Get Rich Slick

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Wow!  For the first time in a very long time, I’m actually getting a REFUND from Uncle Sam to the tune of over $4,000.   And all it took was for me to lose my job for six months and the government to lose about 75k in income tax revenue from me.   I feel like Uncle Sam is saying, “Sorry we gouged you for so long for so much, here’s $4,000!”

Actually this is the first year I didn’t exercise options, cash out stock, or rake in huge bonuses during the past year.   The only “earned income” I had was unemployment insurance from the state.    What really helped were all the freaking tax deductions:  my entire MBA tuition saved me a cool $2200,  student loan interest saved me some money, etc.   The only regret is that I didn’t wait a little longer to buy a car.  I purchased a new car in 2008 and if I had waited another year, I could have saved another a few k in taxes.  Wow, what a great tax return that would have been!   If I had bought a new house that might have been another 8k.  Sometimes, timing is everything!

Oh well, I’m expecting to be back in the higher tax bracket this year so I’m sure I’ll owe Uncle Sam a few thousand this time next year but at least I can buy a new LCD TV finally

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The financial world is a buzz with the Fed raising the discount rate a quarter point stealthily right before options expiry and it is just the start of a very dangerous careening job.

If you’re not familiar with careening, here’s a quick primer:

As is well known, as ships cruise the ocean, their bottoms quickly become covered with barnacles. These barnacles affected the ships speed and mobility. These two characteristics were highly respected among pirate captains, for they knew above everything else that if they were to be pursued in would be speed and mobility that would save them above any amount of firepower they might possess.

Barnacles posed another problem. If they were not removed, periodically, they would also cause irreparable damage to the hull by eating away the wood or weakening the seems between planks. This meant that if the ship were at sea, far from land, it could go down. The threat of barnacles was taken very seriously.

Often ships are dry docked after a long ocean voyage, in order that the hull can be scraped free of barnacles and repaired.

Pirate rarely had the opportunity to dry dock. When a ship could not be dry docked, sailors had to devise other ways to clean the bottom. It was practically impossible to clean the bottom of a ship while in the water. The best alternative was careening.

Careening involved finding a suitable shallow bay where the ship could safely be run aground, thus exposing as much of the hull above the water line as possible. Then the ship would be unloaded as much as possible. The crew would then need to careen or turn the ship over on one side using block and tackle, and manpower.

The crew would try to pull the ship over enough to expose the keel or bottom of the ship. Then they would commence scraping that side of the ship, free of any barnacles. Then any damaged planks would be replaced or repaired. Following this step, if possible the bottom of the ship would be covered with paint, pitch or some kind of proctectant.

Once the one side was done, the crew would careen the ship to the other side and repeat the process.

The task was labor intensive and time consuming. Pirates were sitting ducks while careening their ship. They were often not armed well enough to stand a major ground assault and with their ship run aground they could not take on another ship.

So Barnacle Ben is careening the Federal Reserve (a.k.a Titanic) and this pirate is going to make himself vulnerable on multiple fronts:  the economy, banks, Goldman Sachs traders, grand standing politicians, and perhaps the world.    In the meantime, I’m hoping to cash in on my UUP call options

Aarrrrrr matees!

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Here’s some food for thought, I looked at the USO and UNG call options for January 2012 (in the money) and I was surprised to see over 20% premiums on these two ETFs two years out.   I checked on UGA and this is showing 11% premium just SIX months into the future!  This bothered me quite a bit so I did some further research using my utility company.  I am fortunate enough to live in a state that offers competitive electric utility companies and all of them are pricing in electricity 20% higher than I have today for two years into the future.   My current rate is about $0.10 per kilowatt and signing a two year deal today would cost me $0.12 to $0.13 per kilowatt.

The utility companies are pricing in inflation at 20% two years into the future on electricity rates!   For reference (and control), Microsoft call options TWO years into the future barely show 10% premiums.  Verizon and AT&T are also at 10% or less two years into the future!

This is extremely concerning on one level and extremely profitable potentially if I can figure out what the reason behind this is that people aren’t seeing.  When I check the futures market on WTI Crude it only shows a 10% premium for January 2012.   Somethings out of whack.

Check out the sample charts and calculations.

On one level, I’m tempted to buy UNG or USO or even UGA and sell those options and book my profits for the year.   A 20% return on two years is about 10% per year and way much better than any bank is paying.   The risk?  Who the hell knows what will happen to energy prices two years from now but a 20% return over two years ain’t bad!

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There should be a show on TV called “Banking Makover” along the lines of the Home Makeover show.   The premise of the show should be normal everyday struggling Americans being freed from the shackles of big banks and being moved to small community banks and credit unions.   Personally, I’ve begun my own bank make over journey.   Unfortunately it’s going to take at least 30 days if not more to move all of my accounts.   I’ve already sent letters to Bank of American and HSBC advising them of my displeasure with their little cartel and my intention to shut down all my accounts.

I’m in the process of slashing and burning my accounts at Chase but I’ve got so much money and things tethered to those accounts that it is going to take a while to undo but once done, I won’t be going back.   Hopefully, I’ll post an update by the end of the month but to give you a taste, it takes two payroll cycles to move from one bank to another and although I only had a small amount of my paycheck going to Chase, it’s going to take a whole month to unravel that process!

If you’re angry about the bank bailouts, bank bonuses, and the fleecing of the American taxpayer, I would encourage you to move your money to a credit union or community bank.   So far, my credit union has given me a credit card with a low 7% interest rate compared to the ridiculous rates at the big banks.  It’s not a bad deal altogether.    As an added bonus, my credit union offered to move my remaining auto loan over to the credit card.  This will create two bonuses for me:

1. The title to my car will be released to me -- I’ve switched from a secured loan to an unsecured loan.

2. I ended a business relationship with a big bank and will not be paying them any more interest.

Before you fret about paying the credit card interest rate, I don’t plan on paying interest on more than a month or two since I’ll pay that off once all my money has settled after all the moves.

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I was just amazed when I saw this article about the city of Phoenix implementing a sales tax on groceries!   If any astute readers can tell me what they see wrong with the logic, you’ll win a coveted RichSlick kudos!   I’ve given you a hint (see bold words).

Desperate to save police, fire and other city jobs, a divided Phoenix City Council on Tuesday approved a sales tax on grocery items that will generate tens of millions of dollars a year.

The 2 percent food tax will take effect April 1 and expire after five years, though Mayor Phil Gordon said the council has the option of reversing its decision after it hears from the public during 15 budget hearings planned for this month.

The tax on milk, meat, vegetables and other food purchased by shoppers will generate an estimated $12.5 million for the fiscal year that ends June 30. It will raise another $50 million for fiscal 2011. Food purchased with food stamps will not be taxed.

Uh, excuse me here but where is really the desperation in this scenario?   So the city’s brilliant plan is to make it difficult for people to buy food that they need to survive so they can have bureaucrats and other “essential” services survive?  Is this the worlds greatest oxymoron or what?

Long before we had police, fire or city officials, we had land and labor that meant food but somehow we’ve now inverted that logic where people must starve in order for police, fire and city officials survive.    I can tell you what is going to happen, the people of Phoenix are simply going to drive to Mesa or any other nearby town that doesn’t have this silly tax and the city of Phoenix will end up losing revenue.

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Change you can believe in?  Well it’s turned out to be chump change and if that nincompoop Bernanke is re-confirmed I will close ALL of my big bank accounts which currently include Chase, Bank of America and HSBC.   I’ve already opened a new credit union account and plan on moving my money there as soon as this foolishness continues.  I’ve also applied for credit card through the credit union so I can dump my big bank accounts as well.    The only way we’re going to get any real reform here is to suffocate the system and I’m doing my part.

I’m still totally disgusted that Geithner hasn’t been fired for his role in the whole AIG 100% payout and everyday new revelations show the ridiculous activity of these idiots.

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Well I honestly hoped that I would never have to write this post but I can’t hold back anymore.  I am seriously disappointed in Obama’s administration…seriously disappointed.   I was willing to suspend certain inalienable views in exchange for a single thing:  serious health care reform.   But what team Obama has created is a Frankenstein bill no different than Bush’ Bernankestein during the start of the banking crisis a while ago.

It’s become clear to me that Obama is a one term President and I won’t be surprised to see him as a lame duck President after the 2010 elections.  If it’s any consolation for Democrats, I have no plans on voting Republican as that earth has been scorched as well.   At next years election I will either vote completely 3rd party (libertarian, green, whatever) or not bother voting at all.

Oh well, all I want for Christmas is what I wanted last year, a stable monetary policy with a competent central bank.   Perhaps this is the year….

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I couldn’t believe my doublespeak ears when I watched this video by FDIC chair Sheila Bair.  She is literally lying to your face.  Here’s an interesting game, can you tell how many times she lies right to your face?

Lie #1 0:26 seconds into the video: “Your insured deposits are absolutely safe.”  -- Correct me if I am wrong but aren’t deposits UP TO $250k safe (did you catch that carefully parsed sentence: insured deposits are safe) and not ALL deposits?

Lie #2 0:46 seconds into the video: “Since the history of FDIC no insured depositors have every lost money and no one ever will.”  -- That’s a pretty bold statement, Sheila knows the future with absolute certainty.  No one will EVER lose money with FDIC.

Lie #3 0:57 seconds into the video:  “the overwhelming majority will weather this economic storm.”  -- And how does Shiela know with absolute certainty that this statement is true?

Lie #4 1:04 seconds into the video:  “As the economy heals, so will the banking system.”  -- Really?  What if people lose faith in the banking system, how will it be healed with absolute certainty?   Why are you on a YouTube video assuring us that everything is ok?  You don’t regularly do this do you?   Isn’t the mere fact that you are on telling everyone everything is safe a concern for alarm?

Lie #5 1:44 seconds into the video:  “for the bank depositor, a failure is a non-event.”  -- A non-event huh?   I don’t seem to have the exact same feature that I once had in my bank account once it was converted over; my local branch office closed and now I have to drive further to make deposits.  This is a plain lie.

Lie #6 2:03 seconds into the video: “we are the government” (can borrow from Treasury) -  One the one hand the FDIC claims it is “An independent agency of the federal government” and then on the other it claims it is the government.  Which one is it?

Lie #7 2:09 seconds into the video: “in short we cannot run out of money” -- While technically a true statement, the important thing to note is that being paid back with worthless pieces of paper is just as bad as not being paid back at all.

Lie #8 2:54 seconds into the video: “we can borrow $500 billion from Treasury (i.e. tax payer)” -- This isn’t a reassuring statement, dumping banking problems to the tune of $500 billion on the tax payer is concerning not to mention that  you still can’t cover $4 Trillion dollar worth of deposits with $500 billion.

Lie #9 3:28 seconds into the video: “no insured depositor has ever lost money in the history of FDIC.” -- Curious that this agency isn’t subject to the same “past performance is no indication of future performance” disclaimer any financial agency has to disclose these days.   I guess because FDIC is the government it doesn’t have to comply.

Watch the video for yourself:

I need to hire that facial recognition guy on Lie to Me to check out that eye twitch on Sheila’s left eye.   She almost seems to be having a difficult time telling the truth right to your face but I could be wrong

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I kept hearing that the “recovery” was underway but real unemployment seems to be at 20% so why do I keep hearing the term recovery?   I get my real employment numbers from Shadowstats who use the traditional method of tracking unemployment (see chart below).

So I ask again, why are we calling it a recovery?

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I read two stories today that I thought fit very well together despite not having to do anything with each other.  The first is an interesting post about the Federal Reserve owning more than 100% of mortgages.    The second was about these amazing curtains that block over 100% of sunlight thereby creating a singularity that absorbs all light.

Perhaps the Federal Reserve should buy these curtains to balance out the mortgage issue;  I’m sure the Fed would love to see 100% of the mortgages fall into a black hole and disappear but the silly Fed, they don’t know that they ARE the black hole!

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