Do you have funds for the unexpected?

Owners would have to pay assessments ranging from $80,190 for one-bedroom units to $336,135 for the owner of the building’s four-bedroom penthouse, a document sent to the building’s residents said. The deadline to pay upfront or choose paying a monthly fee lasting 15 years was July 1. The association had just $800,000 in reserves.

The building was in a desirable location. Owners pocketed impressive returns when sold. All, except one apartment, sold for more than double the purchase price. Unit 508, a 1,683-square-foot condo sold for $800,000 in February, more than doubling its 2012 sale price of $370,000.

An HOA commonly maintains a type of savings account called the cash reserves or a reserve account for significant, infrequent, or unexpected common area costs.

When a development’s homeowner’s’ association (HOA) encounters large or unexpected expenses, the HOA needs money to repair or replace the damage. For example, what if a clubhouse roof starts leaking, the pool needs resealing, or a piece of equipment in the fitness room breaks down? At times like these, it is wise for HOAs to have a reserve account.

House in my neighborhood, asking price $800,000. Similar to the price of a condo.

Reserves for single family homes isn’t a bad idea either. When the bathroom tub backed up in my home the plumber said he needed to install a drain cleaning opening under the house. After he crawled under the house he reported that the main sewer line was leaking in many places. Cost for replacing the sewer system under the house was $5,000. There was no reserve fund. There was the retirement investments and that paid the bill. A similar situation resulted in installing new copper plumbing for another $5,500. Termites are lurking and the roof is 30 years old.

Owning a house is expensive but it provides us a place for both privacy and fun.

There are NO Poor People in America

This is a shocking reality reported in the April-May AARP magazine. The median retirement nest egg among retired people in the United States is $50,000 reports the Federal Reserve. Just to review median is not average. In statistics the median is the mid-point separating the higher half from the lower half of a data sample. In other words half the retired population has less than is $50,000 in their retirement account. This data goes along with the frequently reported fact that many people do not have enough money to pay a $400 unexpected expense tells me how poor most Americans are. In the AARP article titled “Protecting Your Nest Egg” the author goes on to offer suggestions on how to save money.

Meanwhile Jeff Bezos’ wealth grew by $99 billion from 2014 to 2018. Bezos is not the only super wealthy citizen of the United States. Michael Bloomberg, Mark Zukerberg, and Elon Musk have wealth in the billions.

This is not the first Guilded Age. The industrialists of the later 19^th century and early 20^th century Gilded Age lived high on the hog, but most of the working class lived below poverty level. As time went on, the income inequality between wealthy and poor became more and more glaring. Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie were all part of that early 1900s world of super wealthy and 12 hour starvation wage working class.

It was that glaring difference between the super wealthy and the rest of us that gave rise to communism.

What is “middle class?” Former Secretary of Labor Robert Reich suggests that the middle class should be defined as households making between 50% below and 50% above the median. Pew Research Center, a non-political organization, on line posting says “About half of U.S. adults (52%) lived in middle-income households in 2018, according to a new Pew Research Center analysis of government data. Roughly three-in-ten (29%) were in lower-income households and 19% were in upper-income households.”

My own opinion is that the idea of the words “middle class” are the wealthy’s definition of everyone who is isn’t part of the super wealthy. No one is poor. Peasant in an unacceptable word. Too demeaning. We are all part of the upper middle class or the lower middle class. So the janitors and house cleaning people are lower middle class. In other words there are no “poor people” in America.

The 2021 federal poverty level (FPL) for a single person residing in the 48 contiguous states or Washington, D.C. is $12,880. Today’s $7.25 an hour minimum wage is below poverty level and low pay for the so called middle class of today is the motivation that results in revolutions.

The difference between America’s aristocracy and British Royalty

There is no difference. We all just viewed a week long burial ceremony for a past president of the United States. Many of us, especially the media, treated George H.W. Bush like royalty. It should be important to note that the founding fathers of America abhorred the royalty of Great Britain. Terms like “your excellency” and “your highness” were specifically rejected by congress as words to be used in addressing the president of the United States. The title of “Mr. President” was decided to be sufficient.

Fareed Zakaria wrote an interesting opinion piece in the Washington Post about the things we all can learn from the WASP class that has managed the United States from its founding. In that article he pointed out that “the old WASP aristocracy did have a sense of modesty, humility and public-spiritedness that seems largely absent in today’s elite.”

For those of you not familiar with the term WASP. It is an abbreviation for White Anglo Saxon Protestant.

My answer is that in public America’s aristocracy (meaning the rich and powerful) takes the positon that they know what is the best for the rest of us mere mortals. Absence of that earlier more modest behavior does not make them royalty.

Zakaria did not grow up in the United States and is obviously blind to the fact that America’s aristocracy promised change for over 200 years but nothing changed. The rich stayed rich and the poor stayed poor. Non-white Americans continuously face discrimination as they have throughout the country’s history. That has not changed with the Trump presidency. The only thing that has changed is the names and faces.

The Bush family was and is still part of that WASP culture and so are the Clintons, the Bidens, the Newsoms (California’s next governor), the Garcettis (mayor of Los Angeles) and almost everyone else in leadership you can name.

Stupidly we, the proletariat, keep sending the same people to Washington and expecting a new outcome. Hillary Clinton seemed to think that just running for president would give her the job. Donald Trump simply saw the opportunity to convince voters that he would lead America to a new place.

Trump’s style has continued to convince Americans that their lives will be better under his leadership. He is just an outsider but is also among the rich that have no real concern for American lives or America’s place in the world. Trump is a WASP from a wealthy family who has done a better selling job of his brand of “he will be helping the rest of us.”

Amazon plans to create more than 100,000 full-time jobs in America

Amazon said Thursday that it plans to create more than 100,000 “full-time, full-benefit” jobs in the United States over the next 18 months.

That sounds wonderful!

Don’t expect Amazon to hire 100,000 coders, however. Much of its current and future workforce is made up of employees working warehouse jobs and answering phones. The average fulfillment associate annual salary is $24,000. That equates to $461.54 per week or $11.53 per hour. Of course if you don’t have a job, $11.53 an hour might sound like at least enough to put some food on the table.

Amazon packaging line

Amazon says the jobs will offer “highly-competitive pay, health insurance, disability insurance, retirement savings plans and company stock.” That is good!

Where are the middle class jobs? They are not at Amazon. They are not at Walmart.

Low paid jobs are now becoming the new normal in America.

Barely Half of 30-Year-Olds Earn More Than Their Parents

Sorry, Young People: You Probably Won’t Make as Much Your Parents Did

As wages stagnate in the middle class, it becomes hard to reverse this trend

From a report in the Wall Street Journal dated December 8, 2016. Barely half of 30-year-olds earn more than their parents did at a similar age, a research team found, an enormous decline from the early 1970s when the incomes of nearly all offspring outpaced their parents. Even rapid economic growth won’t do much to reverse the trend.

Wage stagnation has taken heavy toll since 1970s

“My parents thought that one thing about America is that their kids could do better than they were able to do,” said Raj Chetty, a prominent Stanford University economist who emigrated from India at age 9 and is part of the research team. “That was important in my parents’ decision to come here.”

What’s more, even if President-elect Donald Trump fulfills his promises of rapid economic growth, the trend won’t be reversed significantly. Even if income levels grew 3.8%, the percentage of 30-year-olds who out-earn their parents would bump up to just 62%, the Wall Street Journal reports.

The study was conducted by economists and sociologists at Stanford, Harvard and the University of California. They used tax and census data to compare the earnings of 30-year-olds starting in 1970 to that of their parents.

What the report does not do is explain why wages are stagnant. I will give you my take on this horrible reality. I did earn more than my parents but only because of inflation.

When I married in 1969 my salary was $10,000 per year. According to the United States bureau of Labor Statistics your income today, based upon the CPI Inflation Calculator, that salary equates to $65,866. My father never earned that inflation adjusted salary.

There have been many reasons for the stagnant salaries. Three come to mind almost immediately.

First management earned ten to twenty times the average income of most employees in the earlier parts of the 20^th century. Today management earns 200 to 300 times the average income of most employees.

Second many jobs have been outsourced other countries. That has resulted in more potential employees seeking the remaining jobs. Thus with more people looking for work employers can push down the pay they have to offer.

Third, many jobs have been automated thanks to artificial intelligence (AI), and computerization. Have you seen the inside of an auto manufacturing facility? Automation has eliminated many jobs from welding to painting. Warehouses are now so automated that less material handlers are needed. Office workers, I am one of them, now have computers that perform many of the manually performed functions that were done using typewriters and spreadsheets. That too reduced manpower needs. Less manpower translates to an oversupply of workers and that translates to lower pay. It is all about supply and demand.

It is unlikely that any government of any political party will change this trend. I hope I am wrong.

America’s Free Enterprise System Is Coming to an End!

So the wealthy have the power to do as they wish. These are oligarchs. They are only interested in accumulating unbelievable wealth that will provide their family generations of luxurious living without ever having to work a day in their lives. As our society evolves into a nation controlled by those very wealthy, the vast majority of Americans are becoming ever poorer. Donald Trump talks about the shrinking middle class and the 45 million people either in poverty or near poverty. He is correct in pointing out the discrepancy but he really doesn’t have a solution. He is one of those oligarchs. Those oligarch just don’t care no matter what they say.

Thus we see AT&T buying Time Warner. In what way will this benefit society? It won’t. What it will do is put more power in the hands of a few. It will be a more controlled society.

Wells Fargo may pay a fine but its power remains. The rest of the banking industry is just happy they have not been caught in some other manipulation. The former Wells Fargo CEO John Stumpf “retires” with a $100 Million plus retirement package.

This is a sad collapse of the free enterprise system where individuals can open small businesses and make a living. Privately owned drug stores, food markets, and hardware stores were part of the American well of life. Now its Walgreens, Walmart, Kroger, and Home Depot that control the price we pay and the jobs we have.

How Rich do you have to be?

Wells Fargo CEO Stumpf retires but won’t receive severance pay. That headline reads nicely but it does not reveal all the facts. He will receive more than $100 Million in vested stock and a 401(k) exceeding $24 Million. Forbes magazine reports that “Even though he left on a low, John Stumpf, former CEO of Wells Fargo, will take about $133.1 million into retirement. ’’

What does a man do with $100 Million? I understand that as CEO of Wells Fargo he headed the second largest banking company in the United States but does that entitle him to earn so much money that his family will live in luxury for generations?

Take a look at the board of Directors of Wells Fargo or any other giant corporation and you will see that those directors are almost always part of a very wealthy economic club that sustains their way of life and works to keep their average employees at the same low pay that is 1/20 to 1/30 of theirs.

Stock holders don’t care as long as their shares continue to appreciate and they receive their dividend checks.

Our free enterprise society was built on the right to earn as much money as you can regardless of who remains in poverty and who does not have the money to provide their children with a good college education.

Forbes Billionaires: Full List Of The 500 Richest People In The World 2016 tells me that we have a world where the rich get richer and the poor get poorer. Neither Donald Trump nor Hillary Clinton will change that reality.

The Domino Effect of Outsourcing

From coast to coast, middle-class communities are shrinking

Fully 1 in 3 Americans who work in the manufacturing sector are receiving some form of public assistance, according to a study released this week by the UC Berkeley Center for Labor Research and Education. Of those who came to their positions through temp agencies half are on some type of safety net program. This was reported by CNBC.

I took a drive up to the Griffith Park Observatory here in Los Angeles last month. It wasn’t for going inside the building. It was a windy day and I anticipated a beautiful view from the parking lot. I was not disappointed. I obtained a photo that included a view of Catalina Island on the horizon. The distance is about 35 miles from the observatory.

I chose an alternate route back home and drove by Los Angeles City College. To my shock the sidewalk across the boulevard was lined with the tents and shelters of the homeless packed closely together. According to the Los Angeles Times there are now an estimated 44,000 homeless people in Los Angeles County. How did the numbers get so big?

Sports Chalet (more than 50 locations primarily in California) and Sports Authority (463 stores) are closing all of their stores. They started those closings last month. Kohl’s is closing 18 stores and laying off more than 1,500 employees. Where will the laid off workers go?

Back in November 2015 Macy’s Department stores reported a sharp drop in quarterly sales and lowered their forecast for 2016. Macy’s reported unsold goods piling up in their stores. Today they reported another quarter of sinking sales and once again slashed its financial targets for the rest of the year.

Meanwhile where are the jobs of the past here in Los Angeles and elsewhere in the United States? Those were the thousands of aerospace engineering jobs that were a major contributor to the strong California middle class that are mostly gone. The falloff in manufacturing jobs during the past 14-year period has caused factories to shed about 5 million workers from their payrolls nationally. Factories from all over the nation have moved to other countries. In their place are low paying service jobs that offer pay rates as low as $7.25, $15, and $25 an hour. Those jobs do not support a middle class family. They certainly do not support a Macy’s or Sports Authority price line.

Discount chains like T.J. Maxx and fast-fashion retailers such as H&M offering jeans as cheap as $17 and polo shirts for $10 are succeeding because that’s all today’s workers can afford.

So businesses keep outsourcing your work to low cost countries because you see it as a way to higher profits. Just remember that those of us left with those low paid jobs will be shopping at Walmart, Target, and the other afore-mentioned discount stores. The vicious cycle continues to drive people from the middle class to poor and homeless.

Don’t tell me you do not know what happened to the middle class.

Foolishly Passed Laws and the Unintended Consequences

A Tale of Two Nafta Towns

This is a story about NAFTA. The theory must have been that lower tariffs between Mexico, Canada, and the United States would benefit businesses in all three countries. Who would have thought that American companies would move to Mexico? But that is precisely what happened.

The latest that received attention from Donald Trump are Oreo Cookies and Carrier Air Conditioning. There have been many others that come to mind for me personally.

Bloomberg Businessweek reported on the case of A. O. Smith, an electric motor manufacturer in the small southern Kentucky town of Scottsville (population 4,226). The factory employed 1,100 people. Randall Williams and his wife Brenda each earned $16.10 per hour. The factory closed and moved to Acuña, Mexico. The workers in Mexico earn $1.75 per hour. The Williams have new jobs that pay minimum wage. She works in the high school cafeteria and he fills orders in a local farm store.

Brenda and Randall Williams plan to vote for Donald Trump in November.

A Tale of the Consequence of Minimum Wage Laws

Florida’s governor is fishing for California jobs now that the minimum wage will be $10.50 per hour in January 2017 and $15.00 per hour in 2022.

Laws are passed by government without adequate consideration of possible unintended consequences.

Technological Unemployment

From Wikipedia: “Perhaps the earliest example of a scholar discussing the phenomena of technological unemployment occurs with Aristotle, who speculated in Book One of Politics that if machines could become sufficiently advanced, there would be no more need for human labour.”

It has been reported repeatedly that Queen Elizabeth I of England refused to grant a patent for a weaving machine because it would put the hand weavers out of work. She was correct. It did.

I was talking with an acquaintance about the effects of AI (artificial intelligence) and IT (information technology) on the work environment and the elimination of many jobs. A touch plate at a fast food ordering counter could replace an order taker. So could many other jobs.

One job I held for 7½ years was a scheduling supervisor in a factory. I had decided to quit after about four years. The work was tedious and very stressful. It took me the next 3½ years to find work that would pay more and appeared to offer a chance of advancement. I was responsible for all the production schedules and work orders in the factory. If something went wrong in the middle of the night, the night foreman called me. Today that job would be done more accurately by a computer generated program that could accomplish my 40 plus hour weekly job in minutes.

My father was a structural engineer. He retired just as computers were beginning to be used to calculate stress analysis. His calculation tool was a slide rule. He was a mathematical genius. Today those calculations can be more accurately accomplished using a computer that would provide the results in minutes not hours. The drafting of the structure can now be provided by a computer driven drafting machine rather than a draftsman.

Perhaps the order taker at the fast food counter will still have a job preparing the order. Perhaps the mathematical genius will be working on a program in Silicon Valley. One thing is certain. All jobs that can be mechanized and/or computer driven will result in fewer jobs.

I rarely take my car to a repair garage because they too have been fitted with longer lasting components. Thanks to a well-made furnace and plumbing in my house the need for service maintenance is reduced. That means there is no growing need for service industry workers.

I have yet to hear anyone, neither politician, corporate leader, nor social engineer, explain how even the brightest people will care for their families when the number of jobs is in decline.

We have a serious societal challenge and no answers. Joel Kotkin and other commentators have observed the issue. Now what?