Saturday, September 22, 2018
Straight Talk from Al Jacobs
THE IDIOCY OF OUR HOMELESSNESS
EFFORTS
According to the annual report of the U.S. Department of
Housing and Urban Development, on any given night about 134,000 Californians
are without shelter. Whether they’re bedding down on a street corner bench,
curling up alongside a dumpster, or provided with a cot in a shelter, they’ll
awaken the following morning to spend another day roaming the streets.
And what’s being done by the establishment to ameliorate the
problem? Committees are formed to study the matter; survey crews are hired to
count the homeless; bond issues are passed to throw money here and there; and
elected officials issue proclamations castigating one another. An analysis by
the National Low Income Housing Coalition reveals our state has only 22
affordable and available rental homes for every 100 very low-income households.
Simply stated, California is short more than a million rentable units needed
for its impoverished citizens.
So what’s being considered? The Terner Center for Housing
Innovation at UC Berkeley reports that a 100-unit affordable housing project
can be built for $42.5 million. On this basis, our rental unit shortage is resolvable
for $425 billion. With three months still to go in office, perhaps Governor
Jerry Brown can push this through the legislature.
I have a better way to fix the problem. The federal
government’s Section 8 rent subsidy program, which supplements low-income
tenants’ payments in the competitive rental market, averages out at about $600
monthly per family in modestly priced areas. In this way, the government’s cost
to house the million families works out to $7.2 billion annually. With market
rents available, the prospective landlords will build and pay for each
apartment – and not at the $425,000 envisioned by UC Berkeley, but on the
cheap. And if the poor can’t live in high priced areas, it’s likely all for the
better.
A final thought: I don’t believe there’s any possibility the
homeless crisis will be approached in a thoughtful manner by our elected officials.
There’s a reason for this: I’m convinced most of those persons who run for and
get elected to public office specialize in only one thing: it’s running for and
getting elected to public office. Actually viewing and approaching real life
problems in some sensible fashion is beyond their abilities. And as we citizens
vote the way we do, we deserve what we get.
Al
Jacobs, a professional investor for nearly a half-
century, issues weekly
financial articles in which he
shares his financial
knowledge and experience.
You
may view them on http://www.roadwaytoprosperity.com
Saturday, September 15, 2018
Straight Talk from Al Jacobs
PAYDAY FOR THE BANKS
The headline couldn’t be ignored: “Payday loans get a major
rival.” The announcement: The nation’s fifth-largest commercial bank, U.S,
Bank, headquartered in Minneapolis, Minnesota, will enter the payday loan
business, letting customers borrow sums of $100 to $1,000 for periods of three
months. The cost of these loans will be, in addition to processing fees
charged, $12 for every $100 borrowed – equivalent to an annual interest rate of
71 percent.
Although major banks made short term loans in the past, a
2013 prohibition by then-Controller of the Currency Thomas Curry barred them
from this practice on the basis they trapped many low-income earners into a
cycle of high cost debt they were unable to repay. Apparently the Trump administration
wants banks back into this line of work, which led the current Controller,
Joseph Otting, to rescind the rule this past May. It appears other banks,
including scandal-ridden Wells Fargo, will likely follow suit.
The truly
insidious aspect of the payday-type loan is not the rare one-time use by a
borrower temporarily short of money for an important purpose, but rather the
repeated use by the same persons whose lives are perpetually on the edge of
financial insolvency. According to a study by the Pew Charitable Trusts, most
payday borrowers fall into one or more of the five following categories: those
with lower education, apartment renters, African Americans, those earning below
$40,000 annually and persons divorced or separated. It’s further revealed most
such borrowers use payday loans to cover ordinary living expenses over the
course of months, not unexpected emergencies over the course of weeks.
As for the
practicalities of these loans, they’re clearly predatory by design. As there
are no periodic payments, the lender is invariably compelled to roll the loan
over at the end of the period upon payment of another fee. Accordingly, these
loans normally result in interest rates exceeding 100 percent. It’s not hard to
understand why these cash-strapped payday customers are left with fewer
resources than before the loan.
A final
thought: The payday loan does no favor to the borrower. Persons with few assets
and meager earning abilities are generally better off never borrowing at any
time for any reason. The last thing they need is to pay interest to anyone for
anything.
Al
Jacobs, a professional investor for nearly a half-
century, issues weekly
financial articles in which he
shares his financial knowledge
and experience.
You
may view them on http://www.roadwaytoprosperity.com
Saturday, September 8, 2018
Straight Talk from Al Jacobs
AS THE ECONOMY SOARS
The headline in my local newspaper is favorable – at least a
part of it is: “Economy soars …” Unfortunately the rest of it is less than
encouraging: “… but 40% of U.S. hardly getting by.” The author, David Lazarus, a
business and consumer columnist for the Los
Angeles Times wastes no time describing the problem: “By virtually any
yardstick the U.S. economy is doing great, with corporate profits at record
highs … [yet] a report out this week finds almost half of Americans are having
trouble paying for basic needs such as food and housing.”
Why are corporations doing so well? It’s because they’re
automating their facilities, getting rid of wage-collecting employees, and
moving their operations to places with fewer regulations and less oversight.
And why are Americans having trouble meeting their living expenses? For exactly
the same reasons. Thus, Amazon is doing nicely as an Online company, as it
plans to employ Prime Air as its delivery system to get packages to customers
in 30 minutes or less using unmanned aerial vehicles. Meanwhile, Sears and J.C.
Penney close stores as they dismiss employees. At the same time, Uber and Lyft soon
hope to transport fares nationwide with self-driving vehicles while taxis with
drivers struggle to compete. Perhaps this helps explain why a recent CNBC poll
reports more than half of Americans have seen no change in their paychecks over
the past several years.
What can be done? Many economists call for a higher minimum
wage, a progressive tax system that spreads the nation’s wealth more equitably,
and a social safety net to subsidize all those persons who cannot otherwise
fend for themselves … though they don’t explain how to enforce this without a
full socialization of the economy, in which government dictates how each
company shall operate its business down to the most minute detail – all the
while preventing sources of capital from fleeing the country.
A final comment: Although the economy may be agreeable for a
select portion of Americans, it’s far from favorable for the majority of our
citizens. The current National Unemployment Rate of 3.9 percent sounds
impressive, but the method devised by the Labor Department is contrived –
intentionally so. In reality it’s well into the double digits and growing.
Where we’re heading economically is uncertain, but I foresee untold misery in
the future. I fear that what’s in store for our nation will not be pretty.
Al
Jacobs, a professional investor for nearly a half-
century, issues weekly
financial articles in which he
shares his financial
knowledge and experience.
You
may view them on http://www.roadwaytoprosperity.com
Saturday, September 1, 2018
Straight Talk from Al Jacobs
FUNDING THE COMMUNITY COLLEGE
UC Berkeley Professor David Kirp’s article “Can community
colleges deliver on diplomas?” is statistically well documented. As a senior
scholar at the Learning Policy Institute, he appears to be intimately familiar
with how the state’s 114 community colleges receive their funding. In the past,
enrollment dictated the dollars which flowed, but starting this year, nearly
half will be dependent upon “whether the institution improves student outcome
and how well it serves poor students.” Translated, this means a larger portion
of students must attend full-time, receive associate arts degrees and transfer
to 4-year institutions, so to qualify for needs-based federal financial aid.
I fully understand why the colleges require an infusion of
cash. The state of California is awash in unfunded financial obligations as it
continues to spend with abandon. I question, however, whether the typical
community college student will be well served by this emphasis on an associate
arts degree. I recall, a number of years ago, enrolling in several courses – poetry,
short stories and creative writing. I had a particular purpose and the courses
served me well. To have been coerced into a more extensive course of study to
meet some preordained definition of student improvement would have been
senseless. A gateway to a four-year course of study is not the only reason the
community college exists. Its purpose for many students is to provide specific
instruction as each needs for any variety of reasons.
Professor Kirp then mentions that because of a test given to
each new student, 80% are consigned to remedial math, with many then “dropping
out before they get a crack at classes that lead to a degree.” In addition, as
he points out, students must be enrolled in college-credit classes. He adds
“Many students are clueless about what courses they need to graduate … fewer
than half will pass the math course. Discouraged by the lack of progress, they
leave.”
I’m convinced these new rules being instituted – quite
clearly for the purpose of meeting federal requirements for ever more money –
is transforming the community college into an institution which no longer meets
the needs of many Californians seeking supplemental schooling. It’s painfully obvious that in the world of
the professional educator, dollars allocated to an instructional process
invariably take precedence over any educational purpose.
Al
Jacobs, a professional investor for nearly a half-
century, issues weekly
financial articles in which he
shares his financial
knowledge and experience.
You
may view them on http://www.roadwaytoprosperity.com
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