From those wonderful folks who gave us “The Great Recession” comes ..

During my morning cruise of the financial landscape comes a few frighting snippets from the following link

http://blogs.marketwatch.com/encore/2014/03/04/rethinking-the-4-retirement-spending-rule/

in particular the follow two statements found in the article

First:
“Now, J.P. Morgan is entering the fray with an alternative to the 4% rule its own. The good news: You’re likely to be able to withdraw more than 4% of your account’s balance each year. The bad news: The method is fairly complicated to implement, so you will need the help of a financial adviser (which is good news for J.P. Morgan, which employs a network of them.)”

Second:

“The bank’s “Dynamic Withdrawal Strategy” adjusts both withdrawal rates and a portfolio’s investment allocations annually, in response to changes in both the markets and a retiree’s personal circumstances.”

Note the 4% rule is as they said in the movie “Pirates of the Caribbean” quote “more like a Guideline rather than a Rule”.

How nice of those wonderful folks at J.P. Morgan. I am sure that they are all honorable, nice, concerned and carrying individual. I will bet that even their mothers even love them. Unless you are their mother or some how directly related to them I rather suspect that the reciprocal is not the case.

Retirement planning is complicated at best. That said, there are two major complicating factor for which J.P. Morgan or any one else has no control over, or much less an exact answer for.

The first major complicating factor for which J.P. Morgan or any one else has no control over or exact answer for is just how long are you going to live. There is only one entity that know this information, and they are not telling. Now J.P. Morgan can make some educated guesses, but they are really nothing more than guesses, if they are wrong you are the one on the hook, and they are the ones off of the hook.

The second major complicating factor for which J.P. Morgan or any one else has no control over or answer for is just how healthy are you going to be during your yet unknown golden years. J.P. Morgan can make some guesses, but again as before you are the one on the hook, and they are the ones off of the hook.

Of course their method is complicated? To most of us it might also appear to be confusing, after all there is profit in confusion. Of course with their complicated and confusing method you will need a guide, and it just so happens that they have many guides who are versed in this complicated and confusing method (What a deal, I bet you might even get a cup of coffee or a soda.)

J.P. Morgan is in a revenue capture mode (They just keep paying lawyer to clean up their mess, of which no one person or persons is truly responsible for (either criminally or civilly))(In the mean time they got to use the money). They are closing up shop of some of their other more lucrative revenue capture endeavors,(since the government has either outlawed it or has via regulations and oversight made the costs too high, and conversely the profits too low) IE. prop trading or as I like to call it betting against your customers (they would say adding liquidity to the market) (You say mishmash, I say hodgepodge).

So it is only logical that with the current trends in demographics (old people are the fastest growing demographic) that they set up camp in the vast untapped fields of retirement advise and management, with the prospect unlimited and unfettered fees and commissions are just ripe for the fleecing. Lets just face facts old people are easy marks, and the folks at J.P. Morgan are basically just a bunch of college educated suit and tie wearing Grifters. Not to put too fine of a point on it but I suspect that more of them than you would guess would mate with a snake if you held it for them.

Another statement that made in the post that just scares the crap out of me is this little quote:

“The bank’s “Dynamic Withdrawal Strategy” adjusts both withdrawal rates and a portfolio’s investment allocations annually, in response to changes in both the markets and a retiree’s personal circumstances.”

Just what does that mean? Well the article is strangely silent, but I can only infer that at least once a year they (J.P. Morgan) are going to look at your portfolio and to paraphrase Monty Python “Now for something completely different” just rearrange it, and in the process that at the very least will generate new commission for them, and quite possibly incur additional taxes for you. (Truly a Win Win scenario). This feature will also be on top of the management fee (probably based on assets under management) that they are going to charge you annually. (I just love naked, aggressive, and unrestrained capitalism. Don't you?).

Two final points to remember about letting these wolves into you tent. Somewhere deep down inside the agreement that you will have to sign if you want to have all the features and benefits of their world class service.

First is the fact that you will have NO recourse via the courts when you find out that they have truly bent you over the axle and driven you home. No your only recourse will be via the FINRA arbitrations process as sanctioned by the Securities and Exchange Commission. (Their bat, your balls, their field, their concession stands, their parking, their players, their umpires.)

Second somewhere in the tomb of a document/contract you signed was a requirement for you to be forth coming with any and all information that might have a direct bearing on the decisions being made by J.P. Morgan concerning the planning and management of your retirement assets being held for you by J.P. Morgan. I would not be surprised (but you might be) if the document contains explicit methods for you to formally convey this information to J.P. Morgan in a timely fashion, and failure on your part is not a failure on their part (See your on the hook, and they are not on the hook). Your odds are not good, see preceding paragraph.

The Expectation of Privacy?

At this time there is a lawsuit in the United States Federal Court System, Northern District of California San Jose Division Case Number 13-MD-02430-LHK “IN RE: GOOGLE INC. GMAIL ITIGATION”

This lawsuit was originally brought by nine individuals, some of whom were holders of Gmail accounts and some of whom were not, but who had received and or had sent email from or to Gmail account holders. In the suit they put forth the claim that Google had in fact violated several laws, most notable being Federal anti-wiretapping statute. (Maybe they were just piggy backing on top of the NSA). The lawsuit claims that Google was in fact doing this systematically. (Shock, computer were designed to be systematic.) The suit claims that Google was doing this to profit. (What a freaking surprise.)

Just in case your parents never told you or for that matter your lawyer there are very few places that you can go, very few modes of communications, or very few actions that you do in which you should realistically have an expectation of privacy. E-mail is one of those modes of communications where if you are smart you will not have an expectation of privacy. Your e-mail provider knows the who, what, and when of your e-mail. The recipients of your email, their provider knows the who, what, and when of their e-mail. It is not only a wire tap, it is two wire taps, quite possibly three if you include the NSA since in all reality it is quite possible that they have a backdoor into the various large client mail servers. (They might be the few who can actually see end to end on your e-mail if they are so inclined.) Privacy, as far as e-mail is concern it fairy dust.

You will never get away from the who or the when, that is built into the system. But the what, that is a different matter. You have the ability to encode/encrypt you message. If you are not encrypting your message then shame on you. There are several encrypting packages that can be used, pick one, but know that it is not entirely secure. (As the title of the program says Pretty Good Privacy.) For the very paranoid among us we can use some type of off line one time cypher pad to encrypt our message, then encrypt the message again using a less secure method, send the message to your special friend, with the understanding that your ISP, and their ISP, and in all probability the NSA, at the very least have the who, and when, and possible the what of your message traffic. Realize at some point the NSA will or might realize that you have friends and that you also have special friend.

At the very least you need to have several e-mail accounts with various ISP. I have a several. They all have their particular uses. Mail, Junk Mail, Really Junk Mail, and finally Crap Mail, you get the picture. For God Sakes blow the cookie away, flush those buffers, randomly just quite and restart your browser. Hell for that matter randomly shut down your computer.  Defrag and Compact your hard drives, zero out the free space on the drive.

Take to heart the words of the theme song for Monk, by Randy Newman, "It's a Jungle Out There" , in particular the passage  "You better pay attention Or this world we love so much might just kill you"

Eric Cantor's strange view of the world

WTFAH?

“Eric Cantor’s Foreign-Policy Ideas Would Consign Us to Perpetual War”, at least that is the headline of the post by Conor Friedersdorf. http://www.theatlantic.com/politics/archive/2014/02/eric-cantors-foreign-policy-ideas-would-consign-us-to-perpetual-war/284028/

If this is true and as of yet I have nothing to indicate that it is false, it is a pretty damming position to take, but not really that unusual from someone who them self or for that matter their children have never been volunteered (Drafted) or just out right volunteered to go in Harms Way. It is easier to send someone else off to the unknown, then for you or your love ones to sent off on that journey, especially given that there is a chance that you might be returning home in a flag draped container via Dover AFB. (AKA be the first on your block have your son brought home in a box)

For me it is a little more than a bit upsetting. But it is pretty much what would I expect from an individual who so far has spent their entire adult life either in school, or working in the office (his fathers company) or in the office of an elected official, or in an elected office.

As I said it is pretty much what I would expect, but it is not what I am willing to accept.

I am sure that he is smart (went to some of the right schools), that he loves his wife and his children and that they love him after all he is husband and father, but that can be said about many men now and in the past. Eric might even like the dog and the cat, and the dog likes him back and the cat just plain tolerates him (its a cat thing). I suspect that his is considered to be a pillar of the community. Enough of the voters in Virginia 7^th Congressional district have repeatedly consider him an honorable man (they voted for him, of course with only 58 percent of popular vote it appears some of the shine to disappear) For that matter he has convinced enough of his fellow party representatives make him not only Republican House Minority Whip, but the Republican House Majority Leader. All of this before he turned 50 years old, I sure his parents are proud.

Just like the many citizens of Rome who at one time considered Marcus Brutus to be an honorable man, until that fateful day, I suspect that Eric Cantor is not that far behind Marcus Brutus in that his lack of honor is showing more and more each day. (Beware the idles of January John Boehner maybe one should just quit while you are on top).

So Citizen, the question before us is that at the end of the day do we want or need an individual who would consign the Fathers and Mothers, Sons and Daughters, Brother and Sisters of this country via his Foreign Policy Ideas to Perpetual War?

Question of the Day 18 Feb 2014

Are Bitcoin, Zerocoin, and Dogecoin the Tulips of our day?

Especially given a the recent quote by Zerocoin developer Matthew Green

“if people will put money into Dogecoin, they'll put it into anything”.1

Historically they have. Kinda sounds like tulips to me or maybe stock in company known officially as “The Governor and Company of the merchants of Great Britain, trading to the South Seas and other parts of America, and for the encouragement of Fishing”. But more commonly referred to as “The South Sea Company”.

1. Greenberg, Andy (13 January 2014). "Bitcoin Anonymity Upgrade Zerocoin To Become An Independent Cryptocurrency". Forbes (Forbes Inc.). ISSN 0015-6914. Retrieved 2014-01-30.

Current Employment Statistics (BLS)

I received a post from an investment advisor Mr. Steve Reitmeister, making very discouraging remarks about the differences between BLS statistics as compared to the ADP statistics. These remarks to me indicate a rather limited knowledge about the various systems and how they relate to a business.

I own and operate a business and we just happened to be one have the 144,000 business and government agencies that the BLS samples, additionally we do use ADP for our payroll.

First and most important, accuracy and timeliness of our data to ADP is critical and essential, without it my employees do not get paid in a timely and accurate manner. Second and not so important, my data to the CLS CES survey is not critical or essential to the operations of my business, it is done as a civic duty.

That all said, let me reflect a little about my business. First I still employ the same number of individuals as I did last year, but and it is an important but, I have slashed my G&A, how I did this was by either moved individual from my back office to production positions, or a let back office individual go and hiring individuals to fill offsetting positions in production.

The workload on the back staff nearly doubled, which resulted in a reassessment of priorities for those who were left, and a side note compensation for the “survivors” or “the walking dead” as they call themselves was increased reflect the addition duties thrust upon them. Priorities were adjusted, what we have to have changed, what would be nice to have changed, and what we could live without changed. Additionally we have started to use temporary contractors on a very limited basis to perform certain task are one-shot events (yearly inventory audits).

As a consequence we really only make an attempt to make sure that our response to the BLS survey is accurate about once a quarter, the rest of the time we just change the date and send in the previous months report. On the other hand we make every effort to provide timely and accurate input for our payroll, again as before our business depends on it.

So for Mr. Steve Reitmeister to get all balled up on the numbers the BLS supplies is rather immature and to some extent indicates his fundamental lack of understanding on how the data associated with this report is generated and gathered. Given that there are no immediate or even long-term repercussion associated with lack of accuracy of the data or for that matter timeliness that my business provides voluntarily to the BLS the report should really be taken with several grains of salt.

Additionally your tax dollars were not used in the generation of the data provided to the BLS for this report. It is a classic case of GIGO.

Learning to be still

One of the hardest lessons to learn about investing is to be still.  Learning how not to get caught up in news and most importantly the noise of the moment.  Learning how to wait for the shot.  Learning how to control your breathing.  Learning how to slow things down.  Remembering that it is the long game you are playing.

I have several friends who at the present time who have “Buck Fever” they have seen the stock market on a tear for the last year, and they want to jump in with both feet.  I can tell this from the nature of our conversations and e-mails.

They want to know how much I have added to my various investment positions.  They are surprised when I state that I have not added significantly to any position, but instead I have readjusted some of my position (Take Profits), and given the current conditions I plan to readjust some more in the very near future, after 1 Jan 2014.  Additionally I will not be in too much of hurry.

Their response to this is “Are you crazy?”  My reply is hardly!  They want to know what I am seeing that they are not.  I tell them that we are all seeing the same thing, but that it how we processes it, especially in terms of the various lessons that we have learned to date in our lives and the particulars of our portfolio.

My decisions are based on the particulars of my portfolio, the condition in the market, and my age, and finally my sense of intuition, and when do I want to pay the tax due on any gains.  After 1 January the taxes are due on 15 April 2015, rather then 15 April 2014.

The first two (Market and Age) are easy to explain, the third (intuition) shapes my appetite for risk, and is an enigma, the fourth well it the Wimpy rule (I will gladly pay you next Tuesday).

I tell them that what may be good for me may be bad for them.  To a person they all want a list of reasons why at this time I am doing what I am doing with my portfolio.  So in an attempt to comply with their request here goes.

First reason is that the object of the exercise as always is the buy low and sell high.  At the present time the market is high (especially when compared to my basis), will it go higher (I hope so, that is why I have money in the market)?  Yes.  When?  (I do not know.)  The flip side is can the market go lower? Yes.  When?  (I do not know.)

Second the amount of the unrealized gain in my portfolio is quite high, which is good, but one does needs to capture your long-term gains when and if you can and if it makes sense, in context of carried capital losses.   At the present time it for many of my taxable investments it does not make sense for me, although for some of my tax deferred investments this is not the case since in the end they some will be taxed as ordinary income when the funds are withdrawn, some will not be taxed at all (You have to love the Roth).

Third is that everyone seems to be buying stocks, so maybe it be time to be selling stocks.  On the other hand everyone seems to be selling bonds, and so maybe it might be time to start looking at increasing my position in bonds, again if and when the conditions are favorable to me.  (Yes I know that QE is coming to an end and Bond prices should drop as interest rates rise, but sometime a good deal is a good deal).

The fourth reason is “Reversion to the mean”.  This 2013 is a gross outlier, it is not normal, and it is at least a 2 Sigma event.  Will next year be the same?  Highly unlikely, the law of large numbers is not in my favor.

All systems are self-correcting; you may not want to be around for the correction, especially if you just dumped a large amount of your net worth into the market just before it tanked.  So a slow and steady approach is required (Aim Small Miss Small).

Fifth reason is that I am starting to see articles in the press that “This time is different”.  Unless there was some fundamental shift in the fundamental laws of the universe during one of the nights while I was sleeping, it is not going to be different this time, in the end the results are going to be the same, it is that the timing of the events that will be different.

Sixth, the rate of contact by various brokers has been increasing, either by phone or e-mail.  Most just want to help me in this time of uncertainty.  How thoughtful, caring, and nice on their part (Their mother would be proud of the concern for the plight of others).  The calls go unanswered and the e-mail are deleted, and in some cases the filters for my e-mail are adjusted.  My though on brokers has been discussed in other post.

Seventh reason is more technical in nature and it has to do with CAPE for the market as of 1 November 2013 stands at 25.16, 6 January 2014 it was reported to be 26.07, and quite frankly this is getting in the nosebleed range, and if it gets much higher (27-30) it will be a rectal bleed.

One would need to hold one share of the SP-500 for 25 years for the current earnings to equal a price of that one share.  I know how old I am and 25 years is very close to end of my estimated actuarial lifetime.  This is one of the particulars of my situation alluded to earlier in the article.

At the end of the day I will still have money on the table and in the game for in realty that is the only way to make money.  I will have a little of my unrealized gain and put it in my pocket waiting for the next opportunity to buy.

I tell them that I continue to reinvest dividends, I have minimal amount of programed purchases, and that I continue to watch for other purchase opportunities, and if and when they present themselves, I will act.  But at the present time they are not forth coming, so I have consigned my self to be still and will wait to take my shot, since the basic rule for this endeavor as stated earlier is to buy low and sell high.

DOD and the National Guard

The show down continues between the several states in particular Texas and the Department of Defense.

So what is the SECDEF suppose to do?  Well the first thing he might do is revoke or remove the ability of the affected National Guard’s from enrolling, modifying, or issuing any DOD ID cards.

If Guard members from the affected states have issues with their existing ID cards as they apply to or for access to Federal Facilities or programs they and or their dependents will have to go to a DOD facility, not a state facility to have these actions performed.

For example in Texas if a Guardsman or his family member needs a new ID card they would have to go to their nearest Federal Military Reservation.  That could be Fort Sam Houston, Randolph AFB, Lackland AFB all now known as Joint Base San Antonio, or Fort Hood, or Fort Bliss, or Dyess AFB, or Goodfellow AFB, or Laughlin AFB, or Sheppard AFB.  They might even be allowed to receive this service at Cannon AFB, or Holloman AFB (both in New Mexico), or even Altus AFB (Oklahoma) or Barksdale AFB (Louisiana).  That would be up to the SECDEF.

Depending on the state there should be at least one site in which a Guardsman and or their family member could go to for their credentialing matters.  They might have to drive a few hundred miles, but nothing is too much for these individuals when it comes to defending states rights.

But this is just the tip of the iceberg and I am sure that the various states would or could  find other issues to drive a wedge between the state and federal government.  Politians are a very creative lot, although for many members they appear rather shortsighted group.

But this does raise a deeper question concerning the various National Guards, and in particular Texas.  For many officers in the guard they hold dual commissions, one federal and one state.  There are officers of the Texas National Guard that only hold state commissions.  For all officers their oath of commissioning for Texas states as follows

“I ______________________. Do solemnly swear that I will bear true faith and allegiance to the State of Texas and to the United States of America; that I will serve them honestly and faithfully against all their enemies whomsoever, and that I will obey the orders of the governor of Texas, and the orders of the officers appointed over me, according to the laws, rules and articles for the government of the military forces of the State of Texas”

Title 4 Subtitle C. Chapter 432, Subchapter A, Sec. 431.007 Texas Statues.

The officers in the New York National Guard and most other states, their commissioning oath is as follows

I, ______________________ do solemnly swear (or affirm) that I will support and defend the Constitution of the United States and the Constitution of State of New York against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I will obey the orders of the President of the United States and the Governor of the State New York, that I make this obligation freely, without an mental reservations or purpose of evasion, and that I will well and faithfully discharge the duties of the Office of  _________________ in the Army/Air National Guard of the State New York upon which I am about to enter so help me God.

NGB 337 20060801/

State of Oklahoma requirements

§4445. Oath of commissioned officers. 
Oath for National Guard Officers. Each commissioned officer, before entering upon the duties of his office, shall take and subscribe to the following oath, or such other oath as may be required by National Guard Regulations:

"I .........., do solemnly swear that I will support and defend the Constitution of the United States and the Constitution of the State of Oklahoma against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I will obey the orders of the President of the United States and the Governor of the State of Oklahoma; that I make this obligation freely, without any mental reservation or purpose of evasion, and that I will well and faithfully discharge the duties of the office of ......., in the National Guard of the United States and the State of Oklahoma upon which I am about to enter, so help me God." 

Laws 1951, p. 116, art. 3, § 5, eff. May 16, 1951. 

But for those who hold dual commissions, and typically their federal commission was their first commission the first oath that they recited was

“I _______________________, having been appointed an officer in the Army of the United States, as indicated above in the grade of __________ do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic, that I will bear true faith and allegiance to the same; that I this obligation freely, without any mental reservations or purpose of evasion; and that I will well and faithfully discharge the duties of the office upon which I am about to enter; So help me God.”

DA Form 71, 1 August 1959.

There are two aspect of the Texas National Guard Officers oath that just does not sit right with me and those passages are
 

“ I will bear true faith and allegiance to the State of Texas and to the United States of America”

“I will obey the orders of the Governor of Texas”

The first passage the order of precedence is important the individual is swearing allegiance to the State of Texas and almost as an after thought to the United States of America.  In the law, the order of objects is everything.  When there are two possible conflicting demands required by a contract typically the first one cited takes precedence over the latter.

Not to put too fine of a point on the subject but this second passage from the Texas Oath is even more disturbing in that reminds me of a line from the Reischwehreid.  This was the oath sworn by Wehrmacht officers and soldiers and German civil servants for the years 1934 to 1945.   Which was an oath of loyalty to the

“Leader of the German empire and people,”

Granted the Texas Oath unlike the Reischwehreid actually stops at requiring the applicant from reciting or naming the current governor by name when they take the oath, but in the end that is not really a fine distinction.  The Texas Oath could only have been better if had the applicant renounce any and all previous oaths of allegiance, but I suspect that would have resulted in bad Juju coming down on the State of Texas by the federal government.

The Federal Oath of Allegiance states that the candidate is to “support and defend the Constitution of the United States”.  It is not an Oath of Allegiance to a particular state, or branch of government, and especially not to particular office or officer of the government.  It is accepted that the document (Constitution of the United States) is lawful, and that any orders to defend of the document are lawful.

For majority of the states their required Oath for Officers in their respective National Guards is first an allegiance to the Constitution of the United States, then to the Constitution of their respective state, and if so stated to orders of the President of the United States and then to the orders of their respective Governor.

So as I read the Texas Oath, an officer in the Texas National Guard first allegiance is the State of Texas, and then to the United States of America, and that they are to obey the orders of the Governor of Texas and those officers appointed over them.  The oath is silent as to order from the President of the United States.


There is no requirement in the oath for Texas to determine whether the orders are lawful either under the State of Texas Constitution or even the United States Constitution since the candidate has not explicitly sworn any allegiance by this Oath to support or defend the Constitution of the United Stares or for that matter the Constitution of the State of Texas, they have only sworn an oath to defend Texas, and then the United States of America, and explicitly accept orders from the Governor, and his appointed officers.

This is very disturbing, given this Officers Oath for the National Guard in Texas.  The next question should be whether United States Government via the Department of Defense actually providing funds to this organization?