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Wednesday, April 25, 2012

Destroying Homeowner Wealth in New Jersey

New Jersey -- the Garden State -- may become the Prison State. The largest act of wealth destruction is about to hit New Jersey homeowners with a killer blow that may crash real estate values for generations.

Pending legislation in New Jersey threatens to obliterate the remaining home equity of virtually all New Jersey homeowners -- but especially and most unjustly the middle and working-class homeowners whose wealth is most at risk from attack from their government.

This legislation, the New Jersey Foreclosure Transformation Act (A2168/S1566), really should be called the Home Equity Liquidation Legislation (or "HELL" - get it?).  It will be the biggest and worst means of wealth destruction ever to come out of Trenton (or at least, ever since the infamous Mount Laurel State Supreme Court decisions mandating that each municipality -- no matter its size or wherewithal -- provide low-income housing).  It will be the equivalent of a financial asteroid striking Earth, in this case smashing New Jersey homeowners.

Under the obligatory benign-sounding objectives tailored to be impervious to opposition, the Act will have the State use homeowners' tax dollars to convert neighbors' homes to low-income housing or housing for so-called "special needs" purposes (including shelters for the homeless and those with HIV/AIDS) and, even worse, to restrict their deeds so that such homes remain designated for low-income or special needs for 30 years.  The Act will create a new state agency to subsidize low and moderate-income buyers' home purchases (which is patently unfair to everyone else who bought equivalent homes on their own) and rent out other homes.  It will infuse de-facto housing projects and homeless shelters within suburban neighborhoods full of people who strove, scrimped and saved, permanently crashing for generations the values of the purchased properties as well as those of everyone else around them.  

The legislation will succeed in stabilizing neighborhoods -- after first destroying the values of all homes and ruining once-desirable suburban areas. Once ruined, the Act will stabilize the neighborhoods. Mission accomplished!

But it gets even worse. The damage will not be spread equally. Just look at who is most vulnerable to this wealth destruction. The Act has an escape clause that allows municipalities a 45-day window within which to purchase these foreclosed properties. Wealthy towns like Mendham (Governor Christie's hometown) likely will be able to buy and rescue any properties from such uses, and their residents will assuredly take all necessary measures to keep the projects and shelters out.  Rest assured, the "rich" won't be affected by this Act.  They'll make sure to buy out these foreclosures -- if they don't flee the state first.

However, many New Jersey towns do not have expandable tax bases.  Old and small towns, particularly in the northern and urban parts of New Jersey, have often maximized their property tax ratables because, well, God ain't creating more land. These towns also commonly have strained budgets. These towns, so often populated by the middle and working classes, would be hard pressed to rescue their neighborhoods from the character-destroying effects of this "foreclosure transformation act."  As a result, the remaining wealth of the first generation of homeowners, the responsible and hardworking neighbors among us who so often bought their homes "on their own" and whose modest wealth is often concentrated in their homes, will be extremely vulnerable to destruction.  

Again, as is so often the case with ruinous legislation, this Act targets for financial persecution our middle and working classes, and a large segment of our ethnic and racial minorities who, so far, have succeeded through hard work and prudent savings in making a foothold in suburbia.  These classes, representing some of our most industrious and self-sufficient citizens, would be the prime victims of an unprecedented wave of wealth destruction -- and all in the name of "helping" so-called "victims" of the housing bubble and foreclosure wave.

This Act sends a chilling and dangerous message.  This legislation will defeat the efforts of all the responsible homeowners who didn't try to "game" the system.  It will allow the state to choose your neighbors and, by dictating the price it will pay for foreclosures, to set the new value of your home.  If the Foreclosure Transformation Act is passed, state and local governments, not you, will determine how much your home is worth and who your neighbors will be. Make no mistake about it, the state will set its price for what it's willing to pay to buy a foreclosure.  And this will be done with the regard of the "poor" who supposedly "need" so-called "affordable" housing.  It won't be done with any regard for the home values of longstanding homeowners, who will suddenly face the danger of having undesirables in their midst. The Act will effectively confiscate the remaining home equity for most homeowners, which remains for most people their largest source of wealth. Worse, it will encourage a massive flight out of state as homeowners rush to sell, in turn threatening a new housing price crash.

Of course, the Act's proponents cite the altruistic motives of providing "affordable" housing to low-income residents and stabilizing neighborhoods. These are code phrases for turning bucolic neighborhoods into de facto "mixed" housing where newcomers -- already receiving numerous government subsidies -- will pay barely a fraction of what their new neighbors have and will pay for their mortgage payments. But then consider the specter of having drug users, the homeless and various other undesirables roaming your previously-pristine street, the street for which you sacrificed for years to get that special home, and you can imagine how quickly homeowners' peace of mind will be destroyed in addition to their wealth.

Two generations have been trained to believe it to be politically incorrect to talk about some people being undesirable neighbors.  However, everyone who rents or buys a home makes that exact judgment. People choose where to live and often strive to buy the best home they can afford.  Some areas are more desirable than others. Location plays a role, but so often it is also the "type" of people who are one's neighbors.  But there is one constant: a free people are allowed to select where they live. For better or worse, that is the essence of freedom.  There is nothing racist, sexist or classist in wanting to choose among whom to live.  This is a divine right, the essence of freedom.  For those of us who resisted or rebelled against the concept of arranged marriages, think how repugnant arranged neighbors will be. Conversely, the essence of a totalitarian regime is the state's control over where and among whom you shall live; come to think of it, that's what you face in prison, and indeed the Foreclosure Transformation Act will turn New Jersey from the Garden State into the Prison State.

Get ready for the Act's sponsors to demonize opponents, like me, who object to any government plan to dictate how much my home is worth and who my neighbors will be.  Expect the Act's supporters to impute the vilest of motives to those people who have the audacity to believe that being hardworking and striving to live in a neighborhood they consider nice means that they can choose where and among whom to live.  

The right to property was considered among the most sacrosanct by our forefathers.  This Act will destroy the right to property, by destroying and permanently depressing its value.  Worse than misguided efforts to redistribute wealth, this legislation will transfer it out of state.  Neighboring states' real estate will grow in value, as the value of New Jersey real estate crashes and people flee to new places where they can buy homes without fear that the government will suddenly plop de-facto housing projects or drug rehab centers next door. 

This is worse than eminent domain.  At least in eminent domain lip service is paid to the municipality's efforts to improve an area.  This Act asserts a desire to help the underclass, the homeless and other classes, with a depraved indifference to the rights of their new neighbors who will pay -- in every way imaginable -- for this misguided altruism.

Let's call this Act for what it is: a plan to destroy your home equity and mine. The asserted benefits, to others we already subsidize so they can live among us at a fraction of the cost we shouldered, are almost inconsequential.  This Act is nothing less than an open declaration of war upon the homeowner class, the middle class and the working class.  It is state-sanctioned economic warfare, and quite possibly even more ruinous than ObamaCare.

Eric Dixon is a New York lawyer, political strategist and commentator.  

Sunday, April 22, 2012

Use Primary Vote As Protest Against Romney Health Insurance Mandate

Several Northeast states hold presidential primaries Tuesday, including Pennsylvania, New York and Delaware.  Although Mitt Romney is presumed by many to be the Republican nominee in waiting, the Massachusetts health insurance mandate which he implemented results in a witches' brew of penalties, required forms and regulations.

Stop trusting the regurgitated opposition research and press reports. Look at my original source research, with accompanying comments. Then judge for yourself.

First, here's the penalty for not purchasing health insurance.  This is a tax by any other name.  And the only way to avoid it, is to move out of state. Even if you die, you get hit with the penalty for every month, or portion thereof, in which you were alive without suitable insurance, as proscribed by this form that provides for your level of minimum health insurance "to avoid penalties."

Under the Massachusetts Health Care Reform Act, "individuals who are deemed able to afford health insurance but fail to comply are subject to penalties for each month of non-compliance in the tax year (provided that there is no penalty in the case of a lapse in coverage of 63 consecutive days or less). The penalties, which will be imposed through the individual's personal income tax return, shall not exceed 50% of the minimum monthly insurance premium for which an individual would have qualified through the [state Health Insurance] Connector." (The "Connector" is the state Health Insurance Connector Authority, as explained below.)(Text in bold reflects my emphasis.)

If you're annoyed with the complexity and size of your tax forms (if you did them yourself) or the amount you had to pay a tax preparer this year, consider this required four page form all Massachusetts residents must complete in addition to their state income tax return.

These Massachusetts regulations created a new state bureaucracy just to implement the mandate.  Note the following language: "The [Massachusetts Health Care Reform] Act creates a new independent authority, the Commonwealth Health Insurance Connector Authority, which is responsible, among other things, for setting standards to determine whether affordable health insurance is available to residents, based on the percentage of income available to obtain coverage and the price of coverage. The Connector [Authority] is also responsible for reviewing appeals of the health care individual mandate due to hardship."

It gets worse...

"...the implementation of the health care law involves multiple agencies including the Connector and the Department of Revenue."

Consider that these penalties apply only to adults who are deemed [by the Health Insurance Connector to have been] able to afford health insurance. On an annual basis, the Connector establishes separate standards that determine whether individuals, married couples and families can afford health insurance, based on their incomes and affordable health insurance premiums.(Note this last sentence --- the state government insurance authority declares that it will determine what you can afford and how you will spend your money -- this is a tax by any other name.)

Do you want to fight the mandate penalty?  Here's how you do it.  Have fun doing that without a lawyer, like me. 

Finally, to add insult to injury, here's what they say the purpose of penalties is:

Penalties are not intended as a source of revenue. Rather, penalties are meant to provide taxpayers with an incentive to comply voluntarily with their tax obligations.

Tuesday's primaries are an excellent opportunity for conservatives who believe in a free marketplace and free people to protest ObamaCare and the encroaching government efforts to control and command every aspect of our lives.  A vote for a viable alternative candidate to Mitt Romney is a valid choice, and I would urge you to vote for Newt Gingrich.

Eric Dixon is a New York and New Jersey lawyer who is a candidate for statewide at-large delegate, supporting Newt Gingrich, in the upcoming New Jersey Republican primary.

Wednesday, April 18, 2012

Stats Show Northeast Housing Market In Freefall

I have been skeptical about the prognosis for housing prices for years -- see my prior posts including "Housing Is Going To Zero" on this blog -- but this latest article from Keith Jurow should shed new light and powerful insights on the scope of the pricing problem.

Dr. Jurow is scheduled to be an upcoming speaker at a June 2012 event being hosted by the New York based economic think tank Financial Policy Council (on whose board of directors I serve).  Please contact me for more information about this event.


Monday, April 16, 2012

Insane Heat At Boston Marathon

The 2012 Boston Marathon was run today in insanely hot and humid conditions, with temperatures approaching 80 degrees before noon.  It was also a humid day by any measure, with dewpoints in the high 50s.  

These conditions put all runners -- even world-class athletes -- at risk of potentially fatal overheating from an hours-long, endurance test in which nonstop movement causes the body to continually heat up. The infamously hilly Boston course only increases the exertion level. The risk of such conditions is that, even with water intake, proper clothing (to allow wicking) and rest breaks, the continual heating process can cause the body's core temperature to exceed safe levels; in essence, one can begin cooking to death.

I have only gotten ill and not finished a race -- at any length -- on one occasion, but that was the 2003 New York Marathon which was run in similar temperatures (full sun, 70 degree day, humid) but which was at least 10 to 15 degrees warmer than expected. (What happened to me? I drank too much Gatorade, cramped before the start, and somehow managed to run about 14 miles before stopping and seeking out medical treatment for what was diagnosed as dehydration.) Fortunately, the forecast for today's race was for temperatures to approach the 70s by the start of the race.  Race organizers may have saved lives by offering runners the opportunity to run next year's race instead.  Several thousand runners -- one report had 4,300 -- opted to skip today's race.

Eric Dixon is a New York lawyer and veteran marathon runner.  

Wednesday, April 11, 2012

Strategic Voting for Newt in GOP Primary

The somewhat sudden decision by Rick Santorum to drop out of the Republican presidential primaries leaves many conservative and Tea Party voters with little choice but to support Newt Gingrich.

For months, the conservative and Tea Party members had been united only in opposition to Mitt Romney, with their positive support divided among several candidates: Gingrich, Herman Cain, Santorum, Michele Bachmann, Rick Perry and the indomnitable Ron Paul. 

Since at least February it was apparent that having both Gingrich and Santorum in the race would divide the conservative base and likely ensure a Romney victory.  Yesterday, that electoral calculus shifted radically.  Now, Newt Gingrich gets his one-on-one fight with Romney, a battle that will soon decisively prove Romneyy to be the undoubted party nominee, or a mortally wounded, proven-vulnerable frontrunner deemed certain to lose to Barack Obama in November.

In several states, Santorum will still appear on the ballot in those primaries.  Santorum thus threatens to take votes away from Gingrich (assuming Ron Paul is and remains a single-digit nonentity, notwithstanding the ferocity of his young supporters).  However, if Gingrich is the last best hope of stopping Romney -- even if this conclusion comes by default and the process of elimination -- this view requires voters to recognize and accept the fact that they are voting against Romney and not voting for any particular candidate.  That objective requires that the conservative and Tea Party wings of the Republican Party vote strategically and not emotionally, and a strategic vote means voting for the candidate you think actually can stop Romney during primary season...and Obama in the general election.

For the Tea Party, a vote for Santorum is not just a wasted vote.  It is a vote for Romney.

Eric Dixon is a New York election lawyer, strategic analyst and member of the board of directors of a financial think tank, the Financial Policy Council. 

Tuesday, April 10, 2012

Freddie, Fannie Conservator DeMarco Criticizes Principal Reduction

The head of the federal conservator overseeing Freddie Mac and Fannie Mae, Edward DeMarco, said in comments Tuesday that the problem of a program for mortgage principal reduction would be to encourage defaults and other efforts to claim hardship by the large number of mortgage borrowers who have faithfully kept up their mortgage payments despite being "underwater."

A CNBC report by its housing reporter, Diana Olick, details the remarks.

Sunday, April 8, 2012

The Fake Obama Job Gains

The declining official unemployment rate has been masking the true unemployment picture, according to many of those among the select very few educated, independent economists and financial journalists out there.

The recent Labor Department statistics announced on anything but a Good Friday are the most recent evidence.  The official estimate from the Bureau of Labor Statistics was a monthly increase for March 2012 of 120,000 nonfarm jobs.  But dig deeper into the numbers. Especially the non-seasonally adjusted numbers, since, after all, life is not seasonally adjusted and your misery doesn't come with footnotes.

First, the number of people not in the labor force is up almost 2.4 million in the last year (March 2012 vs. March 2011).  The civilian noninstitutional labor force (that is, people not in jail) has grown by 3.6 million over the last year, but the civilian labor force has grown by only 1.3 million. The civilian rate of participation in the labor force has dropped from 64.0 to 63.6%.  Keep that in mind when you hear about declining unemployment -- again, that is because "discouraged and not looking for work" people are dropping out of what is called the labor force.

The civilian labor force, not seasonally adjusted, shows a two million person increase year over year, but only an estimated 11,000 increase from February to March 2012.  This statistic alone suggests that, even accepting the government figures as accurate, whatever job growth did occur over the last twelve months has flatlined.

Yet other data shows that wage income is barely growing, the number of hours worked is barely growing (we're talking one to two percent annually) and the number of people working both full time at one job and part time at a second job is growing.  Finally, those at the low end of the educational scale are, as always, faring the worst, with those with a high school diploma or less suffering from official unemployment rates of over 15 percent.

Eric Dixon is a New York lawyer, business and strategic consultant and member of the Board of Directors of a New York-based financial think tank, the Financial Policy Council.  The views expressed in this article are his alone.