Wednesday, December 08, 2010

Down and Out on $250,000 a Year - TheFiscalTimes.com

Down and Out on $250,000 a Year - TheFiscalTimes.com:

While this analysis is very gentle toward the quarter million dollar family, it is still an interesting different perspective.

The key points for me as a bankruptcy attorney are that, just because a family can qualify for a traditional mortgage at 80LTV (translation: 20% down, which is loan at 80% of home value) and get car loans for two nice cars, that is not necessary good financial practice.

Qualifying for a large loan does not mean living comfortably with a large loan.

The lessons here are not income related. The lessons are ratio related. The banks loan money at acceptable ratios -- as the bank defines "acceptable."

If the family were to try these goals from the start, what would the difference be?

1. Payoff student loans aggressively within about 5 years of starting this experiment.

2. Take a home mortgage with the same down payment but seek a 50LTV qualification. That means lower home value which means likely a smaller house, smaller utility bills (if house is actually smaller), cheaper homeowner association dues, lower property taxes, smaller yard so less costly landscaping and maintenance, fewer rooms to fill with furniture and furnishings, less storage space so less clutter possible, etc.

3. Keep cars for 8-10 years (mileage and maintenance allowing).

Essentially this family will have more disposable income inside of 5 years than they have now.

It is very conceivable, assuming only a 10% increase in recreational spending, they could have $100,000 saved outside of retirement plans.

Now they can upgrade homes, keep the same ratios, without severely affecting their costs of living. Why? All the income now spent on student loans and car payments might be available for the larger mortgage. The money previously saved on house maintenance, property taxes, and landscaping, may no longer be saved, but a cash savings built up gives breathing room. The prior payments toward principal on the mortgage become additional leverage (assuming a break even or better on the old home). in the new down payment.

The cash in savings is generating interest or dividends. It should grow nominally in most markets (see "modern portfolio theory" articles to outline investment methods).

The key to living better is limiting loans, especially home mortgages. Realtors have many wonderful things to say about mortgages and their interest deductions. They are true -- as far as they go. But realtors are not tax advisors. They don't look at the added costs of more expensive homes like higher property tax payments, more rooms to furnish, more landscaping costs, larger utility bills, larger homeowner association dues, etc. I would hazard a guess that the interest deduction from your income taxes is exceeded by the increased costs of ownership. That doesn't even address the "keeping up with the Joneses" problem.

If the old lesson about enemies is "Keep your friends close and your enemies closer," the financial equivalent is "Keep your loans small, and your mortgage smaller."

Another old line is "The path to Hell is paved with good intentions." I would suggest a financial spin, "The path to Bankruptcy Court is paved with a large mortgage." For the more financially technical minds, "The path to Bankruptcy Court is paved with a large LTV."

Thursday, December 02, 2010

Julian Assange: Should Espionage Act Be Used Against Him? - The Daily Beast

Julian Assange: Should Espionage Act Be Used Against Him? - The Daily Beast:

Being of a libertarian mindset, while being firmly Republican, I do not like to press freedoms into shapes that cause those same freedoms not to look and act as intended. It is like taking a jelly donut and pressing into a Santa cookie cutter, but calling it a donut. Is it still a donut?

With Assange case, it becomes clear that most proponents of free speech, like the ACLU or their wannabes, don't know what they are talking about. Free speech is not about speech with impunity.

Free speech, as aptly described for our Founding Fathers' edification by Lord Blackstone in his Commentaries on the Common Law, suggested that freedoms of speech and press are about the freedom from being prevented from airing an opinion. Blackstone explains that this is not without consequence. After a thought has been expressed, there still can be legal consequences for the speaker or writer. He uses the law of libel and slander as examples. The harm can be done but the harm can lead to punishment.

In this case, we have perfect example of Blackstone's theory. Asange can legally have protected First Amendment rights but still be punished. The government did not act to prevent publication. Asange's rights were protected.

Now the punishment issue. Is it appropriate?

In private industry, there is a strong notion of Intellectual Property Rights and Trade Secrets, as demonstrated in the growing use of the Uniform Trade Secret Act throughout the states. In this law, a company can create an asset that is its right to keep secret. The employees agree not to disclosure, and the employer can take an employee to court to enforce the trade secret. This includes the right to stop the person's freedom of speech about private information. It includes the right to seize information where practicable from certain hands beyond the employee.

My complaint in these types of cases is that we treat the government's national security secrets as legal less protected than commercial trade secrets. Why? Because the press is involved. That is crazy. It is incoherent.

A private person has the right to remain protected in his person, property, and papers. Why? Because the Constitution says so? Not according to Jefferson's writing in the Declaration of Independence. It is because of unalienable rights given by God. It is because of Natural Law. The Constitution does not create the right. It recognizes something that already existed. See Amendments IX and X for further clarification of the point.

In the same vein, a government has a Natural Law right to its own secrets. The First Amendment does not supersede that governmental right. The Federal Government owns the intellectual property that Manning agreed not to disclose by signing up for the military and security clearance. Manning stole government property in the form of National Security Secrets.

The Courts can and should exercise equitable jurisdiction to seize such intellectual property on the basis of clear and convincing evidence of irreparable harm. That includes such information in the hands of a citizen or a foreign national of a friendly nation. (My legal analysis purposely stops at the water's edge for the simplicity of my key argument. The analysis of comity between nations to further this analysis is another topic.)

The problem in this case is not the risk of damage to freedom of speech or of the press. The problem is the accepted analysis of this case misses the point that property has been stolen.

Manning remains free, even after his theft, to say or print what he wants about his observations or opinions. He does not have the right to convert, sell, alienate, convey, or waste another person's intellectual property that he has agreed not to publish.

Assange is the recipient of stolen property. He cannot exercise dominion over that property that he did not receive as a bona fide purchaser for value. Even then, the theft prevents Assange from treating it as his own.

The problem with my analysis is not that I am incorrect. The problem is that political class would find this analysis devastating to their normal method of operation.

Newspapers that receive information that does not belong to the source would be subject to seizure and court intervention.

The problem that we have is that court's treatment of free speech arose over decades where we did not have a good operational concept of intellectual property. All utterances were treated as equal without regard to the information's title of ownership.

My analysis would put the courts in greater play and would have the effect of increasing the consequences to spies and wannabe whistle-blowers who fall outside the scope of whistle-blower safe harbor requirements.

Still the analysis allows a better means of stopping distribution of government information and proclaiming a natural right to do so.

The courts would be kept busy reinterpreting the caselaw, but the effectiveness and predictability of those decisions following this analysis would quickly reduce litigation at the appellate level and focus primarily on the merits of any particular case.

The mess of rules that we have now essentially creates the Wikileaks' problem becoming more common rather than less.