An attempt to bail out the mortgage industry has failed again. It was unpopular. To many Americans, it looked like an attempt to bail out millionaires. But it was an attempt to avert potentially the worst economic crisis since the great depression. That crisis now looks inevitable.
Here is what we are now in for. It is now likely that so many of us will soon be out of work as employment is always the last indicator. Companies usually dismiss workers as a last resort. Those of us that still have jobs in six month will be the lucky ones. I foresee double-digit unemployment in the near future. This means that one person out of every 10 or more will loose their job because of this failed bail-out package. Probably in January or February, at the worst possible time, when it is cold and there people can not pay their heating bills will people really get angry. By then, it will take a trillion to fix things.
It is too bad that people do not see how Wall Street impacts Main Street. It is better to take care of problems when they are small then to let them get too big. But it is too late now.
Monday, September 29, 2008
Sunday, September 28, 2008
Discrimination is Still Alive and Well in this Election
Mad TV and Saturday Night Live.
I have enjoyed many of the skits on these two programs over the years. Even the political ones. But this year, Mad TV is over the top this year with their portrayal of John McCain. McCain is portrayed by Bobby Lee, a very talented comic. Last week, there was a portrayal of McCain vs Obama on a spoof of dancing with the stars. Obama was portrayed as hip--he was break dancing. McCain was portrayed as a music-box robot.
This is proof that one group that it is still OK to discriminate against is older citizens. There are reasons to vote for Barak Obama. One of them is not because he is younger. It amazes me that this portrayal comes from Mad TV on fox. Rupert Murdock is one of the most powerful Octogenerians in the world. Perhaps this is proof that you can sometimes bite the hand that feeds you and get away with it.
Turning 40 this year has made me come to the realization that eventually we will all get older. The best thing about being older is that you have had the time to make mistakes and learn from them.
Saturday Night Live's portrayal of Sarah Palin is not over the top. But it will get old. Palin is smarter than a lot of people give her credit for. I think that Palin's candidacy for VP is proving that there is the right kind of feminist and the wrong kind of feminist. Palin is not the right kind of feminist.
I have enjoyed many of the skits on these two programs over the years. Even the political ones. But this year, Mad TV is over the top this year with their portrayal of John McCain. McCain is portrayed by Bobby Lee, a very talented comic. Last week, there was a portrayal of McCain vs Obama on a spoof of dancing with the stars. Obama was portrayed as hip--he was break dancing. McCain was portrayed as a music-box robot.
This is proof that one group that it is still OK to discriminate against is older citizens. There are reasons to vote for Barak Obama. One of them is not because he is younger. It amazes me that this portrayal comes from Mad TV on fox. Rupert Murdock is one of the most powerful Octogenerians in the world. Perhaps this is proof that you can sometimes bite the hand that feeds you and get away with it.
Turning 40 this year has made me come to the realization that eventually we will all get older. The best thing about being older is that you have had the time to make mistakes and learn from them.
Saturday Night Live's portrayal of Sarah Palin is not over the top. But it will get old. Palin is smarter than a lot of people give her credit for. I think that Palin's candidacy for VP is proving that there is the right kind of feminist and the wrong kind of feminist. Palin is not the right kind of feminist.
Thursday, September 25, 2008
The deal falls apart
The bail-out deal has fallen apart. And it was the Republicans that did it. The republicans have nothing more to loose with the economy right now.
When a democrat was last in the White House--the economy was doing well and there was a budget surplus. And it has all gone to pot with Republicans in charge.
People who can put two and two together will probably vote for Obama.
But there is plenty of blame to go around. There is an economic term called the velocity of money. It is not like velocity in physics. It is based on the savings rate. I spend $1. The person who I give my dollar to is going to save a certain amount and spend the rest. The velocity of money is 1 minus the savings rate. If there are no taxes, and the savings rate is one percent then the dollar that I spend will last until it moves between about 450 people before the last penny is put in the bank.
But what if the savings rate is negative. Right now the savings rate in the United States is negative 3 percent. That means when I spend 1 dollar, the store keeper will borrow 3 cents and spend 1.03. If you do this, it appears that that 1 dollar will never wear out. But that 3 cents has a cost, and it is interest. So that store keeper is not adding three cents to the economy for every dollar that I spend, but it is three cents minus interest. Over the years, the interest will catch up. That is where the economy will crash. That is where we are now. That is the danger of a negative savings rate.
When a democrat was last in the White House--the economy was doing well and there was a budget surplus. And it has all gone to pot with Republicans in charge.
People who can put two and two together will probably vote for Obama.
But there is plenty of blame to go around. There is an economic term called the velocity of money. It is not like velocity in physics. It is based on the savings rate. I spend $1. The person who I give my dollar to is going to save a certain amount and spend the rest. The velocity of money is 1 minus the savings rate. If there are no taxes, and the savings rate is one percent then the dollar that I spend will last until it moves between about 450 people before the last penny is put in the bank.
But what if the savings rate is negative. Right now the savings rate in the United States is negative 3 percent. That means when I spend 1 dollar, the store keeper will borrow 3 cents and spend 1.03. If you do this, it appears that that 1 dollar will never wear out. But that 3 cents has a cost, and it is interest. So that store keeper is not adding three cents to the economy for every dollar that I spend, but it is three cents minus interest. Over the years, the interest will catch up. That is where the economy will crash. That is where we are now. That is the danger of a negative savings rate.
Would You Like Teeth with that?
I have heard the rumor, and I hope that it is a rumor, that some banks will not sign up for the bail-out program if they are forced to get rid of golden parachutes.
THIS MAKES ME ANGRY!
This bail-out law had better have some teeth to it. Meaning...we are not giving you a choice. We will buy your bad debt, you will turn over your bad loans to the government and you will get rid of your golden parachutes. We will give you no choice. We will cancel your passport and prosecute you if you refuse.
Why do certain people think that they need to be rewarded for letting their company go down the toilet. The employees of these firms who get laid off are going to struggle until they can get another job. The CEOs of these companies need to suffer the same fate that their employees will. Unemployment ruins your psyche and your credit. It takes years to recover.
If you leave your company a better place than you find it. If your employees are better off because you were there. If your employees feel that they were treated fairly by you. If your customers are happier. If you investors have profited. If your company has secured its niche for the long-term. If all this happens, then we will make you rich. If all of this happens no one will care about the millions you have sent to your bank account in Bern. Otherwise, no and hell no! We deserve better.
THIS MAKES ME ANGRY!
This bail-out law had better have some teeth to it. Meaning...we are not giving you a choice. We will buy your bad debt, you will turn over your bad loans to the government and you will get rid of your golden parachutes. We will give you no choice. We will cancel your passport and prosecute you if you refuse.
Why do certain people think that they need to be rewarded for letting their company go down the toilet. The employees of these firms who get laid off are going to struggle until they can get another job. The CEOs of these companies need to suffer the same fate that their employees will. Unemployment ruins your psyche and your credit. It takes years to recover.
If you leave your company a better place than you find it. If your employees are better off because you were there. If your employees feel that they were treated fairly by you. If your customers are happier. If you investors have profited. If your company has secured its niche for the long-term. If all this happens, then we will make you rich. If all of this happens no one will care about the millions you have sent to your bank account in Bern. Otherwise, no and hell no! We deserve better.
Tuesday, September 23, 2008
The Golden Parachute Tax.
The current economic crisis is not a partisan issue, and this is not the time for partisan bickering. What we need to understand is that 700 Billion dollars is a lot of money. Personally, I want to hang the people responsible, but I have a better idea. I am normally not for new taxes, but someone needs to pay this bill. The median household earns 44,380 annually. The median household size that earns the median household income is 2.57. This translates to roughly 277 hours worked for every American. This is nearly 7 weeks--that is how long all of us are going to have to work to make this much money.
I only support the bail out if it is going to save jobs and livelihoods. I personally have my doubts about that. I really think that this will exacerbate the problem. In other words, credit will be more difficult to get and housing prices will plummet even further and at a faster rate. The resulting recession may be shorter, but it will be much worse. I would be like getting a flu shot that gives you all the severity of a two week virus in 24 hours. Do we really want this? I don't.
I have been laid off three times in my career. The first time, I got one months severance, the second and third time, I got two months severance. I had a coal parachute that was full of holes. This is what grunts at the bottom of the food chain get when they are involuntarily separated from a company. Only senior executive get the big bucks.
My idea to fix this is bail those guys out, but introduce a new tax. A tax on severance. The "Golden Parachute" tax. Severance packages are tax free up to 1 year salary, or $ 250,000, whichever is lower. Anything beyond that is taxed at 99%. No shelters, no loopholes. This does not cover retirement if you take a pension or an annuity. It does cover a lump sum retirement package. It does cover "voluntary" separation. The government will have the right to investigate any unusual retirements--like someone retiring under the age of 60, or retires and then becomes the CEO of another company, etc. In other words, if you run a company into the ground, you will pay. The government will collect it from you.
I only support the bail out if it is going to save jobs and livelihoods. I personally have my doubts about that. I really think that this will exacerbate the problem. In other words, credit will be more difficult to get and housing prices will plummet even further and at a faster rate. The resulting recession may be shorter, but it will be much worse. I would be like getting a flu shot that gives you all the severity of a two week virus in 24 hours. Do we really want this? I don't.
I have been laid off three times in my career. The first time, I got one months severance, the second and third time, I got two months severance. I had a coal parachute that was full of holes. This is what grunts at the bottom of the food chain get when they are involuntarily separated from a company. Only senior executive get the big bucks.
My idea to fix this is bail those guys out, but introduce a new tax. A tax on severance. The "Golden Parachute" tax. Severance packages are tax free up to 1 year salary, or $ 250,000, whichever is lower. Anything beyond that is taxed at 99%. No shelters, no loopholes. This does not cover retirement if you take a pension or an annuity. It does cover a lump sum retirement package. It does cover "voluntary" separation. The government will have the right to investigate any unusual retirements--like someone retiring under the age of 60, or retires and then becomes the CEO of another company, etc. In other words, if you run a company into the ground, you will pay. The government will collect it from you.
Wednesday, September 17, 2008
What Corporate America and Wahsington Have Forgotten
In answer to yesterday's questions. There are three groups of stakeholders in a business. The employees, the investors and the customers. A corporation is responsible to make sure that each is taken care of. In today's corporate America, we have forgotten about two of them and focused on one.
A company is obligated to its employees. They are the ones who make it happen. The are the eyes, ears and mouth of the company. In my current research project I am finding out that employees are more likely to be unethical at work if the company forgets about taking care of them and puts profits first. According to one source, employees are 91% likely to behave ethically if they have a good work/home life balance. When we force the employees to spend more and more time at the office. When we put pressures on them to put profits ahead of people. When corporate leaders set a poor example for them, unethical behavior spreads throughout the organization. You have to take care of your people and they will take care of you. And they will behave themselves as well.
A company is obligated to their investors to make sure that these people received a fair return on their investment. Give them reasons to invest for the long term by making slow and steady growth the priority. If you are concerned about short-term profits, investors will bail at the first sign of trouble. When you loose money, you will loose it at a faster rate.
A company is also obligated to its customers. Look at the housing industry. How many newly weds are purchasing the house that they will be living in when they retire? Probably a very small percentage. Is it not better to take care of these people so that they will come to you when it is time to trade up? If a real-estate agent treats a customer fairly, will he not have a repeat customer? Even when you earn a lot of money on one sale, is it not better to get repeat business? The best customers are the ones that keep coming back. They will tell their friends about you. Your business will steam roll. The saying goes that it takes 20 positive experiences to make up for one negative one. On a scale of 1 to 10, this is statistically true. If you throw one zero, it takes 19 10s to bring the average close to 10.
If you ask me, the mortgage and real estate industry in this country has messed themselves up. Like I said yesterday, the average income in Silicon Valley is 85,000 per year. The average home price is 830,000. If both spouses are earning the average, then a family can afford 254,000 on a home. The question is, how did it get this way?
It is because the real estate industry uses practices that create artificial demand and the mortgage industry has supported the practice. When the dot com bubble burst, investors went into real estate to make money. With more and more and more people trying to flip houses for profit, the demand escalated. This pushed prices extremely high. Higher than the average home buyer could afford. Banks have to get creative to help people qualify for these king of mortgages. And when the bill came due, people could not pay. This equation was exacerbated by higher fuel costs.
Real Estate agents get their commissions right away. They rarely see the effects of a foreclosure. The mortgage industry profits from a foreclosure if there are not very many of them because they usually sell the house at a price that would make up for the loss...until now. It was a win/win until recently.
I do not think that this crisis will be over until the average price of a house is realistic for the average home buyer. We still have a lot of ground to make up in many of our largest cities in this area. Especially in some cities like the south bay area.
What can congress do? I don't know for sure. Perhaps end the tax credit for the interest on a second home? No...that would bring prices down at an even faster pace. Extend the existing credit for first time home buyers. That will help hold demand in the housing market. More guaranteed loans for first time home buyers and more programs to help first time home buyers make good down payments. Similar helps for dislocated and displaced workers. Perhaps now would be a good time to bring back Pell Grants for displaced workers...and even Pell Grants for such workers that already have a Bachelors degree. Programs that make it easier for experienced workers to get teaching certificates. I also think that there could be a law that pays real estate agents their commissions over time instead of all at once. There are a lot of things that will help...but our congress needs to act now before they go on recess.
A company is obligated to its employees. They are the ones who make it happen. The are the eyes, ears and mouth of the company. In my current research project I am finding out that employees are more likely to be unethical at work if the company forgets about taking care of them and puts profits first. According to one source, employees are 91% likely to behave ethically if they have a good work/home life balance. When we force the employees to spend more and more time at the office. When we put pressures on them to put profits ahead of people. When corporate leaders set a poor example for them, unethical behavior spreads throughout the organization. You have to take care of your people and they will take care of you. And they will behave themselves as well.
A company is obligated to their investors to make sure that these people received a fair return on their investment. Give them reasons to invest for the long term by making slow and steady growth the priority. If you are concerned about short-term profits, investors will bail at the first sign of trouble. When you loose money, you will loose it at a faster rate.
A company is also obligated to its customers. Look at the housing industry. How many newly weds are purchasing the house that they will be living in when they retire? Probably a very small percentage. Is it not better to take care of these people so that they will come to you when it is time to trade up? If a real-estate agent treats a customer fairly, will he not have a repeat customer? Even when you earn a lot of money on one sale, is it not better to get repeat business? The best customers are the ones that keep coming back. They will tell their friends about you. Your business will steam roll. The saying goes that it takes 20 positive experiences to make up for one negative one. On a scale of 1 to 10, this is statistically true. If you throw one zero, it takes 19 10s to bring the average close to 10.
If you ask me, the mortgage and real estate industry in this country has messed themselves up. Like I said yesterday, the average income in Silicon Valley is 85,000 per year. The average home price is 830,000. If both spouses are earning the average, then a family can afford 254,000 on a home. The question is, how did it get this way?
It is because the real estate industry uses practices that create artificial demand and the mortgage industry has supported the practice. When the dot com bubble burst, investors went into real estate to make money. With more and more and more people trying to flip houses for profit, the demand escalated. This pushed prices extremely high. Higher than the average home buyer could afford. Banks have to get creative to help people qualify for these king of mortgages. And when the bill came due, people could not pay. This equation was exacerbated by higher fuel costs.
Real Estate agents get their commissions right away. They rarely see the effects of a foreclosure. The mortgage industry profits from a foreclosure if there are not very many of them because they usually sell the house at a price that would make up for the loss...until now. It was a win/win until recently.
I do not think that this crisis will be over until the average price of a house is realistic for the average home buyer. We still have a lot of ground to make up in many of our largest cities in this area. Especially in some cities like the south bay area.
What can congress do? I don't know for sure. Perhaps end the tax credit for the interest on a second home? No...that would bring prices down at an even faster pace. Extend the existing credit for first time home buyers. That will help hold demand in the housing market. More guaranteed loans for first time home buyers and more programs to help first time home buyers make good down payments. Similar helps for dislocated and displaced workers. Perhaps now would be a good time to bring back Pell Grants for displaced workers...and even Pell Grants for such workers that already have a Bachelors degree. Programs that make it easier for experienced workers to get teaching certificates. I also think that there could be a law that pays real estate agents their commissions over time instead of all at once. There are a lot of things that will help...but our congress needs to act now before they go on recess.
Tuesday, September 16, 2008
Mortgage Crisis and Corporate Greed...Who is to Blame.
Who is to blame for the Mortgage Crisis and the economic problems now. I remember one of Bill Clinton's last State of the Union addresses. He was bragging about how a higher percentage of Americans than ever before were becoming home owners in his administration. I am NOT blaming him for this. There is plenty of blame to go around. From the Oval Office, to the Fed, to almost every state legislature, to Congress, to Corporate America and to many Media Outlets nationwide.
With three weeks complete of my Masters Program, I have come to understand that almost all of us in power have forgotten two basic principles of business.
1. Who are you in business for?
2. Who makes it happen in your company?
If you don't know the answer to these two questions, you deserve to be sleeping under the North Temple viaduct with all the other people who make live there. Let me give you a hint. The answer is not "myself." But if you think it is, or you act like it is then you are part of the problem. The only hints that I will give you is that the first word in each answer is "your." And the second word is not "stockholders." The first letter of the second word for the first question begins with the letter "c" and the first letter of the second word for the second question begins with the letter "e".
And here is another hint. The answer to both questions are the people who businesses across America are taking for granted.
BTW--the average salary in Silicon Valley is 85,000. The average price of a home is still around 830,000. Even the people who sleep under the North Temple viaduct every night can probably figure out that the average wage earner in Silicon Valley can not afford the average home. It should be no wonder then that we have a mortgage crisis. I do not need a Masters Degree to figure that one out.
I will post the answer to these two questions on Saturday.
With three weeks complete of my Masters Program, I have come to understand that almost all of us in power have forgotten two basic principles of business.
1. Who are you in business for?
2. Who makes it happen in your company?
If you don't know the answer to these two questions, you deserve to be sleeping under the North Temple viaduct with all the other people who make live there. Let me give you a hint. The answer is not "myself." But if you think it is, or you act like it is then you are part of the problem. The only hints that I will give you is that the first word in each answer is "your." And the second word is not "stockholders." The first letter of the second word for the first question begins with the letter "c" and the first letter of the second word for the second question begins with the letter "e".
And here is another hint. The answer to both questions are the people who businesses across America are taking for granted.
BTW--the average salary in Silicon Valley is 85,000. The average price of a home is still around 830,000. Even the people who sleep under the North Temple viaduct every night can probably figure out that the average wage earner in Silicon Valley can not afford the average home. It should be no wonder then that we have a mortgage crisis. I do not need a Masters Degree to figure that one out.
I will post the answer to these two questions on Saturday.
Monday, September 15, 2008
We need Mitt
I was pondering on the happenings in the financial world today. I am also pondering on the fact that Congress has recessed for the remainder of the year without acting on legislation that is so important to Utah. Here is a short list of what is not yet done.
1. No agreement for the development of Oil Shale on Federal Land including the Uintah-Ouray Indian Reservation.
2. No law banning the import of nuclear waste from foreign lands.
3. Nothing new on immigration reform.
4. No new drilling leases, anywhere.
5. No financial marker reform.
As the press focuses on the horse race of the upcoming election, here is a run down of the important issues to me and where I stand.
1. We need a long-term energy solution. More sources of fossil fuels now, better technology so that we are not dependent on foreign sources of energy or fossil fuels in the future. In other words--do something because anything is better than nothing. Everything that both sides of the energy debate that people have proposed will work somewhat. Arguing about it until nothing is done is killing us.
2. Stabilization of our financial markets. Have tax policies that force companies to work on long term stability and research and development. My solution...new tax bracket for anyone earning over 15 million per year unless it is paid in stock options that can not be optioned or sold for at least ten years. The only loopholes for this tax bracket would be if those funds are immediately donated to non-profits charities or to schools. (This would include big-ticket athletes and media moguls like Oprah.) This means that big-money CEOs will be financially obligated to consider the long-term stability of their firms, the greater community around them and the training of the next generation rather than the next quarter's financial statements. You will get that golden parachute...in 10 years if your company is still strong and stable.
3. We need a better education system than we have now. We need a plan to get 50% or more of our working population with a Bachelors degree or higher. (Same solution as above.) A Bachelors degree today provides the same potential that 40 acres and a reliable source of water did 150 years ago. This will help keep good-paying high-tech jobs in the US.
4. A comprehensive foreign policy that addresses the war on terror and addresses immigration reform. We want people to come here and contribute to our society and make it a better place. We want to get along with our neighbors and reduce the likelihood that our sons and daughters will die on the battlefield. If people just want to come here and work and then go home and be good citizens of their homeland, lets work to accommodate that. Let's not force those people into hiding. They can be good neighbors, lets help that happen.
My hope for Mitt, and my request. Move back to Utah. Challenge Mr. Bennett for his senate seat. Mr. Earmark has been a disappointment. He represents everything that is wrong with the Republican party right now. He is fiscally spend-thrifty. We do not need Bennett in Washington spending the tax money that my grandchildren and great-grandchildren will pay. We need Bennett retired. Mitt has the clout in this state to make it happen. If we can retire Bennett, it will send the right message to Hatch. Then I will be able to change the name of this blog.
1. No agreement for the development of Oil Shale on Federal Land including the Uintah-Ouray Indian Reservation.
2. No law banning the import of nuclear waste from foreign lands.
3. Nothing new on immigration reform.
4. No new drilling leases, anywhere.
5. No financial marker reform.
As the press focuses on the horse race of the upcoming election, here is a run down of the important issues to me and where I stand.
1. We need a long-term energy solution. More sources of fossil fuels now, better technology so that we are not dependent on foreign sources of energy or fossil fuels in the future. In other words--do something because anything is better than nothing. Everything that both sides of the energy debate that people have proposed will work somewhat. Arguing about it until nothing is done is killing us.
2. Stabilization of our financial markets. Have tax policies that force companies to work on long term stability and research and development. My solution...new tax bracket for anyone earning over 15 million per year unless it is paid in stock options that can not be optioned or sold for at least ten years. The only loopholes for this tax bracket would be if those funds are immediately donated to non-profits charities or to schools. (This would include big-ticket athletes and media moguls like Oprah.) This means that big-money CEOs will be financially obligated to consider the long-term stability of their firms, the greater community around them and the training of the next generation rather than the next quarter's financial statements. You will get that golden parachute...in 10 years if your company is still strong and stable.
3. We need a better education system than we have now. We need a plan to get 50% or more of our working population with a Bachelors degree or higher. (Same solution as above.) A Bachelors degree today provides the same potential that 40 acres and a reliable source of water did 150 years ago. This will help keep good-paying high-tech jobs in the US.
4. A comprehensive foreign policy that addresses the war on terror and addresses immigration reform. We want people to come here and contribute to our society and make it a better place. We want to get along with our neighbors and reduce the likelihood that our sons and daughters will die on the battlefield. If people just want to come here and work and then go home and be good citizens of their homeland, lets work to accommodate that. Let's not force those people into hiding. They can be good neighbors, lets help that happen.
My hope for Mitt, and my request. Move back to Utah. Challenge Mr. Bennett for his senate seat. Mr. Earmark has been a disappointment. He represents everything that is wrong with the Republican party right now. He is fiscally spend-thrifty. We do not need Bennett in Washington spending the tax money that my grandchildren and great-grandchildren will pay. We need Bennett retired. Mitt has the clout in this state to make it happen. If we can retire Bennett, it will send the right message to Hatch. Then I will be able to change the name of this blog.
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