The Online Investing AI Blog

Here’s what ticks me off.

I was just reading that dividend taxes may rise. OK, rise isn’t really a good way to put it. Skyrocketing more than 160 percent is a better way to express the pending tax.

Now, I think taxes are necessary evils. I just want a fair, limited system that requires the goverment to live within its means, just like we all do. Is that too much to ask? Apparently, the answer is yes.

But this tax hike is just plain evil.

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Investing, Money, Online Investing AI, US Economy capital gains, capitalism, dividends, economy, Money, socialism, taxes, US

Things look precipitous.

That means, freaking scary. As in, falling off a steep ledge freaking scary. Europe is in shambles. Oil is threatening major industries in the southeast United States (like they needed the challenge).

We’ve talked about the problems here and here, too.

Other bloggers are talking about the uncertain financial future. Most are doubtful that the world’s governments are going to have any success with either their stimulus or austerity programs. In fact, they’ll lead to more instability.

Is there a way out?

Authors Matthew Bishop and Michael Greene recognize that we’re on the Road to Ruin, but believe there’s a way out: the free market. Their book, Road to Ruin, How to Revive Capitalism and Put America Back on Top, explains their philosophy.

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Investing, Money, Online Investing AI, US Economy capitalism, depression, economic, economy, Money, recovery, socialism, wealth

Daniel Leininger @ Flickr

There doesn’t even appear to be a debate.

If one group of people–somehow–attains a certain amount of wealth and another group appears cut out, you just take a chunk of wealth from the first group and pass it onto the latter. Voila. Everyone is equal again.

Except, that history proves that wealth distribution doesn’t survive its initial pay checks and can actually make things worse. In the early days of the 20th century, Russia tried to redistribute wealth. The Czars became premiers. The boyars became commissars. But the poor people remained poor. Maybe poorer.

Still, wealth and power remained in the hands of a few.

In the Western world, trillions upon trillions of dollars, Euros, yens, pounds, francs, and Deutsche marks, have been redistributed. Somehow, that money continues to find its way back to the same groups.

Wealth distribution will not work, but there is something that will be far more effective.

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Business Strategy, Investing, Money, Online Investing AI, US Economy capitalism, distribution, dollars, government, Money, redistribution, socialism, wealth

After yesterday’s post on California’s budget difficulties and some recent reading in Outliers, a book by Malcolm Gladwell, I’d like to continue the discussion on government spending and America’s budget crisis.

When Dutch psychologist Geert Hofstefe set out to collect information on how cultures solve problems he found that Americans were rated highest on the individualism side on the individualism-collectivism scale.

In other words, Americans like doing things their own way.

Lately, this has been seen as a negative judgment on Americans. It’s cited as reasons for everything from why there’s no national health care to why there’s more gun crime.

The answer, these critics charge, is for America to embrace a more collective mentality and more selfless approach to the economy.

But is social spending really inspired by a desire for the higher aspirations of the common good?

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Business Strategy, Money, Online Investing AI, US Economy capitalism, government, individualism, Money, social, socialism, spending

Adam Smith said that the best model of government spending should replicate the budget of a well-run family.

So, what are American families doing now in the face of the recent economic stress?

According to the latest consumer spending reports, Americans are reducing their spending more than a trillion dollars. They’re also saving more.

Much more.

A survey by AlixPartners LLP said that Americans will save 14 percent of their earnings to replenish retirement savings.

Other statistics reveal that Americans’ “Charge it!” lifestyle is on a break. We’re paying down debt in healthy chunks.

So, let’s review. When planning a budget, Americans are now:

• Spending on essentials.
• Paying down debt.
• Saving for the future.

Sounds like a pretty good plan.

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Business Strategy, Money, Online Investing AI, US Economy capitalism, economy, market, market-based, Money

Crowdsourcing is word that describes the ability to bring masses of people together to accomplish a task or reach a goal. And it’s been pretty effective, too.

I would like to nominate Congress for “Dumbest Financial Move of the Week” and introduce a new term: Congress-sourcing. Congress-sourcing is the ability to bring masses of pompous, self-entitled bureaucrats together to bungle a task or fail to reach a goal and, in fact, make things worse.

Congress-sourcing was responsible for not just the dumbest financial move of the week, but a whole assembly line of them this week.

Congress first approved a bill that allowed retention bonuses for AIG executives. In other words, money that we paid in taxes could be used to retain executives who failed miserably. The legislation was fine, as long as the public didn’t find out.

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Business Strategy, Investing, Money, Online Investing AI, US Economy AIG, capitalism, CEO, congress, dumb financial move, finances, government, socialism

I’ve read lots of articles and editorials suggesting that capitalism has failed and that it is dead.

It may be dead. But it hasn’t failed.

Market-based theory never predicts the eternal growth of economies. The market pitches up and down, in reaction to supply and demand, greed and fear and other factors that influence vibrant markets.

The market self-regulates. In the last six or seven months we’ve seen an example of that self-regulation. Oil prices bubbled and popped. Weird mortgages that tried to bend the laws of finance imploded. Businesses that chased growth over common sense, disappeared over night.

Nobody said self-regulation would be easy, or without pain.

But to say capitalism was a failure is incorrect. It would be like blaming buoyancy or ice formation for the sinking of the Titanic. It wasn’t the principles of buoyancy that crippled and then sunk the ship, it was the myriad of problems and hubris… and bad luck… that sank the boat. The physical properties of buoyancy and ice formation worked in stunning and deadly precision.

I believe this relates, believe it or not, to NASCAR. People attend races to see bunches of juiced-up piles of metal and fiberglass speeding along tracks at breakneck paces. Wrecks are bound to happen and I daresay some people even go to see a wreck or two, just like a few people today wouldn’t mind seeing a couple of those mean financiers get theirs.

Suddenly, though, when someone gets hurt during a race, a cry of anguish is heard and people immediately want answers on how to make the sport safer. How could someone get hurt? Who is responsible? Someone must pay!

It’s a typical reaction and I don’t want to sound callous, but no one can eliminate risk and pain without also altering the potential of better performance.

The recent economic crash may keep people on the investment and innovation sideline forever. The more intrepid financiers, innovators, traders, investors and smart government leaders, however, will learn these lessons and create a better and stronger market.

Business Strategy, Investing, Online Investing AI capitalism, Investing, markets, NASCAR, racing, risk, sporting events, sports