate economic and longer term economic growth problems, which would result in serious consequences in an organized criminal entity.

 

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FAFSA 2025-2026 Forms and Informational Resources

     The 2025-26 FAFSA application  is still being Beta tested and will be available on December 1, 2024.

    Here are some informational links with setting up accounts, calculator tools, etc.

    Here are the FAFSA  and some different deadlines in each state or territory.

    Start early and diligently followup to insure proper and accurate review and to meet the correction deadlines.

    Better luck than last year which saw a decrease nationally in enrollment.

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FAFSA Forms Corrected; Schools/Applicants left waiting

 The FAFSA forms for student aid have finally been corrected to include current inflation tables, but this means applicants must correct applications, which were due at schools in January, and after approved by the Department of Education, sent to schools some time in March.

Good luck.

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You will get Less FAFSA student aid than you Deserve

 While the FAFSA student aid application has been made easier to use, shorter, and the Pell Grant and Max Award should increase, the calculator in the on-line form has an error which will provide a Student Aid Income figure which will be higher than it should be and qualify the student for less aid than they should receive.

This error, that the different percentages of protected income should be inflation adjusted annually was not included in the current calculation table, was noted repeatedly in the comments period.  The Department of Education said it did not have the time for 2024-25 year and would correct it for the 2025-26 period.  The Law specified the period of April 2020 to April 2023, which was a period of high inflation, should be used in implementation.

Student aid from an educational institution takes many forms.  Be sure to not depend on the gross aid amount and look at the different components of the aid offered to see what is really covered.  Here is a simple list of categories.  You may find there are conditions or exclusions of some expenses.

 

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Is the Federal Reserve wrong on unemployment/inflation?

The stock market is down today on a a relatively strong jobs report, because New Keynesian economics and the Phillips Curve say unemployment must rise to lower inflation.

The Bank of International Settlements in its 2022 Annual Report questioned the reliability of the Phillips Curve in the current economic environment of post Pandemic supply chain disruption aggravated by the Ukraine -Russia War with its food and natural gas/oil supply disruptions.

 The wage and price-setting mechanisms and interactions at the very heat of the inflation process are glossed over in the Phillips Curve process hiding the play between worker's bargaining power and capital and resulting in a flattening of the Phillip's Curve.  Studies have shown that in an open economy with a fiat currency, it is possible to have a dramatic increase in employment and a flat Phillips Curve whereas in  a flexible exchange economy a trade-off between inflation and unemployment is unavoidable.

The American Rescue Plan provided a necessary stimulus to the post pandemic lock down and

Economic Growth Towards Normalcy is not Hot Inflation

The current U.S. stock market is suffering the unfamiliarity of people born in 1970 and later who have had no experience with real inflation.  Both CPI and PPI show increases which reflect year-on-year the effect of growth to recovery from the pandemic lows of 2020.  The comparison of month-over-month and year -over-year show the differences in how inflation can be viewed.  While April 2021 PPI is being "reported" as the highest increase since 2009, April 2020 PPI, reported exactly one year ago today, was the biggest drop since 2009.  For more perspective, this is what PPI looks like over the last 25 years.

 Federal Reserve Chairman Powell, Fed regional Presidents, and Treasury Secretary Yellen have repeatedly, for a few months now, cautioned that there will be transitory inflation as the economy recovers towards normalcy.

Part of this transitory inflation will include increases in normally volatile commodities, such as food and gasoline and increases in commodities in substantially more demand as growth and demand increases until supply and.or production catch up.

The shortage of microchips is an example as it has caused new car and truck production to slow or halt, while the price of used vehicles goes up. The demand for lumber is another example.

Economic recovery from the pandemic recession will require significant continuing governmental fiscal spending to boost economic growth and employment by supporting families and their ability to find safe jobs at a pay level which does not keep them in poverty and allows them to afford child care, transportation, housing, food, medical care, and education expenses.  It is not surprising that women have consequently suffered significant job loss.  Until the long term unemployment rate goes down by millions of people, of which 24% have been unemployed for more than a year, more, the Fed will not be looking seriously at tapering.

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Watching U.S. Repo, Liquidity, and the Fed

As I detailed at length in my last post, U.S. Repo, the Fed, Coronavirus, and Global Demand/Supply Shocks, overnight repo submissions have continued to increase to $123.625 billion on 3/10 and $132,375 billion on 3/11.  As a result the Fed on 3/11/2020 has increased the overnight repo daily funding cap to $175 billion through April 13 to provide the liquidity to ease pressures on funding markets and adequate reserves in the banking system.  Besides offering 14 day repo on Tuesday and Thursday of each week capped at $45 billion each offering,  the Fed will also offer three one month offerings capped at $50 billion each starting Thursday 3/12.

With the continued daily increases in repo submissions and the evolving risks in the global economy, this increase in repo operations was to be expected and shows the commitment of the Fed.

Meanwhile, Italy has shuttered all shops except suppermarkets, food stores, and pharmacies in its nationwide lockdown, India has suspended all tourist visas, and, in a Presidential Oval Office meesage to the nation, President Trump announced he would seek to provide aid to affected workers and small businesses, deferred taxes for certain affected individuals and businesses, restrict travel form Europe for thirty days while not offering any additional stimulus and support for health care during this coronavirus pandemic.  The Oval Office message has not been well received as Asian and European markets have significantly tanked and the U. S. Dow futures show tthe Dow is set to fall 1195 points on opening as I write this.

With reduced global travel, businesses telling workers to work at home, universities sending students home, states, cities, and athletic leagues (NBA suspended its season) limiting public gatherings in the United States (which was 4-6 weeks too slow in preparing and responding to the coronavirus infection), the U.S. and global economy is shutting down.  Consequently, as I detailed in my last post, the recessionary pressures on the U.S. economy is obviously increasing.

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U.S. Repo, the Fed, Coronavirus, and Global Demand/Supply Shocks

On March 2nd, I discussed the growing impact of the coronavirus infection's on the stock market and the Federal Reserve monetary policy counseling waiting for more data or a modest 25 basis points cut at the March 17-18 FOMC meeting, only to be immediately frustrated with the quickness of changing information when, on March 3rd, the Fed, after an emergency FOMC telephone conference, cut the Federal Funds Rate 50 basis points.

As I pointed out on March 3, the market noise of March 2nd when the Dow went down 5.09% on significantly lower volume was not the cause (the stock market is noise and not of data interest to the Fed) and I pointed to the repo spike on the morning of March 3rd of the one day U.S. Repo to $108.608 billion which was $8.608 billion more than the $100 billion Fed cap on one day repo.  On 2/28 U.S. Repo was only $26.240 billion and on 3/2 it doubled to $53.140.  On 3/4 the submitted amount was $111.478 leaving $11.478 billion not accepted over the $100 billion Fed cap.  3/5 went down to $87.357 billion; 3/6 was $89.607 billion; and 3/9 was $112.932 billion, all of which was accepted because the Fed raised their cap to $150 billion through 3/12.  In comparison the significant 2019 repo market stress, which was very disruptive, began on September 17, 2019 at $53.150 billion and never went over $90 billion on any one day through November, 2019.

The 14 day repo has been capped at $20 billion and on 3/3 $50.950 billion was not accepted and on 3/5 $52.550 billion was not accepted, but on 3/9 the Fed raised the cap to only $45 billion through 3/12.

You can find recent repo operations here and you can do an historical search here.

The Fed announcement and news conference was fairly uninformative stressing only evolving risks and the Fed's intention to act as necessary.  Tim Duy, who had correctly called the 50 basis points cut, correctly notes the market will not be satisfied, but believes early action by the Fed will help short circuit recessionary dynamics and allow the Fed to squeeze through without returning to the zero bound.  However, Stephen Williamson expressed concern, as I did on March 4, that the potential gains of the Fed cut were too small and the potential costs too large and the Fed should have waited for more data or cut less aggressively. Both economists indicate that fiscal stimulus from the Federal government is needed as the Fed cannot do it alone though monetary policy.

Williamson is also not supportive of the Fed continuing to buy $60 billion in treasuries each month if the market is seeking safe assets and the Fed could sell treasuries exchanging treasuries for cash in its assets and reserves. However, the Federal Reserve has a model of a supply of ample reserves in the implementation of monetary policy.

The Peterson Institute has published two papers recently on Central Banks ability to fight recession and a program for the Fed to fight the next recession which indicates " Traditionally, the Fed has responded to economic downturns by cutting the federal funds rate. But if it continues in the traditional manner, without making any decisive changes to the way it conducts monetary policy, it will have less scope than it should have to counter the effects of the next recession"  The Peterson program is concerned about Effective Lower Bound problems and emphasizes monetary policy at lower Federal Funds Rate necessitating QE.

The Federal Reserve is analyzing the 2019 repo market stress has focused on the confluence of several technical factors and transactions leasing to a decrease in the reserves of the Federal Reserve.
On the other hand, the BIS not only acknowledges the confluence of factors and transactions but notes the four largest U.S. banks, which are heavily involved in overnight repo operations, had bulked up on U. S. Treasuries leaving smaller reserves for lending while money markets have increased risky lending to hedge funds which use repurchase (repo) agreement to fund arbitrage trades.  When the stock market is volatile, hedge funds have more need for repo.

When you consider the continuing global economic demand shock impact from the Trade War and the continuing volatility in equity, bond, and treasury markets there is a lot of pressure for an economic downturn.  The Saudi-Russia oil dispute and plummeting oil prices, the decline in the U.S. ten year treasury to .318% in 3/8-9 overnight trading but ending at .54% on 3/9, and the stock market volatility continuing with the Dow down 7.82% on 3/9 and 3/10 Dow futures up over 1000 points, as I write, all contribute to a growing possibility of not only a demand shock but also a supply shock.  Supply shocks demand governmental fiscal stimulus, but will the government respond strongly and quickly enough?

Without the fiscal stimulus, recession becomes more probable.  According to a recent MIT study which devised an historically back tested new model for predicting the likelihood of recessions, the was a 70% chance for a recession in the six months following November 2019 and 86% for the 12 moths after November 2019.  The six month period would be May/June 2020.

The MIT paper has yet to be proven in reliable in evolving current data, but the equity, bond, and treasury markets continuing volatility and evolving demand and possible supply shocks, means we should be on recession watch  (a recession requires two quarters of negative growth and 1st Quarter 2020 looks like +.7% but March could change that).

Keep your eye on the daily U.S. repo operations.  If it keeps moving up, much less continuing at the high submissions seen this March, you will probably see another Federal Funds Rate cut at the March 17-18 meeting --- maybe sooner.  The Fed needs to maintain liquidity and has demonstrated with the 50 basis points cut it is ready to act strongly.  The market wants a 75 basis points cut, but the market is noise (not data driven but reactive to data) and, like a two year old child, is never satisfied (want want want).  Some economists want a 1% cut or cut to zero, but such a preemptive strike is, in my opinion, very risky;  I want to the Fed waiting for the data and saving ammunition to deploy if a recession appears more likely as the risks evolve in the current demand and possible supply shocks.


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Market and Fed March 3, 2020

Volatility moves fast.  The 5.09% Dow increase yesterday was on 25.46% lower volume than last Friday and the Nasdaq volume was also significantly down at 19.34% yesterday.  The G7 made no fiscal stimulus commitments offering only words of appropriate policy action.

The Fed Repo Operations significantly spiked today with $108.608 billion 1 day term submitted and $100 billion accepted while $70.950 billion 14 day term was submitted with only $20 billion accepted.

The market started down a little over 200 points and started easing back basically on the G7 lack of fiscal stimulus action.  The European market were all up.

The the Fed makes an emergency rate cut of 50 basis points, which is what the market wanted and the market is still down and has gone down over 100 points as I write this at 9:19 AM Central time.

In my opinion the repo spike was the new driving data, but the Fed may find the 50 basis points too preemptive (and consequently less effective) and too much spent ammunition (25 basis points would not have satisfied the market but the that is not the Fed's job) to counter what could be a recessionary downturn as the global economic impact of the coronavirus infection multiplies and the infection grows in the United States.

Officially a recession takes two quarters of negative growth, which should be increasing apparent by the end of May going into June.  The first quarter is pretty obvious.  The Federal government needs to provide fiscal stimulus with direct effect on health care, employment, and support of economic sectors most heavily impacted by the coronavirus economic impact.  Additionally, the Federal government needs to start working with the international community to control and treat the coronavirus infection.  The United States is not in this alone.  If the U.S. does not start effectively cooperating and coordinating international response, including fiscal support, then the economic impact globally will be worse.

It begins.

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Coronavirus, Market Expectations, and the Fed

In the last half of 2018 (with a economic model driven Fed funds rate hike in December in which the Fed message was interpreted as rates will continue to rise) and the data driven Fed holding pattern through 2019 until August, September, and October Fed funds rate cuts of 25 basis points each month from 2.5% to 1.75% in order to tame and prevent inflation as the result of the Trade War economic disruption, the market expectations and self-serving political pressure were never completely satisfied, economic data realistic, or rationally predictive.  The market is irrational and reactive to human behavior much like an infant's terrible twos.

By Friday, February 28, 2020, we had seven consecutive down market days and the market had fallen into correction territory with an approximately cumulative 11.5% drop as the global economic impact of the coronavirus infection starting to sink in and the fears of a potential global pandemic.  As of Wednesday morning, the 26th, economists could see no data reason for the Fed to act.  By the morning of Thursday the 27th, economists were acknowledging the short run economic impact of the coronavirus infection but stating the obvious reality that the data was not present to indicate how long or how deep.  On Thursday the Dow fell 1190.95 points, after a Presidential televised message/presentation the night before raised many doubts as the competence of governmental leadership.  The need for the Fed to make a statement was necessary and Chairman Powell appropriately did so indicating the Fed stood ready to act in response to the evolving risks when appropriate.  By Friday morning, this had caused the economist Tim Duy to change his assessment from an appropriate wait for economic data to the need for a 25 to 50 basis point cut in the Fed funds rate and Goldman Sachs seeing stagnant earnings growth for U.S. companies through 2020 and three 25 basis points rate cuts from March to June of a total 75 basis points and Wall Street expecting at least 50 basis points in March. 

By the morning of Monday, March 2, Goldman Sachs aggressively stated there needed to be a 50 basis points cur in March and at least 100 basis points this year.  Marc Chandler, a forex and macro analyst, was accurately reporting the negative economic data and commenting that central banks words of assurance have a short life.  Tim Duy was concluding the Fed would need to cut 25 basis points in March with a tilt towards 50 basis points and sooner, although the Fed's initial response might be to expand repo operations.  In this same Monday morning, another economist was commenting that central banks are already doing enough for now and that the emphasis in combating a potential pandemic is appropriately directed fiscal spending by government to support the public health system and provide direct (not tax cuts which would come to late and often to the "special" people who do not need them) stimulus to economy as the global impact on the United States becomes more obvious.  As of this Monday the CDC has yet to deliver accurate testing kits to state, county, and local public health agencies and hospitals to provide timely testing.  By this Monday afternoon, general doubts were beginning to be raised that, while the market expects rate cuts, cuts will not work and that the Fed is more likely to cut rates due to a demand shock leading to inflation rather than a recession.  However, a demand shock can also be a supply shock and lead to recession.

By market end this Monday, March 2nd, the Dow finished up 1293.96 or 5.09%, despite European markets being up then turning down (except for UK) on coronavirus concerns.  Hope springs eternal in the market however fleeting the moment may be.

At this moment, I expect the Fed will hold the Fed funds rate in March, unless data between now and the meeting March 17-18 significantly changes.  The growth of the coronavirus infection will get much worse before it gets better.  Expect the Fed to look at the repo rates and repo operation (and the effect of hedge funds on the repo market) as well as bank liquidity throughout the system, particularly the largest banks which handle most repo facilities.  If the data does become more negative, there might be a 25 basis points cut.  This a wait a see how bad and how serious the public health problems impact the economy, prices, and employment --- and for what length of time.  The Federal government needs to listen to Congress and spend money to stimulate the public health response and directly stimulate the economy with spending which has more immediacy of impact than possible future impact.

If the economic impact grows more negative over the next two to three months, we may see the data showing that a recession could start in May-June.  Notice the use of the word "may" and not "will".


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2020 Important Tax Facts and Dates

Morningstar has compiled a succinct informational listing of important tax facts for individuals, investors, and important tax dates throughout the year.  I see no reason to write my own list as it does not require any professional originality.  You can find the information here.

This link will enumerate the twelve tax deductions and credits you need to evaluate for tax planning and their effective use to you.

Lastly, there are eleven tax deductions you can still take if you use the standard deduction.

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Required Minimum Distributions and The Secure Act

There is continuing confusion on how RMDs are treated since The Secure Act became law.

If you turned 70 1/2 years old in 2019, you are still subject to the old law and required to begin RMDs.  If you turn 70 1/2 in 2020, you do not need to take RMDs until you turn 72 years old.  If you have been doing RMDs, you need to continue.  Always use the IRS worksheet.  If you receive an RMD notice from your broker/dealer or retirement account custodian or trustee and you did not turn 70 1/2 years old in 2019 or have not been taking RMDs but you will be 70 1/2 in 2020, you should probably ignore it.  The IRS has issued Guidance here.  You should never just accept  an RMD notice with a calculated amount from a retirement custodian or trustee or broker/dealer; you should always

Is High Corporate Credit An Inceasing Risk to the Economy?

 Last year, the Fed commented on the historical level of corporate credit with rapid growth concentrated in the riskiest firms.  One risk is a market dislocation which causes an increase in credit spreads and a contraction of credit market liquidity.  In January 2020, Moody's Analytics questioned if overvalued equities increase the risk of high corporate debt, because the debt could impact profits and/or cash flow and this might promote a equity market downturn and increase pressure on companies with high debt.  At the present time, the market overvaluation is not at the level of 1999-2000.  Moody's Analytics has published a second commentary entitled, "How Corporate Credit Might Burst An Equity Bubble".  The article continues the discussion of a market downturn amplifying corporate leverage and the two feeding on each other.  The one data set you should watch

America Has Squandered the Economic Recovery

The Harvard Business School has just released a report which finds current business and political leaders have squandered the economic recovery with loss opportunities for a stronger future economy

BIS Quarterly Review (December 2019) and Repo Markets

The December 2019 BIS Quarterly Review is out and it includes some very interesting articles.

There is one on the evolution of OTC interest rate markets.  Given these are an indicator of market volatility, the research is important, because the turnover of interest rate derivatives has increased for a variety of reasons; some of which are the changing structure of the market.

Collateral is king in the euro repo market.  Repo markets provide liquidity, but the euro repo market has seen activity which indicates investors are seeking particular securities rather than just liquidity and the availability and price of those particular securities has become a factor in the euro repo market.

One article receiving a lot of attention is one on the September stress in the U.S. dollar repo market

2020 Form W-4 Is Complicated and Invasive

 In June, I wrote about the proposed new Form W-4.  The final Form W-4 for 2020 can be found here with an explanation on how to fill it out.  Be prepared for a long process using a worksheet or an IRS calculator (which will not have 2020 tax information until 2020).  It is as complicated as filling out the new tax forms and requires an invasive amount of information about your incomes.

If you have multiple jobs, a employee job and a self-employed business, are a new employee but not

Beware: New Medicare Plan Finder Tool Misadvises

The new Medicare Plan Finder Tool has been found to have glitches which could result in consumers choosing more expensive plans by mistake.

It ranks plans by lowest premium without consideration to out of pocket copay expenses. 

In the past the Tool calculated total cost making the new Tool even more misleading if you have relied upon it in the past.

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Italian Mini-BOTs Would Be Liability Swaps

In the last two weeks there has been a flurry of economic/financial writing about the Italian proposal for a parallel currency in the form of mini-BOTs by an Italian Lega politician, Claudio Borghi, who, as a former Deutsche Bank person, should understand the implications of a parallel currency deployment and who has been quite vocal in his desire to exit the euro.  Since Italy is the third largest economy in the eurozone, the impact would be significant unlike Greece.

Most of the writing has been monetarily critical --- concentrating on perceived debt increase to unsustainable levels and legality.  Papadia and Roth have tried to review the competing viewpoints through existing literature, but they omit the earlier 2015 Andresen and Parenteau electronic TAN proposal, which was the basis of the Varoufakis plan via Galbraith.  Papadia and Roth would have us believe the paper form would be better than the electronic form, because it would be less likely to be used criminally.  In fact, the electronic form is even less like currency, less expensive and simpler to implement, and not subject to counterfeiting.  Papadia and Roth make a good listing of what makes currency and what makes a security.  In their conclusions, they worry about the mini-Bot enabling an

New W-4 Tax Withholding Form Is Not Simple

 The draft of the proposed, new W-4 tax withholding form has been released for comment until July 1.  In many ways it is like filling out a  supplemental 1040 and people will have to look at their last year tax form to fill it out. 

If you have a second job, summer job, both spouses work, own a small business and work another

Some Links from Week of 2/25 -- 3/3/2019

I do weekly research in economics and finance with the links available by subscription (contact me).  Here are a few of the approximately twelve pages for the past week.  The links are of interest and worthy of thought.  They do not reflect whether I agree with them or not.

Prospects for inflation in a high pressure economy -- Hooper, Mishkin, Sufi

Inflation Risks and Expectations

Fed Balance Sheet News

Future of Fed Balance Sheet - Quarles

What can we learn from the NY Fed's inflation gauge -- Tim Duy

 U.S. Economic Outlook and Fed Monetary Policy -- Clarida

Did the yield curve flip? -- SF Fed

Are Normal Yield Curves actually Normal?

20 Years of the eurozone

Public Debt through the years -- Eichengreen

Kraft Heinz exposes the corporate debt problem

Italy's Debt and the Spread

Italy's Carige bank faces 630 million euro capital gap 

What if the problem of the EU turns out to be Germany and its banks

Risky Retirement Business -- Carmen Reinhart

How imperfect knowledge shapes financial markets

Temporary price level targeting -- Bernanke

News and Central Bank Growth Forecasts

Bank of England reads the Guardian

Governments bears responsibility for income inequality and the tools to reduce it

Conversation with Emmanuel Saez


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Suffering from Tax Refund Surprise?

If you found you have no or much smaller tax refund this year, you did not pay attention to withholding amounts and the loss of itemized deductions.  I warned my readers of this on January
 15, 1918.

 Prior to that

Michael Pettis on "Why US Debt Must Continue"

Each week I do economic and financial research that results in over ten pages of links, which is available to those who contact me and subscribe.

One notable link from this past week is a new post by Michael Pettis entitled "Why U.S. Debt Must Continue" in which he tackles the issue of rapidly rising household, government, and business debt in the United States and many other countries around the world including China and some European countries.

In the first part, he discusses debt and some of the conditions under which it effects economic growth

Federal Reserve & Data Dependency

The Federal reserve will raise rates by 25 bps this Wednesday at the December FOMC meeting.  This is the expected economic consensus, although market participants want rates to be lowered to boost market valuations.  While fears of slower global growth are driving volatility, the markets are noisy data in the basket of data the Fed tracks and reviews, because the Fed makes its decisions not on fears or exuberance but on the data and the documented trend of the data.

While slower growth would normally be accompanied by lower inflation, trade wars and tariffs can yield slower growth and rising prices (inflation).  Political uncertainty domestically and internationally can cause endogenous and exogenous volatility and economic instability, but economic data reflects what has happened and reacts to what will happen.  The Fed is concerned about financial stability --- not politics --- not market fears; it is data dependent while recognizing

Capital Township's Inconvenient Financial Numbers

Prologue

This post contains information (administrative expenditures to actual services ratio) I was not allowed to include in a Springfield Journal-Register (SJ-R) letter to the Editor published (after 26 days of publication delay because someone did not like the publicly documented information on file at the Illinois Comptroller’s Office, particularly the administrative costs to services ratio of which I was only allowed to include a conservative calculation which did not include the 20% Township error omitting $374,925 in General Assistance administrative cost despite my documenting the error amount as an administrative expense from FY 2016 and FY2017 reports on file) on September 1, 2018, and two letters submitted on October 16, 2018, which where rejected for publication within two minutes of sending. A requested hyperlink documenting the information source (see the link below) to be published with the letter, which I immediately sent when the published letter was first submitted in early August, was never used on the SJ-R website. 

Two letters, containing much of the information below, submitted on October 16, 2018, were rejected for publication within two minutes of sending.

It is as if someone high up (not the Letters editor) does not want the public information on file at the Illinois Comptroller’s Office discussed publicly in the media.

 

Whatever the motives and reasons, the bottom line is the public discussion of this proposed merger of Capital Township with Sangamon County has been inadequate, truncated, and seemingly suppressed.

I have since learned that the Con op-ed was written as an unpublished letter to the editor a month prior as a protest of the City Council vote to table a City petition to merge Capital Township with the City and later pushed by the SJ-R as the op-ed piece with imposed significant data changes and denied the author a review of the Pro op-ed and the ability to respond to the actual Pro op-ed. This speaks directly to the intentional informational manipulation and suppression of informed public discussion on this issue by the SJ-R.

CAPITAL TOWNSHIP’S INCONVENIENT FINANCIAL NUMBERS

The Pro and Con Op-Ed articles on the proposed absorption of Capital Township, which is entirely within the City of Springfield, by the Sangamon County Board were very disappointing with the “pro’s” self-serving twists and blarney and the “con’s” overly conservative and way too politely constrained attempt. The people of Capital Township (the City of Springfield) deserve a more rigorous discussion than has appeared in local media.

While townships can provide a variety of services, such as roads, cemetery, parks, and general assistance, Capital Township provides only one service (General Assistance) in the FY2017 amount of $755,533 at a direct program administrative cost of $374,925 (just salaries?) while the total Township salaries are $906,779, central Township administrative costs are $851,449 for total Township FY2017 expenditure of $1,981,907.

It is misleadingly convenient to characterize Capital Township efficiency as a single service program (General Assistance) within Capital Township rather than the operation of the whole Township. Because a government exists solely to serve the needs of the people, the ratio of total administrative expenditures to total actual services is how a governmental unit is efficiency evaluated and Capital Township at $162.32 for each $100 of services is excessively higher and more grossly inefficient than any other Sangamon County Township government. Chatham Township, which provides road, cemetery, recreation/parks, General Assistance, and community building services has an expenditure to services ratio of $44.49 for every $100 of services. It is purposefully misleading to try to pose Capital Township solely on its welfare expenses to welfare services ratio. Capital

Tariffs, Uncertainty, Investment, and U.S. Trade Deficit

Tariffs increase uncertainty domestically and internationally. decrease corporate investment, and will not decrease the U. S. trade deficit.

From Marc to Market "Tariffs will not Reduce the U.S. Trade Deficit"

"The US trade deficit is likely to widen due to growth differentials and the impact of taxes on imports." 

 From the New York Fed --- "Do Import Tariffs Help Reduce Trade Deficits?"
"... what seems clear from our analysis is that import tariffs will reduce both imports and exports."

Turkey is Harvesting the Risks of Its Foreign Denominated Debt

Noah Smith has hit the nail on the head when he writes that Turkey's currency crisis is the direct result, as many emerging nations have experienced, of issuing debt denominated in foreign currencies rather than its own currency.

It is just bad economics for any nation to issue debt in a foreign currency.  I wrote about this in relation to Argentina in 2010 and Argentina still, today, has the problems associated with foreign

When Government Serves Only Some People --- Video

In Illinois there are over 1400 (1429-1431 depending on who you ask) and 25 townships in Sangamon County which cost County residents $6,461,080 in 2017 property taxes which works out to $84.42 in administrative expenses for each $100 of services, which is not just grossly inefficient, it is obscene.  In fact the administrative expenses may be even higher because some expenditures,

Tariffs and Trade Wars

Markets do not like tariffs.  They react negatively and add to markets dislike of economic and political uncertainty.  Trade wars only intensify economic and political uncertainty.  The United States not only imports, it exports.  Both imports and exports result in jobs.  In a trade war, job losses

The Flattening Yield Curve as a Sign of Economic Strength

The economist, Tim Duy, has written another article on the flattening yield curve in which he details how, given our current economy and economic data, the current flattening yield curve is most likely an all clear signal of economic strength. He concludes, "The thing to fear is when inflationary

When is a Flattening Yield Curve Inversion Really Significant?

Tim Duy has written an excellent article on the recession significance of a flattening yield curve inversion in which he concludes it is not likely to result in a recession until the Federal Reserve continues hiking rates after the inversion.  I think he is correct.

There has been a lot of alarmist speculation on yield curve inversions signaling recession without a thorough look at history and the differences with the past that a long flattening of the yield curve in a

The Path to Pension Reform in Illinois is not Pretty

The Chicago Federal Reserve Bank and the Civic Federation held a conference in April to assess the State's options with respect to its pension systems liabilities.

A copy of "Navigating Pension Reform in Illinois" can be found here.

Basically, the report says what we all know that the State has ignored its funding mandates, that

What Is The Aggregate Real Rate of Return of Risky and Safe Investments In The Economy?

 About four weeks ago in my Weekly Research links provided on a daily basis to subscribers, I linked to a NBER study through an ungated earlier version, because NBER paywalls the general public.  The title is "The Rate of Return on Everything, 1870–2015" by Jorda, Knoll, Kuvshinov, Schularick, and Taylor.  The paper asks "What is the aggregate real rate of return in the economy? Is it higher than the growth rate of the economy and, if so, by how much? Is there a tendency for returns to fall in

Tax Software Exposes Users to Phishing

 When you get email that requests you use a link, you need to ignore it, check the sender source embedded in the mail, and if you think you should take action you do so my going (by entering in your browser) to the known real website and accessing your account.  There are all kinds of tax season and IRS phishing scams.  Be suspicious.  Know the IRS never contacts you be email or phone; they use US mail only.  Most recently users of popular tax software programs have been subject to phishing attacks.


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Emerging Market ETFs and Global Risk

 A recent paper studied investor flow into and out of emerging market ETFs and found they amplified global risks and ignored local conditions unlike market indexes and and mutual funds which did not.

I recommend reading the paper, because it suggests to me that investors ignore what is going on with the actual holdings of the ETF within a more comprehensive macroeconomic assessment.  This exposes those local markets to an exaggerated global financial risk and increases market volatility.

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Exchange Traded Funds 101

I have written some short articles on ETFs trying to discuss potential liquidity problems, some inappropriate structures, and trading costs (as opposed to buying and holding) and I have some more articles planned as I have time to write.

The newest edition of the Journal of Economic Perspectives has an interesting article, which is linked in my Daily Research Links available to subscribers, entitled "Exchange-Traded Funds 101 for Economists".  While the article addresses structure and types of funds, liquidity, trading implications,

Estimating Potential GDP and Output Gap

 I have been very interested  in output gap estimating and researching the issue, because there are economic theory conflicts which muddy what governmental fiscal policy should be.  While I have not had the time to pull my research together in an article, I continue to follow the subject and add to my research.

The CBPP has a new paper out entitled "Real-Time Estimates of Potential GDP: Should the Fed

2018 Employer Withhholding May Turn and Bite You

The New IRS withholding calculator will not be available until February, the old W4's will continue to be used despite no longer reflecting the new tax law and 2018 employer withholding may result in under withholding  resulting in higher taxes owed at year end and possible tax penalties, particularly if there is more than one income in the family, you work at more than one job during the year, and/or you have multiple jobs at the same time.

You will need to proactively monitor and review your withholding, including using the new

2018 Tax Facts and Dates

 Morningstar has published a very succinct listing of 2018 tax facts, as a result of the new tax law, and important tax dates in the link above. The Pursuit of Financial Happiness(TM) has always been about information.  Some people, when reading our articles, do not read or dismiss the embedded links which provide not only pro but

Watch for Eonia Year End Spikes

In the last two days of November, the Eonia, which is the one day Euribor rate, spiked 6.1% and 6%, which is very unusual.  Bloomberg gave, as an explanation, that the National Bank of Greece had excess liquidity of 450 million euro which it loaned in the last two days of November to peers in its country, but would that cause two days of 6% spikes?  Was something else going on with eurozone bank liquidity?

The two regional Italian banks Carige and Creval have been struggling for additional funding, along with four other small Italian banks, to meet the ECB balance sheet liquidity rules and lower allowable NPLs (non-performing loans).  But any month end liquidity needs would have been relatively small.  However, new ECB bad loan rules will become effective January 1, 2018 despite significant opposition, particularly from Italy.  This will put additional pressure on Italian banks, because, while eurozone banks as a whole have 5% NPLs, Italian banks have 15% of that 5%.  The final compromise is to enforce the new NPL rules on a bank by bank basis, whatever that means.

Meanwhile, on 18 November Monte dei Praschi di Sienna, had to put $671 million (569.4 million euro) in reserve, before its new reorganization board meets for the first time in December, which

Job Losses Under New Tax Law Already Beginning

Under the new U. S.  tax law, corporate interest deductions are capped at 30 % of adjusted taxable income (ATI).  I have already seen a privately owned company (owned by a private equity firm) announcing major layoffs effective at year end and internally communicate the new tax law  will result in paying higher taxes. 

Full Text of Final GOP Tax Bill

 It is the intent of the GOP Congressional leadership to vote on this bill as soon as possible to preempt any informed debate or public review or discussion.  The vote will purposefully be prior to any CBO fiscal analysis, despite an at least $1.4 trillion deficit impact, or any Joint Conference on Taxation analysis as normally required.  The Tax Bill is a huge economic blunder which will cut spending on infrastructure, education, make health insurance more expensive, do nothing to boost wages, and put a bullseye on Medicare and Social Security.

Here is a link to a post by a tax attorney/law professor providing a links to the full 1097 page bill and  a 570 page explanation.

The economic "benefits" are based on historically inaccurate assumptions of trickle down economics and false arguments to justify huge benefits to the very wealthy as opposed to little or no benefits (in some case even more taxes paid in future years)  for the the middle class or poor.  This bill will economically cripple the Affordable Care Act and increase American citizens without health care by 10-13 million.  It is direct attack on higher education and public education.

When the patently erroneously revenue assumptions prove systemically lacking, you may expect these GOP Congressional leaders to propose massive cuts in Social Security and Medicare to make up for their purposefully misrepresentation of the tax bill's revenue.

It pays to be a big money political donor.

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See How GOP Tax Plan Will Impact Your Taxes

Here is an interactive page where you can click on your state and then click your tax bracket and see if you benefit or actually pay more in future years.  You may be surprised what happens in 2019 and how different it will be by 2027.  People in lower tax brackets are going to see how they will pay for the benefits thrown at the the highest tax brackets.

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Daily Research Links for Week #388 (August 14 - 21, 2017)

Here is the link (which is a private page) to The Pursuit of Financial Happiness(TM) Daily Research Links for Week #388.  I am now working on Week #399.  The Week #388 is a Pdf which is ten pages long with active links for you to follow.  You may want to bookmark the above Daily Research link and visit as you have time.  These links are available on a current Daily basis by e-mail (just those days links) to subscribers to The Pursuit of Financial Happiness(TM) Daily Research Links.  To request a subscription, contact me at mjscpa@sbcglobal.net.

These links contain differing viewpoints which are worth reading and, therefore, do not connote my approval or disapproval.  They are articles, audio, video, Pdf documents, studies, etc. on macroeconomic and financial issues of value in understanding what is going on in various countries, the world, and the markets.

You might also want to check out the home page of my professional website www.mjscpaplan.com.

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Daily Research Links for Week #387 (August 7-13, 2017)

The Pursuit of Financial Happiness(TM) Daily Research Links for Week #387 are 12 pages long and can be found here.  I am presently working on Week #397.  The Daily Research Links contain a variety of viewpoints worth reading and digesting; it should not be assumed I agree or support any particular viewpoint, particularly when I am presently a variety of viewpoints on an issue or subject.

These Research Links are in the original language, may contain audio, video, long studies, etc on macroeconomic and financial issues   These help me understand what is going on in the world, in different countries, market sectors, companies, and economies.

These Daily Research Links can be sent by e-mail world-wide on a current daily basis if one wishes to subscribe by contacting me at mjscpa@sbcglobal.net.

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Daily Research Links for Week #386 (July 31 - August 6, 2017)

 Here is the link to The Pursuit of Financial Happiness(TM) Daily Research links sent daily to subscribers world wide for Week #385.  It is 13 pages long.  I am now working on Week #395.

As I have indicated, the links do not reflect my agreement but only that they are worth considering.  The links may be audio, video, pdf documents, long studies,as well as news and other articles, and are always in the original language (not translated). 

This is research I do on a daily basis as a fiduciary fee only registered investment advisor.  No matter where you live in this world, if you wish to subscribe to The Pursuit of Financial Happiness(TM) Daily Research Links you may contact me at mjscpa@sbcglobal.net.

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Data Breach: Lock or Freeze Credit

If you have had your credit information stolen or exposed to a data breach, such as Equifax, you need to monitor your credit and bank accounts.

The data breach at Equifax apparently compromised personal information in one of its credit monitoring programs (where consumers can "safely" have their credit monitored for unauthorized use) which included birth dates and social security numbers.  While they are now offering a free (and new) lifetime credit lock program where you control who has access to your credit information, I would be reluctant to trust them again.  Their initial response to the data breach was tardy and the initial data breach customer service website they set up looked like a phishing website.

If you have recently received notification that a debit or credit card is being replaced as the result of a data breach, you would be wise to assume it is probably Equifax related.

Immediately monitor your credit card and/or bank accounts twice daily.  You can use Credit Karma to monitor Transunion and Equifax and Credit Sesame to monitor Experian; both are free.  I would avoid any credit monitoring service which charges a fee.

For the most part, a credit lock program are designed to be continuing fee services and are marketed by credit reporting services, while a credit freeze involves an initial fee and a fee for each temporary lifting (should be $10 --- if you are over 65 years old, an active duty military, or a victim of identity theft it should be free).  The Illinois Attorney General provides information, including form letters for each credit reporting service, on what the fees should be for different individuals and I would expect other state attorney generals to also provide this information.  You should also be able to get non-state specific information from the Consumer's Union.

On the whole, you would probably be better off with doing a security (credit) freeze then getting netted by what is normally a more expensive credit lock marketed program.  Do the credit (security) freeze.

Update 10/3/17:

It may cost victims of Equifax data breach $4.1 billion to freeze credit.

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Daily Research Links for Week #385 (July 24-39, 2917)

The Pursuit of Financial Happiness(TM) Daily Research Links for Week #385 are here.  They are 12 pages long.  All links are in original language and may include audio, video, or long studies.  They are macroeconomic and financial information worth reading and do not imply I agree or endorse them.  You have to be able to consider and apply critical thinking to anything you read.

I am presently working on Week #393.  If you are interested in an eamil subscription to The Pursuit of Financial Happiness(TM) Daily Research Links, no matter where you live in this World, contact me at mjscpa@sbcglobal.net.

As thepursuitoffinancialhappiness.com website is constructed it will archive all past  daily research links (after 4 weeks of existence to non-subscribers) and research topics.    We will also have podcasts again as subjects deserve the attention.


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Daily Research Links for Week #384 (July 18-24, 2017)

Here is another week of daily research links for Week #384 for The Pursuit of Financial Happiness(TM).  I am now working on Week #393.

Week #384 is only 12 pages long.   As I have indicated previously, these links are being provided to not just inform, but to allow readers to determine the value of these economic and financial research links, that I use. 

If you would like to receive them on a daily subscription basis, wherever you live in the world, let me know at mjscpa@sbcglobal.net.

We are in the process of designing thepursuitoffinancialhappiness.com website where we will archive past research topics and weekly links which are at least 4 week old.  We may also put together some past writings and form them cohesively into The Pursuit of Financial Happiness(TM)  e-books on investing, estate planning, and other relevant topics. 


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Fiscal Stimulus and Global Imbalances

 The Federal Reserve 2017 Jackson Hole Symposium had what I found to be two particularly interesting papers.  The Auerback-Gorodnichenko paper "Fiscal Stimulus and Fiscal Sustainability" which finds that fiscal stimulus in a weak economy, even in countries with high debt, can improve fiscal sustainability.  Jason Furman's remarks on the paper with many charts was very good.  For those of us who have long maintained that fiscal stimulus designed to put people to work, improve needed infrastructure, and stimulate growth in the national economy -- not wasteful political favoritism or handouts to large financial institutions and the rich and rentiers --  are necessary to effectively recover from deep economic recessions and depressions, this is a welcome paper.

Menzie Chinn's paper  "The Once and Future Global Imbalances?  Interpreting the Post-Crisis Record" which documents fiscal policy can and has had a noticeable influence on current account balances.  Chinn had additional remarks with graphs.  Maurice Obstfeld, chief economist at the IMF, also provides remarks detailing the differing economic viewpoints on global imbalances and the problems with resolving the debate.

Federal Reserve Chairman Janet Yellen's speech on financial stability was very subdued and reassuring, particularly in her defense of bank regulations, which many have taken as a subtle rebuke of the current Administration's desire to reduce and/or remove regulations on banks, despite the Great Financial Crisis of 2008.

Here are all the papers, speeches, and remarks at the Symposium.

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Do ETFs Negatively Impact Portfolios?

In a recent paper studying ETF investors using data from a large German brokerage,the authors found that ETFs do not improve portfolios with the ETF portion of a portfolio underperforming the non-ETF portion of the portfolio by -1.16% and investors using ETFs used all investment products sub-optimally.  All investors in the study had refused free financial advice and were self-directed investors.  Poor timing in buying and selling accounted for .77% of the underperformance.   When compared to a market portfolio buy and hold strategy, the majority of the underperformance was due to security selection behavior. (See tables VII and VIII in the paper.)  The study found no investor distinct group benefited from, or increased diversification with, ETF use.  When trading costs were included with gross returns, the results were worse.

The authors suggest that it would be better to invest in a buy and hold strategy with a low cost diversified market investment.

This means, in my opinion, that the self-directed investor approaching or in early retirement should look for a low Beta (1.00 or lower) and a high Sharpe Ratio (the higher the better) market investment as well as review cost and performance through the years.  An investor with a long time horizon might include Alpha (the higher the better) in the criteria.  There are several that should pop up on an ETF criteria screen for deeper analysis.  If you have a fiduciary, fee only, financial financial advisor, there might be more portfolio options in a buy and hold strategy which is allowed to slowly grow.

The study concluded: "We find that the portfolio performance of individual users relative to non-users of ETFs slightly worsens after ETF use. The loss comes mostly from buying ETFs at the “wrong” times rather than choosing the ex-ante “wrong” ETFs. Therefore, adopting a buy-and-hold strategy is more important than selecting better ETFs. The benefits from a buy-and-hold strategy are twofold. First, as our analysis reveals, a buy-and-hold strategy would prevent investors from trading ETFs at “wrong” points in time. Second, the positive effects on gross performance are amplified for net performance as trading costs in buy-and-hold strategies are naturally lower.

"Our paper thus points out that the wonderful innovation of passive ETFs, with its enormous potential to act as a low cost and liquid vehicle for diversification, may not help individual investors to enhance their portfolio performance if they actively abuse passive ETFs by buying and selling them at “wrong” times. Ironically, the low cost and high liquidity of these ETFs seem to encourage their trading, and this aggravates an individual’s temptation to engage in some sort of timing. Our finding should make regulators, consumer protection agencies, companies with 401k plans, and financial economists more cautious when recommending ETF use. From a policy perspective, therefore, promoting savings on well-diversified ETFs that simultaneously limit the potential to actively trade in them might be beneficial to individual investors." 

This is the fifth post is a series on ETFs.  The fourth post, which has links to the first three in its first paragraph, on synthetic ETFs can be found here.


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