Tag Archives: investments

Thoughts

A few words on the economic crisis at hand

I’ve just got to say what I’m about to say, because it’s gnawing at me from inside, and I need to have it out. I’m not going to pretend I’m some economic guru, and I’ll use plain words.

My thinking on economics is simple. I understand tangible products. If an economy makes stuff I can touch and see, if it manages to sell that stuff both inside and outside the country, and the unemployment rate is low, then things are well.

I think things started to go sour when our industries decided to shift manufacturing to third-world countries. The thinking was that cheaper labor would result in cheaper products and lower prices. The truth was that it took jobs away from our country and it really only resulted in higher profits for the investors, not lower prices for us. As more companies would announce they were moving factories abroad, I would wince, because I knew our economic power was decreasing with each and every move. When you’re making less stuff in your own country, it’s plain common sense to realize that your economy is weaker.

As our economy started to move away from manufacturing and toward the service sector, I winced again. If you’re not making tangible products, what are you really making? Services? Knowledge? That’s all nice and good, but you can’t base an economy on intangibles. You just can’t. You have to have a good, healthy mix. I suppose I shouldn’t complain about this so much, since I work in IT. Still, at least what I make is tangible. I make websites and web systems. You can see and touch those, or click on them anyway. But not everyone can be a knowledge worker. It takes a certain amount of dedication, interest, perseverance and education, and many people simply don’t have the inclination to do that, or to be knowledge workers. That’s where having a good mix of jobs to offer your people is important. The more manufacturing jobs you move away from the country, the less variety you can offer your people. Plus, what do you do with all the folks you’re laying off as you “restructure” your economy?

When real estate prices started going up like crazy, I knew they’d come down, hard. They were bound to do so. When a pathetic little townhouse with a few tiny rooms, made out of plywood and fake brick cladding, cost over $400,000, that couldn’t be good. As prices kept going up, and people bought up multiple properties using ARMs, banking on the hope that the values of these properties would continue to grow, but no regular person could afford to actually own one of them, that was just plain wrong. When the home prices in most neighborhoods are so high that they’re out of reach for most, that’s asking for trouble.

Then I heard about the gaming that went on behind the scenes, as loans were approved by mortgage companies which seemed to sprout out everywhere. We knew someone who worked at one of these companies, and that person was just shocked at what went on. Executives would push employees to approve more and more loans only so they could get fat bonuses and afford McMansions and Mercedes cars. Meanwhile, the employees got nothing but low pay and long hours.

What’s more, I also heard about investment firms buying up groups of mortgages left and right, and re-selling them, and creating ridiculous layers of investments and speculations on top of these (mostly) insecure loans, in order to squeeze as much profit from them as possible. I’m sure that if you go back and check most loans, you’ll find 5-6 layers of additional financial speculation on top of the original mortgage. That’s insane and it makes me sick when I think about it. Instead of letting someone borrow money and charging them the set interest fee for the life of the loan, banks were selling these loans left and right as soon as the papers were signed, not caring where they ended up, letting others take the fall when and if the loan defaulted, etc ad nauseam. I knew that wasn’t going to end well.

Fast forward a couple of years to where we are today, and is it really any surprise that we’re here? Is it? And what’s being done about it? The government wants to bail out the banks and give them insane sums of money. You can’t do that! If they’ve mismanaged their own money so badly over these past several years, while their executives got filthy rich, let those same “smart” executives figure out how to fix their own problems! But no, what we’ve got now are scare tactics employed across the main stream media, where politicians and bankers are trying to scare us into giving in and allowing the bailout plan to go through. We’ve got bankers lobbying politicians to get the plan passed, and we’ve got them salivating at the thought of getting a piece of the bailout pie. This is ridiculous and irresponsible!

I keep thinking about Bush’s televised speech when he wanted to go into Iraq. And then I think about his speech just a few days ago, where he used the exact same scare tactics and language to try and get us to agree to the bailout plan. Jon Stewart did a great job of contrasting the two speeches on The Daily Show [reference]. Here’s a man that’s derailed our country, our economy, our international standing, and our military over the past 8 years, and we get to see his scare tactics in use once more. He’s clearly beholden to special interests, and they write his agenda. They wrote his agenda when he said we should go into Iraq, and they’re writing his agenda now that he wants to bail out the corrupt bankers. Given his track record, does he really deserve any credibility? I don’t think so.

So what should we do? Ride it out. Let the bankers suffer and cry. Let’s take our proverbial castor oil, let the crap pass through the system, and move on. They said it would be a disaster yesterday, when the stock market tumbled 778 points, and yet it jumped back up by 485 points today as investors gobbled up stocks while the prices were low. I think we all need a serious round of belt-tightening. Many Americans need to learn a hard lesson, namely that life doesn’t work on credit, that you need actual, real money to buy stuff. People and politicians and banks everywhere need to learn real fiscal responsibility. They need to learn that they can’t run up bills on credit cards and loans and credit derivatives and bond issues and not expect them to come due at some point. They need to learn that saving is more important than spending, and that a healthy economy means an economy that keeps its jobs inside the country, and makes most of what it needs inside the country as well.

It is truly unfortunate that none of the candidates running for president is saying this. I support Obama on my website, as you can tell by the Obama button in the sidebar, but that doesn’t mean I agree with him on everything. I think he’s the better choice out of the two, but he’s pretty short on substance when it comes to what needs to be done about our economic crisis. And he actually supports the bailout plan — probably out of fear, because he doesn’t want to be saddled with a big recession should he win office. I honestly wish Ron Paul was still running for president, because he’d get my vote, solely for his common sense approach to this whole mess.

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Lists

Condensed knowledge for 2007-09-19

A bit of a health theme to this edition of condensed knowledge:

  • A new CPR technique was discovered. It’s called OAC-CPR (Only rhythmic Abdominal Compression). As its name implies, you only press on the abdomen, eliminating the risk of broken ribs, mouth-to-mouth, and fatigue from pushing so hard. Definitely worth looking into this!
  • Prozac found in the drinking water in the UK. Apparently so many people are on the anti-depressant in England, that it can now be found, diluted, in the water supply, after having passed through their bodies, into the sewers, through the water treatment plants, etc. Although the “experts” are saying there’s no risk, I doubt it. I mean, this is a drug, found active, in the water supply!
  • WD40 turns out to be a great help for bad joints. Despite the precautions written on the cans, rubbing it into the skin was of tremendous help to a man suffering from joint pain. Not sure that I’d recommend this.
  • Aspartame is the behind the spike in suicides for teen and pre-teen girls. Apparently, it’s a powerful mood-changer — it causes depression. Something to think about the next time you buy your children something with Nutrasweet or Aspartame as the sweetener.
  • Exercising in traffic is bad for your heart. Now that’s something I’ve known was wrong for some time. It just didn’t make sense to me when I saw people running on the sidewalk, next to heavy traffic, breathing in all those noxious fumes. When I run, I want to breathe fresh, healthy air, not someone’s nasty car exhaust. I just couldn’t get why they’d put themselves through something that unhealthy. It turns out the particulates from vehicle emissions decrease our blood’s ability to clot, and restrict the amount of blood that reaches the heart immediately upon exposure.
  • Mobile phones are as dangerous as smoking. So reads a recent headline… People have gone back and forth on the safety of mobile phones for years. Now the EU has finally decided to pick a side and take action. The article’s in Romanian, but what it says is that governments are starting to take mitigating action, first by warning people of the risks, and then by looking at ways to minimize exposure to WiFi radiation. They’re recommending that people go back to using wired Internet connections instead of wireless ones.

Now for some funny stuff:

And some economic discussion:

  • Greenspan on Iraq war, oil link. He confirms what I’ve thought and said for some time. In his talk with Matt Lauer, he touches on the housing bubble and the fiscal irresponsibility of the current administration, but he has no compliments for the Democrats, either. Last, but no least, he says the dollar may be replaced by the euro as the reserve currency of choice.
  • Transparent Investing: what your broker doesn’t want you to know. Here’s a site that offers a purportedly frank discussion of index investing. Definitely worth a look.
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How To

Get smart about money in 135 minutes

Two easy steps are involved with this:

  1. Take 90 minutes to watch Dave Ramsey’s video entitled “Dumping Debt“. It was posted to YouTube in 10-minute segments. Here they are: Part 1 – Part 2 – Part 3 – Part 4 – Part 5 – Part 6 – Part 7 – Part 8 – Part 9. This was possibly posted without Mr. Ramsey’s permission, so please consider purchasing the DVD from his web store. (via Get Rich Slowly)
  2. Take 45 minutes to watch Paul Grignon’s video entitled “Money as Debt” on Google Video. Trust me on this. You will be shocked. You will have your eyes opened, and then you’ll realize what makes the world go ’round. (Cristina, thanks for pointing this out to me!)

Since both of these resources were posted online at full length, and I’m not sure if they were posted with or without their authors’ permissions, you’d be smart to watch them now, while they’re still available. I do not endorse use of copyrighted materials without permission — and to be fair, I don’t know that’s the case here — but I did want to share this information with you. If the videos should become unavailable for some reason, then please consider purchasing them. They are worth your time and money.

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Reviews

Meet LaserMonk in Chief

You wouldn’t think a monastery deep in the western woods of Wisconsin would be involved with re-manufactured laser printer cartridges, but there they are, a multimillion dollar business, up to their necks in profits… See, the monastery was in dire financial straits, and Father Bernard McCoy, now the Chief Operating Monk, struggled to keep it afloat. One day it struck him as he searched for a way to save on toner cartridges. Why not tell others about the great deal he got? And why not act as the middle man and purchase these cartridges for them?

The monastery’s initial investment of $2,000 turned into $2.3 million in sales in 2005, and is expected to double this year. The monastery is out of the pits, and can now afford a private plane and a horse stable, among other perks. How do they manage the profits? The monks are all volunteers working for the monastery, and take no salary. LaserMonks is a non-profit. To top it off, Father Bernard has high plans. He wants to take over the toner market. With this sort of a business model, they’re a real threat to their competitors. I have to wonder about the scalability and sustainability of their business, but only time will tell.

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Thoughts

China's growing energy problem, and the US policy quandary

Just read an article written by someone at AP and published on MSNBC, entitled “World feels China’s growing thirst for oil“. I wish they’d publish author names as well! This was a very well-written article, and full of insights into the issue.

If you thought China’s energy demands are small still compared to the US, you’d be right, but what you may not know is that they’re growing at a much larger rate than US demands. What this means is that oil companies in China, a country short of energy reserves of any kind other than coal, have been busy bees for the last decade, striking deals all over the world to meet demands.

China is now competing directly with Japan for energy, and indirectly with the US. All of this leads to tension, especially when China tries to strike up deals that lock the oil reserves only for its use, and when they support abusive regimes in countries like Iran and Sudan, undermining US foreign policy.

If you think this isn’t serious, think again. Here’s a quote from president Bush: “Oil — the dependence upon oil is a national security problem, and an economic security problem.” To back up his words, the US has built a strong naval presence in the Malacca straits, the narrow passage through which most of the traffic from the Middle East and Africa moves on its way to East Asia. This concern isn’t partisan. Democrats – Joe Lieberman being one of them – agree with Bush’s characterization.

I recently read through a World Bank report that I can’t share here, which said that China’s energy demands will only grow. They’re exploring many routes, one of which is hydroenergy, most of their energy still comes from coal, and oil needs will continue to increase.

My take on it is this: the problem is that they’re the biggest manufacturing center in the world. Companies everywhere have shifted their production facilities to China because of its cheap labor costs and lax environmental standards. So it’s a bit hypocritical to expect China to regulate its energy use while they’re making most of the products for the Western world.

The point is, the industrial portion of the global economy has to reside somewhere, and China’s the place right now. I don’t foresee a decrease in that sort of energy consumption as a whole – the world population’s increasing, not decreasing. If China decreases its production, factories will have to be built somewhere else to meet demand.

To see how truly complex this problem is, you have to look at the relationship between China and the US. They’re propping up the US economy by investing heavily in our bonds and economy. We also depend on them for various of our manufacturing needs, whether we like it or not. China could easily hurt our economy by withholding investment. We’ve got a Communist country propping up a capitalist country. Do you see the irony in this? We have to plead with them to regulate their currency price in order to add more value to our dollar, and we threaten them with military force (very subtly, but effectively) in the Malacca Straits and other places, like Taiwan, which is another hot button issue. Isn’t it a messed up world?

While all of this is happening, we aren’t getting our act together when it comes to reducing our energy needs and investing in renewable energy. We complain when the price at the pump goes to $3, when we should think about conserving energy, especially when it comes to automobile use. We are still privileged in the US. We enjoy low prices for energy while the rest of the world pays $5 to $7 per gallon. We, the general public, keep blaming the oil companies and calling them our enemies, when they’re trying to help meet growing demand with dwindling supplies. We expect oil to be there when we fuel up at the pump, yet we don’t realize how volatile oil markets can be, for many reasons, political and environmental ones ranking at the top of the list.

We should wake up and thank God we’re so privileged in the US. Most of us don’t realize it. I’m writing this from Romania, where oil prices are around $6 per gallon, and most people make about $200 per month. Do the math and see if you could live with that! It’s time we woke up and started conserving, and it’s also time automobile manufacturers and other equipment manufacturers started making products that are more energy efficient. It’s also time city planners started building cities that are more pedestrian-friendly, with broad sidewalks and short walks to shops and other public attractions. We should do all this before we get into real trouble because of our thirst for oil. I don’t think any of us want global conflict on this issue.

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