CPI, California, Fraud and The Last Line

Jan 15

Inflation, aka the Consumer Price Index (CPI), really does seem to be heading down

It’s at 6.5%. That’s actually good-good news.
Yes, prices are still 6.5% higher than they were a year ago, but the federal reserve may slow down, or even stop, their interest rate increases.

Back in June, the CPI was up 9.1%, so 6.5% is smokin’ but still higher than the fed target of 2% to 3%.
However, this may be enough for the Fed to NOT raise rates at the end of the month.

That’s a good start to the new year. This week we will hear about the producer price index, December Retail Sales and home building.
Oh, and by the way, CIT Bank has a 4.05% money market and Schwab is offering a 4.55% 6-month CD.

A money-center bank offers their super platinum honors money market account that pays… 0.07%.

Nickel and Diming - This is the perfect phrase for the State of California.

This past week I received an email from a client that asked about a notice they received from their payroll provider. It seems there would be an automatic debit from their account in the amount of $661.61 to catch up with their FUTA.

FUTA is Federal Unemployment Tax Act and not the nickname of some artist.
Every employer in California pays 0.6% of an employee’s wages to the federal government for unemployment insurance. That helps run the program, or so the rumor goes.

SUI = State Unemployment Insurance. New employers pay 3.4% of the first $7000 of each employee’s wages during the calendar year to California. After a few years, the rate is determined by claims and other criteria.

As it turns out, that $661.61 is generated from a 0.3% additional tax from the feds. Odd; why would they do that?
Well, you may recall that during covid, there were a few claims for unemployment insurance in California. As a matter of fact, there were more than $20 billion in fraudulent unemployment claims that were paid out to folks in California prisons, in out-of-state prisons and far-off places like Ukraine. Really.
There were so many claims, that the state had to borrow from the federal government to get them paid.

When you borrow from the federal government for this purpose, you have to pay them back within two years, otherwise, your tax-paying businesses that are in the state have to pony up 0.3% or up to $21 for each employee and if it goes another year without getting paid, it goes to 0.6%. Yes, it’s not much but it is another nickel and dime that owners have to pay to do business in this state.

And what is the loan amount balance? $19.3 billion.
Yep. If there had not been that fraud from a department that didn’t care enough to track these cons, this business owner would not have to pay another $661.16 that she will now pass on to her customers. Or absorb.
Because the state is not paying attention to its nickels and dimes, you have to pony up and pay the feds for the sins of the state.
Keep writing letters…

From the category of “You can’t mitigate fraud”.

JP Morgan Chase was duped by the owner of a business it bought for $175,000,000.
It seems when they went in to look at the books, there was push back by the seller to let them citing “privacy concerns”.
When Chase insisted, they created, from scratch, almost 4,000,000 users because the company wasn’t worth anything with only the 300,000 users they had.

The good news is that her Chief Information officer told her to pound sand when she asked him to do that.
The bad news is that she found some IT PhD to do it for $18,000.

The customer count issue came to light when Chase sent out an email marketing blast and 70% of the emails were kicked back. That’ll raise a flag.
Here’s the weird part: It’s another 30 year-old thinking they can get away with anything. Between this gal and the pasty pudgy ex-CEO of FTX, is there a pattern here?

Neither of these folks thought this was wrong, and why would you? Wall Street was completely duped by Theranos Founder Elizabeth Holmes at the age of 19 in 2003, finally blowing up 12 years later when she was 31…
Maybe the threat of an 11 year sentence doesn’t carry much weight anymore.

I’m not sure being part of the Forbes “30 Under 30” list is something to email home about.

Editorial Correction

One of my readers explained the bail circumstances for the pasty pudgy ex-CEO (SBF) that I mentioned in last week’s report. I thought you only had to put 10% of the bond to make the whole thing work. However, for $250,000,000, it’s another story. My reader states (and all emphasis are his): “NO surety will take on this bond because if someone is able to burn $25 million on a premium they are going to FLEE. Someone deposited liquid assets to the court worth $250 million. SBF has made motions to keep the identity of the guarantors confidential.”
Thank you, Tim.

The Last Line

Oddly enough, the only good news in today’s Report is the continued decline in the CPI.
So here are my thoughts:

In 34 years of business, I have found almost all business owners that I deal with to be solid folks.
I have done over 200 PPP forgiveness applications, all over the phone or zoom, and only 4 of them had a formal agreement. No one ever questioned paying me for my services.

Yes, there are a few bad apples, but your gut will tell you if the person you are dealing with is a bad apple. Pay attention to it; don’t just think it was the sushi you bought at the gas station while you were filling up.
If you are a sales rep, don’t let your commission check override your spidey-sense; all you salespeople know what I’m talking about, too.

Once the owners or managers think you do bad deals, you will not be able to get rid of that label and it will be time to move on.

At the end of the day, week, month or year, the system does work, but from time to time, you may get duped; just don’t dwell on it.
Even Chase gets fooled.

Two weeks down, 50 to go. Keep on budget!

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