Los Angeles City Mayor is a Failure

• Los Angeles has a $7.1 billion General City budget (this does not include the Airports, Harbor and Department of Water & Power budgets)

• Los Angeles is a full-service City government composed of elected and appointed offices, including commissions, departments, and agencies.

• Los Angeles City government has a workforce of about 37,000 employees that provide a variety of services ranging from crime control to tree trimming.

The above information was copied from a Los Angeles city web site that tries to inform the citizens about how the city government functions. Los Angeles Mayor Villaragosa says that the city will have shortfall of $24 million in its current budget. If the administration would just cut back its department budgets to those that existed just three years ago they would save more than $100 million. This will most likely mean that some jobs will have to be eliminated. That reduction is not nearly enough to reduce city services in any significant way.

The problem is that the mayor doesn’t want to impact his Teflon surface with any damaging decisions before next year’s election. The truth is Villaragosa has not successfully fulfilled any of his many promises.

Schools are ineffective, crime is a serious problem (especially gang activity), public transportation is poor in most parts of the city, traffic is impossible, the cost of living has driven out the middle class, business has been driven out of the city due to high taxes, and the list goes on and on.

Antonio Villaragosa’s smiling face is better than his predecessor’s continuously glum appearance. Jim Hahn never cracked a smile.

Imagine the United States Being Attacked – Not Israel

For the next few minutes imagine that you live in a city that is 16 kilometers (10 miles) from the border and your city is being shelled from that neighboring country. It is just 12 miles from downtown San Diego, California to Tijuana, Mexico. Buffalo, New York is just across a river from Niagara Falls, Canada. If either of those countries started shooting rockets into the United States, how long would it take for the U.S.A. to retaliate?

Israel has been the victim of continuing rocket attacks for many years. There is a city of 120,000 people that is 10 miles from the Gaza strip. That city and other towns near Gaza have been shelled with rockets almost daily. That is the reason that the Israeli government has decided that it must respond. I doubt that the United States or any other nation would have taken so long as Israel has in responding to those rockets.

Israel did occupy Gaza for 38 years. That occupation ended in 2005. Their withdrawal was done in the hope that peace would come to that area. It has not. Instead the Palestinians have continued their assault on Israel. There does not appear to be a peace accord on the horizon. It is likely that other nations will pressure Israel to stop their attack. It is doubtful that the end of the Israeli attack will bring an end to the Palestinian rocket attacks.

There has been no solution to this situation since 1948 when Israel became a free nation. As long as Israel’s neighboring nations and other Arab groups continue to wage war there will be no peace.

Evaluating Investment Funds

I almost never read stock and mutual fund reports and other information that those many companies send me. When I do, I rarely go past the third page of reports that have at least 50 pages. I like to look at the graphs that compare performance with other investments. Sometimes I find some interesting facts like Mario J. Gabelli earning $9 millon last year while his fund lost 20% of its value.

The most recent report I received is the Oppenheimer Strategic Income Fund Management Commentaries and Annual Report dated September 30, 2008. It totals 128 pages of information that would require an accountant’s knowledge to really understand. Oppenheimer’s auditor is the famous Deloitte & Touche LLP. That company attempts to reassure me by writing that the financial statements “represent fairly” the condition of the company “in conformity with accounting principles generally accepted” in the U.S.A.

I am not reassured as there is discussion of Swap Contracts, Credit Default Swap Contracts, and a variety of other swap contracts. This was supposed to be a conservative investment.

Bernard Madoff has been accused of cheating his clients out of billions of dollars. It’s an accusation that has yet to be proven. Although the accounting firm that reviewed his records is small there is no evidence that it was not qualified to audit the Madoff investment company. If Rene-Thierry Magon de la Villehuchet, the suicide victim and an esteemed financier who tapped his upper-crust European connections and invested both his client’s funds and his own money in Madoff’s company, could not recognize a scam how could us less trained individuals know that Madoff was running a ponzi scheme?

Who among us non-financial experts can read one of these reports and really understand the investment company? I rely upon magazine and newspaper articles, Morning Star, some financial newsletters and occasionally a broker. I will be spending more time learning to read and understand those annual reports and disclosures.

The Countdown to January 20, 2013

Mike Allen’s Politico Playbook and Keith Olbermann on MSNBC provide us with a countdown to January 20. An on line clock counts the seconds to inauguration of Barack Obama. Of course the political talk shows need something to gossip about and this is an easy topic. The problem is that so many people seem to believe that everything will change when we have a new president. There is no evidence to support that belief.

The leading people in the Obama team are not new to federal government service. They are just a new set of faces that are more aligned with Democratic Party views. What brilliant new thoughts are in their heads? There is no evidence to indicate that anything will change.

Barack Obama’s stimulus plan seems to be taken from ideas that were employed during the depression and other significant economic downturns. Those incentive programs were mildly successful at best. Many of the economic advisers that Obama has selected were there in the Clinton administration when the congress passed laws giving banks, insurance companies, and investment houses more freedom to enlarge their business with little or no government oversight.

Bob Gates and the military have been the machine that has brought the United States the surge in Iraq. Obama says he wants to use the same tactic in Afghanistan.

America has been losing its manufacturing base for 30 years. There has been no indication of any specific program to reverse the trend. A life line to GM, Chrysler and Ford will not stop the downward spiral of those companies. Less than one half of all vehicles sold in the United States are manufactured by these three companies. Where was the management of those companies when they saw the downward trend over the past 20 years? Somehow in 90 days those three companies say they are going to reform themselves. Does anyone believe this?

Unless Barack Obama and his team have some brilliant new ideas that will be revealed after January 20, I predict we will be inaugurating a new president on January 20, 2013.

January 18, 2013

I was wrong. Barack Obama is a master politician. In addition he had the good fortune to run for re-election against someone who ran a poor campaign and did not relate to the average American.

Ponzi Scheme

“In a Ponzi scheme, not all investors lose. The first investors gain much. Those who manage to get out in time retain their investments and some of their gains.”
TAMAR FRANKEL, a law professor at Boston University, on the Madoff scandal.

A ponzi scheme has also been called a pyramid scheme. In fact the first item I see when Googling the words ponzi scheme are “pyramid scheme.” The most prevalent that I am familiar with are the multi-level marketing businesses. Those entering at the top floor convince their friends to buy in to the sales plan. They buy “sales kits” that are filled with product. Those friends then sell their friends to buy in to the sales plan. This process goes on and on. Each person receives a commission for everyone in his network that sells participation. The problem is that there is very little selling of product outside of the group who keep buying into the sales plan. Eventually these schemes run out of friends. Those people at or near the bottom earn relatively little but those at the top of the pyramid have “earned” significant commissions.

It has been suggested that Bernard Madoff really did not hold investments that earned 10-12% per year. I personally do not believe that those kinds of earning are possible on a continuing basis. Mr. Madoff is accused of paying his clients that return from new money that was invested in his firm. The scheme worked well as long as redemptions were low and more investors were added to the list of clients. Declining stock values brought a wave of redemptions that his company was unable to fulfill. The SIPC and the Securities and Exchange Commission obviously did not monitor the Madoff investment company. This will likely cost the government significant money.

“There’s a sucker born every minute” is an expression that was attributed to P. T. Barnum. Whether he did use those words I do not know. ‘A fool and his money are soon parted ‘is an idiom from an unknown source that is probably the definition of someone that falls for a ponzi scheme.