Oct

26

I just saw a Toyota commercial. It was clear their direction was for building fuel efficient cars and cars that limit carbon emmissions. What I get from your marketing is that you are committed to selling your bloated inventory of SUV’s under the guise that they are more fuel efficient than other SUV gas guzzlers.

You seem committed to closing plants but seem to have no plans for anything other than contracting your business. As someone that will likely be buying a new vehicle in the next three years none of you are even on my list to consider.

Ford, you have a car you are selling in Europe that gets 60+ mpg. Y’all, quite being numbskulls and shake up the good ‘ol boy club running your companies and get busy!

 Remember the 70’s?

Oct

25

No one seems to have a clue what is going on. Not sure I understand this. Lets take inventory…
1. The Stock Markets have become Casinos
Thanks to derivatives which is what hedge funds are all about. In layman’s terms a derivative is a financial instrument that people buy into that bets that an underlying “real” asset (a stock, a fund, a bond, a commodity) will either rise or fall in price. A derivative is essentially a contract that has nothing much to do with the actual security itself.  
2.  10 Years loaning money to consumers without the means to pay them back
The subprime market is a market that makes high risk loans. Typically these loans come at high interest rates. They are predatory and often serve to enslave low income people. For example in the seventies I bought a stereo on a loan I got from HFC. I was young and did not have good credit at the time. The loan rate was 23.9%. With subprime the interest rates are high as the consumer of the loan has a higher risk of default. So what did the corkballs at Freddie and Fannie and other places do? Well, they lent money to high risk people but did so at fairly low rates called ARMs (Adjustable Rate Mortgages). I could write 100 pages on this alone but let’s segue to #3. By the way, the subprime lending bonanza was not just confined to housing. Autos and other high end consumer goods ended up getting into the game.
3. Subprime loans were bundled up and sold as securities by investment banks 
 This was to “spread the risk.” Actually investment banks could not get enough of this and began being the originator of the funding for this market. It became quite insane for the reason that the people selling all this worthless paper were getting paid commission. They were all getting quite rich while putting foolish people deeper and deeper in debt. Hey why not, with the price of housing rising 8-15% a year the math was easy to sell. Did people in this business know what they were doing…this brings me to #4.
4. Credit Default Swaps
This is “in reality” not “in practice” an insurance contract that is backed by nothing other than a promise. Companies like AIG insured the subprime market with these. “Hey WAMU and Wachovia you pay us a premium of X dollars and we will cover your subprime note in case of default.” “Sure sounds good to me,” says these idiot bankers. Problem is credit default swaps are not regulated, not well tracked, and again backed by nothing other than hot air. It worked essentially like this but on a much grander scale. Imagine I entered into a contract with you. I tell you I will cover the loan on the car you co-signed for your irresponsible teenager. Pay me $500 dollar a year and we have a deal, I will cover the $30,000 Mustang he bought. In reality I have no money to cover the loan and unlike real insurance do not put any of the money you pay me aside to cover you in the event that your teenager defaults. Life works good for all of us as long as your son can make the payment.
To make matters worse and scary for all of us no one really knows how much money is out there in the credit swap market. Estimates are as high as 60 trillion (yes trillion) in credit default swap paper. To put this number in perspective the US GDP (Gross Domestic Product) was estimated at 13.8 trillion in 2007. Essentially there is more credit default paper allegedly out there than the combined domestic product of the entire planet. By the way GDP is the measure of the flow of goods and services for a period of time (usually a year).
Ponder this for a moment. All of these greedy bastards in this phony insurance alone have created a business with a value greater than all the worlds goods and services.  This business they created is backed by nothing.
Folks, I am not making this stuff up. This crap was going on for the last decade and all of these investment people with college degrees from the boardroom to the cubicles knew exactly what they were doing was risky at best, unethical for sure, and in the era of Sarbanes-Oxley quite criminal in nature, though to them a loop hole.
So when you see the markets swinging each day up and down like a tilt-a-whirl you now have some idea why.
Yes, this is depressing. Yes, this is going to get much worse. How much? Who knows. I am not trying to promote doom and gloom. I am trying to tell you what is real. In the coming days I will give my 2-cents on what you can do to ride through this storm and what we all need to do to get the world economy back on track. There is no easy fix to any of this. BUT, we need to fix it in the right way. This is not currently the course we are on.

Oct

24

In the past few months I have watched finance experts, …and cork balls like Bill O’Reilly claim ignorance to our recent meltdown.

Wait a minute… are you kidding? What a bunch of revisionist doof bags (when they can actually remember)…

On January 19th I wrote a blog titled “The Great Mortgage Debacle” http://everydollarmatters.com/blog/2008/01/19/the-great-subprime-mortgage-debacle/

Here is an excerpt…

“Housing market is so hot…
 - People can flip houses in weeks, making crazy profits without even lifting a finger.
 - To get into a house you have to offer more than the asking price
People with credit so bad they cannot qualify to move into most apartment complexes are given loans for housing they cannot afford at terms that are outrageously unfair
… Absolute Insanity …

I guess since it has been a while since the .COM insantity we needed a new means of losing our minds.”

I certainly was not the only one crying wolf back then.

I must say I am so glad to here all the experts now telling me what anyone with a lick of common sense back in Q4 of 2007, and Q1 of 2008 already understood.

 

 

Oct

24

I don’t want to say I told you so…but I am. On June 25th I berated both the Democrats and the Republicans and how they were handling matters. Actually it was quite the tirade.

http://everydollarmatters.com/blog/2008/06/25/at-what-point-will-we-be-getting-to-what-really-matters/

I do not claim to be a sooth-sayer or any great pundant on these matters. During this tirade I asked Mr. Obama and Mr. McCain and their parties to get to the issues. I also predicted that if the republicans did not pull their heads out they would be in for the surprise of their life come November. Newsflash, they are still clueless. Obviously Obama and his party read the tea leaves as they seem to be more in touch and as a result will win convincingly 12 days from now.

Oct

24

I usually like what Newt Gingrich has to say. He seems to be one of the few remaining conservatives that has not totally lost his mind. But when Newt recently compared CNN to Pravda I could not help but think “Newt, dude, have you never seen Lou Dobbs program?”

Oct

21

With gas prices falling it is far too easy to breath a sigh of relief and ignore this issue. We certainly did back in the seventies. Fact is a) for the sake of climate change; b) our economy, we need to deal with this issue just the same as if prices were still $4.25+ per gallon.

On a positive note according to http://wiki.answers.com/Q/How_many_cars_are_there_in_the_US there are 62 million registered vehicles in the US. If these cars conservatively use 8 gallons of gas each a week lets apply some simple math. When gas was $4.00 a gallon Americans were spending 1.98 billion a week in buying gas. With gas now at $2.91 a gallon we are spending 1.44 billion a week. Consumers are some spending $540 million less a week. This is money that is making its way into other facets of our economy. These are conservative numbers.

 

Oct

14

Well we can all breath a sigh of relief. YEAH RIGHT! This is just another day on the economic roller coaster. Since 1933 was mentioned in many headlines it is time for a history lesson on a few points these new stories failed to mention.

Message: These were not happy times folks. Do not get too excited about the 937 point rise. The facts remain:

Between this and our energy problems (remember those?) and the war in Iraq (remember that?) we are in for a slow down of our economy that may or may not be on the scale of the 1930’s but there is just no avoiding an economic slowdown, especially if we want a recovery that is sound and considers future generations.

 

Oct

13

An interesting read.

http://www.xat.org/xat/moneyhistory.html

Oct

11

If you are 45 you have at least twenty years left to work. Point being that you need to look at whatever harrowing times we are going into with a long term lens.

Two things you should do assuming you have the financial means

1) Increase your cash position

2) Keep your 401k contributions going but put them into conservative stock funds

#2… are you crazy.

NO!

You are NOT an industrial investor that has to think about where your gains and losses are on a quarterly basis. You are going to buy stocks and funds in companies like GE, IBM, Toyota. Strong companies with good balance sheets. Only buy into these types of companies at this time.

Remember, buy low, sell high. If you are 45 you have 15 years before you have to start thinking about moving your money to less riskier financial instraments (bonds, CD’s, etc…).

 

Oct

7

It is time for some practical advice on a number of subjects starting with debt. When it comes to your finances there are many factors you need to consider.  There are some general principles we should all live by, but there is no “one size fits all” strategy when it comes to your money. 

One thing is clear, from our government to our businesses to each of us, we have collectively become a nation of debt. This has got to change. Getting out of our current crisis by all parties taking on yet more debt is not a solution to the problem.

Fact is business and individuals that have not been very good with their money deserve to fail. I know this sounds harsh, especially when talking about individuals but what is the alternative for those that are too far financially gone?

I did not get involved in the Dotcom madness of the mid to late nineties. I did not get involved with the far too liberal lending of equity in ones home or buying a home that was way beyond my means. I have been responsible with my money and do not carry any credit card debt or consumer debt except what is left to pay on my mortgage. I do not expect our govenment to bail any one or any entity out that DOES NOT have the means to repay their debt!

Each day for some time now I get to sit and watch my investments and retirement diminish as the market falls. It does not seem fair but it is the current reality. I do not expect the government to bail me out. Losing money sucks, but that is the risk one takes when buying securities.

Fact is a large part of the problem is debt. We need all start reducing our debt. As long as you have an income you can begin to pay down your debt. This may seem like a strategy that will continue to slow things down even further, but I can tell you that a solution that increases a consumers debt is only going to hold off the avalanche a little longer. Starting to be more responsible with our money is something all of us need to do.

 

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