Monday March 8 2010

A person I know did work for a temp firm that hires employees for major high tech manufacturers in Austin. All of them Samsung, Dell, et al, use these temps in their manufacturing operations. That way when they want to lay off employees, the temp firm takes the unemployment hike, not them. Now connect the dots. The person of interest  got laid off as an employee of the temp firm. The temp firm hired said person  back, as a contract employee,ie, they are following the same pattern as the their client. 

Okay so where is this going?  If we can outsource US tax returns to India, why not outsource CPA work to contract CPAs?  Accountemps does this already. Interestingly Robert Half, the accounting employment people, own that company. No doubt it provides temp help for folks asking Robert Half to find them a perm job, in the mean time….

Can you see where I am going with this?  How long before CPA firms or corporations decide to locally outsource the accounting work to the new CPA Temp Pool Provider?  That way the 

FICA, FUTA, SUTA, Medicare tax, Obamacare tax, WIT are all someone else's problem?  Defined Contribution plan, forget that!  As more cities fall by the wayside with Defined Benefit Plans I expect less and less of this in the future. 

Now that I think about it further, a CPA firm is nothing more than a group of CPAs offering services for an hourly fee. Even CPA firms have eliminated the traditional lavish corner office and use hoteling of cubicles to better manage space and costs. A few years back I read about someone starting a firm to do a specific kind of audit. The idea was to use empty nesters whose children had left home. These folks were looking for some work but not a full load. It seemed to work well both ways. I understadn that the founder of Pre paid Legal uses a lot of female lawyers who can work from home answering calls and take care of their children at the same time.

It's coming, you read it here first. My point, when you leave here are you prepared to 'go it alone' in this Brave New World.

Monday March 8 2010

 That was the opening to the Beverly Hillbillies, all social trends in the US tend to start on the West Coast, so let's head west to see what is happening. I commented in class a couple of weeks ago that we would see riots before this financial crisis ends, well we did not have to wait long. 

California raised state tuition a whopping 32% in November, now schools are facing cuts as the government has to juggle demands for prison guard raises versus university expenditures. And sure enough that reliable canary in the coal mine, the students at Berkeley are our early warning sign things are not well on the Left Coast. Bu the way tuition at UT Austin has gone from $2500 a semester to over $4,000 the last few years….

Now, remember, and it is impossible to ignore the politics of this, that CA and NY are both broke, read the article. And both states delivered this administration to the White House. So like the brokers who believed they were too big to fail, I am sure the states of CA and NY believe that the Federal Govt will eventually backstop their failures. And by backstop I mean, send money….. My question, at what point will the fiscally responsible states who are supporting all this say, wait a minute….

Monday March 8 2010

Japan's moniker is the Land of the Rising Sun, no doubt a reference to its island status offshore Asia. But since its stock market top in 1989, the sun has been setting. This article  suggests that debt is about to overwhelm savings and production. Readers will recall this is the same problem the PIGS face in Europe and that CA AZ NY NJ face here, Japan is just getting there faster. A population that is not replacing itself cannot pay off the debt and obligations of the previous generation. 

The basic accounting equation is A = L + OE. The problem is that Assets are getting smaller and the L fails to reflect lots and lots of off balance sheet liabilities for govts around the world. Govt Pensions like social security are example number one. 

Meanwhile France and German have announced some sort of short term rescue for Greece, okay what about Spain Portugal and Ireland, not to mention New Jersey…

Monday March 8 2010

Like the rock thrown into the pool, the ever widening ripples are taking down lots of other players in the financial crisis. Ambac is a firm that 'insured' municipal bonds. The bankruptcy of the Las Vegas Monorail in February, has caused even the optimistic to wonder if Ambac can survive. The stock has already colapsed, the precursor to receivership. The problem is that the fear of across the country defaults is now so great everyone realizes, like FDIC which is bankrupt, that it is not possible to insure all the bonds Ambac claimed to cover. 

We will shortly study derivatives, a CDS is a Credit Default Swap, This is an insurance policy that cover the risk of default on the part of the issuing party. The market is bidding up the cost of CDS on Ambac betting that in fact Ambac will default. 

Sunday March 7 2010

A dilemma is a situation in which all possible outcomes have unfavorable consequences. That is now the situation facing Incarnate Word here in SA. I have given up trying to link to the on line SA Express, but if you have the Sunday paper, this is a front page article. Now

the City has occupied a piece of land between the Zoo and Incarnate Word since 1920. 

Now IW wants it for an art building and fencing center

but, the head of the Zoo Conservancy will not hear of that

The Mayor 'only an activity that is consistent with nature is proper for this site' 

The President of IW notes it has essentially been a storage and dump for many years…

the President of IW wants a 50 year lease

The Zoo Board notes that is longer than most of us will be alive, sounds like a sale to them, 

and that is where I am going, a capital lease is essentially a sale in that the lessee has the property for 75% of its life, in this case it is the lives of the people that are the issue.

IW is land locked, beats me….