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2019-04-12 07:00 by Karl Denninger
in Musings , 2775 references
[Comments enabled]  

Let me point out a few things.

1. I have in front of me my Social Security "benefits and wage record" statement.  It says I have qualified for disability, because I have worked enough credits through my life.  Were I to be able to claim to be disabled right here and now I would get $2,342.00 a month for life -- that is, $28,104 a year tax free.

2. Two years after the date they deem me "disabled" I qualify for Medicare (irrespective of my age) and since I have no other outside income I would pay next to zero for Medicare.  Now I have "free" public health care.

3. Being "low income" and "disabled" I would also qualify for Section 8 housing.  Provided I was willing to move to somewhere there were open slots (typically you have to move to a county outside of the major metro areas to not have to contend with a long waiting list) the government would also give me northward of $500 a month -- or another $6,000 a year -- of housing assistance.

In other words all I have to do is be able to claim I cannot work due to some "disability" and I magically get $34,000 a year, or somewhere north of $20/hour (since there are no taxes withheld from that, but there are from wage income.)  Forever.

If I am an entrepreneur and gross $25,000 a year or less (note -- far less than this disability income) I can have "health insurance" for almost nothing.  In fact I currently pay about $15/month.  Note, however, that this is gross income -- on which I must pay taxes, most-particularly FICA and Medicare tax from the first dollar onward.

That Obamacare subsidy completely evaporates by the time I make less than double that, about $42,000 -- and the monthly charge for that "insurance" is nearly $900 a month, or $9,600 a year -- which I must pay, on top of FICA, Medicare (combined 15.3% of gross) and whatever federal income tax liability (~10% bracket, roughly) is.  In other words out of that $17,000 in additional income from $25,000 to $42,000 I must pay $9,600 + $2,601 + $1,700 = $13,901 plus any state income tax owed.

That is a tax rate of 82% on that $17,000 in earnings before state income taxes. I get to keep nearly nothing of that money but I have to work for all of it.

So I actually have $28,099 (not including the FICA and Medicare tax on the original $25,000) by working hard at trying to build a new business while if I claim to be disabled I have roughly 30% more and I get to sit on my ass and drink beer or (if I live in the right state) smoke weed all day for the rest of my life.

Further, if and when I destroy my health doing that all the medical care I need as a result I don't have to pay for either.  But if I wreck my health by burning the candle at all ends at once (and getting about 4 hours of sleep -- maybe -- a night), as I did for over a decade being an entrepreneur I am entitled to..... nothing.

500,000 fewer small businesses exist now than did a year ago.

Do you now understand one of the major reasons why?

In the mid 1980s I took a salaried job that made $18,000 a year.  It was challenging on a technical and "skill" basis, but miserable in terms of working conditions.  It was several years before I cracked the $40,000 a year barrier in gross earnings.  During all of those years, none of which provided me a nickel in overtime pay I was expected routinely as a professional (coder) to work in many cases as much as 80 hours a week, whether for someone else or self-employed.  With that quite-modest salary and no overtime I managed to provide myself with a modest (1 bedroom) but clean, comfortable and livable apartment, a vehicle, sufficient food (I never went hungry), electric, water, garbage service, phone and similar.  I managed to save enough money to pay for (with cash) a decent TV and stereo.  I did not have much extra money at the end of the month but I received zero government benefits or subsidies, nor did I receive any benefit, subsidy or gift from anyone else either.  I had plenty to eat, enough money to enjoy a night out at the local bar once in a while and enough money to take women out on dates on occasion -- and I was able to afford a place to live by myself, not needing to have a roommate or live with my parents who in fact lived in a different state.

Car insurance was a fraction of what it costs now.

Food was a fraction of what it costs now.

Health insurance was a fraction of what it costs now.

Utilities were much cheaper.

Rent was less than half what it costs now in the same building.

You could actually obtain $500 cars from ads in the paper and they ran perfectly well.  They looked like crap and were old, but were functional to get you to and from work.  When they broke down and required something expensive to fix them another one was available on a trivial basis and the title and tag fees were much smaller than they are today too, so transferring from one to the other was cheap.

All of this happened inside and just outside of Chicago -- a major city -- in the immediate metro area, not somewhere in the sticks.

A few years prior to that it was routinely possible to spin (or deliver) pizzas and make enough to go to college -- room, board, tuition and books.  Again, you wouldn't have a lot of money at the end of the month but you could make it.  You can't today; it's impossible.

The problem isn't income.

It's expenses.

The alleged "no inflation" world we have lived in is a lie.

The solution to the problem cannot be to lift wages because if you do not address the cost problem prices will rise faster than wages since nobody works for free and every increase in wages means more than one person touches the money before the employee gets it.  Such an attempt therefore will always screw the people at the bottom the most and those in the middle of the transactions will skim off a piece for themselves, making the people at the top richer!  The paradox is that if you lift the minimum wage from $10 -> $15 some number of people will get zero instead of $10 (they'll be unemployed as they're replaced by a robot, an order kiosk or similar) but even those who get $15 will see their cost of living and taxes, both direct and indirect, go up by enough that they will actually lose standard of living even though in dollars they make more.

This has happened every single time through American history.

It will happen again.

It is regressive enough, and punishing enough, that there is no way I will stand up a company in this environment.  In addition to that the lack of Rule of Law means that if some rich billionaire *******, whether it be Beelzebezos, Zucker****er or other lies, cheats, or even outright steals what I produce I will not able to stop him, sue him and he won't go to prison.  If I try to use the very same tactics these bastards use I will either be sued into bankruptcy or prosecuted and imprisoned, so even if I'm willing to be an unprincipled prick the odds of my getting away with it and succeeding are nearly zero.

We either fix this, starting with the medical scam as I've outlined before, or this nation and its financial future are finished.  Further, unless we fix this intelligent people will not choose to have children since they cannot get ahead of the tax leech that claims disability and sucks off all their money while slugging down beer and drugs by the truckload.

Time's up folks.

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2019-04-04 11:11 by Karl Denninger
in Musings , 124 references
[Comments enabled]  

Cut the crap folks.

America is a Socialist Nation right now.

What is "socialism"?  It is a political system in which government owns or regulates the means of production and distribution of goods and services.

This in turn means that one may receive without producing as the community dictates collectively, and one is obligated to produce without receiving, or will receive only as the community dictates collectively.

The simplest means of determining whether or not a government is in fact socialist is whether government employees receive, on a like-for-like basis for their labor, greater or lesser total compensation than private sector employees.

Why?

Because a government employee is employed at the pleasure of the collective population, and not market forces.  Therefore their risk of becoming unemployed is always lower than someone with a similar job function in the private sector.

If, in aggregate, said employees at a local, state or federal level have a higher total compensation then the government is socialist since in a market economy this is impossible; one's compensation includes the risk of losing one's job.

With all other things being equal therefore in a market economy government always pays less.

Incidentally socialism always collapses because when someone receives without working someone else must work without receiving.  But you can't force the latter person to do actually do so at anything approaching their ability.  They can and will either "slow walk" production or simply quit and choose to receive without working.

This is the lesson of history and it happens every time.

We have six years, at best, before the downward spiral occurs right here.  Once it gathers that amount of speed it will be nearly impossible to stop except by extreme violence.

In other words grow a set now or consign our nation to the status of Venezuela.

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2019-04-02 07:00 by Karl Denninger
in Musings , 1402 references
[Comments enabled]  

Grrrr....

Hindman:   Americans know they need to plan for their later years and get their affairs in order, especially as retirement approaches. But while people recognize that need, too many aren’t following through and taking action.

When someone passes without a will, it means they have died “intestate” – meaning the intestacy laws of the state where they reside will determine how the property is distributed upon your death. But without clear direction on how you would like critical items like financial assets, property, personal possessions and items of emotional value distributed among loved ones, confusion and disarray are a common end result. Not only does the lack of a will create turmoil and headaches – both financial and emotional – for family members; it heightens the risk that your end-of-life preferences won’t be carried out in accordance with your wishes. On the other hand, a well-prepared legacy can give you the simple and satisfying peace of mind of knowing that you’ve done what you can to organize your life, shape your legacy and leave your family with a roadmap of your preferences. It can be one of the greatest final gifts we leave to those we love.

Yes, you should have your affairs in order.

But I really dislike self-interested jackasses peddling crap -- and this falls into that category.

First, there are plenty of people who need no Will at all.  If you have little or nothing in terms of assets, or intend to die broke and have no minor children then a Will is not only a waste of time it is functionally worthless.  In fact in that situation whoever you name as Executor (Personal Representative in some states) would be five-alarm stupid to accept the job and file the Will with the courts because there's nothing to get but once you file there are both costs and responsibilities.  In other words if you know you will either die broke or in the hole and have no minor children then save the money.

You should still have a durable power of attorney and advance directive; those are to some extent state-specific depending on where you live, in an attempt to have what you want to happen actually happen when it comes to you being flat on your back and unable to make decisions.  Make damn sure said advance directive is on file with all the hospitals and other places you might be taken if you collapse without warning; until said place has it and knows they have it they'll do whatever the hell they want and maybe, but not necessarily, whatever someone who identifies as one of your next-of-kin wants.  If this isn't what you want it's bad news and the cost of that, if any, will wind up billed to your estate which your estate will be obligated to pay.  So if you do only one thing make it that advance directive and put it on file at all the local hospitals.

Warning: Some people will tell you to put someone else on your accounts.  If you are offered this, to be a "second signer" or "co-owner" do not accept unless you are that person's spouse, in which case it is (of course) perfectly ok.  The reason to refuse is that if they do something stupid you are fully responsible legally and financially, and this can ruin you instantly.  Consider someone who has brokerage account and is short at the margin limit of a company that gets taken out and the stock doubles.  They will come after your house!  Don't do it.

power of attorney gives you the ability to take care of business while the other person is alive without that risk and is the correct instrument; there are several forms of that from very limited ones for a specific asset or account and specific directives all the way to a general durable power of attorney that is extremely broad and essentially gives the person who holds it the same rights as the principal.  Just be aware it turns into a pumpkin instantly upon the principal's death and if you are holding one it is a civil and in some cases criminal offense to self-deal or otherwise screw the principal who gave it to you.

If you have or expect to have assets, or in the instance where you have minor children then a Will is appropriate.  Just understand its limitations and do it the right way to minimize them.

Specifically, get anything worthwhile out of the Will and thus out of probate.  This will make your heirs happier as it's faster, cheaper and has a near-perfect capability to have happen exactly what you wish so long as that's legal.

The first thing to consider is that for anything that doesn't trigger gift tax issues (e.g. things worth under $14,000 in total to a single person, but perhaps of immense sentimental value) give it to the people who you want to have it while you're still alive -- but before you're on your deathbed.  This is very unlikely to be challenged and if it is the person challenging it will be forced to spend money on a legal case with no monetary reward.

When you die with or without a Will but with some assets subject to probate then "someone" has to file with the probate court.  If you do not have a Will then whatever is subject to probate is distributed based on state law; there's a table they go down (e.g. "spouse first, then any direct descendant children, then ..... and on and on until the category fills.)  A Will overrides this to any extent you wish and nominates one or more people (in a chain, if the first refuses or is dead, etc) to be the Personal Representative (or "Executor" in some states; same thing, different names depending on the state.)

However, as soon as that Will is filed with someone named as Personal Representative (assuming the designation of either as valid is not contested, and it can be if someone wants to), or Probate is open "intestate" (with no Will) the fees start.  Filing and publication fees are typically in the many hundred dollar range right up front.  Unless that person both lives locally and can and will keep their act together sufficiently to deal with the court on a routine basis then there will also be legal fees involved.  Most people will either want or need at least legal consultation in doing this job; if you have a law office do it "end to end" for you (which is also an option) the cost is going to double or more.  The cost of this process in dollar terms is almost-always well north of a thousand dollars simply in court fees alone by the time it's all said and done; with lawyers involved it only takes one that's a bit of a snake to run the bill through the roof since all time is billed hourly.  Choose wisely and ask lots of questions!

Further, and much worse in many cases than the money hit is the fact that once Probate is opened there are statutory time windows that amount to a virtual standstill in terms of anything being paid out or distributed and similar.  The reason for this is that all states have a "Bar Date" for claims; 3 or 4 months is common and the clock does not start running until Probate is filed and published.  A company or person with a financial claim on the estate has that long to file their claim; if the Personal Representative pays out anything beyond funeral and ordinary maintenance costs (e.g. utility bills on a house, etc) and there are insufficient funds to cover claims he or she can be held personally responsible for those debts!  Therefore the usual (and good) advice is distribute nothing until the bar date passes so you know exactly how much is left.  If the Personal Representative is comfortable enough with the decedent's debt profile (usually only true if you were running that person's money for a couple of years prior to their death) then some distribution can be made sooner, especially of things that have little financial but lots of sentimental value (various bits and pieces of personal property, etc.)  One thing to be very conscious of is anything on a lease; this most-often comes up with cars but it can be anything (e.g. an apartment!)  Death does not void a lease in nearly all cases and the firm or person the decedent took it from can and usually will try to collect the entire remaining balance of payments.  That can be a literal crap-ton of money and is quite capable of turning a modest estate into a smoking hole with negative value.

Next up is that most states assess an inventory fee on estates -- which amounts to a tax.  That's usually assessed on the net value of assets on the day of death. Some assess straight-up taxes as well.  There is also a potential federal estate tax issue but that doesn't hit most people as the limit is quite high ($11.4 million at present); if you're in that bracket then you're a 5-alarm idiot if you don't already have professional legal advice to deal with it in advance with some sort of bypass trust.  There are ways to defray that tax and in some cases completely avoid it but that has to be done well in advance, so if you're that wealthy head thee to a good estate planning attorney pronto.

Note that if you do not file probate on an estate then there is still a statute of limitations on debts -- typically two years, but in some states it can be materially longer.  In other words if there are debts then it's to advantage to bar any who don't pay attention by filing Probate -- but only if there are assets to pay the debts with and, when that's done, something will be left!  Otherwise the correct action is to walk away and let the creditors pound sand; that you're named in a Will does not mean you're obligated until and unless you accept the appointment.  Figure out if it's worth it (there will be something left, in your best estimation, and whatever you'll receive is enough to be worth your trouble) before you file!

IMHO, assuming no minor children, your goal while alive should be to make it not worth it to Probate the Estate even if there are assets and by doing so deny both the lawyers and the courts their fees.

Many times this can be done.

First, financial accounts of various sorts can for zero cost have what is known as "POD" put on them.  That's payable on death and it's exactly what the name implies.  You designate who gets what percentage and it's a simple form you fill out at the bank or brokerage.  If you die your heirs need only present a death certificate, which they can usually obtain within a week or your passing, and the money is theirs -- period.  A cashier's check is cut and that's the end of it.  Likewise life insurance policies should always name specific beneficiaries and not your Estate.  If you have modest debts -- such as a credit card for ordinary monthly expenses -- and someone you trust to pay it when you die then POD them an account specifically for that purpose with just enough in it for that to happen.  They pay the debts after you pass with that money and that's the end of it.

Second, if you have Real Estate and it's owned and has a positive equity then the superior means of dealing with it is usually a Trust.  It costs money to set one up (typically a couple of thousand if a lawyer does it) and it's state specific as is a Will so if you're planning on moving then choosing your venue can be important as well as state tax considerations can come into play.  A trust, once set up, must be funded by having the assets transferred into it.  In other words for a house you re-title the house into the Trust.  A material advantage of this if you do it before you buy the house in the first place is that it largely "hides" who owns it in the public records (e.g. "Green Acres Trust" as opposed to your name) and since Trusts are private it takes a fair bit of work to uncover who it is (it's not impossible, so if you're trying to screw someone you'll likely fail -- but it keeps the nosy out of your business without a fair bit of work and cost to run it down.)  In the trust documents you name a successor trustee who is the person (or chain of persons) who obtains control of the trust after you die.  You can designate pretty much anything that's legal which you want done in a Trust.

Trusts can also have financial accounts re-titled into them and that's frequently done if, for example, you have minor children and a fair bit of money -- or adult children you don't want to have get all the cash at once.  Thus the term "Trust Fund Babies"; if there's plenty of money you may be perfectly ok with having a law firm named as the successor trustee to carry it out when you get hit by a bus since you don't care about the fees and costs.  For most people designating the chain of heirs is sufficient, but once you get into high net worth situations you may make a different choice.

The key difference with a Trust is that just like a POD on a financial account it doesn't go through probate; the court never gets their hands on it and thus there are no delays or fees assessed by same.  This means the heirs get possession and control literally as soon as you diewhich makes things a lot simpler.

Consider that if you have all your assets covered by a Will -- a house, a bank account, maybe a brokerage account -- and you die, until someone files that Will and is named Personal Representative how does the power bill get paid at the house?  Your bank account is locked on the day of your death and a power of attorney to access that account becomes worthless.  Someone is going to have to fork up their money to take care of that until the Will can be put into probate and Estate accounts set up and financial accounts transferred or liquidated, all of which costs time and money.  In addition there's a very clean argument that nobody has the right of possession (e.g. to live there!) in said house at the moment of your death until Probate is established and on the day the Probate Court appoints the Personal Representative that person immediately has a fiduciary duty to preserve the value of same for the benefit of all the heirs.  This can easily conflict with reality; let's say you have someone living in the house who is a partial heir but is a drug user and might trash the place or interfere with the sale required since no heir has the means or desire to buy out the others; the PR can, if the house isn't to pass solely to said person, have a legal duty to forcibly evict them no matter who it is and no matter what else is in the Will as their duty is to protect the Estate assets for the benefit of all the heirs (not just the person living there) and that duty is not to the dead person it's to the court!

If the bank account is POD'd to your heirs in some percentage distribution and the house is in a Trust that specifies that "X" has a right of possession then you immediately (within a couple of days) have the funds to pay the power bill and whoever is so-designated has the rights set forth in the Trust document no matter whether it's to the benefit of the asset -- or the rest of the estate -- or not.  In other words your desires before your death are continued exactly after your death and as long as whatever you put in that document is legal it's enforceable.  Even better is that whatever people have the right to possession of the property need do nothing to enjoy it, and the title remains undisturbed since the Trust still owns it.

Finally none of this changes tax and debt obligations; you cannot evade either.  If you try creditors (or the IRS) can (and if its worth it for them will) sue to claw back whatever you try to distribute outside of the process.  If you have $10 large in a bank account and owe $25 large on a credit card, thinking you can POD the bank account to your daughter as a way to screw the credit card company out of the $25,000 that's likely to fail and get her sued a few months after you pass, quite possibly after she's already spent the money!  Don't do that.

Finally there are "small estate" rules for people who die with little in the way of assets but the limits vary from state to state and in some states are laughably low, to the point that someone with nothing more than a modest car exceeds them.

As you can see this can be a lot more complex than it first appears, even if you aren't particularly wealthy.  The only place it doesn't matter at all is if you either are or intend to die broke (or even better, deeply in the hole) -- in that case then **** 'em and do nothing with regard to finances (e.g. POD, will or trust), on purpose, but make damn sure nobody else has joint responsibility for anything so the people who you owe can't come after someone else when you die.

In short get competent advice -- there are plenty of people out there who are outright snakes and whoever is managing things for you when you pass is going to get to meet a bunch of them.

I just recently wound up my later mother's estate; I'm not a lawyer nor did I set up her affairs originally, but I did hold powers of attorney for both financial matters and health care and was her Personal Representative, and have seen the flat-out ugly bullcrap that everyone in the world tries to pull.  I got dozens of spammy and in some cases scammy letters from various entities and people, along with more than a few phone calls.  It's a five alarm pain in the ass and a good thing that I'm pretty-much a pissed-off alligator when someone steps on my tail and am more than willing to chase-and-bite -- hard.  Most people would have been butt****ed by some of the crap that was pulled -- as it stands everyone who was legitimately owed money (not many) got paid and there was something left, with none of the schemers and scammers getting anything.  That's the way it should be but it was overly complex -- when my time comes it won't be.

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2019-03-28 07:00 by Karl Denninger
in Musings , 131 references
[Comments enabled]  

It was just a matter of time....

Now researchers have turned to yeast to do something more improbable: manufacturing the cannabis compounds CBD and THC. By loading brewer’s yeast with genes from the cannabis plant, they’ve turned the miracle microbes into cannabinoid factories. It’s a clever scheme in a larger movement to methodically pick apart and recreate marijuana’s many compounds, to better understand the plant’s true potential.

Oh my.

Without yeast there would be no beer or wine.  Nor bread, for that matter (leave aside the hosts in the local Catholic Church which are unleavened!)

Essentially what's happened here is that people have bioengineered what goes on in the cannabis plant -- except they are doing it selectively, which is very cool for a whole host of reasons.

First, you can get exactly what you want -- and none of what you don't.  Isolating CBD is not very hard but growing plants and then isolating it from them is, well, more trouble.  And risky -- what if there's more than a trace of THC in there?  The entire batch is a zero.

But with this method there is no THC produced and thus there is no risk.  Oh never mind that it's probably also easier and more-prolific in terms of the amount you can produce in a given amount of space.

I like it.

A lot.

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2019-03-21 09:55 by Karl Denninger
in Musings , 123 references
[Comments enabled]  

Now this is good....

A Nashville bakery went viral this week after it created a cake to celebrate a man getting a vasectomy. Signature Desserts posted a photo of the cake covered in white frosting adorned with lemons and the words: “100% JUICE, NO SEEDS. HAPPY VASECTOMY!"

I can get behind that one...

smiley

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