- Plastic surgery, liquor licenses, vasectomies: The costs that capture Americans’ curiosity
- 2006 redux: Rating agency pronounces itself unconcerned about a shaky pile of debt
- Revisiting “the Gate of Tears” and a threat to the global oil trade
- The tragedy and farce of a “successful counterterrorism strategy”
- Property taxes, then and now: The mail keeps pouring in
America — a nation obsessed with the cost of plastic surgery. Well, eight of the 50 states anyway. And nearly everyone else is just as messed up.
Or so we glean from a peculiar exercise carried out recently by the folks at the website Fixr. They performed 50 searches on Google, using the autofill function — like so…
The asterisk generated the most popular “cost” searches. Performing this operation for each of the 50 states, Fixr created the following map. We can’t decide whether it’s revealing, disturbing or pointless…
But if you’re looking to start a small business, maybe this will give you some ideas. Good luck.
[What’s up with “a minor” in North Dakota?]
Maybe today’s the day the major U.S. stock indexes can notch a gain.
So far this week, every day’s been a loser. But as we write, the Dow, S&P 500 and Nasdaq are all in the green — if barely. The S&P sits at 2,060.
Gold slipped back below $1,200 this morning. At last check, the bid was $1,198.
The big economic number of the day is GDP. The Commerce Department issued its third and final guess at GDP during the fourth quarter of last year. Annualized, it’s an anemic 2.2%.
As the wonks would say, it’s still “below historical trend.” In plain English, as our Jim Rickards is wont to remind us, it’s a depression.
Crude has pulled back below $50. Trader fears about the war in Yemen are subsiding, although, as we’ll see shortly, that confidence might be misplaced.
That $5 trillion pile of energy debt is looking ever shakier this morning.
As you might recall, Jim Rickards warned here in January that total corporate debt issuance for energy exploration between 2009-2014 totaled $5 trillion. Many of those projects are no longer profitable with oil no longer north of $80 a barrel. Jim is sure a wave of defaults will hit late this year or early next.
Cue this morning’s Wall Street Journal: “The ranks of financially stressed companies have swelled to a 4 1/2-year high as the sharp drop in oil prices batters energy companies.”
All told, 184 U.S. companies now have a B3 credit rating from Moody’s — the worst of the worst. Energy firms make up 13.6% of the total, a record. At least three energy companies have landed in Chapter 11 bankruptcy this month.
Remarkably, Moody’s appears little concerned about these developments. Its forecast for corporate defaults next year is “still pretty low” in the words of Moody’s associate analyst Julia Chursin.
We seem to recall the rating agencies expressed similar confidence about subprime mortgage-backed securities in 2006. Just sayin’…
[Ed. note: In addition to the $5 trillion pile of energy debt, there’s the $9 trillion pile of dollar-denominated debt in emerging markets. It too is vulnerable with the dollar so strong right now.
Said Jim Rickards in January: “If default rates are only 10% — a conservative assumption — this corporate debt fiasco will be six times larger than the subprime losses in 2007.”
To help you brace for impact, Jim penned his third book, The Big Drop: How to Grow Your Wealth During the Coming Collapse. If you don’t yet have your copy, don’t look for it at Amazon or your neighborhood bookstore — it’s an Agora Financial exclusive, available only here.]
Oil prices are retreating, but the war in Yemen isn’t going away.
Saudi Arabia is set to follow up its air campaign with a full-on ground invasion; 150,000 troops are massed on the Yemen border. Egypt is joining in — it’s dispatched troops aboard transport ships to the Yemen coast as well. President Obama has authorized the Pentagon to furnish “logistical and intelligence support” to Saudi Arabia.
If you’re not up to speed on all the players in Yemen — and you can’t tell them without a scorecard — we direct you to yesterday’s episode.
Meanwhile, the head of U.S. forces in the Middle East told Congress yesterday the military will make sure the Bab el-Mandeb Strait will remain open.
As our Byron King has long pointed out, the strait is known as “the Gate of Tears.” If you want to ship oil from the Middle East to Europe, the shortest route is through the Gate of Tears and the Suez Canal — two of global shipping’s biggest chokepoints.
Nearly 7% of all the crude carried by tanker ship around the world passes through Bab el-Mandeb.
So while Yemen has relatively little oil to speak of and is located far from the richest oil fields in Saudi Arabia… a not-insignificant risk remains that the war could plug up the global oil trade.
Remarkably, the White House still considers Yemen a model for counterterrorism.
Last fall, President Obama said, “This strategy of taking out terrorists who threaten us, while supporting partners on the front lines, is one that we have successfully pursued in Yemen and Somalia for years.”
But that’s when President Hadi was still in power, supporting the U.S. drone war in Yemen. Now Hadi has fled the country and a free-for-all is underway.
No matter. It’s still a success, presidential spokesman Josh Earnest said on Wednesday. “The White House does continue to believe that a successful counterterrorism strategy is one that will build up the capacity of the central government to have local fighters on the ground to take the fight to extremists in their own country. That is a template that has succeeded in mitigating the threat that we face from extremists in places like Yemen.”
Reminded by a reporter about the aforementioned free-for-all in Yemen, Earnest doubled down:
“We have not seen that kind of progress in terms of strengthening the central government. I think you could make a pretty strong case that we’ve seen the opposite of that, but we do continue to enjoy the benefits of a sustained counterterrorism security relationship with the security infrastructure that remains.”
Forecast: While Saudi forces with U.S. backing duke it out against Yemen’s Houthi rebels, the war will give space for al-Qaida and ISIS to expand their own territory within Yemen.
Sounds like a “successful counterterrorism strategy” to us…
But if a terrorist tries to board a plane in the United States, they’re sure to be caught with the help of the TSA’s behavior checklist, right?
As we perform one last scan for headlines before wrapping up for the week, we see the muckrakers at The Intercept have gotten their hands on the TSA’s list of behaviors that can get you singled out for extra harassment.
The 92-point checklist is not classified, but the TSA has kept it close to the vest ever since the checks were introduced in 2007. The Intercept says it got a copy from “a source concerned about the quality of the program.”
We can see why that source would be concerned…
No wonder the Government Accountability Office found in 2013, after scouring the program from top to bottom, that “the human ability to accurately identify deceptive behavior based on behavioral indicators is the same as or slightly better than chance.”
That’s $900 million down the drain the last eight years…
“Property taxes made sense earlier in our country’s history,” writes a reader continuing our property-tax thread, “when there were no other taxes and when only landowners were allowed to vote.
“Today, when many of the states pass revenue to local governments, when nonlandowners get to vote on all kinds of taxes whether they pay them or not and when fees for all manner of local government services have skyrocketed, it makes no sense at all and represents just one more example of government confiscation of private property.”
“Property tax is rent paid to the local government for allowing you to purchase, live in and maintain your property,” writes another.
“The owner needs permission for certain uses of property (zoning regs) or to change/improve the property (building permits), and if tax is not paid, the ‘owner’ is evicted and the property sold, most often at much lower than market prices. You only own your home as long as you pay your rent (taxes).”
“I’ve lived in a number of states with varying rates of income, property and sales taxes,” says a third. “The bottom line is that for a given level of government services, they must extract the revenue — I mean taxes — in some way.
“Texas has no income tax but high property and sales taxes. Others have high income taxes and lower property and sales taxes. Of course, California has high everything! The answer is for taxpayers to make legislatures (city, state and federal) cut back on services to only what is really essential. Which is also the problem when the masses vote for more goodies paid for by ‘other people.’”
“When the municipalities and the states need money in the future — and they will need more money — property taxes are one place they will go to,” writes a fifth. “They will do this for one obvious reason: It is a constant revenue stream that is not affected by the economy.
“They can raise sales tax rates, but if sales volumes decline, they are left with lower revenue streams. They can add fees and taxes to all the utility bills we receive, but if we disconnect the cable or hand in our cellphones, there is nothing they can do about that.
“But real property isn’t going anywhere, and that revenue is guaranteed. So look for additional property tax increases in the coming years as government finds it is the most reliable source of income.”
“I haven’t seen anyone point out that property taxes, in their original intent, were the primary means of funding local government.
“I would have no issue with them as long as they were used as intended… for infrastructure, police, fire, schools, etc.
“Unfortunately, that doesn’t seem the case anymore, as all sorts of other taxes have sprung up to cover various ‘costs’ of government, including the worst offender in income taxes. A good portion of our taxes now covers excessive bureaucracy, cushy retirements, vote buying programs and large interest payouts to the banking cartel.
“Ditch the other 20-some-odd percent of my income (40%-plus if you include hidden taxes) being confiscated and I’d be quite happy with the 1-2% percent property tax.
“Love The 5.”
“Sorry, Dave, but (let’s get the ‘but’ out early, I say) I’ve got to bring up ROI (return on investment) when it comes to the outlandish property taxes in Seattle, even though Washington state isn’t the worst offender.
“I don’t know about other states, but Washington and Seattle public schools are mainly funded by property taxes. On an almost annual basis, the school supporters tug at the heartstrings of the voters to get more and more for ‘the good of the children,’ and all the while the kids get dumber and dumber because our union-led teachers think it is harmful to children to conduct standardized tests and have minimums for graduations, let alone make the teachers live up to some sort of standards.
“Talk about diminishing returns!
“Always enjoy The 5 and the reader banter!”
“The first thing communists do when they take over is get rid of the landlords confiscating the land,” writes our final correspondent. “You can own your home but not the land. It’s usually a 99-year lease, so in essence you are renting the land from the government. Property tax versus paying rent. You could say it comes down to semantics.”
The 5: With government, it usually does…
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
