INC-centricity

Psychology of Recession

That's a bit of a pretentious heading - as if I'm qualified to comment on either psychology or economics. However, as an amateur observer of the human condition, it does strike me that a significant component to our current economic quagmire is largely in our head. It seems that while we have transitioned over the years from an agricultural economy to a manufacturing economy to a service economy to an information economy - what we really are is an economy of confidence. When we lose that intangible, psychological element of our collective selves, we perceive ourselves to be in huge economic trouble. And, because we are an information-based economy, we have an amazing ability to measure, calculate, survey, report, broadcast and share our lack of confidence with the world. 

But the reality is probably much different from our perceptions. Just as the roaring real estate bubble led us to believe things were better than they actually were, the constant talk about foreclosures, layoffs, and economic "crisis" of all kinds probably has us believing things are now much worse than they actually are. 

I liken this to following my favorite sports team: The Wolf Pack of the University of Nevada. I am a huge college basketball fan, and because I don't live in Reno, I follow my team at a distance, which means - because I am also a geek - I lurk on the main message board devoted to my beloved Pack. 

What I see there from game to game is, I think, a microcosm of our overall reaction to economic news. When the Wolf Pack wins, the fans are elated and ready to take on the champs. When the Pack loses, the fans angry, frustrated, depressed, and evidently prone to drown their tears at the local pub. The confidence swing from week to week can be really amazing. 

A small losing streak of a couple of games has the diehards prepared to fire the coach, complain to the Athletic Director, cancel their season tickets and commit hari kari. A modest winning streak and the fans have the basketball team back in the Sweet 16. Same team. Same coach. Same talent. Same season. Yet, wildly different perceptions of how good or how bad the team really is.

I've learned that you just can't trust the fans to accurately judge the team's performance. And you can't trust the talking heads at CNN, CNBC or the Dow Jones Industrial Average to accurately judge the performance of the economy. In all of these cases, the commentators are biased - one way or another - by the psychology of the moment. 

Bottom Line: It probably isn't as bad as it seems.

War on "tax havens"

This from The Guardian:

The world's most secretive tax havens are to be prised open after Barack Obama's new administration endorsed far-reaching legislation to crack down on them.

The decision to force "secrecy jurisdictions" to reveal the identities of the super-rich and major corporations who use them came from the US treasury secretary, Timothy Geithner, at a congressional hearing and will be seen as a blow to places such as Jersey, the Cayman Islands and Switzerland.

"We fully support the legislation … on offshore tax centres, and we look forward to working with you as part of the broader effort to address international tax evasion and close the tax gap," Geithner told the House ways and means committee late on Tuesday.

Key measures in the new legislation, now likely to be in force within 12 months, include revealing the beneficiaries of secretive trusts and identifying "offshore secrecy jurisdictions" that "unreasonably restrict US tax authorities from obtaining needed information" as well as severely increasing penalties against tax evaders and closing numerous loopholes.

What have I been saying?  At the end of the day, asset protection strategies that rely solely on secrecy will bring you nothing but trouble.  Rely on statute for your protection, not on snake-oil secrecy.

How are small business owners dealing with landlords in today's economy?

Almost every small business owner that I know is either 1) currently renegotiating their lease with their landlord, or 2) getting ready to renegotiate their lease.  From business owners I have talked to, they are experiencing a wide range of reactions, communication and negotiations.  Some landlords are working with tenants to try to keep them, others have drawn a line that they don't renegotiate with tenants. I know one strip mall that has lost half their tenants solely because the landlord won't renegotiate with clients.  What are you experiencing?  Are you trying to renegotiate your lease?  Is your landlord open to talks?  DId you find a win/win resolution?  Share your experiences!

Nigerian 419 scam awarded Nobel Prize

The Ig Nobel Prize, that is.  The spoof awards, organized by the science humor journal, the Annals of Improbable Research, honor scientific achievements that "make people laugh - then think". They were presented at Harvard University's otherwise distinguished Sanders Theatre in Cambridge, Massachusetts, US, on Thursday. 

Self Sufficiency and the New Orleans Crisis

It is difficult to watch the news footage of the horrific suffering, loss, and inhumanity occurring in New Orleans as a result of the hurricane.  The catastrophe is on such a scale that no individual or group can take the blame - although I am now hearing several self-serving politicians try to point fingers at their political enemies to assign the blame and to take advantage of the horrible situation for their own purposes.

Does the Better Business Bureau actually provide value online?

I received a letter today from the Pam Morgan, President/CEO of the Better Business Bureau of Northern Nevada, an organization that my company has belonged to since 1989 - and has maintained an excellent track record, I might add.  This is the second letter I have received from them in the last couple of years on the same topic, and one that I believe demonstrates clearly that the BBB does not necessarily provide what it claims to provide its members: the right to promote the fact that they belong to the BBB.  The issue is regarding the limitations the BBB places on PAYING MEMBERS regarding links to the BBB website (which you would wrongly assume they would actually encourage) or use of BBB logos.

Why Nevada Public Education is not going to improve

Legislative initiatives don't deal with the real issues

    By Steven Miller, policy director, Nevada Policy Research Institute

Here in Nevada the political class endlessly professes its dedication to getting our public schools out of their seemingly interminable rut.

Largest bank security breach ever hits Bank of America, Wachovia

CNN/Money Magazine are reporting that Bank of America and Wachovia Corp are notifying over 670,000 customers that their account information was stolen by bank employees to a man posing as a collection agency.  Bank officials say the number of accounts affected may top one million.
Link: Data at Bank of America, Wachovia, others compromised - May. 23, 2005.

The Luckiest Ponzi Scheme

The systemic problem that Nevada taxpayers face is political

By Steven Miller, Nevada Policy Research Institute

When Charles Ponzi was defrauding investors in 1916 Boston, little did he know that within 20 years his particular dodge would be embraced as the official policy of the U.S. government.

Ponzi convinced people to let him invest their money, but he never made any real investments. He just took funds from recent "investors" and gave it to the early birds, paying the latter a handsome profit on what they had paid in. He then ballyhooed the early birds' "success" to get still more "investors," using their money to pay the previous crop and so on.

Of course, to keep paying "profits" to his earlier marks, Ponzi had to continue finding more and more pigeons. Eventually, unable to find enough of them, his system collapsed and Ponzi went to jail. Because he had never made any real investments, Charles Ponzi never had any real money with which to pay back earlier entrants into his system. Consequently, when he couldn't recruit enough new suckers, the earlier ones discovered the calamitous nature of the scam to which they'd entrusted their earnings.

Today whenever an investment "opportunity" is found operating on these same dire principles, it becomes known, naturally enough, as a Ponzi scheme. The reason Social Security is in trouble is because it is such a scheme.

Just like Charles Ponzi, it makes no real investments. It simply takes money from recent people forced to pay into the system and gives it to earlier people, now retiring. Congress then blows whatever is left, and federal IOUs for it all get deposited in a Parkersburg, W.Va. filing cabinet-the real home of the mythical Social Security "Trust Fund."

Also like Ponzi, Social Security eventually will be unable to recruit new "contributors" fast enough to pay out the benefits the government has promised. Since fewer workers enter the system annually, versus those who retire, Social Security-if not reformed-will also mimic Ponzi's con by collapsing.

Indeed, that day grows ever nearer. The federal Board of Trustees of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds noted last year that the Social Security program's projected tax income "will begin to fall short of outlays in 2018." In other words, in just over 12 years the program will be technically insolvent.

If it offends your sensibilities to hear Social Security described as a mere Ponzi scheme, famed economist Paul Samuelson, an enthusiast for the New Deal, was positively gleeful over the flimflam nature of the program. "The beauty of social insurance," he wrote in Newsweek in 1967, "is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in.. How is this possible? . Always there are more youths than old folks in a growing population.. A growing nation is the greatest Ponzi game ever contrived."

Despite his candor about Social Security's unsound nature, Samuelson was completely wrong on its demographic future. Since families are having fewer children and people are living much longer, for 60 years the number of retirees has been growing faster than the number of workers. In 1945, a retiree was supported by payroll taxes from over 40 workers; in 1960, a retiree was backed by only 5.1 workers; today it is just 3.4, and by 2035, it will be only two. This is the crisis looming over the Social Security system.

It is also the reason that Social Security-if the program is to survive-must replace its cheesy Ponzi-scheme architecture with a realistic method of retirement financing. In short, Social Security must join the modern world and-like IRAs and 401Ks-access the time value of money, sometimes called the "magic" of compound interest.

Notwithstanding shameless demagoguery from die-in-the-last-ditch Democrats, personal retirement accounts are essential for bringing Social Security into solvency. The Ryan-Sununu bill, for example, has been scored by the Chief Actuary of Social Security as a way to bring the system into permanent balance, while offering significant personal accounts and requiring no benefit cuts or tax increases.

Its merit is that real benefits, available from the personal accounts, would substitute for the Ponzi-scheme pay-outs of the existing Social Security system. As the system's benefit obligations are increasingly transferred over to the personal accounts, Social Security would be brought into solvency.

Recently, panicky partisans have been proclaiming Social Security "is the most successful government program in history."

Not true. Just the longest running-and luckiest-uninterrupted Ponzi scheme.

Las Vegas Business Press starts series on Nevada Resident Agents and Nevada Incorporation

The Las Vegas Business Press published the first of two articles about the Nevada incorporation and resident agent industry this week.  I am quoted extensively - although not entirely accurately - in the article as the result of my role as the president of the Nevada Resident Agent Association.

Generally, the article is positive - although it significantly overstates the problems within the industry. 

A few years ago, there was a bill before the Nevada legislature that proposed to regulate the resident agents in the State.  That bill was brought by the Nevada Bar Association as one of those "Attorney Full Employment Act" measures that the legal profession is deservedly known for.   During those hearings a couple of legislators asked a series of questions to help them understand the scope of the need for this new regulatory body.

Q:  (Addressed to the Secretary of State's office)  "How many complaints do you receive every year about resident agent activities?

A: "Very few.  Most of the complaints we receive come from resident agents complaining about other resident agents." 

Q:  (Addressed to the Bar Association):  "How many complaints does the Bar receive every year about attorneys?"

A:  "Thousands."

End of hearing.  Regulatory bill dead.

Identity theft issues in the news

A lot has been written about breach of secured data by hackers into the ChoicePoint computer system in 2004.  Using stolen identities, the hackers created documents that wouuld make them look like legitimate ChoicePoint customers.  Once in the system, they accessed approximately 145,000 records of individuals, including Social Security Numbers, driver's license numbers and credit reports.  Now, the lawsuits are starting against ChoicePoint by damaged parties.  While this certainly highlights the problems created in our society as the result of identity theft, it also underscores the need for individuals to value and protect their personal security.  But, the problem is much larger than just ChoicePoint.

A couple of weeks ago, several of my employees received letters from our prior health insurance providor, The Principal Group, informing them that one of their affiliated companies had experienced the theft of one of their computers that contained thousands of confidential client files.  In the letters, my employees were warned to contact credit reporting agencies and notify them of the potential problem to flag their personal credit files.

Now, I read where Bank of America lost data relating to 1.2 million SmartPay cards that contained backup information enroute to a backup center.  Evidently, not all the backup tapes arrived safely.  A few mysteriously disappeared.

How prevalent is this problem?  The FTC estimates that it impacted 1 in 30 people in a one-year study period starting in 2002, and has gotten worse.  Shockingly, most companies don't notify individuals when a security breach occurs, and only California even requires such a notification.