Get Rich Slick

This Wall Street Journal article points out what I’ve been suspecting for years: Pre-paid college tuition is a scam!  It’s a scam or rather “ponzi” scheme just like social security, medicare and any other government program with similar characteristics.

This poor woman has contributed $100,000 under the false assumption that her grand kids college education would be taken care of but now the state is struggling to keep up and finding all sorts of loop holes to not fulfill their obligations.  Hmmm…..sound familiar?

Patti Lambert wanted to pay the college tuition for her eight grandchildren. So for the past 16 years, the real-estate agent signed onto the state of Alabama’s prepaid tuition program. She invested more than $100,000—a daunting amount but a good deal because the prepaid plan promises to cover tuition no matter how much it increases.

Or so she thought. Facing a severe funding shortfall, Alabama is trying to renege on its promise to foot the whole bill. Instead, the state wants to pay the average tuition rate, potentially forcing schools and families to make up any difference.

When my wife and I first got married, we went through our finances and my wife showed me some contributions she was making to a similar program for her younger sister.  I immediately told her to quit paying it and request a refund.  She got all of her money back and we put it in savings.   I told my wife that when the time came, we would help her out as much as we could but that ultimately the plan wasn’t going to work.   A few years after the state froze the program and significantly modified the plan, making many people unhappy.    My sister in law graduates this May and my wife’s been helping her along the way with tuition and other items.

I’m still waiting for the day when the exact same thing happens to social security and at the current rate of disintegration that should only be a few years away.

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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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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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Wow, just days after I wrote this post about Facebook, another article was sent to me about some privacy issues and this one pertains to personal finance:

Want a bank loan? Get yourself more Facebook friends — but make sure they pay their bills on time.

Banks are beginning to look at user accounts on Facebook, Twitter and other social networking sites to determine if an applicant is loan-worthy, raising privacy concerns as well as questions over whether a person’s online friends, likes and dislikes can actually measure their financial stability.

Everything a person does publicly on their social-networking accounts can be found by market researchers if the user’s privacy settings allow it. Researchers are now looking at a person’s online conversations, the groups they join, products they look at and even who their friends are to determine loan-worthiness.

“The presumption is that if your friends are responsible credit cardholders and pay their bills on time, you could be a good credit customer,” reports WTOP News in Washington, DC.

This gives a whole new meaning to “Am I my brother’s keeper?”

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By pure accident, I ended up on google news archives and discovered something very interesting.   I was searching for a list of companies that went bankrupt in 2009 and I came upon an odd little graph at the top of the google archive.   I’m not sure how the graph works but I’m assuming that the graph indexes the amount/volume of words used in News articles for the period in question.   Since news organization often give the readers “what they want” to read I can surmise that news articles are a reflection of societies’ needs, wants, likes and hopes.    So here are the graphs for a few key words.

The  graphs include economy & money related, recovery, depression, education, regulation, deregulation and gloom and doom famine, disease, death:

Just by looking at the graphs and the major spikes that occurred during major economic distresses such as the great depression and world war II,  I don’t think we are anywhere near the end of the current economic calamity but you can draw your own conclusions.

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Just after a few short days of writing this post on governments cutting back on education, we now have cities with the audacity to tax poor students via tuition to server the interests of fat, old, pensioners.    What in the hell is the world coming to?

The mayor of Pittsburgh calls it the “Fair Share Tax.” But to officials at the city’s 10 colleges and universities and many of their 100,000 students, it is anything but.

Mayor Luke Ravenstahl said the universities rejected his request to pay $5 million a year to the city, and that he had no other option.

On Wednesday, the City Council is expected to give preliminary approval to Mayor Luke Ravenstahl’s proposal for a 1 percent tuition tax on students attending college in Pittsburgh, which he says will raise $16.2 million in annual revenue that is needed to pay pensions for retired city employees. Final Council action will be on Monday.

That’s right, when things get tough, the young get screwed in favor of the old, fat and useless.   Absolutely amazing.

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It’s been an interesting week for news on the state of governments running out of cash.   New York has just announced that they are running out of cash and cutting back on government services:

Under a possible budget-saving measure, the Metropolitan Transportation Authority would charge students half-price fares next year – and full fares starting in 2011, sources told The News.

About 550,000 schoolkids get free or discounted bus and subway passes under a program the state and city once fully funded.

Some school districts are having difficulty making payroll because of budget cuts and delayed payments from the state, Deputy Education Commissioner Dale Dennis said Tuesday.He said he has not seen schools in such dire financial shape since he started working for the state 42 years ago.

“School people are about as stressed as I’ve seen them,” Dennis said.

He said the Division of Budget is working with at least 7 schools districts on forwarding enough money to them to make payroll before Christmas.

“The cash flow for them is extremely crucial,” he said.

And in Illinois:

CARBONDALE, Ill. – Thousands of employees are on edge after hearing news they might not get a paycheck later this month.  They work for Southern Illinois University, which is one of the region’s largest employers.

The problem started in October, when the state fell behind on its payments to SIU.  University leaders say they can’t make anymore cuts and need $16 million in back payments with in a weeks time or they won’t meet payroll at the end of Dec.

Interestingly, almost every article I read on states cutting back almost always have to do with education: schools, universities, and transportation (for kids) is cut.   I haven’t read a single story about bloated government administration officials being laid off or fired.

Ever since I went back to work, I thought we were finally climbing out of the hole we dug ourselves into but the reality is starting to hit me that we are just BEGINNING to go down the rabbit hole.   What wonderland 2010 has in store for us is up in the air but I don’t think it will be anything good.

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Sometimes things happen in the world that could be very attributable to incredible random coincidences and yet sometimes the events fit a very plausible conspiracy theory even if it is a bit far fetched.   So in the past few weeks I’ve been reading about some interesting happenings around the world and I’ll start with Martin Armstrong.

Martin Armstrong is a cycle theory man with a pretty good track record.   He is currently in prison and has been for a while but was recently moved to a maximum security prison after a few reporters were demanding some more interviews on his take on the current economic mess.   You can catch up on this conspiracy theory here and you can get a great background read here.

Next up is the peculiar timing of the death of the Bloomberg reporter who died recently of heart related illness.   What is so special about this reporter was that he was the one that sued the Fed for disclosure on its activities during the economic crisis.   Despite several orders from a Federal judge that the Fed needs to comply with disclosure, I don’t think a single document has been produced yet out of this case by the Fed which continues to appeal.

And lastly, there are a few stories about a recent delivery to Hong Kong of gold filled with tungsten instead of pure gold.   You can read about that theory here.

All of these stories and theories line up for something I read over at another site claiming that a collapse is coming in the Summer of 2010.   I guess we’ll need to wait and see.

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Look like Asian stocks are getting slaughtered at the start of the day.  I’ll be surprised if this doesn’t spill onto the USA.  It’s gonna be an ugly week.   I won’t be posting this week as I will be traveling on business and I don’t have any posts queued up for posting.   I need a break anyway!

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Do you want to know what the major problem with the economy really is right now?  No, not the Fed nor sub-prime lending nor jobs nor any government statistics coming out of any government agency.

No, the real problem with the economy right now is that we have approximately 50% of the population rooting for economic failure so their political party can take over during the next election.   To be perfectly fair, there was a great deal of rooting for failure during the last few years of Bush’s administration so Democrats could win the election so I’m not being partisan here but the whole situation has gone out of control.

I saw a clip of people cheering that the Olympics for 2016 went over to Brazil instead of the USA.   Excuse me but don’t we want jobs in the US?  Doesn’t this stimulate the economy?   I don’t write about politics on this blog because I am literally sick of both parties and I often vote for any third party candidate just to try to change the insanity but it often doesn’t help.

An article in The Independent recently discussed the deals Brazil, Gulf Arab States, Russia and China are cooking up to eliminate the dollar from oil transactions.   Is anyone out there cheering for this?   Don’t hold your breath because it’s not supposed to take effect until nine years from now but if and when it does happen things aren’t going to be pretty:

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

And while I’m not a big reader of Paul Krugman, his recent opinion piece resonated with me right on the money:

Think about just how bizarre it is for Republicans to position themselves as the defenders of unrestricted Medicare spending. First of all, the modern G.O.P. considers itself the party of Ronald Reagan — and Reagan was a fierce opponent of Medicare’s creation, warning that it would destroy American freedom. (Honest.) In the 1990s, Newt Gingrich tried to force drastic cuts in Medicare financing. And in recent years, Republicans have repeatedly decried the growth in entitlement spending — growth that is largely driven by rising health care costs.

But the Obama administration’s plan to expand coverage relies in part on savings from Medicare. And since the G.O.P. opposes anything that might be good for Mr. Obama, it has become the passionate defender of ineffective medical procedures and overpayments to insurance companies.

So whether the 2010 elections come and a change in political control takes place for the house or senate it won’t matter much because the other party will be rooting for more failure.   The fiddle will change hands and will be played as Rome continues to burn…

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