Infrastructure now

To carry the war analogy further with regards to the virus, Trump has come up with a great plan. The great depression was defeated when the war started and the government spent money it did not have to build tanks and planes. Trump is suggesting the same thing be done but use the money for infrastructure. There would be no problems with the environmentalist since the money would be used to repair and replace existing roads, bridges and buildings. After ten years of depression the spending for war material save the economy and the US came out of the war the single super power. Trump wants $2 trillion and should tell the EPA to get things ready and give the jobs to private contractors. How much better it is to build bridges instead of tanks.

1968 Flu

The 1968 flu pandemic called the Hong Kong flu because it started in Hong Kong killed over one million people world wide and 100,000 in the United States. It effected mostly people over age 65. I was working in Georgia and do not remember any disruptions. The Viet Nam protest were at their high point and ML King and Robert Kennedy were killed and so the news didn't cover the flu like it might. Perhaps if the country had declared war on the virus lives may have been saved.

Essential employees

People are expressing surprise at who are the essential workers like truck drivers, nurses, and food stockers. Early in my career, I worked in a food processing plant and there was a central dust collector system. This picked up dust from throughout the plant and packed in 50 pound bags and sold for hog feed. One morning there was an emergency and the supervisor failed to notice that the man who collected the dust did not show up. About four hours into the shift the entire plant shut down. The plant manager could go on two weeks vacation and no one would notice he was gone. I learned early on that the most important employees were not the ones you would suspect.

DNR

The big news today was that certain hospitals are instituting the do not resuscitate (dnr) for some virus patients. Many patients who are on ventilators are also connected to a heart monitor. In most cases if the heart stops a half dozen experts jump into the room each with a different responsibility working to restart the heart. This procedure has been modified for coronavirus. The experts are now required to put on their protective gear before entering the room. This means a possible delay of one or two minuter when every second counts. The result is that the patient may die before the experts get into the room. A possible life could be sacrificed in order to protect the experts. This is deemed an acceptable risk.

Four months or more

Under existing law there were many restrictions regarding qualifying for unemployment benefits but the new virus law removes those so that just about everyone who was working and lost their job because of the virus will qualify. This means that all of those people now qualify for $600 per week unemployment compensation and this is set to continue for four months. $2,500 per month for four months is $10,000 times 100,000,000 people is one trillion dollars. There are not that many people at this point but as time passes more and more will lose their jobs. If things do not improve it may be necessary to go another 4 months. It is like being at war, the cost doesn't matter if survival is the prize.

Unemployment

If you live and work in Minnesota and you earn $15 per hour you might be faced with a tough decision this summer. A salary of $600 per week makes you eligible for $300 per week in unemployment compensation. The first four months you will also receive $600 per week from the senate virus bill. This means you will be asked to go back to work and have your salary drop from $900 per week to $600 per week. As an added benefit payroll tax is not taken from unemployment compensation.

Virus percentage

A few weeks ago the death rate in Italy was 9% and in South Korea 1.4% and the question was posed will the US be an Italy or a South Korea. Well the question has been answered as the latest figures show the US 80,138 cases and 1,151 deaths or 1.4%. Keep in mind that all of these numbers are on the high side because there are many people who have the virus and do not report it or perhaps don't even know they had it.

Senate virus bill

Senate bill If your income is less that $75,000 for single person or $150,000 married you will receive $1,200 per adult and $500 per child. After this initial payment most people will become eligible for unemployment compensation and each would receive $600 per week over and above the regular payments which vary by state. The law allows almost everyone to be eligible for these payments. In Minnesota it is about 50% of your wages up to $640 per week. If you were earning $1,000 per week your MN unemployment benefit would be $500 plus another $600 or a total of $1,100. Some states the weekly benefits are lower and some are higher so depending on where you live your benefit for not working could be higher than while you worked. This may sound good but it is only set to go on for four months. At that time the $600 weekly benefit ends but it could be extended depending on how the economy is doing.

Blood immunity

In the early 70's the poultry industry was hit hard by a virus called leukosis. About 12% of all chickens were discarded at the plant by USDA inspectors. Ralston Purina injected turkeys with the virus and found it was not harmful to turkeys but they then injected baby chicks with the turkey blood and the chicks were immune to the virus. This procedure is now being tested with the coronavirus. Blood from people who have recovered from the virus is being injected to people who have not had the virus to see if it will provide immunity.

Who dies

The latest controversy to spring up surrounding the virus is the trade off between public health and restarting the economy. Some say it is just another way of saying that some older people will have to be sacrificed to save the jobs of younger people. The press always wants to put things in terms of this or that when the this and that represents the extremes of two sides. The more logical approach is to move away from the stand apart policy in some areas while maintaining a close to home strategy in other areas. The idea of sacrificing one group to save another is not new. During WW 2 the young men between ages 18 and 30 were sent off to war in order to save children, seniors and women.

Taiwan

The value of learning from the past can be demonstrated in Taiwan. With a population of 22 million in an area about the size of Maryland, they have only 100 reported cases and one death even though they had millions of visitors from China last year. How they did it is a lesson for all. In 2003 Taiwan was hit hard with the SARS virus and they took steps to prepare for any future viral attacks. They stockpiled needed medicines and equipment and it paid off big. The Swine flu hit the US hard in 2009 with 60 million cases and 12,000 deaths but no planning for the future took place. Once it was over it was forgotten. Will this time be different or will it be out of sight out of mind.

Military power

The argument about spending money on the military or on social programs is ongoing and should be. In Econ 101 it is called guns or butter. In a free society this decision is ultimately made by the people. The United States with the most powerful military in the history of the world has broken the mold in that there is no attempt to use that power to expand territory. Throughout history the powerful have always overpowered the week. Going back to the Greeks and Alexander, the Romans and don't forget the sun never sets on the British empire. How would things be different if some other country had the US military under their control. Would Russian start to take over Europe. Would Iran destroy Israel and take control of the Mideast oil. Would Germany raise up another Hitler or Japan another Tojo. How about Kim Jong-un in North Korea. Would he want to take over the world.

Virus testing

The people being tested for the virus are those who exhibit one or more symptoms. Of those 13% test positive and of those 1.3% die. 80% of the fatalities happen to people over the age of 60 and 90% of those to people who have one or more underlying health problems. If you are under the age of 60 and have no serious health problems with heart or respiratory you can feel fairly confident that the virus will not attack you. Add to that if you follow the safe distance rules you will be even less likely to catch the virus and this will also help you avoid the flu which has already killed 23,000 this season. The reason to follow the safe distance rules is the fact that you could test negative today and get the virus tomorrow. In other words behave as if you are positive

Virus bill

The virus bills proposed by congress come in three stages. The first stage was $8 billion and passed quickly in both houses and was signed by Trump. The second phase is $100 billion was also signed by Trump. The senate is now debating the third phase which is one trillion dollars. This phase includes: $250 billion going directly to people $350 billion to small business 39 weeks of unemployment compensation $242 billion to safety nets like food stamps and $110 of that to hospitals $208 billion to big companies which will have to be repaid Debate is OK but if it turns into squabbling it will make the senate look like business as usual.

Daily briefings

As might be expected some people are complaining about the daily news cast by the President concerning the virus. They say they are morphing into campaign rallies. A few say Trump is too optimistic. During the depression FDR had what came to be called fire side chats during which he spoke in positive tones about the future. Churchill carried England past its darkest hours with his optimism and unwillingness to give up.

Food cost

The reason some grocery stores are running low in various food products is not just because people are building up reserves but because more people are eating at home. Stats show that people eat out 40% of the time and this accounts for the run on groceries. This is just one more example of how the world has passed us by since we eat out about once every couple of years. Some of these people will be surprised at how much less they are spending on food and this may start a new treand.

Ramp up time

To suddenly ramp up production takes time based on the product. Many products are produced two or three shifts per day so they can start up the third shift and work weekends but often times the supply chain limits production. An extreme case is the poultry industry. There 320 USDA plants and each produces about 100,000 birds per day running two shifts, five days per week and cleaning the third shift. To increase production is not limited by plant time but by increasing the number of birds. It starts with the basic breeders that produce laying hens. This is about 20 weeks. These hens produce eggs that hatch in three weeks and then another 8 weeks to grow to 3.5 pounds to process. Thus it takes about 8 months to increase production in the processing plants. Looking at face masks is a different story. This COVID-19 pandemic era is not the first time Prestige Ameritech has faced a sudden surge in demand for its products. The company faced a similar rush during the H1N1 outbreak in 2009 and hired hundreds of additional workers to cope. But as soon as that outbreak was over, its U.S. customers shifted back to Chinese suppliers, who can produce protective equipment at a fraction of the company’s costs, according to Wired. Some feel the government should have bought up a large reserve supply at that time but it wasn't done. Will it be done this time?

Higher prices for safety

An old adage says there is a silver lining in every cloud and this is true with the coronavirus. It has brought to the attention of the public that the US is dependent on China for many necessary items most importantly but not limited to pharmaceuticals. Many feel it is time to bring home the manufacturing of critical products. It just so happens that this fits neatly into what Trump has been saying for years. Somehow US negotiators have allowed China to become the sole producer of certain items that would be considered necessary for the countries safety. Companies sent so many jobs overseas that the US can no longer provide needed items on its own and must rely on other countries especially China. It is time to bring manufacturing back home and consumers will have to pay higher prices for this safety feature. This means that wages will go up and so will prices which may lead to wage/price inflation. It is a price that must be paid to keep the country safe.

Testing, testing

As I watched Morning Joe today, I realized that some never Trumpers are in a pickle. As the Ukraine situation faded away the new hope for getting rid of Trump was the virus. If they can show that Trump mishandled the crisis then they have a chance to unseat him. They have hung their hats on the slow start to testing as the one way to defeat Trump. As things change they will want to keep the testing problem in the forefront of the news but it is getting difficult to do so. As people come together along with businesses and government joining forces the blame game loses its importance. If the country gets through this it will be too late to resurrect the Ukraine case and the election will be upon us. It is necessary to talk testing testing testing.

Stocks

When Trump was elected several leading economist predicted the market would tumble but instead the Dow rose by 9,000 points. These gains have all been lost in just a couple of weeks but many are thankful for the rise because if the market had gone the way some had predicted the Dow might now be below 10,000 where it was over 20 years ago. The logic of trading by investors who investigate stocks has been replaced by computers and on volatile days computers conduct 90% of the trades. The computers base buy and sell decisions on algorithms that are activated by certain words in the news reports. Thus computers chase each other up and down as small investors watch their retirement funds gyrate.

Math

The local schools have an excellent math program. I have been in every class from 6th grade through 12th. Math students do OK as long as they don't get behind because each year builds on what was learned the year before. With that in mind and working around the virus, schools may stay closed until June and then resume through the summer months. This would have the student ready in the fall to continue the leaning path.

Small business

There are 30 million small businesses in the US employing 60 million people. As these businesses are force to close down or reduce hours many will not survive. We often hear about people who live paycheck to paycheck but we will soon find out that many small businesses are in the same boat.

Higher prices

One outcome of the current virus situation is the understanding that the US cannot rely on other countries as its sole source of medicinal supplies. Another example to illustrate the point is the mining of rare earth metals. These represent the raw materials needed by our modern high tech society. These ores are available in the US but in order to mine them and meet the EPA rules the companies cannot compete with China where rules are ignored or nonexistent. Any company that tries to mine these elements here will face a China that will lower prices to run them out of business. While some EPA regs can be reviewed and eased the best solution is to mine these ores here and pay a higher price. US companies who use these products will have to pay more and consumers must be willing to pay higher prices for electronics.

Testing is not the end

According to the news, the reason to be tested is so if you test positive you will know to isolate yourself as much as possible. Is it possible that people who test negative will be less vigilant and not take the needed precautions. The danger is that a person can test negative today and be infected tomorrow. People cannot be tested everyday so each person should act as if they tested positive. Instead of emphasizing testing the emphases should be on behaving is if you were infected. Even if everyone weretested that would not indicate what tomorrow might bring.

Apple

Part of the Trump tax cut allowed companies to bring home money from overseas on a one time deal at a lower rate. Some $700 billion dollars was repatriated. Much of this was used to buy back stock which is a way to distribute money to stockholders. Apple for example brought home $250 billion and used $150 billion to buy back stock and this increased the dividend 57%. Apple has 1.1 million shareholders. If they had given that $150 billion buy money to the employees each of their 137,000 employees would have received over one million dollars. Hard to say which of these options would have been the most controversial since the average Apple employee earns $125,000.

Virus counts

It appears that people in South Korea are better able to fight off the virus than those in the US As of yesterday South Korea tested 274,000 and found 8,300 positive or 3%. The US has tested 25,000 with 4,400 positive of 17%. The death rate in South Korea is about .7% while in the US the death count is 2.2%. South Korea is the size of Minnesota with 50 million people while the US has 320 million. The logistics make it easier to work with smaller populations. While testing allows for more accurate statistics it is only a snapshot because someone testing negative today could be positive tomorrow.

Virus then and now

The United States has about 924,000 hospital beds and in the 2009 swine flu epidemic 265,000 were hospitalized. Between April 12, 2009, and April 10, 2010, the CDC estimates swine flu caused 60.8 million illnesses, 273,304 hospitalizations and 12,469 deaths in the U.S. If the current virus is similar this started in January 2020 and would abate by January of 2021. With all of the closings the hope is that the virus will not last as long.

Market economies

The oil business has suffered under the recent price decline caused by the slow down in the economy. The state of Texas loses $85 million dollars per year for each one dollar per barrel drop in price. The upside is that fuel prices also drop and this helps consumers with gas prices and industry like airlines with cheaper jet fuel. In a free market economy it is not uncommon to have winners and losers. The market is controlled by supply and demand which in turn controls price. If you can produce a product or service that people want at a price they can afford then both sides win. That is how a free market economy works. The job of government is to limit corruption while promoting competition.

Teledoc

While I don't have any chronic underlying medical conditions, I am 82 and in the group that is vulnerable to the flu and the concept of teledoc can be a great benefit. With this new approach if I feel a cold or flu coming on, I can call a medical professional and discuss my symptoms. If they conclude my situation is mild they will recommend that I stay home for a few days and call back if things worsen. At that point they will mail me a swab and I swab my nasal area and return the swab for testing. If it test positive they may then recommend hospitalization. The test takes 24 hours once the sample is received. This is so much more efficient than trying to make an appointment with the doctor and going to the office and possibly contaminating others. Kudos to who ever came up with this idea.

China jobs

In 1980 China's communist government opened up it's economy to free market principals. It took about ten years to get started but in 1990 the GDP was $350 billion and today it is $14 trillion. When China made the move to the free market many experts predicted that when people get economic freedom they want political freedom. With that in mind the US tried to help China by buying their products hoping it would open the government to freedom. Industry and government worked together to not only buy products from China but to move US businesses to China. China's rapid economic growth has led to a substantial increase in bilateral commercial ties with the United States. According to U.S. trade data, total trade between the two countries grew from $5 billion in 1980 to $660 billion in 2018. In the process the US exported many blue collar jobs which resulted in the shrinking of the US middle class. Some of these jobs present a danger to the US. Case in point. China has become the sole provider of ingredients necessary for the pharmaceutical industry.

Red tape

Here are some of the details about the proposed house bill to help offset the virus. The draft bill is pretty comprehensive, and includes (according to Roll Call) 14 weeks of paid sick leave, extended unemployment insurance, a new paid emergency leave benefit, food assistance for low-income people and kids whose schools have closed, mandatory waiver of insurance co-pays for virus testing, and supplemental Medicaid money for states that declare a public-health emergency. While these are good ideas, implementing them will challenge government efficiencies. Will the people who need the help get the help or will it be tangled up in red tape understanding that when red tape goes away it opens the door to corruption.

Gut decisions

One of the major complaints about Trump's style has been his insistence to go it alone relying on his gut instinct to make major decisions. Reporters say he does not listen to the experts and often times overrides their suggestions. Yesterday the NY Times came out saying that Trump is just a bystander allowing his underlings to do the work. They concluded that his lack of direct involvement is hurting the plans to fight the virus as he defers to the experts to decide what course of action to take. This opinion was enforced on Morning Joe today as they further criticized Trump for not getting more involved.

Markets

When doing financial planning for businesses it is necessary to place a value on the business. There are three common ways to do this. First if your take home profit is $10,000 you calculate how much money you need in the bank to earn that much net. If CD's are paying 5% then 10,000 divided by .05 or $200,000 in the worth before taxes. A second way is replacement. How much would it cost to replace the current assets while adding some value to existing customers and company reputation, things called blue sky. The third is used for public traded companies and you multiply the current value of the stock times the number of outstanding shares. This last way was used often but does it really represent the value. Take today's market situation. Are we to believe that the value of GM as a company has decreased by $18 billion dollars in one week. All the major drops in the market have been reversed usually in short order. In 1987 the market dropped 22% in one day. That is the total of what the market has dropped in the last two weeks. In two years it completely recovered. If you sell you lock in your losses but if you wait history tells us that you will recover.

AIME

During my career as a financial planning I became very familiar with social security benefits. These are determined by using the highest 35 years of wages, indexing these amounts to inflation and dividing to get the average monthly indexed earnings (AIME). The average 62 year old retiring today would get about $800 per month from social security. If they are now making $30,000 per year and the government cancels their payroll tax for one year their pension would decrease to $765 assuming their employer would continue to pay the employer share of payroll tax. This is a reduction of $35 per month. They would receive $2,280 this year and it would take 5 years to recover that at $35 per month.

Virus

In the past most people who contacted the flu did not report this as they just stayed at home until they recovered so there is no way to get an accurate count on how many have the flu at any given time. The data on the cornoavirus says that 118,000 people world wide have contacted the virus and 4,300 have died which represents a 4% death rate. If you assume that many others have or have had the disease but go unreported then the death rate is lower. If you add in the fact that most who die from the disease are older citizens with weakened immune systems then the chance of the ordinary citizen dying is again lower. A senor citizen with underlying chronic health problems would be wise to stay close to home.

National healthcare

The cost of private healthcare in the USA is $2.4 trillion dollars and 25% of that is administrative cost. This $600 billion dollars is where the saving comes from by going to national healthcare. Bernie Sanders wants to use that savings to help pay for national care. Joe Biden wants to give people the option of keeping their private care or going to a government option which means he will not have the administrative savings to work use. Part of the savings comes from the elimination of 2.7 million jobs in the healthcare industry. Other savings come from government purchasing power by controlling hospital, doctor and drug cost and finally from rationing. The biggest winners with national healthcare will be the private corporations who will no longer have to pay for employee healthcare. It is quite surprising that Sanders has not suggested that these companies keep paying but sending the money to the government to help pay for healthcare.

Anniversary

Today is our 52nd wedding anniversary. On our 25th anniversary, I planned a surprise party for Eunice. Besides having guest over, I went all around trying to find a copy of the Anniversary Waltz and finally a local disc jockey got me a tape which I played at the party and Eunice and I danced in the kitchen. Today what are called love stories often center around the bedroom but if you want to see a real love story watch the movie, The Egg And I, with Fred McMurray and Claudette Colbert. They have had a tumultuous first year and they are living on a chicken farm. On the evening of their first anniversary he comes to the house from the barn and looking through the window he sees she has prepared a candlelight dinner and she is in her wedding dress. He sneaks in the back door and puts on his wedding suit and they both dance to the anniversary waltz. That is what I call a love story.

Agreements between countries

It is said that those who don't know history tend to repeat past errors. This is particularly evident when dealing with tyrants. Hitler came to power in 1933 and for the next 6 years the world followed the policy of appeasement with most experts saying that they opposed war. After taking over the Saar Basin, Austria and Sudetenland, the British sent Chamberlain to Munich in September of 1938 to reach an agreement with Hitler. Hitler agreed if he was allowed to keep Sudetenland, the German speaking part of Czechoslovakia, he would not take any more territory and Chamberlain came home declaring that peace was at hand. Six months later Hitler took over the rest of Czechoslovakia. In August 1939 Hitler signed a non-aggression pact with Stalin and in June of 1941 he launches a surprise war against Russia. Agreements made with dishonorable people are not worth the paper they are printed on and this should be kept in mind when making peace with the rebels in Afghanistan. The same is true with Iran and North Korea as well as trade arrangements with China.

Airlines

It was announced today that the airlines will lose $100 billion dollars because of the virus. The news gave the impression that somehow this money would just disappear. The money not spent in the airline business will likely be spent in some other way and if not it will be saved or invested. While it may adversely effect the micro economy of the airlines it will not effect the macro economy of the United States or of the world.

ICC

The recent emergence of the International Criminal Court (ICC) is one more reason why the United States should be wary when it comes to world organizations. This group was founded in 1998 and President Clinton wanted the senate to approve but they declined. In 2002 President Bush withdrew US interest in the ICC. The court is now investigating US actions in Afghanistan claiming war crimes. Meanwhile the United Nations is claiming the US committed war crimes by bombing Syria. The US is withdrawing from the UN's human rights council but continues to be the largest contributor to the UN since the US pays 22% of the cost while the other 192 countries pay 78%.

Biden vote

On Morning Joe today, they were analyzing the democratic primary vote and decided that the candidates who are out underestimated the importance of the Black vote. If that is the case then Bernie is the next one out leaving Joe Biden as the winner. The surprise to many is that the field that started out with so much diversity, ends up with two old white guys battling it out. With the mantra of anybody but Trump, it doesn't matter what Biden's platform is or how he performs he will get the democratic vote. Biden is middle of the road on most issues planning to keep and improve Obamacare as opposed to Universal coverage. His going green is a slower approach stating zero carbon emissions by 2050. He opposes decriminalizing border crossings but does want a path to citizenship. He wants to raise corporate tax from 21 to 27 percent but is against a wealth tax. He offers two years of tuition free community college and not full college and not erasing student debt. While he has no direct cash give away programs his biggest weakness is no mention of jobs. After the more wild promises from other candidates many voters will have a sigh of relief if Biden is the nominee.

Swine flu

The Swine Flu in 2009 killed 570,000 people world wide with 12,500 in the United States while 61 million around the world caught the flu. The first cases occurred in California in March of 2009 and by the end of May spread to all 50 states. By November 22 million Americans were infected and 4,000 had died. By January 2010 55 million Americans infected and over 11,000 had died. In April, 2009 President Obama said he was concerned and watching the situation carefully. In October the President declared a national emergency.

Cut payroll tax

Trump has proposed a payroll tax cut. This is the best way to help low income workers since everyone pays 7.65% into social security/Medicare. One half of all workers pay no income tax so a lower income tax rate will not help them but they all pay payroll tax. For someone earning $15 per hour this puts $2,300 per year into their pockets.