Saturday, December 29, 2012

Don't laugh--I have a Vegan Restaurant recommendation for you. Those of you who know me know how ridiculous THAT is. However, I believe this very small chain of restaurants will be the next "big thing" in casual dining. Just wish I had the money to invest!!

I am by NO MEANS a foodie, food critic or connoisseur of fine food.  In general, I dislike most vegetables and have an elevated disdain for green vegetables.  I am a meat and potatoes kinda guy.  That last descriptor is not a generalization. It is pretty much a truism that plays out on my plate at just about every meal.  Bad on me, so says my cholesterol level and blood pressure.

My daughter is a vegetarian/vegan.  Has been for several years. Don't understand it, but I respect it.  I just tell her to leave me out of it. Ha! Did not work so well.  Went to a vegan restaurant in Dallas, Texas with her on her birthday once.  Tasteless food prepared and served by, well, equally distasteful people.  Hated every minute of it and stopped for fast food on the way home.  True story.

We moved to Chicago a year ago.  For her birthday, she wanted to go to a dinner and a show. She found a vegan restaurant in the Wicker Park area of Chicago.  I was fooled into trying the "life-style" again. We went to a restaurant called "Native Foods". Attitude changer!!

I have read stories about investors who accidentally came across "the next great thing" in terms of a budding business, got in on the ground floor, and cashed out rich.  I always wondered what it would be like to be "that guy" and be presented with "that idea". I gotta say, this place is THAT THING!  The only thing missing for me is the financial capital to invest, because I believe this will be a hit and it has tremendous growth potential.

I don't know how they do it with the "fake meats", BUT if they can fool and satisfy a confirmed carnivore like me, then I have to think their upside in terms of a cross-over effect to gain market share is huge.  Sell someone like me on vegetarian food/meats and you have a winner.

Another upside---they seem to hire "normal" people (in look and attitude) who don't look like they just came from an Animal Rights Front raid.  Don't ask me to elaborate on that, you know darn well what I mean.

Native Foods has VERY few locations at this time, but they apparently have plans to expand.  If you have a chance to eat at one, I would highly recommend it.  Not sure if it is just this one location that does it well or not. Check out their website, find a location and try it.

Now, if I can just find some money to invest...

Note: I am in no way affiliated with Native Foods and dont know anyone associated with the company. I dont even know if they are looking for outside investors.

I am just a hungry person that occassionally stumbles upon something worthwhile. 

See here the latest level of Household income it takes to be considered a high income earner. You will be surprised at how little it takes to be near the top!

Interesting graphic from the Wall Street Journal.  The article states these figures are "national" and do not completely reflect regional differences in income relative to cost of living.

Numbers at the bottom left indicate what it takes to be in the different percentiles of income.  A key word is "Household"---this could be the income of just one person or multiple people that make up a household.

For instance, you could have two teachers married to each other, both earning $55,000 per year (not unrealistic) and be considered in the TOP 20% of income earners.  Surprised you are that high in the "rankings"??

Curious as to how much (or how little, depending on your perspective) members of the Military earn per month? See the numbers here....

I don't think most people know what members of the military earn on a monthly basis.  Here is the pay schedule for enlisted men/women.  I got this from the latest Executive Order signed by the President to give Federal Employees a raise. Find that HERE. You will also find the Officer pay schedule there as well.

Each branch of the military has different names for the "E" designations.  Go HERE to find the equivalent rank for each branch.

I was in the Marine Corps--E-1 (Private), E-2 (Private First Class), E-3 (Lance Corporal), E-4 (Corporal), E-5 (Sergeant), E-6 (Staff Sgt), E-7 (Gunnery Sgt), E-8 (First Sgt OR Master Sgt--depending on the career track), E-9 (Sgt Major). 

(Click on images to get a clearer view)

Friday, December 28, 2012

The President quietly signed an Executive Order yesterday giving pay raises to Federal Workers, including the Vice President, the Senate, and the House of Representatives. See here the new pay schedule for these deserving ladies and gentlemen...

Seems like bad timing to increase pay for Federal employees now, in the middle of a BUDGET CRISIS, but what do I know.

Yesterday (Dec 27th) President Obama signed an Executive Order authorizing pay increases for all classes of Federal Workers. You can find the whole Executive Order HERE

Here is a clipping of the new pay schedule for your Federal elected politicians and other key Federal positions. 

If you spill milk after January 1st you will want to cry because it might cost as much as $8.00 a gallon. Congress does it to us AGAIN! This is a strange story you have to read to believe.

Caught up in the morass in Congress (House AND Senate) is the fate of the latest Farm Bill.  If it is not renewed on or before January 1st, the price of milk MAY dramatically increase as a result. (See HERE for more on this story).

This is the result of an archaic provision that says if the bill is NOT renewed in a timely manner then the formula for determining the prevailing "Price Floor" paid to dairy farmers will revert to calculating the price floor using 1949 (yes, you read that right) production costs.  Adjusted for inflation, that means the price floor is estimated to DOUBLE, hence doubling the price of milk overnight.

A price floor is used to help reduce individual farmers exposure to market price fluctuations that agricultural commodities are routinely subject to due to factors generally out of control of the farmer.  It guarantees, in advance, the farmer will receive a minimum price for their commodity if the bottom falls out of the market and the market price falls below production costs.  This has been farm policy in the US since the 1930's.

If the market price decreases (demand decreases, supply increases, or some combination of both) then the farmer receives the predetermined Price Floor price. The Price Floor in this case is said to be "Binding" on the market. The Price Floor price will become the de facto market price for everyone else.

If the market price increases (demand increases, supply decreases, or some combination of both) then the farmer receives the market price and not the Price Floor price.  The Price Floor is said to be "Non-Binding"on the market.  Farmers are receiving a market price HIGHER than the Price Floor. They are better off and don't need the Price Floor to fall back on.

The purpose of the Price Floor is to keep farmers from losing money in the short-run so they can stay in business.  It guarantees them a certain amount of income to meet expenses and hopefully break-even, at best, at the end of the harvest.

Here is the kicker: Right now the market price for milk is HIGHER than the Price Floor (dairy farmers are not unhappy at this point). The Price Floor is "Non-Binding". However, if the Farm Bill does not pass in a timely manner, the Price Floor is expected to increase significantly ABOVE the market price and the Federal Govt will pay the Price Floor price to farmers.  The Price Floor will become the new de facto market price everyone else pays.FOR NO OTHER REASON THAN THE INACTION OF THE HOUSE AND SENATE!

Below the fold, is my detailed explanation of how a Price Floor works. Complete with graphs!!! 

This is an important concept in Microeconomics, so I hope it helps with understanding how this particular government action described above affects a market.

Wednesday, December 26, 2012

What do the Economic pie and retail opening on Thanksgiving have in common?

The "economic pie" does not get bigger by shifting the slices around the plate.  Retail sales are not the source of economic growth, but a by-product of it. This does not surprise me at all.

The New Black Friday Strategy Backfired On America's Retailers
"Early store openings for Black Friday only shifted the holiday consumption pool, which was the opposite of the intended effect," he wrote. 

"Retailers wanted early buying to lead to splurge buys towards the end of the season (emphasis mine). The thought they hoped to trigger: 'man, did I REALLY get everyone enough?'”

Do the people who run these large stores actually read the business section of the paper?

"To increase taxes on the rich, or to decrease deductions available to the rich, that is the question."--- I TRY to answer here...

The "game" of doing your taxes is to minimize the income that is subject to taxation.  People at all income levels do this.  What I would like to do with this post is to do a basic explanation of how taxes work within the framework of potential policy changes coming down the pike---changes in Marginal Tax Rates and/or deductions you can take to reduce your tax liability.  I tried to make this as simple as possible  and dont pretend to know all the issues.  Let me know where I am going wrong.

Marginal Tax Rates are the tax rates, expressed as a percent, assessed on "each additional dollar" of taxable income (wages and/or other sources of taxable income, i.e. interest on savings accounts).  In the US we have what is called a "Progressive Marginal Tax Rate System"--the more you earn, the more you pay in Federal Income Taxes.

It looks like this:
Confusing, isn't it.  Let's keep it simple and look at a Single Person who earns $600,000 per year (a bonified 1%-er) with all sources of taxable income accounted for.  Assume this person has qualified deductions equal to the average of those in his/her income range. This (2009) table shows those average deductions in the major categories that people typically take deductions. This is  the latest data I could find. Wont be completely accurate but we will get the message.
So, if this person was representative of the average in their income bracket, their qualified deductions would total ($38,149 + $48,317 + $25,527 + $18,488) $130,481.
Instead of having a taxable income of $600,000, they would have a taxable income of $469,515. See the difference?
If you look at the first table with the ascending Marginal Tax Rates (10%, 15%, 25%, 28%, 33%, 35%) you will see that our person earns more than $338,351 so this puts them in the 35% tax bracket, so all $469,515 is taxed at 35%, right? right?...Well, no. 
That is their Marginal Tax bracket, meaning ANY income OVER $388,351 is taxed at 35%,  The taxable income earned prior to $338,351 is taxed at (1) different marginal tax rates and (2) on different benchmarks of taxable income. 
Here is the math:
The first $8,700 of this persons taxable income is taxed at 10% ($8,700 minus 0 = $8,700 X 10% = $870).
The taxable income between $8,701 and $35,350 is taxed at 15% ($35,350 minus $8,701 = $26,649 X 15% = $3,997)
The taxable income between $35,351 and $85,650 is taxed at 20% ($85,650 minus $35,351 = $50,299 X 25% = $12,575)
The taxable income between $85,651 and $178,650 is taxed at 28% ($178,650 minus $85,651 = $92,999 X 28% = $26,040)
The taxable income between $178,651 and $388,350 is taxed at 33% ($388,350 minus $178,651 = $209,699 X 33% = $69,201) 
Any taxable income OVER $388,515 is taxed at 35% ($469,515 minus $388,515 = $81,000 X 35% = $28,350).
 If we add up all the numbers in bold we will get the TOTAL Federal taxes this person owes--$141,033.  (Assuming they had NO with holding throughout the year, this is the amount they would write a check for). Remember, this total was the result of taxing different levels of income at different marginal tax rates).
If we want to find the Average Tax Rate on our taxable income we would divide $141,033 by $469,515 = 30.03%. 
While this person is in the 35% marginal tax bracket, he effectively pays 30% of his taxable income in Federal taxes. The average is lower than the marginal because large chunks of his income is taxed at lower rates.
Now that we understand that, let's look at how a policy change on this taxpayer will effect him/her.
I believe it is likely, as a result of compromise, the Marginal Tax Rate for the 35% taxpayer will increase to 39.% ("Clinton era" marginal tax rate on the highest level of taxable income).  You can think of this as a 4.6 percentage point increase OR a 13% increase in the rate (39.6%-35% = 4.6%/35% = 13%).
Assume all the other Marginal Tax Rates stay the same (there is talk of moving the 33% rate to 36% too, but we will ignore that here).  The only new calculation will be on the income OVER $388,515, which was $81,000.  $81,000 X 39.6% = $32,076.  Before the increase it was $28,350, a difference of +$3,726 additional Federal Taxes due  and a new total of taxes due of  $144,759 ($141,033 + $3,726 = $144,759)
Now, our Average Tax Rate will be $144,759/$469,515 = 30.08%.  We raised the marginal tax rate on this person by 4.6% percentage points (or 13%), but increased the average tax rate paid by this person by LESS than 1 percentage point! 
What IF instead we implemented a policy that effectively decreased this person DEDUCTIONS by 13%, as opposed to increasing the marginal tax rate by that much. What effect would that have?
Refer back to the total deductions this person had---$130,481.  Decrease this by 13%, or $16,963, and our total qualified deductions will be $113,518.
Now, his/her taxable income will be $486,482 as opposed to $469,515. 
As before, all the numbers below $388,515 will stay the same.  We want to tax the amount OVER $388,515 at 35% ($486,482 minus 388,515 = $97,967 X 35% = $34,288).  Compare this to the change in taxes paid at the higher rate of 39.6%---$32,076. A difference of +$2,212. 
Our new Average Tax Rate is $146,971/$486,482 = 30.21%
If we do nothing and the Top Rate stays at 35%,  the 1%-er would pay $141,033 in Federal taxes (30.03% average tax rate).
If the Top Rate goes to 39.6% then he/she would pay $144,759 in Federal taxes (30.08% average tax rate).  An increase of $3,726.
If we kept the Top Rate at 35% but decrease (cap?) qualified deductions by 13%, then he/she would pay $146,971 in Federal taxes (30.21% average tax rate). An increase of $5,938This is 59.4% MORE in tax revenue than raising the marginal tax rate to 39.6%.
Seems to me that too much focus is perhaps put on Marginal Tax Rates, especially at the top.  Seems like it would be productive to address loopholes and deductions.  However, that would mean taking on powerful interest/lobbying groups. 
On second thought, never mind...

Monday, December 24, 2012

Cinemark stops discriminating for two days! Oh, you did not know they discriminated against you? They do so to the Third Degree. I took a picture to PROVE IT!!

Went to the movies tonight. This sign was on the door.

In this case, discrimination can  work out for you.  Movie theaters are an example used in Microeconomics to illustrate the concept of Price Discrimination.  If a business can segment its customers by their willingness and ability to pay, then it can capture some "consumer surplus". Some consumers will pay the posted market price, but some will pay less, depending on how the business chooses to efficiently segment their customer base.  Some do it through coupons, by age (Senior Citizen OR children under certain ages), or time of day (matinee pricing).

This strategy is worth it to the business because it fills seats that might go empty. People have lots of alternatives on a normal day (leisure or work).

Not so on Christmas Day.  No need to discount on a day that people will be looking to do something soon after the opening of presents. 

Plus after listening to Uncle Leo tell his same stories for the 20th time, you are willing to pay the going price (and more) for a ticket to escape.  Tell me it isn't true.  :)

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