Tag: 50%

How The Baby Boomers Blew Up The Stock Market

Guest post by Jesse Felder

In my last piece, I openly worried about a few very smart investment minds who have recently attempted to rationalize or justify the persistently high equity valuations we have seen over the past 25 years. I don’t believe that, “it’s different this time.” The modern economy doesn’t have any new magical component that makes a standard stream of cash flows any more valuable than they were 50 or 100 years ago. Nor have investors become generally more intelligent.

I think there’s a very simple explanation for the high stock market valuations since 1990: demographics. From 1981-2000, the baby boom generation came into their peak earning and investing years. Is it just coincidence that during that very same time we witnessed the largest stock market valuation bubble in history? No. In fact, there is a statistically significant correlation between demographic shifts like this and stock market valuations.

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A few years ago a pair of research advisors to the Federal Reserve Bank of San Francisco demonstrated this link. They found that demographics (specifically, the ratio between retirement age workers to peak earning and investing age ones) is responsible for 61% of the changes in the price-to-earnings ratio of the stock market over time. Additionally, they found that when their model’s forecast p/e was off by a significant amount the real p/e consistently reverted to their forecast p/e.

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BRING SOME MARSHMALLOWS

This is video of the latest in a series of explosive train derailments over the last few years. A 109 car CSX train derailed earlier this week in West Virginia. It was carrying some of that good old North Dakota fracked oil. Well, at least we know it burns just as well as regular oil.

And these oil cars were the new super safe railcars that are supposed to resist rupture. I think CSX may have been sold a load of shit, because these railcars didn’t resist too much.

I wonder if the costs of these unfortunate accidents are factored into the shale oil miracle storyline. Obama and his environmental nazi minions do everything they can to block the Keystone pipeline and other rational pipeline extensions. With oil at $50 per barrel, these pipelines probably no longer make much sense economically. But from a safety and environmental standpoint how can they possibly argue that sending oil by rail across our horrible rail infrastructure is a safer and more environmentally friendly method.

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WHO ARE THOSE DIRTBAGS NOT PAYING FEDERAL TAXES?

I’m really getting tired of the GOP storyline about 50% of Americans paying no Federal Income taxes. The unspoken, but clear message, is that 50% of Americans are lazy good for nothings riding the coattails of the hard working people who pay Federal Income taxes. The MSM and the ruling establishment want to distract the masses from the real culprits in destroying this country – Wall Street, K Street, and Mega-Corporations – by using propaganda to convince the middle class to focus their wrath on the poor. This 50% storyline has been pounded home day after day by the folks at Fox News and other MSM outlets. You hear it at the GOP debates as the ignorant candidates speak of the unemployed and people on food stamps as if they are lepers. 

The beauty of successful propaganda is having a smattering of truth mixed in with a large portion of exaggeration, misinformation and ignorance of a few facts. I happen to be related to one of these low life 50%ers living high on the hog off real working Americans. It’s my widowed mother.

I know she pays no Federal income taxes because I do her tax return. This leech on society doesn’t even pay state income taxes. She rakes in $15,000 per year in Social Security income and makes due with what remains of my Dad’s IRA. Her effective tax rate is zero. The GOP candidates declare that she should pay her fair share. Why should she live off the hard work of real Americans? That is the mantra being shoved down our throats day in and day out.

Well let’s dig a little deeper and maybe find some truth. Let’s try to figure out her EFFECTIVE OVERALL TAX RATE.

My mother still lives in the 900 square foot row home that her and my Dad bought in 1957 for $10,000. Even though they never used the public school system, they have paid real estate taxes for decades. In fact, the annual real estate taxes for her huge estate are $3,600. She also drives a car. The total state and Federal taxes on gasoline comes to 51 cents per gallon. She also uses electricity, phone service and natural gas in her house. Those bills contain approximately 5% taxes from various localities. In addition, she buys stuff to live. PA has a 6% sales tax on stuff you buy in the state.

So lets see what the effective overall tax rate of this “deadbeat” is.

Annual Income                            $15,000

Real Estate Taxes                         $3,600           24%

Gasoline Taxes                               $150                1%

Utility Taxes                                      $150                1%

Sales Taxes                                      $450               3%

Correct me if I’m wrong, but I think that comes to an effective overall tax rate of 29%. In addition, she hadn’t gotten any increases in her Social Security income for two years because the government said their was no inflation. But her Medicare premiums went up 5% per year. As you can see, the GOP candidates really are focusing on the right problem. Deadbeats like my mom are making out like bandits.

Now let’s look at a theoretical deadbeat based on the median salary of people in the U.S. The median worker salary in the U.S. is $25,000 per year. That means that 50% of Americans make less than $25,000 per year.

Let’s assume we have a married couple in my mom’s neighborhood living in a similar row home. The husband works in Philadelphia and makes $25,000, while the wife works part time because they have one child and brings in $10,000. With the deductions for mortgage, real estate taxes and kid, they would owe zero Federal Income taxes. These are the people scorned and ridiculed by the GOP establishment as worthless pieces of shit. Let’s assess their OVERALL TAX RATE:

 

Annual Income                            $35,000

State income taxes                       $1,050           3%

Phila & Local taxes                       $1,100           3.1%

Payroll taxes                                   $2,000           5.7%

Real Estate Taxes                         $3,600          10.3%

Gasoline Taxes                               $500            1.4%

Utility Taxes                                      $200               0.6%

Sales Taxes                                    $1,000             2.9%

If my math is correct that comes to a 27% overall effective tax rate for these free loaders.

So these are a couple examples of the dirtbags that are being used by the powers that be to try and convince you that the super rich in this country aren’t really pillaging the national wealth through their complete capture of the economic, financial and governmental apparatus in this country. Mitt Romney made $20 million last year and his effective Federal tax rate was 14%. I don’t know what his overall effective tax rate was, but I will bet you $10,000 it was lower than my mother’s 29% rate. He has 40 tax specialists working to insure he pays as little as possible under the law – which was written by people like him for people like him.

The next time I go to my mom’s estate, I’ll tell her to vote for Romney or Gingrich because people like her need to pay their fair share. That’s what’s wrong with this country.