The Alpha Myth

Rejecting the Ownership Society

2010-08-07T18:27:00.000-07:00

In America, we have a strong ownership society. Everything is geared towards owning, from mortgage interest deductions to loose borrowing standards. Renters get no tax breaks for renting, but people who are already financially fit enough to buy a home get to deduct their interest. Is ownership really that beneficial?

I stood amongst the mob at REI today, looking for a new tent. My old half-dome is too small for my new married life. I was prepared to spend about $400 for a nice, 6 person tent, which could accomodate me, my wife, and any future members of the family. Only a few tents were set up, so it was difficult to really tell which one I would like. The REI assistant mentioned to me that they rent tents - I could just rent one and try it out. A three day rental would cost me $35.

Happy to forestall a purchasing decision and a large cash outflow, I decided to rent. As I was filling out the paperwork, I thought about the break even point for purchasing. At $35 dollars per camping trip, it would take 11.5 camping trips until renting the tent was more expensive than owning. Assuming 3 camping trips a year, that would be nearly 4 years worth of camping where it is cheaper to rent the tent than to buy. That is also assuming no repair costs on the purchased tent.

There is also the opportunity cost of having that $400 dollars tied up in a tent, when it could go somewhere else needed. Then there is the flexibility issue. If for some reason I were to come upon hard times and needed to cut back, I could always not camp and save the rental cost. If I owned the tent, leaving it in my garage will not save me anything. (I could sell it for a depreciated value though.)

Then there is the efficiency issue. If I average 3 camping trips a year, 3 days each, the tent is in storage for 356 days a year, not being used. If I rent a tent from REI, it is being used while I am not camping. Assuming a 70% utilization rate, that's 255 days a year it is being used. If each person that had rented the tent instead purchased one, they would need 85 tents total to replace one tent that was being rented and shared.

85 tents versus one shared tent. That's a total of $34,000 spent if everyone purchased a tent, and just $2,975 if everyone rented. Then there is the raw materials and labor that could be put to another use. And that is just tents. Think of all the other often purchased but rarely used items. Tents, boats, heavy duty trucks, power tools, yard equipment such as rototillers and chain saws are usually just rusting somewhere. How much of our national GDP and net worth is tied up in the garages of America, not being used?

I am in no way advocating socialism here. :-) I'm just talking from an efficiency standpoint. Why are we so obsessed with owning things we don't use on a daily basis? It seems a bit wasteful, and can act like a large financial anchor.

Google's Free Optimization Consultation

2010-07-14T14:50:00.000-07:00

A few months ago, I was contacted by a Google representative who asked if I would like a free consultation for my many Google Adwords campaigns. I run an OSHA safety training business, and spend quite a bit of money on online advertising.

When I received the offer, I was pretty excited. My little business had caught the attention of Google, who deemed me worthy of some free consultation. I had my ads set on conversion maximization, so it was automatically bidding for me. I figured that addition help would really help my improve my ROI.

Unfortunately, it did not turn out that way. They asked me to place the campaign in manual, and told me that they would get back to me in a few days. A week passed. Another week passed. I contacted them and requested a status update, and they told me 48 hours more. Then another week passed. Finally, they had my campaigns updated. Here is what I found:

1. Grammer and spellling errors. A lot of them. Some of the ads they created for me just didn't make sense. I found "Great Safety Trainings" in a lot of my campaigns.

2. Keywords: It seems that they didn't look at the landing pages of my campaigns, because some of the keywords did not make any sense.

3. Ad Groups: They created a few ad groups with no coherent theme.

I spruced it up the best I could and decided to let it run for a while and see how it performed. Both conversions and traffic decreased, and my sales dropped by over 1/3. Today, after two months of monitoring and tweaking, I just deleted all the work they did and reset it to where it was in early May.

So if you get an offer for Google for free consultations, I would think hard. If you are relatively happy with your ad performance, it may be wise to pass.

Thoughts on Gold

2009-11-18T15:37:00.000-08:00

Cashforgold.com ads are nearly inescapable on television. With gold at $1145 per ounce and climbing, it is getting a lot of attention as an investment, as a hedge against inflation, and protection from the falling dollar. John Paulson, a billionaire hedge fund manager, has started a new fund for gold and mining. With gold getting all this attention, is it a good place for the average person to put their money?

Well, lets tackle the investment question first. Gold is not an investment. (At least in my humble opinion.) An investment is utilization of capital that will allow it to grow into something more than the original investment. Let's say that you decide to make a $500 dollar investment in a Portland, Oregon personal chef business. That business can take on new clients, offer new services, and grow your investment to something very large.

Now, if you invest that same $500 into a half an ounce of gold, that gold will never change. It may be a pretty paperweight, but it can't spontaneously become an ounce of gold. It's never going to replicate, no matter what you feed it. The "return" on your investment is subject to market prices, not organic growth.

Speaking of market forces, what happens when the price of wheat skyrockets? Farmers plant more wheat, which brings prices back down. The same is true for gold. Price goes up, and we get businesses like Cash For Gold taking advantage. Also, mining companies dig more tunnels, which also brings prices back down.

Then there is also tried-and-true common sense. Unfortunately, one of the golden rules of investing is that if its getting lots of media exposure, and people are talking about it, you've already likely missed the boat. You may catch a bit of the final upswing, but you will likely find yourself in the same situating that the people who jumped into the housing boom ended up in. Remember when oil was $140 a barrel and people said it was never going down?

I'm not saying that gold shouldn't be a small portion of your portfolio. Just don't get caught up in the hoopla. It's overrated.

A Star Is Born

2009-10-19T15:40:00.000-07:00

I have discovered that my favorite thing in business to do is working on starting new ones. I'm like a kid with a toy, its nice and shiny for a while, and then something else comes along. My current fascination is my fiance's new business project, which is a personal chef business. Since returning from New York, she has started Merrill Culinary Services LLC. I have had a lot of fun helping her with her business design, and I think that it will do great for her. You can check her out at: http://www.theediblelife.com/.

The End of The Rainbow

2009-08-28T12:35:00.000-07:00

Another great kids show has ended. After a 26 year run, Reading Rainbow is going off the air. Apparently, their has been a shift in priorities in funding. The government wants PBS to focus more on phonics and reading skills, while Reading Rainbow was more focused on getting kids excited about reading.

I actually had some small involvement in reading rainbow. In the early nineties I helped film some of those little clips where the kids talk about the books they read while I was a camera man at Homework Hotline.

Here's the story:
http://voices.washingtonpost.com/federal-eye/2009/08/did_education_dept_help_kill_r.html

A Potpourri Of Observations

2009-08-25T18:41:00.000-07:00

First off - blogging is difficult. At first I thought of it as like having a Twitter account. Anyone can tweet - but not many write something worth reading. I suppose blogging is much the same as having a column, without the deadlines. That's where I get tripped up. I work well under pressure, but tend not to work at all when I am not pressured.

I've met a few professional bloggers since moving to New York. It actually is a surprising amount of work. It kind of goes against my "Four Hour Work Week" philosophy. I really got into it for SEO purposes. I wanted to promote my business, Affordable Safety Training, but generating links to it. I've since decided that SEO Management is at best questionable, and at worst voodoo. Run your website in a way that serves the needs of your customers, and forget about all that other crap.

It's been months since I've posted anything. I''ve been very busy with the business, an engagement, and planning a move back to Portland, Oregon. So I am going to throw some random stuff out there.

It's Time...
I am now officially engaged. I proposed to Leta in Central Park, and we set a date for May 1st in Salinas, California. I am very excited about getting married. Since we got engaged, Leta has watched this video about 35 times.

"I'll Bet There's An App For That"
I love my Iphone for personal use, but it has been a pretty large disappointment for me for business purposes. I think the apps in the app store are too focused on games and entertainment. However, today I downloaded an app from by bank that allowed me to deposit checks with my phone. It was so easy, I snapped a photo of the front and back of the check, pressed "Send", and it was in my account seconds later. Afterwards I just tossed out the check. Talk about convenience.

"Springtime For Hitler"
The film "The Producers" is about the only time I find Hitler references appropriate, and that's just because they are funny. Once again, people have gone crazy and decided that anything politicians propose that they don't agree with is Nazi-esque and what Hitler would do. Here's a clip of one of these idiots. Watch as Barney Frank responds very appropriately, I think.

It's inappropriate when the right wing nutjobs make Hitler comparisons, just as it was inappropriate when President Bush was being compared to Hitler over the Iraq War. (People forget the Iraq war has bipartisan support in Congress, unfortunately.) If you call someone Hitler, there better be either genocide or a global war involved, otherwise you are just a jackass.

Speaking of Health Care

Really not sure where I stand on this issue. I like the idea of the public option, but I fear that our government is just to unorganized to make it work. I am leaning towards President Obama on this issue, just because that seems to be the side of the issue that is less crazy.

I think that's all I have in me right now. Happy now Viki? :-)

It's Official - The NBA Is Crooked

2009-05-27T08:50:00.001-07:00

I have officially joined the tin-foil hat camp. The NBA is crooked and has put the fix in for Cleveland.

There is no way this is a technical foul. The NBA desperately wants its Kobe-James matchup, and will do everything they can to make it happen.

Oregon - A Business Friendly State

2009-05-08T07:02:00.000-07:00

Since I work out of my home, I don't get the standard water cooler human interaction that most people get from going to work everyday. I make up for this by participating in online discussion. As an ardent Blazer fan, I spend a bit of time of Blazer related blogs.

The other day, I came across a blog entry from Dwight Jaynes, a retired reporter, who stated that Oregon's hostile business environment is the reason that we cannot get another pro sports team. This is an urban myth that has been popularized by the likes of Bill Sizemore and his anti-tax establishment. It's something that Oregonians hear, every election cycle.

First of all, I am not in any way anti-business. I usually roll my eyes when I hear people rant about "evil" corporations. I understand how tax policy can create an environment that businesses can be successful in. What I don't subscribe to is the notion that any tax is bad tax.

Let's take a look at the facts. The Tax Foundation, a Washington DC pro-business think tank, releases an annual ranking of states and their business tax policies. In 2009, their rankings have Oregon as the ninth best for business friendliness. That's "best" not "worst." Now granted, their are eight others above us, but surely being in the Top 10 is something we should be happy about. Out of those eight, only Texas, Florida, and Nevada actually have larger populations.

So please, next time you hear someone stating that Oregon has a hostile business climate, correct them. Don't let them damage our reputation by reciting party talking points.

Here's a link to the report.

World Food Program

2009-04-24T09:24:00.000-07:00

Leta and I played tourist yesterday, I headed down to the United Nations complex for a tour. It is something that I have had on my to-do list since moving here. It actually got me thinking about a lot of things, mostly depressing. I wanted to share one of the promotional videos from the World Food Program. It really puts things in perspective.

Don't Let Your 401(K) Slip Away

2009-04-20T08:40:00.000-07:00

Last night, 60 Minutes did a saddening piece on the massive losses many Americans have sustained in their 401(K)'s. It profiled several individuals, near their retirement age, who are now facing a lifetime of work due to the precipitous decline in their 401(K)'s. It is a story that is too common today. Unfortunately, this is an event that could have been avoided, especially for the people near retirement age. Here are some tips on managing your 401(K):

1. Always Remember That Reward=Risk

When you open a 401(K) account, the list of choices is daunting. It is filled with financial terms that are difficult to understand. The fund names are grand and exciting. So how do most people end up selecting the funds? Their optimism gets the best of them, and the select the funds with the highest return, which is the one financial metric on the sheet that is easy to understand.

This is where most people go wrong. Risk and reward is a fundamental tenant of finance. In order to attract capital to riskier investments, larger returns must be offered. If you see a fund in your 401(K) that has a 18% return, that means that the fund manager is taking significantly more risk with your money than one with a 3% return invested in government bonds. Those funds have a higher upside, but the downside can be rough, as you have seen lately.

This does not mean that you should avoid the higher return / higher risk funds. It simply means you should not bet your retirement on them.

2. Remember That A 401(K) Balance Is NOT How Much Money You Have

This is a common misconception, and can lead to big miscalculations when planning your financial future. When you log on and check your 401(K) balance, you are not seeing how much money you "have" in your account. Your are simply seeing what the market will pay today for the assets you have listed in your account. Markets can fluctuate on both economic conditions and speculative fervor.

When planning you future, you need to understand what assets that you have in the account, not just the balance. A person with a 401(K) in cash or government bonds can rely on that money as being their when they need it. If your money is in stocks, you simply have a claim on the future income of that company or industry segment. Your 401(K) balance is the going rate for that claim today.

What does that mean in the real world? It means that when you look at your 401(K), think about as a claim, not a balance. Think about the company or segments that your money is in, and their potential value in the future. Focus on where you money is, not just how much.

3. Worry About Where You Are, Not Where The Markets Are

401(K) planning is about individual circumstances. As evidenced by all the traders looking for jobs, not even financial professionals can time the markets. Don't try. You asset allocation should be determined by your needs. If you are nearing retirement age, you should be heavily invested in low-risk bonds and treasuries. The people in the 60 Minutes piece could have avoided major losses, has the managed their 401(K) appropriate to their circumstances. Everyone is scared to miss out on the markets next big move upwards. The problem is, those folks usually get caught up in the crash.

4. Take Advantage of Retirement Targeted Funds

Most people don't have the time to get learn the difference between growth and income funds. The term "asset allocation" eludes many who make a living from something other than finance. If you are unsure about selecting your 401(K) funds, ask for help! Check with your employer. Many companies offer free financial planning seminars.

Retirement Targeted Funds are growing in popularity. They ease the burden on deciding where to put your 401(K) money. All you have to do is select the year that you plan to retire, and the fund will do the rest. It will shift your money from stocks to bonds and cash as you grow older. It takes the worry out of the equation. You should still monitor these funds, but they make sure you will not reach 60 and suddenly see your retirement evaporate.

Tea Parties Explained

2009-04-14T18:11:00.000-07:00

Its good that they cleared this up.

Tea & Taxes

2009-04-13T15:38:00.000-07:00

April 15th is approaching, and small business owners such as myself are struggling to make both payroll and their quarterly tax pre-payment. This year, the long lines at the Post Office for last minute tax filings will not be the only story on the news. Thanks to some motivated conservative politicos, we will be treated with "Tea Parties" across the nation.

These Tea Parties are in protest of the growth of government spending. I find it ironic that these protests are modeled after the Boston Tea Party. That was a protest against the Tea Act, a taxation that was applied without representation. In this case, we have the exact opposite. President Obama, and his liberal spending priorities, was democratically elected by a majority of the populace. Now he is fulfilling his campaign promise.

I am supportive of any event that causes people to become more politically involved. In this case, however, I find their concern for government spending less than genuine. The growth of government spending wasn't a concern, when it was their team doing the spending. Now the other side is funding their priorities, and suddenly a revolt is in order. It seems like it is more of a national tantrum, voicing frustration that their side lost.

It should be good TV though! I am sure that Fox News will be all over it.

For all those who missed it, here is Rick Santelli's tantrum, that inspired the event.

Portland Trailblazers Send Kobe Home Winless... again.

2009-04-11T07:25:00.000-07:00

The eight game home winning streak over the Lakers is impressive, but meaningless. Most of the Blazers were not around to take part in that streak. What is important is that the Portland Trailblazers are playing playoff basketball, right now.

With only three games left, Portland is already the winningest team in the Rose Garden. They are reaching the stride as the other teams in the Western Conference are staggering over the finish line. They've gone from a group of jump shooting rookies to a team that no one wants to see in the playoffs, especially Los Angeles.

A couple things from last night:

1. Traveling - I still have no idea what travelling is in the NBA. Greg Oden caught the ball in the post, and even on a replay, I could not see any movement on the feet. Yet he was called for a travel. In the third quarter, he shuffled his feet about seven times for his much admired "up and under" dunk - yet no call. Can someone please explain the travel rule to me?

2. Nicolas Batum - Huge block on Kobe Bryant, and a strong all around defensive performance. This kid is going to be scary good in a few years.

3. Greg Oden - If this were stat-happy baseball, we would have an official statistic for the "bother", which is a defensive play that is not a block, but where the shooter is forced to change his shot. Greg certainly racks up those. He changes the way opponents play in the paint, just by standing there. Even Kobe did not dare to attempt a dunk with Greg on patrol, he settled for the step back jumpers.

4. Brandon Roy v. Kobe Bryant - At the end, with the game on the line, you put the ball in the hand of you best player. Both teams did that. Portland won. Draw your own conclusions.

Microsoft's Brilliant New Ad Campaign

2009-04-09T10:24:00.000-07:00

Microsoft was heavily criticized for launching its new advertising campaign, using Jerry Seinfeld and Bill Gates as spokesman. People saw it as out of touch with consumers. Here is one of them:

I thought it was brilliant. It was a two pronged strategy. The first was to call attention to a new campaign. The did it with a quirky, odd commercial that called attention to its brand. This was a setup, causing critics to howl that it was out of touch. Then, with a true basketball move, they feigned right, and headed left, launching these new down-to-earth "I am a PC" commercials that are easy to connect to.

Who doesn't love cute little kids? Then they followed it up with the value and personalization features of PC's.

The reason this ad campaign connects so much for me, is that I recently went through this same dilemma. I needed a new computer and monitor for my business -and I had a list of requirements, which included a 24" monitor. I looked at Apple - but I couldn't customize the features I wanted, and the total price was a good $1,000 more than what I got with Dell. As a business person, I could not justify that added expense. Apple is starting to remind of Henry Ford when he said of his Model-T's, "You can get it in any color, as long as it is black."

The Blazers Makes The Playoffs!

2009-04-06T07:13:00.000-07:00

Words can't describe it!

Unemployment Goes Up By One

2009-04-05T09:18:00.000-07:00

My cousin Joel just had his first child. We are only a month apart, so its weird to see him as a father. Congrats cuz!

Portland Trailblazers Get No Respect

2009-04-04T07:58:00.000-07:00

I've always hated the "No Respect" cliche. It's overused, and rarely accurate. Respect is usually a matter of perspective. You don't "get" respect, you have to earn it. I also try not to be too much of a homer. I am Portland born and raised, and an ardent Blazer fan, but I have a fairly digital mind, and I try to base my observations on fact. Even then, I really feel that the Trailblazers are not getting the respect that they deserve. Here are my thoughts.

1. The Numbers Don't Lie

It's easy to rattle off the Big Four in the NBA right now. Los Angeles, Cleveland, Boston, and Orlando are the big contenders this year. So who is number five? Most sports analysts will throw San Antonio into this mix, along with the Houston Rockets, Denver Nuggets, and New Orleans. The Blazers are usually an afterthought.

Take a look:

Marc Stein Power Rankings: #9

NBA.Com Power Rankings: #10

Fox Sports: #9

USA Today: #8

CBS: #7

Now, I don't know what goes on behind the scenes on Hollingers automated rakings. It may turn out that he is a very good man, and just a very bad wizard. But his is the only numbers based ranking system on the web. And it has the Blazers at #5, with only a two point rating margin to the top 4.

2. Big Wins

Portland gave the LA Lakers their worst defeat of the year.

Portland gave San Antonio their second worst loss and have beat them 2/3 so far.

Portland beat the Celtics without their All-Star guard Brandon Roy.

Portland beat Orlando in Orlando, and lost by only one in Portland.

Portland was a Brandon Roy fade away from giving Cleveland their second home loss, and the only team to take Cleveland into overtime at home.

Thats a pretty good resume against the top four.

3. Youth

Portland is the second youngest team in the NBA, and has the youngest starting lineup. Yet, they are succesful against veteran teams. Thats an amazing thing.

4. Opposing Announcers

I live in New York City right now, so I watch the Blazers on League Pass. For road games, I get the opposing teams announcers. They do not even bother to review the stat sheets and scouting reports prior to the game. These are just some of the things that I have observed:

- Against Atlanta, the announcers were calling the Blazer bench players by position, because they had trouble remembering the names.

- Again against Atlanta, after watching LMA, the called him the best power foward that "they had never heard of."

- Last night, against the Thunder, the announcers claimed the officiating has a "serious impact" on the game. In a 35 point blowout! The only thing that the officials did wrong was not calling the fight before the Thunder were knocked senseless.

5. The Blazers are not a "promising young team."

The Blazers were a promising young team last year and the year before. This year they are a take no prisoners, knock down, tough playoff contender. They get treated like that young kid at the basketball court who is trying his best, but just not ready to play with the big kids. The others cheer him on and think its adorable that he might become a baller some day. The Blazers are ballers today - they are not "promising."

I really think that the Blazers can make a strong playoff run, and it might suprise some folks. Who knows, if they go far enough, we might even be treated to some highlights on ESPN. Wouldn't that be nice?

Hoorary For Falling Home Prices Part II

2009-04-03T08:25:00.001-07:00

I got some flack about my stand on falling home prices, but CNN has a story today on the families that are benefiting from reasonable priced housing. We had to clear the speculators out of the market, so it could go back to being what it was meant to be, a home.

Tina Fey Sighting

2009-04-02T15:10:00.000-07:00

Another celebrity sighting to add to my list. Leta and I walked by Tina Fey and her family today in central park. It was a great spring time day. We lounged in the park and enjoyed some ice cream while listening to park band jazz.

Hooray For Falling Home Prices

2009-03-31T07:12:00.000-07:00

I would like to say that I am above saying "I told you so", but I admit it is one of my favorite pastimes. S&P/Case-Schiller just released their latest home price indices, which shows overall record housing price declines. I am am sure you can tell by my glee that I am renter, not an owner.

I am 31. I have a job that pays pretty well, and have been steadily and well employed over the last ten years. Over that time, I have been chastised by family and friends, for "throwing" my money away on renting an apartment. "Its a waste" they told me. Home prices always rise, and you can build equity. "They are a great way to save money."

In support of these arguments, they always listed the same example of how their parents bought a house for $40,000 dollars thirty years ago and now it is worth $280,000. "That's a $240,000 dollar profit!" they claim.

Here is why the conventional wisdom is wrong:

1. Housing is NOT an investment vehicle!
I have argued this until I am blue in the face, and I finally found someone who agreed with me. My grad school finance professor came to my aid with some formulas and a simple premise. An investment is something that INCREASES your buying power relative to the economy. If you own a house, and its value goes up $50,000 dollars - you have not really gained anything. Why? Because all the houses in your neighborhood when up similarly. The only way to that money out is an equity loan or by selling and moving into a smaller home.

2. People do not properly account for housing costs.
In the example of the housing appreciating from $40,000 to $280,000, people claim a large profit. However, they are ignoring the total cost of home ownership. They forget that they paid roughly the initial price of the house in just interest. They don't count the visits from the plumbers, the repair to the furnace, the cost of maintaining a yard, carpeting, repairs. etc. In the ten years that I have rented an apartment, I have never sunk a single penny into repair or maintenance costs. (Not to mention I was paying 1/3 rd of the cost of a mortgage.)

3. Owning a house should not be part of the America Dream.
The American Dream is about being able to provide for yourself and your family through dignified employment. Not everyone can afford a home, and not everyone should own one. The most recent issue of The Economist noted in a study that home ownership was a large contributor to unemployment. It reduces the mobility of the work force as people are unwilling to move for a job opportunity.

4. Affording a house.
If the affordability of a house relies on the terms of your financing agreement. (i.e. you need a low rate to afford the home) then you can't afford the home. That's the big problem with President Obama's housing recovery plan. He wants loans renegotiated to lower payments and make the homes affordable. The most likely outcome of that is forestalling a foreclosure, and increasing the amount of money people are dumping into a home that they cannot afford.

So why am I cheering falling home prices? (Besides the "I told you so" factor?) Because I want a house, eventually. I want a nice kitchen and a yard with a garden for Leta. But I want the house on my terms, something that is affordable and not value inflated by the massive housing subsidies that we have poured into home ownership. It's not for investment purposes, it is just a way of life decision.

Can I squeeze in one more "I told you so" into this post? I told you so!

The Most Interesting Man In The World

2009-03-30T08:17:00.000-07:00

When it comes to beer, I don't really have any loyalties. When I am feeling poor, I ask for the Coors Light, or PBR. When a feel a little more financially secure, I usually go for whatever pops in my head. That is where advertising comes in. A few years ago, a rash of Red Stripe drinking was inspired by their catchy ad.

This year, Jeff Kling, of Euro RSCG/New York, is responsible for Dos Equis "The Most Interesting Man In The World" campaign. Its a brilliant campaign. One that raises brand awareness, and casts Dos Equis drinkers as interesting and sophisticated. I've never had a Dos Equis, but I'll give one a try at the next opportunity.

Here is the most interesting man on careers. Good insight, I think.

HAZWOPER 40 Hour Online Training

2009-03-29T15:15:00.000-07:00

A little shameless self promotion here. Affordable Safety Training has just made HAZWOPER 40 Hour Safety Training available on its website.

This course is specifically designed for workers who are involved in clean-up operations, voluntary clean-up operations, emergency response operations, and storage, disposal, or treatment of hazardous substances or uncontrolled hazardous waste sites. Topics include protection against hazardous chemicals, elimination of hazardous chemicals, safety of workers and the environment, OSHA regulations. This course covers topics included in 29 CFR 1910.120 (e). The online course meets the standard requirement of 40 hrs of initial training. The three days field experience under a trained, experienced supervisor is the responsibility of the students employer or potential employer. Note: This training is only valid when accompanied by a certificate demonstrating completion of 8 hours of Hands-On Training in accordance with 29 CFR 1910.120 (e).

Check it out!

The Republican Lack of Budget Proposal

2009-03-28T19:58:00.000-07:00

This week the Republicans releases their alternative budget proposal. I spent some time going through it, and was quite disappointed. Now I was raised in Portland, Oregon, so I have strong Democratic tendencies. However, I have always felt the DNC lacked strong economic fundamentals. Government spending absorbs free cash, reducing the available capital for businesses to grow and innovate. I do think that the government can provide valuable services, including health care.

I must admit that President Obama's budget proposal makes me nervous. Our government's debt is financed by investors looking for a guaranteed return. The more debt we issue, the more difficult it will be to finance it. This will damage an already weak currency, cause inflation and erode our savings. But I think it is important to keep in mind that President Obama is a calculating man. He issued the massive budget request, knowing he would only get a portion of it. He wants to start high, then meet in the middle.

So I thought that the Republicans may come up with a good alternative proposal for a more financially stable future. Unfortunately, the proposal read more like a restating of their policy platform, instead of a solid budget proposal. Buried in the proposal is a SHOCKING tax change. It includes a reduction in the top income tax bracket to 25%. This tax change would run up an even larger deficit than the President's plan.

Next week they will be releasing the "numbers" portion of their plan. It will be interesting to see the massive spending cuts they propose in order to make the tax cut possible. Or maybe they will leave that for another time. Here is (R) Mike Pence attempting to promote a budget with no numbers.

Go Blazers

2009-03-27T08:01:00.000-07:00

A rockin scene at the Rose Garden last night. It is hard to watch the Blazers come of age from New York. I wish I could be there. What a fantastic game against the Suns. In case you missed it, here is the best five point play I have ever seen:

EMT Test Preparation

2009-03-20T07:22:00.000-07:00

I always like to support entrepreneurial adventures. In that spirit, I would like to announce the opening of EMTPrep.com, a EMT test preparation service. A friend of my has launched this business. The website offers a very affordable way to study for the EMT exam. Check it out!

AIG Bonuses & Kings

2009-03-17T08:33:00.001-07:00

Today, CNN had several stories on its site about the AIG bonus situation. Yesterday, President Obama expressed his outrage over the awarding of the $165 million in "extra" pay awarded to AIG employees. He specifically singled out the derivatives traders as receiving unwarranted compensation.

I have several problems with this. First, for many types of jobs, bonuses are not "extra" pay. They are provided for in the hiring agreement and relied upon as normal salary. Traders rely on bonuses the same way waiters rely on tips. The bonuses were part of a contractual agreement between the two parties, and I don't think the US government should be in the contract breaking business.

Second of all, I find it highly unlikely that two lower level traders came up with the derivative insurance schemes. It had to be approved by senior executives. After that, the traders were executing a game plan that the company called. Fine the company and prosecute the executives, that's fine by me. But why break contracts for employees who were working as directed? Do we really know that they did not "earn" their pay?

Recouping the bonuses may be the right thing to do, but it requires serious consideration, and I think should only be done if there is evidence of gross negligence on the part of the individual employees, not on a snapshot of AIG.

On another subject, NBC rolled out its new drama Kings last night. It clashed with a Blazer game, so I did not watch it, but I saw it on Hulu today. I found it a bit overdone and silly, but in a good way. It is a modern day retelling of King David. It has a great cast, and stunning visuals. Its nice to see a TV program with a complex story and intellectual themes. I am bit tired of the "Bravo" disease that has infected the airwaves. You should check it out if you get a chance.

The Accomplices of Bernie Madoff

2009-03-14T09:09:00.000-07:00

Joe Nocera wrote a great piece for the New York Times about the accomplices of Bernie Madoff. His general point is harsh, but important. Bernie Madoff could not have accomplished this scam without people providing him the money, and not performing a common sense due diligence. The "victims" of the scam are also the enablers, who let their belief in easy money override the realities of modern finance.

After the sentencing is concluded, the question going to become if there should be restitution for the victims. What ever assets are left from the scam, as well as the Maddoff's personal assets, should be redistributed to the victims. Other than that, asking the government to make them whole is not appropriate. As noted in the article, no one made the stockholders of Enron, or Bear Stearns or Lehman Brothers whole again. Putting the taxpayers on the hook for their lapse in judgement is not fair to the rest of of us. Besides, if we do that, they won't learn anything.

He closes with an interesting story:

"Late Thursday afternoon, I called Richard C. Breeden, the former chairman of the S.E.C. who had recently served as a trustee to get money back for investors who had been involved in a billion-dollar Ponzi scheme that was uncovered more than a decade ago. He had miraculously been able to pay investors close to 60 cents on the dollar, partly by increasing the value of the assets that the scheme was built on. That’s far more than any Madoff victim is going to get. (So far, the Madoff trustee has identified only $1 billion in assets.) Tragically, Mr. Breeden said, some people who had invested in the Ponzi scheme that he helped clean up turned around and gave their money to Mr. Madoff.
“I guess some people never learn,” Mr. Breeden said."

Cramer versus Stewart

2009-03-13T07:02:00.000-07:00

The exciting conclusion of Jon Stewart's week long crusade against CNBC are here! A face off interview between Jon Stewart and Jim Cramer. I think that it is unfortunate that Jim got caught up in this as the face of it, because he is one of the few people on CNBC that throws the BS flag when he senses BS. I would have liked to see Kudlow on their instead.

There is one part of the interview, which I show here, where I think that Jon really captured the moral outrage we are all feeling.

Celebrity Sighting

2009-03-12T16:57:00.000-07:00

Since moving to New York, my only celebrity sighting has been passing Kirsten Dunst on the street, and crawling around the bushes outside of Ina Garten's house. I have not had nearly the celebrity encounters that Leta has. However, today Leta and I were eating lunch at the Lexington Candy Shop when Frank Langella, who played Nixon in Frost/Nixon, sat down at the table next to us and plowed through a sandwich and a New York Post. He actually seemed quite grumpy, and grunted out a "thank you" to a passing admirers compliment on his acting ability.

Cramer and NBC Respond to Jon Stewart

2009-03-11T10:02:00.000-07:00

Here is a clip of Jim Cramer and Joe Scarborough of MSNBC responding to Jon Stewart's critcisms. I think they are kind of missing the whole point about the proximity of financial journalists to the companies that they are supposed to objectively cover.

Why nationalize the banks?

2009-03-10T19:01:00.000-07:00

Today's financial rally may have killed the bank nationalization idea, but I can't help but wonder... what is the logic behind nationalizing the banks? Dr. Doom says we need to "temporarily take over the banks, clean them up and get them working again."

If actual bankers don't know how to do that, how can the government hope to succeed?

The Great Advice of CNBC

2009-03-06T06:31:00.000-08:00

Once again, Jon Stewart hits it on the head. Here's a great clip of all the financial "journalists" on CNBC giving terrible advice on the markets and the financial viability of the companies they cover. My favorite quote is Jim Cramer shouting "there is nothing wrong with Bear Stearns" six days before they go out of business. It is apparent that the financial journalists are way to close to the companies they are covering.

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

Winter in Central Park

2009-03-04T06:53:00.000-08:00

One of my favorite things about living in New York City is our vicinity to Central Park. It is an incredible landscape, and I spend many of me free hours wandering aimlessly through the trees. This weekend we had a snow storm, which covered the city with a fluffy, soft, West Coast style of snow. I grabbed my camera and put on a few layers, and went to take some photos.

I made the mistake of wandering into The Ramble, a puzzling set of trails in the middle of the park. My normally strong sense of direction abandoned me, and I came out of the ramble facing the west side, thinking I was facing the east side. I turned left and headed for what I thought was home. The blinking CNN shone through the trees and alerted me of my folly, but by that time I was at the south end of the park. (The tall building should have been a clue!) So I turned around and hiked through the snow back to 93rd. It turned out to be a much longer walk than I intended, but I got to spend some time in the snow. And that is always fine by me.

My First Print Ad

2009-03-02T13:13:00.000-08:00

I just received my copy of my first print ad. It is running in Facility Safety Management March's copy, so sign up for a free subscription!

Now Is The Time To Expand Your Business

2009-02-25T10:28:00.000-08:00

It is a bold statement to say that the current economic climate is a good time to expand businesses. However, it if you can take the long view and free up a little cash, it is a great time for an investment. Consider these reasons:

1. Available Inexpensive Talent
Higher unemployment means that here are lots of qualified individuals out there, looking for employment. Now is the time to pick them up for an affordable salary, and the gratitude that comes along with providing employment. Be sure to include a retention plan with increasing compensation, or you will lose them again as the market returns.

2. Low Sales
It is counter-intuitive to expand your business in a period of lagging sales, but this really is the best time to get things right. With infrequent sales, you have the time to perfect new business practices, as well as the ability to pay special attention to new customers. When the economy rebounds, you will have established and robust business practices that allow you to successfully meet that ramp without customer satisfaction suffering. I have chosen this time to expand my business, Affordable Safety Training, into a new market, knowing that I will be able to build it at a controlled pace.

3. Low Prices
I have a wish list of items for my business, and I have been trolling the internet, waiting for my target items to hit just the right price. When Dell has its 20% off weekend special again, I will be pouncing on that for a new monitor and desktop.

I understand that cash is a luxury at this point, but if you can get some reasonable credit terms, think about reaching out and expanding into some new turf. A few years from now, you may be happy you did.

The Perfect Weekend

2009-02-21T07:26:00.000-08:00

Leta had to work Valentines Day, so we postponed until a few days later, when she had two days off. Since moving to NYC, we have not left, and we were both getting a case of city fever. So as my gift to her, I surprised her with a trip to the East Hamptons.

Getting behind the wheel of a car again was a little bit nerve racking, especially in New York City. The two hour drive out there was uneventful, as we made only a few wrong turns. The highway had lots of empty road side stands, which I imagine in the summer time must be full of fresh fruit and vegetables.

I got us a suite at a B&B in the East Hamptons called The Mill House Inn. What a fantastic place that is. The suites were amazing, and the left us a great bottle of wine. Even though it was early afternoon, we cracked our first bottle. It's vacation - right?

After relaxing with a few glasses of wine, we headed down to the beach, where the weather was cold but clear. Having grown up near the Pacific ocean, the Atlantic seems so calm and passive. No large crashing waves, no churning foam. It was a beautiful day, and we spent some time reliving our youth by playing in the sand.

We even managed to find a playground, deserted for the winter. After a while of playing on the beach, we decided to track down Ina Garten's house, one of Leta's favorite TV chefs. An internet search proved fruitless, but one of the cooks at our B&B directed us right to her place, which was only a few blocks away. Ina was not home, and there was a lot of construction work going on. After awarkedly pacing outside of her propery, we snapped a few photos and decided we should be on our way before we were paid a visit by the local sherriff.
That night we had a good but overpriced (what isn't overpriced here?) dinner at The Palm, and then headed back to our suite to enjoy the fireplace and the giant Whirlpool tub.

The next day we explored the area, and had lunch at a the nice but much lower key area of Sag Harbor. We did some wine tasting at the Woolfer Vineyard. The wine flights were very nice, and the gourmet cheeses were incredible. We bought a bottle to remember our trip by.

The weather broke for the worse, and we headed back into the city. Leta napped peacefully in the passenger seat, trying to recover her strength for another busy week at Union Square Cafe. It was great trip, and nice to get away from the never ending bad news cycles we have been accustomed to. It was nice to spend some quality alone time with my girl, who I am incredibly fortunate to be with.

Understanding The Stimulus

2009-02-09T16:33:00.000-08:00

Washington D.C. is flooded with talk about how to best stimulate the economy. It essentially comes down to three arguments.

Tax Cuts
Government Spending
No Action

Tax Cuts - I am always a fan of tax cuts, when it is fiscally responsible to do so. The argument is that a reduction in taxes makes more money available in the private sector for spending and investment. This is true, however, in uncertain times they do not work very well. Right now, the problem is not a lack of available money, it is that there is too much uncertainty out there. Workers are afraid to spend because they might lose their jobs. Banks are afraid to lend because they worry people will not be able to pay it back. The most likely result is that both individuals and corporations will squirrel the money away as a buffer for these hard times. That does not help anyone.

Government Spending - There is a strong case for government spending. First of all, they can borrow at cheaper rates than any person or company. The government can spend while no one else is willing too, which will create jobs. Plus, if the spending is done wisely, it can also create returns by creating efficiencies and improving infrastructure.

No Action - Only the most ardent free market advocates are advising this. It is true that markets are cyclical, and usually will rebound. Some say we should ride it out without mortgaging our future.

Where I Stand - Our nations infrastructure is crumbling, and we need jobs. It seems like a no brainer to me. Lets fix our roads and bridges, and create some jobs in the process.

It will be interesting to see if President Obama can make the sell on this stimulus package. So far he has been pretty passive. I bet at the news conference tonight he comes out swinging.

Scaffolding Safety Training

2009-02-09T16:27:00.000-08:00

Another message from our sponsor....

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Way to Go Denny's!

2009-02-03T13:01:00.000-08:00

With so much bad news out there, its nice to get small bit of good news. As announced in their Super Bowl commercial, Denny's gave away free Grand Slam breakfasts at every one of their locations today. Of course it was a promotional stunt, but giving a away a free meal in hard economic times is admirable. It was also great that strangers packed into booths together for the meal. Its a great way to get to know your neighbors.

Another Bad Super Bowl

2009-02-02T07:20:00.000-08:00

Two Super Bowl wins and one victory for the Pittsburgh Steelers. Each win only counts as half when you have the officials on your team. Three years ago we had that awful Super Bowl were Pittsburgh was handed the game against Seattle. Now, they have again been the beneficiary of terrible officiating.

There were several game changing questionable personal foul calls against Arizona. Then the game on ended on a very questionable call that at least should have been reviewed. It sure looked like a forward pass to me. In the last two minutes of the game, officials can review any call to make sure it is correct. Why would they choose not to review such a key play in the Super Bowl?

It sure looked like a forward pass.

Not the time for protectionism...

2009-02-01T14:20:00.000-08:00

Most people remember Ben Stein for his droning history professor appearance in Ferris Beuller's Day Off. As boring as he may be, pay close attention to his valuable lesson on the Hawley-Smoot tarrif act. About a minute into the clip, he talks about how the US Government passed a bill that drastrically raised tarriffs on imports, in an attempt to increase demand for domestic goods. This plan backfired massively, as other countries retaliated with their own tarrifs, and the country plunged deeper into the Depression.

Today, Congress is tempted to return to protectionism in an attempt to stimulate domestic demand. They are jamming the recovery bill full of "Buy American" provisions. At first glance is seems like a good idea, and it is politically popular. But in today's economy, the success of commerce relies on the ability for goods to flow across countries borders from the places who can produce goods most economically. If we "Buy American", then China and the EU will respond, and trade will be stifled, making a bad economic situation worse.

Don't be tempted by the lure of protectionism. Free trade means jobs and prosperity for all.

Five Lessons of the Crash

2009-01-28T09:40:00.000-08:00

It is difficult to avoid the bad news. Word of layoffs, hardship and desperation is everywhere you look. There are some positive things to come out of this turmoil however. If you are young enough to recover financially, this is the burn from the stove that can shape your future. For those who care to learn, this crisis has reinforced some valuable lessons.

Lesson #1 Risk = Return and Return = Risk

This lesson cannot be over-emphasized. It is a rock-solid, unbreakable, steady rule of investing and finance. Riskier investments require higher returns to get financed. If you have a financial adviser, or a mutual fund, that is returning 12%+, it means they are taking larger than average risks with your money! No one would call up their broker and yell at them for a 20% return - but they should. It means that your money has been placed at a higher level of risk. High returns are not always good - they can be symbolic of a very large fall.

Lesson #2 There is No Such Thing as a Guarantee

Not in investing, anyway. AAA rated bonds are supposed to fail once every several thousand years. They have been defaulting regularly this year. Fixed income annuities are only as good as the company that offers them and the body that insurers them. No one is to big to fail.

Lesson #3 Beware of Strangers Bearing Gifts

Think Bernie Madoff. If a financial product has to be sold to you like a vacuum cleaner, its probably not in your best interest to buy it. There are no "inside scoops" or "sure things." If someone was really good at managing money, they would not have you at a steak dinner trying to get their hands on yours.

Lesson #4 Diversification Is More Than Owning Different Sectors
Jim's magic formula for owning stocks in different sectors does not make your diversified. Diversification is owning more than equities, and even includes boring old cash.

Lesson #5 There is Nothing Rational About The Markets
This is the hardest one for financial geeks to swallow. The market is made up of human buyers and sellers, and is therefore made up of their emotions as well. Right or wrong - we buy high and sell low. Don't rely on theoretical fundamentals to be the protective bottom of your portfolio.

Welding, Cutting and Brazing Safety Training

2009-01-22T08:55:00.000-08:00

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Toyota struggles and announces an 11 day shutdown

2009-01-06T07:53:00.000-08:00

For the most part, I think that the United States can be a pretty xenophobic place. Not by spite, or malice, simply because there is not a lot of cultural interaction with other nations. Its geographically isolated. When we do interact with other cultures, it is usually on our terms, as different groups assimilate into the US.

Which is why I find our hallowed deference to foreign car manufacturers so interesting. The nation is convinced that the Big 3's problems are solely of their own making, and they have not figured out something that foreigner manufacturers have. Yet, Volkswagen has applied to the German government for a bailout, and Toyota just announced an 11 day shutdown of its operations.

Now, I have been an active critic of Detroit, but sometimes you have to face economic realities. When the economy turns south, the last thing anyone wants to do is buy a car. So all car makers are struggling, foreign and domestic. I never thought I would say it, but I admire the Bush administration for having the courage to step forward and take action when Congress wouldn't.

Don't "Buy American"

2009-01-02T12:18:00.000-08:00

The incoming administration is working on a stimulus package, the next "New Deal." One of the tenants of this proposal is a requirement that all materials be "American." Here is an article describing the steel companies plea for help .

While this sounds like a good idea, it has two major problems.

1. Efficient Use of Taxpayer Dollars
The government has a responsibility to use our tax dollars as efficiently as possible. These means they should find the best combination of quality and price. Sometimes that may be found in the U.S., sometimes not. Wise spending will reduce budget deficits, and eventually allow us to lower taxes, which puts more money in everyone's pocket.

2. Decreases the competitiveness of US Companies
If companies in the United States get busy based purely on political declarations, they will not have to work as hard to be successful. In the short run, that is helpful. However, in the long run, they will find themselves chased out of business by foreign competitors that have learned to be more efficient.

Don't buy into the "Buy American" hype... unless they are truly the best suppliers.

Happy 2009!

Jeremy (and just about everyone else) beats top fund managers

2008-12-19T07:42:00.000-08:00

A few years ago, Bill Simmons, (AKA The Sports Guy) tried an experiment. He wanted to see how a seasoned sports analyst would match up against someone who knew nothing about sports. He asked his wife, a sports-phobe, to make football picks to see how she would stack up against him. The first two years, his wife beat him solidly. This year, he is actually beating her, but not by much.
What is her secret? In a column last year, she laid out her strategy. It was based on things such as primary color strength, which cities had the best food, and whether or not a hated ex-boyfriend rooted for that team. Yet, she won the first two years and is close on the third.

This year, Bill Miller, a famous fund manager, is not doing so well. His Value Trust is down 55%, with a 10 year average of -2.9%! That is including a 48% year in 1998. Now, my own meager portfolio is down 43% this year, with a slightly positive 10 year return. Here's the kicker: I use index funds, and have an average expense ratio of about 0.3%. The Legg Mason value trust has an expense ratio of 1.68%! Not only has he lost more money than me, it cost his investors over 5 times as much to do it.
I am not a stock picker, not an active trader, and spend more time following the Portland Trailblazers than the market. So what's the lesson? You can do it yourself, and usually perform just as well as the pros. Plus, you will actually make more by saving on paying the outrageous fees. Another bonus, you don't risk putting your money into the hands of guys like this.

Jon Stewart on the Auto Bailout

2008-12-05T14:18:00.001-08:00

Its a scary thought, but as usual, Jon Stewart of Comedy Central offers good perspective on the auto bailout. After the clip, he goes on to conclude that the reason Congress shoveled money to the finance industry was that they did not have any clue what they did, so could not grill them. Unfortunately, cars are easier to understand.

The Daily Show With Jon StewartM - Th 11p / 10c

http://www.thedailyshow.com/video/index.jhtml?videoId=212876&title=clusterf#@k-to-the-poor-house

Barack Obama Interview
John McCain Interview

Sarah Palin Video
Funny Election Video

Too old to be a backpacker...

2008-12-03T10:28:00.000-08:00

I stumbled across the article today. It seems now that I am in my thirties, I am too old to be a backpacker. I have backpacked my way through Europe, Asia and the South Pacific. Now, if I were to to take up a journey again, there is a new term for me, according to this article. I would be a "flashpacker."

Looking for a few good deals in equity? Here are some things to look at:

Lincoln Electric: LECO
It has a high quality product, a great business model, and has not had a layoff in over 50 years. Its trading less than 8 times earnings, with a 2.5% dividend yield, and a Beta that will likely magnify your returns during an upswing.

Burlington Northern: BNI
2.2% dividend yield, and a top performer in the industry. Plus, its a railroad, so substitution and new competitors are hard to come by. Its one of the few stocks that seem to have weathered the storm reasonably well, trading at 12 times earnings.

Friday Bullets

2008-11-28T13:26:00.000-08:00

Want to see the battle wounds of a line cook? Scary.

AIG, who promised to limit bonuses after receiving $178 billion from the Federal Government, has invented new compensation: the "retention pay."

Black Friday claims another victim, a Wal-Mart employee who was trampled by customers stampeding for the right to buy crap.

The House Financial Services Panel is set to have another hearing on the auto bailout. After shoveling money as fast as they can to rich bankers, the Federal Government is once again ready to verabally admonish an industry that actually employs average Americans.

Its 7:04 AM in New York City....

2008-11-23T04:00:00.000-08:00

I just watched one of the most amazing sunrises. Leta was off to work on a Sunday morning, and I went for a jog around the reservoir. The sun rising from behind me reflected of the skyline, turning all the buildings a shimmering gold, which was reflected in the water. I stopped of at Dunkin Doughnuts on the way back for a coffee and a bagel. Its a great way to start a Sunday.

So a lot of things have happened since my last post. Leta and I drove across country to New York with all our belongings packed into a truck. I have been up to my neck in my last term in school, and Leta is busy working the hot line at Union Square Cafe. The financial worlds have crumbled, and stocks are trying to test the theory that their values cannot go negative. Its been three months since I called bottom on Bank of America at $21 per share, now it is at $11.

I find myself watching the news in awe rather than fear. I am not retiring anytime soon, so I more feel like I am watching history than watching my life savings deteriorate. It will all be back. For every boom their is a bust, and for every bust their is a boom.

My class on Channel 8 News

2008-10-13T13:08:00.000-07:00

My class on Channel 8 News discussing the finance crisis:

http://www.kgw.com/video/video-index.html?nvid=290306&shu=1

For those who missed the VP debate...

2008-10-05T13:10:00.001-07:00

A sign seen on Wall Street....

2008-10-05T11:33:00.000-07:00

The Hidden Bailout

2008-09-30T11:29:00.000-07:00

The 700 billion bailout package has dominated the news, and taken Wall Street for wild swings. Hidden in all the mess, was a bi-partisan bailout aimed at the battleground states of Michigan and Ohio. On September 25th, Congress passed a 25 billion dollar loan program for America's fledgling auto industry. These loans are supposedly to be used to upgrade technologies to produce newer, greener vehicles. Apparently losing billions of dollars was not enough of a motivation to get automakers to do it on their own.

American Financial Scam Email

2008-09-24T09:31:00.000-07:00

My mother passed this one along, its hilarious....

SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIPDEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE. I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS U.S.

IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU. I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S.

THIS TRANSACTION IS 100% SAFE. THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE=2 0NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS AN INTERMEDIARY SO THE FUNDS CAN BE TRANSFERRED. PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO WALLSTREETBAILOUT@TREASURY.GOV SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION.

AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT YOUR FUNDS.

YOURS FAITHFULLY,
MINISTER OF TREASURY PAULSON

The Heroes of Wall Street

2008-09-22T10:55:00.000-07:00

In the midst of the largest financial crisis of the century, a lot of villains have been named. Reckless CEO's, risk managers asleep at the switch, and downright criminal lending practices. Nothing has been said of the heroes. Why? Because these heroes have been conveniently cast as the perpetrators of a fiendish deed. They dared to put their money where the mouth is... and prospered.

Short-selling is the practice of making a bet the a stock price will fall. A short seller borrows the stock from another party and immediately sells it and the higher price. In the future, he returns the stock to the borrower buying purchasing it again. If the price of the stock went down, they keep the difference. If the price goes up, they have to pony up the difference.

It's the yen to the yang of buy and hope it goes up. While it sounds pessimistic, it provides a critical tool to properly valuing stocks and the efficiency of the markets. The problem is that since people profit on stocks going down, rumors can play a devastating role in reducing the value of a stock. (Of course, rumors can also cause stocks to go up.)

Over the past year, many people have made fortunes shorting the financial stocks that own the toxic mortgage back securities that the government has now agreed to buy. They made the correct analysis that these companies were overstretched, and would soon see their stock prices crumble.

While these short sellers were screaming that the emperor has no clothes, the SEC decided to fix the problem. Their solution? Instead of addressing the root of the problem, the financial instability of these companies, the decided to silence the nay-sayers by instituting a ban on short-selling. They removed the financial mechanism to reveal the truth, and hoped no one would notice.

If the government has listened to these heroes of Wall Street, we might have avoided a trillion dollar bail out. Instead, they silenced dissent to keep the gravy train rolling. Unfortunately, that gravy train derailed, and the taxpayers are now busy cleaning it up.

OSHA Safety Training

2008-09-22T10:46:00.000-07:00

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Socialize the Risk - Privatize the Profits

2008-09-18T05:50:00.000-07:00

Two years ago, I was taking a summer term at L'ecole de Marseille Euromed. We had a very quirky French professor for Global Capital Markets. The entire time he spent describing the current global capital market, the weaknesses, and what will happen to have it all come crashing down. At the time we somewhat wrote it off as an anti-capitalist presentation, but he has been proved 100% correct.

Yesterday, the Fed announced a bailout of AIG, a gigantic insurance conglomerate. Like other institutions, their risk management team was asleep at the switch, and they got caught up in the subprime mess even worst than most. Not only did they buy these toxic securities, they insured others for theirs.

Martin Sullivan, the CEO of AIG until just recently, the one who led the company into this mess, received a salary of 11 million per year! He, and other well compensated employees, have led the company into this mess, and now the taxpayer is bailing them out.

It seems the rule is, if you screw up, screw up REALLY BIG. Endanger the whole financial system and you will get a taxpayer bailout. Screw up just small time, and you can go under. Socialism has arrived in the US - but its the bad kind. The kind that grants the profits to the elite - but sticks the average tax paying worker with the bill.

What the hell is going on on Wall Street?

2008-09-15T15:32:00.000-07:00

Its interesting to be living here in New York City during financial crisis, because everything is magnified in the local media. I wanted to head down to Wall Street to watch the carnage, but I didn't make it.

Here is a few quick answers to common questions:

What is going on?

Investment banks are required to keep their investments on the balance sheets at current values. So when a bank acquires a large amount of bundled loans, they go on the balance sheet at cost. When the value decreases, the banks must "write down" the value of those investments. Even though actual cash doesn't change hands, the expected future value is reduced, which affects the solvency of the organization.

The correction in the housing market has caught most banks unaware - and they are stuck with the assets that are rapidly decreasing in value. This causes them to look for more cash - via the Fed discount window or by raising new capital. Also, rumors of bad debts can cause investors to withdraw money from these banks, requiring the company to pay out cash.

Is it bad?

Not unless you are retiring soon. These corrections are needed. The housing market was due for a huge correction - and this is the fall out. If you were smart enough to not believe the hype about real estate being a sure bet - good for you.

How will this affect me?

Credit cards rate will likely go up, and future loan applications will scrutinized heavier and require more collateral. Businesses will have a tougher time acquiring credit for expansions, so employment may drop.

What should I do?

Don't log on and check your statements for a least six months. Keep on your normal investment schedule - don't give up on the markets, and don't try and time it. Slow and steady wins the race.

Coney Island

2008-09-03T10:41:00.000-07:00

On Labor Day, Leta and I took the afternoon and headed out to Coney Island. It is fantastic that you can hop on a subway a few blocks from your house and end up at the beach. I wish we could do that in Portland. We rode the Q through south Brooklyn, where I saw real houses for the first time in New York. Large, Victorian old style homes - something you don't see very often here.

I was surprised at how run down the amusement park was. I had to delicately place my snack trash on top of a leaning pile of garbage. The workers were terse and unfriendly, and one of the ride operators shouted at people in the line to not just "stand there like A-holes." I guess I should be used to that by now.

We rode the Wonder Wheel, which is a Ferris wheel type ride where the cars slide precariously around on tracks as the wheel rotates. The ride was over 90 years old, and the sign boasted "85 years without an accident."

The Cyclone, a world famous roller coaster, was incredible. It was built in 1927, and is the worlds oldest operating wooden roller coaster. The first drop was 60 degrees, and it was a doozy. I have never felt such a steep drop on any roller coaster, and I have been on a lot of coasters.

Leta and I finished of the evening with a walk on the beach. It was a great afternoon, and I got to knock another site of my list.

Harlem and North Central Park

2008-08-30T14:45:00.000-07:00

Today is Saturday, and Leta is working a 12 hour shift at Union Square Cafe. I had an errand to run, and decided to make a day of it. I got on the D train, and took it into Manhattan and all the way up to 125th street, the heart of Harlem.
I am not sure what I expected in Harlem. It is one of those places that you hear a lot about, so it gets built up in your head. It surprised me how much it looked like Brooklyn. Lots of small shops, people on the stoops, and a huge line at Dunkin Doughnuts. (A huge phenomenon out here on the East Coast.) I felt perfectly safe, despite its bad reputation. Their is a lot of cultural and economic gentrification in progress, which could be good or bad, depending on your view.

Harlem originally was a Dutch settlement. Far to the north of the main population, it was subject to a lot of Native American attacks. A housing crash in the early 20th century led landlords to abandon their "white only" tenant rules, and blacks migrated en masse to the neighborhood. It has been a center of black culture since then, and recently has enjoyed more prosperity.

I walked down through Harlem and came across the Harlem Meer. (Meer is Dutch for lake.) This is an amazing lake in North Central Park, an area not frequented by tourists. Fishermen stood idly as they gazed at their lines. Hills roll up out of the waters into a wooded refuge. It was very tranquil, much quieter than the southern parts of the park.

Since my first trip to Central Park, I have been searching for the spot from the movies where a person skates down a hill out of control and ends up in a lake in central park. I have seen that occur in at least a half a dozen movies, but Big Daddy and It Can Happen To You are the only two that I can name. I suspect that the spot is somewhere on the Harlem Meer, but I could not find it.

After the Harlem Meer, I wandered down through the park to the Reservoir. Once an actual aquifer for the city now it just provides water for the Harlem Meer, and great views for the people. The view from the north side of the reservoir looking south is one of the best views I have ever seen. Giant skyscrapers crop up out of the wilderness. It is an incredible sight.

I kept walking south, and ended up at the Conservatory Water. This is a great small man-made lake where the locals sail elaborate radio controlled sailboats. I couldn't resist, and plunked down $10 for a half an hour with a sailboat.
It really was a great time. the wind was light, so you can to carefully adjust your trim. I met an older gentleman their, who was a regular. Together we used our boats to snag some trash and bring it back in. I had a blast, and could have done it all afternoon.

I enjoyed my little nature stroll in the park, and I highly recommend that you take some time away from the tourists, and venture into the northern part of Central Park.

The Economics of the Subway

2008-08-25T08:57:00.000-07:00

I have spent a lot of time on the Subway since arriving in New York, and I have have started to notice the marketing segmentation that is displayed on the subway advertising. I live in Brooklyn, and usually take the train to and from Manhattan. This is how it breaks down.

The Q Line

This line originates on the south end of Central Park. It has 4 stops in Manhattan, and then takes the Manhattan bridge into Brooklyn where it follows Flatbush avenue. The line goes down into Prospect Park, to Brighton Beach, and terminates at Coney Island. The subway cars are new, with digital displays and clear speakers. The advertisements are mostly for colleges, plastic surgery, and vacation travel.

The N and the R

These follow the same lines in Manhattan, but instead branch of in Brooklyn down to Bayridge and Fort Hamilton. Older cars, with ads for personal injury attorneys (get rich quick themed) and alcohol.

The A and the C

Pass through Bedsford Stuysvent. The cars are old and decrepit, and wall to wall alcohol advertisements. (Not kidding, Budweiser bought out the whole train, nothing but beer ads.)

I will leave it to you, dear reader, to guess which lines pass through the nice areas of Brooklyn, and which pass through the poor ghettos. Its saddens me to see that the only advertising they saw fit for the underprivileged was a sedative to alleviate the pain of poverty.

Read here for more.

The Creep of Inflation

2008-08-23T13:04:00.000-07:00

We have been hearing a lot about inflation on the news lately. Nowadays, "inflation" usually references the general increase of prices, but it used to reference the amount of money supply. Economists and policy makers are now dealing with a problem. Normally when the economy stalls, the government can increase the money supply by lowering rates for borrowing. This encourages businesses to make more investment, and encourages consumers to buy things with lower credit card rates.

Unfortunately, we are in a time period where the money supply is decreasing due to the credit crunch and raising rates, while prices are actually increasing. This does not give policy makers a lot of good options for managing the economy.

Just in the last few days , inflation has affected my safety training business. My online Quickbooks subscription price went up 20%, and my merchant processing went up 25%. It looks like the days of negligible inflation my be soon at an end.

Ellis Island and Our Nation of Immigrants

2008-08-21T10:05:00.000-07:00

Yesterday, Leta and I took the ferry out to Ellis Island. Walking through the massive receiving hall, I thought about all the families that got their start fresh in America. We are a nation of immigrants, but for some reason, we have forgotten our roots and submitted to xenophobia.

What happened? We have gone from immigration strengthening our country, to casting it as a villain of economic prosperity. George Washington said:

"The bosom of America is open to receive not only the Opulent and respectable Stranger, but the oppressed and persecuted of all Nations And Religions; whom we shall welcome to a participation of all our rights and privileges, if by decency and propriety of conduct they appear to merit the enjoyment."

The promise of freedom and self-determination brought people to our young country in droves. The entrepreneurial spirit of people looking to improve their future, created an economic powerhouse that has resulted in the country that we see today. Nowadays we are so afraid of leaving our mundane jobs because of a lack of health insurance or 401(k), we cannot possibly comprehend what would be like to pack all your belongings in a basket, step onto a freighter, and make a new life for yourself in an unknown land.

While the anti-immigration lobby pretends that their issue with immigration is legal status, we know the truth. They are not offended by someone flouting the law. People speed on the highway every day, and no one is up in arms about that. What they are really scared of is to compete with somebody who's willing to work harder for less, and a perceived cultural dilution.

I read an article that said, Social Security and Medicare would be much better off if we increased immigration to improve our tax base. I don't think that people searching on a better life should be the hot button issue that it is in today's politics.

I think Bill Clinton said it best:

"More than any other nation on Earth, America has constantly drawn strength and spirit from wave after wave of immigrants. In each generation, they have proved to be the most restless, the most adventurous, the most innovative, the most industrious of people. Bearing different memories, honoring different heritages, they have strengthened our economy, enriched our culture, renewed our promise of freedom and opportunity for all…."

Financial Institutions Are Not Your Friends

2008-08-19T18:45:00.000-07:00

Jeffrery Strain over at the Street.com posted a an article today entitled "Six Awful Truths About Personal Finance." It made some pretty good points, and specifically one about how financial institutions are not your friends. Here is what he had to say:

"Financial institutions are not your friends. Banks, credit card companies and even investment firms are there for only one purpose: to make money off of you. No matter how much they tell you that they have your best interests at heart, they are not your friends and they will charge you with any fee that they think they can get away with. It's common for banks to add "courtesy overdraft protection" to your banking accounts, which can cost you hundreds of dollars and fixed-rate credit cards are only fixed until the credit card issuer decides they want to change the interest rate. You must always look out for your own interests and make sure that these financial companies are not trying to nickel and dime you., because they have no problem changing the rules in the middle of the game -- especially if they feel they are not getting enough of your money. So next time you listen to their pitches, remember that their primary purpose is their bottom line and not yours. Use their financial services if it is advantageous to you, but never become complacent or you will find a lot of your hard-earned money flowing to their pockets."

Don't be suckered in by pictures of majestic rocks or reassuring baritone voices. These companies want your money so they can invent fees to suck away your wealth. Most personal money managers are the same.

It really is not that hard to manage your finances. Check out a personal finance book at a library. When you do decide to enter the market, use a low cost, no fee mutual fund company. Vanguard is at the top of my list.

Or if you have any questions,
Ask me!

Summer Time!

2008-08-16T13:37:00.000-07:00

103F here in Portland and I am headed to the river for some water skiing. Thought a good summertime tune was in order.....

Wall Street and the Buttonwood Tree

2008-08-13T18:25:00.000-07:00

In 1653, New Amsterdam constructed a wall on the south end of its settlement. This wall stretched from the current day Husdon River to the East River. The road next to this wall became known as "Wall Street." In the late 18th century, traders gathered under a buttonwood tree on Wall Street to trade stocks. They formalized their trading with the Buttonwood Agreement, and the New York Stock Exchange was born.

I spent the evening wandering around the Wall Street neighborhood. I have also flirted with the idea of getting involved in finance, but I am not sure I could handle the Wall Street environment.

As I got off the subway, I walked past this store:

Since I left my Millionaire ID card at home, I did not enter to check out the bargains. I wandered down to the Wall Street bull, a very famous, and very crowded statue. It is a symbol of financial optimism. This statue has a pretty interesting story.

In 1987, the artist Di Domica spent $360,000 of his own money to cast the bull. It was immediately following the crash of 1987, and the financial community was feeling rattled. On December 15th, he trucked the bull in during the middle of the night, and dropped it off at the front door of the New York Stock Exchange. The police impounded it, but the public protested. It was transferred to transferred to nearby Bowling Green park, and is now a popular attraction.

I wandered around, and accidentally stumbled upon the local banker hangout, Stone Street. It is a tiny little street, hidden behind Broad street. It is blocked off from vehicles, and was completely packed with suit and tie type folks.

It reminded me a lot of Europe. I pulled up to the bar and ordered a $7 Guinness. My casual attire got me a lot of strange looks, as I was an obvious outsider. I listened to them as I thought about how they were making there living by trading ownership of companies, essentially trading the labor of average Americans, who are earning much less. Its thoughts like that which sometimes get me discouraged about finance.

Its a good thing we "exploited" Chinese labor...

2008-08-11T13:40:00.000-07:00

There was an article on CNN today about the spiraling cost of doing business in China. I remember in high school, Nike came to my school on career day to promote business and design education (as well as themselves, obviously). Some self-inflated jackass in the audience stood up and asked the Nike presenter why should we be celebrating them "exploiting Chinese laborers by paying them less than a dollar a day." The presenter stumbled a bit, and the guy sat down with a smug look on his face.

Even back then, I have had major issues with people who don't understand basic economics.

First of all, unless a person is literally being forced to work, it is very difficult to "exploit" someone based on wages alone. If Nike goes to Cambodia and pays less than the market wage, nobody will work for them. They will go down the street to the higher paying gig. Tourists don't seem to mind when their Euro or dollar goes a long way in Asia, but get upset when the wages translate the same way.

Secondly, the United States became a superpower on the back of the Industrial Revolution, where low wages, and long hours were common place. Industrialization is a phase of development that every country goes through. Low wage jobs will eventually yield more specializations and opportunities for growth.

Now look at China. Foreign investment flowed in, raising both technology and wages. Income is increasing by 10 to 15% annually. This new found wealth is a result of foreign companies making investments in their country. Now literacy, health care, and infrastructure are all growing rapidly.

Where would China, or other developing countries be, if companies had not chosen to invest in China in the 80's and 90's, when they were told it was immoral?

Once Upon A Time In Brooklyn....

2008-08-10T10:30:00.000-07:00

I sit here writing, overlooking a tree lined patio in Fort Green, Brooklyn. Leta and I just moved in, after staying in Manhattan for the last three nights. The apartment is awesome, huge by New York standards. It it a one bedroom with an office, and is right on Dekalb street, a very hip part of Brooklyn.

We stopped by Union Square Cafe, the site of Leta's externship. Its a neat place, and has been voted the top restaurant in NYC. She's excited and frightened at the same time. We went out last night and met up with celebrity chef Wylie Dufresne. He has been voted one of the Top 10 chefs in America, and battled Mario Batali on Iron Chef America.

Its been great to far, and I will be sure to keep everyone posted. I will return to my usual financial minded ranting after the glitz of moving to NYC wears off.

New York, New York!

2008-08-06T16:44:00.000-07:00

Its the day before we leave for our New York adventure. I am so excited about spending a few months in the city. We have an apartment in Fort Green, Brooklyn. We hear its in a great neighborhood.

I will be sure to update you all on our trip!

Paris for President

2008-08-06T15:56:00.000-07:00

I have been weighing the pros and cons of both candidates, trying to decide which candidate The Alpha Myth will endorse. Fortunately, the two party system has been dealt a blow with a new third party candidate, one that can bridge the divide of the two sides.

So I now introduce The Alpha Myth's official endorsement:

Sometimes others failures make you feel a bit better...

2008-08-01T12:58:00.000-07:00

I just got through closing out the month on my safety training business. Although I posted a growth in sales, my gross margins fell about 25%. It got me bummed a bit, until I read this. GM has posted a 15.5 billion (yes with a B) dollar loss for the second quarter of this year.

Oops!

It amazes me that a company that builds cars could be that far behind on consumer trends. They didn't foresee how rising gas prices could affect sales? They couldn't predict that $4 dollar gas would reduce demand for SUVs? It seems that the company should have an action plan in place for every incremental shift in gas prices, shifting production as prices go up and down.

Anyway, sometimes its good to know that someone has screwed up worse than you!

Have a great weekend!

Say it ain't so, Ted!

2008-07-31T14:03:00.000-07:00

Al Capone, the most notorious mobster of the 20th century, was sent away not for murder, but for tax evasion. Here we have another case of accounting being the downfall of a public figure. Senator Ted Stevens (R) from Alaska was indicted on charges of filing false financial statements. Unable to prove bribery, the Feds settled on this charge.

I, for one, am devastated. Who will explain the Internet to us now? (This clip gets me every time, skip ahead to 2:00 for the best parts.)

Pay attention your accounting!

What is a mutual fund?

2008-07-30T12:19:00.000-07:00

One of my readers has asked the question "What is a mutual fund?"

I am going to try and avoid my usual MBA techno-speak, and explain this in a way that normal people can understand clearly.

Let's say Josh and Jeremy having money they are willing to invest, but don't know anything about the market. They decide to hire a knowledgeable person, Leta, to manage their investments. Josh and Jeremy pool their money, and give it to Leta to manage. This, on a very small scale, is a mutual fund. It is a collection of money that is brought under one manager to invest in the best interests of their clients. The manager then takes a small portion of the money each year as a fee for their work.

Now depending on the type of mutual fund, this money could be invested in the stock market, bond market, any specialty markets, or a mixture of the three. Most mutual funds are open funds, which means anyone can add money to the fund, and can withdraw it whenever they choose.

Mutual funds are very common, because it allows people to invest in the markets and utilizing the skills of a professional manager, instead of having to pick stocks themselves. It is a massive market, and very competitive. Choosing mutual funds can be a daunting task.

Check back here for more on mutual funds, costs, and how to select the right one for you.

Take Me Out To The Ballgame

2008-07-29T12:07:00.000-07:00

I had a great time in San Francisco this weekend. I was visiting an old high school buddy. I've been told "The coldest winter you will ever spend is summer in San Francisco." It rang true this weekend. We went to see a Giants game, and watched them get clobbered by Arizona.

There were a lot of empty seats, which always surprises me for sporting events. Even if you were to give out free tickets, you would at least make some money on concessions and merchandise.

Friday Flashback: Jim Cramer Goes Mad

2008-07-25T17:14:00.000-07:00

Its a beautiful Friday here in Portland, Oregon. I thought I would throw in an old favorite to watch, Jim Cramer going crazy about Ben Bernake's perceived slow reaction to the credit crunch that occurred in the summer of last year. Skip ahead to 1:51 to get to the good part. (BTW, I think Jim was way of his rocker on this one.)

Have a great weekend!

Who's blogging about the iPhone?

2008-07-24T14:02:00.000-07:00

Just about everybody, it seems. While I have resisted the urge to join that fray, I just recently bought an iPhone 3G, and feel the need to add my 2 cents.

I needed a smart phone for my safety training business. I had a Blackberry at my previous job, but I found it too clunky, and the Internet browser was nearly worthless. Being that my business is an Internet one, I need a robust browser with lots of options. I ended up joining the masses and settling on an iPhone.

I was struck by two things: It is very fun to use, and does not seem to be immediately business friendly. The phone itself is a blast to play with. There are all sorts of unexpected goodies, like the slot machine wheel that appears when making selections from lists.

I was surprised about the lack of task management tools on the phone. The calendar is pretty robust, but there is no To-Do list or anything of that nature. I am sure that this can be solved with one quick download from the app store, but you would think something like that would be standard.

The GPS and mapping functions are incredible. They offer turn by turn directions, and the search functions make finding anything in the city.

The applications are great too. I love having Pandora at my fingertips. The games are a lot of fun. I use Facebook and Myspace directly from my phone now, since it is much faster than logging on.

All-in-all, it is pretty great phone. Heavy business users might not find the more entertaining aspects of the phone useful, but for those of us who like to mix business with pleasure, its a great fit.

The Next Wall Street Wizard

2008-07-22T10:52:00.000-07:00

Here is my niece Sabrina as she works on a discounted cash flow analysis for BNI:

Sabrina is slightly bearish on the market, but does not feel it will be as bad as many profess. She advises that managers with large commodity positions start scaling back to cash, and start a tech stock shopping list for when they bottom out. She sees oil settling in around $112 - $116 a barrel after the summer driving season. She is currently enamoured with the railways, and sees heavy construction as a good long play, as the nations infrastructure will need a major overhaul in the next decade.

I'll give you 100 Billion dollars...

2008-07-20T14:26:00.000-07:00

In Zimbabwe dollars that is. This week the government of Zimbabwe introduced 100 billion dollar bank notes. This is the equivalent of about $1 American dollar. Meals in Zimbabwe run at about 500 billion dollars. The government estimates inflation to be at 2.2 million percent, while economists estimate that it is three or four times that.

This is an excellent example of how important it is to manage inflation. The U.S. Federal Reserves main mission is to mange inflation while fostering employment. They manage our lending rates in order to keep inflation to a manageable level.

Inflation usually takes off when governments starting printing money (literally) in order to pay their debts. In Germany, between the wars, the government printed money in order to keep their economy going. This resulted in reducing the value of its currency, which in turn caused things to cost more. This resulted in the famous images of Germans burning money to keep warm, because it was cheaper than buying fuel.

The United States is doing a lot to devalue its own currency. Current account deficits, and excessive borrowing is causing our currency value to drop. This is turn makes staple goods, such as wheat, fuel, and food more expensive. This increases pressure on consumers, which then can cause the economy to recede. This in turn reduces tax revenues through a decreased Gross Domestic Product, which leads to more borrowing, and more depreciation and current account deficits. Inflation can be a wicked wage-price spiral. It's going to be interesting to see how we work our way out of this situation, so we don't end up printing billion dollar bills. It's going to be interesting.

The Motley Fool

2008-07-17T12:26:00.000-07:00

I used to be really impressed with The Motley Fool. They provided sound financial advice, and discouraged the aggressive trading that the market has become known for. Unfortunately, their business has digressed. My email is now full of advertisments from The Motley Fool, promoting stock picking services that will make me rich.

Just remember, any financial advisor that promises to make you rich is probably only good at making themselves rich.

Fed Rescues Failing Resteraunt

2008-07-14T09:55:00.000-07:00

Today the Fed announced it would be extending its discount window to the Uptown Silver Dollar, a poorly conceived struggling restaurant in Portland, Oregon. The Fed will be offering the same rate 2.25% that it gives deposit banks and large investment banks. Hank Paulson was quoted as saying "The Uptown Silver Dollar is a crucial component of this nations financial infrastructure. Its failure would cause irreparable harm to the nation." Sceptical economists are noting that the implicit government backing up the bar is skewing the risk profile of low-brow drinking establishments. The owners could not be reached for comment on this story.

Run on Freddie Mac and Fannie Mae

2008-07-11T11:19:00.000-07:00

Investors are bailing from Freddie Mac and Fannie Mae, the government created (but supposedly independent) home loan guaranteee corportations. For those who are not familiar, they work something like this:

Freddie Mac (or the Federal Home Loan Mortgage Corportation) buys mortgages from banks, repackages them, and sells them to investors on the secondary market. Why is this neccessary? It allows liquidity in the system, and creates a national market for mortgages. Just think, if your mortgage had to be financed through deposits at your local bank, areas without a lot of deposit sources would not be able to issue home loans. Folks in Parma, Idaho, would not have access easy access to mortgages, while people in L.A. might.

Its a good system, but it presents one huge problem:

It contributes to inflated home prices. While these companies are supposedly independent, they were created by the government, it therefore has an implicit promise by the government for bailout should they fail. This reduces the risk profile of the home loans, therefore making mortgages artifically cheap. While you think this would be good, it increases real estate specualtion, and makes homes for the regular folks unaffordable.

With a possible failure on the horizon, the Administration is talking about stepping in for a bailout. (At our expense of course.) Its another example of how securitization is a much more tangled web than we think.

Summering In New York

2008-07-11T10:25:00.000-07:00

So, the culinary gal got an internship at Union Square Cafe, which was voted New York City's most popular resteraunt eight of the last ten years. (The other two years it came in second.) I will be flying out there with her for August and September, before I return to Portland for my last term of grad school.

I am really excited about living in New York for a few months. I am going to see the city, catch some games at Yankee Stadium, and of course, try and get some work done. I am really excited about doing a financial tour of New York, seeing the stock market and anything else I can find.

What to do with extra cash?

2008-07-09T15:22:00.000-07:00

It doesn't seem to be a problem for many, but todays market environment has some people questioning what to do with extra cash. On CNN today, there is a piece by Suze Orman recommending people to stash it in a savings account and time-weight average their way into the market.

http://www.cnn.com/2008/LIVING/personal/07/09/suze.orman/index.html

While I generally find this to be a good idea, it seems right now would be a time to take a larger leap. There are some large institutions out there with dividend yields in excess of corporate bonds. For instance, Bank of America (BAC) is trading at near 52 week lows with an astounding 11.9% dividend yield!

With their assest base and strong history, it seems that is a pretty safe bet for some long term growth. With a P/E of less than 10 and the CEO promising to honor Countrywide's debt without decreasing the dividend or raising new capital, they must be in decent shape.

"President" Mugabe

2008-07-07T10:03:00.000-07:00

I find it incredible that such blatant violations of human rights can occur in todays world, without serious reprecussions for the abusers. (Darfur is an ongoing example.) Robert Mugabe of Zimbabwe has "won" another term as president. This after the opposition leader pulled out of the election due to mass violence and intimidation against his party. An opposition leader's wife was raped and murdered, and hundreds of opposition supporters have been detained, tortured and even murdered.

While this is established fact, the African Union has refused to denounce his actions. The G8 leaders, (or G7 + Russia as some call it) took the South African President Mbeki to task over failing to exert their influence on the matter.

You know you have REALLY messed up when George W. Bush is giving you lectures on morality.

http://www.timesonline.co.uk/tol/news/world/africa/article4287943.ece

Real Estate Record Decline

2008-06-24T11:35:00.000-07:00

Home prices registered a record 15.3% decline this month. I have heard a lot of people take blame for this market correction. Banks, the Fed, mortgage underwriters. I have yet to hear real estate agents take any responsibility in this crisis. (Of course, consumers are the main culprits.) These agents pushed homes on people that they knew was out of the price range.

And why not? They are getting the closing fees and are wiped clear of the asset. It seems that as an agent of this transaction, the real estate broker should have a share in the risk, just as they have a share in the reward. If an agent sells a house to someone out of their price range, and then they default, a portion of the fee has to get refunded to the bank who now owns the assett. It may cause agents to be a little more responsbile in thier selling.

Anyway, here is the link on the latest drop: Real Estate Posts Record Decline.

New Urbanism

2008-06-16T16:41:00.000-07:00

CNN had an interesting article today about young people and "new urbanism." It talks about how people are starting to prefer the walkability of cities and urban environments.

I know that I am much happier leaving in the city than in the suburbs. Rent is more expensive, but I save money overall by not having to drive. (don't even have a car) The article had an interesting quote

"The so-called McMansion, he said, will become the new multi-family home for the poor."

That's a big shift. I think the best thing we can do for conservation and emissions control is to live near our work, school and shopping. (I can walk to all three.)

Here is the article: Is America's Suburban Dream Collapsing Into A Nightmare?

A message from our sponsor....

2008-06-16T13:09:00.000-07:00

Our sponsor, Affordable Safety Training, has released a Forklift Safety Compliance Kit, which contains the written program, training materials, and certification you need to certify employees to operate forklifts.

Check it out: Forklift Safety Training.

Honda's new "Zero Emissions" fuel cell car.

2008-06-16T09:46:00.000-07:00

I think it is great that automakers are investing money and time into building vehicles that are more fuel efficient and have lower emissions. However, I think labeling a vehicle as "zero emissions," even if it is hydrogen powered, is not intellectually honest.

In the United States, we get half our electricity from the burning of coal. The rest comes from nuclear, natural gas, hydro and oil. The generation of hydrogen takes an enormous amount of energy, and some even argue its a net loss by using hydrogen to power vehicles.

A hydrogen vehicle is not "zero emissions", it merely transfers the energy load from the vehicle to the hydrogen generation plant, which consumes more energy, and then increases emissions from our coal fire plants.

Don't get me wrong, I love more environmentally friendly innovation. But I am wary of any technology that looks like a "magic bullet" to consumers. If they think all they have to do is buy a certain technology, instead of reducing consumption, we will get nowhere fast.

It is going to take all of us making major changes in our lifestyles to get emissions and energy consumption under control.

Here is an article on the new technology: Honda Rolls Out Fuel Cell Car

Charlie Wilson's War

2008-06-15T14:50:00.000-07:00

I watched Charlie Wilson's War last night. It was an interesting movie, with a few good overall morals. The morals being:

Despite good intentions, you never really know what is going to happen.
Don't commit to an action unless is has been thought through and you are prepared to see it to the end.

Makes me wonder about our current Iraq situation - do we now have a moral obligation to complete what we started?

Or is leaving and letting the people figure it out themselves the best course of action?

We had to invade Afghanistan because we failed to follow through after the Soviets were expelled. If we withdraw from Iraq, will we end up having to -re-invade it 20 years from now.

Anyway, good movie. It really makes you think.

Check it out here on Netflix.

Mercy Corps Criticized for Taking Chevron Money

2008-06-08T16:05:00.000-07:00

Sometimes the NW just gets ridiculous when it is up on it's high horse. People are actually upset over the $150,000 that Chevron gave Mercy Corps for Myanmar hurricane relief, a place where Chevron does business.

How dare a business donate money to the community that it is in! That's an outrage. That seems to be the thinking of many people. They are afraid that Chevron is using it to whitewash they record. So? Its money that helps starving and homeless people!

Sometimes people get so caught up in their politics, they forget to look at the big picture.

Here's the link describing the issue, in a very sensible editorial by David Reinhard, of The Oregonian.

http://www.oregonlive.com/news/oregonian/david_reinhard/index.ssf?/base/editorial/121279834666280.xml&coll=7

-And don't get me started on people hating oil companies because they make a product we cant get enough of. Its like fat people getting mad at McDonalds. You don't like their product, don't buy it.

New iPhone Release

2008-06-06T23:35:00.000-07:00

I can't help it, I am very excited for the new iPhone release. I don't even own any Mac products besides an iPod, but I think that the application software on the iPhone has real potential that has yet to be realized.

My Quickbooks online even offers an iPhone application.

I am really hoping for the 3G internet speed, but that seems to be a given now. Hopefully they will incorporate Java into this version.

Its funny to watch the Blackberry / Iphone debate unfold. They want to settle which one is better. I think the best one is the one that meets your particular need the betst.

Read the fanboys on both sides yelling at each other:

http://www.networkworld.com/community/node/28488

Oil Hits New Record High

2008-06-06T12:13:00.000-07:00

Oil prices have hit another record high. I think that the falling dollar has a lot more to do with this than people realize. OPEC keeps insisting that supply is in line with demand. The anti-regulation pundits always predicted that government sponsored conservation was not neccessary, because consumers would do it themselves when prices started to go up. Looks like they are turning out to be correct.

Oil Prices at Record High

Suze Orman on SNL

2008-06-05T14:31:00.001-07:00

I am a big fan of Suzy Orman, she has a real common sense approach to personal finance. They did a great spoof of her on SNL.

Suzy Orman on SNL