****WARNING: I'll be talking politics here so feel free to click away if you're afraid getting soiled by association. :) Full disclosure: I've know Mr. Doheny since our days competing on the baseball fields in Alex Bay.
Capital Tonight posted Mr. Doheny's - the presumed Republican candidate in NY-23 - fundraising totals for Q4 and they were very impressive. Just over $306k in the last 3 months. However, I think it could best be used as a real estate shopping guide. If you want to know where the swankiest towns on the east coast are just look at this contribution list - Armonk, Rye, Chappaqua, Scarsdale, Larchmont, Bernardsville, NJ, Ridgewood, NJ, Greenwich, CT, New Canaan, CT, and of course NY, NY. If you're thinking of relocating from upstate NY you'd be lucky to end up in one of these towns.
Well, that's okay you say, that's the nature of the political beast. You have to raise money whenever and where ever you can. True, but in my 5 minute review of the forms I only found 2 contributions that would be classified as coming from NY-23. There were two contributions totaling $5,500 from individuals in Watertown (there was one contribution from East Syracuse but I believe that's outside of NY-23). Maybe I missed something and if I did I'll be happy to correct it - you can see the full report here.
So doing the math $5,500/$306,000 = 1.8% of Mr. Doheny's fundraising came from local supporters while the remaining 98.2% came from individuals in TX, NJ, NYC, CT, Long Island and Westchester. So that's the definition of 1% in NY-23 - the % of people that can contribute to a political campaign.
I'll do the same analysis of Congressman Owens fundraising when he releases his information and I imagine the numbers will be similar.
A critical component of campaign finance reform that I'd like to see would be a limitation to contributing only within your voting district (after we fix Citizens United). Oh, and can we stop double dipping? It's clear that many individuals are contributing in the name of their spouse and/or children to avoid the limitations on campaign contributions.
I dream of the day when someone launches a campaign to run as independent for the Broke Party.
Their platform will be -"I won't spend $1 on this campaign. No advertising, no fundraising, no buses, no flyers. Every day I'll host a skype conference call where we discuss the issues. I'll do it from home so I don't incur any travel costs."
Someone running like that would probably poll around 20% in NY-23. :)
Friday, January 27, 2012
Thursday, January 26, 2012
The Romney tax debate is all wrong
I'm amazed that EVERYONE is missing the real story with the Romney 14% tax rate story. Here's the deal - we structure our tax code to encourage investment. Invest over a long enough time and you are rewarded by paying a lower rate. Since the bulk of Romney's income comes from investments he gets the benefit of that lower rate.
However, this is where it gets interesting. There has been a long debate over whether people like Gov. Romney who are not the actual investors but rather the managers of the investmens, should have their money taxed like that of the investors.
Consider this hypothetical example... Let's say Sane Capital decides to raise a new buyout fund. They raise $98 from wealthy investors and kick in $2 to act as the general partner.
Sane Capital then buys company ABC, strips out inefficiencies, turns a profit and sells ABC to another competitor three years later for $200. Sane Capital repays their investors their capital of $100 and a hurdle rate return (call it $15 for this example). Now we're left with roughly $85 of "long-term gain". The typical Private equity firm gets 20% of the profits, so in this case $68 would go to the investors and $17 would go to Sane Capital.
The great debate is: should that $17 gain on the Sane Capital $2 investment be taxed as "long-term gain" or "operating income" because their operations (fixing the business) is what generated the income? I'm not a tax expert and I don't play one on TV but every Private Equity guy I've ever talked to agrees that this is really OPERATING INCOME (meaning they should be taxed at normal income tax rates) but they aren't in any rush to change the tax laws.
I know most eyes glazed over when I started talking investments and tax policy but hopefully I added a little color to the tax debate surrounding Gov. Romney's tax returns. It's not about the 14%, but rather is the income a gain or income from operating the business?
Cheers!
However, this is where it gets interesting. There has been a long debate over whether people like Gov. Romney who are not the actual investors but rather the managers of the investmens, should have their money taxed like that of the investors.
Consider this hypothetical example... Let's say Sane Capital decides to raise a new buyout fund. They raise $98 from wealthy investors and kick in $2 to act as the general partner.
Sane Capital then buys company ABC, strips out inefficiencies, turns a profit and sells ABC to another competitor three years later for $200. Sane Capital repays their investors their capital of $100 and a hurdle rate return (call it $15 for this example). Now we're left with roughly $85 of "long-term gain". The typical Private equity firm gets 20% of the profits, so in this case $68 would go to the investors and $17 would go to Sane Capital.
The great debate is: should that $17 gain on the Sane Capital $2 investment be taxed as "long-term gain" or "operating income" because their operations (fixing the business) is what generated the income? I'm not a tax expert and I don't play one on TV but every Private Equity guy I've ever talked to agrees that this is really OPERATING INCOME (meaning they should be taxed at normal income tax rates) but they aren't in any rush to change the tax laws.
I know most eyes glazed over when I started talking investments and tax policy but hopefully I added a little color to the tax debate surrounding Gov. Romney's tax returns. It's not about the 14%, but rather is the income a gain or income from operating the business?
Cheers!
Tuesday, January 17, 2012
Developing story - re: NYS tax receipts
This news is just out today but the Wall Street Journal is reporting that "that Morgan Stanley will cap cash bonuses
at $125,000 and "will defer the portion of any bonus past $125,000 until
December 2012 and December 2013".
Now for mere mortals a bonus of $125,000 pre-tax would seem like a gift from above, but for the Wall Street crowd $70k after tax is barely going to cover the down payment on their new Lamborghini Gallardo. The deferred comp will still be nice for these heavy hitters but here are the potential fallouts that I see....
* Many of these people that are capable of making $1 - $5 million/year will start to flood the hedge fund industry. This means many people that formerly worked in Manhattan will be moving their $5 million salaries and their associated spending to hedge funds around the US - CT, CA, etc. This will have a negative long-term impact on state revenues in NY State.
* The timing of this news has to be making some people really sweat in Governor Cuomo's office. The Governor is set to release his budget today and that is premised on certain assumptions for Wall Street salaries/bonuses and their associated taxes. However, if all of Wall Street decides to follow this model of capping cash payouts NY State could be in a world of hurt in 2012 as revenues start to dry up.
* Finally, the reduction of tax revenues at the Federal level could have a huge impact on the 2012 Presidential race. The initial expansion of the Federal debt ceiling was designed to get the country through to January or February 2013. However, revenues have been a bit behind expectations and spending has been a bit above projections. Right now the best guess is that we'll be bumping up against the debt ceiling in late November 2013 or December 2013. However, if Wall Street cash bonuses are limited there is a chance we could hit the debt ceiling in October. If that were to happen imagine the chaos that would create in the late stages of the Presidential campaign.
Cheers!
Now for mere mortals a bonus of $125,000 pre-tax would seem like a gift from above, but for the Wall Street crowd $70k after tax is barely going to cover the down payment on their new Lamborghini Gallardo. The deferred comp will still be nice for these heavy hitters but here are the potential fallouts that I see....
* Many of these people that are capable of making $1 - $5 million/year will start to flood the hedge fund industry. This means many people that formerly worked in Manhattan will be moving their $5 million salaries and their associated spending to hedge funds around the US - CT, CA, etc. This will have a negative long-term impact on state revenues in NY State.
* The timing of this news has to be making some people really sweat in Governor Cuomo's office. The Governor is set to release his budget today and that is premised on certain assumptions for Wall Street salaries/bonuses and their associated taxes. However, if all of Wall Street decides to follow this model of capping cash payouts NY State could be in a world of hurt in 2012 as revenues start to dry up.
* Finally, the reduction of tax revenues at the Federal level could have a huge impact on the 2012 Presidential race. The initial expansion of the Federal debt ceiling was designed to get the country through to January or February 2013. However, revenues have been a bit behind expectations and spending has been a bit above projections. Right now the best guess is that we'll be bumping up against the debt ceiling in late November 2013 or December 2013. However, if Wall Street cash bonuses are limited there is a chance we could hit the debt ceiling in October. If that were to happen imagine the chaos that would create in the late stages of the Presidential campaign.
Cheers!
Gas consumption...
I knew that $3.25 - $3.75/gallon gas was going to have an impact on consumption but I'm surprised to see the final year-end numbers dipped so dramatically.
Some of the decline could be explained by increased fuel efficiency but a a drop this steep must be tied to a slowdown in the economy.
Some of the decline could be explained by increased fuel efficiency but a a drop this steep must be tied to a slowdown in the economy.
Friday, January 13, 2012
The 99% and the 0.000001%
If you ever wondered why it's so hard for the 99% to find entry level employment in the US maybe it's a case of the "inmate took my job".
I still had this antiquated view of prison work programs of where prisoners were stamping out license plates. My how times have changed....
"The federal government calls it "the best-kept secret in outsourcing" — providing inmates to staff call centers and other services in both the private and public sectors.
The U.S. government, through a 75-year-old program called Federal Prison Industries, makes about $750 million a year providing prison labor, federal records show.
Inmates provide private call center service, including data review and sales lead generation, for "some of the top companies in America" under a federal mandate to help companies repatriate jobs they have outsourced overseas.
When New York residents call the Department of Motor Vehicles, for example, they might get an inmate at Greene Correctional Institution in Coxsackie, near Albany, or at Bedford Hills Correctional Facility for Women near White Plains."
I think there is a good deal of merit in training people to have marketable skills that they can use after they pay their debt to society. However, I struggle with a couple of ideas here:
* Private companies can utilize this prison labor at significantly lower rates than they might otherwise have to pay a traditional employee.
* The government is in effect subsidizing these businesses by offering below market labor.
If the prisoners (or the state) were paid an equal wage to that of a traditional employee than I think you could argue that this is a win/win but when some prisoners are being paid $0.50/hour I think the market is thrown out of whack. What do you think?
*****************************************************************
When I first read this story, I thought it had to be a joke especially in an era of smartphones, twitter, etc.
Apparently, one company has figured out that not all wealthy people are very bright and to capitalize on this phenomenon they introduced the Black Astrum line of business cards. These hand crafted, diamond encrusted business cards are available only to the special few that are "invited" to pay roughly $1,500 PER BUSINESS CARD!! Want to get a set of 100 to impress your friends and family? That will be the cost of a starter home. For that price I think you'd better make sure your phone number and email doesn't change very often.
Ah, life is good for the 0.000001%.
I think I'll stick with Vistaprint for all my business card needs :)
***********************************************************
Cheers!
I still had this antiquated view of prison work programs of where prisoners were stamping out license plates. My how times have changed....
"The federal government calls it "the best-kept secret in outsourcing" — providing inmates to staff call centers and other services in both the private and public sectors.
The U.S. government, through a 75-year-old program called Federal Prison Industries, makes about $750 million a year providing prison labor, federal records show.
Inmates provide private call center service, including data review and sales lead generation, for "some of the top companies in America" under a federal mandate to help companies repatriate jobs they have outsourced overseas.
When New York residents call the Department of Motor Vehicles, for example, they might get an inmate at Greene Correctional Institution in Coxsackie, near Albany, or at Bedford Hills Correctional Facility for Women near White Plains."
I think there is a good deal of merit in training people to have marketable skills that they can use after they pay their debt to society. However, I struggle with a couple of ideas here:
* Private companies can utilize this prison labor at significantly lower rates than they might otherwise have to pay a traditional employee.
* The government is in effect subsidizing these businesses by offering below market labor.
If the prisoners (or the state) were paid an equal wage to that of a traditional employee than I think you could argue that this is a win/win but when some prisoners are being paid $0.50/hour I think the market is thrown out of whack. What do you think?
*****************************************************************
When I first read this story, I thought it had to be a joke especially in an era of smartphones, twitter, etc.
Apparently, one company has figured out that not all wealthy people are very bright and to capitalize on this phenomenon they introduced the Black Astrum line of business cards. These hand crafted, diamond encrusted business cards are available only to the special few that are "invited" to pay roughly $1,500 PER BUSINESS CARD!! Want to get a set of 100 to impress your friends and family? That will be the cost of a starter home. For that price I think you'd better make sure your phone number and email doesn't change very often.
Ah, life is good for the 0.000001%.
I think I'll stick with Vistaprint for all my business card needs :)
***********************************************************
Cheers!
Just when you thought it was safe to go back in a Lincoln...
I've actually heard some decent reviews of the new Lincoln MKZ concept car (even though it looks like the son of an Infinite G35 and that wretched Honda CrossTour) but you know someone is going to have a rough day in the office today after they debuted this car in Detroit yesterday.
"Something seems to have gone awry with the showcar's electronics as it sat on the show floor. At some point, thin puffs of smoke began wafting from the driver's side door panel. No actual flames were spotted or damage reported, but something tells us someone is going to have some explaining to do."
You can see the video here, which is worth its weight in gold as the Ford exec starts scrolling through his iPhone looking for "what to do when the car that is supposed to save our brand catches on fire". :)
"Something seems to have gone awry with the showcar's electronics as it sat on the show floor. At some point, thin puffs of smoke began wafting from the driver's side door panel. No actual flames were spotted or damage reported, but something tells us someone is going to have some explaining to do."
You can see the video here, which is worth its weight in gold as the Ford exec starts scrolling through his iPhone looking for "what to do when the car that is supposed to save our brand catches on fire". :)
Monday, January 09, 2012
Hotel in two weeks?
Okay, so there is no doubt that building this hotel took weeks or months of prep work but watch this video and try hard not to be amazed at the speed with which things get done in China.
The prefab sections come completely wired, plumbed, sheetrocked and tiled. All of the interior components of a section - interior studs, sheetrock, etc, - are shipped on the same platform so when a section is lifted into place all of the interior components are there as well. This really speeds up construction because you aren't spending days on site lifting interior components up into an existing frame.
The implications of this on the global market are significant. What happens when they export this technology and you can buy a prefab hotel online for $19,999 via paypal? What does that do to global real estate values? How about pricing pressures on the global construction industry? As someone pointed out construction is one of the last industries not to be outsourced in the US. Check back with us in 2025.
Cheers!
The prefab sections come completely wired, plumbed, sheetrocked and tiled. All of the interior components of a section - interior studs, sheetrock, etc, - are shipped on the same platform so when a section is lifted into place all of the interior components are there as well. This really speeds up construction because you aren't spending days on site lifting interior components up into an existing frame.
The implications of this on the global market are significant. What happens when they export this technology and you can buy a prefab hotel online for $19,999 via paypal? What does that do to global real estate values? How about pricing pressures on the global construction industry? As someone pointed out construction is one of the last industries not to be outsourced in the US. Check back with us in 2025.
Cheers!
Monday, December 19, 2011
Holiday Potpourri
As I've stated repeatedly, I try to avoid political discussions like the plague, but yesterday's end of the Iraq War brought to mind many questions that I thought might be worth reviewing in a non-political way.
1) In 2000 (prior to entering 2 wars) the US Defense budget was $387 billion. In 2012, when we should only be fighting one "war" as we chase 5 bad guys around a wasteland in Asia our Defense budget will be $662 billion. If we could somehow turn a switch and ratchet back our defense spending to just the obscenely high levels of 2000 then we could save over $275 billion per year that could pay down debt, cut taxes, build infrastructure or basically pay for every full-time college student's tuition in the US. I know that's wishful thinking but what is the Holiday season without a little fantasy :)
2) As I read another story about our withdrawal from Iraq (side note: can we please make an effort to pronounce the name of their country correctly? It is NOT eye-rack) I wondered how well we know the country that we've been at war with for the past 9 years. As we were departing the country yesterday the country's prime minister, a Shiite, had the country's vice-president, a Sunni, detained at the airport. If you had to guess what percentage of the population in Iraq is represented by Sunnis, Shiites and Kurds what would you say?
If you guessed 52% for the Shiites, 28% for the Sunnis and 20% for the Kurds give yourself a gold star (these are all rough estimates). The point is that during out time in Iraq the Shiites and Sunnis have appeared to be working toward the same goal - namely getting us out of there. However, now that we are gone there is a real risk that the Shiites will decide they'd like to run the show as they are a majority. Oh, and that real big country to the east of Iraq that seems to want to stir trouble --- roughly 90% of their population is Shiite.
********************************************************************
Here's another step forward in the future of higher education - "On Monday, MIT is announcing that for the first time it will offer credentials — under the name "MITx" — to students who complete the online version of certain courses, starting with a pilot program this spring." This is one of the two models of higher education emerging over the next twenty years. Gone are the days of sending Johnny off to some campus in the rolling hills of Vermont. The college experience of the future is going to be online, rigorous and target specific career opportunities.
Stanford opened up a course earlier this year for free and the response has been overwhelming. The professors have said that the quality of work they are receiving from the online students is on par with what they are getting from their Stanford students.
I even downloaded one of their courses on App development and watched the lectures while working out in the gym. It's pretty impressive stuff.
"MITx" as a non-profit entity established inside the university that will offer an "MIT-sanctioned certificate" for completing various courses or, perhaps eventually, whole course sequences — though MIT emphasized full degrees will not be in the offing.
How exactly will it work? On a conference call Friday, university officials were short on many details — how many courses would eventually be offered, how much it would cost, even the name of the first course for the experiment in spring.
They did say they would focus, at least initially, on science and engineering, where assessment is fairly objective and easily scaled up. Users might include a high school senior who wants to take an early freshman class at MIT, or college students at overseas universities where a particular course isn't offered.
One day I'll let the cat out of the bag with regard to my other vision for the future of higher education but I think there is a business model there that could be worth some coin so I'm going to refrain from giving that one away for free :)
1) In 2000 (prior to entering 2 wars) the US Defense budget was $387 billion. In 2012, when we should only be fighting one "war" as we chase 5 bad guys around a wasteland in Asia our Defense budget will be $662 billion. If we could somehow turn a switch and ratchet back our defense spending to just the obscenely high levels of 2000 then we could save over $275 billion per year that could pay down debt, cut taxes, build infrastructure or basically pay for every full-time college student's tuition in the US. I know that's wishful thinking but what is the Holiday season without a little fantasy :)
2) As I read another story about our withdrawal from Iraq (side note: can we please make an effort to pronounce the name of their country correctly? It is NOT eye-rack) I wondered how well we know the country that we've been at war with for the past 9 years. As we were departing the country yesterday the country's prime minister, a Shiite, had the country's vice-president, a Sunni, detained at the airport. If you had to guess what percentage of the population in Iraq is represented by Sunnis, Shiites and Kurds what would you say?
If you guessed 52% for the Shiites, 28% for the Sunnis and 20% for the Kurds give yourself a gold star (these are all rough estimates). The point is that during out time in Iraq the Shiites and Sunnis have appeared to be working toward the same goal - namely getting us out of there. However, now that we are gone there is a real risk that the Shiites will decide they'd like to run the show as they are a majority. Oh, and that real big country to the east of Iraq that seems to want to stir trouble --- roughly 90% of their population is Shiite.
********************************************************************
Here's another step forward in the future of higher education - "On Monday, MIT is announcing that for the first time it will offer credentials — under the name "MITx" — to students who complete the online version of certain courses, starting with a pilot program this spring." This is one of the two models of higher education emerging over the next twenty years. Gone are the days of sending Johnny off to some campus in the rolling hills of Vermont. The college experience of the future is going to be online, rigorous and target specific career opportunities.
Stanford opened up a course earlier this year for free and the response has been overwhelming. The professors have said that the quality of work they are receiving from the online students is on par with what they are getting from their Stanford students.
I even downloaded one of their courses on App development and watched the lectures while working out in the gym. It's pretty impressive stuff.
"MITx" as a non-profit entity established inside the university that will offer an "MIT-sanctioned certificate" for completing various courses or, perhaps eventually, whole course sequences — though MIT emphasized full degrees will not be in the offing.
How exactly will it work? On a conference call Friday, university officials were short on many details — how many courses would eventually be offered, how much it would cost, even the name of the first course for the experiment in spring.
They did say they would focus, at least initially, on science and engineering, where assessment is fairly objective and easily scaled up. Users might include a high school senior who wants to take an early freshman class at MIT, or college students at overseas universities where a particular course isn't offered.
One day I'll let the cat out of the bag with regard to my other vision for the future of higher education but I think there is a business model there that could be worth some coin so I'm going to refrain from giving that one away for free :)
Tuesday, December 13, 2011
Low volume grind
Markets have been spinning their wheels this week in the wake of the "big bailout" last week. A bunch of factors are probably contributing to the current malaise.
1) Confidence is fading fast that this deal can ever receive full acceptance in the EU.
2) The uncertainty has really caused a spike in the US dollar relative to Euro and other currencies.
This last point is particularly important to watch. It now takes just $1.30 to buy 1 Euro which is the best exchange for the dollar in nearly a year. The dollar has only been stronger on 2 occasions in the past 3 years. This will mean lower gas/oil prices as the dollar strengthens (yeah!) but it could make it more difficult for US companies looking to sell in Europe (see Intel's comments yesterday about European demand falling off a cliff in the past few weeks).
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Photo of the day:
1) Confidence is fading fast that this deal can ever receive full acceptance in the EU.
2) The uncertainty has really caused a spike in the US dollar relative to Euro and other currencies.
This last point is particularly important to watch. It now takes just $1.30 to buy 1 Euro which is the best exchange for the dollar in nearly a year. The dollar has only been stronger on 2 occasions in the past 3 years. This will mean lower gas/oil prices as the dollar strengthens (yeah!) but it could make it more difficult for US companies looking to sell in Europe (see Intel's comments yesterday about European demand falling off a cliff in the past few weeks).
*************************************************
Photo of the day:
This is the view from inside a "fake" Disneyland style resort that was being built in China about ten years ago when construction suddenly stopped.
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Chart of the day:
While you'll hear lots of breathless debate over taxes in the coming year note this chart which shows the top US tax bracket over the past 30 years and the actual effective tax rate paid by the highest 1% of earners.
Note that while the top statutory rate bounces around the effective rate has remained fairly stable. The 1% should thank their friendly neighborhood tax professional for achieving this lofty goal :)
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