Black Coffee: The Warren Buffett Tax and Vacation Club

It’s time to sit back, relax and enjoy a little joe

Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of what’s been going on in the world of money and personal finance. Here’s what caught my attention over the past week…

Blogs I’ve Been Following This Week

Afford AnythingYo, Warren Buffett, Can I Crash on Your Couch? Hey, the next time you’re going to be in Omaha, Nebraska and need a place to stay — try sending billionaire Warren Buffett a post card asking if you can crash at his place. If you’re like Paula’s friend, Andrew, you might get lucky.

PT Money35 Christmas Gift Ideas for Under $35. This is a terrific list for those struggling to come up with holiday season gift ideas. By the way, I’ve got one more that PT can add to his list: $34.99. Well … it’s true.

L. Bee and the Money Tree - Two Savings Rules to Live By. Says Lauren: “I had a girlfriend who put away 10 dollars per week for four years and then went to Italy.” Uh huh. Are you thinking what I’m thinking? Why didn’t Lauren’s girlfriend just send Warren Buffett a post card asking about his Lake Como timeshare? Then she wouldn’t have had to wait so long.

Money Counselor - Do You Invent Needs? Are you the kind of person who will buy anything if the price is right, whether you really need it or not? If so, be sure to check out Kurt’s wise counsel regarding better ways to shop.

The Millionaire Nurse BlogHotel Rewards Clubs: 5 Reasons You Should Join. I originally thought this was a pretty smart article — but now I’m not so sure. After all, who needs hotel rewards clubs when there’s a chance you could stay anywhere in the world Mr. Buffett has a home-away-from-home for nothing more than the price of a post card? What am I missing here?

The Way-Back Machine: Past Posts Of Mine You May Have Missed

From December 2009:

How to Avoid Paying a Mandatory Gratuity for Bad Service – It used to be that tipping was meant to reward and encourage your server for exemplary service. Not any more. Especially, if you eat at a restaurant with a party of six or more.

Credits and Debits

Credit: Who says the economy sucks? According to the National Retail Federation, 247 million Americans visited stores and websites during the Black Friday weekend; that’s up 9% from 2011.

Debit: Then again, the Weekly Standard points out if that’s really true, then every American over 14 went shopping last weekend — including 40,397 Americans who are currently older than 100 years-old. I know.

Debit: And if you believe that, you probably also believe the US unemployment rate was only 7.9% in October.

Debit: You’d probably also believe that the revised third-quarter GDP estimate of 2.7% is the sign of a booming economy. Not even close. At best, GDP growth has been anemic since the stimulus bill was passed in early 2009.

Debit: Remember, GDP growth was just 2.0% for the first quarter of 2012 and only 1.3% during the second. In fact, GDP growth has only been above 4% once since the recession officially ended, as this chart shows:

Post recession GDP growth under 4 percent is nothing to write home about.

Debit: Unfortunately, since the third quarter of 2009, GDP growth has averaged a paltry 2.2%. In a $16-trillion economy, that translates to, at best, just $352 billion in increased GDP from the $800 billion stimulus program.

Debit: So the stimulus provided a fractional economic benefit of just 44 cents on the dollar or, to put it another way, the government wasted 56 cents on every stimulus dollar it spent. Despite this, there are those pushing for additional government stimulus.

Credit: With poor returns like that, the economy would have been much better off if the US Treasury had simply cut 300 million Americans a check for $2667.

Credit: Yes, I’ve said this before: I still pine for the good old days, when US GDP growth exceeded 4% an astounding 15 times between the third quarter of 1983 and the first quarter of 1989, as this chart shows:

Remember the good old days of (relatively) smaller government and real economic growth?

Credit: The big difference between then and now: the size and scope of the federal government in every aspect of our everyday lives. In this case, less really is more, folks. I ain’t sayin’. I’m just sayin’.

Debit: Instead of downsizing the federal government — and enjoying the truly significant cost savings and economic boom that would surely result — our politicians are fixated on raising revenue. There’s a reason for that.

Credit: While tax increases have never been able to curb Washington’s spending problem, over time, they do encourage further government expansion and even more reckless spending.

Debit: Some folks believe our politicians’ desire for additional revenue is so insatiable that current 401(k) and other retirement account tax benefits are now at risk. One thing is certain: the mortgage interest deduction is on the table.

Debit: Even Warren Buffett is still clamoring for higher taxes; a minimum tax of 30% on those making a million bucks and 35% on those earning more than $10 million.

Debit: Too bad the added revenue from Buffett’s proposed tax is so insignificant it would take 514 years to accrue enough funds just to pay off the 2011 deficit.

Credit: If that’s not vivid proof our debt is the result of too much spending as opposed to too little revenue, I don’t know what is.

Debit: Even so, 60% of Americans are still buying big-government politicians’ disingenuous pleas for “a balanced approach” that includes higher taxes on the wealthy. Unbelievable.

Credit: I’m still waiting for Buffett — who’s worth about $46 billion — to lead by example and cut a check for $45 billion to the US Treasury. How about it, Mr. Buffett?

Debit: Yes, I realize I’ve probably just lost any chance I ever had of getting free lodging from Mr. Buffett. On the bright side, I’ve still got Bill Gates, though!

By the Numbers

Ever wonder how much it would cost to buy some or all of the gifts in the 12 Days of Christmas song?

$107,300 Price for all 364 items mentioned in the 12 Days of Christmas song.

$24,431 Price for only one set of the core items, assuming you buy them in traditional stores.

$40,440 Price for same core set if you buy everything online. (But look at how much money you’d save in gasoline!)

6.1 Percentage increase in the price from 2011.

6 Items from the song that didn’t increase in price this year. (Maids-a-milking, ladies dancing, lords-a-leaping, calling birds, turtle doves and the partridge.)

$189.99 Price of a pear tree.

$165 Price for three French hens.

$750 Price for five golden rings.

$58 Price to rent eight maids-a-milking for one hour. Only the partridge was cheaper ($15) this year.

$7000 The cost of seven swans-a-swimming — the most expensive item from the 12 Days of Christmas. Just don’t tell the eight maids-a-milking.

Source: USA Today

The Question of the Week

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Other Useless News

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Letters, I Get Letters

Every week I feature the most interesting question or comment — assuming I get one, that is. And folks who are lucky enough to have the only question in the mailbag get their letter highlighted here whether it’s interesting or not!

Earlier this week, David took time out from his busy schedule to critique my opinions on US monetary policy and the state of the economy:

Mr. Penzo: You clearly have NO idea what you’re talking about …

Someday, David, we’ll both look back on your assertion, laugh nervously, and then change the subject.

I’m Len Penzo and I approved this message.

Comments

  1. 5

    says

    You better join the hotel rewards clubs. Andrew in Paula’s article got to MEET Buffett and give him a t-shirt, not to STAY with him….though meeting a billionaire would be pretty cool, even if I don’t agree with his politics.

    By the way, what’s for dinner when I drop in on my free trip to the West Coast? PBJ or Penzo grill special?

    • 6

      Len Penzo says

      I’m certain Andrew could have stayed with Buffett if he had pressed the matter once he met him.

      That’s my take on the matter, and I’m sticking with it.

      When are you coming out, Dr. Dean? Can’t wait to see ya!

      (As for dinner … send me a post card and put in your request. You’ll probably get whatever fare you wish for!) :-)

  2. 12

    says

    Where are you getting your prices from??? Lords are pretty expensive these days, ask twitter, or the BBC, who’ve just coughed up £185,000 in damages to one. Seems like a pretty good return if you can get 12 of them inside your $107,000 estimate? ;)

  3. 13

    Martin says

    So let me get this straight – you won’t accept widely-held statistics about inflation that contradict you, but you will accept stats about GDP growth? Facts must be really nice when you can just ignore the ones that don’t suit you.

    Also, over half of the stimulus was in the form of tax cuts, so the Fed didn’t spend $800 billion. Also, the tax cut half of the stimulus is commonly see as the least stimulative/effective part of the bill, so your request that 100% of the stimulus be in the form of tax cuts (which is what sending everyone a check is – see some of the Bush cuts) would have been much worse.

    • 14

      Len Penzo says

      I was alive and fully aware during the good economic times of the 80s, Martin. My family and I benefited from them, as did the entire country. If you were alive then, you’d know that the GDP figures I show make sense.

      Likewise, I’m also fully aware now, and my eyes are still wide open. Unlike a lot of folks, I know the difference between fantasy and reality. My eyes are always wide open.

      I also see inflation all around me today — despite the gov’t reports that it’s tame. I explained to you last week that I have been tracking my own data for years and it contradicts what the government is telling me now. If anything, the latest GDP figures for today are too high. In case you haven’t noticed, the economy is struggling almost everywhere you look. Or are going to tell me that it’s booming?

      And another thing … asserting that tax cuts offer less economic benefit than government spending is flat out wrong. Actually, it’s an insane to even suggest. Tax cuts are the most efficient way to give the economy a boost — especially capital gains tax cuts.

      What do you think unleashed the unprecedented economic boom that drove those high GDP figures in the 1980s? (Hint: It wasn’t government spending.)

      You seem like a smart guy, Martin. I still have high hopes that you’ll wake up one day and realize I’ve got my head screwed on correctly.

      None are so blind as those who refuse to see.

    • 15

      Volfram says

      Inflation wasn’t mentioned in this article, what statistics are you referring to?

      What I can tell you is that most of my friends and I agree: inflation is a symptom of a strong economy, not a cause. Trying to strengthen your economy by boosting inflation is like trying to solve world hunger by shoving a hose down everyone’s throat with an air compressor attached to the other end.

  4. 16

    George says

    You know what pisses me off? This blog article is all common sense(that’s not what pisses me off) but you’re preaching to the choir. The choir’s got to go out and preach! And not just preach! People like you me and all our Internet land friends need to push this agenda on every single person we meet. Sure it might seem like an imposition to rain on a strangers parade but the media feels no shame about it and neither should anyone with some G-d given common sense. Send the Commies home, they’re stupid, next time you hear one speak do us all a favor and prove how stupid they are

    • 17

      George says

      It’s easy to gloss over written word you don’t agree to. Much harder to escape a loud voice on the street

    • 18

      Len Penzo says

      I am trying my best, George. We all need to keep this in mind though:

      For 3 out of every 10 people we preach to, the light bulb will go on and they’ll realize the financial trouble we’re all facing.

      4 of 10 want to believe you, but will still be reluctant to see any significant reductions to the federal government entitlement gravy train — even though they sense that it will ultimately be destructive to the economy and our way of life.

      The other 3 of 10 simply prefer big government programs and will look for any excuse to deny the evidence presented. For them, it’s damn the torpedoes and full speed ahead.

      Keep that in mind, so you don’t get too frustrated. The key is to not give up on that middle 4 out of 10. They can be persuaded — it will just take repeated discussions! And if you can persuade them, we can still win the day with the other 3 out of 10 who WILL understand. It will just take a bit longer than we’d like. Hopefully, the economy won’t blow up before then.

  5. 19

    deRuiter says

    One of Warren Buffet’s companies has a tax bill of over a billion dollars. Did Warren gladly pay it? Heck no! He’s hired a phalanyx of highly paid lawyers and tax accountants who are hard at work to see how this particular company could weasel out of paying the taxes owed. Warren Buffet’s a hyopocrite. What’s to stop the Sage Of Omaha from cutting a check for a few extra millions to the U S Treasury eavery year if he thinks his taxes are too low? Nothing, but Warren and his staff devote all their time looking for ways to keep from paying the taxes on their businesses (a worthy goal which increases revenue for the shareholders.)

  6. 20

    Volfram says

    Wait, $10 a week for four years? That’s only $2000, I would think the plane tickets to Italy alone would cost more than that.

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