Here I explain in 10 easy steps how US corporations shelter profits in "overseas" or "off-shore" accounts. Funny thing is, those profits are hiding in plain sight all around you! See here why...

Interesting article that details how US corporations can book some of its profits on US sales of goods/services into overseas (or "off-shore") subsidiaries and how those profits are NOT subject to taxation in the US.

Here how it works in 10 easy steps:

1. I produce a high tech product, oh, say, a Smartphone and I sell primarily in the US market.

2. I develop and patent a new technology that improves the Camera in my Smartphone and it will add tremendous value to the phone!

3. I set up a legal subsidiary (really just an office with a secretary) to my company in, oh, say, the Cayman Islands or some other country that is VERY friendly to foreign corporations.

4. I sell ALL THE LEGAL RIGHTS to my new technology to this foreign subsidiary for $1.00 (I get a little revenue from this transaction).  This technology won't produce all my profits, but it will produce a good portion of them.

5. The foreign subsidiary now "offers" to sell me the right to use the technology in my phone for, say, $11.00 (I GOTTA have it for my phone!!). 

6. I pay $11.00 for the technology, now an EXPENSE for me, and the foreign subsidiary of my company makes a profit of $10.00 ($11.00 in revenue minus the $1.00 they paid me).

7. I declare to the IRS the $10.00 in profit "earned" by my sudsidiary will "permanently" stay overseas (off-shore).  IRS says "fine", it is not subject to US taxation!

8. My subsidiary has $10 that they can now (1) invest locally or (2) get this (!), INVEST in the US, whether that be in US Stocks, Bonds (Govt or Private), or other financial or physical assets. Also, if I play my cards right, my subsidiary COULD put that money in a US bank (earning interest) and I could go to the same bank and get a loan for $10.00!! 

9.  So, I could end up borrowing my own money (earning and paying myself interest) on profits that were never taxed in the US.

10.  The point of this?  All those profits the media reports that are "hiding" in Foreign banks accounts are really, for the most part, here in the good ol' USA!

SWEET!!! This is a simplistic example, but read the whole article below and you will see the structure of my example holds some water.

Also, look at some of the biggest offenders--the maker of some of yours and mine favorite products/services.  Feel a little unclean now that you know this?

Firms Keep Stockpiles of 'Foreign' Cash in U.S.

There's a funny thing about the estimated $1.7 trillion that American companies say they have indefinitely invested overseas: A lot of it is actually sitting right here at home.

Some companies, including Internet giant Google Inc., GOOG +6.17%software maker Microsoft Corp. MSFT +1.47%and data-storage specialist EMC Corp., EMC +1.77%keep more than three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, according to people familiar with the companies' cash positions.

In the eyes of the law, the Internal Revenue Service and company executives, however, this money is overseas. As long as it doesn't flow back to the U.S. parent company, the U.S. doesn't tax it. And as long as it sits in U.S. bank accounts or in U.S. Treasurys, it is safer than if it were plowed into potentially risky foreign investments.

Gallup Poll that nicely illustrates the divide in the US as to who people blame for our various woes--Government or Corporations. Where do YOU fall in this poll?

Latest Gallup poll showing the differences between Republicans and Democrats regarding their respective view of Government and Corporations.   I modified the results to illustrate the extremes on both sides. An almost perfect Venn Diagram would overlap the silent majority---Independents, and implicitly identifies the REAL PROBLEM---Crony Capitalism.   This is where I reside. How about you???

Crony capitalism is a term describing an economy in which success in business depends on close  relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, or other forms of dirigisme.^[1] Crony capitalism is believed to arise when political cronyism spills over into the business world; self-serving friendships and family ties between businessmen and the government influence the economy and society to the extent that it corrupts public-serving economic and political ideals.

 


"Where the U.S. gets its oil imports, in one map"

Where we get our imported oil to fuel our economy is largely dictated by geography and close proximity to the source.

Canada is our largest source: 2.3 million barrels of oil per day, especially for a large section of the Mid-West.  Mexico, Saudi Arabia, and Venezuela (primarily in the South/South West) are next in line bunched up at around 1.3 millions of barrels per day (each).

(Please see the article that accompanies this graphic HERE  (hence the title of this posting). It is very interesting and has some links to learn more about this issue)

Source: Wonkblog at Washington Post

It is suggested in the article cited that the completion of the Keystone Pipeline (below) will bring an estimate 1.5 millions of additional oil to the South, potentially displacing oil we currently get from the above mentioned countries and then some. 

 

Good thing? Bad thing? Or is it just a thing?

 

 

What do a bad movie and Jets QB Mark Sanchez have in common? They both give you that Sunk Cost feeling. Read here the connection...

 

Here is an excellent article merging an economic concept and a solid real life example---an NFL quarterback and "sunk costs".

The Jets made a large, multi-year, multi-million dollar financial committment to a player, Mark Sanchez.  He has not worked out so well, but they are contractually committed to paying him for a few more seasons. 

Should this finanical committment keep the Jets from playing him and replace him with someone else who might produce a better outcome for the team, or should they play him and pay him is millions even though they are pretty certain he is not going to be "the guy" that gets them to the next level?

In other words, should the past (and ongoing) investment they have in a failing Mark Sanchez be considered a "sunk cost" and have no bearing on what they should do going forward to improve the team? 

All leads back to Opportunity Costs, of course...

That Sunk-Cost Feeling

""...The Jets have stumbled into a classic economic dilemma, known as the sunk-cost effect. In a purely rational world, Sanchez’s guaranteed salary would be irrelevant to the decision of whether or not to start him (since the Jets have to pay it either way). But in the real world sunk costs are hard to ignore. Hal Arkes, a psychologist at Ohio State University who has spent much of his career studying the subject, explains, “Abandoning a project that you’ve invested a lot in feels like you’ve wasted everything, and waste is something we’re told to avoid.” This means that we often end up sticking with something when we’d be better off cutting our losses—sitting through a bad movie, say, just because we’ve paid for the ticket. In business and government, the effect pushes people to throw good money after bad. The quintessential case of this is the Concorde. There was never a convincing business case for the supersonic airliner, and there were numerous attempts to kill it. But those attempts all failed, in large part because of the billions that had already been spent....""

Read more: http://www.newyorker.com/talk/financial/2013/01/21/130121ta_talk_surowiecki#ixzz2ILHtsBs5

Nice graphic showing the 2012 Federal Budget and historical trends in spending and revenues. Are things getting better???

Nice graphic showing the 2012 Federal Budget.  The left graphic shows the major categories of spending categories (mandatory and non-mandatory) and revenue sources.  The box above the revenues shows the shortfall---the Budget deficit for 2012.

The graph on the right shows Federal Spending and Revenues as a percent of GDP overtime. Historical average for Federal spending is 20.5% of GDP and Tax Revenues average 17.9% of GDP over time. 

You can see at any point in time where actual spending and/or revenues are relative to the long term average.

 The Gray Bars represent periods of Recession---notice, in general, spending increases and revenues decrease during recessions.  Automatic Stabilizers (unemployment compensation, Food Assistance, other Income support programs, etc) and discretionary Fiscal Stimulus Plans (roads, bridges, and other infrastructure projects) are implemented, at the same time when tax revenues are decreasing. 

Budget deficits increase during recessions and, hopefully, decrease when recovery occurs.

You be the judge.

Source: The Big Picrture Blog

Great product for potty training OR the average college student...

Go HERE for the article. Or just stare at the picture... :)



Source: Wired

Here is a detailed map of all the murders in Chicago this past decade and why you SHOULD visit the city in spite of it. Don't deny yourself this experience!!

I have lived in Northern Illinois for a year now. I have visited downtown Chicago many times.  I ALWAYS feel safe.  Those of you who are familiar with the area, I often walk from Union Station to different points along Lake Shore Drive and in between.

I circled that area on the map above.  It is considered the Downtown area of Chicago. It is a bit of an oasis relative to what you see around it.  The little finger-like area jutting out into Lake Michigan on the rigtht is the famous Navy Pier.

I only post this to tell you that, from my experience, visiting Downtown Chicago is safe and I NEVER get hassled by anyone.  People politely ask for money, but do not pressure you.  Again, that is MY experience.

So, don't miss out on visiting a great city. 

Nice graph showing the 69' Mets caused persistent debasing of the currency. What else could it have been?

This graph shows inflation, as measured by the Consumer Price Index (CPI), from 1776 to Present.  Don't ask me how they got data from that far back. 

The creation of the Federal Reserve is widely cited as the downfall of the value of the dollar.  Guess I see some inflation post 1913, especially after WW II.

However, even a high school economics teacher can see that in 1970 when the dollar went off the "Gold Standard" did we see an acceleration of inflation (or was it the 69' Mets?).  Co-incidence?  Someone smarter than me (everyone out there) please tell me.  

Source: HERE

Healthcare premiums and stagnant wages all in two easy to read graphs...

Health care costs have contributed to stagnant wages for most workers. I don't THINK this is controversial. 

Below is a chart showing the increase in annual premiums paid for coverage, 2002-2012.  The cost in dollars terms you see below are BOTH the employee and employer contributions to the total price paid for health insurance. The employee pays part of the cost out of their wages and the employer pays part of the cost on behalf of the employee---this is known as "non-wage" compensation.



Source: Forbes

In 2002 a family policy cost $8,003 dollars.  Using the BLS inflation calculator, in today's dollars that would be equivalent to $10,242.  Yet, the policy today actually costs $15,745---$5,503 or 54% more than the if the policy increased at the general rate of inflation as calculated by the Consumer Price Index.

Here is another chart showing the percentage changes in various measures of wages and health care premiums paid by workers.  Green line is the percentage change in wages.  The blue and red lines are what employees and employers contribute in premiums. The gray line is the general level of inflation as measured by the Consumer Price Index (CPI).

Green line is relatively flat.  Red and Blue lines increasing at steady rate.  Red and Blue lines are the ones contributing to the flat green line.  Health care premiums holding down wages.  Can you see it?



Source: Forbes

Note: Not saying this is the WHOLE reason, but as with many issues there are many contributing factors.  This is just one, but a pretty important one

Nice infographic on the incredible amount of food that is wasted from the field to the table. These numbers look very bad, but are they really?

You will have to click HERE to see a larger image.

On first look, I was aghast at the amount of "leakage" or loss of product along the supply chain from field to table. 

But then I thought about it.

With all the latest advancements in technology, processing and packaging, how aweful HISTORICALLY the waste and loss must have been compared to today, in real terms.

In nominal terms, there is going to be a lot of waste because we produce more food than ever.

If you look at the percentages they use for "developed" vs "developing" countries, I would venture to say that 50 years ago you could  apply today's developing countries percentages to the developed worlds.

In other words, if developled countries are doing twice as well as 50 years ago in reducing waste/leakage but it STILL seems like a lot of spoiled/damaged/lost food.

Or...it could be the developed world consumers are so picky that even slightly damaged produce does not get put on the shelves and is thrown out, whereas, the our fore-mothers/fathers would not have been so finicky about a bruise or two.

Source: CNN

Just back from Disney World with an Economics lesson. You did not think I was riding the rollercoaster, did you? Has Disney raised its Theme Park prices TOO MUCH in the past two years since I last visitied? See my analysis here.

Below are the prices for admission to the Disney World Parks in Orlando, Florida.  Just got back from there for vacation!

A one day ticket today for a person 10 and older is $89.00 and under 10 is $83.00.

In 2010, I did a blog entry on elasticity of demand using a price increase they imposed at the time (go HERE for that entry).  At that time the price increased to $82 for 10+ and to $74 for under 10.

+

For the 10+ ticket that is an 8.54% increase and a 12.16% increase for the under 10 ticket.

If we were to factor IN inflation (using the BLS calculator) that $82 dollar 10+ ticket in 2010 should be $86.57 in today's dollars. It is actually $89.00)

The under 10 ticket ( $74 in 2010) would be $78.13 in today's dollars. It is actually $83.00.

Quite amazing that the Disney was able to increase their ticket prices FASTER than the general rate of inflation DURING a prolonged economic downturn. That shows some significant pricing power within this market.

Hold your Fast Pass, there Goofy!!

Let's look at what is probably (I have no idea for sure, though) a more common ticket purchase---a 3 Day ticket. 

A 3 Day 10+ ticket cost $232.00 in 2010. In 2012 dollars that is $244.94.  The ticket price today is $242.  Increased slightly less than the rate of inflation.

A 3 Day under 10 ticket cost $214.00 in 2010. In 2012 dollars that is $225.95. The ticket price today is $226.00.  Increased slightly less than the rate of inflation as well.

So, this result shows Disney may not have the pricing power I initially thought they had.

I suppose I could do the math to figure out the rest of the days, but I am still tired from the trip.

Extra credit if you want to do it for me.  :)

Here are 16 predictable things that happen when a good and/or service is banned/outlawed. Happens like clock-work. The costs accrue quickly!

When you ban something, or severely restrict its free trade, that most people want (not just insiders, but the public at large), a predictable domino effect will take place.

Found (HERE) the following 16 predictable things that follow the ban/outlawing of a good and/or service that usually happen on cue.

When a law bans exchanges wanted by everyone directly involved a number of things happen:

1) The exchanges continue;
2) Prices of the banned items rise and wars to control turf begin;
3) New criminals are created, including many people who are ordinary good people (like colored margarine seekers);
4) New enforcement agencies and staff are created;
5) New jails are built and new jailers are trained;
6) Laws, lawyers and lawsuits proliferate;
7) A new branch of law and its practitioners prosper and support further extension and complexification of regulations;
8) A portion of the entire apparatus of enforcement and punishment is progressively corrupted;
9) New agencies and staff are created to discover, eliminate or suppress the corruption;
10) Many begin to support ever more drastic suppression and punishment;
11) A profitable subliminal partnership emerges unifying the interests of violators and enforcers as the profits from the illegal trade are negotiated and distributed among them;
12) The business engages all of the following: bad people buying and selling, good people buying and selling, police, judges, academics, enforcement trainers and suppliers, prison builders and suppliers, staff to support all of this, journalists to cover it, media organizations to sell the coverage;
13) Completely uninvolved people are caught in crossfires, including taxpayers;
14) The costs of controlling the new flourishing evil continue to grow seemingly without limit;
15) The vast network of beneficiaries of the law applaud and lobby for its continuation, vilifying all opposition;
16) Everyone gets more and more discouraged and inclined to hate all humanity. This list is probably too short.

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)