Thursday, July 24, 2014

Immigrants or Refugees?


You remember these words carved into the Statue of Liberty. Don't you?


Give me your tired, your poor, 
Your huddled masses, yearning to breath free, 
The wretched refuse of your teeming shore, 
Send these, the homeless, tempest tossed to me, 
I lift my lamp beside the golden door. 

Why don't we believe and practice these words anymore? Can't we see that most of these kids trying to enter this country are from three countries - Guatemala, Honduras and El Salvador? Because of the War on Drugs between 2009 and 2012 a civilian was more likely to be killed by violence in these countries than killed in Iraq at the height of the insurgency.

These kids are truly refugees.

What's with airplanes this year?

In March Malaysia Airlines flight 370 went missing. Today Algeria Airlines reports one of its planes has gone off the radar. This happened 55 minutes after takeoff. It was flying across the Sahara from Burkino Faso to Algeria. There are 110 passengers and six crew on board.

Wednesday, July 23, 2014

An extra tooth or two

Ashik Gavai, a teenager from India, had had gum problems and pain for the past year and a half. He was finally correctly diagnosed as having "complex composite odontoma where a single gum forms lots of teeth. It's a sort of benign tumour." The tumor was pretty tough and required the use of a chisel and hammer to open it. Then the deluge started:

Teeth of Indian teenager Ashik Gavai

The deluge was 232 small teeth, the most anyone has heard of. He still has 28 regular teeth.

Just another plagiarist

While it's a front-page article in the NY Times, the charge of plagiarism against a national politician is not new. The names of Rand Paul and Joe Biden come readily to mind. Today's politician who "confronts questions of plagiarism" is Senator John Walsh, recently appointed Democrat from Montana. 

The article contends that the final paper required for Mr. Walsh’s master’s degree from the United States Army War College seems to indicate that the senator appropriated at least a quarter of his thesis on American Middle East policy from other authors’ works, with no attribution. Most of the appropriations are word-for-word. When interviewed by the Times, Mr. Walsh said he did not believe he had done anything wrong. Here is one way of looking at his thesis:


The plagiarism is not Mr. Walsh's sole difficulty with the truth. His claim to have graduated from the University of Albany was refuted. He was denied a promotion from colonel to general in the National Guard because he urged other guardsmen to join a private advocacy group, the National Guard Association of the United States, in which he was seeking a leadership role.

A worthy Senator?

And the count goes on and on

Another week, another GM recall. This time it's only 717,960, none of which is related to the ignition switch. There are several reasons but a turn-signal bulb is the biggest culprit this time with 120,426 instances of a problem. 

Tuesday, July 22, 2014

Dumb Tourists

Pam Martens of Wall Street on Parade reports today on the first day of testimony before the Senate's Permanent Subcommittee of Investigations. I don't know what the scope of the investigations are, but this one is about hedge funds and high frequency trading.  The subject is extremely complex and, in her mind, very likely not quite kosher; she calls those not on the inside - her and us - "dumb tourists".

First, you've got a situation where the banks with whom the funds deal can leverage these deals as high as 20-1. Yet, Federal law has something called Regulation T, which says that a bank or broker-dealer cannot extend more than 50 percent margin on a stock account. Then, you've got something called a basket option, which defines all these trades (which last minutes) as long-term transactions and, thus, subject to a lower tax rate. The Senate report says that one firm may have engaged in "tax avoidance of more than $6 billion". It is also questionable as to whether the books and records say who is the true owner of an account.

Another interesting excerpt from the Senate report:
“Large partnerships – which include hedge funds, private equity funds, and publicly traded partnerships – are some of the most profitable entities in the United States.  According to a 2013 preliminary report issued by the U.S. Government Accountability Office (GAO), ‘[i]n tax year 2011, nearly 3.3 million partnerships accounted for $20.6 trillion in assets and $580.9 billion in total net income.’ That GAO report also found that the IRS was failing to audit 99% of the tax returns filed by large partnerships with assets exceeding $100 million.”
The hearing continues on Wednesday.

Monday, July 21, 2014

Makes no sense to me

80% of California is classified as being in an extreme drought. Yet, water use actually jumped one percent this May, compared to the same period last year. Then, you get the weird case of Laura Whitney and her husband, Michael Korte. They live in Glendale, part of Contra Costa, and  have been trying to conserve water by cutting back on lawn watering, taking shorter showers, and doing larger loads of laundry. Here's how their lawn looks.

Michael Korte walks across his lawn in Glendora, Calif. Korte and his wife face a possible fine of up to $500 for not maintaining their lawn during the drought.
Although the Water Board says that lawn care is typically the single biggest water user for the average property and a 500-square-foot lawn can use more than 18,000 gallons of water per year, they have decided to fine the couple as much as $500 for not keeping their lawn green.

Oliver on Prisons

Sunday, July 20, 2014

Subprime Redux?

It's not mortgages as it was in the 2000s. Now it's car loans. Auto loans to people with tarnished credit have risen more than 130 percent in the five years since the immediate aftermath of the financial crisis, with roughly one in four new auto loans last year going to borrowers considered subprime. This year subprime auto loans are up 15%.

Many of the characteristics of the mortgage subprime debacle are present with these auto loans. The accuracy of the information in many loans is highly questionable, often income is overstated and employment history, more or less, made up. The loans are often at least twice the size of the value of the used cars purchased, including dozens of battered vehicles with mechanical defects hidden from borrowers.And the loans are being sold to people who can't really afford them. The loans are bundled into complex bonds - which are listed as investment grade by the ratings agencies - and then sold as securities by banks to insurance companies, mutual funds and public pension funds. The interest rates can be as high as 23%.

Results are deteriorating. In the first three months of this year, banks had to write off as entirely uncollectable an average of $8,541 of each delinquent auto loan, up about 15 percent from a year earlier, according to Experian. In another sign of trouble ahead, repossessions, while still relatively low, increased nearly 78 percent to an estimated 388,000 cars in the first three months of the year from the same period a year earlier. The number of borrowers who are more than 60 days late on their car payments also jumped in 22 states during that period.

Jury gone wild

A jury in Florida seems to have had it in for R J Reynolds, the tobacco company. They awarded the widow of a smoker who died in 1996 $23.6 billion dollars in punitive damages and $16.8 million in compensatory damages. I'm sure Reynolds will appeal the decision and will likely lower the awards significantly.

Oliver on climate change

Friday, July 18, 2014

Inversion Simplified



Some other companies practicing inversion: Mylan, Medtronic, AstraZeneca

Since 2008 (six years ago), two dozen U.S. companies have moved their legal base abroad as part of a merger, the same number that did so over the previous 25 years.

You should read David Rothkopf's article

He ruminates on this week's slaughters of the innocent - the four kids killed on the beach in Gaza and the downing of the Malaysian plane over the Ukraine. It's a powerful piece. Here are some excerpts:
Modern low-intensity conflicts are won and lost on their ragged edges. Nations act as though the careful plans of their militaries and intelligence operations can harness the chaos of combat and guide it to advance their interests. And then the unplanned happens, collateral damage occurs, and it has a bigger impact on politics and the position of combatants than all the calculated elements of the conflict added up.
While the Israeli government can and repeatedly does justify its actions against Hamas as self-defense, it cannot argue away the deaths of four children on the beach or, for that matter, the large number of other civilian victims of its attacks. There is no moral equation that offers a satisfactory calculus to enable us to accept the death of innocents as warranted.
Leaders on both sides have lost all sense that when you share a land, you share each other's children, and that they belong not to the flawed nations of today but to the promise of what might come tomorrow.
The sight of dead children not only weakens Israel politically and dents the country's international standing, but it taints every defensible action Israel might take and devalues any future peace by literally having snuffed it out for those killed.
When innocents die, standard military metrics for success or failure pale in comparison with the human costs depicted so graphically in the media -- highlighting once again with indelible and deeply disturbing images the hubris of leaders who delude themselves into believing they can control the uncontrollable.

From our meditation instructor

Corporations should pay their fair share of taxes

Monolithic corporations, like Pfizer, have cut their federal income taxes a lot. The share of federal revenue coming from corporate taxes has fallen from around 32 percent in 1952 to 8.9 percent now. As a share of gross domestic product, it has fallen from about 6 percent of GDP then to less than 2 percent now.

This is due largely to a process called inversion. Basically, a company buys or merges with a non-US company and claims to no longer be based in the US to get out of paying certain taxes. The company does, however, keep the same employees, executives, buildings, sales channels and customers it had inside the US before the switch.


This has worked quite well for Pfizer. Bloomberg reports “earnings before taxes outside the US were $15 billion in 2011 while losses within the country were $2.2 billion. … These operating results appear to be inconsistent with [Pfizer's] domestic and international revenues, which in 2011 were $26.9 billion and $40.5 billion, respectively.”

In addition to inversion, companies need not repatriate profits held overseas. Again, the money adds up; Pfizer held as much as $73 billion of taxable profits outside the US in 2012.

Thursday, July 17, 2014

400,000 deaths per year?

That's what one study estimated with regard to preventable harm in hospitals. Another study claims that patients are no better protected now than they were 15 years ago. A third concludes that preventable patient harm is the third-leading cause of death in America. Other studies show that medication errors, adverse drug events and injuries due to drugs occur in up to 25 percent of patients within 30 days of being prescribed a drug.

In my business days one of the 'cliches' I felt was reality was: you can't manage if you don't measure. That appears to be the basic problem in reducing the number of deaths that are preventable. Providers and public health agencies still are not accurately measuring the harm.

Elaine Stritch Died Today

Against Muslim-Americans?

Since Bill Clinton, the President has sponsored a dinner at the end of Ramadan. The dinner is meant to honor Muslims who are celebrating the end of a day of fasting during the holy month of Ramadan. These dinners have not been especially newsworthy until this year. This year there was a modicum of news. Some Muslims did not accept the invite and protested the event. The President endorsed Israel’s ongoing assault on the Gaza Strip. He also had a good word to say about NSA spying on Muslim-Americans. And he invited the Israeli Ambassador to the US, an outspoken advocate of Israel's settlement enterprise who has claimed Muslim and Arab culture is endemically violent.

Disaster Planning by TBTF banks

Things in the financial world have grown very, very complex. When Lehman failed, it had $639 billion in assets and 209 subsidiaries; it took three years to unwind the bank. Today JPMorgan has $2.5 trillion in assets and 3,391 subsidiaries. Could it ever be unwound? 

Dodd-Frank mandated that large financial institutions submit plans to the Federal Reserve and the FDIC explaining how they could be “rapidly” liquidated without bringing down the economy. 

Here's what Stanley Fischer, the Fed Vice-Chair, has to say about that,“In short, actively breaking up the largest banks would be a very complex task, with uncertain payoff.” His boss, Janet Yellen, notes that the wind-down plans are “complex” and some plans encompass “tens of thousands of pages.” She says that there is a "process" to handle the situation. However, I suspect she has doubts about some of the plans as she also says, "I think we need to give these firms feedback.”