Small Businesses Can Learn From Holiday Retail Results

Small Businesses Can Learn From Holiday Retail Results

The Big Takeaway From Following Article Is Business Is Moving Online


“8 Things Small Businesses Can Learn from this Year’s Holiday Retail Blitz

Small Businesses Can Learn From Holiday Retail Results

Small Businesses Can Learn From Holiday Retail Results

Date: December 03, 2015

Recent data from this year’s Black Friday, Small Business Saturday and Cyber Monday highlight some important trends for small businesses going forward.

Move over, Black Friday. There’s a new trend taking hold among shoppers: mobile devices, which accounted for almost half of all online traffic over the weekend, according to Adobe Digital Index.

GET AHEAD THIS HOLIDAY SEASON: Use NFIB’s Holiday Small Business Survival Guide to finish off 2015 with a bang.

Sales from this year’s Black Friday were less frenzied than in years past, dropping more than 10 percent, according to ShopperTrak, a consumer research firm. In fact, the number of online Black Friday shoppers surpassed that of in-store shoppers, according to the National Retail Federation.

Meanwhile, more small business owners and entrepreneurs are taking advantage of the power of mobile’s reach, using hashtags and other social media tools to capitalize on the busiest shopping season of the year.

And though Black Friday sales stagnated, Small Business Saturday and Cyber Monday saw measurable growth in both traffic and sales. A record 95 million shoppers turned out for Small Business Saturday, shelling out $16.2 billion. That’s a 14 percent increase from the $14.3 billion spent last year.

Here are some other major takeaways from the recent Black Friday, Small Business Saturday and Cyber Monday events:

Smartphones and tablets are drastically changing consumer shopping habits. On Cyber Monday, mobile users accounted for 28 percent, or $514 million in online sales. Overall, it was the biggest Thanksgiving weekend for e-commerce, with about $11 billion in online sales—a 15 percent increase from last year.


Read Rest Of Article On HERE

Small Businesses Can Learn From Holiday Retail Results

Irwin Schiff Tax Protester Political Prisoner

Irwin Schiff Tax Protester Political Prisoner

What Ever Happened To The First Amendment Of The Constitution?


Ninth Circuit Rules 85-Year-Old Tax Protester Should Stay In Jail

Irwin Schiff Tax Protester Political PrisonerIrwin Schiff Tax Protester Political Prisoner


Irwin Schiff is probably one of the more famous alternate tax thinkers. His seminal work “How Anyone Can Stop Paying Income Taxes” is available in hardcover on Amazon for one cent. In his twilight years (He was born in 1928), he has been living in free federal housing. According to the Bureau of Prison Inmate locator he is at Fort Worth FCI with a projected release date of July 26, 2017. His son, Peter, who considers him “America’s foremost political prisoner” has been campaigning for his release. You can order your “Free Irwin” T-shirt here for $25.

When it comes to tax controversy there is a rather long continuum you can follow. Knock on wood, but for many of my clients in the last couple of years, it has ended where it should – a no change audit report from a revenue agent, whom my client never had to meet. Mr. Schiff was in court at the far opposite end of the spectrum. That would be appealing your sentence after you have already been convicted and are serving your prison term. That is what Mr. Schiff was up to. The Ninth Circuit had disappointing news for Mr. Schiff yesterday. His appeal, based on ineffective assistance of counsel has been turned down.

Here are the high points:

Schiff’s argument, that appellate counsel was ineffective for not appealing the district court’s exclusion of evidence of his bipolar disorder, fails. Schiff’s claim regarding the exclusion of mental health evidence is similar to one raised by codefendant Cohen on direct appeal, and which formed the basis for this Court reversing Cohen’s conviction and remanding for a new trial. United States v. Cohen, . But Schiff and Cohen were situated very differently with respect to knowledge about the validity of their beliefs. Even assuming Schiff’s appellate counsel was ineffective, Schiff cannot demonstrate that he was harmed by counsel’s failure to raise this issue on appeal.

I have to say he has my sympathy, there. Bi-polar disorder has marred my career from time to time. It is a tricky thing to catch, because you can feel so good when you are manic. That’s the more dangerous part of the disease when you do risky stuff. Depression is not so dangerous, unless, of course, you get suicidal.

On direct appeal, this Court characterized the evidence against Schiff as “overwhelming, particularly the evidence that he intended to deceive the government through the use of zero returns.” United States v. Cohen, 262 F. App’x 14, 16 (9th Cir. 2007). The overwhelming evidence at trial was that Schiff was aware his claimed beliefs lacked merit and that he simply disagreed with the law. Schiff had previously been punished for filing zero returns. He knew that numerous tax returns submitted by his clients had been returned as frivolous by the IRS and had resulted in penalties upheld by courts. He also knew his positions regarding tax law were rejected in every court to consider them.

Given the extensive evidence that Schiff knew his views of the tax law were incorrect, he cannot establish that his Cheek good-faith defense was prejudiced by counsel’s decision not to raise on direct appeal the district court’s suppression of evidence of his bipolar disorder.

The problem with the Cheek defense is that you have to be smart to raise it, but if you show that you are too smart, then it does not work.

Schiff’s counsel was not ineffective for choosing not to appeal the district court’s exclusion of certain testimony seeking to confirm Schiff’s own beliefs that the tax laws are invalid and unenforceable. Counsel could have reasonably concluded that evidence was irrelevant to the issue of willfulness.

Finally, appellate counsel was not ineffective for failing to appeal the district court’s refusal to admit into evidenceThe Great Tax Hoax , a book Schiff authored which explains how he reached his beliefs about tax laws, and a 3 1/2 -hour tape of a video seminar in which Schiff explains his beliefs. The book and video contained misstatements of the law and would have served to confuse the jury and waste its time.

I’m going to seeking more commentary and may do a follow-up post on this. This decision makes me a bit pessimistic for Kent Hovind (Doctor Dino)’s appeal of his sentence. Of course the doctor has God on his side, so that should make a big difference.

You can follow me on twitter @peterreillycpa.

Irwin Schiff Tax Protester Political Prisoner

Your Own Online eCommerce Store

Your Own Online eCommerce Store

5 Budget-Friendly Marketing Tips for Your Online Business

Here’s a good article written by Matt Winn, Online Communications Specialist at Volusion.

Volusion is an eCommerce Marketing Company that does it all.

Your Own Online eCommerce Store

5 Budget-Friendly Marketing Tips for Your Online Business

By Matt Winn | November 5, 2010 | Ecommerce Marketing & Promotion

Your Own Online eCommerce Store

Read these economical marketing tips for your online business.

Trying to market your ecommerce site, but don’t have a lot of spare cash? No problem. Check out these five budget-friendly marketing ideas to spread the word and boost traffic.

Let’s face it, times are tough. Making any business investment is like pulling teeth, especially when it comes to marketing. The irony is that in a poor economic climate, we need an extra push to drive traffic and sales. But how do you balance a small budget with big marketing goals?

While budget-friendly marketing seems like an oxymoron, there are several options to market your online business without breaking the bank. In the spirit of thriftiness, check out these five tips.

Feel free to ask questions and add your own ideas by leaving a comment below!

Budget-Friendly Marketing Tip #1: Prioritize Your Marketing Initiatives
In a world of so many communications channels, it’s difficult to decide where to start. A haphazard approach to marketing is a drain on your budget. Thus, prioritize which initiatives you need to invest in and create a timeline. While you likely can’t push all the campaigns you’d like to, you can work toward your goal incrementally.

The first notch in your marketing belt should be quality site design. This is the most important investment you can make – why spend money bringing people to your site if they bounce because it’s ugly? Then, move into other initiatives like SEO and PPC while working with more affordable options in between.

Budget-Friendly Marketing Tip #2: Utilize Social Media
Everyone is talking about social media these days, and rightfully so. It’s a powerful medium that’s ideal for engaging customers and building relationships. Better yet, the only investment is your time. But just having a Facebook and Twitter page isn’t enough – you’ve got to build relationships with others in the social world.

Get started by doing a Twitter search that’s related to your field. Find people that are influencers in your industry and begin engaging with them by retweeting their content and sending tweets their way. It may take some time, but eventually they’ll catch on and return the favor, giving your online business exposure to customers in your target audience.

Also be sure to reach out to your fan base through social channels. Publicize your marketing promotions, company news and industry information to your community. Sharing information that others want to absorb will help spread the word without having to spend a dime.

To get started with your social media strategy, check out our free white paper, “Is Your Social Media Strategy Really a Strategy?”

Budget-Friendly Marketing Tip #3: Focus on Current Customers
While it’s tempting to focus your marketing energy on acquiring new customers, it’s much more budget-friendly and effective to target your current customer base. It’s almost three times more expensive to get a sale from a new customer than a returning one. Thus, step up your communications with current customers by enabling your loyalty program and sending email newsletters. Your current customer base is also an excellent hub to build your social following.

Another nice thing about working with current customers is that they’ll start talking about your business to friends and family. So give your base a reason to sing your praises by delivering exceptional customer service.

Budget-Friendly Marketing Tip #4: Study Your Analytics
In order to get the most bang for your buck, you need to concentrate your marketing efforts in the places that are most effective. Fortunately you can make data-driven decisions by running reports from your shopping cart software and using free analytics tools, like Google Analytics. For example, studying the keywords that drive the most traffic to your site will help determine the keywords to insert in your content and marketing communications. Analyzing which discounts were most popular will allow you to decide which promotions to axe and which to run again.

Budget-Friendly Marketing Tip #5: Churn Out Content, Build Links
Much like social media, content marketing only requires an investment of your time. To get started, research topics that are hot items within your industry and poll your customers to find out what they want to learn more about. Then, start performing research and create a well-written article that provides insight and advice, if appropriate. And within that content piece, include a link to your website.

Once the writing is done, promote the heck out of your shiny piece of content. Share it on social channels and ask influencers (the ones you built relationships with from Tip #2) to spread it on their social outlets. Go out into the blogosphere and leave related comments with links to your content piece. Engaging the online community will bring additional links to your website, which is SEO gold.


One final thought is to be patient and keep investing. For those that have large marketing budgets, it’s easy to make a big splash upfront. But for the rest of us, slow and steady wins the race. Whatever you do, never blame a small budget for a lack of marketing.

Happy selling!
-Matt Winn, Online Communications Specialist, Volusion

Jobs Meltdown Jan 10 2014

Jobs Meltdown Jan 10 2014

US Labor Force Falling Like a Rock

July 10, 2014 brought some shocking jobs numbers.

Some are saying that this could convince the Fed that QE5 is in order.

Our feeling is that the onset of Obamacare is responsible for the drop in real employment.

Jobs Meltdown, Obamacare Could Pave Way For QE5

US labor force at 35 year low

Paul Joseph Watson
January 10, 2014

Today’s horrendous jobs figures allied with the expected economic impact of Obamacare are stirring rumors that the Federal Reserve could resort to QE5 – yet another round of money printing madness.
Jobs Meltdown, Obamacare Could Pave Way For QE5 100114dollars

Jobs Meltdown Jan 10 2014

Image: U.S. Dollars (Wikimedia Commons).

The US Department of Labor released a report today which revealed that just 74,000 jobs had been added to the US economy in December, surprising analysts who had expected a figure above 200,000.

However, even more shocking is that the labor participation rate has dropped to a 35 year low, with only 62.8% of Americans participating in the jobs market in December. 91,808,000 Americans are not in the labor force. The reduction in the unemployment rate from 7% to 6.7% is explained by the fact that many more Americans have given up looking for work.

The result of over $1 trillion dollars of Fed spending in 2013 has resulted in all time highs for the stock market, but less jobs were created in 2013 compared to 2012.

This “jobless recovery” has sparked fresh talk that the Federal Reserve, which recently announced it would taper its bond buying program, may in fact be preparing to launch QE5, cranking up the printing presses once again in a desperate effort to prolong the illusion of economic rehabilitation.

A further factor that could prompt the Fed to panic is the expected cost to the economy of Obamacare.

Richmond Federal Reserve President Jeffrey Lacker told Reuters today that it would take two quarters of negative economic figures for the Fed to reverse its decision to taper, but he sounded an ominous warning about the impact of Obamacare.

“I think the Affordable Care Act is something that we are watching very closely because it’s something that could well have a substantial economic impact,” said Lacker, adding that he expects a lot of turmoil in the health care industry.

Some analysts have warned that Obamacare represents a “neutron bomb that will decimate the U.S. economy.”

The Financial Times is also reporting today that the unemployment figures could put the taper in doubt.

“Despite admitting asset-bubbles, fears over stock-multiples and excessively easy lending; the Fed will launch QE5 when Obamacare drags the US economy into trouble,” reports Zero Hedge.

Jobs Meltdown Jan 10 2014

How To Deal With an Unhappy Customer

How To Deal With an Unhappy Customer

What To Do With Unhappy Customers

You as a small business owner will be required to decide from time to time if it is worthwhile to continue with a problem customer.

Of course you would like to have nothing but happy customers – but it’s not possible.

Here is an excellent article from giving some overview advice.

Dealing With That Unhappy Customer
Gene Marks
BY Gene Marks | December 12, 2013

Things are not going well with my customer Fred. Here, let me let him explain:

“I am more than willing to pay for your services — I just didn’t get what I paid for.”
“If I was advised upfront of the charges I wouldn’t have agreed.”
“It still is not working. Would you be okay for a service that you didn’t get?“
“That is not how I understood it. I am frustrated with your company.”

What can I do here? Fred is obviously not happy with me. He hired my company to help him install a software application on his computer and is dissatisfied with the services. What would you do if Fred was your customer?

Wait. Before answering that, you’ll need a little more background. Fred runs a very small company made up of…well…just Fred (he’s an independent insurance agent). Before embarking on our little project, Fred had a hundred questions. Once started, Fred continued his barrage of questions, both by email and phone. His budget, as you can guess, was miniscule. Fred unfortunately suffers from selective memory as well — he doesn’t seem to remember the issues, challenges and costs that my staff explained to him before getting started. He heard only what he chose to hear and now wants the job done based on his perception of what the costs would be.

Related: What Not to Do When Taking Clients Out to Lunch

We will never be right. We will never win. Even pointing him to the contract that he signed which explained the costs is fruitless. Fred, like most of our small business customers, signed it, but never read it — of course. Why do I even send these contracts anyway? And what are we going to do…sue him? Frankly, the more time we argue with Fred the more money we lose on this little customer. This nuisance customer. C’mon…you have them too. What do you do with guys like Fred? Here’s what I’ve learned:

Look at the long term. As much as I’d like to please Fred, I’ve got a business to run. This little project was only a few hundred bucks. And considering the amount of angst Fred caused my staff, there was little profit. But could Fred potentially be a big client? Might he be interested in spending a lot more money in the future with us? Does he have relationships or connections with others that could turn into big dollars? If so, then it’s worth sucking up the losses. But not in this case. I doubt he’d ever spend another penny with my company, happy or not. And though I can never be certain, I don’t see any of his friends knocking on my door with that next million dollar deal. Keeping him as a customer offered little future economic benefit.

Never fire your customer. Even though I see no future with Fred, I’m not going to fire him. Why? Because I admit that I’m a prostitute. I’ll do business with Satan himself if I can legally make a few bucks. So I stood firm. I politely (see below) told him that I’m happy to help him and this is what our charges would be. I’m not in the business of giving stuff away, particularly when we really did nothing wrong (at least this time). I leave the decision up to Fred. If he wants to work with us, great. If not, that’s completely up to him. I’m prepared to lose him because the long term doesn’t look very profitable (see above) so I’ll let him decide. I may decide to double my hourly fees, but I’ll never fire him.

Related: 3 Simple Ways to Keep Your Customers Happy

Always, always, always be polite and professional. The worst thing you can do with an unhappy customer is to fight with him. No, that’s not the worst thing. The worst thing is to fight with him over email! We’ve all done this. And then we cringe when we look back at the conversations a few weeks later. Even if the customer is calling your mother a hook-nosed, wart-faced witch you should never respond in kind. Keep it polite and professional. Take the high road. You can have fun with this too, just watch how exasperated the angry customer gets as you reply back to him with cheer. More importantly you’ll never be ashamed of your behavior months later. And who knows who will read these emails then?

Never blame your employees. Even though Fred was an impossible customer, some mistakes were made by my employees. Even so, you must never blame them in front of the customer. Talk to them offline if necessary. Keep a unified face. Stand behind your people. In the long run, knowing that you have their back will keep them loyal. Valuable employees are as important as valuable customers. You’re the boss. It’s your business. You failed to adequately supervise the job, train your people or handle the situation. Step up and take responsibility.

Always remember…no one bats a thousand. My company has 600 active clients. We sell mostly to small- and medium-sized businesses. I can’t possibly please everyone. In fact, I’m happy if two-thirds of my clients are happy. There will always be a group of people that have an issue at any given part of the day. Don’t let it bother you. Accept that as fate.

“I will take my business elsewhere,” Fred said to me. I had offered to keep working with him, as long as he paid. He didn’t like that option. It’s a free country. He’s free to be a nuisance and not pay someone else. And I’m free to find better, more profitable customers. I don’t like unhappy customers, but I’ve learned not to get too upset about them.

How To Deal With an Unhappy Customer

Employers Allowed To Discriminate Under Obamacare

Obamacare Still Lets Employers Discriminate—for Now

By Karen E. Klein August 29, 2013

Question: Under Obamacare, can small businesses still offer health insurance based on classifications of employees, such as offering management and salaried employees insurance but not offering it to technicians and hourly employees? If we can’t do that, can we offer other extra benefits to our management team? And can we cover less of their premiums since they are already making more money than the rest of the staff?

Answer: The Affordable Care Act extended nondiscrimination rules for health insurance that originally applied to self-funded insurance plans, typically offered by large employers, to all health insurance plans. That means that, under Obamacare, those rules are likely to apply to small and midsize companies as well. The IRS rules, dating back to 1981, don’t allow employers to offer health insurance—or better health insurance—only to their executives and owners.

The rules covering nondiscrimination in health plans, however, have not yet been issued, and the IRS has announced that they will not be enforced until they are, says Steve Friedman, an attorney in Littler Mendelson’s Healthcare Reform Consulting Group in New York City. “We’re all waiting to see exactly what the government will and won’t allow when they finally issue the nondiscrimination rules,” he says.
STORY: Private Equity’s Hospitals: A Business Model for the Obamacare Era?

Once the rules are released, businesses will have at least until the beginning of the following calendar year to comply. “No one knows when they’re coming out with the rules, but we doubt it will happen this year,” Friedman says. Even when they are released, the new rules will not apply to companies whose health insurance plans are grandfathered in, meaning they offer the same benefits they did back when the ACA was passed in 2010. “If your plan is grandfathered, the new nondiscriminatory rules will not apply and your company can continue to discriminate in favor of management and salaried employees as in the past,” says John Barlament, a lawyer in the employee benefits group at Quarles & Brady, in Milwaukee.

Still, once the rules are in place, employers face stiff fines if their policies favor highly paid employees: $100 a day for each employee that isn’t eligible for the better plan. If your company is likely to be affected, it makes sense to start planning now for rules that could be in effect starting in 2015.

As to your next question—yes, you can give extra benefits to your executives as long as the benefits are provided under a separate contract not linked to your main health-care policy, says Michael Capaldo, director of employee benefit consulting for American Investment Planners in Jericho, N.Y. The U.S. Department of Labor has a list of “excepted benefits”—including long-term care insurance and limited-scope dental or vision coverage—on its website. “You could also give your highly compensated employees something like cash bonuses to pay for their other insurance, such as homeowner’s,” Capaldo says.

Finally, your last question asks about whether you can discriminate in favor of lower-paid employees by footing more of the bill for their insurance than you do for your salaried employees. That’s always been allowable and won’t change under Obamacare, Barlament says. “At our law firm, like many others, the attorneys pay more for their insurance than the nonattorney staff because it is recognized that the attorneys make higher salaries and can afford to cover more of their own costs.”

Debt Ceiling Countdown – Mid Oct Deadline

If They Don’t Raise The Debt Ceiling – Then What?

Here’s a good article taken from the Phoenix Business Journal which gives a bit of a heads up that possibly it’s getting ready to “hit the fan”.

Interesting to note that all the Treasury Secretary has to work with is 50 billion.
U.S. to hit debt ceiling in mid-October

Aug 26, 2013, 1:57pm MST

Phoenix Business Journal

by Kent Hoover – Washington Bureau Chief
The Treasury Department says the U.S. government will hit its borrowing limit in mid-October, meaning it can pay its bills with only whatever cash it has on hand.

The Treasury Department says the U.S. government will hit its borrowing limit in mid-October, meaning it can pay its bills with only whatever cash it has on hand.

Start the debt ceiling countdown: The U.S. government will reach the limit of its borrowing ability in mid-October, according to Treasury Secretary Jacob Lew.

Lew delivered this news today in a letter to House Speaker John Boehner. Once the U.S. government hits its debt ceiling, it “would be left to fund the government with only the cash we have on hand on any given day,” Lew writes.

That cash balance is projected to be around $50 billion — “insufficient to cover net expenditures for an extended period of time,” Lew writes.

It’s unclear when the U.S. would exhaust its cash, Lew adds, because that depends on “inherently variable and irregular” factors, including the willingness of investors to roll over Treasury securities.

“If investors should become unwilling to loan the United States money, the United States could face an immediate cash shortfall,” Lew writes. “Indeed, such a scenario could undermine financial markets and result in significant disruptions to our economy.”

While mid-October is the drop-dead deadline for raising the nation’s debt ceiling, Congress should act sooner, Lew writes, in order “to protect America’s good credit” and “remove the threat of default.”

Lew reminded Boehner that increasing the government’s borrowing authority does not increase government spending; “it simply allows the Treasury to pay for expenditures Congress has previously approved.”

“Failure to meet that responsibility would cause irreparable harm to the American economy,” Lew writes.

Lew’s letter increases the pressure on Congress to reach an agreement on raising the debt ceiling after it returns to Washington next week. President Barack Obama insists he won’t negotiate with Congress on this issue, but Republicans are considering using the debt ceiling deadline as leverage for forcing additional spending cuts or even defunding health care reform.

Small Business Employee Privacy Policies

Important Privacy Policies That Must Be Implemented

If you want to maintain a happy workplace for your small business, then all of the following need to be addressed.

Ethical Employee Privacy Policies
by Tanya Robertson, Demand Media
Confidential employee files should be locked up to prevent unauthorized access.

Employee Privacy

Confidential employee files should be locked up to prevent unauthorized access.

Business owners who want to do the right thing may be unsure of what to include in employee privacy policies. On one side, businesses have the right to monitor the actions of employees while they’re on the job. At the same time, employees also have a reasonable expectation of privacy in certain circumstances. It can be a fine line between what is acceptable, fair and ethical, and what isn’t, and even the courts sometimes waver in how they rule in cases involving employee privacy.

Legally, businesses have the right to monitor employee communications. However, the laws still allow employees a reasonable amount of privacy. For example, an employer is allowed to monitor work-related phone calls, but as soon as a call is determined to be personal in nature, monitoring must cease. The only exception is if the employer has policies in place forbidding personal calls on company phone lines. With emails, courts have upheld that employers are allowed to monitor all emails except in cases where employees are told their emails are kept confidential or are password protected. Internet usage on the job is more restrictive. Employers are allowed to monitor all Internet usage in the workplace and restrict or block employee access to the Web as the company sees fit.
Background Checks

Many companies routinely perform background checks on job applicants before extending an offer of employment. From the employer’s perspective, these checks are necessary to reduce liability by verifying that the information the applicant provided is true. However, employers must stay within reasonable guidelines when it comes to the information obtained. For example, any inquiries must be related to the job the applicant is applying for and the potential employee must be told what information will be checked and then give written consent.
Drug Testing

When it comes to drug testing, employees legally have more privacy rights than job applicants do since they have more to lose should they fail the test. Some industries, including transportation and aviation, are required to follow federal drug testing requirements for all employees. In the private business sector, drug testing is optional and left up to the company to decide how to handle it. Employers cannot force an applicant or employee to take a drug test. However, they can legally choose to deny or terminate employment for refusing to take the test or for failing it. Since procedural drug testing laws vary in each state, it’s important to check your state’s laws to find out exactly what’s allowed and what isn’t before setting or changing your company policy.
Personnel and Medical Records

Employees can reasonably expect that their personnel and medical records are confidential. It’s the employer’s responsibility to make sure that only authorized personnel have access to these records and only for legitimate business purposes. The confidentiality rules on medical records is even stricter. For example, the Americans With Disabilities Act specifies that employers must keep employee disability records separate from personnel files and in a secured location. Other laws, such as the Health Insurance Portability and Accountability Act and the Genetic Information Nondiscrimination Act, also have their own confidentiality requirements on medical records.

About the Author

Tanya Robertson has been writing professionally since 1999 and editing since 2004. She has contributed to Trix 4 Travel and established a writing services company, International Composition. Robertson holds a Bachelor of Science in legal studies and a Master of Business in accounting from Davenport University.
Photo Credits:     Hemera Technologies/ Images

Druckenmiller Says Financial Storm Is Coming

We are reprinting Druckenmiller’s interview below, however, we believe that indeed a financial storm is coming. But we believe that the reasons stated in his interview are just some of many.

Wall Street Legend Warns: A ‘Storm’ Is Coming

Mar. 1, 2013 6:15pm Becket Adams

Stan Druckenmiller Warns That the U.S. Econ. Is Heading Into a Dangerous StromScreen grab.

Noted hedge fund manager Stan Druckenmiller, 59, on Friday warned that the U.S. economy is headed for a “storm” that could prove to be far worse than the financial meltdown of 2008.

But first, if you’re not familiar with his name, here’s what you need to know: He’s one of the most respected and successful hedge fund managers in the past 30 years.

Obviously, you don’t achieve that type of success (or notoriety) on Wall Street by running your mouth. That being said, if Druckenmiller, a former partner of billionaire liberal philanthropist George Soros, is predicting serious economic trouble for the U.S., perhaps we should listen.

“I see a storm coming, maybe bigger than the storm we had in 2008, 2010. And really, the reason could happen without people looking as for a lot of similar reasons that we could get into,” he said during an interview with Bloomberg TV’s Stephanie Ruhle.

“But the basic story is, the demographic bubble I was looking at way back in ’94 that started in 2011, we are right at the first ramp-up of this thing that is about to hit,” he added.

His comments were made during a larger discussion on the dangers Social Security, Medicare Medicaid, and unfunded liabilities as high as $211 trillion, pose to future generations.

“I think people like me and others need to speak out. It’s about the future, not about the present where the problem is,” he said.

“While everybody is focusing on the here and now, there’s a much, much bigger storm that’s about to hit,” he added. “I am not against seniors. What I am against is current seniors stealing from future seniors.”

Watch the Bloomberg TV interview here.

However, if it’s any consolation, Druckenmiller isn’t totally without hope. Indeed, he actually thinks the U.S. has a chance of turning this ship around.

“With the proper education and with proper voices out there, we could have 40 million kids marching down to Washington,” he said.

Your Retirement At Risk From Feds?

We first started hearing about this from some underground sources we have.

Now it looks like the cat is out of the bag.

Now we are not in the business of giving financial advice, but we are all taking a look at some possible strategies to stay ahead of the Feds.

February 22, 2013

The Feds Want Your Retirement Accounts

By John White
Quietly, behind the scenes, the groundwork is being laid for federal government confiscation of tax-deferred retirement accounts such as IRAs. Slowly, the cat is being let out of the bag.

401 Low Hanging Last January 18th, in a little noticed interview of Richard Cordray, acting head of the Consumer Financial Protection Bureau, Bloomberg reported “[t]he U.S. Consumer Financial Protection Bureau [CFPB] is weighing whether it should take on a role in helping Americans manage the $19.4 trillion they have put into retirement savings, a move that would be the agency’s first foray into consumer investments.”  That thought generates some skepticism, as aptly expressed by the Richard Terrell cartoon  published by American Thinker.

Days later On January 24th President Obama renominated Cordray as CFPB director even though his recess appointment was not due to expire until the end of 2013.

One day later, in the first significant resistance to President Obama’s concentration of presidential power, a three judge panel of the U.S. Court of Appeals in Washington DC unanimously said that Obama’s Recess Appointments to the National Labor Relations Board are unconstitutional.  Similar litigation testing the Cordray appointment to the CFPB is in the pipeline.

The Consumer Financial Protection Bureau (CFPB) created by the 2,319 page Dodd-Frank legislation is a new and little known bureau with wide-ranging powers.  Placed within the Federal Reserve, a corporation privately owned by member banks, the CFPB is insulated from oversight by either the President or Congress, its budget not subject to legislative control.  It is not even clear that a new President can replace the CFPB director on taking office.

Unusual legal and political environments have a significant impact on the CFPB. With Cordray’s recess appointment in doubt several questions remain unanswered.

1) What will become of the CFPB when Cordray’s appointment is found invalid?  An indicator comes from the NRLB, which operated unconstitutionally for years without a quorum.  In 2007 the Senate threatened no NLRB nominations reported out of committee.

The NLRB continued operating with two members.  Then a Supreme Court ruling in June of 2010 invalidated the NLRB decisions for lack of a quorum.  Fisher & Phillips give the details about what was done next.

But recovery from the Supreme Court’s sting was quick, with Liebman and Schaumber still on the Board and with two new Members confirmed, … the suddenly full-strength Board simply added a new Member to the “rump panel” of the original decisions and managed to rubber-stamp many of the disputed Orders – at a record-setting pace – with the same result…

This may explain why President Obama renominated Cordray a year early.  Once confirmed Cordray can rubber-stamp decisions made while he was unconstitutionally appointed.  Otherwise those decisions will be invalidated.

2) What will the CFPB do with your money?  The CFPB incursion into individual personal savings, in order to control how you invest your money, isn’t a new idea. Current proposals grew from a policy analysis as disclosed by Roger Hedgecock.

On Nov. 20, 2007, Theresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, presented a paper proposing that the feds eliminate the tax deferral for private retirement accounts, confiscate the balance of those accounts, give each worker a $600 annual “contribution,” assess a mandatory savings tax on every worker and guarantee a 3 percent rate of return on the newly titled “Guaranteed Retirement Accounts,” or GRAs.

How would that be accomplished?  The Carolina Journal reported Ghilarducci’s 2008 testimony to Nancy Pelosi’s House.

Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts “including 401(k)s and IRAs” and convert them to accounts managed by the Social Security Administration.

Your Government universal GRA investment savings account is an annuity managed by Social Security.  Hedgecock noted ‘[m]ake no mistake here: Obama is after your retirement money. The “annuities” will “invest” not in the familiar packages of bond and stock mutual funds but in the Treasury debt!’

By 2010 Bloomberg published an article titled  “US Government Takes Two More Steps Toward Nationalization of Private Retirement Account Assets.” In that article Patrick Heller observed that, with Democrat control of Congress and the Presidency:

[I]n mid-September 2010 the Departments of Labor and Treasury held hearings on the next step toward achieving Ghilarducci’s goals. The stated purpose was to require all private plans to offer retirees an option to elect an annuity. The “behind-the-scenes” purpose for this step was to get people used to the idea that the retirement assets they had accumulated would no longer be part of their estate when they died.

So the Government would get the money, not the estate or family of the people who saved the money during a lifetime of work.  That’s a one hundred percent death tax on savings.  Worse, the most responsible and poorest families will be penalized.

Democrats had a blueprint for diverting people’s savings from private investment to government debt.  Then in 2010 the Tea Party won the house…

3) Why should the Government intervene in people’s savings decisions?  The justifications for Government intervention in private financial decisions are varied.  Panic over the economy, Wall Street, mandating savings equity, eliminating investment risk, financial crisis losses, retirement security, much-needed oversight, your 401K becomes a 201K, shoddy financial products, and predatory investment bankers are just a few.

If the financial industry is so predatory, how is it possible that savers keep any money?  More importantly, we have all those government agencies, FDIC, FINRA, SEC, Labor Department, Treasury Department, NCUA, Office of Thrift Supervision, FHFA, NCUSIF, Comptroller of the Currency, Office of Foreign Assets Control, Pension Benefit Guaranty Corporation, hundreds of criminal penalties, and state level regulators.  Are we admitting the Government is incapable of policing criminal and predatory behavior?  Do we have invincible predators plundering the people, or do politicians Cry Wolf?

And about that crisis in the economy.  Former Congressman Barney Frank, one of the authors of Dodd-Frank, admitted to Larry Kudlow that Government was to blame for the housing crisis.

Professor Ghilarducci said “humans often lack the foresight, discipline, and investing skills required to sustain a savings plan.”  Professor Ghilarducci tells us that people are flawed, no argument there.

Her solution, substitute Government decisions for the judgment of the millions of people who actually earned and saved the money.  She fails to mention the government bureaucrats wielding the power to compel you to comply are themselves imperfect.  Which is preferable, one faulty Government solution or millions of individual free choices?

4) Are there other forces pushing Government to confiscate people’s savings?  With $16 trillion in debt the short answer is yes.  When governments embark on a path of spending money they don’t have, they resort to financial repression.  According to Wikipedia:

Financial repression is any of the measures that governments employ to channel funds to themselves, that, in a deregulated market, would go elsewhere. Financial repression can be particularly effective at liquidating debt.

Do we have any evidence that the US Government is pursuing financial repression?  Yes we do. Jeff Cox at CNBC.  “US and European regulators are essentially forcing banks to buy up their own government’s debt-a move that could end up making the debt crisis even worse, a Citigroup analysis says.”

An Investors Business Daily article, Banks Pressured to Buy Government Debts, notes that “[b]anks can’t say no. They fear the political fallout. So they meekly submit to the government’s dictates.”

Meanwhile the Wall Street Journal reports that “[i]n 2011, the Fed purchased a stunning 61% of Treasury issuance.”  Then a CNS News article revealed that  “[s]o far this calendar year [2013], the Federal Reserve has bought up more U.S. government debt than the U.S. Treasury has issued.”

5) Is the health of Social Security (SS) a factor? There are several potential measures of when Social Security retirement goes broke.  One measure is when FICA tax income doesn’t cover the cost of retirement checks.  We have passed that point already.  Others say that SS is fine until the lock box runs out of special issue bonds (IOUs).

Even though the SS bonds in the lock box cannot be sold on the open market, the Treasury Department remains under political pressure to honor that obligation by borrowing real cash to redeem the IOUs.   At least until the IOUs in the lock box are gone.  How long is that?  Based on a credible source, Bruce Krasting at Zerohedge suggests not long.

SS consists of two different pieces. The Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). Both entities have their own Trust Funds (TF). OASI has a big TF that will, in theory, allow for SS retirement benefits to be paid for another 15+ years. On the other hand, the DI fund will run completely dry during the 1stQ of 2016.

So Krasting expects the President and Congress will soon be forced to choose between 4 solutions:

1 Increase Income Taxes

2 Increase Payroll Taxes

3 Cut disability benefits by 30%

4 Kick the can down the road and raid the retirement fund to pay for disability shortfalls.

Krasting predicts Congress and Obama will be behind door number four. His credible source is the Congressional Budget Office report Social Security Trust Fund–February 2013 Baseline.  In the footnotes it projects a $1 Trillion drain on the retirement fund which currently holds $2.8 Trillion.  That’s a loss of approximately one third of the retirement IOUs.

Krasting however omits another possible solution, politicians can raid private retirement savings to put more IOUs in the lock boxes and more real money in the Treasury.  Other people’s money is a temptation and $19.4 Trillion is a very large temptation.

Social Security is the largest entitlement program with a trust fund of $2.8 Trillion IOUs, soon to be reduced by another $1 Trillion.  Can any politician, addicted to spending, resist that temptation of $19.4 Trillion?  That’s real people’s real money that will be spent by Government in exchange for IOUs given to the SS lock box.

Meanwhile newly minted Senator Elizabeth Warren has entered the debate.  Conservatives and Republicans have challenged the CFPB in the wake of the unconstitutional recess appointment.  Bloomberg speculates that Warren might agree to trim the CFPB powers in a compromise. Bloomberg reported:

“A strong independent consumer agency is good for families and lenders that follow the rules and good for the economy as a whole,” Warren said yesterday in an interview. “I will keep fighting for that.” [snip]

Some observers have suggested that Warren’s original support for a commission-led bureau might mean she would be amenable to compromise on that issue. Warren spokesman Dan Geldon said such speculation is mistaken.

“Senator Warren thinks the single director structure makes sense and that CFPB should continue to be able to operate, like every other banking regulator, without relying on appropriations for its funding,” Geldon said.

Bloomberg also notes that soon “the Senate will have to decide whether to vote to confirm director Richard Cordray in his post, which would make a legal challenge pointless.”

Conservatives and Republicans challenge the surrender of legislative power to the bureau, the concentrated power of a single director, the unconstitutional recess appointments, and the violation of constitutional separation of powers.  The Republican position is the constitutional questions and litigation presently underway should be resolved prior to approving a director of CFPB.

The constitutional issues surrounding Dodd — Frank and the CFPB are beyond the space for this article.  For those interested in the legal issues, a good synopsis can be found at the Mark Levin Radio Show podcast for February 18th.  Mark is an attorney and his Landmark Legal Foundation has argued many cases before the Supreme Court.  He can explain complex legal issues in straightforward language.