Our States Dire Financial Situations

Most of this country’s states are having financial trouble. Pension and other poorly undertaken contracts are making it impossible for most to balance their budgets. Tax revenues are down from past levels, while spending cuts have not kept up with demand for state services and outlays.

Yet, liberal legislators keep handing out promises and largess as if prosperity still reigned. School costs keep growing. Public service and government-worker union pressures are destructive for officials seeking budget solutions.

Unionized employees often get 70% or more of their income for retirement each year, after only thirty years or so of work.

Chicanery, legal or not, is also at work. Many government pensions are permitted to be ‘spiked’ upward with overtime pay and raises, before retirement.

Fact: It takes $1 million in capital funds at 5% to get one $50,000 annual pension per worker per year. And that 5% is not being achieved these days.

Bankruptcy to break pension contracts is not an option for states, without federal law changes (but for cities and towns.)

There will have to be some freeze in obligations or change contracts for individual solutions.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Market for Gold

The market for gold as coins and bullion has been going well on average, over the years, thanks to the weakening dollar. I have frequently commented on this because I feel gold can be speculative for most folks who have no idea about its downside.

It can fall sharply, with any attempts to balance the U. S. budget, which will have to be done if the country is to avoid becoming another Greece. And gold does not earn income or revenues upon which to establish intrinsic value.

In bad times, it’s a psychological defensive weapon in many ways, but psychology often changes.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Analysts Who Select Your Investments

Securities analysts give you investment advice. They suggest what securities to buy and sell.

Analysts constantly critique management of publicly owned companies. They claim to know what products and services companies ought to produce and what they should charge. Analysts propose when to hire and fire top executives.

Yet very few analysts have hands-on ability to understand how any business operates from the inside. They are not even that proficient concerning Wall Street inner activity.

As I have often, they haven’t the business experience to successfully run a pushcart.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Investment Strategies by Media

Whenever the financial media discusses investment strategies, it’s about a favorite of someone being interviewed or reviewed. Perhaps the strategy is a public relations release, disguised as financial news.

The purpose of investigations I have done of literally thousands of independent strategy studies and investing techniques, have helped me delve into the investment strategy phenomenon.

My conclusions often differ with that of the media, which tend to overlook strict investment strategies and techniques. So efficient strategies get short shrift. Yet, proper strategy use increases the odds of investing success.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Ratings of Commercial Credit Agencies

The past change in the AAA rating of U.S. credit should make us consider the question of ratings on non-governments as well.

The bulk of commercial credit ratings are done by Moody’s, McGraw-Hill’s S&P, and Fitch Ratings, the three largest of  a handful of government-approved services.

Critics say they did poor evaluations of credit-default swaps and subprime debt issues. And in this way contributed, to a great extent, to the 2008 financial downturn. There were also charges of conflicts of interest.

Payments for ratings are made by firms who sponsor the evaluations.That is, those who issue the debt obligations.

What is needed is more competition. That means more credit evaluation services being recognized by our regulators.

And more diligence by borrowers. That would be the ideal way to prevent serious credit rating problems from developing again.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Derivatives Are Not The Villains

A government can hide its long-term, poor fiscal position with short swap, or credit default derivatives. This paper manipulation made things look what they were not with Greek’s financial deficit spending over recent years.

Using derivatives for deception was wrong.

However, derivatives have a legitimate function in government financing, as they do in normal business and financial transactions.

Eliminating derivatives or making them tougher to write, will dry up the supply of conventional debt financing, That will simply make it tougher for governments to get credit. They will then sell their bonds only at much higher interest cost.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Deep Recessions Should Always be Short

Throughout U.S, history we have had economic cycles. To even them out the Federal Reserve System was legislated  a hundred years ago.

But human-handed regulation has never really succeeded at that function.

Experience has taught us, however, that natural cycles very quickly correct themselves. And that the deeper the downturn, the sharper the economy will bounce back.

Except when government meddled in the 1930’s as it has in recent years. Along with multi-trillion dollar budget deficits that are confusing and scaring large and smaller, job-creating business owners.

The economy should be thriving again, and isn’t.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)