Category: economy

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Going Virtual & Other Experiences

When the Pandemic hit, we were already paperless & cloud based. We weren’t trying to be PAPERLESS. Nor were we trying to be REMOTE.  We were just trying to stay on the cutting edge of technology.

The first computer I ever saw was at the offices of my Big 5 accounting firm. It was a paper tape job. The second computer I ever saw, I actually mistook for a railroad freight car somehow misplaced into the basement of the high rise my Fortune 500 #254 employer had offices in.  It turned out to be a Burroughs mainframe computer. Burroughs was the big dog in mainframes in those days, but I was disappointed it wasn’t an IBM, the only computer company I had ever heard of. Your watch probably has more computing power than that behemoth. I’m still not certain whether the railroad car housed the computer, or if the railroad car WAS the computer. In any event, every month when the financial statements were printed, all the C Suite executives met in the basement to get the first P&L’s off the printing press. So as a young executive I was hob-nobbing with the CEO, CFO and all the CXO’s of a Fortune 500, about 15 of us in all. Actually, it struck me as foolish to require the entire C Suite (not called that in those days) stand around and watch a dot-matrix printer slowly crank out printed pages. But that’s what we did.

 IBM 360

Later when I was in the C suite of a bankcard company, we had dual IBM 360’s (probably the most successful computer IBM ever built) and later an IBM 370, which didn’t work out as well for us. The computers were sequestered behind glass walls on elevated floors to facilitate air conditioning necessary to keep those powerful computers from melting down to a puddle of plastic & metal.

After leaving the corporate world in the dust and running for Congress, I started my own accounting firm, where I bought two IBM System 3 computers. (My LinkedIn profile provides more info if interested. https://www.linkedin.com/in/elliscpa/)

it took all night to process & print one tax return. If you made a mistake, it took another day. Bookkeeping was more efficient, so we used them for bookkeeping, but we were actually just trying to stay on the front lines of technology innovation. We were certainly the first CPA firm in our city that used computers in any way. As a general rule, the CPA profession did not take quickly to automation. Two decades later I knew CPA’s who were still paper based and using adding machines (I still miss my adding machine.) and shipping off tax returns to be processed at processing centers. To this day, the largest CPA firm in the city I am now located in still provides paper copies of tax returns and charges extra for a digital PDF copy. They bought a building on a major street to increase walk-in traffic.

Today, the software is setting the pace, not the machinery, and certainly not your location. We have clients situated right next door to a CPA firm that uploads everything to us, half way across the country, for us to do their returns.

Everyone in our practice has a computer and two screens, but it’s the software where we outdistance our competitors. When the pandemic hit, we had 12 or 14 computers working with a server. When we got the stay at home order, it took us a day to move everything to Microsoft One Drive, and our server went the way of the horse & buggy. We added Textus & Microsoft Teams and that was it. But we could have done just as well without those new programs. Texting on our phones kept us connected. We hit the ground running & never stopped. When PPP came along. it gave us a boost in work load, but we were so efficient we pumped them all out like we’d been doing them for years. It disappointed us that it took the government quite a long time to decide how to tax them & the terms of forgiveness. If Chinese tanks pulled in front of their building, it would take them two weeks to decide what to do.

The biggest problem we had as dealing with 10-15 people scattered around the country without just walking down the hall and asking. It wasn’t that we weren’t communicating, it was that we were communicating too much. Everyone could text & call everyone else. We also had text groups for the Tax Team, The accounting & payroll team and the entire Ellis Team. Every time a message comes in I get a beep to alert me. Textus & Microsoft Teams also alert you to incoming messages. I remember one morning sitting in my home office listening to the messages come in. It sounded like a machine gun going off, and I knew I had to read every single one of them.

Our biggest problem was the communication was too efficient. Who would have thought? We may be unique, but everyone was closely connected and missed everyone, so they communicated back & forth about everything.

That’s our story, but we know for a fact, that was not everyone’s story. I have a family member that works for Spectrum, a local wifi provider. He said they were busy setting up offices at home for CPA’s. I have also stumbled across things on the web here and there about how CPA’s did not do well in the Pandemic. There were a lot of businesses that failed during pandemic, fortunately none of our clients. Those failures came from someone’s practice. But no one of them is willing to say, “We fell apart during pandemic.”

Observations.

To this day, months into this thing, most businesses are not back to full staff.  Some of them still won’t let customers in their business. Every business that does is much less crowded than they used to be. Their business has to be off by half, or more. Nor are they stocked as well. Where I live, nearly every used car lot has gone out of business, and many restaurants. Before all this is over, more will fail. This is contrary to our experience. Our business actually increased during pandemic. What is everyone else not doing that we did?

Overall, the marketplace is moving backward, not forward. There is still a movement not to reopen schools, and I just got a notice on my phone that Sam’s is going to require masks again starting next week. My supermarket required masks two days ago. And where I live, nothing out of the ordinary going on.

Just between you & me, this is completely bullxxit. There are a lot of states reporting increased infections, but the fatality rate is lower than the ordinary flu. Plus there’s apparently some fraudulent reporting. In my opinion, this entire cluster-flux was politically motivated. If we can ever prove that, hundreds or thousands will go to the guillotine. I can’t wait.

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Every Protruding Nail …

… Gets Hammered Down

Double Irish Under Attack

Closure to hurt American companies

The Link: http://www.businessinsider.com/double-irish-tax-loophole-could-close-2014-10#ixzz3FfJEWoAR

A graphic explaining it. http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html

This is a sad day. One of my favorite things in the world, Apple’s tax shelter is under attack. The Double Irish with a Dutch Sandwich is very likely to go the way of the Dodo bird and Swiss Numbered Accounts.

It’s a wonderful thing when someone takes what other people take for granted, looks at the same thing from a different angle, and discovers a breakthrough.  This is now we got penicillin and the theory of relativity. And it’s how we got the Double Irish.

A long time ago, some tax guys working for Apple (and others) took a look at the complicated global tax picture and decided there had to be a weak link in there somewhere. In fact it turned out there were several of them, which they duly uncovered. Then they put them together into a cohesive tax strategy and ended up saving Apple $400 billion dollars in tax.  That’s $400 Billion Dollars.

Hooray for them. This is what business is all about. Finding an edge and capitalizing. It’s called competitive advantage.

Things went along swimmingly and the tax savings piled up until, a decade later, the New York Times got wind of it and published an article. (Thanks a lot NY Times.) Then Congress held hearings and raked Apple over the coals, for no reason at all. (Thanks a lot Congress. You just ridiculed an iconic American company known far and wide for its creativity for being overly creative.) Then along comes an organization called “The Organization for Economic Cooperation and Development” that declares war on the Double Irish.  (We all know any company with “Cooperation” in its name is up to no good. Your organization just caused a remarkable case of cooperation between a private company and several countries to blow up. Pay more attention to your name.)

Ireland’s finance minister is proposing today to close the popular tax loophole.

Woe is me.

Everything was completely legal. No one broke the law. No one ever accused them of breaking the law. No one has ever been prosecuted. Dolce & Gabbana, those nitwits, were prosecuted for a bungled attempt to avoid taxes, but Apple’s strategy was completely legal. Even after everybody in the world knew about it, nobody was prosecuted. They were condemned by the Political Correctness Police, but never prosecuted and never even accused.

The countries knew what they were doing when the passed the laws. They did it on purpose to create tax havens. They did it to boost their economy. It worked. Now Ireland is succumbing to pressure and closing the Double Irish.

Who pays the price?

Apple, Google, Facebook, GE, Caterpillar and others.

The American economy

You and me

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Gold?

Gold has broken through the $1,200 level on its way down.

I hesitate to say basement, so I won’t.

This isn’t the first time Gold has spiked.  But when it started down last time, you couldn’t sell it. It dropped from $800 to $300. That’s a drop of 62.5%. It hovered around $300 for decades. This time it has dropped from $1900 to $1200 (41.6%).  If it goes as low as it did the last time, it will bottom out at $712.

Remember I never give investment advice. I just think out loud. But I wouldn’t want to be India or China right now. They own massive amounts of gold with no hope of liquidating their position in one piece.  Any attempt by those countries to sell will drive the price down faster and further. Their buying spree was probably part of the pressure driving gold to the all time high this time around.

If they’re listening to the pundits, China and India aren’t as smart as we thought.

http://www.businessinsider.com/gold-on-the-verge-of-falling-below-1200-2014-10

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Government Response to Tax Inversions

Twofold response.  

More adventures in la la land.

http://www.reuters.com/article/2014/07/22/us-congress-tax-inversions-idUSKBN0FR1RA20140722

First …

Remember TAX INVERSIONS from a couple days ago? The practice of buying a foreign company and moving your tax base to that country? So far this year, nine TAX INVERSIONS have taken place, and the government is beginning to notice. The logical response would be … “whew, we’d better cut taxes” … but that isn’t the response coming from the political class. The response is more along the lines of … “immediate action is needed … we have to put a stop to this … double up your fists, get your guns, we’re gonna bust some heads.”

The fact that taxes are so high they’re driving business away, doesn’t even enter their mind. Neither does it enter their mind that the ONLY way to solve that is to CUT TAXES. If we have the most expensive taxes in the world, everyone will leave eventually. Outlawing TAX INVERSIONS will not solve the problem. Google, Apple, Amazon, Caterpillar, etc. found other ways to do the same thing. There is always another way. Once a company starts looking for ways to save taxes, they will find ways. If that’s illegal, they’ll leave. Stopping TAX INVERSIONS will not stop the flood of companies abandoning the United States. You can only do that with a tax cut.

Second …

Orin Hatch’s response to TAX INVERSIONS is to REFORM TAXES.

This is another danger sign.
Here are some basic definitions to help you understand government speak about taxes.
CUT TAXES – means to CUT TAXES.
TAX HIKE – means to HIKE TAXES.
TAX REFORM – this is tricky … to the person hearing the phrase, it means CUT TAXES … but to the person saying it, it means INCREASE TAXES.
TAX REFORM is just a tricky way of saying TAX INCREASE.

As I said on my earlier post … will the last person out please turn off the lights?

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Does this make sense?

Is there something wrong with this picture?

One out of six men in their most productive years (25 to 54) are not working. Our best and brightest are sitting in a wading pool in their front yard sucking down brews and working on their tan. They’ve given up ever getting a decent job. At the same time, illegals are swarming into the U.S, to take advantage of amnesty promised by the Republicans. Does this make sense?

Agriculture in the San Fernando Valley is being shut down to save a few fish, while cities, farms, businesses and families fall apart. Does this make sense?

Russia is using it’s gas pipeline to blackmail Europe while the Keystone pipeline that could set Europe free (and the U.S) is continually delayed. Does this make sense?

Journalists couldn’t think of a single instance in which America’s relationship with a foreign country had improved in the last five years. Does this make sense?

OK. I’m just wondering. Are we stuck in a time warp where nothing makes sense any more?

Graph (above) & article (below) from The Weekly Standard …

http://www.weeklystandard.com/blogs/1-8-american-men-between-ages-25-54-are-not-working_793938.html

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“Can the private sector innovate and create wealth faster than governments and central banks destroy it?”

Although it seems a perfectly obvious question to ask, it’s relatively startling to see it in black and white and to read it on the written page.

This is the battle we’re faced with. This is the battle we’ve been fighting ever since the 2008 decision to waste our money by bailing out GM, IAG and all the big banks instead of letting them take their lumps in the market place. Since then annual drollops of quantitative easing have added shame to suffering every year.

Today the national debt stands north of $17 trillion and we add to it daily. There is no opportunity to turn this around, it can’t be ignored and sooner or later … we will pay the piper. That will be a bloody day because government spending and pensions will come to an abrupt halt, And you know what that means … there’ll be no more low level government functionaries to insult you.

I don’t know about you, but when they shut the government down, I didn’t miss a damned thing.

A headline on Drudge (Washington Scrambles to Provide Food, Clothing to Illegals Streaming Across Border) and the linked-to article in Reuters highlights our government’s ‘drunken sailor’ spending proclivities. We are still throwing around money like it was made out of paper.

Article here …
http://www.reuters.com/article/2014/05/28/us-usa-immigration-children-idUSKBN0E814T20140528

(John Mauldin of Mauldin Economics asked this question at their 2014 Strategic Events conference.)
http://www.mauldineconomics.com/editorial/thoughts-from-the-frontline-special-updates-from-the-strategic-investm

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Surprisingly Good News

From John Chambers, CEO of CIsco

” In a nutshell, the U.S. is good and growing, Europe is fragile but growing, and the emerging markets are just bad.” Here’s the transcript via SeekingAlpha.com.

Decide for yourself. The economists I follow are fighting over whether we will have hyperinflation or debilitating deflation. The signs do seem to point to trouble ahead … for instance … record numbers no longer participate in the economy … for those of you in Rio LInda, that means … not gainfully employed … We appear to be a joke on the world stage … nobody pays any attention to us any more … not a good sign … but we did spy on basically everyone … And how on earth can we make the national debt disappear without taxing us into oblivion? Perhaps the main dude has a rabbit in his hat.

If Mr. Chambers could tell us how to solve all thee problems … I would be much more impressed with his assessment.

But in one sense, I am in agreement … My forecast is that the 21st century will be boom and bust. Boom for those companies who are prepared for the turmoil of the 21st century with top notch infrastructure and customer service, who will blossom and shine in the turmoil they have prepared for. Those that haven’t, will taste the bust. You can access our long term forecast on our web site … http://www.elliscpa.us

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By the way, I’m also an anarchist.

From Vox Day, via Zero Hedge

“One need not be a socialist, or oppose capitalism, to oppose the income inequality that is the result of theft. With the assistance of the Federal Reserve and Congress, the banks have financially raped the American economy and the American people through fraud and political corruption. A reckoning is overdue. Everything that has been done in the last five years has been done in order to postpone it. And yet, a reckoning is coming nevertheless, because that which cannot continue will not continue. The rich simply cannot consume enough to substitute for more equitable consumption; how many cars can a man drive? In how many homes can a man dwell?”

<a href =”http://voxday.blogspot.com/2014/02/the-dark-side-of-income-inequality.html#comment-form/”&gt; Vox Popoli

People are bitching about the income inequality between the richest 88 people in the world and the rest of us. But there are more important things out there we should be paying attention to. The worst thing about this kind of income inequality is the potential for creating a landed aristocracy. But the answer is an estate tax that prevents passing on enormous estates to heirs unhindered, or worse yet, parking them in dynasty trusts,. A few generations of heavy taxation and incompetent heirs would eliminate that wealth. You probably hate estate tax, but that is all that stands between us and a landed aristocracy. Is it really healthy to have families like the Kennedy’s and the Bush’s rise to the top of the food chain? Would it even be possible for another Lincoln to rise to the Presidency?

Kill those dynasty trusts.

Very rich people make a lot of money, but they don’t just take it away from us. We have to participate willingly for capitalism to work, and we do. After all, it’s the best system out there for delivering the goods we want for a price we can afford. The only alternative, and it’s not a very good one, is centralized planning.

The income inequality we can’t deal with so readily comes from other sources. The most egregious comes from the abuse of government and power … just because they can. In many countries, this one included, that is the big problem. People get rich just because they’re powerful enough to take it away from us. Our government first bled us dry in the name of social engineering, just because they could, just because we trusted them. Then when we were already bled dry, they drove us deeply into debt to raise the money to feed their magnificent machine, enriching themselves and their favored classes as they went. just because they could.

The only way to deal with that is political revolution. Perhaps there will never be enough opposition to put a stop to this kind of income inequality. Perhaps we can never recover. Perhaps the values we used to hold dear are gone forever. But perhaps someday people will begin rolling out the guillotines.

Just thinking.