Steaming Hot Pancakes: A voice of common sense

2012-01-23T20:00:00.001-05:00

Mortgage tax credit could jump-start housing market

By Bruce Hahn, president of the American Homeowners Grassroots -01/18/12 07:23 PM ET

Re: “Bernanke calls for more action to revive the housing sector,” Jan. 4

We are becoming a nation of renters. The only glow in the current housing sector is the big jump in apartment construction. Permit applications to build apartments with five or more units increased by 80 percent in 2011. By comparison, building permit requests for single-family homes rose just 3.6 percent.

Potential first-time buyers have decided to remain renters. They are staying out of the market because they are afraid of the continuing decline in home values and because for most of them there is currently no homeownership tax incentive to offset that very real risk.

There are millions of unsold foreclosed homes, and their numbers will increase in 2012. There are also millions of underwater homeowners who can’t afford to move, homeowners can afford to move up but need to sell their home first. They are unable to sell their home because of the lack of buyers, who in turn have the same problem they do. In the end we’re not going to revive the ailing housing market until first-time buyers return to the market in large numbers.

To bring first-time buyers back to the market we need to create homeownership tax incentives to offset their legitimate concerns about continued declines in home values. A couple that doesn’t own a home typically takes the “standard” federal income tax deduction, which will be $11,600 in 2011. That’s about the same as the mortgage interest and real estate tax payments on a $130,000 mortgage, which they could itemize if they buy a home. The net result is there is little or no financial incentive for many renters in the lower tax brackets to buy a home.

Until Congress fixes our very regressive homeownership tax incentives, we are unlikely to see significant recovery in the housing market. The current mortgage interest deduction formula confers a proportionately much greater tax benefit on a wealthy homeowner, who would probably still buy a home even if their tax incentives were slightly less.

The solution would be to replace the mortgage interest deduction with a flat mortgage interest tax credit — the tax credit would be the same regardless of income tax bracket. The percentage of mortgage payments that could be subtracted from net income tax liability would be the same for younger first-time buyers in lower tax brackets and for older move-up buyers in higher tax brackets.

A typical homeowner would still get the same net homeownership tax benefits over his or her lifetime. The incentives would no longer be regressive, so they would for the first time actually provide an effective home ownership tax incentive to many first-time buyers.

From Bruce Hahn, president of the American Homeowners Grassroots Alliance and the American Homeowners Foundation, Arlington, Va.

A new idea for the banking industry

2011-12-30T06:55:00.002-05:00

http://www.linkedin.com/share?viewLink=&sid=s788578586&url=http%3A%2F%2Fwww%2Eforbes%2Ecom%2Fsites%2Fpetercohan%2F2011%2F10%2F29%2F5-debit-card-fee-got-you-mad-time-for-deposit-only-banks%2F&urlhash=4jno&pk=nhome-chron-split-realtime-updates&pp=1&poster=18255176&uid=5558484366776074240&trk=NUS_UNIU_SHARE-title

A Mistake "Brilliant" ..like they say: You can't learn to walk if you are too afraid of falling down!

2011-12-30T06:54:00.000-05:00

http://www.forbes.com/sites/petercohan/2011/12/29/learning-from-brilliant-mistakes/

Could this be the great educational GAME CHANGER we've been waiting for?

2011-12-30T06:40:00.000-05:00

http://www.forbes.com/sites/jamesmarshallcrotty/2011/12/21/m-i-t-game-changer-free-online-education-for-all/2/

Want to move? Want a better job? More opportunity? This list is for you!

2011-12-30T06:38:00.000-05:00

http://www.forbes.com/pictures/eddk45edeml/americas-25-best-performing-cities-2/#content

CAN THE AVERAGE AMERICAN AFFORD THE AVERAGE AMERICAN HOUSE?

2011-11-10T19:31:00.001-05:00

House prices in the recent market:
Median Mean
Sep 2011 $204,400 $243,900

Average Income for the same period: $49,445

Using the old formula of buy a house priced at three times income we arrive at

49,445 X 3 = 148,335 204,400- 148,335 = 56,065 or 27%

The median housing price needs to fall 27% in order for the average American to be able to afford
the "average" house!

Anybody remember stagflation?

2011-11-09T19:11:00.000-05:00

After torturing the numbers I say that inflation has been running close to 6.34% in the period of the past 6 months...taking away the "seasonal adjustments" and adding in any wage increase or decrease in the past 1/2 year (but not counting currency flux). While growth is effectively Zero when comparing oranges to oranges....I guess I'm back to being a pessimist after a few days of "irrational exuberance" . Gas up 20%, clothes 5.2, groceries 7.6, home energy 4.3 all in 6 months (DOL numbers http://www.bls.gov/news.release/cpi.t02.htm) I weighted the gains in each sector with the most common spending habits of Americans....and the CPI is still stuck in neutral? ....Real Unemployment is about 7 points higher than what is being stated by utilizing Pre-Clinton methods the number unemployed grows to 16.1%....STAGFLATION!
If we add back currency fluxuation the outlook is even worse. A 15.7 % decline in the dollar against the Swiss Franc (the most stable currency). The dollar is worth less, it buys less, our incomes are worth less and prices are rising...Is it all caused by the falling dollar? Hard to say. But the dollars fall should be helping exports, thereby increasing jobs...that macro view is out the window.

Some thoughts on the Penn State / Joe Paterno scandal (IMHO)

2011-11-09T18:55:00.000-05:00

First I want to take a moment and examine the story behind the Penn State case. Here are excerpted stories around the victim known as "Victim 6". Note that the district attorney in the investigation chose NOT TO PRESS CRIMINAL CHARGES.

Victim Six

Victim Six cried when he read the 23-page grand jury presentment released Saturday, his mother said. And not for himself.

“He had no idea how bad it was,” she said. “He was lucky. He only had that one contact with him.”

It allegedly happened in May 1998, following a tour of the football locker rooms. Her son and another boy, both 11, shared a shower with Sandusky.

When he got home he said, ‘If you’re wondering why my hair is wet, we took a shower together,’ and ran into his room, his mom recalls.

She called police.

But after a six-week investigation that included the mother confronting Sandusky in her home as police listened in the other room, Sandusky was cleared.

Then-Centre County District Attorney Ray Gricar decided there wasn’t enough evidence.

"Paterno notified Penn State athletic director Tim Curley and vice president Gary Schultz. Curley and Schultz have since been charged with failing to report the incident to the authorities.

Paterno hasn't been accused of legal wrongdoing. But he has been assailed, in what the state police commissioner called a lapse of "moral responsibility," for not doing more to stop Sandusky, whose lawyer says he is innocent. Sandusky retired from Penn State in June 1999." "http://www.huffingtonpost.com/2011/11/09/joe-paterno-retiring-penn-state-football-season_n_1083821.html

"1998
Victim 6 is taken into the locker rooms and showers when he is 11 years old. When Victim 6 is dropped off at home, his hair is wet from showering with Sandusky. His mother reports the incident to the university police, who investigate.

Detective Ronald Schreffler testifies that he and State College Police Department Detective Ralph Ralston, with the consent of the mother of Victim 6, eavesdrop on two conversations the mother of Victim 6 has with Sandusky. Sandusky says he has showered with other boys and Victim 6's mother tries to make Sandusky promise never to shower with a boy again but he will not. At the end of the second conversation, after Sandusky is told he cannot see Victim 6 anymore, Schreffler testifies Sandusky says, "I understand. I was wrong. I wish I could get forgiveness. I know I won't get it from you. I wish I were dead."

Jerry Lauro, an investigator with the Pennsylvania Department of Public Welfare, testifies he and Schreffler interviewed Sandusky, and that Sandusky admits showering naked with Victim 6, admits to hugging Victim 6 while in the shower and admits that it was wrong.(NOTE: THE SOCIAL WORKER REPORTED HIS FINDINGS TO THE DA...THEN THE DA FAILED TO PRESS CHARGES, WHY IS THERE NO OUTCRY THAT THE SOCIAL WORKER BE FIRED? The social worker is mandated to protect children!)

The case is closed after then-Centre County District Attorney Ray Gricar decides there will be no criminal charge." http://espn.go.com/college-football/story/_/id/7212054/key-dates-penn-state-sex-abuse-case

Now if Paterno had pressed the matter any further, after the state's attorney chose not to press the criminal charges...couldn't he then be the target of a libel/malice suit from Sandusky for harassment...considering he had already been cleared by Gricar?

Paterno did what he was supposed to do, turn whatever he knew over to the college officials, if that failed then turn to the DA...but the DA already had declined to charge Sandusky!

What I want to say is that the victims are now trying to 'end run' the law. They are declaring that they were wronged by the inaction of Joe Paterno...They have the big media guns a blazing and everyone is overwrought...But this doesn't change the fact that, if there is blame to be dished out, I think that DA Gricar is the first in the whipping line. It's not Paterno's primary job to prosecute the law, it is the DA's... it was the DA's job to prosecute AND HE DIDN'T.

IF, IF , IF someone could conclusively PROVE collusion (by Paterno) to prevent prosecution then sure, Paterno could be implicated (notice I said 'could be').

Beyond that, I feel the victims are attempting to re-write the law by appealing their case in the court of public opinion. At which point I feel the need to throw a flag and shout "FOUL!". And shame on the media for buying into this, but I guess it sells there days. The dethroning of heroes is big business for the media perhaps it sells advertising time on TV...for me it just degrades what little credibility the media still harbors, and precious little that is!

The Dirtiest Word in the Financial Dictionary

2011-11-08T22:05:00.001-05:00

The Dirtiest Word I Know in Finance

By Michael Cramton

November 08, 2011

There are a lot of dirty words in the financial dictionary -- bankruptcy,Black Friday, derivatives, credit default swaps -- to name just a few. But there's one that beats them all hands down.

It can ruin a company, a marriage, a friendship and can undermine the best-laid plans. It is a shackle that can keep you from achieving your personal goals. It can enslave you, and if you abuse it, it can destroy your entire financial future.

To give you a hint, the average American household had $54,000 worth of it in 2009.

The typical college student will graduate this year saddled with $24,000 worth.

And American taxpayers carry over $14 trillion of it thanks to the federal government's spending habits.

I'm referring, or course, to debt -- and it's one main causes of financial hardship plaguing the country today.

Most people think of debt as simply part of their monthly loan payment. But the best way to illustrate debt is to look at the total amount of money you spend over the lifetime of a loan. Once you look at debt like that, you can see how expensive borrowing money really is.

For example, say you borrow $100,000 with a 30-year mortgage at 7%. Over 30 years, you'll end up paying $140,000 in interest to the bank. By the end of the loan, you've paid more than double (2.4 times) that of your house's original purchase price.

[See how much interest you'll pay over the life of your own mortgage using our Mortgage Calculator.]

To illustrate just how dangerous debt can be on your personal finances, consider these facts:

1.55 million bankruptcies were filed in 2010 alone -- Many were filed from those who overspent or overextended their lines of credit. Bankruptcy not only remains a stain on your credit reportfor up to ten years, it can greatly hinder your ability to own a home and sometimes even keep you from getting a job.
The average American household carries a credit card debt balance of $15,799 with a typical interest rate of 14.67%. That means even if the household pays a minimum monthly payment of $200, a whopping 97% of that amount will go towards paying interest. At that rate, it would take 24 years to pay off the balance even if the household stopped charging another cent on the card!
A report last done by public policy institution Demos found that the average credit card-indebted family uses 21 percent of its income just to pay its monthly debt.

It's not a wonder why 74% of respondents polled in a recent Employee Benefit Research Institute survey said they expect to continue working during retirement.

The rising costs of living and debt have placed a straight jacket on the average American looking to financially prosper. But there are some Americans that have figured out how to avoid the problem.

[InvestingAnswers Feature: 7 Terrifying Things They Don't Tell You About Bankruptcy]

The biggest difference between rich and poor is how they respect their credit.

Rich people know that credit is a tool to be used to their advantage. They know how to cultivate it and how to use it in a way that increases their bottom line. But at the same time, they recognize it can be a double-edged sword that can keep someone from achieving financial freedom if abused.

Those who treat their credit with little respect, accepting every offer that comes their way and racking up the balances with abandon, are always the ones who find it difficult to ever get ahead in life.

To them, credit is a limited resource that should be squandered while it's available, with little outlook on what disadvantages they could face in the long-term.

In short, this abuse of credit and debt is the best recipe I know of to remain in a financial prison.

So what's the single best way to get out of debt today?

Avoid it like the plague.

If you've come out on the losing end of a battle with debt in the past, you need to get back on the horse and pay it off. There's no easy answer here except the slow and steady route of making arepayment plan and sticking to it.

There are plenty of tactics for making headway on this front, and I recommend this article for those in a credit card quandary: 10 Ways to Dig Yourself Out of Credit Card Debt.

And for those that are just embarking on your financial journey, there are three golden rules for dealing with debt and credit. Repeat them like a mantra.

1. Respect your credit score. It's the single best resource you have for securing loans at an affordable rate. Know it, cultivate it and practice good habits for maintaining or improving it.

For more, read our feature: 7 Steps to Perfect Credit.

2. Keep your expenses low. If your basic living expenses take up more than 50% of your income, it's going to be tough to not rely on credit to make ends meet. A good general rule of thumb is that housing should never exceed 33% of your monthly income. A car payment should be no more than 10% of the amount you take home. Practice good spending habits and you'll be less likely to turn to credit when in a financial pinch.

3. Choose your debt wisely. Some debt is good debt. Mortgages and student loans with low interest rates are often times necessary to leverage yourself into a prosperous future of higherearnings or financial stability. But consumer loans with exorbitant interest are an impatient man's folly. But whether its good debt or bad, if the payments are more than you can afford, you're simply spreading yourself too thin and setting yourself up for failure.

The Investing Answer: Like most bad habits, debt is easy to pick up and a real nightmare to put down. For those with a solid respect for their credit score and their account balances though, debt is a problem they will rarely have to face. Know what you're getting into before you sign up for any loan, and always keep a rational head in regard to the realities of what it will actually take to pay down a balance.

Friend to Friend Banking Survey

2011-11-06T21:55:00.001-05:00

2011-09-18T18:28:00.003-04:00

Florida representative Cliff Stearns was quoted by The Hill asking for the resignation of the head of the Energy DepartmentsFlipping through channels this afternoon I happened to catch a snipette of the testimony about Solyndra and the government's guarantee of their loans. The background on this is the American tax payers are out about 500 billion plus dollars from the bankruptcy of Solyndra.

Now, there is a fear that the Solyndra fiasco will taint the public's view of the industry. I don't think it will. I think it will serve to further tarnish the public's view of the ability of government fat cats to make the right calls and not totally flub things whenever they try to step into the "deep end of the pool" (meaning the real economic world). And here's why we should be very afraid:

The witness testified that they (meaning the DOE) had no way to know that the price of solar cells could fall below production costs so quickly, at which point, the questioner noted an article written in 2004 referencing such a rapid drop in price and noting that investors had best beware of this. The gentleman from the DOE obviously knew nothing about the article. What's in even more worrisome is that his answer was " Since then we have increased our staff with a group of highly talented analysts with years of experience in the public sector.

Now, if I understand what he was saying .... they are using (most likely) analysts and analytical methods that are designed for the public sector to analyze budgets for a private company (for those of you not familiar with the two methods, take my word for it, there is a big, big difference).... and we wonder why nothing this government does works out in the real world? You can't live in an ivory tower and run a capitalist system, this is not a command economy....And the politico's in Washington can't just command economic growth.... Try as they might.

What have we learned in 2,066 years?

2011-09-05T21:43:00.001-04:00

"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." - Cicero - 55 BCEvidently nothing has been learned.

Your Effective Tax Rate: What it is and what it means

2011-09-03T23:48:00.008-04:00

The effective tax rate is the percent of income you actually pay as tax to the federal government. You can add in the tax you pay your state if you like and get an even clearer view. To be realistic we could include sales taxes paid in (if we have that figure) along with state and local taxes, school tax, municipal use taxes, local income taxes (if we have those as well) and any other tax you can find. I focused on just the federal taxes paid...bad enough!

EFFECTIVE TAX RATE = INCOME TAX EXPENSE/PRETAX INCOME

Ok, so here's how it's done. You take your total withholding minus your refund and divide by before tax income (that's the top line on your return) and we get the effective rate. Usually this falls somewhere between 10 and 25 percent for federal taxes. If you add your state taxes (using the same method) you have the total effective income tax rate. If you are middle class and paying over 25% ...well you aren't middle anymore, and you need a tax pro to help with your tax planning.

Ideally you want that number as low as possible, the lower the number the more "tax efficient" you are. That means that fewer of your hard earned dollars are going to pay taxes.

Leadership begins with optimism

2011-08-29T21:36:00.001-04:00

Tour boats ferry people out to the USS Arizona Memorial in Hawaii every thirty minutes.

We just missed a ferry and had to wait thirty minutes.

I went into a small gift shop to kill time.

In the gift shop, I purchased a small book entitled, "Reflections on Pearl Harbor " by Admiral Chester Nimitz.

Sunday, December 7th, 1941--Admiral Chester Nimitz was attending a concert in Washington D.C.

He was paged and told there was a phone call for him.

When he answered the phone, it was President Franklin Delano Roosevelt.
He told Admiral Nimitz that he (Nimitz) would now be the Commander of the Pacific Fleet.

Admiral Nimitz flew to Hawaii to assume command of the Pacific Fleet.

He landed at Pearl Harbor on Christmas Eve, 1941.

There was such a spirit of despair, dejection and defeat--you would have thought the Japanese had already won the war.

On Christmas Day, 1941, Adm. Nimitz was given a boat tour of the destruction wrought on Pearl Harbor by the Japanese.

Big sunken battleships and navy vessels cluttered the waters every where you looked.

As the tour boat returned to dock, the young helmsman of the boat asked, "Well Admiral, what do you think after seeing all this destruction?"

Admiral Nimitz's reply shocked everyone within the sound of his voice.

Admiral Nimitz said, "The Japanese made three of the biggest mistakes an attack force could ever make, or God was taking care of America. Which do you think it was?"

Shocked and surprised, the young helmsman asked, "What do mean by saying the Japanese made the three biggest mistakes an attack force ever made?"

Nimitz explained:

Mistake number one: the Japanese attacked on Sunday morning. Nine out of every ten crewmen of those ships were ashore on leave. If those same ships had been lured to sea and been sunk--we would have lost 38,000 men instead of 3,800.

Mistake number two: when the Japanese saw all those battleships lined in a row, they got so carried away sinking those battleships, they never once bombed our dry docks opposite those ships.

If they had destroyed our dry docks, we would have had to tow everyone of those ships to America to be repaired. As it is now, the ships are in shallow water and can be raised. One tug can pull them over to the dry docks, and we can have them repaired and at sea by the time we could have towed them to America.

And I already have crews ashore anxious to man those ships.

Mistake number three: Every drop of fuel in the Pacific theater of war is on top of the ground in storage tanks five miles away over that hill.

One attack plane could have strafed those tanks and destroyed our fuel supply.

That's why I say the Japanese made three of the biggest mistakes an attack force could make, or God was taking care of America.

I've never forgotten what I read in that little book.

It is still an inspiration as I reflect upon it.

In jest, I might suggest that because Admiral Nimitz was a Texan, born and raised in Fredricksburg, Texas -- he was a born optimist.

But anyway you look at it--Admiral Nimitz was able to see a silver lining in a situation and circumstance where everyone else saw only despair and defeatism.

President Roosevelt had chosen the right man for the right job.

We desperately needed a leader that could see silver linings in the midst of the clouds of dejection, despair and defeat.

There is a reason that our national motto is, "IN GOD WE TRUST."

An Invitation

2011-08-25T18:27:00.002-04:00

GLOBAL DIALOGUE INSTITUTE

PRESS RELEASE

ANNUAL GLOBAL PHILOSOPHY FORUM AT HAVERFORD COLLEGE
Saturday, October 1st, 2011
on

CONSCIOUSNESS, CONNECTIVITY AND QUEST FOR THE UNIFIED FIELD OF GLOBAL WISDOM, SCIENCE AND SPIRITUALITY

TOPIC: MAKING SENSE OF OUR GREAT EVOLUTIONARY SHIFT

A Deep-Dialogue between Andrew and Ashok on the Transforming Power of Evolutionary Enlightenment

Featuring
Andrew Cohen and Ashok Gangadean

Followed by Reception and Book Signing 5-7pm
It has become increasingly evident in recent decades, especially upon entering the 21st Century, that humanity is facing unprecedented crises on a planetary scale as we shift into a global age. And there appears to be a heightened awareness that our human family is in the midst of a long-emerging evolutionary shift as we awaken and mature as a species. There are of course quite diverse understandings of the depth, nature and magnitude of this “shift” and how it addresses the crises that now threaten our sustainability and even our survival on earth. Many initiatives have emerged across the globe to make sense of our evolutionary shift, and one of them is the gathering of “Evolutionary Leaders” who have issued a “Call to Conscious Evolution”. Our two speakers are among the members of this initiative and you may get a more direct sense of these voices from the following site:
http://sourceofsynergyfoundation.org/evolutionary-leaders

In any case there is a growing sense that humanity over millennia has been in an ongoing evolutionary maturation and our collective global wisdom suggests that we have arrived at a most exciting tipping point or great shift in our human drama which has brought us to the threshold of an awakening to our conscious, intentional or mindful role in our evolutionary future, an unprecedented crossing into conscious evolution and facing our moment of choice.

Andrew Cohen is one of the eminent voices at the leading edge of the awakening event who will help us in “Making Sense of our Great Evolutionary Shift”. We are delighted that his new book- Evolutionary Enlightenment is being released at this time. This Forum is focused on celebrating the release of his book and is designed for an in-depth dialogue on central themes. To learn more please visit his website:
www.evolutionaryenlightenment.com

An open Reception and Book Signing immediately follows the dialogue from 5:00pm to 7:00pm in celebration of the release of Andrew’s new book. All are invited

ABOUT THE BOOK:
In Evolutionary Enlightenment, Andrew Cohen redefines spiritual awakening for our contemporary world—a world characterized by exponential change and an ever-expanding appreciation for the processes of evolution. Cohen’s message is simple, yet profound: Life is evolution, and enlightenment is about waking up to this fundamentally creative impulse as your own deepest, most authentic self. Through five tenets for living an enlightened life, Cohen will empower you to wholeheartedly participate in the process of change as your own spiritual practice. Evolutionary Enlightenment not only makes deep sense of life today; it will show you how to play an active role in shaping the world of tomorrow.

ABOUT THE AUTHOR:
Andrew Cohen is a spiritual teacher, cultural visionary, and founder of the global nonprofit EnlightenNext and its award-winning publication EnlightenNext magazine. His original teaching of Evolutionary Enlightenment redefines spiritual awakening within the context of cosmic evolution and highlights a new understanding of God or Spirit as the creative impulse toward change in both self and culture. After a transformative meeting with the renowned Advaita Vedanta master H.W.L. Poonja in 1986, Cohen began teaching internationally and almost immediately started reshaping the larger cultural conversation about the purpose and significance of enlightenment in our time. He founded EnlightenNext magazine almost twenty years ago as a forum for serious spiritual and philosophical inquiry, and has since become known for his unique capacity to foster culture-changing dialogues among leading thinkers from a wide array of traditions and disciplines.

Ashok Gangadean is Professor of Global Philosophy at Haverford College where he has taught for the past forty-three years. Throughout his career he has focused on clarifying the fundamental common ground across widely diverse worldviews and seeking to expand philosophy and cultural life into a wider global context. He is Founder-Director of the Global Dialogue Institute which has developed effective methods of Deep Dialogue for renovating cultural life. His forthcoming book- Awakening Global Enlightenment -will appear soon. A six CD audio version of this book recently appeared with Sounds True. Ashok is also Co-Convenor of the World Commission on Global Consciousness and Spirituality which brings leading and emerging world leaders together in deep dialogue to help articulate global wisdom, vision and values in addressing the most pressing concerns and crises on a global scale. He is also Co-Chair of the World Wisdom Council. His most recent book- Meditations of Global First Philosophy: Quest for the Missing Grammar of Logos appeared recently from SUNY Press and introduces new dimensions of ((Global Reason and Enlightenment)).

See the attached poster for more details. This Annual ((Forum)) is open to the public and all are welcome. The ((Global Philosophy Forum)) has been continuous for over a decade and has convened a diverse range of eminent voices across disciplines in deep-dialogue in quest of the fundamental patterns of the universe, for the convergence of science, wisdom and spirituality through the ages.
Ashok K. Gangadean, (Host and Convenor) Emily Judson and John Marshall Gest Professor of Global Philosophy, Haverford College Website: http://www.awakeningmind.org

Contact: Andrea Pergolese, Haverford College (610) 896-1031; email: apergole@haverford.edu

Still Plenty of Downside for Housing

2011-08-13T10:38:00.000-04:00

Looking at the averages once again as I have for the past few years I am still seeing a big difference between what people are earning and the cost of the house they can afford. According to recent figures (per the US Census) the average american family has a gross income of $63,100, while the average home (nationally) has a median price of 235,000.

According to the old model (the one we are currently trying to recover from!) a homeowner could afford to pay five times their income for a home. The long term affordability average, before we entered this era of inflated housing prices, is closer to three times income. Using simple math I multiplied the mean income by three (63,100 x 3 = 189,300 this is what you can afford using th e old affordability "rule of thumb"), subtract the median home cost (189,300 - 235,000) and divide by the median home cost to find that prices would need to drop by another 19.5% in order for the average family to comfortably afford the average house (nationally).

If we use the mean home cost the calculation is even meaner. With a mean average home cost of 269,000 prices would have to fall roughly 30% to get back to a three times income affordability.

The take away: I predict the pain isn't over.

Why Socialism Fails

2011-08-07T21:00:00.003-04:00

As the late Adrian Rogers said, "you cannot multiply wealth by dividing it."

An economics professor at a local college made a statement that he had never failed a single student before, but had once failed an entire class. That class had insisted that Obama's socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, "OK, we will have an experiment in this class on Obama's plan".
All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A...

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy.

When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great but when government takes all the reward away, no one will try or want to succeed.

My Personal Lemonade Story

2011-06-03T18:35:00.000-04:00

My Lemonade story: I'd like to be able to say that I saw the economic collapse coming back in 2005, but I didn't really. I did see the almost certain demise of my position in my industry at the time, construction. There was an AhHah! moment when I realized I was the only person on the job who spoke English and that I could not communicate with the crews I was in charge of. I realized I was no longer relevant in that spot and needed to find a new place for myself that would be a better fit.
I went back to school, finished my undergrad degree, with a MS in Marketing, and went to find a corporate job. Now I know this is the reverse of how many people have realized their personal adventure, but I had been a business owner and worked as an independent contractor for my entire working life. When doing a personal assessment I realized that many of the weaknesses I struggled with professionally could be strengthened by a stint in corporate.
I applied for and got a job in financial services, an area I had always found interesting and have continued to grow in that company since 2007. It's been a bumpy ride but compared to the cataclysm that occurred in the construction industry it's been a piece of cake.
I realize that if I hadn't made the move when I had I would be lined up in the unemployment line like so many other construction professionals are today. I guess the take-away is : When you feel it's time to move on...Do it! Don't wait. When you have that moment of clarity (we all do from time to time) act on it! There is no time like right now!
I have since gone on to finish my masters in accounting, completing my transformation and strengthening my resume, my current employer even helped with tuition.
There is no time like right now! There is no reason not to but your own fear...Take an educated leap! That's my advice.

How to be BRILLIANT at a Moment's Notice!

2011-05-31T19:36:00.002-04:00

I have been a fan of Todd's since..well before there was a facebook! Anyway if you want to shake up your head, learn how to look at problems differently and consistently come up with creative solutions....well join the group and buy the book...you probably need it...and if nothing else it's fun!

The Accidental Creative: How To Be Brilliant at a Moment's Notice [HD]
Fun video by Epipheo Studios about the upcoming book. Woohoo!
Length: ‎2:34

Shadow Government Statistics

2011-01-14T16:51:00.000-05:00

John
Williams'
Shadow Government Statistics
Analysis Behind and Beyond Government Economic Reporting User-name:

August 24th, 2004

"GOVERNMENT ECONOMIC REPORTS: THINGS YOU'VE
SUSPECTED BUT WERE AFRAID TO ASK!"

A Series Authored by Walter J. "John" Williams

"Series Master Introduction"
(Part One in a Series of Five)

August 24, 2004
_____

In 1996 -- the middle of the Clinton economic miracle -- the Kaiser Foundation conducted a survey of the American public that purported to show how out of touch the electorate was with economic reality. Most Americans thought inflation and unemployment were much higher, and economic growth was much weaker, than reported by the government. The Washington Post bemoaned the economic ignorance of the public. The same results would be found today.

Neither the Kaiser Foundation nor the Post understood that there was and still is good reason for the gap between common perceptions and government reporting: government data are biased in politically correct directions and increasingly have diverged from common experience and reality since the mid-1980s. Inflation and unemployment reports are understated, while employment and other economic data are overstated, deliberately.

For several years, I conducted surveys among business economists as to how they viewed the quality of government economic data. The following were actual comments:

· The senior economist of a major retail company told me, "Quality varies. The retail sales numbers are terrible, but money supply data are great."

· The senior economist at a major bank offered, "There's a problem with money supply, but I think retail sales are pretty good."

The point is that when an economist knows a sector well, he also recognizes the limitations and distortions of related economic reporting. Gathering and reporting accurate information on a timely (one-month) basis for components of the U.S. economy is nearly impossible. Nonetheless, most career government statisticians in Washington work diligently to provide the best information possible within the limits of the existing reporting system. A number of reporting distortions, however, are not accidental.

What follows is brief background on the reporting system and how the numbers can be viewed. Separate installments will address the specifics of employment, inflation, GDP and budget deficit reporting. Other areas will be addressed upon request.

The first regular reporting of now-popular statistics such as gross national/domestic product (GNP/GDP), unemployment and the consumer price index (CPI) began in the decade following World War II. Modern political manipulation of the government's economic data began as soon as practicable thereafter, with revisions to methodology often incorporating positive reporting biases. As a result, investors and most economists, relying on the government's data, often miss underlying economic reality. Consider:

· During the Kennedy administration, unemployment was redefined with the concept of "discouraged workers" so as to reduce the popularly followed unemployment rate.

· If Lyndon Johnson didn't like the growth that was going to be reported in the GNP, he sent it back to the Commerce Department, and he kept doing so until Commerce got it right. The Johnson administration also was responsible for gimmicking the accounting that hides most of the federal deficit.

· Richard Nixon had a highly publicized war with the Bureau of Labor Statistics on the unemployment data. Nixon wanted to report the unemployment rate as the lower of the seasonally adjusted or unadjusted number, at any given time, but not specify same to the public. While that approach was unconscionable at the time and never used, basically the same methodology was introduced in 2004 as "state-of-the-art" by the current Bush administration.

· The Carter administration was caught deliberately understating inflation.

· Systemic changes were introduced during the Reagan administration to boost reported GNP/GDP growth on a regular basis. The wildest manipulations, however, happened at the time of the 1987 liquidity panic. In addition to intervention in the futures markets by the New York Fed to help prop the stock market after the October 19th crash, direct and heavy manipulation of the trade deficit data, under the direction of the Federal Reserve and U.S. Treasury, was used in conjunction with massive currency intervention to help bottom the dollar and to contain the currency panic at year-end 1987.

· The first Bush Administration began efforts at the systematic reduction of the reported rate of CPI inflation, and worked an outside-the-system GDP manipulation aimed at helping with the failed 1992 reelection bid.

· As former Labor Secretary Bob Reich explained in his memoirs, the Clinton administration had found in its public polling that if the government inflated economic reporting, enough people would believe it to swing a close election. Accordingly, whatever integrity had survived in the economic reporting system disappeared during the Clinton years. Unemployment was redefined to eliminate five million discouraged workers and to lower the unemployment rate; methodologies were changed to reduce poverty reporting, to reduce reported CPI inflation, to inflate reported GDP growth, among others.

· The current Bush administration has expanded upon the Clinton era initiatives, particularly in setting the stage for the adoption of a new and lower-inflation CPI and in further redefining the GDP and the concept of seasonal adjustment.

As a result of the systemic manipulations, if the GDP methodology of 1980 were applied to today's data, the second quarter's annualized inflation-adjusted GDP growth of 3.0% would be roughly three percent lower (effectively netting to zero percent or below). In like manner, current annual CPI inflation is understated by about 2.7% against the pre-Clinton CPI methodology (would be about 5.7%), and the unemployment rate is understated by about seven percent against its original design and what many people would consider to be actual unemployment (would be about 12.5%).

As to the financial results of federal operations, the application of accrual accounting and generally accepted accounting principles to federal operations shows an actual fiscal year 2003 deficit of $3.7 trillion, as reported by the U.S. Treasury, versus the reported cash-basis $374 billion.

Key Factors to Consider with Any Economic Release

Hearing or reading an economic statistic in the financial media is of little value, unless the context of the reported number is clear, detailing the type of change, any inflation adjustment, seasonal adjustment and revisions.

Seasonal Adjustment -- Widely followed data often are adjusted to remove patterns of distortion that recur regularly, year after year, or that are tied to business or trading days. For example, retail sales are strongest during the holiday season; February 2003 had 28 days, February 2004 had 29 days.

While seasonal adjustment is a legitimate tool for enabling month-to-month or quarter-to-quarter comparisons of data that might otherwise be biased by calendar trends, more often than not, the government has problems with its adjustments. Areas that usually do not adjust well: weekly unemployment claims and employment seasonals related to holidays and the school year.

One way to avoid many seasonality questions is to look at growth on a year-over-year basis, July 2004 versus July 2003, for example. Trends in annual growth are largely free of seasonal distortions.

Seasonal factors typically are calculated annually, based on recent years' patterns of activity. The Bureau of Labor Statistics, however, went to revising and recalculating its employment seasonal factors each month, as of January 2004.

Inflation Adjustment -- If inflation is up 3.0% for the year, and sales are up 2.0% for the year, then sales fell 1.0% after adjustment for inflation. Deflating dollar numbers is a legitimate approach to viewing data with the effects of inflation removed.

Terms that mean data have been adjusted for inflation include real, constant dollars, in 2000 dollars, in chain weighted 2000 dollars. Beyond no inflation reference, terms that mean data have not been adjusted include nominal, and current dollars.

The most popularly followed inflation-adjusted economic statistic is the GDP, which reflects the growth in dollar economic activity minus the growth in inflation. If inflation is understated, which it is, then the resulting real GDP is overstated.

Type of Growth -- Is the reported growth month-to-month, year-to-year or annualized? Most monthly economic releases are reported showing month-to-month change. Quarterly numbers are shown either with quarter-to-quarter growth (i.e., the Employment Cost Index) or at an annualized rate of change (GDP). (SAAR means seasonally adjusted annualized rate.)

As discussed earlier, more meaningful trends usually are seen in year-to-year change, although such patterns rarely get publicized. Year-to-year change (the way most businesses look at their sales -- How am I doing against last year?) usually eliminates seasonal distortions in unadjusted data or residual seasonal distortions in adjusted data.

Revisions -- Most economic series go through regular and often significant revisions, typically for the next several releases and then annually in some form of a benchmark revision, as the government gets better or more complete data. A monthly number can appear to be strong or weak due solely to prior period revisions.

Two series that do not get revised on a not seasonally adjusted basis are the CPI and the unemployment rate, unless a mistake is made or the series is redefined. In such instances, often the new series is not comparable to the old series, but the financial media rarely pay any attention to those details.

The Kleptocrats are Back and Running Strong!

2010-12-01T08:08:00.003-05:00

In a just released report, New York State's Comptroller Thomas DiNapoli presents his expectations for what is set to be another bumper year for Wall Street. Per the report: "The first quarter of 2010 was among the most profitable on record ($10.3 billion), but in the second quarter profits eased (to $3.8 billion) and were more in line with pre-crisis levels. It appears that profits were relatively modest in the third quarter as well, but 2010 could still be the fourth most profitable year for the securities industry in New York City." Yet here is the most relevant piece: "While it appears that the cash bonus pool will be smaller than last year, the average bonus paid to employees in the securities industry in New York City may be a bit larger, since the pool will be divided among fewer workers given continued staff reductions". Money well earned. So summarizing the report - in a year when US underemployment persists at around 17%, when the US federal debt is at nosebleed levels, when well over 40 million Americans are on foodstamps, when personal bankruptcies are at the highest they have been in 5 years, when GDP is about to turn red again, when America still doesn't have a formal budget, the average banker bonus may be one the biggest ever on record. Peasants - 0; Kleptocrats - 1.

Click the link above for the whole post...if your stomache is strong enough!

How the Federal Reserve System Manufactures Money-Robert Prechter

2010-11-18T19:41:00.001-05:00

Over the years, the Federal Reserve Bank has transferred purchasing power from all other dollar holders primarily to the U.S. Treasury by a complex series of machinations. The U.S. Treasury borrows money by selling bonds in the open market. The Fed is said to “buy” the Treasury’s bonds from banks and other financial institutions, but in actuality, it is allowed by law simply to fabricate a new checking account for the seller in exchange for the bonds. It holds the Treasury’s bonds as assets against -- as “backing” for -- that new money. Now the seller is whole (he was just a middleman), the Fed has the bonds, and the Treasury has the new money.

This transactional train is a long route to a simple alchemy (called “monetizing” the debt) in which the Fed turns government bonds into money. The net result is as if the government had simply fabricated its own checking account, although it pays the Fed a portion of the bonds’ interest for providing the service surreptitiously. To date (1st edition of Prechter's Conquer the Crash was published in 2002 -- Ed.), the Fed has monetized about $600 billion worth of Treasury obligations. This process expands the supply of money.

In 1980, Congress gave the Fed the legal authority to monetize any agency’s debt. In other words, it can exchange the bonds of a government, bank or other institution for a checking account denominated in dollars. This mechanism gives the President, through the Treasury, a mechanism for “bailing out” debt-troubled governments, banks or other institutions that can no longer get financing anywhere else. Such decisions are made for political reasons, and the Fed can go along or refuse, at least as the relationship currently stands. Today, the Fed has about $36 billion worth of foreign debt on its books. The power to grant or refuse such largesse is unprecedented.

Each new Fed account denominated in dollars is new money, but contrary to common inference, it is not new value. The new account has value, but that value comes from a reduction in the value of all other outstanding accounts denominated in dollars. That reduction takes place as the favored institution spends the newly credited dollars, driving up the dollar-denominated demand for goods and thus their prices. All other dollar holders still hold the same number of dollars, but now there are more dollars in circulation, and each one purchases less in the way of goods and services. The old dollars lose value to the extent that the new account gains value.

The net result is a transfer of value to the receiver’s account from those of all other dollar holders. This fact is not readily obvious because the unit of account throughout the financial system does not change even though its value changes.

It is important to understand exactly what the Fed has the power to do in this context: It has legal permission to transfer wealth from dollar savers to certain debtors without the permission of the savers. The effect on the money supply is exactly the same as if the money had been counterfeited and slipped into circulation.

In the old days, governments would inflate the money supply by diluting their coins with base metal or printing notes directly. Now the same old game is much less obvious. On the other hand, there is also far more to it. This section has described the Fed’s secondary role. The Fed’s main occupation is not creating money but facilitating credit. This crucial difference will eventually bring us to why deflation is possible.

A reprint of a letter from Greg Roy

2010-11-18T19:07:00.002-05:00

While I must admit, I rarely read him, usually they are typical marketing letters, but this time...This time I think Greg Roy is right on point with this ...

Former Federal Reserve Chairman Alan Greenspan appeared on Meet The Press this past Sunday where he warned, "The United States must move to rein in its massive budget deficits or it faces the risk of a bond market crisis."

He added, "We've got to resolve this issue before it gets forced upon us."

Greenspan attributed the risk of a bond market crisis to the deficit, which hit $1.3 trillion this year, stating that it may begin to frighten the bond market.

The conventional wisdom in D.C. for the past 40 years is that "deficits don't matter." Former vice President Dick Cheney publicly stated a few years ago that, "Reagan proved deficits don't matter."

Just last month the Wall Street Journal ran a story titled, "Monetizing all the debt, all the time Commentary: Trillion-dollar deficits don’t matter."

So why is Greenspan now worried that the huge deficits the U.S. Government is running do all of a sudden matter, and could cause a bond crisis?

When investors and governments around the world were willing to lend the U.S. more money than the U.S. wanted to borrow, the deficits were not a problem, because they could be covered by borrowing.

But, just like you and I can reach our borrowing limit, so, too, can the U.S. Government. What happens when that day arrives?

Answer: The Fed just prints money out of thin air to loan to the government, at interest, of course.

Nice work if you can get it.

I'd love to be able to create $600 billion out of thin air, loan it to the U.S. Government, and collect billions a year in interest for doing so.

How much does it cost to electronically create $600 billion? Virtually nothing. It's equal to what you spend to keep your computer running every month.

Why does one group of private bankers get the privilege to create the money of the United States out of thin air and lend it to the United States at interest?

The point of today's email is to share the concerns of a bond crisis. When the U.S. Government could spend money by using a credit card, insufficient income (deficit spending) didn't matter.

But when the credit cards all reach their limit (foreigners and investors no longer willing to lend to the U.S.), then the Fed steps in and creates the money out of thin air to cover the deficits.

This is highly destructive and will lead to watered-down, diluted U.S. Dollar, which will mean it will take more dollars to buy the same things as before.

The inflation index will then rise, and that leads to a bond crisis.

Alan Greenspan didn't outline all the steps in his interview on Meet The Press, but those are the factors he sees.

He used the word "crisis." I see the potential as well.

..... a crisis is coming. The days of being able to kick the can down the road are rapidly coming to an end.

History is still a good teacher- The Demise of the Bank of New England what, how, and why!

2010-11-14T17:43:00.000-05:00

The Bank of New England Blowout
(thankyou to The New Federalist, and The American Almanac)
The January 1991, failure of the Bank of New England (BNE), which had until its collapse been one of the 10 largest bank holding companies in the United States, provides a good example of the way federal regulators have propped up the banking system, and of the risks faced by banks which play in the world derivatives markets.

The collapse of the speculative real estate market, which virtually wiped out the Texas banking system in the late 1980s, spread to New England by the end of the decade, bringing to a close the speculative bubble known as the ``Massachusetts miracle.'' Boston-based BNE, which had lent heavily in the regional real estate market, suddenly found itself with overwhelming losses on its real estate portfolio. The bank, which had grown rapidly thanks to the real estate bubble, was dying with the collapse of that bubble.

In October 1989, BNE, which then had $31.4 billion in assets, announced plans to dramatically downsize the bank through massive asset sales and employee cutbacks. The plans included selling some 10% of its branches, closing loan production offices in Chicago, New York, and Philadelphia, and reducing its work force by more than 20%.

In late December 1989, BNE took the extraordinary step of rescinding a previously announced 34@ct quarterly stockholder dividend. The step was forced by federal regulators, who were already making preparations for the inevitable failure of the insolvent bank. Federal regulators also threw out the chairman of the bank, and replaced him with an interim chairman, H. Ridgely Bullock.

In early February 1990, in an attempt to calm public fears and prevent depositor runs, Bullock declared that the bank was ``off the critical list and getting better.... We're in a fix-it mode. We're not going to be as big, but we're going to be better.''

BNE was not ``off the critical list,'' however; the only thing keeping its doors open was a massive covert bailout from the Federal Reserve. By the time Bullock made his statement, the bank had already received nearly $1 billion from the Fed.

Beginning in mid-January, the Fed had begun pumping vast amounts of money into BNE via loans from the Boston Federal Reserve. Federal Reserve statistics show that the Boston Fed lent banks in its region $478 million the week ended Jan. 24, compared to just $3 million the week before. While the Fed does not reveal to which banks the money was lent, it is clear that most, if not virtually all, went to prop up BNE.

The weekly bank lending by the Boston Fed rose dramatically in the following weeks: $440 million the week ended Jan. 31, then $723 million the next week, then $930 million, and $1,280 million the week ended Feb. 21. During each of the next seven weeks, the Fed pumped between $1.5 billion and $1.85 billion into the bank; by April 11, the Boston Fed had lent $15.6 billion to its regional banks, the vast majority going to the Bank of New England.

By March, after some $5 billion of bailout funds had already been injected into the bank, the Office of the Comptroller of the Currency and the Fed issued formal cease-and-desist orders to the bank. The Fed order stipulated that the bank could not pay stock dividends without permission from the Fed--a requirement that had already been in effect for more than three months!

Even more comical was the bank's admission in its second quarter 1990 report to the Securities and Exchange Commission, that it may need government assistance to survive. This, after some $18 billion had already been funnelled into the bankrupt bank!

The end for the Bank of New England came on Jan. 4, 1991, when Chairman Lawrence Fish told federal regulators that the $450 million loss the bank suffered in the fourth quarter of 1990, had wiped out its $225 million in equity, making the bank officially insolvent. At this point, the bank had just $23 billion in assets, and had fallen from 10th place on the list of largest U.S. banks, to 33rd place.

Not surprisingly, the announcement triggered massive depositor runs at the banks, with long lines forming at its corporate offices. Two days later, on Sunday, Jan. 6, 1991, federal regulators officially closed the bank. Federal Deposit Insurance Corp. Chairman William Seidman estimated the ultimate cost to the agency of the failures at $2.3 billion, at the time the second most costly bank failure in U.S. history, after the 1988 failure of First RepublicBank Corp. of Dallas.

Why did federal regulators pump more than $18 billion into the Bank of New England, and then close it? If they were going to close it anyway, why did the regulators keep the bank open for a year after it was insolvent?

The answer is: derivatives.

The Wall Street Journal, in a June 18, 1991, article by Craig Torres, revealed that regulators had propped the bank up for a year in order to unwind its portfolio of ``off-balance sheet'' derivatives transactions.

``Everybody knew we had $30 billion in assets'' on the balance sheet, BNE head of treasury operations Arthur Meehan told the Journal. ``But nobody but a small cadre of regulators and analysts knew we hand $36 billion in off-balance sheet activity.''

During November and December 1989, before BNE publicly revealed the size of its fourth-quarter losses, BNE chief currency and derivatives trader David Pettit was able to trim his off-balance sheet exposure by $6 billion; getting rid of the remaining $30 billion was not so easy.

The bank, under the close supervision of federal bank regulators, began attempting in January to cash out thousands of derivative transactions. However, as word of its financial troubles spread in financial circles, banks all over the world denied BNE credit, and demanded cash up front. Not surprisingly, this is when the Boston Fed began pumping money into BNE.

Having become a pariah on world financial markets, BNE enlisted the help of Shearson Lehman and Prudential Securities to help it unwind its currency swaps on the Chicago Mercantile Exchange's International Monetary Market. By doing so, Meehan acknowledged, ``we moved the risk out of the interbank system into the exchanges;'' but had we not, he said, regulators would have been forced to take over BNE's trading positions.

By the end of 1990, BNE had reduced its derivatives portfolio to $6.7 billion. A week later, the bank was closed.

The collapse of the BNE nearly sent the global banking system into ``gridlock,'' the Journal warned, adding, ``It all sounds far-fetched. But that's just what nearly happened, federal regulators say, in the months before they seized the Bank of New England.''

If BNE, with its $36 billion in derivatives, nearly sent the global banking system into gridlock, imagine what would happen were Citicorp, with its $1.4 trillion in derivatives, to fail.

``For certain banks there is a lot of exposure'' in the derivatives market, a senior examiner at the Office of the Comptroller of the Currency told reporter Torres. ``If we had a real problem with one of the larger banks, a meltdown scenario would be a possibility.''

That meltdown scenario is not just a possibility. It is, in fact, well under way.

CNN on ObamaCare

2010-11-02T12:56:00.002-04:00

Maybe we should just put Wal Mart incharge!

2010-10-27T22:09:00.000-04:00

Don't Buy What the FED's selling- Greg Roy

2010-10-16T02:56:00.004-04:00

Greg Roy wrote this and I agree...remember those famous last words "I'm from the government and I'm here to HELP YOU"!

I read an Associated Press headline a few minutes ago that said, "Stock futures rally after Bernanke says Fed is ready to provide more help to economy."

That's a complete con job, but Helicopter Ben
can't successfully pull that one on me.

The Fed Can't "Help" the Economy.

Brian Sack of the New York Fed said this week that, "QE adds to household wealth by keeping asset prices higher than they otherwise would be..."

Yeah, and the heroine dealer sells his product by telling you that it will "add to your enjoyment and quality of life."

Both are big, fat, ugly lies.

QE is short for "quantitative easing."

QE is nothing more than diluting the purchasing power of your money. Yes, things will cost more as a result of QE, and you will be no better off; you'll actually be worse off because your income will not keep pace with inflation.

Of course the media plays right along with this con job.

From listening to these teleprompter readers, who pass themselves off as economic journalists, the only thing standing between where we are now and economic Utopia are some purchases of government bonds by the Fed.

All the Fed needs to do, at least according to the people on TV, is create some more money, give it to their well-connected friends, and our financial system will be rid of all its problems.

Let me assure you that the Fed does NOT have any magic method to cure all of our financial ills.

Of course, since the Fed and the giant Wall street firms are in such a cozy relationship, Wall Street would like you to believe otherwise.

The Fed has already been creating money from thin air and handing it over to their friends, and they announced they stand ready to continue to do what they have been doing.

Well they've been doing that for quite some time, and it hasn't gotten us out of the woods yet. I have no reason to believe that it will now.

QE will only make financial matters worse - much worse.

Bernanke's statement is of such little relevance that it is ridiculous. It's the equivalent of me saying that I'm going to buy a new pair of shoes this year, therefore the economy has no more problems.

I buy a new pair of shoes every year, so what's the big deal?

The Fed simply cannot cure the problems in our economy with currency debasement.

The underlying problems remain, and reducing the value of the dollar to the same value as monopoly money will only bring complete disaster, and not economic improvement.

Bernanke is a threat to our financial well being.

Editor's note: Inflation is sure to follow...be prepared

Paris Façades: Carol Gillott Gallery Opening

2010-10-16T02:52:00.000-04:00

How Much Should You Work on Your Credit Score?

2010-09-28T17:38:00.001-04:00

http://www.cbsnews.com/stories/2010/09/27/business/main6905975.shtml

Ground Zero: Russian Offers $10M for Muslim Center Site to Build ChessCenter

2010-09-17T19:32:00.002-04:00

The Russian president of the World Chess Federation is offering $10 million to buy the site of the controversial Muslim community center near Ground Zero in order to build an international chess center instead of the controversial mosque.

Kirsan Ilyumzhinov, also the president of the Russian Republic of Kalmykia, announced at a press conference in Moscow Thursday that he has sent letters to New York Mayor Michael Bloomberg and Hisham Elzanaty, an investor in the Park51 site, on behalf of the World Chess Federation with their offer.

"I believe that international conflicts are extremely dangerous in complex times such as ours," Ilyumzhinov wrote in the letter to Bloomberg. "As the president of the World Chess Federation (FIDE) and as a person who has always supported interreligious understanding, I propose the construction of an International Chess Center at the suggested site of the mosque."

"My dream as president of FIDE is that chess becomes the only 'battlefield' between East and West," he added.

Ilyumzhinov told the Interfax news agency that his proposal is a solution to the "split within the American society" over the controversial project.

"What I am proposing is not to divide people on the basis of religion and ethnicity, but to unite the public around such a great game as chess," he said.

If accepted, he said, the center "will be built in the form of a chess figure, the king, of glass and concrete, which will decorate the city of New York."

Ilyumzhinov says that the offer of $10 million for Park51, also known as the Cordoba Project, was set because development mogul Donald Trump had previously made an offer "and we've decided to outbid him," according to news agency RIA Novosti. FIDE says the money would come from Ilyumzhinov himself and an unnamed investment group.

Sounds like a good idea to me...what do you think?

Is education the key to economic progress?

2010-09-06T17:23:00.003-04:00

"I know no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion by education. This is the true corrective of abuses of constitutional power."
-Thomas Jefferson

PERCENTAGE OF GRADUATES IN THE US over age 25(from DOL website)

High school graduates, age 25+, 2000 80.4%
Bachelor's degree or higher, age 25+, 2000 24.4%
From the above statistics we interpolate that 19.6 % of Americans lack a basic education (haven’t passed the 12th grade). This equates to about 60 million people who are rapidly becoming a permanent underclass.

Where have all the old jobs gone?
President Obama has talked about the need to put people back to work, saying that job growth is the “No. 1 focus in 2010.”
BUT a major obstacle to that goal — and an obstacle that, so far, has gone mostly unacknowledged — is that many of the jobs cut during this recession are never coming back. The world changed while we were waiting in the unemployment lines.
There is now a burgeoning underclass that has beeen forming out of those who have been completely left out of the educational (and many would say “economic”) equation. How did this happen in the greatest nation on earth?
The culprit may be a corollary of Moore’s Law, the idea that exponential advances in technology, innovation and automation work to displace an ever increasing number of workers as each new recession comes around.
The result is disconcerting: compared with previous recessions more employment gains in this recovery will come from new jobs, wholly new jobs, not the re-tooling of old ones.
This is creating a sea-change in the job market. Many people who were employed previously in lower skilled, more physical types of work find themselves set adrift in the current work environment with the now constant demand for high tech skills and media savvy.
The old jobs are gone…and they're not coming back….ever. This is creating a permanent underclass. Those with low levels of education and skills that are no longer economically meaningful along with others unable to locate work because of geographic oversaturation (think Michigan) are rapidly becoming marginalized, my fear (for this country) is that this marginalization will become a permanent piece of the economic environment.

While the rest of the world followed our lead and sent an increasing number of their young people to university we (meaning the US) fell gradually back, rested on our laurels and forgot that education is and always will be the prime driver of economic and technological expansion.

2010-09-06T17:05:00.000-04:00

Don't Forget About Color-Seth's Blog

2010-08-29T09:20:00.003-04:00

I recently created a job aid for work. I color coded the various pieces of information on the spreadsheet for added clarity. When I sent it out to my colleages many were surprised at the use of color. What amazes me is that more people don't use color in their spreadsheets. I use it so much I've made color a part of every EXCEL spreadsheet I create. It makes for easier reading, and when you have to read a bunch of numbers anything to make it interesting is appreciated! (Shockingly not everyone shares my affinity for bookkeeping!)

Expecting the Unexpected...should I still try and act surprised?

2010-08-28T23:19:00.008-04:00

On a personal note, we replaced our 20 year old heat pump on friday...we've been steadily making improvements the past few years to increase efficiency and hopefully reduce our bills a little...
...and, of course, we made startling discoveries concerning why the original heat pump hadn't worked very well. My friends know that I'm pretty handy around the house. In my past life, I was a carpentry contractor for over 25 years. I gave up the contracting life for a job in the corporate world.

Glad I did it and will never look back!

But can you imagine the trauma I go through having work done in our house?
We hired the HVAC contractors thru Home Depot. The prices were reasonable and the contractor recommended has been in the business for a long time and they're bonded, insured and certified (for what ? I'm not quite sure!).

Two fellas show up at 7:45AM on Friday with a large truck and a van then start unloading the heat-pump and the new air handler as well. They soon had the condenser unit set and running and the air handler was almost in place when the gentleman installing the air handler announced to me that there was a problem. The air 'returns' for the system were completely blocked with insulation and debris.

[For those of my gentle readers who aren't familiar with the inner workings of such things, perhaps a brief explaination is in order. Air movement around your house is governed by pressure which ciculates the air much like a heart circulates blood. In a central air system the system is made of two different piecea. The machine outside the house is called the condenser, it cools (and heats for a heat pump) a coolant that then is transfered to the air-handler aka that thing in your closet or basement or sometimes attic that makes odd noises)the air-handler is where the cooling actually takes place. A fan (called a squirrel cage)inside the airhandler pulls the air in and over a coil which contains the coolant (basically like antifreeze) which cools the air. It then blows the cooled air into the ducts and through your house (like the heart's ventricle). The 'return' is the duct work that moves the air moves back to the air-handler (like the heart's atrium) to be cooled yet again]
I took a flashlight and peered into the small drop ceiling area next to the air handler and sure enough, the return ducts had collapsed and were completely blocked with insulation, fallen duct wrap, and other flotsam and jetsam from when the attic was finished 9 years ago (before I lived here).
The contractor told me he would charge us a thousand dollars to clean it up...and I looked at him like he had two heads! A thousand dollars?!?!
We have always wondered why the second floor never cooled as well as the first...most repairmen would say: "because heat rises" or some such...we now know why...we just couldn't find out why until our airconditioning unit had been completely removed and the airhandler was torn out.
Being a renaissance "man for all seasons" I pride myself on being fit and ready for any task. So, naturally I felt I was capable of doing this one. I figured I'd have it done in a few hours. My HVAC contractor thought I was crazy and said that I'd be spending my whole weekend fixing the ductwork. I came up with a short term fix of installing the airhandler in the closet where it goes, then not connecting it to the ductwork (allowing for air movement through the second floor to act as a 'return' to cycle the air back to the airhandler, mostly by leaving the doors open). And we could attach the remaining ducts on Monday after I fixed the collapsed returns.
I called my wife, who was at work, and informed her of the situation and told her that I thought we just might be spending the weekend home fixing the duct problems so the contractor could finish the job on Monday.

I woke up this morning, had two cups of coffee and got to work on the cleaning and building while Susan went to the gym.

It was a messy, nasty, ichy, stinky job...But I was done in about 5 hours. I started by turning off the A/C and putting a piece of cardboard over the unit to keep the dust from falling into it. I the then spent the next two hours pulling loose insulation out of the ceiling cavity. When that was done I took a breather (literally, a breather as I had a heavy duty dust mask on, and a Tyvek suit with rubberbands on the sleeves to keep it shut! Makes ya kinda warm...and the insulation makes ya kinda fuzzy...!)
After I sat outside cooling off I went to Home Depot and bought a few boards to make ducts with. I figured a duct is basically a box, I can make a box...I fixed it like a carpenter would, I cleaned a path through the insulation where the air needed to go, built ducts out of 1X8's and wedged up the insulation board with the boards.Then I vacuumed the new 'ducts' I had built. I filled in the gaps between anything with a can of expanding spray foam, and Voila! New ductwork! And I was done by 1 PM!

After all that I was beat, I haven't done any carpentry in 3 years and it's still hard work. But I got my dear wife to buy me dinner...I figure it was the first time I ever made $200/hour doing carpentry. That is if you want to believe that a thousand dollars saved is a thousand dollars earned!(Ben Franklin would!)

I have one word...just one word....SILVER

2010-08-26T20:37:00.001-04:00

I've been buying silver, a little ever now and again...just when I can afford to...so far I'm up about 12% ....just don't go crazy 1 part silver to 4 or 5 parts cash is a good mix...

Oh, btw, Bullion Direct has the best prices...check it out yourself!

2010-08-22T12:44:00.001-04:00

“A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.” – Scottish historian Alexander Fraser Tytler, Lord Woodhouselee (1747-1813), unverified attribution

Read more: http://www.businessinsider.com/here-comes-the-imminent-flight-of-us-capital-2010-7#ixzz0xM0LiWhG

Can the average family buy an average house in America?(without loosing their shirts?)

2010-08-21T11:13:00.005-04:00

Overall, the median U.S. home price rose to $176,900 in the second quarter of 2010 (Source: Bankrate.com)

AVERAGE HOUSEHOLD INCOME: $48,500(DaveManuel.com, 8/21/10)

Mortgage Rates: 30 year fixed stands at about 4%

Average down payment = 10%

Lets do some quick math

176,900 - 10% down payment = 159,210

Monthly payment : $760.09 (for 30years @ 4%)

Lets not forget to add PMI since they are only putting 10% down

add $82.26 (http://www.goodmortgage.com/Calculators/PMI.html)

Most realtors calculate an additional 25% on top of the payment for maintenance costs on a home so we'll add another $210.

Lets not forget real estate taxes (in Pennsylvania where I live it averages about 30 mills) Lets estimate it at $530 which is low for many communities.
That's 130/month.

That totals to 1182 per month in housing costs.

On the income side we have 4,042 per month gross income from our example.

So let's write a monthly budget for our 'average' family based on averages:

We have calculated their housing costs as 1182 per month.
Avg Electric bill $120
Phone $60
Food $160
Car 700
Car Insurance 200
Cable 40
Restaurants 200
Gas 240
Clothing 150
Cellular 100
Credit cards 200

TOTAL 3352

And here is where the squeeze comes:

Gross income is 4042 but withholding takes away 25% of that or roughly $1000.
So they are left with 3352 in bills and 3000 in income....and then credit cards don't get paid every month, maybe they stop eating out for a while.
Then, our average American feels deprived and they splurge on something!

And, the credit card bill goes up...or they borrow from the bank or take out a payday loan...

And next...we all know what happens next right?

One of them looses their job, or gets sick, and they forgot to pay disability insurance and ....

WHAMMO! The party's over!

Then they try to sell the house, but, they never really took care of all those little niggly maintenance issues the realtor told them about.

The house sits on the market and doesn't sell...they sink deeper in debt...They start to argue over money (if they hadn't started this long ago!)
Then come the lawyers, what ever's left they take ...but the couple, now divorced, are living together because they have to, they can't sell the place. The house falls further into ruin... The prices of the houses on their block falls because of the declining state of this one property....

Ok enough of that you get the idea...what caused this problem in the first place? It wasn't some bone head in Washington or on Wall Street. It was the bone-head who bought a house he couldn't afford to begin with...

And don’t write to me about "teaser rates" and other such non-sense! Come on if you can't read the contract maybe you should just...dare I say it?? RENT!

Unemployment remains unchanged at 9.5% REALLY?

2010-08-15T12:27:00.006-04:00

Ok so they are saying the unemployment numbers are 9.5%... after reading the headlines I came away with the quick "in-my-head" calculation that it's really more like 10.2%. So I went searching for the relevant data and using the government's own numbers...I finally got around to looking this up this morning, and I found that what I had guessed was pretty close (I was off by around 200K jobs).

Here's how my figuring went:

I started at the census population (the latest number I found was 307,006,550)for the US as a whole. Then subtracted the under 18 years old and the over 65 years old age groups.

307,006,550 - [24.3% (population under age 18)+ 12.8% (population over age 65)]

24.3% = 74,602,592
12.8% = 39,296,838
___________________
37.1% = 113,899,430

307,006,550 minus 113,899,430 = 193,107,120 working age individuals in the US.

I then subtracted the disabled who totalled 49,746,248.

This left me with 143,360,872 able bodied workers ages 18 to 65.

According to recent unemployment numbers (supplied by DOL) there are presently 14.6 million unemployed currently on the roles.

14,600,000 / 143,360,872 = 10.184%

this rounds to 10.2% unemployed (like I said I was off buy around 200K by my first guess)

There are some differences in how I calculated the total work force but the DOL numbers (http://www.bls.gov/news.release/empsit.t02.htm)
were slightly LOWER for the overall workforce making the percentage unemployed slightly HIGHER! I used able bodied population between ages 18 and 65, they use age 16 as the lower limit, that may explain the minor difference. (And I took out all seasonal adjustments)

By another way of calculating the aggregate workforce, I quote the DOL website: "In July, the number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 6.6 million. These individuals made up 44.9 percent of unemployed persons..." (http://www.bls.gov/news.release/pdf/empsit.pdf).

Working backwards: 6.6 million / 44.9% = 14,699,332(rounded to the nearest whole number)

Which would place the aggregate number of unemployed even higher, closer to 14.7 million.

If I add in an additional (just under) 1% to the workforce (which would approximate the gain in population according to the population clock estimate(http://www.census.gov/main/www/popclock.html) as of this morning)...the work force is 144,757,634 and 9.5% of that is equal to 13,751,975.

BUT, if the number of unemployed is 14.7 million...See, the government number still won't work (even after a good massageing!) even the expanded workforce number comes in at 10.15%, closer to my first guess than the 9.5% that's been trumpeted in the media...?

...I can't help but wonder if the real unemployment number is being obfuscated being that we are rapidly approaching an election? But I leave that to your judgement.

Education pays ...

2010-08-07T10:20:00.000-04:00

Education pays ...

Op-Ed Columnist - Putting Our Brains on Hold - NYTimes.com

2010-08-07T10:14:00.000-04:00

Op-Ed Columnist - Putting Our Brains on Hold - NYTimes.com

Are you making up things to worry yourself over?

2010-02-15T18:30:00.004-05:00

We've now heard a steady stream of warnings from the media about every disaster scenario imaginable. I thought I'd take a moment and pause to revisit some of those great disasters that never were. There have been many stories written in recent years about all the many manias that we, as a species have fallen victim to...here's a short list:

First to come to mind, it just happened a few months ago (I did no research for this...is any really needed?) is the SWINE FLU...the while world was slated to contract this dread disease. It was unstoppable, experts were on CNN telling us how the flu 'pandemic' would spread across the workd. Vacinations were desprately needed, there was a shortage of available vaccine. The unvaccinated population had little to no defense against this virulent strain of "super-bug".

Hmm, heard anything lately? Any outbreaks anywhere else in the world. I'm sure scientists will say that because of the vaccine the US averted the crisis...which (I'm a cynic at heart) sounds rather self serving. Maybe we had the 'swine flu epidemic' story to take our minds off of what was really happening in the world? Like the economic disaster (that's pretty real). The global financial chaos (again we were 'pulled back from the brink').

.....then there were some of the other weird predictions that never came true.

.....the greatest HOAX of time...the dreaded Y2K financial meltdown! The world was going to end...computers crash, financial markets tumble, grocery stores with no food since their thermostats use computer chips manufactured before anyone thought there might not be a "19" in the date! Hmmm, what ever happened about that? Kinda odd, it sorta went past with a whimper....( At that historic moment I was at a retreat for the grand occasion I don't remember there being any problems like those the so called 'experts' predicted).

Those of us old enough to remember (you need to be at least 45) may remember "Global Cooling". Yes, I said it right, Global Cooling! Scientists over the world were convinced that the carbon pollution in the air (put there by all the factories belching smoke) would reflect so much of the sunlight that the whole world was going to cool and we'd be facing a new ice age...? Really? Your's truly was among the thousands of protesters that converged on Washington DC in the sping of '80 to protest: "No more NUKES! Hell no we won't glow!" etc...Ok so I was wrong...But please forgive me, after all, I was young and idealistic.

But (fortunately) when the scientific prediction of global cooling didn't transpire according to the predicted path, science (ever creative thinkers that scientists are) invented a new disaster, that's right, you guessed it! This time it's: GLOBAL WARMING!

Those of us privledged few who have read (at least) a little history are well amused by these schenanigans. In a forgotten part of history, all the way back in1844 there once was a mass hysteria in Russia concerning the end of the world. People were convinced the world was going to end in 1844! And the religionists had PROOF! PROOF! PROOF! that is was it, the world was coming to an end... to save yourself from the tribulation of the "end time" everyone was told to give all their possessions to the church and then throw themselves on burning pyres to be purified.(I swear I didn't make this up...actually I couldn't if I tried! I'm not that imaginative, after all I'm only a blogger not a scientist!) Thousands of people burned themselves alive to get away from the rapidly approaching end of days....it's very sad really.

Which begs the question: Do you think we'll ever learn?

If you want to be afraid, be afraid of the quadrillion+ dollar derivatives risk that has the potential to undermine the financial survival of the entire planet.

See, there IS something real to worry about!

The Linchpin Videos

2010-02-05T18:31:00.004-05:00

As you may know I'm a big fan of Seth Godin, here's a piece of one of his latest projects. The Linchpin videos (first in a series) "We're traveling around, finding interesting people and asking them to riff for a minute or two about what makes someone indispensable. Kicking off the weekly series is Gary Vee. Click the picture to view it. We'll do four for February and see how it goes."-Seth

Linchpin: GaryVee from Seth Godin on Vimeo.

5 centuries of bubbles and bursts - 1634-38: Tulips (1) - Money Magazine

2010-01-12T14:50:00.000-05:00

5 centuries of bubbles and bursts - 1634-38: Tulips (1) - Money Magazine

Karl Rove: Obama's Fiscal Fantasy World - WSJ.com

2010-01-08T10:24:00.000-05:00

Karl Rove: Obama's Fiscal Fantasy World - WSJ.com

H&R Blockheads and the Regulating IRS - WSJ.com

2010-01-08T10:20:00.000-05:00

H&R Blockheads and the Regulating IRS - WSJ.com

Reuel Marc Gerecht: The Meaning of al Qaeda's Double Agent - WSJ.com

2010-01-08T10:19:00.000-05:00

Reuel Marc Gerecht: The Meaning of al Qaeda's Double Agent - WSJ.com

An Elegant Statistic: Rents Signal Rise of D.C., Fall of N.Y. - WSJ.com

2010-01-08T09:52:00.000-05:00

Proof that supply and demand still work
Rents Signal Rise of D.C., Fall of N.Y. - WSJ.com

Congress To Vote on Debt Ceiling - WSJ.com

2009-12-15T23:31:00.000-05:00

Congress To Vote on Debt Ceiling - WSJ.com

One Year Later ... the Credit Crunch Lingers- Mike Burnick

2009-11-04T08:48:00.000-05:00

Credit markets have certainly improved from last year’s crisis and near financial meltdown, no question ... but conditions are still NOT back to “normal” ... not by a long shot.

A stark reminder of this comes from the fact that NINE more banks shut their doors last week — bringing the total to 115 bank failures so far this year — the most since the aftermath of the Savings & Loan crisis nearly two decades ago.1

In fact, these latest bank failures pushed the already insolvent FDIC deposit insurance fund even deeper into the red. The FDIC (meaning ultimately, taxpayers) had to cough up another $2.5 billion to “resolve” these nine troubled banks.2

In fact, the FDIC fund has already been operating in a DEFICIT balance since September 30. And, that was after the deposit insurance fund shelled out or committed $32 billion in bank bailouts since the crisis began. Even worse, according to its own analysis, the agency expects bank failures to continue through 2010!3

To some extent, these deepening problems in the banking sector were completely overshadowed last week by news that our economy is growing again!

The broadest measure of output in the economy, Gross Domestic Product (GDP), advanced at a +3.5% annual rate in the third quarter, according to preliminary government estimates.4

This was slightly ahead of consensus forecasts, which called for +3.2% growth. Never mind that motor vehicle output (thanks to “cash-for-clunkers” ) accounted for nearly HALF of the total increase in GDP growth last quarter, and that this program is now over.5

With these lingering issues, can we count on this robust GDP number to repeat in future quarters? And, has the financial storm truly passed, paving the way toward a sustainable recovery? Or, was this just a one-quarter GDP wonder ... with demand artifically created by government stimulus?

To help answer this question, let’s turn to a potentially even more troubling story about another financial failure early this week ...

CIT Group, a major lender to small- and mid-size businesses, filed for bankruptcy protection on Sunday. This wasn’t a total surprise, because the lender has been in intensive care since the credit crunch intensified over a year ago.

But CIT’s failure is significant. It is the largest financial failure since Washington Mutual was seized by regulators a year ago. It is also the first lender that had received government bail-out funds to go under ... taking $2.3 billion in taxpayer money down with it.6

That’s how much the U.S. Treasury injected into CIT late last year as part of the Troubled Asset Relief Program (TARP) — $2.3 billion. At the time, CIT was deemed “too big to fail”... along with many Wall Street firms ... but evidently, not anymore.

More troubling is the wide impact CIT’s failure could have on businesses throughout Main Street America. Remember, CIT was one of the nation’s biggest lenders to more than ONE MILLION small- and mid-size firms. I’m talking about a vast array of mom & pop businesses – like retailers, restaurants, manufacturers and distributors.

These are firms that are finding it increasingly difficult to access credit these days in order to fund their day-to-day businesses.

In 2007, CIT made almost $40 billion in new commercial loans. The firm financed another $45 billion in trade receivables that year ... but this figure plunged to just $4.4 billion in the first half of 2009.7

Last year, CIT was also the top lender for Small Business Administration (SBA) loans, but so far in 2009, the ailing firm originated just $65 billion in SBA loans.8

Here’s the problem: small businesses employ HALF of our country’s workforce and account for the bulk of new job creation in America. They also contribute nearly 40% of total GDP. But credit to consumers and small business has contracted by TRILLIONS of dollars as big banks cut their credit lines.9

They have never had a harder time getting a loan, and have very limited options to turn to for needed financing in today’s ailing credit markets.

To be sure, large public companies have been able to issue new debt since markets began to stabilize early this year, or have received government TARP funds — sometimes both. Unlike their public counterparts, small businesses are unable to access public credit markets and are finding it increasingly difficult to raise needed capital from other sources.

That’s because big banks — those that are still members of the “too-big-to-fail” club — simply AREN’T making new loans.

Now, U.S. bank lending has declined for the past 21 straight weeks, with total outstanding commercial loans and leases plunging by an astonishing $216 billion over that period. That’s a record 15% yearly rate of credit CONTRACTION — never before seen in ANY recession since records began.10

This credit contraction has been broad-based across all lines of business: consumer loans ... real estate lending ... and industrial loans. This may seem odd, since the big banks have received trillions in TARP money and other government bailout programs ... not to mention the ability to borrow from the Federal Reserve at near ZERO interest rates.

But rather than making productive new loans, which could help the economy recover on a sustainable basis, banks seem perfectly happy to stash this cash in their vaults ... or play the yield curve ... by borrowing at low rates and reinvesting in slightly higher yielding Treasury securities. So much so that cash on bank’s balance sheets soared by $160 billion last week alone ... and now totals a record $1.3 trillion!11

In other words, more than one year after the Lehman failure ... even with massive government bailouts ... the “velocity” of money in the U.S. financial system — or the money multiplier, as it’s called — is still extremely depressed.

Simply stated, all this liquidity created by the government and pumped primarily into Wall Street may have succeeded in shoring up big banks’ balance sheets ... at least for now.

But most of this money remains trapped in bank vaults rather than finding its way into the real economy and into the hands of credit-worthy businesses desperately seeking financing to remain afloat.

As a result, the current level of money and credit available to the real economy — the one on Main Street — may simply not be enough to sustain a normal business-cycle expansion and lasting recovery.

Of course, all this sounds disturbingly similar to Japan’s economic stagnation over the last two decades.

After its stock market and real estate bubbles popped in 1989, Japan’s big banks and major corporations suffered a massive shock to the system. In response, they refused to lend, hoarded cash, and were saddled with staggering bad debts that took many years to fully recognize and write-off.

Last year, major American icons followed suit, including Citigroup, General Motors, AIG, Merrill Lynch and General Electric, suffering a similar shock to the system. Many were bailed out by Washington. Small and mid-sized businesses, unfortunately, haven’t been so lucky. Apparently, they are “small-enough-to-fail.” Let’s hope not.

But without access to credit for Main Street businesses and absent government stimulus, sustained GDP growth may prove difficult to achieve going forward. Let’s hope we don’t keep moving down the same path as Japan has been on over the last 20 years. Stay tuned!

Good investing,

Mike Burnick
Director of Research & Client Communications
Weiss Capital Management, Inc.

1 Bloomberg: Bank Failures Buffeting FDIC Efforts to Bolster Insurance Fund, 11/2/09
2 Ibid.
3 Ibid.
4 Ned Davis Research Daily Economic Commentary, 10/29/09
5 Ibid.
6 Wall Street Journal: CIT’s Swoon Hits Taxpayers, 11/2/09
7 Ibid.
8 Reuters: CIT failure to leave small businesses floundering, 11/1/09
9 Wall Street Journal: The Credit Crunch Continues, 10/1/09
10 Gluskin Sheff Economic Commentary, 11/2/09
11 Ibid.

The OBAMA economic plan: GUESS WHAT! The Numbers Don't Work!

2009-10-30T20:08:00.005-04:00

...does this make sense? if $16,000,000,000 were used to create 30,000 jobs that's $533,333 spent to create each job....and if (according to more conservative Obama administration estimates) $150,000,000,000 was spent to create 650,000 jobs
.......that's $230,770 to create each job.
The average wage in America for 2008 was $39,652 (SSA figures) so they spent 13 1/2 years wages (on the aggressive side) or 5.8 years wages (more conservative estimates from the Obama administration) to create those jobs...
.... the payback period for those jobs is 6 years or more....what happened to the money? Where's the "economic stimulus" in that? A six year payback period?

...what happens if those jobs don't last 6 years? Where did the money go? Will the projects financed by the stimulus still have value in 5 years? 10 years? Will money still be owed on those projects? Are infrastructure projects that are being built with OUR stimulus money being paid for in full so there are no additional tax or tolls to be collected (FROM US!) ?

I thought the (supposed) reason for the stimulus was to jump start the economy?
I wonder how much we'll be paying in the future for the projects initiated under the stimulus...AND AND AND Paying taxes to pay off the money we are borrowing from foreign governments to create the stimulus...

IS THERE SOMETHING I'M MISSING HERE?

Come on, ya can't kid a kidder... who's kidding who?

Swine Flu: Is Another "Wave" Still Ahead? | Elliott Wave International

2009-09-09T09:47:00.000-04:00

Swine Flu: Is Another "Wave" Still Ahead? | Elliott Wave International

QuickBooks 2009 Certification Course and Exam

2009-08-26T01:12:00.000-04:00

QuickBooks 2009 Certification Course and Exam

MauledAgain

2009-08-22T02:46:00.000-04:00

MauledAgain: "Silver"

Time to apply a little patience and a lot of common sense.

2009-08-22T02:33:00.003-04:00

I read a short article at WSJ online awhile back that talked about the size of the financial bubble that this “bail out” is trying to fix. the amounts are so staggering that the $1 Trillion being allocated is like a moth in a hurricane!

I’m not alone wondering why no one is talking about the 500 trillion dollar global derivatives market and the nil effect that our puny $1,000,000,000,000 in bail out money will have on the derivatives already out there…that’s only .2% of the total nominal value of the global market…Is there something I’m missing here?

I think we’re in trouble…

Unless:

1. People start living within their means (YES I MEAN YOU!)

2. Everyone stops borrowing like there’s no tomorrow

3. WE ALL ACTUALLY START, dare I say it, saving money!

Learn a lesson from all of this mess!!!! and begin to live and manage your money with discipline.

Then maybe, just maybe, we can find a way out of this insanity,

We will no longer fall victim to the predatory practices of those evil money lenders
(Fool me once shame on you, But fool me twice …then shame on me!)(Didn't BOTH Jesus and Mohammad warn us all about money lenders in the Bible and the Koran?)

While everyone is busy (in Washington anyway) pointing fingers, we know who is to blame…WE ARE!

Sure Wall Street is evil and corrupt NO DUH!!

Politicians are a bunch of hacks who only look like their actually getting something done…While actually lining their own pockets and fleecing the people (again NO DUH!)

But WE THE PEOPLE.We can change how we manage ourselves, and our money.

Once and for all we need to change how we do things:

Common sense needs to become common practice (to quote my friend Todd Henry)

Take the words of Gandhi to heart -Be the change you want to see in the world.

Then 'We The People' can save the world (like we always do). We can do it by saving our money. I don’t think I’d be the first person to give this financial advice: Build cash, stop borrowing money with credit cards. Right now building cash is vital, it’s your life preserver in a thicket of complex financial problems. A great goal is to have 2 years of expenses put away (hey that's what corporate treasurers shoot for!).

Step one: Cut spending, cut spending, and then cut it some more.

Step two: Keep your cash in short term instruments. Money markets pay better than savings accounts. Just be careful when choosing a management company. Be sure and pick one that has a strong financial position (you can’t go wrong with either of the big guys, Vanguard or Fidelity).

Step three: Be extra careful with your credit right now. Spend a little more time each month planning your budget and checking your cash flow timing, don’t be late, if you let your credit slide in this environment you’ll be toast. Lenders are getting tougher and tougher, I just read a white paper from Fair Isacc (you know: the FICO score people) describing how they are adapting their scoring models to make it harder to rebuild your credit in the future if you have a slipup in your past (what a bunch of sweethearts they are, don't get me started on what I've found out about them).

Cut spending, build cash reserves and then invest them wisely (in highly liquid asset classes). Then watch and wait for the right time. Believe me, you’re time will come if you’re careful, patient and frugal.

Seth's Blog: Patient capital, markets that work and ending the endless emergency of poverty

2009-08-21T06:55:00.000-04:00

Seth's Blog: Patient capital, markets that work and ending the endless emergency of poverty

Small Biz: Auction Accounts to Get Cash Now | Financing | Small Business | Mainstreet

2009-08-20T10:17:00.000-04:00

Small Biz: Auction Accounts to Get Cash Now | Financing | Small Business | Mainstreet Bringing factoring into the digital age!

Is Hiding Your Social Security Number Worth It? at SmartMoney.com

2009-07-24T10:59:00.000-04:00

Is Hiding Your Social Security Number Worth It? at SmartMoney.com

The Art of Nonconformity » Sufficiency

2009-06-17T10:22:00.001-04:00

The Art of Nonconformity » Sufficiency

What Patton Might Have Said

2009-06-11T19:07:00.003-04:00

SUBJECT: What Patton Would Have Said

I think this is how General George S. Patton would sum
things up... and then catch holy hell from Eisenhower.
Patton sure had a unique way of expressing his thoughts.

ATTENTION!

http://mail.google.com/mail/?ui=2&ik=d208cd6ee1&view=att&th=121cc74a1cf7078e&attid=0.1.0.11&disp=emb&zw

To all those whining, panty-waisted, pathetic citizens,

it's time for a little refresher course on exactly why we

Americans occasionally have to fight wars to keep this

nation great.

Now, see if you can tear yourself away from your

Reality TV and Starbucks for a minute, pull your

head out of your ass, and LISTEN UP!

Abu Ghraib is not "torture" or an "atrocity". This is

the kind of thing frat boys, sorority girls, and academy

cadets do every year. A little fun at someone else's

expense certainly is no reason to wring your hands

or get your panties in a wad.

GOT THAT?

Now, what is pictured below IS an atrocity!
http://mail.google.com/mail/?ui=2&ik=d208cd6ee1&view=att&th=121cc74a1cf7078e&attid=0.1.0.4&disp=emb&zw

http://mail.google.com/mail/?ui=2&ik=d208cd6ee1&view=att&th=121cc74a1cf7078e&attid=0.1.0.5&disp=emb&zw

http://mail.google.com/mail/?ui=2&ik=d208cd6ee1&view=att&th=121cc74a1cf7078e&attid=0.1.0.6&disp=emb&zw

And, so was THIS!

http://mail.google.com/mail/?ui=2&ik=d208cd6ee1&view=att&th=121cc74a1cf7078e&attid=0.1.0.7&disp=emb&zw

So, which part don't you get?

http://mail.google.com/mail/?ui=2&ik=d208cd6ee1&view=att&th=121cc74a1cf7078e&attid=0.1.0.8&disp=emb&zw

So, you think that Islam is a peaceful religion? My ass!

Millions of those warped and misled sons-of-bitches are

plotting, as we speak, to destroy our country and our way

of life any way they can. Some of them are here among

us now. They don't want to convert you and they don't want

to rule you. They believe you are a vile infestation of Allah's

paradise. They don't give a shit how "progressive" you are,

how peace-loving you are, or how much you sympathize with

their cause. They want your ass dead, and they think it is

God's will for them to do it.

Some think if we give them a hug or listen to them, then

they'll like us. Oh, you agree? Then, you are a pathetic

dumb ass! If they manage to get their hands on a nuke,

chemical agents, or even some anthrax... then you will

wish to God we had hunted them down and killed them

while we had the chance.

How many more Americans must be beheaded? It seems

that you've fallen asleep again, so get your head out of

your ass! You may never get another chance!

Now, get off your sorry ass and pass this on to any and

every person you give a damn about... if you ever gave a

damn about anything!

DISMISSED

Op-Ed Columnist - Rising Above I.Q. - NYTimes.com

2009-06-08T20:01:00.000-04:00

Op-Ed Columnist - Rising Above I.Q. - NYTimes.com

Chrysler and the Rule of Law - WSJ.com

2009-05-15T12:32:00.000-04:00

ALL HAIL KING (I mean president?) OBAMA!

Chrysler and the Rule of Law - WSJ.com

Our tax dollars at play.....Check out this post from a fellow blogger Quotes from a D.C. airport ticket counter ! Hilarious!

2009-04-17T14:38:00.004-04:00

These are the people who are spending our money.

Your government at leisure..... A DC airport ticket agent offers some examples:

1. I had a New Hampshire Congresswoman ask for an aisle seat so that her hair wouldn't get messed up by being near the window. (On an airplane!)

2. I got a call from a candidate's staffer, who wanted to go to Capetown. While I started to explain the length of the flight and the passport information, she interrupted me with, ''I'm not trying to make you look stupid, but Capetown is in Massachusetts "Without trying to make her look stupid, I calmly explained, ''Cape Cod is in Massachusetts , Capetown is in Africa '' Her response - click.

3. A senior Vermont Congressman called, furious about a Florida package we did. I asked what was wrong with the vacation in Orlando . He said he was expecting an ocean-view room. I tried to explain that is not possible, since Orlando is in the middle of the state. He replied, 'Don't lie to me, I looked on the map and Florida is a very thin state!'' (OMG)

4. I got a call from a lawmaker's wife who asked , ''Is it possible to see England from Canada ? '' I said, ''No.'' She said, ''But they look so close on the map.'' (OMG, again!)

5. An aide for a cabinet member once called and asked if he could rent a car in Dallas . When I pulled up the reservation, I noticed he had only a 1-hour layover in Dallas When I asked him why he wanted to rent a car, he said, ''I heard Dallas was a big airport, and we will need a car to drive between gates to save time.'' (Aghhhh)

6. An Illinois Congresswoman called last week. She needed to know how it was possible that her flight from Detroit left at 8:30 a.m., and got to Chicago at 8:33 a.m. I explained that Michigan was an hour ahead of Illinois , but she couldn't understand the concept of time zones. Finally, I told her the plane went fast, and she bought that.

7. A New York lawmaker called and asked, ''Do airlines put your physical description on your bag so they know whose luggage belongs to whom?'' I said, 'No, why do you ask?' She replied, ''Well, when I checked in with the airline, they put a tag on my luggage that said (FAT), and I'm overweight. I think that's very rude!'' > After putting her on hold for a minute, while I looked into it. (I was dying laughing). I came back and explained the city code for Fresno , CA is (FAT - Fresno Air Terminal), and the airline was just putting a destination tag on her luggage.

8. A Senator's aide called to inquire about a trip package to Hawaii . After going over all the cost info, she asked, ''Would it be cheaper to fly to California , and then take the train to Hawaii ?''

9. I just got off the phone with a freshman Congressman who asked, "How do I know which plane to get on?'' I asked him what exactly he meant, to which he replied, ''I was told my flight number is 823, but none of these planes have numbers on them.''

10. A lady Senator called and said, ''I need to fly to Pepsi-Cola , Florida . Do I have to get on one of those little computer planes?'' I asked if she meant fly to Pensacola , FL on a commuter plane. She said, ''Yeah, whatever, smarty!''

11. A senior Senator called and had a question about the documents he needed in order to fly to China . After a lengthy discussion about passports, I reminded him that he needed a visa. 'Oh, no I don't. I've been to China many times and never had to have one of those.'' I double checked and sure enough, his stay required a visa. When I told him this he said, ''Look, I've been to China four times and every time they have accepted my American Express!''

12. A New Mexico Congress woman called to make reservations, ''I want to go from Chicago to Rhino, New York .'' I was at a loss for words. Finally, I said, ''Are you sure that's the name of the town?'' ''Yes, what flights do you have?'' replied the lady. After some searching, I came back ith, ''I'm sorry, ma'am, I've looked up every airport code in the country and can't find a Rhino anywhere.' ''The lady retorted, ''Oh, don't be silly! Everyone knows where it is. Check your map!'' So I scoured a map of the state of New York and finally > offered, ''You don't mean Buffalo , do you?'' The reply? ''Whatever! I knew it was a big animal.''

Now you know why the Government is in the shape that it's in! Could anyone be this DUMB? YES, THEY WALK AMONG US, ARE IN POLITICS, AND THEY CONTINUE TO BREED!
Posted by poloist12 at 4:45 PM 0 comments

Seth's Blog: Urgent personal finance advice

2009-04-10T08:15:00.000-04:00

Seth's Blog: Urgent personal finance advice

Innovation is the way....

2009-04-03T16:16:00.003-04:00

I recently received one of those long sales letters that we all get now and again. But there was a nugget of wisdom inside this one that I liked: so I stole it! and here it is:

Innovation always "goes up while the economy goes down," says W. Chan Kim, Fellow of the World Economic Forum.

And he's right...

In 1969, while the economy slumped 1.9%, the number of patents granted jumped 14%.

During the energy-induced recession of the early seventies, unemployment hit 9%. GDP dropped 4.7%. And yet innovation handed us major breakthroughs with advancements in DNA and the Internet.

Heck, recessions even served as the catalyst to launch innovative and now iconic brands like Trader Joes (1958), MTV (1981) and the iPod (2001).

Without exception, every notable recession over the last 100 years has seen innovation put us back on the road to economic prosperity.

Today's no different. -Anon

AIG is chump change -- let's find corporate America's hidden billions | Salon

2009-03-25T09:50:00.000-04:00

AIG is chump change -- let's find corporate America's hidden billions | Salon

Geithner plan will rob American taxpayers: Stiglitz | Reuters

2009-03-25T07:46:00.000-04:00

Geithner plan will rob American taxpayers: Stiglitz | Reuters

FASB blinks on Fair Value- Accountants World.com

2009-03-25T07:38:00.001-04:00

AccountantsWorld – Extensive resources for accounting, tax and payroll. Accountant, CPA: Join the largest community of CPAs and accountants.

What does $1 Trillion look like?

2009-03-24T20:44:00.001-04:00

My friend Todd Henry posted this...a great link! Makes you think!

Ready...Set ....Go...You're unemployed! Ya better have a plan...

2009-03-15T18:34:00.009-04:00

Here are the grim facts:

The average severance payout: 13 weeks pay (on average 2 weeks pay for every year of employment).

Average duration of unemployment: 22 weeks (statistics of unemployed workers 45-64 yo)

Source: Bureau of Labor Statistics.

How many weeks can you live off of your emergency savings? If you have less than 12 weeks pay in reserve (that's 6 missing paychecks if you are paid bi-weekly) you could be caught short.

What to do?

Make changes NOW to beef up your emergency cash account. Economize, cut out what you can cut out. If you think you still have job security, pay off what you can afford to pay off (and stop stop STOP running up the credit cards!) and pay down what you can't pay off. It wouldn't hurt to pay a little extra on your mortgage and get a month ahead.

If (and it is only an if)the axe falls, then pay only the minimums on whatever credit balances you still have. Work part time to bring in what you can to supplement your savings (if you're a single income household), or stay home and take over bargain hunting as part of your new role as a full time economizer/job searcher. (btw....don't forget great bargains can be found on EBay)

I don't mean to push doom and gloom but forewarned is forearmed! Ya gotta have a plan!

Another TED: Hans Rosling- WE CAN save the world & sword swallowing!

2009-03-15T08:39:00.004-04:00

Who says that statisticians don't have a sense of humor!

Another Great TED Talk

2009-03-15T08:19:00.001-04:00

DINKS

2009-03-13T19:29:00.002-04:00

It's a rather funny name...then I realized I am one!

Facebook | Everyone Needs to Feel Wealthy or How to Live a Good Life Via Food - Scordo.com

2009-03-13T19:26:00.000-04:00

Facebook | Everyone Needs to Feel Wealthy or How to Live a Good Life Via Food - Scordo.com

Millions are no longer millionaires

2009-03-11T16:36:00.000-04:00

When Giant's fall they smash everything beneath their shadow

2009-03-09T22:19:00.010-04:00

I am deeply disturbed by the imminent collapse of CitiBank. I don't know exactly where they stand today, but only a few years ago they were one of the largest players in the ForEx marketplace. I am left to wonder what their demise would mean to global liquidity (already pressed to the brink by the banking crisis). When Lehmans collapsed, no one was thinking about the functions they supported in the commercial paper market. Then, after they were gone, everyone was shocked to find out that there was no commercial paper market! It was gone. Where did it go? The paper market, it turns out, was a functional role that Lehman's filled.

I'm afraid that the same may happen with Citi, only this time around the global currency market will be the one to take the hit. For the record, Citi has over $2 trillion in assets and operations in 100+ countries. Citi fills a special niche in the global marketplace.

According to articles printed by the Wall Street Journal, 75% of foreign exchange depends on large global banks. These are tremendous corporations: names like Swiss Bank,Citigroup, Deutsche Bank, Union Bank of Switzerland, Chase Manhatten, Barclays, UBS AG, Royal Bank of Scotland, HSBC, and Bank of America.

The average daily trading volume in the Forex market is a little less than 2 trillion dollars(US). In 2002, Citi joined with Morgan and Chase to create Atriax. Atriax trades about half of ForEx volume (that's a trillion dollars a day)!

A similar structure, FXAlliance (FXAll), was created in 2001 and links together 50 international banks. FXAll accounts for about 25% of the marketplace. 75% of the world's currency markets are handled by only two very large players. So you can see the risk is clustered at the top and the fall of any one of these giants has the potential to destroy the delicate global web that is ForEx trading. Can anyone afford to let them fail?

The last thing we need is a currency meltdown on top of the raging liquidity meltdown we are already experiencing. Without sound global currency markets the flow of goods (I'm thinking food and oil) in and out of the ports of the world could grind to a halt. I hate to be yelling FIRE! in a crowded building but how many more financial behemoths can burn to the ground before the international economic engines start to sputter and stall?

The Tax History Project

2009-03-07T10:23:00.001-05:00

COBRA Continuation Coverage Assistance Under The American Recovery And Reinvestment Act Of 2009

2009-03-06T14:29:00.000-05:00

COBRA Continuation Coverage Assistance Under The American Recovery And Reinvestment Act Of 2009

The Stimulus: What's In it for You?

2009-03-06T09:04:00.001-05:00

The Doomsday Math Formula

2009-02-25T00:20:00.002-05:00

This from BOing BOing is a bit of a rant..but a fun read!

A snip from this month's WIRED cover story by Felix Salmon about a mathematical formula that played a critical role in the global economic collapse (which is worsening still as I type this blog post). Snip:

A year ago, it was hardly unthinkable that a math wizard like David X. Li might someday earn a Nobel Prize. After all, financial economists—even Wall Street quants—have received the Nobel in economics before, and Li's work on measuring risk has had more impact, more quickly, than previous Nobel Prize-winning contributions to the field. Today, though, as dazed bankers, politicians, regulators, and investors survey the wreckage of the biggest financial meltdown since the Great Depression, Li is probably thankful he still has a job in finance at all. Not that his achievement should be dismissed. He took a notoriously tough nut—determining correlation, or how seemingly disparate events are related—and cracked it wide open with a simple and elegant mathematical formula, one that would become ubiquitous in finance worldwide.

For five years, Li's formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels.

His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched—and was making people so much money—that warnings about its limitations were largely ignored.

Then the model fell apart. Cracks started appearing early on, when financial markets began behaving in ways that users of Li's formula hadn't expected. The cracks became full-fledged canyons in 2008—when ruptures in the financial system's foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril.

David X. Li, it's safe to say, won't be getting that Nobel anytime soon. One result of the collapse has been the end of financial economics as something to be celebrated rather than feared. And Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.

Recipe for Disaster: The Formula That Killed Wall Street (WIRED). BTW, the moral of the story as I see it is that we should STOP MATH NOW! Also: WIRED's other must-read story this month, Dan Roth on the move to bring radical transparency to the SEC. (Via @chr1sa, who I like to refer to as Original Recipe Chris Anderson)

Related Boing Boing blog post: How are you coping with collapse-anxiety?
posted in: Economy

'Atlas Shrugged': From Fiction to Fact in 52 Years - WSJ.com

2009-02-21T11:29:00.000-05:00

'Atlas Shrugged': From Fiction to Fact in 52 Years - WSJ.com

When asked if I'm a republican...

2009-02-20T08:48:00.004-05:00

I recently forwarded and email to a friend of mine who wrote back "Oh no, are you a republican?". The post I forwarded was about how Bush and McCain and Allen Greenspan had warned congress about the impending risk from Fannie and Freddie. It's not about politics...it's about the real history of how congress responded when first warned of the problem...

I've been a registered independent most of my life...I can't help but think that the republicans have gotten the shaft from the press, EXAMPLES: no one is talking about the success of Iraq...but the press goes on and on about how much trouble Bush got us into in afganistan...or how people going back to Clinton warned about the dangers to the financial system from Fanny and Freddie...and the same @$$W0les that helped create the problem (including legislations that mandated the granting of loans to people with no hope of paying it back) are now sitting in judgment of big business and saying that the mortgage industry/Wall Street was the problem...when you dig a little deeper you will find that they were taking money from these mega corporations all the time...till it became politically expedient to throw them under the bus...
I think it's incredible that democrats forgive their leaders every moral infraction, but republicans get tarred and feathered and run outta town on a rail....

It's not about politics ...it's about calling it what it is...maybe "politics" isn't a strong enough word!

Information 'diffusion'= The end of the expert

2009-02-16T06:39:00.008-05:00

Reading Seth Godin's blog topic from a few days ago I got to thinking about experts in general. He wrote about professional reviewers and how their days may be numbered.

I think it's quite possible that the era of the 'expert' is pretty much over.

Why? Because the internet has flattened accessibility to information. Usable information is no longer the domain of specialists and ivory tower (those who can't do) teachers. With perfect information perfectly diffused thru the system we no longer need experts to tell us what's happening, we are limited only by our search skills to efficiently locate data when we want it. Google has pretty much solved that problem.

Now, information has been made available to anyone with a surfing device. (Whoops, almost wrote 'computer' but that is "so five years ago".. now that we can search using cell phones and other handhelds.)Virtually all the information in the world has been 'democratized' via the internet.

But, the real democratization of information is limited by our individual ability to understand (and use) the data. Some things we're just not going to be able to democratize, we can diffuse the information for surgery,for example, but we still can't use it without some serious training. But jobs like being a sports writer, an automotive writer, a, dare I say it, a finance writer (just follow the experts, and look at the mess we have!), and these experts may all be 'diffused' out of business.

The experts may still have a place in all of this (if they think fast and find a way to influence the conversation), but their roll will change to something closer to the role of a subject matter expert. What they know may be important, but experts will no longer be the keepers of the keys when it comes to information and opinion. You must provide information that people pay attention to ("Ideas that spread, Win" -Seth Godin) and influence the discussion.

When a local web community can deliver 10 reviews of local restaurants written by people who are your neighbors why do we need professional food writers? (Who may have been comped their meals, or could be best buddys with the chef?)

When you combine this trend with the steady, inexorable decline of newspapers as meaningful sources of reliable information, the change in how influence is purveyed is obvious.

...I can't help but think of a phrase from Star Trek appropriate to this topic: to all those ivory tower experts out there BEWARE: "Resistance is futile, you will be assimilated"

Economic Scene To Spend or to Save? Trick Question

2009-02-13T19:51:00.001-05:00

A little humorous wisdom borrowed from my friend Alicia Bay Laurel: I present to you Swami Beyondananda

2009-02-11T08:17:00.001-05:00

Swami Beyondananda's 2009 State of the Universe Address
Submitted by alicia on Wed, 2009-02-04 21:37. blog

The Shift Has Hit the Fan:
Welcome to the Sane Asylum

By Swami Beyondananda

The shift has hit the fan!

Humanity has shifted its karma into surpassing gear, and political climate change has come to America. Thanks to a grassroots up-wising, we the people huffed and puffed together in the same direction and the winds of change blew in a breath of fresh air. And we can all breathe easier.

The vote in November was more than a vote for a new President. It was a vote for a new precedent to overgrow the lowest common dominator paradigm and take a step towards government of the people, by the people, for the people where the government does our bidding, not the bidding of the highest bidder—and where the Golden Rule can finally overrule the rule of gold. In the short term, the up-wising has been successful, and the American Evolution has begun. The first big shots have been fired, and we are on the road to recovering from an eight-year bout with Mad Cowboy Disease and Electile Dysfunction.

But now, if we want to heal the body politic of conditions like Deficit Inattention Disorder, Truth Decay and the deadliest one of all, an unchecked Military Industrial Complex, we must elect ourselves. Spiritually, it’s time to quiet our barking dogmas and evolve past the Ten Commandments to an even greater realization the One Suggestion: We are all in it together. Once a critical mass of us chooses to live by this credo, we can avoid the critical massacre called Armageddon, create Disarmageddon instead, and achieve fulfillment as a species—Humanifest Destiny.

The End of the Age of Nefarious?

Every journey into the light is preceded by a dark passage, and our entry into the Age of Aquarius is no different. As predicted in the celebrated quatrain, “When the goon moves into Lincoln’s house, and stupider aligns with Mars, then greed will guide the planet and fear obscure the stars …”), the Age of Nefarious delayed the start of the new millennium. But now the quatrain is heading down a new track, and soular power is shining a light on the endarkened corridors of soulless power.

Just as the eight-year journey that took us from Whitewater to Blackwater was coming to an end, some overzealous Bush-bashers hurled footwear to give the departing regime one final boot. That was understandable, but unnecessary. Better we should keep our shoes on, and use them to stand together at a time when healing wounds is more important than wounding heels. Besides, without Bush there could have been no Obama. His alarming actions awakened more people than Buddha, and a body politic in a fear-induced coma miraculously regained consciousness.

And now there is a new President: Barack Hussein Obama. After eight years of insanity, we can proclaim to the world, “America has a President Hussein!”

So now, we must face another awesome truth: We are living in a world gone sane.

Welcome to the sane asylum.

Trickle Down Goes Belly Up

It’s a good thing our political fates are on the upswing, as our economy has taken a sharp downturn. The house of credit cards economy based on trickle down has gone belly up, and we must face another, sadder truth. Individually and collectively, we”ve been suffering from Deficit Inattention Disorder, and since we were unable to do the math, we must now do the aftermath. It”s a buy-o-logical fact. You cannot spend more than you have. Nature knows this. We can use no more energy than what we have in reserve. We cannot charge energy on our Ascended Master Card and repay it next lifetime.

So yes, the casino economy coming down, but there is an upside to the meltdown. There is a great opportunity in the crisis. Consider this. When the dollar hits zero, we can pay off our entire $10 trillion national debt and hardly feel it!

Meanwhile, over the past eight years we have seen the fall of reptilian entities like Enronosaurus Wrecks, and most recently a character named Madoff made off with billions. Our entire economic system has been revealed as an extraordinary ponzi scheme where ordinary people are left holding the empty bag.

Unfortunately, this is nothing new. It”s the same old needy-greedy where our collective fear of not having enough – “scare city”—has empowered those privatizing privateers who are plundering our planet with their mining operations: that’s mine, that’s mine, that’s mine. This mining has overmined the planet and undermined humanity. Thus, the emergency we face right now.

So, what do we do? I am glad I asked that question. We must go beyond the fear-based state of emergency, to a state of emergent seeing. That is where we emerge and see the genuine wealth that is all around us: the virtually infinite energy from Father Sun, the prolific nourishment Mother Earth brings us every season, the love we generate from our hearts, and the inventiveness of our minds. With this realization, we have a one way ticket out of scare city … and we enter a state of a-bun-dance. That is where we get up off our assets, move our buns, face the music and dance together. In using our resources to create good goods and greater goodness, we can weave a web of mass construction that will make us all interdependently wealthy.

Heartland Security and Purple People Power

So … how do we do this? How do we go from our habitual “every cell for itself” consciousness that has caused our current “mining disaster”, to acting on the evolutionary truth that we are in reality “all cells in the body of humanity?” How do we shift from survival of the fittest to thrival of the fittingest?

First we must move from the fear-based Homeland Security to the love-based Heartland Security, and realize our one true security is in the land of the heart. While the beliefs in our head fool us all the time, the love in our heart is foolproof. When we face up to love, we can face down the fear.

What this means in practical reality is that we must step across the “red-blue” political divide that has kept us separate, and show our true colors as one purple people. Yes, we have all been wounded by polarizing politics, so let’s give ourselves a purple heart, and take the next courageous step to cohere around our shared “heart core” values and become … we, the purple.

I have a dream … that the rednecks shall lie down with the blue necks, and we tune out the polarizing mainstream media, which is sadly a brainwashing machine stuck on spin. More than ever, we need forums not againstums, dialogue instead of debate. When the body politic stops mass-debating and chooses to have healthy, pleasurable intercourse, we will finally create a healthy brainchild together.

This February, we celebrate Abraham Lincoln’s bicentennial, and our friend Richard Lederer (the anagram master known as Riddler Reacher), tells us that when we scramble the letters in “Barack Hussein Obama,” we get “Abraham is back: One U.S.”

You don’t have to be a Barack-backer to see that instead of relying on leaders from above, the next evolutionary step is for us to become the leaders we have been waiting for. I am Lincoln. You are Lincoln. We are Lincoln. And by linkin’ together, we free ourselves from slavery to the divisive beliefs in our minds, and form a more perfect union in the land of the heart.

Sure, these ideas may seem far-fetched, but we are nearer to fetching them than ever before. Remember, we are now living in a world gone sane. Change is ahead, change is afoot, and everything is changing from head to foot. Like it or not, we are destined to have heaven on earth. Might as well get used to it.

Copyright 2009 by Steve Bhaerman. All rights reserved. To find our Swami’s schedule and get a free catalogue, call toll free (800) SWAMI-BE or visit him online at

A Group of Predictions

2009-02-11T07:01:00.008-05:00

Fortune spoke to some of the market's sharpest thinkers and what they had to say about the future is frightening.

Nouriel RoubiniAKA "Dr Doom"

Things are going to be awful for everyday people. U.S. GDP growth is going to be negative through the end of 2009. And the recovery in 2010 and 2011, if there is one, is going to be so weak - with a growth rate of 1% to 1.5% - that it's going to feel like a recession. I see the unemployment rate peaking at around 9% by 2010. The value of homes has already fallen 25%. In my view, home prices are going to fall by another 15% before bottoming out in 2010.

For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments such as short-term or longer-term government bonds. It's better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It'll be hard and challenging enough. I wish I could be more cheerful, but I was right a year ago, and I think I'll be right this year too.

Bill Gross of PIMCO

...lenders and investors alike must begin to assume risk as opposed to stuffing money in modern-day investment mattresses. The process will take time. Twelve months of the Obama Nation will not be sufficient to heal the damage of a half-century's excessive leverage. The downsizing of private risk positions - replaced by government credit - will also result in reduced profit margins and a slower rate of earnings growth after the bottom is reached.

Investors need to recognize these titanic shifts in market and public policies and be content with single-digit returns in future years. Perhaps the most lucrative pockets of value are in high-quality corporate bonds and preferred stocks of banks and financial institutions that have partnered with the government in programs such as the Troubled Assets Relief Program (TARP). While their profitability may be restricted, their ability to pay interest and preferred dividends should be unhampered. Above all, stick to high-quality companies and asset classes. The road to recovery will be treacherous.

Robert Shiller

I'm optimistic that we'll do better this time (in comparison to the depression), but I'm worried that we're vulnerable. One of the lessons from the Depression is that things can smolder for a long time. What I'm worried about right now is that our confidence has been hurt, and that's difficult to restore. No matter what we do, we're trying to deal with a psychological phenomenon. So the Fed can cut interest rates and purchase asset-backed securities, but that only works in really restoring full prosperity if people believe that we're back again. That's a little hard to manage.

In terms of the stock market, the price/earnings ratio is no longer high. I use a P/E ratio in which the price is divided by ten-year average earnings. It's a really conservative way of looking at it. That P/E ratio got up to 44 in the year 2000, which was a record high. Recently it was down to less than 13, which is below the average of around 15. But after the stock market crash of 1929, the price/earnings ratio got down to about six, which is less than half of where it is now. So that's the worry. Some people who are so inclined might go more into the market here because there's a real chance it will go up a lot. But that's very risky. It could easily fall by half again.

Sheila Bair head of FDIC (this one is my personal favorite, you'll see why...)

My 87-year-old mother is a native Kansan who grew up in the throes of the Great Depression and the Dust Bowl. She is a classic "buy and hold" investor who would make Warren Buffett proud. Her investment returns always exceeded those of my father, to his eternal consternation. He actively traded his stocks and produced decent returns, but nothing like those my mother achieved by simply buying stocks of companies she understood and liked, and then holding onto them.

So I have become a strong advocate of the "basics" when it comes to investing: Do your homework, invest in securities you understand, and then hold on. As a government policymaker, I advocate informed investment decisions - not only to protect investors from losses but also because the efficient functioning of our capital markets relies on investors' doing their homework.

Trillions of dollars of investor money funded millions of mortgages that borrowers had little chance of repaying. Investors relied heavily on ratings agencies, which in turn relied too heavily on mathematical models instead of analyzing the underlying loans. To be sure, borrowers, brokers, lenders, securitizers, as well as state and federal regulators, all bear responsibility for the widespread deterioration in lending standards. But the problem was compounded by the fact that those ultimately holding the risk - the investors - did not look behind their investments at the quality of the mortgages themselves. If they had, they would have seen high loan-to-value ratios, little income documentation, burdensome fees, and steep payment resets.

.....we now know that as home prices began to depreciate, borrowers were unable to refinance, leading to massive foreclosures and further price declines. This self-reinforcing downward spiral is at the core of the economic problems we face today.

We will dig out of this. And when we do, I hope for a back-to-basics society - where banks and other lending institutions promote real growth and long-term value for the economy, and where American families have rediscovered the peace of mind of financial security achieved through saving and investing wisely. We need to return to the culture of thrift that my mother and her generation learned the hard way through years of hardship and deprivation. Those are lessons learned that the current crisis is teaching us again.(italics added by editor)

Jim Rogers(I'm a big Jim Rogers fan, have been for years, if there's a way to play it, Rogers will find it)

You're going to see gigantic shortages developing over the next few years. The inventories of food worldwide are already at the lowest levels they've been in 50 years. This may turn into the Great Depression II. But if and when we come out of this, commodities are going to lead the way, just as they did in the 1970s when everything was a disaster and commodities went through the roof.

...I've been buying recently is agricultural commodities. I've also been buying more Chinese stocks. And I'm buying stocks in Taiwan for the first time in my life.

...I'm now selling long-term U.S. government bonds short. That's the last bubble I can find in the U.S. I cannot imagine why anybody would give money to the U.S. government for 30 years for less than a 4% yield. I certainly wouldn't. There are going to be gigantic amounts of bonds coming to the market, and inflation will be coming back.

In my view, U.S. stocks are still not attractive. Historically, you buy stocks when they're yielding 6% and selling at eight times earnings. You sell them when they're at 22 times earnings and yielding 2%. Right now U.S. stocks are down a lot, but they're still very expensive by that historical valuation method. The U.S. market is yielding 3% today. For stocks to go to a 6% yield without big dividend increases, the Dow will need to go below 4000. I'm not saying it will fall that far, but it could very well happen. And if it gets that low and I'm still solvent, I hope I'm smart enough to buy a lot. The key in times like these is to stay solvent so you can load up when opportunity comes.

John Train(the voice of experience in this group advises to move to defensive stock holdings)

I presume that although we are in a severe recession it will not decompose into a full-scale depression, because that is what everyone is afraid of and desperate to avoid.

Investment opportunity is the difference between the reality and the perception. And since many equities are priced as though a depression might be on the way, many of them are attractively priced.

One approach I am comfortable with is owning shares in wonderful businesses that do well in all circumstances - Johnson & Johnson and the like. They rarely fly out of the park, but provide long, steady gains that will get you where you want to go. They often have huge cash hoards, e.g., Cisco, Apple, Microsoft, and Berkshire Hathaway, whose war chests exceed $20 billion. Or Hewlett-Packard, Google, Intel, or IBM, all in the $10 billion league. Such companies can take advantage of a weak market just as private investors would, with the difference that they know very well how much to pay for what fits their product line.
...when should you buy? In or near what I call the Time of Deepest Gloom, if you can spot it.

Meredith Whitney of Oppenheimer

What happens in 2009? Frankly, it's hard for me to predict what's going to happen next week, never mind next year. What I will say is that I expect all these banks to be back in the market looking for more capital. We'll also have a wholesale restructuring of our banking system, probably toward the end of 2009. There will be banks getting smaller, banks going away, and banks consolidating. At the same time, though, I think you'll see more new banks created. We've already seen more applications. And it's a great idea: You start with a clean balance sheet and make loans today with today's information. Plus, right now you've got a yield curve that's good for lending.

I think the overall economy will be worse than people expect. The biggest issue will be consumer spending. If 2008 was characterized by the market impacting the economy, then 2009 will be about the economy impacting the market. It's already started.

Wilbur Ross(a billionaire turnaround expert weighs in on the government economic plan)

...the economy will not stabilize until mortgages are adjusted down to the value of homes, with affordable payment schedules, and until new mortgages become available across the home-price spectrum. Till then, the poverty effect of falling house prices and unemployment moving up toward 7% will hold consumer spending back from its former 70% contribution to our economy.

Hopefully the new Treasury Secretary, Tim Geithner, will incentivize lenders to restructure mortgages by guaranteeing half of the reduced principal amount and sharing among the government, homeowners, and lenders any subsequent appreciation.

Addressing unemployment is paramount. Detroit needs government support in order to implement independently verified concessions from all stakeholders - not just labor...

If President Obama promptly and decisively resolves these problems...and restores public confidence, he can end the recession by early 2010. If not, the economy will languish for a long time. Given the economic uncertainty, investors who are too worried to buy equities might consider tax-exempt bonds with yields around 6%, equivalent to almost 10% before federal, state, and local taxes. Investors who want to hedge the risk that federal deficits might lead to longer-term inflation and drive up interest rates, causing these bonds to decline, might buy some TIPS, or Treasury inflation-protected securities, as well. TIPS are U.S. Treasury bonds whose principal amount varies with consumer price indexes to provide holders with a rate of return in constant dollars. TIPS prices currently imply near-term deflation, and that means that they would appreciate in value if inflation comes back.

At my firm, we've been starting to invest in some distressed financial companies. That seems as if it will work out reasonably well, because they're very, very cheap. The financial services sector is kind of where the problems started, and it's probably going to need to be fixed in order for the problems to be resolved. We see opportunities there.

OK, so what's to be found in all of this? I read two ways to go, either stay in cash and short term instruments, with a little foray into TIPS and short term bonds (Meredith Whitney & Dr Doom) , or maybe move towards defensive stocks (Wilbur Ross & Sheila Bair), or Jim Rodger's advise to put your money into ag commodities (a little beyond the pale for most investors).
Personally I'm leaning towards a mix of TIPS, money market mutual funds and a longer term muni-fund (taking Mr Ross's suggestion about a 6% yield). So there you have it...what do you think?

A Glimpse into the Ancient World

2009-02-10T02:30:00.005-05:00

Nebuchadnezzar II (Nabu-kudurri-usur II) was the real genius and builder of Babylon. Of its 70 years in existence he ruled 45 years. As the commander of Nabopalassar’s armies he was unstoppable. He broke the power of Egypt at the battle of Carchemish and proved to be one of the mightiest monarchs of all time.

Among the cities he invaded and plundered were Tyre, Moab, Ammon, Edom, and Jerusalem.

Inscriptions, documents and letters written during the 43 years of his reign (604-562 BC.) give an idea of the power and wealth of Babylon. Here are some interesting facts according to the historian Herodotus (Bk 1, 178-186) about Nebuchadnezzar's Babylon:

-In the form of a square, 14 miles on each side, and of enormous magnitude

-The brick wall was 56 miles long, 300 feet high, 25 feet thick with another wall 75 feet behind the first wall, and the wall extended 35 feet below the ground

-250 towers that were 450 feet high

-A wide and deep moat that encircled the city

-The Euphrates River also flowed through the middle of the city. Ferry boats and a 1/2 mi. long bridge with drawbridges closed at night

-"Hanging Gardens"(one of the wonders of the ancient world) and water was raised from the river by hydraulic pumps

-Eight massive gates that led to the inner city and 100 brass gates

-Streets were paved with stone slabs 3 feet square

-The great Tower (Ziggurat) and 53 temples including the "GreatTemple of Marduk." 180 altars to Ishtar

-Golden image of Baal and the Golden Table (both weighing over 50,000 lbs of solid gold.)

-2 golden lions, a solid gold human figure (18 feet high)

-Nebuchadnezzar’s palace was considered to be the most magnificent building ever erected on earth.

The civilization that was Babylon was the center of the ancient world for 25 centuries...I find it a most sobering thought that the great city described here has been reduced to nothing more than a pile of dust in the desert. The bricks of the great walls all scavenged and scattered about the world. Babylon was all but forgotten for over 1500 years (except as an old Bible story) until it was discovered by modern archeologists...

What will be remembered of America 1500 years from now...and what, if anything, will remain of our once great civilization?

Let Thrift Be Your Ruling Habit

2009-02-07T10:15:00.005-05:00

Save a part of your income and begin now, for the man with a surplus controls circumstances and the man without a surplus is controlled by circumstances.
– Henry H. Buckley

It took thrift and savings, together with tremendous character and vision, to make our nation what it is today. And it will take thrift and savings, together with constant ingenuity and stamina, to conserve our remaining resources to enable us to continue to be a great nation.
—John W. Synder

Thrift is that habit of character that prompts one to work for what he gets, to earn what is paid him; to invest a part of his earnings; to spend wisely and well; to save, but not to hoard.
—Arthur Chamberlain

More people should learn to tell their dollars where to go instead of asking them where they went.
—Roger Babson

Debt is the secret foe of thrift, as vice and idleness are its open foes. The debt-habit is the twin brother of poverty.
—T. T. Munger

Thrift and prosperity have gone hand in hand since Abraham's flocks grew and multiplied. Thrift is not, as many suppose, a self repression. It is self expression, the demonstration of a will and ability to raise one's self to higher plane of living. No depression was ever caused by people having too much money in reserve. No human being ever became a social drifter through the practice of sensible thrift.
—Harvey A. Blodgett

THRIFT IS A HABIT- by Elbert Hubbard

A Habit is a thing you do unconsciously or automatically, without thought. We are ruled by our habits. When habits are young they are like lion-cubs, soft, fluffy, funny, frolicsome little animals. They grow day by day. Eventually they rule you.

Choose this day the habit you would have to rule over you. The habit of thrift is simply the habit which dictates that you shall earn more than you spend. In other words, thrift is the habit that provides that you shall spend less than you earn. Take your choice.

If you are a thrifty person you are happy. When you are earning more than you spend, when you produce more than you consume, your life is a success, and you are filled with courage, animation, ambition, good-will. The the world is beautiful, for the world is your view of the world, and when you are right with yourself, all's right with the world.

The habit of thrift proves your power to rule your own psychic self. You are the captain of your soul. You are able to take care of yourself, and then out of the excess of your strength you produce a surplus.

Thus you are not only able to take care of yourself, but you are able to take care of some one else—of wife, child, father and mother, to lend a hand to sick people, old people, unfortunate people. This is to live.

The man who can not earn a living for himself is something less than a man. The man who can barely get a living and no more is a little better than a barbarian or a savage.

"All wealth comes from labor applied to land," said Adam Smith, who wrote a wonderful book on the subject of thrift.

This book, The Wealth of Nations, was published in the same year that American's Declaration of Independence was signed. Buckle calls it, "the greatest book ever written in its influence for good, save none."

In this book is the statement, "All wealth comes from labor applied to land." Nowadays we say, "All wealth comes from intelligent labor applied to land." Let us say, "All wealth comes from loving labor applied to land." The successful labor is loving labor.

Loving labor and thrift go hand in hand. He who is not thrifty is a slave to circumstance. Fate says, "Do this or starve," and if you have no surplus saved up you are the plaything of chance, the pawn of circumstance, the slave of some one's caprice, a leaf in a storm.

The surplus gives you the power to dictate terms, but most of all it gives you an inward consciousness that you are sufficient unto yourself.

Therefore, cultivate the habit of thrift, and the earlier you begin, the better. And no matter how old you are, or how long you have lived, begin this day to save something, no matter how little, out of your earnings.

Off the beaten track of travel there is a country school, the typical little red school house.

The teacher is a hunchback. Once he wrote: "I know nothing about the science of education. I just love my children, and we study together and work together." And so, out to one side of the school, in summertime, there is a school-garden where every child has a little flower-bed or vegetable-garden of its own.

The pupils plants the seeds he wishes to plant, digs it up sometimes to see how it is coming along, waters it, hoes it, watches it sprout through the surface, wooed with the kisses of the summer sun. He sees it grow and evolve into a beautiful plant, that produces a flower, perhaps at the top, and an edible beneath the surface.

So last May in this garden the children were growing corn, potatoes, marigolds, sweet williams, violets, and through this working out of doors instead of playing games all of the time, the children were learning to economize time, to be saving of time, for time rightly used is the thing which, when it co-operates with love and labor, produces wealth and all the things necessary to life and well-being.

But on a last trip to that little red schoolhouse, the teacher told of another innovation. It was this: A savings-bank account for each child in the school, a bank-book for each child who can deposit one cent or five cents.

Here was a lesson in economics. And economics is simply the science of business, and business is the science of human service.

Some day business is going to be regarded as the greatest science in the world, for it includes the science of making a living. And my little hunchback teacher recognizes this fact, so he is teaching his children the science of saving, and thrift will become, indeed, a habit with those children.

The thrift habit is a sister to a good many other beautiful habits. Thrift implies industry, and of course thrift is economy, and economy means the care of things and their proper use. You do not waste anything that can be used. You save it, care for it, reserve it. In the country when we get more apples than we can store in the cellar, we peel them, slice them, dry them in the sun or in pans on the stove, and then the children string them with a thread and needle, and we hang them in a dry place in the garret where they can be used when we need them. Children in the country sometimes will preserve many pounds of apples this way and sell them, and buy clothing, or books, or a gramophone, or skates, or shoes.

There is a factory in a country town where there are two hundred fifty employees, and every employee in that factory has a savings-bank account.

Thus this factory is a school run on a principle somewhat like that of the little red schoolhouse, where the little hunchback teacher, with no children of his own, is yet the father and big brother to all of his pupils.

Children should early be taught the savings-bank habit. Such children will grow up—at least, most of them will—able, courageous, helpful, willing, and a few of them will evolve into strong and able people, leaders in any line of undertaking which they may select or which Fate may send.

Thrifty people, other things considered, have good health. Thrift implies that you do not overeat, that you sleep at least eight hours, that you go to bed early and get up early. Benjamin Franklin was right: "Time is money." Time is surely money when it is rightly used.

The habit of thrift tends to give clear eyes, good digestion, efficient muscles. People on moderate salaries have no business to patronize taxicabs. Leave that to elderly people who can not easily board the street-car; also leave it to the people who have pride plus and who wear clothes they are afraid will get soiled.

Young people, especially, should economize, always remembering that we should have everything we really need. It is folly to skimp in eating for the sake of saving, or to wear dowdy raiment. Have what you need, but do not buy things you do not need.

But there is a joy in going without things—a fine tang eliminating the superfluous. Old Walt Whitman knew of this when he said: "Henceforth I Will complain no more. Done with indoor repinings, strong and content I will take to the open road."

It's lovely to be able to walk, to run, to carry your own grip, to get along without flunkies, to eat moderately, sleep hard, breathe deeply, and look everybody in the eye with a look which says you can take care of yourself.

In the beating of the heart there is a secondary movement. We call these two movements systole and diastole. Every worthy action has this secondary effect, which is also good. We know this secondary by the name of "survival value," and survival value is the thing that endures after the act itself is complete.

There is a survival value in the habit of thrift. Besides the money you save, you are adding strength to your character, you are digging trenches, building fortifications, laying in ammunition, and providing yourself against any attack from enemies, such as poverty, disease, melancholy, distrust, jealousy, insanity.

Ben Franklin is our greatest example of thrift. He wrote more on it and wrote better than any other man we know. He began practising thrift when he was twelve years of age, and he practised it and wrote on it all his life.

He became the richest man in America in his day, richest not only in money but in health, brains, sanity, good-cheer, influence. He was a scientist, a businessman, a linguist, a diplomat and a philosopher. He always paid his way. He founded the University of Pennsylvania, founded the first public library in America, organized an insurance company, pretty nearly captured the lightnings, invented spectacles, manufactured the first cook-stove, went to France and borrowed money on which Washington fought the War of the Revolution; and the basis of all the strength and excellence of Benjamin Franklin lay in the fact that very early in life he acquired the habit of thrift.

Shakespeare above all writers we know knew the value of thrift, not only thrift in the matter of money but in the matter of ideas, of working his thoughts up into good coin. He wrote out his thoughts, and thus got the habit of expressing them, and while he was a businessman and would not consider himself anything else, he yet lives for us as the greatest writer of all time.

Thrift in thought will lead to the habit of writing, and any good man who writes a little every day will become a good writer. We grow by doing.

Well did Shakespeare say, "Thrift, Horatio, thrift!" implying that the young man Horatio should acquire the habit of thrift first,and then all else in the way of good things would follow.

The girl or boy who acquires the habit of thrift early in life will be a power for good in any community. Thrift! It is the basis of all the other virtues. To spend less than you earn—thisF way lies happiness. Thrift!

Elbert Hubbard was a renouned philosopher, author, editor and lecturer of the late nineteenth and early twentieth centuries. In 1895, he founded the Roycrofters, a semi-communal community of artists and craftspeople, in East Aurora, NY. He and his wife were lost at sea, May 7, 1915, while travelling to England aboard the ill-fated Lusitania.

A quote from Elbert Hubbard

2009-02-07T10:00:00.000-05:00

There is a survival value in the habit of thrift. Besides the money you save, you are adding strength to your character, you are digging trenches, building fortifications, laying in ammunition, and providing yourself against any attack from enemies, such as poverty, disease, melancholy, distrust, jealousy, insanity.

The Next Financial Tsunami: Pensions

2009-01-23T08:03:00.008-05:00

A favorite read of mine each day, CFO.com recently delivered an article about the plunge in pension plans caused by the decline in the equities market. The problem is placing a heavy burden on corporations that offer defined benefit plans to their employees. The value of their debt and equity portfolios have collapsed and they are left with funding shortfalls at a time when cash is scarce. These shortfalls will need to be filled from the already cash strapped corporate coffers. This problem only looks to get worse unless pension funds are 'saved' by a significant turn around in the financial markets.(I have never found 'HOPE' to be a meaningful financial planning tool!)

The Pension Protection Act of 2006, which was created after the technology and internet collapse in 2001, requires companies to cover 94% of retirement-plan liabilities for those obligations to be considered fully funded in 2009. Recent funding statistics indicate that there is over a 30% shortfall in funding ratios. Where will the additional money come from? How much are we talking about here? Good questions. Good questions with few answers.

This also has a direct effect on company balance sheets. A FASB (Financial Accounting Standards Board) Ruling: FAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, requires companies to report the funding levels of their retirement plans and estimates of future liabilities on the balance sheet. Short falls are then taken as a deduction from Net Income...ouch. Or even worse: as a reduction to shareholder's equity...Or, liablity can be buried in the balance sheet under the category of Other Comprehensive Income. Buried to obscure the effect these ballooning liabilities will have on the company's financial picture, or even their viability going forward (yes folks, we have an even newer way to spell bankruptcy!).

In his article for CFO.com from September 2006, David Katz writes: "In the new standard, the funded status of a pension will be defined as the difference between the fair value of a plan's assets and the projected benefit obligation, a gauge of liabilities that includes estimates of employee salary increases and other costs far into the future. Opponents of the metric favored the use of an accumulated benefit obligation because it doesn't include estimated future pay increases."

Translation: benefit payouts are calculated on future salary levels which increase the current liability on the books. The trick that bothers me is that future dollars would be devalued by inflation, but when the future values are put into today's dollars the overall effect is to inflate the liability.

Another double whammy contained in the calculation is: as equity markets decline, not only are companies facing a drop in available funding (they can't go out into the market and float a stock issue to raise needed capital), but they also have a decline in retirement plan funding levels which must be met to keep ahead of the required funding levels set by law (94% is the required level: i.e. a fall of 30% funding puts them at 64% and sponsors then have to pony up that money to meet the funding level regulations). Benefit departments are stuck in the middle and being pulled at both ends.

Will this new crisis sound the death knell for Defined Benefit Plans (DBP's)?

DBP's have, for the past two decades, been steadily losing ground to defined contribution plans. Part of the reason they have fallen from favor is the risk incurred having to guarantee funding for payouts to employees both now and in the future. DBP's create risk for companies, where as DCP's lay off that risk to the individual contributors.

Into the mix we add together the current liquidity crisis, ballooning unfunded liability, escalating regulation around retirement plans, and we are left with another(dare I overuse an already overused metaphor?) financial 'perfect storm' barreling down upon us...

How many companies will be bankrupted by having to meet the funding levels required by retirement plan regulations? How will they come up with the cash needed to secure future payment levels? Will the DBP's require another round of bailout legislation? Is anybody paying attention to this in Washington? (or in the mainstream press?)

The answers to these burning questions coming soon to future headlines. The real question I'm beginning to ask is: When does all of this end?

Response to an article about the Fed and their 'control' of the economy in the past ...

2009-01-23T07:15:00.003-05:00

It has always seemed to me like the Fed's 'control' of the economy is a case of the tail wagging the dog...

I'm not too sure I agree with the assessment of Mr Greenspan's tenure at the helm of the FED, they can only DO so much (read 'not much') and their work is always noticed in the wake of an economic disaster of some sort. Not too long ago mortgage companies petitioned Washington and requested reduced lending standards so that people could afford houses at 5 times their annual income. Supposedly, if they had a good credit rating (I haven't heard anyone talking about Fair Isacc and their scoring method, aren't they implicated in all of this mess? Does scoring really work? Having gone through two major banking debacles involving the credit and lending system could there be something wrong with the system?), and the moneycrats said AMEN....The government's economists decided one day to re-jigger the way inflation is measured (that was before Mr.Clinton left office)...and the moneycrats said AMEN,

The way inflation is measured effects the judgment of policy makers to the point where they can no longer see inflation, although every American who shops at a local grocery store can tell you that the price of a box of cereal has risen over 50% in the past 2 years ... They don't want to see inflation because then government and large corporations would have to pony up larger COLA increases every year to their employees as well as the recipients of retirement plans...(and the money-crats say Amen)

The money that was released into the economy in the form of inflated real estate prices which then allowed homeowners to use their homes for ATM's while accelerating housing prices (apparently they accelerate both up and down!)supplanted common sense in the minds of investors, mortgage companies, appraisers and the entire industry built around home buying, selling, and valuation.., all that newly created wealth was never really counted as 'inflationary'....but was it? Wasn't that just printed money created by subtly changing lending policies and turning a long term blind eye to the real inflationary pressures in the system?

The point is that the Fed has had little, if any, political will to do what needed to be done in the past 10 -15 years to prevent all of this...and I'm not sure they could have even if they wanted to...The banking sector has a definite penchant for going broke, like lemmings jumping from the ice shelf into the sea...and... I'm not sure anything can be done to stop them (or the general public) from flinging themselves headlong off of tall economic buildings. The problem is, when they fall, they take everyone down with them.

A Cheaper & Better Way to File Your Taxes

2009-01-19T13:57:00.001-05:00

I came across this interesting article on AccountantsWorld. It's useful and I thought you would enjoy this.

CCH CompleteTax Makes Tax Prep and E-filing Even Easier and More Affordable for 2009
(If you cannot click on the link, please copy and paste following URL in the address field of your browser - http://www.accountantsworld.com/desktopdefault.aspx?page=newsstory&category=newsstory&StoryId=b0119076.0sw)

Wayne Silverman

Your Money - Preparing Your Budget for Disaster - NYTimes.com

2009-01-18T06:35:00.001-05:00

Your Money - Preparing Your Budget for Disaster - NYTimes.com

Seth Godin- From Pie-in-the-sky Philosophy to Reality

2009-01-11T09:39:00.003-05:00

The thing about goals

Having goals is a pain in the neck.

This is a post from Seth Godin's blog...If you don't subscribe ...well...I think you aughta...

If you don't have a goal (a corporate goal, a market share goal, a personal career goal, an athletic goal...) then you can just do your best. You can take what comes. You can reprioritize on a regular basis. If you don't have a goal, you never have to worry about missing it. If you don't have a goal you don't need nearly as many excuses, either.

Not having a goal lets you make a ruckus, or have more fun, or spend time doing what matters right now, which is, after all, the moment in which you are living.

The thing about goals is that living without them is a lot more fun, in the short run.

It seems to me, though, that the people who get things done, who lead, who grow and who make an impact... those people have goals. - Seth Godin

Hedge Fund Manager: Goodbye and F---- You - News Blog - Daily Brief - Portfolio.com

2008-12-27T11:12:00.000-05:00

Hedge Fund Manager: Goodbye and F---- You - News Blog - Daily Brief - Portfolio.com

Luxury Discounts - Portfolio.com

2008-12-27T10:47:00.000-05:00

Luxury Discounts - Portfolio.com

Ten people who predicted the financial meltdown

2008-12-20T17:32:00.000-05:00

Money Central - Times Online - WBLG: Ten people who predicted the financial meltdown

CPA's give some advice on how to improve your finances NOW!

2008-12-16T15:59:00.003-05:00

In a recent weekly poll conducted by the AICPA, CPA’s across the country were asked: "What is the most important action you recommend consumers take to maintain their financial position?" The number one response given was avoiding rash decisions (50.03 percent of respondents), followed by diversifying investment portfolios (25.18 percent), and third reducing debt (18.25 percent).

The survey also indicated that just under half of the responding CPAs (48 percent) believe that they will become more involved in personal financial planning services during the next three to five years. And, more than half (56 percent), indicated they will be more likely to increase retirement planning services during the next 12 months

CPA respondents commented that they would advise clients to focus on improving retirement planning and not count on Social Security as a secure option for their future. Next on the list of suggestions were: to encourage individuals and small businesses to pay off high interest debts and work to develop realistic, achievable financial plans. These three suggestions can be implemented by businesses and individuals alike. The last suggestion was one about attitude: To work on improving your financial outlook during this economic downturn. Even accountants recognize that keeping a positive attitude is important, especially in times when it's easy to be dragged down into the "doom and gloom".

Cash Flow Projections- Not just for businesss anymore!

2008-12-15T23:54:00.002-05:00

I have been surfing the web and reading how to prepare cash flow projections. There are lottsa good articles available on this topic. Made me think perhaps regular people couldn't learn a few things from this line of study.

Basically a cash flow projection takes your expected inflow and compared it with your expected outflow of cash each month. As an individual you can just take a calender and first write down when your bills are due, not the due date, but what day you have to send them to your creditor. Maybe you could do that on a calender with a red pen.

Then take a black pen and fill in your paydays for the month. Then we can do a little math and find the projected cash balance (could be positive or negative) for each day in the month...lets use a green pen to write that number on the calender.

This gives you your own cash flow projection for the month. Yes, it's just that simple!

So what does it mean?

Well if you have any negative numbers in green ink then you need to have that amount or even a little more in your savings account to transfer over to your checking on those days. If you have a negative balance at then end of several pay cycles then you are living above your means and you need to reduce your spending.

Likewise, if you have additional money piling up in your checking account then you should be moving it into a savings vehicle like a short term CD or a money market fund. You should work on saving at least 3 month's expenses (Suze Orman says 8 months worth of expenses for your emergency savings account, but you have to find your own comfort level for emergency savings. I'm almost to 6 months of expenses now and I think for me that's comfortable)

Once you master this, and you are consistently reducing your spending and moving money into your savings, you may be ready to move on to using credit cards to pay all your expenses.

Instead of paying out your cash when ever a bill comes due you pay with your card, then pay your bill every month. You can get a current card balance online or by calling the phone number on your card. IF you are careful and pay on time every month then you will quickly build your credit and your score will go up which means you can then find better and cheaper cards without fees and lower interest rates...not that you needs them! By paying your card off every month you should not be charged any interest.

The bonus to paying all your bills with the card is the book keeping. You no longer have to track your spending on your own the card company does it for you. You have your entire payment history on each bill every month. You can take that budget data and tweak it to find new ways to save!

You can do this by using credit to smooth your payments out over the month. Just remember it's a tool and not a crutch.

With this method you build your credit limits, you also build your cash cushion, so if you were laid off from work you could reduce your payments on your card, spend some of your savings to supplement unemployment compensation and weather the storm without ruining your credit or emptying your savings.

You get the best of both worlds. I know there are plenty of financial experts that say to cut up your credit cards, or hide them and never use them, I know this is a different way of doing things. But, what I an suggesting forces you to be responsible with your credit. If you can't stick to a budget then this may not be for you. If you know you can do it, then this really is the best solution for people who are sick of fighting with money.

Moderation in all things. Understand what you are doing, and why you are doing it. That is the road to financial strength.

So what have we covered?

In this article you have learned how to make a cash projection, how to match income with outflow of cash, and how to smooth out your cash flow using credit responsibly. You now know as much as many (so called) finance experts. Use the knowledge wisely and reap the rewards.

Turning Thanksgiving leftovers into a great breakfast!

2008-12-14T21:46:00.001-05:00

I have a great breakfast recipe that I learned watching Emeril LeGasse on Good Morning America a few days before Thanksgiving. I call it Leftover Turkey Mash & Eggs.(serves 2)

Put a medium sized fry pan on the stove at med/hi heat with a small dollop of butter (or olive oil).

Get out your left over mashed potatoes or candied yams from the great Thanksgiving banquet and put 2 Tsp's in the pan to warm them up.

Take some left over turkey meat (just a small hand full) and chop it up into 1/4" cubes, add to the pan and mix the turkey into the mashed potatoes.

When everything is nice and hot in the pan, push the mixture to the side and break a few eggs into the empty side of the pan and fry up the eggs.

Place 1/2 the mix onto a plate with an egg and you have a great breakfast and it takes only 5 minutes max!

More from Forbes on recent indictment of Marc Dreier

2008-12-12T11:28:00.000-05:00

The Dreier Case: Where's All The Money?
Liz Moyer, 12.10.08, 04:10 PM EST
When the prominent lawyer was arrested, tens of millions of client funds were missing from escrow accounts.

The bizarre circumstances of Marc Dreier's arrests in Canada and New York in the last week, and accusations of a brazen $113 million fraud may ultimately take a backseat to a bigger question emerging from the saga: Where did all the money go?

At the time of Dreier's arrest in Toronto on Dec. 2, tens of millions of client funds were missing from escrow accounts at his prominent 238-attorney law firm, Dreier LLC, which counts several celebrities and sports stars as clients. Dreier even managed to transfer $10 million by telephone from escrow accounts to his personal account while sitting in a Canadian jail awaiting a bail hearing, court records say.

The prominent attorney's fall from grace has left the firm in dire circumstances. According to court documents filed Monday, it is four weeks behind on its malpractice insurance payments and hasn't paid December health insurance premiums or rent for its Park Avenue offices. AT&T (nyse: T - news - people ) canceled BlackBerry service for employees on Monday.

Dreier, the sole equity partner, is the only person authorized to make transfers from the escrow accounts and apparently the only one who can authorize the transfers to pay the bills. The court documents detail a firm in disarray, with no one in charge and nearly $40 million worth of art work left hanging on walls of nearly abandoned offices.

The Harvard- and Yale-educated litigator has, until now, led a high-octane career, with stints at Fulbright & Jaworski and Rosenman & Colin before founding his own firm in 1996. His personal life has been described as opulent, with homes in Manhattan and the Hamptons and a 120-foot yacht.

Prosecutors accuse Dreier of selling $113 million worth of fake notes to two hedge funds in an elaborate scheme. One of the funds was refunded its $13 million investment after it was tipped off to potential fraud.

Dreier allegedly fabricated the notes and supporting documents and even used elaborate ruses involving accomplices to convince potential investors. He also tricked employees of a New York real estate developer and an accounting firm into granting him access to office space to meet with investors.
Comment On This Story

As the alleged fraud was unraveling, Dreier firm employees noticed something else amiss. Significant funds were missing from escrow accounts--the firm had eight co-mingled accounts and eight separate accounts maintained for individual clients.
Related Stories

A court statement by a Dreier law partner says $37.5 million of $38 million attributed to a single client had been transferred from the firm's escrow accounts into an account controlled by Dreier, but the statement didn't give a time-frame for that transfer.

The tip-off about the missing funds was a request by a Dreier partner, Norman Kinel, to Dreier to disburse $38 million in client escrow funds for unsecured creditors of 360 Networks, a Seattle telecommunications firm that had been in bankruptcy in 2001 and 2002. The Dreier firm represents the unsecured creditors.
Dugg on Forbes.com

Kinel first requested the funds on Dec. 1, and on Dec. 2, when he realized the transfer hadn't been made, he twice requested the funds again. He learned of Dreier's arrest on Dec. 3 and, through a lawyer, contacted the Federal Bureau of Investigation and the U.S. attorney.

John Provenzano, the law firm's controller, said in the court documents that at the time of Kinel's request, the escrow accounts had only $19 million in them.

Even while Dreier sat in jail in Toronto awaiting his bail hearing, he was attempting to transfer funds out of the escrow, according to the court documents. He asked for $8 million on Dec. 3, which Provenzano says he denied. And he asked for $10 million on Dec. 4 by talking directly to the firm's bank after Provenzano denied him again.

Dreier was in contact with partners at the firm those two days, according to the court documents. Asked about the missing escrow funds for 360 Networks, Dreier is reported to have said he could have sold some of the art collection to return the money if he had been allowed to return to New York.

"I understood from his conversation that Mr. Dreier was implicitly admitting he had improperly used client escrow funds," says the court declaration by Joel Chernov, one of the partners at Dreier who was on that phone call.

Just over $3 million of client escrow funds have been returned to clients, but many more requests have been made for the rapidly diminishing pool. The Securities and Exchange Commission, which filed a civil fraud suit in conjunction with criminal charges filed against Dreier on Monday, asked the court to freeze Dreier's assets.

An accounting firm employee, cooperating with prosecutors, got Dreier on tape admitting to be "ashamed" of his role in fabricating the notes, according to the U.S. Attorney in Manhattan.

The case took an even more bizarre twist last week when Dreier was arrested for impersonating an employee of the Ontario Teachers Pension Plan. Canadian prosecutors say he was trying to convince Fortress Investment Group (nyse: FIG - news - people ), another hedge fund, to invest $40 million or so in notes guaranteed by the pension fund. He allegedly impersonated the fund's senior counsel in its offices to meet with Fortress representatives.

Prosecutors haven't said whether they have located the $100 million that Dreier got from allegedly selling the fake notes.

Dreier was released on $100,000 cash bail (in Canadian dollars) in Canada on Friday and arrested by U.S. prosecutors on Sunday when he arrived at LaGuardia Airport. Dreier's lawyer, Gerald Shargel, was not immediately available to comment.