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Thursday, February 25, 2010
Structured Products Are Alive And Well, Not Dead, Thanks To "Too Big To Fail"
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Thursday, February 18, 2010
Time To Tax Non-Profits
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Tuesday, February 16, 2010
Copper Defies Supply And Demand
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Now let's look at the rise in copper prices. The copper bull market corresponded with a reduction in inventories. But as stocks of copper have grown, the price of copper has decoupled. Instead of going down, price has been rapidly rising. Why and for how long? China is the reason most often mentioned.That and the weak US Dollar. Many believe that China was hoarding copper as an alternative to buying Treasuries, plus their lending and building boom would make good use of the metal. In fact China did buy over 40% of ALL copper in 2009. It's economy is no where near 40% of the world's economic output. Many feel that the Chinese have a huge inventory in addition to the LME and Shanghai warehoused inventories. Odds are that China will not be a 40% buyer in 2010. And the dollar has been anything but weak lately. Yet copper continues to rocket upward. If the Chinese have slowed their purchasing and the dollar has strengthened, what keeps copper up? Pure momentum and speculation. Some of the same economic recovery belief that the stock market sees. In fact, copper has been fairly well correlated with the S&P500 lately. Even speculators can read charts and when you read the inventory chart you should get scared. When producers like FCX say they aren't seeing enough pick up in demand to warrant capital investment that should be a warning that production is exceeding demand. As inventories continue to grow the price of copper will need to adjust downward. I haven't figured out how, or if, to profit from copper's mis-pricing. Shorting high beta stocks like FCX could get painful as could buying an inverse ETF. I'm going to keep thinking and exploring as I think copper is overblown. |
Monday, February 15, 2010
Are Longleaf and Fairfax Visionaries Or Just Stuck?
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Saturday, February 13, 2010
The Pension Bubble
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Lauren, I appreciate your desire to see Mount Dora not only retain it’s charm, but improve as the economy recovers. I share that vision. However, as a resident, and healthy taxpayer, I also expect my city to operate efficiently and show fiscal responsibility.
A major area of fiscal irresponsibility is the pension benefits currently offered to employees in the General Employee Pension Plan. I think it is entirely appropriate that the city council examines the Plan and, after study, makes changes. The current plan is not sustainable, for employees or taxpayers. Employees have not had a raise in pay for two years because the city could not afford it, largely due to an accelerating pension contribution. Not only the absolute dollars contributed to the plan, but the percentage of total payroll have skyrocketed. Additionally, investment performance has been poor. The combination of overly generous benefits and poor investment results has left the Plan in a seriously under funded position. A continued acceleration of this situation will affect all city services, as Plan contributions will take up larger and larger portions of the annual budget.
The goal of pension reform is not to harm employees. Some, however, would not have such a sweet deal. Others, the rank and file, could see paychecks actually increase as they currently pay up to 7% toward their pension plus 6% for social security. And, due to budget constraints, haven’t been receiving pay raises. Some employees may very well welcome a 401K Plan that allows them to keep a few more dollars of net pay and gives the city the flexibility to offer pay increases.
Let’s look at the Plan. It uses a .03 multiplier, and is generous on vesting, early retirement, final year income adjustments, and other components. What that means is that a long-term employee can retire with an income that exceeds his final pay level! For life! Mostly funded by taxpayers. An example: Multiplier [ .03 ] X years of service [30 years] X Final Pay. So, .03 X 30 =. 9 then, .9 X Final Pay, say, 80,000 =$72,000 PLUS Social Security of, lets say $25,000. resulting in a city/employee funded retirement income of $97,000. Remember, both city and employee pay 6% of income into social security. Most plans deduct that benefit from the pension, but the Mount Dora Plan doesn’t!
The over-riding question is should the taxpayer continue an employee’s income for life? Is 30 years of work worthy of that amount of compensation? In the past possibly as government salaries were not as generous as in private business, but for a long time city employees have enjoyed comparable pay scales.
The Council should solve the pension situation and also look at any other areas that affect the fiscal soundness of the city. Luckily for our community, the city isn’t burdened with a large debt load and if the Council acts diligently, it won’t become so.
Thanks for listening. Bill Kabourek
Wednesday, February 10, 2010
Are Central Bankers Throwing Life Preservers or Anchors?
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Tuesday, February 2, 2010
$30B For Small Business Lending A Boon To Banks
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Monday, February 1, 2010
Shameless Plug Time--Buy Men Who Are Making America
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