Economy – Page 14 – Really Right

Introducing CALSavers Your State Run Retirement Plan

The Chief explores another socialist step in the cradle-to-grave care provided by the almighty state of California.

In case you missed it, a new retirement program goes live in California starting July 1st. This plan was put in place because the state wants businesses who don’t offer a retirement plan to be forced to offer them. It’s very easy to enroll, actually you are automatically enrolled, unless you opt out. Starting next year, any business with over 100 employees is required to enroll, the following year, the employee number drops to 50, then by 2022, the employee threshold drops to 5.

Details on the actual program are tough to glean, so I called the Employment Development Department (EDD) and they could not answer my questions. Seriously if you want bruises on your brain by all means call them. The State Treasurer’s Office (STO) did provide some color, but not any direct answers. In fairness I totally threw him off his game, after he called me back and said a long spiel which sounded like Latin or some other generally accepted language in California. When he came up for a breath, I told him, “Sir, this is an Arby’s.” He was shaken. I continued to dig for answers, to which this guy either 1) didn’t know or 2) would get back to me about.

From what I could find out online, it looks like if you do nothing that you “opt in” resulting in 5% of your paycheck being remitted to the State and deposited in this retirement plan. The 5% increases by 1% each year until you reach 8%. Anyone can “opt out” or “opt back in” anytime. Such fluid policies seem like a strange hybrid model and an HR nightmare for a small business. If you opt in and don’t put an income level in the program it defaults to 30k a year, so if you make less than that you will be “feeling the Bern” on your paycheck. Something tells me that the paperwork won’t get corrected quickly nor will they “refund” the overage. Account changes are made with the state via internet or snail mail not your HR person so how does this state program communicate with employer to coordinate withholding amounts remain correct?

The account is an after-tax investment i.e. Roth IRA. It appears you have the choice of a mutual fund or a money market fund to deposit your money into. Investing in a money market fund makes little to no sense as they only provide about 1% interest a year. Fees run about 1% a year as well effectively destroying and rate of return on that account. The whole thing reeks of being a Ponzi scheme……

Well, actually it is.

The program was started with a loan (interest to be paid back) from both the SEIU and the CTA, two of the most powerful unions in California.

Two large public employee unions, the California Teachers and the SEIU, each contributed $100,000. Public employee unions played a major role in a national drive to create state-run savings plans for the private sector.

Public unions think improving private-sector retirement can help counter pressure to cut government pensions or, following the corporate trend, switch to 401(k)-style individual investment plans that create no long-term debt for employers.

The nine-member CalSavers board has looked at a public union-backed “pooled IRA” that could gradually, by diverting some of the investment yield in good years, build a reserve large enough to replace some of the losses in a bad year.
State-run retirement savings plan ready to launch

So, the “savers” will have to pay a fee to participate and must be enrolled automatically, or employers will be fined $750 per employee. So now an employer must complete all applicable forms for a new hire, and have them complete this paperwork? This is unfair. No wonder businesses are fleeing the state. Think of the food service industry or a minimum wage jobs where they turnover employees constantly. Another curve ball here, what if the employee doesn’t have a bank account and receives a paper check? What if the employee gets terminated and you fail to let “CalSavers” know? Do the deductions continue? Those fees are ridiculous and are literally just redistributing wealth to current retirees. For example, Vanguard offers accounts for literally a fraction of the fees. The “redistribution” I speak of is just a new way to keep current pension retirees happy. Keep this in mind, older folks (social security/pension recipient) vote in very large numbers, and it would spell the end for many a political career should said pension check bounce. Make no mistake about it, the SEIU and CTA could care less about any non-union member, they want their own taken care of first, and everyone else is a sucker and they are out of luck.

How would this plan even be enforced? The Treasurer’s Office representative said the state has a data base on all eligible business…. where? Even the Secretary of State’s Office can’t possibly have every business on record! Even if they did, how can they screen based on how many employees you have? Is their info really up to the minute? How can that be verified? This would be a nightmare to enforce!

Which parlays into my next point, the real point of this program is to create a brand-new layer of government workers, and a separate group of folks 100% dependent on government. While this may just be a pilot program initially, it will eventually expand to include 7.5 million workers in California… Why is what you may ask?

Low income citizens will opt out of said program (think about it $13 an hour with 8% of pretax paycheck deducted) doesn’t leave much room for food each month. Actually, it amounts to a salary cut…with rising fuel, food and housing costs retirement won’t be an option.

As a result, they will want to lure people like me into this scheme. If you earn around 80k that’s $6,400 a year that goes under state run control each year. By opting out and staying at Vanguard they lose out on that “revenue.” Trust us folks, there is a plan for this, and eventually I will be forced into the account or assessed a penalty for opting out.

As I consider this, I can think of many other questions. What if you leave the state while still working age? Can you roll it into another private account? Or is it heavily penalized and forced to remain in CA? I feel this will become a defined benefit scheme similar to current pension funds used by our state workers, where they are “funded” until they aren’t anymore and the last ones in are wiped out. What makes me skeptical is that the program was known as “Secure Choice retirement investing” prior to a name change. Is it just me or is using the word “secure” in regards to retirement plans just inviting a major lawsuit?

In addition, how does shareholder voting work? Obviously, these funds are going to hold a bunch of companies (more on this in a minute) and as a shareholder you have a right to vote but I don’t see this being allowed. Is Big Brother casting shareholder votes on my behalf so they can steer the market in a way more in line with their political ideology? What companies are being invested in? Something tells me Phillip Morris, Raytheon, Pepsico and other “sin/bad for you companies” will be passed over. Want to take bets Tesla, and other “green” startups will be preferred? Politics over investment return is part of the governing documents of this scheme.

ESG/Socially Responsible Investments: Responsible social, environmental, and governance investing is an issue important to some Participants, and an Investment Option reflecting that belief should be offered.
INVESTMENT POLICY STATEMENT Appendix I

I noticed a bond fund is available, I assume any state with policies/laws we don’t agree with here in CA will be passed over in favor of CA junk bonds! This is just a new way to put a hand on the scale to get a desired outcome, no question it bothers some in this state Tesla is literally going up in smoke. Or is this a way to load up on company stock and push for policy changes? If this program goes the way of MYRA at the federal level what happens to the government workers? I have a feeling they won’t be laid off just folded into an existing bureaucracy.

Worst of all workers will be screwed. You will find yourself laid off and working the same job as an independent contractor or a “temporary staffing worker.” All in the name of your employer avoiding this new program.

You have been warned…..

“The Chief”

San Francisco Explores Buying PG&E’s Assets

Did we do it again or did we do it again! We said in this very space on a couple occasions that San Francisco could be a buyer of Pacific Bankrupt Gas & Electric’s assets, well the city has hired a prominent investment banker from Jefferies LLC to assist in exploring buying the assets. When you hired a firm like Jefferies you are very serious. The fee’s charged by this prestigious firm are so high a credit card company would be jealous.

Jefferies LLC consultant team tackling options on buying PG&E assets

While nothing is final, I would say the assets the City wants are as good as sold since PG&E needs cash to pay off its fire liabilities in both the Bay Area and “Paradise”.

The San Francisco Public Utilities Commission said on Tuesday it has hired an adviser to explore the potential acquisition of PG&E Corp’s distribution assets, sending shares of the power company up 2.6% at $18.37.

San Francisco has hired Jefferies LLC as buy-side financial adviser, the utilities commission’s Press Secretary Will Reisman told Reuters in an e-mail statement.
San Francisco city hires adviser to explore potential acquisition of PG&E assets

In some ways this makes sense. The City can keep the rates cheap as it won’t have to subsidize rural areas. The lines are almost entirely underground so fire liability is essentially nil. The City desires to be greenhouse gas free in the near future, so I guess it reduces fossil fuel reliance.

Bloggers note: What fossil fuel plants are left here? However the burning question is how will they generate power? In a post Enron era would you really want to rely on an out of area producer? A jilted PG&E who you bought the assets on the cheap from? Sun? Water? Wind? Waves? Biomass?

Green energy production, the future of San Francisco

I guess being able to sell the masses on lower rates and “transparency” makes sense in some ways but I don’t see the end game here. Additionally as discussed here, the infrastructure is very old, outdated and more saliently what exactly does the City think its purchasing? Wires and pipes underground are very easy to maintain, you just ignore them until there is an issue, but how old are these pipes and wires and are we sure we know where they are buried? What if the “big one” finally happens? Is this really the liability I would want to take on as a city? Well I suppose if you want lower rates.

I guess Rahm Emanuel was onto something when he said, “Never let a good crisis go to waste”, but I just don’t see this penciling out.

In a way I feel bad for the ratepayers in San Francisco. While SMUD may not be perfect, I wouldn’t want any PG&E assets within a 90 mile radius of my house.

“The Chief”

Rent Control Smoke and Mirrors

Photo above: Los Angeles Mayor Eric Garcetti

Those of you aspiring to get rich in California real estate better buckle-up and get ready for a tumultuous ride. Those owning commercial property, your day is coming; but today; let’s look at those of you that rent housing to others.

First, congratulations! You are about to win the lottery. At least according to people that I know that rent property. No, really. Thanks to the California Assembly, under the guise of affordable housing, you are about to score bigtime. AB 1482, has passed the Assembly and is waiting on the Senate for action. This bill is a ‘guaranteed income for life dream’…at least until you get hosed by whatever happens when Prop 13 is dismantled.

This bill allows you to increase tenant rent by five percent a year plus inflation.

“… prohibit an owner of residential real property from increasing the rental rate for that property in an amount that is greater than 5% plus the percentage change in the cost of living …”
AB 1482

It’s possible that the actual rent increase could go up to seven percent if our benevolent lawmakers decide to more closely mirror the Oregon version of the law but who knows. Anyway, the only thing standing between you and this utopian dream is two guys, the senate leader and Governor. I’m not sure I’d bet against the house (pun intended) on this movement.

So what is the downside of such blessed compassion on the masses?

Ironically, more than 10,000 apartment units in San Francisco reportedly sit vacant. That’s another result of the city’s rent control and tenant ordinances: Landlords are afraid to rent their apartments to strangers. Because tenants are granted special “rights,” it’s difficult to evict them. Landlords let the properties sit idle.

That’s a reality. If the cities where I own rental houses pass rent control, I won’t be the only one who is done with that type of investment. Who has enough blood-pressure medication to handle the stress of it? In rent-controlled cities, landlords exit the business and turn their apartments into luxury condos. If they can’t make a profit, they’re not about to install new counters or put on a pricey new roof. We end up with third-world conditions: the wealthy living in beautiful places and everyone else in squalor.
Rent-Control Initiative Could Obliterate California’s Housing Markets

Oh, should this legislation go down in flames, never fear. Regardless of legislative action, statewide rent control will be on the ballot in 2020 and it’s considered a slam-dunk by its opponents.

Californians need to ponder this unpleasant reality given that community activists appear to have gathered enough signatures to place a statewide initiative on the November ballot that would overturn state limits on local rent-control ordinances. The 1995 Costa-Hawkins Act forbids California localities from placing rental-price caps on single-family homes, condos and newer construction. It also bans vacancy controls, meaning that landlords in rent-controlled cities are free to raise the rent to market rates once tenants vacant the property.

If California voters approve the repeal of that measure, the state’s housing crisis will get worse—especially in the liberal, high-priced coastal cities that almost certainly will embrace tougher rent control laws. It’s going to be difficult to stop the initiative, for obvious reasons. The pro side will hit the “easy button” (the rent is too damn high; we’ll magically make it lower!). Unfortunately, it’s hard to make a complex economic argument to voters who are suffering from unaffordable rent and housing prices, but it’s worth rehashing the long-proven results of such ordinances.

Why Tesla Still Lives

When I saw that Tesla stock was up today (which is a rare occurrence), I thought Elon was back on Twitter but alas, I found a different reason. Tesla is getting free money.

As mentioned in a previous installment, Tesla is being subsidized by European automakers so they can make their emission goals thanks to the nonsensical fake environmental “science” of carbon taxes and emission credits. Now Bloomberg has published an article that Tesla is also being subsidized by American automakers GM (Government Motors) and Fiat-Chrysler.

For years, Tesla Inc. has hauled in revenue by selling credits to other carmakers that needed to offset sales of polluting vehicles to U.S. consumers. These sorts of transactions have largely been shrouded in secrecy — until now.

General Motors Co. and Fiat Chrysler Automobiles NV disclosed to the state of Delaware earlier this year that they reached agreements to buy federal greenhouse gas credits from Tesla. While the filings are light on detail, they haven’t been reported on previously. They also represent the first acknowledgments from carmakers that they’re turning to Tesla for help to comply with intensifying U.S. environmental regulations.

The deal with GM will come as a surprise to those who thought years of sales of plug-in hybrid Chevrolet Volts and all-electric Chevy Bolts would leave the largest U.S. automaker in the clear with regard to regulatory compliance.
GM and Fiat Chrysler Unmasked as Tesla’s Secret Source of Cash

Oh, also buried in this article is a nugget about the 2020 election.

And the company wants to bank the credits for future years when emissions rules get tougher — especially if a Democrat beats President Donald Trump in 2020.

“This might not be a bad hedge,” said Mike Taylor, the founder and president of Emission Advisors, a Houston-based environmental credit consultant and broker. “If a Democrat gets elected in 2020, GM may need the credits and prices may go up.”

If you read further into the article …

Tesla has generated almost $2 billion in revenue from selling regulatory credits since 2010.

So between US and European manufacturers, we now know that Tesla has banked at least $4.3 billion dollars just for existing—and producing nothing.

Once again, it is proof positive that in a truly free-market economy, Tesla would not cut it as a viable business. Only because of government interference–direct and indirect–does this company still draw breath.

Under Armour Inc. Switches to Inflation Based Pricing

By “The Chief”

William and I have been surprised lately by the statistics showing “jobs growth,” most of which coming from low skilled positions by the way, however an advertisement caught my eye in my inbox yesterday. I shop, like many other Americans online; usually getting free shipping and most of the time paying no sales tax. Under Armour basically spams my inbox daily; however, this one was a doozy and the guy who sent it out probably should be re-assigned. Here at reallyright.com we don’t have a practice of call for people to be fired (unless they work at ESPN or for taxpayers). Take a close look at the email…it says additional 30% off! Yet the prices of said items have actually been marked up by 30%. Not a great look if you are a major, publicly traded company, especially one with a ton of people who consume your products.

Under Armour plus 30 percent sale
Hurry 05/22/2019 Only

This is really a rough look, which makes me wonder if they decided to switch to an inflation model where the price changes as inflation rates are dictated? Or is this a new Venezuela based system that since the value of the currency is so low the price must keep going up? Either way rough look, nonetheless. What’s even more disturbing? The original email went out at 9:58 am and the retraction didn’t go out until 6:15 pm. Who was minding the store? I find it hard to believe no one caught this…this is a pretty large error? The retraction gets sent at the end of the day? I wonder what sales were like? The types of things in this society that go unnoticed blows my mind.

As an additional nugget a “pride email” showing off their newest “pride offerings” went out as well, and there were no errors in that, so I guess we see where they stand on “the issues.”

This is an issue that has been building for a while now, I will detail it in a future blog, but the “job growth” is happening at the high end, or the very low end. The 90-day types will cheer the job reports, but mass layoffs have started, and it is not pretty. These are low skilled workers assigned to social media/email accounts trusted with sending the info out. They are monitored by aloof absentee middle managers who spend most of their time applying for their next job, so retractions don’t go out till later. Anyone want to take bets; if the “pride email” was screwed up, a couple of people would be paying with their jobs?

“The Chief”

Morgan Stanley Says Tesla Stock May Drop to $10 a Share

Wow, I thought I was tough on Tesla but others are really piling on. The consensus is that their stock is heading down to about $100 per share. However, Morgan Stanley is even more dire.

Morgan Stanley cut its bear (worst-case) forecast on Tesla’s stock from $97 to just $10 on Tuesday, citing concerns about the company’s increased debt load and geopolitical exposure.

“Our revised bear case assumes Tesla misses our current Chinese volume forecast by roughly half to account for the highly volatile trade situation in the region, particularly around areas of technology, which we believe run a high and increasing risk of government/regulatory attention,” the research team, which included analyst Adam Jonas, said in the note.

But it’s not just the Tesla bears making cautious calls. Financial services firm Baird also cut its Tesla estimates Tuesday, lowering the company’s stock to $340 from $400, while T. Rowe Price, for years one of Tesla’s biggest investors, sold around 81% of its holdings over the first three months of 2019.

Link: Tesla shares could drop to $10 in a worst-case scenario, Morgan Stanley says

The article also couches the story as Tesla can overcome all the adversity but they are hoping that Tesla can change. I don’t know about you, but the last guy selling hope and change was to total disaster.

Oh, there is a bright spot. Like Microsoft propping-up Apple in during the Clinton Administration to avoid accusations of a monopoly, other auto makers are paying money to Tesla so they can build cars that people want to buy and still meet the emission standards set by the government.

Carmakers across Europe are striving to meet a 2020 EU target of average car CO2 emissions of 95g per kilometer. To avoid the fines, the EU allows automakers to pool their fleets together and purchase credits from other automakers with a surplus. Last month, Financial Times revealed a deal between Tesla and Fiat-Chrysler (FCA) worth “hundreds of millions of euros”. According to the Financial Times, the understanding is now worth around €2 billion ($2.3 billion USD). The deal with FCA is expected to be an extremely great boost of money for Tesla but FCA should keep in mind that the sale of emission credits will not last forever. The new regulations while helping Tesla financially are pushing other carmakers to release their own all-electric vehicles as nobody in the industry is ready to keep dispensing billions to their own competitors.

Link: Fiat-Chrysler Is Ready To Pay Tesla Up To 2.3 Billion For Emissions Credits So It Can Meet European Car Emissions Standards For 2020

Elon Musk with the look that says, “It’s not personal, it’s business”

Tesla has also introduced another price cut for its cars. OK, actually they raised the price of their cheap cars by $400 and cut about $300 off the higher priced vehicles. Contained in the story are these choice words.

The moves come as Tesla’s stock is under pressure from investors who are becoming skeptical of CEO Elon Musk’s ability to turn a profit and keep the business growing, all while balancing demands of developing a self-driving ride system and building new products such as a small SUV, a pickup truck, a new roadster and an electric semi.

“The business fundamentals of Tesla always have been shaky, but the stock price has been buoyed by the story that this is a company that was going to do huge things,” said Navigant Research analyst Sam Abuelsamid. “What we’ve seen in the last month or so is people are starting to recognize maybe that wasn’t really true.“

Last quarter was among the worst for Tesla in the past two years. Sales tumbled 31% in the period. Musk predicted another loss in the second quarter but said Tesla would be profitable again by the third quarter.

Link: Tesla reduces prices on Models S and X amid stock slump

Tesla’s slide in value continues. The gap between what Elon Musk promises and what he can deliver is finally becoming apparent to more people. Investors took a risk on his out-of-the-box thinking but clearly he has failed to deliver on the promises. Once governments quit propping him up, the market will get to decide his fate.

Lastly, we have no word on anybody accepting the bet for $10K that Musk is right on his predictions even though it’s been out there for the better part of a week. Nevertheless, Mr. X has contacted me and is ready to serve Kool-Aid for whoever takes the wager.

Oh, the children in his neighborhood have offered their tea set and a bag of Chips Ahoy cookies for use at his Kool-Aid party.

PG&E Introduces the “Rolling Blackout”

Special Report from The Chief

In case you missed it, PG&E is bankrupt; however, they are allowed to continue to operate while the state regulator figures out whether to let them re-organize or partout the company. PG&E has been wallowing for about a year now, trying to convince legislators to overturn the “inverse condemnation” law that forces them to repay any damage done by their equipment in the event of a wildfire. This has gone nowhere and predictably the utility has responded by saying they are going to implement “rolling blackouts.” The policy, as explained by the utility, is that PG&E will attempt to reach out to affected customers within a day or two of the scheduled blackout. Such blackouts are contemplated when high winds are in the forecast. They will send out a warning, and then cutoff all power to the area. The company goes on to add, the power will be restored when danger of their equipment causing wildfire is no longer imminent. The spokesperson added that some customers could be without power for days.

Under intense scrutiny from regulators and an unsympathetic federal judge, the utility Wednesday rolled out a fire-safety plan for 2019 that calls for shutting power to vast chunks of its territory when winds kick up and other fire perils abound. It’s designed to curtail the type of deadly wildfires that drove PG&E into Chapter 11 bankruptcy last month.

…PG&E is still evaluating the criteria it uses for blackouts, which are based on heat, lack of humidity, high winds and other factors.

In any event, he said the company is committed to a system that, when blackouts are imposed, will spread the impacts to much wider areas than before.

Link: California wildfires: Get ready for bigger, broader PG&E blackouts this summer

On one hand I understand why the company is doing this. If the windstorm knocks over the power lines causing a fire to spark, they are on the hook for all damages. Easiest way to prevent said liability? Cut the power! If you happen to live in an area where a wildfire could start if their equipment is knocked over? Too bad, so sad. Have solar on your roof? Thanks for your service….but your power is still being cut. If you’re thinking about buying a Tesla emergency battery generator…in addition to reading some of Williams articles, just understand that battery could either catch fire….or not last long enough to generate power for your dwelling. In addition, if you live in a rural area, you are automatically a low priority for having your utility service restored. So if you live in the sticks, or a tee pee like me, you could be without for several days. The battery power generator you are buying will only work for a few hours at most, keep in mind most houses in rural areas tend to be much bigger than a standard tract home in the city or suburbs.

Who Decides

The scariest part of this is that you are at the mercy of a very corrupt and morally bankrupt PG&E. It’s frightening that their “meteorologists” (no doubt overseen by a team of lawyers) will determine when the power should be cut and restored. It’s alarming to be at the mercy of the only utility on the planet whose carbon foot could be seen last summer with the naked eye from the International Space Station.

In California where the utility pays for all damage caused by their equipment, you can rest assured your power isn’t being restored until everyone is certain the storm has more than passed. Even more worrisome are the practical ramifications of this policy. While hospitals and maybe assisted living centers will have a backup generator, it will not power the facility very long. The entire community, city, or region will be without power meaning no street lights, gasoline or other fuel sales, restaurants, stores, everything will be down.

Summary

Thanks to Pacific Gas and Electric, this summer you can relive the glory days of Governor Gray Davis and simultaneously live like the folks in Venezuela. From now on, in the PG&E service area, electrical service is a privilege not a right. What’s the old saying, “Forewarned is forearmed”? Unlike the Gray Davis era, in the enlightened age of Gavin Newsom, they’ll let you know when it’s convenient to provide electrical power. But remember, you only get billed for what you actually use.

As an added bonus, PG&E could now consider letting their union workers have holidays like the Fourth of July and Labor Day off. This will save them having to pay double and triple time to their union employees working on legal holidays and it won’t inconvenience many customers because most folks are eating out of their ice chests and picnic baskets during these holidays.

There is Hope

Despite these ominous threats, fear not fellow Californians. Our leader of the republic, Gavin Newsome, has committed $75 million to the cause. No word on what that money will be spent on. We wait patiently to hear more about the other added millions later in this process. Newsome added he is “scared.” Well rest assured sir, your house in Fair Oaks is in SMUD’s service area, and chances of a wildfire causing your power to be cut are NILL. In addition if your power were to go out, I’m sure you won’t have to wait in line like the rest of the unwashed masses, his majesty will have power turned on far before any of us.

Stripping PG&E’s Carcass

In related news: The City of San Francisco has begun discussions to look into buying the local SF portion of PG&E during the bankruptcy process.

As PG&E (PCG) continues to emerge from Chapter 11 bankruptcy protection, the city of San Francisco is reportedly considering offering a deal to the utility for some of its power assets.

The multimillion-dollar deal is expected to happen within the next few months as Mayor London Breed told PG&E back in March that a formal bid would come if it proves feasible for the city, Bloomberg reported.

San Francisco is looking to purchase PG&E’s electric distribution system in the city, which it estimates “in the range of a few billion dollars,” according to Monday’s report from the San Francisco Public Utilities Commission.

Link: Why Would The City Of San Francisco Purchase PG&E’s Power Assets?

I’m unsure of what they are thinking because the city would be liable for any equipment damage causing a resulting fire. In addition, does anyone know what infrastructure is even located under the city’s streets? Also, where do they plan on getting the power needed for their city? As William pointed out, there is precious nothing as far as electricity generating assets around the City, please don’t think Hetch Hetchy is capable. Maybe using the methane from their own citizens “deposits” found all over the town’s sidewalks? I know liberals want to send us to a Dark Age with all the green new deals; however, it seems like PG&E wants to do one better and send us to the Stone Age; less the ability to wield fire.

You have been warned.

The Chief

Apple Reports Tesla Fire

Apple is having a bad week. First the US Supreme Court says their app store is likely a monopoly and can be sued in lower court as such (without specifically ruling on the merits of the case) and then China and the US are at loggerheads over trade and tariffs.

Supreme Court

The U.S. Supreme Court dealt Apple Inc. a major setback in an eight-year-old lawsuit over the App Store on Monday, but the bigger news is the big effect it could have on Big Tech.

The Supreme Court ruled Monday that plaintiffs have a right to sue Apple in a class-action lawsuit that alleges monopolistic behavior in the App Store resulted in overcharging. While the end result for Apple is uncertain for now, the ruling appears to be positive for consumers who buy services on platforms owned by Apple and other tech companies, because it gives them the ability to sue for alleged monopolistic pricing practices.

The case was filed in 2011 by four iPhone users who alleged Apple had unlawfully monopolized “the iPhone apps aftermarket” and that Apple locked iPhone users “into buying apps only from Apple and paying Apple’s 30% fee, even if ” the iPhone owners want to buy them elsewhere.

Link: Apple’s loss at the Supreme Court is ‘a big victory for consumers’ fighting Big Tech’s app and platform monopolies

Trade Wars

Apple closed down nearly 6% on Monday after news of a major escalation in the U.S.-China trade war.

China said on Monday that it decided to raise tariffs on some U.S. goods after President Donald Trump threatened to further raise tariffs on Chinese imports last week.
The trade war is affecting a lot of different stocks, but Apple seems to be hit harder than most. The Dow Jones Industrial index dropped 2.6%, and the Nasdaq Composite dropped 3.5%.

Apple is especially vulnerable to a trade war with China for two primary reasons.

First, it assembles its iPhones primarily in China. Although it has a lot of American suppliers — it spent $60 billion on American suppliers in 2018 — iPhone assembly is done in mainland China.

The other reason is that Apple, unlike other big tech companies, makes a substantial amount of its money by selling its products to Chinese consumers.

Link: Here’s why Apple is so vulnerable to a trade war with China

Apple News: Tesla Burning

OK so what does Apple have to do with a Tesla fire? Well this story is from Apple Daily. No word on whether this is a subscription service offers by Tim Cook and company but here’s the story.

A Tesla Inc electric car caught fire in a parking lot in a Hong Kong shopping mall, the Apple Daily newspaper said on Tuesday, but no one was injured in the blaze, whose cause was not immediately known.

The electric car burst into flames 30 minutes after being parked in the city’s San Po Kong district on Sunday, the newspaper said, with three explosions seen on CCTV footage.

Firemen took 45 minutes to douse the fire.

Link: Tesla car catches fire in Hong Kong parking lot

OK, so pop quiz. What is the acceptable way to fight a Tesla fire? Can you just pour water on the burning battery or would this be an environmental offence, especially here in California? Do the synthetic materials used in its construction give off cancer causing fumes? This vehicle certainly must come with a Prop 65 warning label. When fully involved, is it a Class D fire? 45 minutes to burn may be normal if water is not allowed.

Apple crashing and Tesla burning, oh, what a week (and its only Tuesday).

Tesla Drivers Starting to Feel the Burn

Yep, leave it up to Democrats to push for their “green” agenda and then screw the folks that drink the Kool-Aid thinking that they are socially responsible and saving the planet. You and I know this is utter crap, but some folks are slow learners.

Illinois drivers are learning that utopia isn’t cheap. If you own a Tesla or other electric vehicle, the Illinois legislature thinks that you can afford an annual registration fee of $1,000 per year. Why? Because electric vehicle owners don’t pay their fair share of gas taxes.

Electric car owners in Illinois could take a large hit to their bank accounts after lawmakers proposed an extreme hike in registration fees for electronic vehicles in the state.

The proposal would raise the annual registration fee to $1,000, more than 57 times the current amount of $17.50.

Illinois officials believe the legislation will raise $2.4 billion for future projects, the major one being roadway improvement, according to the Chicago Tribune.

The bill was introduced last week by Chicago state Sen. Martin Sandoval, a Democrat who says the registration fee hike is imperative to help fund necessary infrastructure improvements.

The reason for the extreme hikes are that electric vehicles don’t provide the state any gas tax revenue.

Oh, Liberals in the state are outraged:

“It’s outrageous,” Tesla owner Nicoletta Skarlatos, 56, told the Chicago Tribune. “I thought Illinois was progressive and would want to encourage EV (electric vehicle) ownership.”

“Imposing fees on EVs that are over 400 percent more than their gasoline-powered counterparts is not only unfair, it discourages promising new technology that will reduce our dependence on petroleum, reduce emissions, and promote the Illinois economy,” Rivian spokesman Michael McHale told the Chicago Tribune.

OK, learning opportunity for Liberals and low information voters…Progressive means getting financially screwed by the government because government can never really be too big, and after all it is your god and the proper way of worship is giving your all to the divine. “Green Agendas” and “Carbon Footprints” are all about centralizing power in the government by reducing your freedom. There is not now nor ever was any manmade climate crisis. It is hubris and arrogance to believe that is even possible. Oh, sorry, hubris is:

English picked up both the concept of hubris and the term for that particular brand of cockiness from the ancient Greeks, who considered hubris a dangerous character flaw capable of provoking the wrath of the gods. In classical Greek tragedy, hubris was often a fatal shortcoming that brought about the fall of the tragic hero. Typically, overconfidence led the hero to attempt to overstep the boundaries of human limitations and assume a godlike status, and the gods inevitably humbled the offender with a sharp reminder of his or her mortality.

Link: Definition of hubris

Oh, those of us using internal combustion engines are not exempt from the wrath of the legislature.

The bill would also make things more expensive for residents who drive non-electric cars. The state’s gas tax would go up 19 cents to 44 cents a gallon, fees for driver’s licenses would double and the registration fee for non-electric vehicles would go up nearly 50% from $98 to $148.

The article concludes:

Illinois was seventh in electronic vehicle sales last year and there are about 15,000 registered in the state. Over 200,000 electric vehicles were sold last year, about two percent of total U.S auto sales, according to Jenny Acevedo, an analyst with auto research firm Edmund.

“Every automaker has broadcast loud and clear that the future of automotive is autonomous and electric,” Acevedo told the Chicago Tribune. “Certainly, going from $17.50 to $1,000 in terms of registration isn’t going to move the needle in the direction the industry is hoping.”

Link: Illinois residents could be charged $1,000 a year to own an electric vehicle under new legislation

Did you note in the above that only two percent of autos sold in the country were electric, yet Tesla is now reportedly the number three US automaker. Using what metric? Sorry but production numbers do matter to us in the real world.

Prediction

If this law is defeated, look for it to be followed-up with a mileage tax. I think that is the real plan here, but you need to mold public reaction to be that $1,000 per vehicle is harsh but a mileage tax on electric vehicles is “fair”. This “fairness” is a Liberal buzz word for spreading the misery. Note that no one is disputing the premise that vehicle taxes should be increased, its just a matter of how to do it. Most electric vehicles are purchased by the wealthy so making them pay more is going to happen. I have always said the greatest so-called benefit of electric vehicles is not paying the gas tax but politicians will fix that loophole.

Warren Buffett is at it again!

The Oracle of Omaha, AKA the world’s best investor ever, AKA rich Uncle Penny Bags pulled off a move this past week that will make anyone jealous.

As always, the context of the story first…. a company called Anadarko Petroleum accepted a takeover bid by Chevron, with Chevron offering to pay to buy the entire company and merge the two together.

Another oil and gas company, Occidental Petroleum decided to join the bidding as well. Chevron being much larger than Occidental meant Occidental needed to find big pocket investors to outbid Chevron. Enter Penny Bags, stage left.

Buffett, through his investment vehicle Berkshire Hathaway, offered to lend Occidental 10 billion in return for 8% interest. In today’s world of low interest rates, why not go to an investment bank? While the oil patch had a rough go for several years, things are looking brighter, and I have a feeling someone would have lent them the money far cheaper. Just to give you an idea of how great Buffett’s return is, experts in the investment world consider 7% returns a year being good, well Buffett is getting that, plus 1% essentially risk free. I say risk free because if the corporation goes bankrupt, Buffett is in line for payback far before the shareholders are. But as the guy pitching Ronco Knives on late night TV infomercials will say, “But wait, there’s more”! Buffett added a deal any of us unwashed masses can only dream off; he gets a signing guarantee fee, meaning if Occidental does or doesn’t end up buying Anadarko, Buffett gets $50 million. That’s right folks, there you have it…literally risk-free money! Chevron got in on it as well, since they get a 1 billion breakup fee if Occidental does in deed buy Anadarko as well.

Just to summarize, when I bought my house, the interest rate I took was 4.125%. I got the best rate possible at the time. Why on God’s green earth would anyone take 8%, when alternatives were available? I’ll explain more later, but this is usury on Buffets part, and I think it should be investigated. He is essentially making a payday loan to Occidental and holding them and their shareholders hostage for a ransom, win or lose. Keep in mind that Occidental has a very clean balance sheet and could have issued more stock or even done a bond offering for quite less then Buffett’s offering but oh well.

Buffett’s imprimatur is apparently valuable to Occidental Chief Executive Officer Vicki Hollub: The 8 percent that’ll be paid out on the preferred shares is more than twice the average coupon on Occidental’s debt.

Link: Warren Buffett tosses a $10 billion bomb into Chevron-Occidental bidding battle

Now here is where Elon Musk makes Occidental look foolish. Tesla borrowed 1.6 billion in the form of a convertible bond (can be exchanged for equity in the company) issued by investment bank Goldman Sachs (one of the best in the business mind you) for 2%. By the way, Goldman is currently telling investors to sell Tesla; at least that’s what their analysts say publicly. So just to break it down here, Occidental a well-run oil company, and a good balance sheet got the money for 8%. Whether they win the bid, they have to pay 50 million. Penny Bags gets his cut up front win or lose, yet Tesla who lacks any business acumen is able to get the money from Goldman for 2%? I guess in the weird world we live in–William has done a fantastic job lighting Musk on fire–but here Musk comes off as a winner. Occidental CEO Vicki Hollub comes off as a very aloof Chief Executive. I guess in the next 90 days we will find out who won.

The Chief

Editor’s Note: Buffett’s intervention appears to be tipping the scales away from Chevron and toward Occidental Petroleum. I guess Wall Street wants Buffett to do for the petroleum industry what he has done for Kraft Foods.