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Herbert Stein’s Law

3 Oct

The father of Ben Stein, Herbert Stein, wrote that “If something cannot go on forever, it will stop”.


If we look at the distribution of wealth in the US, Stein’s Law is at work. Stein’s law could be used as a way to describe why the “American’s Are Not Getting Fatter” as well, or why Detroit went bust.

And, as the Federal government begins to address raising the National Debt limit in the next couple of weeks, it is very much consistent with Stein’s Law that “it’s not really a ceiling if you continue to raise it.”

What is more important to the average Joe, is what’s going to happen to the stock market, and the economy. As the “U.S. Stock Market Moves Further Away From Reality“, below is a chart of the stock market (SPY) over the last 20 years. It looks like another top could be forming.


If Stein’s Law is working on the debt ceiling, it may be working on the stock market as well.

A Part of the Incarceration Industry in America

23 Sep

One of the more successful businesses in the US, the private prison system is alive and well. This is due in no small part to the close relationship between the government and this private industry group. First let’s start with an image of how many countries in the world have a higher incarceration rate than the “Land of the Free”:

That’s right. The US is the world’s leader in incarceration. The next closest incarceration rate to any country that is not an island nation is Rwanda.

In another measurable in the incarceration world, the US is the only country in the world that incarcerates children for life. You can find an image of all the countries that condemn children to die in prison here.

In order to further the success of this business, below is a graphic of the location of prisons where state governments are committed to finding enough offenders to fill 90% of the available beds:

And in California, the state is working toward not releasing nonviolent drug offenders despite a federal court order. Instead, they are discussing a new alignment between the state’s prison guard union and the private prison corporations that would expand the current incarceration levels.

Also of note, although blacks in the US only make up 30% of the population, they make up 60% of the prison population. A graph of the African-American population in the US has a relationship to the incarceration map above.

This sure looks like a strange form of capitalism, where business failure is not an option. You can find out more about how to invest in this growing business at CCA’s investor page.

Corn – The #1 Subsidized Crop in America

10 Sep

A naturally occurring source of high protein is now a nutritionally deficient, inedible, bio-engineered product for commercial use only. The genetically modified corn in the US is used to produce ethanol (40%), high fructose corn syrup, and animal feed. The animal feed is primarily used as feed for cattle (to generate protein) who cannot survive on such a diet without the use of antibiotics. The high fructose corn syrup is used as a food additive in breadscereals, breakfast barslunch meatsyogurtssoft drinkssoups, and condiments. In King Corn, two college students followed the progress of field corn they raised on an Iowa farm from the field to the table.


The transition from simple farming in the 1950’s to the industrial production today did not occur overnight. Any changes will take time to implement. It is clear that America has been sold, and is buying cheap food. The consequence of cheap food is exhibited in the increased rates of obesity and diabetes. Below are two studies on the effects genetically modified corn on laboratory rats. (USA leads the world in biotech crops with approximately a 90% adoption rate across all biotech crops. – ISAAA Publication)

Three different genetically modified corns were used to compare their effects of on mammalian health” :

“Effects were mostly associated with the kidney and liver, the dietary detoxifying organs, although different between the 3 GMOs…. Our analysis highlights that the kidneys and liver as particularly important on which to focus such research as there was a clear negative impact on the function of these organs in rats consuming GM maize varieties for just 90 days.”

Excerpted from “Long-term Toxicity of a Roundup Herbicide and a Roundup-Tolerant Genetically Modified Maize“:

This is the first long-term peer reviewed toxicity study into the health impact of a GM tolerant maize crop and the world’s most popular herbicide, Roundup. The research shows that consuming even relatively low levels of the commercial NK603 Roundup tolerant GM maize or of the herbicide, Roundup, can result in greatly increased levels of mammary tumors, kidney and liver damage, and premature death in laboratory rats.

Between the genetically modified corn seeds through the commercialization of the product itself a fresh look at corn is in order.

Industry Battles to Deny Contribution to Bee Disorders (CCD)

6 Sep

The chemical industry that generates the chemicals designed to kill insects is denying their activity (products) affects bees. To protect their revenues from neonicotinoid sales losses, Syngenta and Bayer filed suits against the European Commission who placed a two year ban on these pesticides.


The FDA in the US is under pressure to take action against the use of neonicotinoids for the same reasons the European Commission took action.

More than a year ago, three “new” studies associated neonicotinoids to Colony Collapse Disorder (CCD).

  1. “researchers found that exposure to small, sublethal doses of a neonic called thiamethoxam significantly affects bees’ ability to find their way back to their hives—”at levels that could put a colony at risk of collapse.”” Science
  2. “Given the scale of use of neonicotinoids, we suggest that they may be having a considerable negative impact on wild bumble bee populations across the developed world.” Science
  3. Experimental results show that the environmental release of particles containing neonicotinoids can produce high exposure levels for bees, with lethal effects compatible with colony losses phenomena observed by beekeepers. US National Library of Medicine

The use of these pesticides could place the US food supply in jeopardy, yet the punishment for violating the bans does not offer much of a deterrent. In Florida, a Corporation violated state law twice, killing millions of bees and was fined $1,500. The economic impact to the beekeeper was placed at $240,000, mostly due to loss of honey sales.

“it’s estimated that commercial beekeeping adds up to almost $16bn in value to US agriculture every year.”

This week it was announced that a pilot study reveals that more than half of garden plants attractive to bees sold at Home Depot and Lowe’s have been pre-treated with pesticides that could in fact be lethal to the bees.

The legal system could very well delay the suspension of the use of neonicotinoids. The Guardian has set up a Question and Answer site just for the subject of Beekeeping, colony collapse disorder and the future of bees. It is moderated by Allison Benjamin, author of A World Without Bees.

The Cost of Doing Business

2 Sep

It came out this week that the legal fees for the largest banks in the US will exceed $100B. That was only a portion of the $700B provided to these large banks in 2008.

Image

In the Quarterly Report to Congress from the Special Inspector General for TARP, the current obligation on that money stands at $456B. This “Special Inspector General” is also responsible for all litigation with regards to the TARP bailout.

It is interesting to see all of the litigation listed in this report. Of special note is that of all (107 convictions) the people prosecuted, it appeared that none of them worked for these big banks. They were what one might call small potatoes. Of the 51 listed in the report, all (with reported employers) came from one of the companies listed below :

American Mortgage Mount Vernon Money Center
Appalachian Community Bank Nations Housing Modification Center
BBR Group, LLC Network Funding
C&C Holdings, LLC New Point Financial
Colonial Bank Omni National Bank
Compliance Audit Solutions Inc. Orion Bank
First Community Bank Oxford Collection Agency
FirstCity Bank ProTrust Management, Inc.
Friends Investment Group Taylor, Bean & Whitaker
Galleria USA, Inc. Team Management, LLC
Home Front, Inc. The Shmuckler Group, LLC
Mortgage Solutions Specialists Timelender

A separate report from SIGTARP does list Bank of America as one of the companies prosecuted, and working up the economic ladder, there was Angelo Mozilo, head of Countrywide, who sold BofA $40B of toxic assets, who avoided any criminal prosecution.

This $100B cost of doing business seems like a bargain.

Some High Paying Jobs in the US

5 Aug

If you’re looking to get into a high paying job in the US, you might want to consider becoming a broker of artificial hips. A recent article about a man in need of an artificial hip appeared in the New York Times. The list price for the hip, without a mark-up (list price – yea), was $13,000.

An artificial hip, however, costs only about $350 to manufacture in the United States

In the case of the artificial hip, with a cost of $350, and a resale of $13,000, that is a whopping 96% gross profit%, or a gross profit$ of $12,550. In the US last year, there were 332 hip replacements. If you multiply the 332 times the $12,550 per hip, you get $4.1M.

In the NYT article, that hip replacement quoted to the patient in the US at $13,000 was eventually performed in Europe at a total cost of $13,660. That $13,660 not only included the hip, but “all doctors’ fees, operating room charges, crutches, medicine, a hospital room for five days, a week in rehab and a round-trip ticket from America.”

The bottom line of all the above is if you can get anywhere within the economic food chain that is the US Healthcare industry, you can make a fortune. And, if you want the same healthcare, you can get it outside of the country at a fraction of the price paid domestically.

Companies and Corporations obviously pay their employees using operating profits from their businesses. One only needs to look at the profit margins and average sales per employee to understand where the high paying jobs are located. Examples of a few companies/ organizations are listed below:

Company Example
Official Profit Margin
Revenue
# of Employees
Gross average Sales per Employee
Average Income per Employee
US Dept. of Defense
?
?
3,200,000
?
?
Walmart
3.62%
$469,162,000,000
2,100,000
$223,410.48
$20,744.00
Goldman Sachs
24.00%
$36,290,000,000
33,000
$1,099,696.97
$399,506.00
Dollar General
5.87%
$14,800,000,000
90,000
$164,444.44
$30,282.00

Time to Increase the US GDP Numbers

31 Jul

If you follow the S&P 500, you’ll know that the companies that comprise this list are not the same as those in the 1950’s, or 1930’s, or even last year. As time marches forward, often companies that have lower and lower market caps, among other reasons, are replaced with ones that are rising in value. This has a distorting effect on S&P 500 charts over time. From a practical standpoint, you need to keep the list current to accurately reflect what the current market is like. Also it does not make sense to keep some companies on the list that are no longer viable. (an example)

Well, it appears that the way the government measures the US GDP is in for a similar, but not the same, update. Today, July 31, 2013, the changes will be announced.

    For the first time in four years, the Commerce Department will revise its estimates of U.S. gross domestic product — the value of U.S.-made goods and services — back to 1929. 

For the first time, money spent on R&D and on the Arts will be included in the GDP. It appears the international community had already accepted the changes to increase their respective GDP numbers.

    The biggest share of America’s R&D spending goes to develop new drugs

The government says the difference between that final growth estimate updated annually, and the initial GDP estimate released within a month of a quarter’s end, can be as much as 1.3 percentage points in either direction.

It will be interesting to see how the new numbers impact the national GDP, but this is probably done in an attempt to offset the downgrade in the GDP numbers posted last month. The total impact looks likely to be in the $400B range annually. That works out to be about 2.7% of the $15 Trillion GDP number for 2012.