Tag: Money Management Mishaps

War is Good for Business

War is good for business. At least if you’re on the waging side. It’s probably not so good for those on the invaded side. But who can bring themselves to care about them when we’re talking about numbers like this:

BOSTON, Sept. 26, 2017 /PRNewswire/ — Force modernization will be one of the primary factors underpinning growth in global defense spending, driven by unprecedented developments in autonomous systems, missile, space and cyber-electronic warfare, and other technologies. Strategy Analytics: The Strategy Analytics Advanced Defense Systems (ADS) service report, “Global Defense Spending Outlook 2016-2026,” forecasts the global defense budget will grow to $2.41 trillion in 2026, with the opportunities available to industry growing at a CAGR of 3.5% to reach $771 billion.

Force modernization, if it follows in the footsteps of the F-35, will involve a great deal of money. However, there will be little to show for that money. The F-35, for example, still has problems reliably delivering oxygen to pilots even though it has cost over $1 trillion. Imagine the same thing happening with other military equipment. If we look at the raw numbers alone, it’ll be amazing economic growth!

Unfortunately, all of the resources invested in “force modernization” cannot be allocated to productive uses like new manufacturing plants, office buildings, and research and development for new consumer products.

Murder Includes a Nice Severance Package

Killing Philando Castile has been lucrative for Officer Yanez. Not only did he enjoy a paid vacation but he also received a generous severance package:

“A reasonable voluntary separation agreement brings to a close one part of this horrible tragedy. The City concluded this was the most thoughtful way to move forward and help the community-wide healing process proceed.”

According to a copy of the agreement supplied by the city’s attorney in the matter, Yanez will receive a lump sum of $48,500 minus applicable deductions and tax withholdings.

He also will receive payment for up to 600 hours of accrued personal leave. The agreement did not note how much time he has accrued.

Yanez was making $72,612.80 a year when he fatally shot Castile on July 6, 2016, during a traffic stop on Larpenteur Avenue in Falcon Heights.

$48,500 plus 600 hours of accrued personal leave for murdering somebody is a pretty decent deal. Granted, he’ll have to hang low for a while and wait for this entire mess to blow over before another department will likely take him on.

When a police officer screws up they receive a paid vacation until whatever they did falls out of the news cycle. When they screw up more they might get fired and have to wait until their union forces their department to reinstate them. When they really screw up they are brought before a grand jury to be exonerated. When they really screw up they’re brought before a jury to be exonerated and given a nice severance package.

I must say, being a police officer and screwing up sounds like a good gig.

What Happens When You Rely on a Third Party for Revenue

Earlier this year many gun channels on YouTube reported that their videos were suddenly disqualified from receiving ad revenue. This change in policy happened without warning and the rules established by YouTube were vague to say the least. In the hopes of appeasing both advertisers and content creators, YouTube attempted to clarify its rules. But if you read YouTube’s guidelines you’ll notice that they remain incredibly vague.

A lot of people have been screaming about free speech but that’s irrelevant. YouTube is a private entity and therefore can make whatever rules it wants. The real issue here is relying on a third party for revenue.

There are two ways content creators can guard their income from arbitrary rule changes made by their hosts. The first is having a contractual agreement where the host can face penalties if they arbitrarily change the terms. The second, and this is the one I generally prefer, is to host their own material on their own systems. This is what I do with this blog (and every other service I rely on). If you own everything you get to make the rules. If, for example, I decided to monetize this site, there would be no way for a third party to cut of my revenue by changing the rules.

YouTube looks like a sweet deal because content creators can put their material online without facing the costs of hosting the material themselves. But there ain’t no such thing as a free lunch. The price content creators pay for using YouTube is being entirely at the mercy of its one-sided user agreement, which can be changed at any moment without prior notice being given. Content creators can scream about free speech or censorship or whatever else makes them feel oppressed. But they only have themselves to blame because they put themselves into a position where their revenue source could be cut off by a third party at any moment.

Have Some Government

Let’s say the government has offered you half of a duopoly on a product that is otherwise illegal. However, the government has also placed a bunch of ridiculous restrictions on that product that will unnecessarily raise your production costs. Do you take the government up on its offer? If you’re smart, you don’t:

Minnesota’s two licensed medical marijuana manufacturers have lost a combined $11 million in just two years of sales, according to financial documents obtained by The Associated Press, continuing losses that hint at systemic problems with the state’s tightly regulated program despite a recent expansion that allowed thousands more patients to buy the medication.

Minnesota Medical Solutions posted a $1.2 million loss in 2016, a year after losing more than $3 million. But LeafLine Labs’ losses worsened: The company said it lost $4.7 million last year, after losing $2.2 million loss in 2015.

When the medical cannabis bill was passed in Minnesota it included a mind-boggling number of restrictions. For example, medical cannabis cannot contain any leftover plant material. Why? Who knows. What we do know is that the law made it so two companies with a duopoly can’t make a profit on a product that teenagers in every high school in the country manage profit off of.

Unfortunately, this will likely be the status quo in this state for many years. The problem with medical cannabis laws is that once they’re passed it makes passing full decriminalization more difficult. One of the best arguments for cannabis legalization is its medical benefits. When medical cannabis laws are passed that argument is no longer available to advocates of full decriminalization. This is another example of the good being the enemy of the better. Medical cannabis laws may appear to be better than full criminalization but they’re actually a detriment to full decriminalization.

The Hero the Twin Cities Deserves

I generally believe that the United States education system is a cesspool. But once in a while somebody emerges from the muck and becomes a hero to us all. Beth Elaine Allen is one such person:

According to 12 felony and gross misdemeanor counts filed Friday in Hennepin County District Court, Beth Elaine Allen, 64, is estimated to owe the state more than $50,000 in outstanding taxes, penalties and interest over a five-year period. Charges say Allen failed to pay income taxes since at least 2003, but due to the statute of limitations for tax crimes, charges are limited to years 2010 to 2015.

Five years of denying the State of Minnesota a portion of her revenue. That’s quite a streak! Of course, it could have been longer if she was more intelligent about it. If you’re going to forego paying taxes you should do everything you can to stay off of the Internal Revenue Service’s (IRS) radar. For example, if you can’t pay your mortgage don’t spend lavishly after your home is foreclosed:

Investigators also found that Allen bought a Minneapolis condo in 1992 for $245,000 and made mortgage payments of $1,400 until it was foreclosed in 2011, that she paid $94 a day to live at the Residence Inn in Plymouth and pays $700 a month to store her belongings. Credit card receipts show she spent thousands on travel, restaurants, grocery stores, liquor and wineries.

That’s the kind of thing that raises red flags with revenuers and red flags can lead to investigations. So I commend Beth on refusing to pay money to the State but I think she could have gone about it better.

More Corruption at the ATF

Here we go again, another story of corruption at the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF)! This time the agency that likes to sell guns to Mexican drug cartels was caught using an off the books bank account for some rather luxurious expenditures:

WASHINGTON — Agents with the Bureau of Alcohol, Tobacco, Firearms and Explosives used a secret, off-the-books bank account to rent a $21,000 suite at a Nascar race, take a trip to Las Vegas and donate money to the school of one of the agent’s children, according to records and interviews.

Agents also used the account to finance undercover operations around the country, despite laws prohibiting government officials from using private money to supplement their budgets, according to current and former government officials and others familiar with the account.

Before you make the mistake of assuming that those expenses were related to an investigation:

Other expenses, such as renting a 16-person suite at Bristol Motor Speedway in Tennessee, had no obvious connection to law enforcement operations. A.T.F. agents, along with some community members, used the suite in 2012 for the Irwin Tools Night Race, a Nascar event, according to two people who worked closely with the bureau at the time. A receipt obtained by The Times shows the suite cost $21,000.

Agents also donated money from the account, according to documents and interviews, including thousands of dollars to the high school and volleyball team of the daughter of an A.T.F. agent in Bristol. The agent, Thomas Lesnak, is now retired and did not respond to messages seeking comment. He has previously dismissed suggestions that anything was done improperly.

It’s good to be the king’s men and family of the king’s men!

Although every government agency is corrupt, the ATF seems to excel at corruption. There doesn’t seem to be a year that goes by where the agency isn’t caught in some kind of major scandal. The story notes that this latest incident shows the lack of ATF oversight but this is really a minor offense when it comes to the shenanigans of the agency. And if arming Mexican drug cartels didn’t result in more agency oversight this certainly won’t.

What this story really illustrates is how ineffective it is to give an organization a monopoly on holding itself accountable. The government maintains such a monopoly. The consequences of this have become obvious. When an agency is caught doing something corrupt no punishment, or at least no noteworthy punishment, is dispensed. Usually a hearing happens before Congress. During the hearing some members of Congress pretend that they’re shocked to find corruption within the agency in question. The hearing will be followed by a few days of government officials appearing on news channels berating the corrupt agency. Then, after the week’s news cycle is over, the entire matter vanishes from the headlines and people’s memories.

The Letter of the Law

The road to Hell is paved with good intentions. Oftentimes people will discuss the intent of a law versus the letter of a law. This discussion usually happens when it comes to light that a law that was passed with good intentions ends up being abused by enforcers following the letter.

In an effort to thwart tax evaders (which qualifies as good intentions to statists although I’m not sure why), a law was passed that required individuals and businesses to report all bank deposits greater than $10,000. It’s a little known law, which means many small business have been running afoul with it. Since the intention of the law was to catch tax evaders you would think that these accidental violations would result in little more than a notice being sent to the offending businesses alerting them of the law’s existence so they wouldn’t violate it in the future. But the Internal Revenue Service (IRS), not surprisingly, has been following the letter of the law, not the intent:

While structuring is technically a crime, it’s something of a secondary one. The reporting requirements were enacted to detect serious criminal activity, such as drug dealing and terrorism. They “were not put in place just so that the Government could enforce the reporting requirements,” as the IG’s report puts it.

But according to the report, that’s exactly what happened at the IRS in recent years. The IRS pursued hundreds of cases from 2012 to 2015 on suspicion of structuring, but with no indications of connections to any criminal activity. Simply depositing cash in sums of less than $10,000 was all that it took to arouse agents’ suspicions, leading to the eventual seizure and forfeiture of millions of dollars in cash from people not otherwise suspected of criminal activity.

The IG took a random sample of 278 IRS forfeiture actions in cases where structuring was the primary basis for seizure. The report found that in 91 percent of those cases, the individuals and business had obtained their money legally.

Structuring is the crime of breaking up bank deposits over $10,000 into multiple deposits under $10,000. That’s right, breaking up larger deposits is a crime in the United States because of the “good intentions” of a few politicians.

But the IRS doesn’t care what the intention of the law was, it only cares about the letter of the law. Instead of using the Bank Secrecy Act to pursue individuals and organizations trying to conceal illegal activities by breaking up larger bank deposits, the IRS has been pursuing individuals and organizations who have been performing perfectly legal activities. By doing this the IRS has managed to seize millions of dollars from innocent people.

Is there any reason why the IRS is despised by basically everybody? Is there any reason why libertarians flip out whenever a seemingly innocent law is passed?

I doubt the IRS will suffer any punishment for this since it was technically doing its job by enforcing the law. But this story should serve as a warning to people who often let the intention of a law cloud their judgement. When it comes to enforcement the intention of a law doesn’t matter, only the letter.

Government Funding of Science is a Curse

Donald Trump announced his budget. It’s what you’d expect from a neocon. Money was shuffled from neoliberal favored programs into the military:

Yesterday, the Trump administration released its first proposed budget outline. While this is just the first step in what will inevitably be extensive negotiations with Congress, it gives a clear indication of what Trump’s priorities are. First and foremost, he is focused on the military, which will see a $54 billion increase in spending, offset by cuts or wholesale elimination of programs elsewhere. Science is clearly not a priority, as it is repeatedly targeted for cuts in every agency that funds it.

But those cuts aren’t evenly distributed. NASA’s budget is almost entirely unscathed, although Earth sciences research funded by the agency will be cut to expand funding elsewhere. The National Science Foundation, a major source of grants for fundamental research, isn’t even mentioned, so there’s no sense of how it will fare. And the harshest cuts appear to be directed at biomedical research, which will see a dramatic 20 percent drop in funding for the National Institutes of Health.

As one would expect, the neocons are cheering this increase in military spending while the neoliberals are flipping out because the proposed budget cuts from their beloved science. What they fail to realize is that cutting funding for science would be a good thing for actual science.

Resource misallocation has plagued science for decades. Instead of science that focuses on the market (that would be you and me), companies have been allocating resources for the State’s pet projects in order to obtain government funding (which takes the form of tax dollars stolen from you and me). With less government funding to go around researchers would once again have to rely on the market to decide where resources were allocated. That would mean more research into making better goods and services instead of whatever idiotic pet project some random politician drummed up.

Of course, since the military budget is going up resource misallocation will continue to plagues science. Researchers will continue to focus on the State’s pet projects instead of what the market wants. Those pet projects will merely shift to making more effective methods of blowing shit up. This, of course, will anger the neoliberals because blowing shit up isn’t within their vision of what science ought to be. But the belief that science ought to be one thing or another and dictated by the State is the fundamental error being made here.

Looking Good While Thumping Skulls

The Los Angeles Country Sheriff’s Department decided that its current silver colored metal uniform ornaments are no longer in vogue. To correct this horrible fact the department is going to spend $300,000 of taxpayer money on replacing all of its current silver colored ornaments with brass colored ornaments:

The Los Angeles County Sheriff’s Department is getting down to brass tactics.

Sheriff’s officials are spending $300,000 on items they say would make deputies look more professional in their jobs and could help make them safer.

But the taxpayer dollars won’t go toward tools such as higher-quality ballistic vests, backup guns or body cameras, all of which are optional items that deputies have to pay for on their own.

Instead, Sheriff Jim McDonnell is spending the money on a minor cosmetic makeover of deputies’ uniforms: changing the color of their belt buckles and other metal pieces of gear from silver to gold. That way, the metallic bits — all made of brass — will match the gold-hued tie clips, lapel pins and six-pointed star badges that deputies already wear, McDonnell said.

This waste of money wouldn’t be so bad if the department was a business with funds acquired through voluntary trade. But the department is funded entirely through expropriating wealth from the people is claims to protect. I doubt the color of the metal ornaments will even be noticed by 99.9 percent of the department’s victims clientele. After all, who really gives a shit what color the metal ornaments on an officer’s uniform are when they’re either responding to your 911 call or thumping your skull because your skin color is a bit too dark for their liking? Since nobody will likely notice nor care about this change it’s an even bigger waste of taxpayer money than most expenditures.

But I’m sure the officers will feel better knowing that the metal bits on their belt finally match their tie clips.

A Fantastic Specimen of Corporate Speak

Rumors of Gander Mountain’s demise have been on point. This probably doesn’t come as a surprise to anybody who has walked into one of its stores. Its prices are ridiculous, especially in this age of online shopping. A lot of its used guns go for the same price as new guns elsewhere. And when it runs a sale the prices finally come down to normal prices elsewhere.

In the last week people have been claiming that Gander Mountain is in the process of filing bankruptcy. The company finally put out a statement on the matter. I think the statement will go down in history has one of the best examples of corporate speak:

As a privately held company, it is our longstanding policy not to comment on our business affairs. Unfortunately, recent speculative news articles have caused concern among some of our customers, employees, and trade partners, and require us to make a rare exception.

Gander Mountain is the nation’s largest outdoor retail network with 162 specialty stores across 26 states. We are a fully integrated Omni-Channel retailer dedicated to servicing the hunting, camping, fishing, shooting sports, and outdoor products markets. As ‘America’s Firearms Supercenter™,’ we are a market leader in the shooting sports category with an extensive offering of firearms, ammunition, and accessories.

Like most retailers, we are subject to normal economic cycles, changes in our industry and shifts in consumer demand that require us to adapt our business accordingly. It’s been that way since 1960, when we started out as a catalog company in small-town Wisconsin, and it remains the case today. It is this constant adaptation and desire to offer our customers the best selection, best value and best service that has been our hallmark for generations.

Gander Mountain and its ownership group have undertaken a best-practices approach to review our strategic options specific to positioning the company for long-term success. When we engage in such a review we often seek information and advice from external advisors to inform our decisions. To assist in this process, we have retained Houlihan Lokey as independent advisors and we are confident that the outcome of the review will identify the right go-forward strategy. In the meantime, our Gander Mountain stores and gandermountain.com remain the place to go for all of our customers’ outdoor adventure needs.

That is a lot of words put together to say nothing meaningful. If I had my corporate buzzword bing cards out I’d have probably screamed bingo at least a dozen times. I could have cut that statement down to a single sentence: Our financials are fucked and we’re brining in outside help in the hopes of fixing this shit.

I’ve periodically told gun control advocates that if they really want to land a blow against the gun industry they should vote for Republicans. The industry does best when the fear of gun control legislation is on the table, which is generally higher when Democrats get into office. Since the Republicans have pretty much taken everything we’re probably going to see a great culling of gun manufacturers and resellers as sales drop. Business like Gander Mountain, whose propensity to overcharge is well known through the shooting community, are in trouble.