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Erik Paulsen Congratulates You On Your 401K - But Hold On...

Category: Economy
Posted: 04/20/18 16:32

by Dave Mindeman

A tweet from Erik Paulsen:


@RepErikPaulsen

Have a 401(k)? #TaxReform is working for you. Learn how stock buybacks are good news for the more than 50% of American households that own stock:


Then he linked this site: Buybacks are Great for Working Americans

The reasoning....

Workers benefit when stock values rise. Stock buybacks increase the value of retirement accounts and personal equity holdings. If investors continue holding stock instead of selling it back to the company in a buyback, its value will increase because there are fewer shares in circulation. Higher stock values increase the funds in retirement accounts, boosting workers' retirement income.

Another line of reasoning is that stocks permeate retirement plans.

"First, investing isn't just for the wealthy. Over half of American households own stock, either directly or indirectly. In fact, worker retirement accounts (company pension plans, 401(k)s, IRAs, etc.) hold 37 percent of all U.S. corporate stock."

OK - that may be true, but does it really benefit the American worker and middle class that much?

Color me skeptical. Even though 37% sits in retirement accounts that still leaves the overwhelming majority sitting in hedge funds, corporate buybacks, and wealthy individual players.

With a 401(K), you can have some limited control over what happens to the stock but most of it is in mutual funds, which means some Wall Streeter is managing your money. And they are not going to have the same profit incentive to make that money work as they would for a wealthy client who expects big returns. More often than not, your money manager will use a safe slow growth mutual fund with limited risk and unable to take advantage of market swings. Which is good safe management, but not something that will benefit greatly in the current environment.

So let's talk about those buy backs. Why do corporations buy their own stock back. Well, it turns out (surprise), it is mostly for selfish reasons.

1. Dividends. For a company dividends are a means of giving stock value but it is also a "cost of equity" - meaning they want to give dividends as a reward for shareholders, but if they have fewer shares to pay dividends on, they can keep the excess money.

2. Preserving the Dividend. When a company has to cut back on its dividend, the share price will usually take a big hit. If the company buys back its shares in lieu of a potential dividend reduction later, the share price can be maintained with that reduced "cost of equity". The shares bought back can then be reissued later with the potential for making a profit.

3. Undervalued Stock. Companies will buy back shares at times they think their stock price is not reflecting its worth. Share buybacks can often be reissued at a higher price when the stock comes closer to its value. The company gains the profit.

4. Earning Per Share. Buying back stock makes the stock more attractive because fewer shares in the marketplace automatically increases the earnings per share value. Profits can be the same but when extrapolated over fewer shares, the EPS looks great to investors. Also, by buying back shares, it can also be viewed by the market that management has enough confidence in the company to reinvest in itself.

*************************************

So, as you look at those advantages, 401K's get a bit of a boost, but just like everything else involving this tax cut, the big money is made by the Wall Street players and their wealthy clients. Corporations aren't doing this for your benefit, they are doing it first and foremost for themselves.

When Erik Paulsen congratulates you on your 401K value, he is not telling you the whole story.

He never does.
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"Winners Make Policy, Losers Go Home"

Category: Congressional Races
Posted: 04/16/18 11:35

by Dave Mindeman

Mitch McConnell is noted for a political axiom...."Winners make policy, losers go home."

Ignoring the arrogance of the statement, it unfortunately is true. And the Democratic Party always takes up that loser mantle for some reason.

It has been on display again this year. It is like we didn't punish ourselves enough in 2016, we seem to need to do it again.

What do I mean? I mean this constant internal attack on Democrats that makes unity nearly impossible.

Somehow the money in politics (which is disgusting) has been hung around the neck of any Democratic candidate who has money, raises money, or extolls the necessity of having money in order to win. This needs to be addressed in the context of reality.

We are stuck with money being a criteria to win an elected office. I don't like it, you don't like it, and I think a majority of the American people don't like it. But it is here and as long as Republicans control legislative bodies, nothing will ever be done about it.

Hillary needed to raise a lot of money and she was villified for it - even though a fair amount of that money was used to help other campaigns. Yes, Bernie raised money the right way and it made him a nomination contender. But that was as far as he could take it. It is extremely doubtful that without the Democratic fundraising machine he would have been able to sustain his campaign through the general election. His donors were getting tapped out and campaign violations for exceeding limits were numerous.

We cannot change the need for money in politics without being able to legislate it out. That is truth. It is the simple, unvarnished truth.

In the 2nd District, Jeff Erdmann raised little money. Something he pointed to with pride and his supporters were pointed to it with pride as well. But no matter how much you agreed with Erdmann's platform, (and it was a good one), the reality was that he could not even garner 30% of the delegates at the convention. He is not going to be on the ballot. He is not going to be anyone's standard bearer heading to November. He didn't raise enough money to get his message out to enough people and now he will go home.

Winners make policy, losers go home.

I do not like having to point this out. But if we are EVER going to change money in politics or Citizens United - WE HAVE TO WIN ELECTIONS!

I shouldn't have to even point that out. It is obvious. It was obvious in 2016 and it should be blatantly obvious in 2018.

Denigrating DFL candidates over the money they raise is a fool's errand. It just is. Making an example of Democrats over money in politics, while Republicans are the beneficiaries of an open spigot of cash is self-defeating and frankly, stupid.

If the Democrats would happen to take control of Congress, then the process of getting Citizens United overturned and a new campaign finance law in place can begin. And I say begin, because even then it will be a long laborious process to make that change. And we will need to win - win in several election cycles. Only then do we have a chance.

In 2016, progressives made an issue of Clinton's ties to corporate money. Her positions maintained full support for overturning Citizen's United. She railed against unlimited corporate spending. And yet, too many Democrats indignantly would not support the "corporate Democrat". They voted 3rd Party or did not vote at all. And we got Donald Trump.

Winners make policy, losers go home.

And so we all went home. Trump and the Republicans were free to legislate anything they wanted. All we could do is protest to take government back, when we gave it to them in the first place.

We are united on the idea that Republican policies are bad. We are united on the framework of getting money out of politics. We are united on policy issues from the environment to budgets. But for some reason, Democrats will not tolerate Democrats who know we cannot unilaterally disarm on money in politics. That we have to play the game that controls the battlefield until we can reach the point where we win.

Winners make policy, losers go home.

Let's support our candidates. We do not plan to go home this time.
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DFL Congressional Campaigns Minnesota

Category: Congressional Races
Posted: 04/15/18 13:24

by Dave Mindeman

Three of the Congressional endorsing conventions happened yesterday. In the snowstorm. And let me just commend the dedicated DFLers who managed to get there under difficult circumstances. There is definitely a strong motivation with Democrats this year. We are woke...as they say.

CD2 endorsed Angie Craig on the first ballot yesterday. Jeff Erdmann ran strong for a first time candidate, but Angie Craig upped her game as well and has built a pretty formidable organization. I believe she will do well against Jason Lewis with a great chance to flip this district.

CD3 endorsed Dean Phillips. He has been building a strong campaign as well and it showed at the convention with a quick endorsement. Phillips lacks campaign experience, but he has been a quick study. And CD3 Democrats have shown extraordinary motivation to oust Paulsen this time around. This will be a tough race because Paulsen is a bit slippery in how he presents his views. He can be a moderate one minute and a Trumper the next. A political eel. Phillips has an opportunity - we shall see how he approaches it.

The 8th District had 10 ballots and no candidate came close to the 60% threshold. Leah Phifer led on every ballot but could barely break 50% at her highest point. As candidates were forced out, most of the freed delegates gravitated to Joe Radinovich. There was also a dramatic moment when the Latino caucus got a suspension of the rules to speak along with the candidates; and they denounced endorsement of Phifer because of her former career as an ICE agent. She tried to give an explanation of what she did as an agent, but in the end, the needle did not move.

Phifer wanted and needed the convention endorsement more than Radinovich did. His late entry, along with Jason Metsa, stalled any momentum that Phifer had been building pre-convention. Now it looks like all the candidates will regroup for a primary contest. Phifer will enter that with a disadvantage.... with weak fundraising to this point and now no access to DFL lists and support.

Although a primary free for all may look divisive, the late retirement of Rick Nolan made choosing a successor a little more complicated. It will be expensive to win, but I believe the candidate that wins will be on stronger footing heading into the general election. A healthy debate will be needed to sort out a number of conflicting issues that the 8th District presents.

The last district with a contest (District 1) will convene next Saturday and hopefully a strong candidate will emerge from there as well.

Minnesota plays a big role in taking back the US House. I think that Democrats are moving into position - now we need some strong campaigns to finish the job.
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