Articles on Economics and
Investing
revised Jan. 7, 2013
Kenneth A.
Kuhn
I took the time to study investing in great detail and as a result
I have made a lot of money with wise investments. There is no short cut --
you have to do the work. The money you make from investing is what you
earn for making the effort. It is not free money nor is it luck.
People who believe in luck do not make money -- they win (very rarely)
money.
I am working on, as time permits, a number of articles
about the science, mathematics, and thought process of practical
investing. You lose money the easy way. You make money the hard way.
There are many popular myths, gimmicks, and scams that provide the easy
way to transfer your money to someone else. When the man
with money meets the man with experience, the man with the money gets the
experience and the man with experience gets the money . If
you take the time to study investing then you can avoid the traps, make money,
and live a rich life.
My hope is that sometime during 2012 and 2013
to have at least a few articles ready to be posted below. These
articles will form a series of lectures on investing. Stay tuned ...
Investing versus
Gambling This is an age
old question with lots of mis-information. This chapter explains the
real difference which you must understand in order to become a good
investor.
Choosing Quality Dividend Stocks There is a related spreadsheet: dividend_screen_sample.xlsx . By popular demand
this is another chapter in what will be my book on
sane investing. I describe the method I have used for
years to build a great dividend stock portfolio.
Failure of the
Progressive Tax This essay
shows how the progressive tax has conditioned the population into thinking
someone else should be paying taxes and thus has limited the ability of
government to collect taxes.
Voting Your Economic
Stake This essay
explores one of the reasons we have run-away government spending and proposes
a method for the population to regain control.
Social Security
Explained This politically
neutral article explains how Social Security works and debunks a number of myths
pro and con.
Using taxation
to Increase Average Income This
essay addresses the paradoxical question of whether taxation can be used to
increase the average income of society. I present a proof of how this seemingly
impossible feat is remarkably easy to accomplish. Who says taxes
are bad? Have I gone completely mad? Well, perhaps mad like a
fox. Read and learn an important trick in the science of
deception.
Unfair
Taxation in Alabama Alabama taxes are often accused of being
very regressive. However, when complete, rather than craftily omissive,
accounting is used the picture changes drastically.
The Trillion Dollar
Scandal I really should have called this The Multi-Trillion Dollar
Scandal as the total price tag is going to be closer to ten trillion than one
trillion. This is a detailed explanation of the financial debacle that hit
the United States starting around 2006. It was no accident. It had
been building for many decades and all political parties are guilty. I connect
the dots of how a long list of programs to "help" the poor were used as cover
and added up to the sub-prime crisis and how a sequence of deregulation (by
BOTH political parties, not just Republicans) added up to the Wall Street
crisis. These were actually two separate but related debacles. I
point out that any one of the dots would not have done the deed. It was
the collection of dots that added up to the perfect storm. I also point
out some needed reforms although none will be enacted. Update: Since this
was written in Oct. 2008, more information has surfaced that further implicates
the various parties. As critical as I was of the government and other
parties it turns out that I was not critical enough. The new
information makes an even stronger case that the Securities and
Exchange Commission was either very involved in the scandal or totally
incompetent. The Federal Reserve and the U.S. government have been working
very closely together to place the entire country into permanent and deep debt
for the enrichment of the elite types who are in control. Trust in
anything has been destroyed and market will not recover for a very long
time. I recently discovered a significant omission in the major dots -- it
is The American Dream Downpayment Act of 2003 signed by Bush on Dec. 16, 2003
after passing in both the Senate and House by unanimous consent (no records
kept) -- so do not blame just Bush -- as described in my article the Democrats
and Republicans have almost always acted together -- thus I doubt there are
really two parties. This act provided $10,000 for sub prime borrowers to
make either a down payment or to cover closing costs. Although the size of
the act was small, ~$200,000,000 per year, the multiplier effect of practically
zero percent down payment levered the effect well into the billions per
year. This plus coercion by HUD to Freddie, Fannie, the banks, and others
to facilitate bad loans insured that there would be a huge housing crash.
It was not an accident. Eventually, I am going to revise the article
to include new material.
Stupidity Repeated This is a commentary about an
announcement on Dec. 4, 2008 from the moronic government about a new program to
make home loans as low as 4.5 percent. A new debacle begins. The concept seems
to be that a new debacle will help us get out of the problems of the previous
debacle -- thus the title.
Wrongful
Evicitions and Government Lies
Warning:
Do not read this if you are a sensitive
sheeple as you will be offended. This is a commentary
concerning the Jan. 7, 2013 settlement between a number of large banks and
Federal regulators concerning alleged wrongful evictions during the housing
debacle. I expose a huge lie in all of this. It is related to the
above two pieces. I will be accused of being insensitive
for this piece
but that is not relevant. The question is am I right or am I right? When
I am fed a lie I feel compelled to point it out. I am just the messenger
-- no matter how politically incorrect the message is.
An Economic Comparison Between Gasoline and Electric Cars
I like the concept of electric cars but the economics just do not add up
right now. Even ignoring the cost of batteries, electricity is only
moderately cheaper than gasoline (as of late 2008). It is a lot cleaner
however and this article points out several non-economic virtues that have a
value although it is hard to assign a number.
An Economic Comparison Between Gasoline and Ethanol (coming
soon)We have been forced to pay a high price for ethanol in the name of
"green" and it does not even reduce overall pollution. The key focus of
this short article is comparing the price versus value of various
gasoline/ethanol blends at the pump. Ethanol looks cheaper if you do not
know the facts.
How Not to Save Money on Gasoline This is a short
article that illustrates the economics (or the lack there of) of shopping around
for the lowest price gasoline.
The Economic Knowledge of Poor People Warning: Do not read this if you
are a sensitive sheeple as you will be offended. This is a link to the commentaries section of my web
site where I posted a short essay/rant about entitlement syndrome. All I
did was write a collection of common statements we all have heard.
Those statements are highly offensive to me as a working person not dependent on
government handout. My essay/rant appears to be highly offensive to those who
can only accept things presented in a politically correct manner. So there is
something to offend everyone. The topic has nothing to do with investing but
does explain the economic perspective of a lot of people. This
short piece illustrates the total disconnect in our society that is driving the push
towards socialism. The piece is horrible but you need to understand it.
How to Select Dividend Stocks (coming soon) -- I
specialize in the selection of dividend stocks for my portfolio. A
portfolio of good dividend stocks provides an income that automatically
increases with inflation and also with growth of the companies. It is not
hard to do this. You only need to understand certain fundamentals. I
reveal my methods in this article.
In addition to basic lectures on investing I am working on
some short (some may be long) articles on the following topics. I put
these here to be memory jogs so I will not forget. I
only get to work on these sporadically as I do so much
else.
Social Security -- a huge rip off designed
to make it difficult for low-incomers to get ahead -- but in the name of
"helping" them. With carefully selected partial data Social Security can
be made to look good. I show the complete numbers that social security
advocates do not want you to see. In years past, the general population
was led to believe that Social Security was their primary retirement and as a
result saved little, if anything. That was the trap and it worked
perfectly. Smart people knew that Social Security was only a supplemental
payment and that it was important to save for retirement. Now that the
non-savers are retiring they "need' more money. This is the basis for
increasing the amount withheld from paychecks for Social Security thus reducing
the amount one is able to save for retirement thus making Social Security a
necessary function. Th irony is that having a Social Security system
strengthens the need for it. Few understand this and the article I will
post will explain this in more detail.
Progressive taxation
and the corresponding progressive income scale -- lowers income for
low-earners while raising income for high earners. Not many people are
aware of the progressive income scale which more than compensates for
progressive taxation and I explain the details. Perhaps you will
understand why a number of prominent liberal wealthy types seem to be nutty and
advocate for higher taxes on themselves. They are just nutty like a
fox.
True tax reform -- Most methods you hear about
concerning fair tax and similar phrases are little more than neo-socialism with
clever marketing. I show a method that is simple and very effectively
gives the population the power to limit government growth and spending yet
provides funding for needed projects.
The corruption of tax
deductions for charity -- It is very expensive for the government to be
in the charity business which is what happens when deductions are allowed for
gifts to charity. This opens the door to money laundering via crafty
charities. Many auditors are required to investigate whether the money is
being "properly" used as defined by the government. Being a tax free
organization allows the government to dictate operations and limit free
speech. One example concerns a preacher endorsing or speaking against a
particular candidate for office. That kind of free speech can not be
allowed if the organization is tax free. It is much better for everyone to
as Jesus Christ would say today, "Pay what they owe to the government and give
what they wish to charities." Then a preacher or anyone else could say whatever
they want as a private citizen. Then all the auditors and investigations
and funneling of tax-free money to "undesirable" enterprises would be
eliminated.
Election reform -- Again, most methods you
hear about are little more than neo-socialism with clever marketing to fool the
sheeple. I illustrate a method that actually makes it possible to put
qualified leaders in office -- unlike our current system. Although not
strictly part of economics or investing, it is related in that good
government is necessary.
Economic issues of health care
reform -- Health care is very expensive in the United States and has
been growing at several times the inflation rate. That can not
continue. For example, extrapolating the roughly $7,000 per capita
spent in 2008 to 2098 using a very conservative and probably too low a growth
rate the figure comes to $7,000,000 per capita. That will not happen
because the system would crash many years prior. The problem with every
concept I have seen proposed by either those that won or lost the election of
2008 involves hiding the cost via a complicated shell game that few in the
population can understand and adding the remainder cost to the national
debt. With 100% certainty I can tell you that any such concept will
ultimately fail. I break down the economics of this and point to a
required change of thinking -- i.e. view health care as an expense of life
rather than a benefit one is entitled to. I point out why the cost is high
and what really can be done (although unlikely to happen) that could make the
cost manageable. Ironically for me (I am a devout anti-socialist) the
solution involves the quasi communist/socialist concept of public ownership --
similar to a public utility. I use the description, quasi, because the
concept is often erroneously equated to socialism but there is an important
distinction. This is a very brief synopsis. The details will be in
the article.
How to steal wealth by giving it away --
The real purpose of wealth redistribution is for it all to flow to the economic
elite via low incomers. The little people or sheeple as I often refer to
them never figure this out and gladly march right into economic slavery.
The stolen wealth comes from the middle class and lower upper class. The
poor have nothing to steal and still won't after wealth
redistribution.
If the income of the "evil" rich is reduced then
the result will be higher taxes on the middle class -- This concept is
not well understood and this brief note will explain it. The short of it
is that because of the steep progressive income tax the majority of personal
income tax revenue comes from the high earners -- the ones everybody complains
about. Middle class and below pay remarkably little tax although they are
under the mistaken belief that they are taxed to death. It follows that if
their incomes were reduced to levels that the broad population thought was fair
then the income tax from that group would radically drop. A broad and
significant tax increase across the population would become necessary to
compensate. When I hear people complain about the high earners I ask the
question, "How much more in income tax would you be willing to pay in
order for those people not to make so much money?" This concept is so
far out of their thinking that they have a hard
time grasping.
If there was one million dollars to
either give to the CEO of a company or disperse to 1000 low paid workers --
which is better? Believe it or not it is much better to give it
all to the CEO. The government collects the maximum possible tax from
this. This counterintuitive result is a consequence of the progressive tax
system. Disbursing it among lower incomers would turn into an
expense for the government with the current tax system. This note will explain
the details. With a flat tax structure one could make a strong case for
the wide disbursement.
The difference between social investing
and socialism -- with clever wording the two can be made to appear the
same although there is a huge difference. In short, social investing makes
it possible for people to work and earn their way up the ladder and with minimum
cost to society while socialism is a scheme to transfer wealth to the economic
elite by building economic traps in the name of "helping" those people and with
great cost to society.
An analysis of taxation versus
welfare -- This analysis explores the concept of net income after tax
and net income after welfare versus the time and effort required. It seeks
an answer to the question as to what level of taxation versus what level of
welfare would it make little sense to work. I worked the mathematics of
this out many years ago and set it aside as the results are kind of
scary. I had forgotten about it but recently discovered my old notes and
realized that I should put them in presentable form. It is something to
think about. The concept is obvious but I explore where the thresholds
are.
See my Writings Page for some related and
thought provoking writings.
Email contact information
You are invited to visit my main web page at http://www.kennethkuhn.com . There is a variety of
material there - mostly information for my electrical engineering students,
pictures and stories of my cats, and my writings against socialism.