MONEY 37 - ECONOMY/BANKING RIDICULOUS

THIS IS MY 37^TH POST ON UNDERSTANDING MONEY TOOLS

I write these blogs mainly from a constructive point of view to help those who read them.  I am going to re-visit banking with this blog. I am also going through parameters banks have set in conjunction with the US Government and the outcome which is ridiculous and not a pretty picture for the future. I will touch upon the current US economic situation that all ties in together.

As I write this on August 14^th, 2013 the Federal Government is all but shut down because the Republicans and Democrats can’t decide on finances.  Come this Thursday, August 17^th, the US Government may default on its debts.  This is horrible for many reasons and will have a future negative effect on our country and the people, especially the middle class. What are the obvious negative affects?  Some immediate thoughts are interest rates will go up, America’s credibility to pay its debt will go down, the US dollar that has been held as a benchmark to world currencies will go down, and the recovering building industry which happens to be the biggest US industry will slow and perhaps lead us into another strong recession.

First, have we ever defaulted on debts?  The answer is yes.  We did after the War of 1812 in 1814, and again in 1979. As a sidetrack, I will quickly touch upon the financial detriment of war and much of what has lead us into so much debt. After our Revolutionary War we were broke.  World War I and World War II were necessary wars, and left us in debt.  After those wars I am not sure if our involvements in wars had much to do with anything other than top political people deciding to go to war, and the defense contractors making a ton of money.

The Korean “conflict” could have ended in three weeks as we pushed the North Koreans back to the Chinese Border and the Yalu or Amrok River in that amount of time.  Viet Nam was over Communism. Now some of the world’s most capitalistic countries are in Asia, including Viet Nam.  That war was long and financially a disaster except to a few who made millions.  On August 15^th, 1971 we went off the gold standard to a Fiat currency because we couldn’t pay our debts to the French.  On and on, and then the Iraq war and Afghanistan which have both proven to be a failure, and not one 9/11/2001 was from either of these countries.  You get the point, ridiculous decisions, and now we are broke.

Let’s take all my ranting into how it affects you and me.  As you know the US Government in August, 2007 started indicating that our banking system was tanking financially. The US Government started restructuring regulations, and along with the Federal Reserve started assisting certain banks and large corporations. The Federal Reserve started a program called Quantitative Easings, referred to as QE 1, QE2, QE 3, and now QE4.  The total money involved is about $3.4 trillion.  Now, we must know that the Federal Reserve is independent from the US Government, however it’s power is indisputable. “He who has the gold rules!” As we know, the Federal Reserve has been purchasing US bonds to keep the interest rates artificially low.

Okay, so the big boys have been helped; all the major banks, including investment banks on Wall Street, with the exception of certain ones like Lehman Bros. have been assisted with generous amounts of money, and they invest this money for their own profitability. Quite selective! The Q’s were meant to help the economy in general and it did, however the word “trickle down theory” was a part of this. As I’ve stated many times, “trickle down” does not work, and certainly didn’t.  The theory is if you give the big companies, big banks and the wealthy the money, eventually the money will reach the middle class and perhaps a bit for the poorest people.  Unfortunately, the theory didn’t work at all, and never in history has worked. That is one reason labor unions were started many years ago, to bring some equality to hours worked and a decent pay level. The first appearance of labor uniting was as far back as the 1820s, although real strength started around President Lincoln’s time in about 1866.

With new regulations in place for banks and commercial lending what has happened?  Basically, unless you have so much money you don’t need a loan, you can’t get a loan!  The wealthy don’t need loans, and if they do, they have many sources to go to in the US and outside the US.  Of course, poor people can’t get loans.  Now, the middle class is being crushed.

Last Friday, I had meetings with two financial institutions, one being a credit union and the other being a large US bank which I have had accounts with for over 20 years.  The meetings were a test.  Here is how it went and the outcome. I asked if I could get a relatively small loan, $500,000 to start a home building company that I have structured and have ready to go.  This type of loan is considered a business loan and I was told by both institutions that unless I have had a company in business and showing a profit the past three years I could not get a loan.  So…..I went to ask for a personal loan to see if I could get further.  I was told that I could get a loan if I collateralize the loan with liquid assets, like stocks and bonds, for an amount equal to or greater than the loan amount. I also would need to have enough income to support my current living expenses plus the additional interest and principal reduction on the new loan. Why would I want a personal loan if I had sufficient income?  Aren’t you then essentially borrowing your own money?  It is essentially impossible to get a loan other than a small amount on credit cards at high interest rates.  The banks pay approximately 1/4 to 1/2% interest on a short-term deposit.  If you borrow money it is much higher. Years ago, banks were happy with a spread of 2-3% between what they paid out and what their lending interest rates were, not any longer. A lot of credit card debt is 20% or more.

This is crazy, and is leading to the downfall of the middle class and this country unless something is done. Developers now need to have a large percentage of space leased to major corporations as banks know they are not assisting small businesses, and therefore the big public companies need to be able to support and loans. About 9 out of 10 new small businesses go bankrupt in the first 3 years. Many times the reason for small businesses going bankrupt is that they are under-funded and need loans to meet their needs during business cycles.

Wages and incomes are down for middle class people, thus people won’t be able to buy the same goods and services as in the past. We need money circulating and none of this outrageous $3.4 trillion in QE money has reached you or me.  The banks have invested this money, and aren’t lending it out.

I have read that many middle class people are now cashing in their retirement accounts to start small businesses as banks won’t loan.  This means people are desperate to get some money to start something that will possibly bring in cash to live on.  Fundamentally and economically this is not good. First, you are taking away retirement security, and secondly this will catch up with America down the road. Middle Americans will have no retirement money to live on and join the poor. When you take money out of your retirement account you have the penalty of 10%, and federal and state income tax on top of that, so in most states it amounts to about half your withdrawn money.

This situation has also forced people to seek capital from private lenders. Many private parties who have money to lend want outrageous rates like 20-25% plus collateral for the loan, or a healthy portion of the business.

Enough said.  Bottom line, unless we change banking regulations and get money into the system, available and at low rates to help the middle class start new companies it does not bode well for the future.

MONEY 36 - HEALTH CARE

THIS IS MY 36^TH POST ON UNDERSTANDING MONEY TOOLS

There has been so much talk in the past couple of years about health care in the United States.  I am especially referring to the so called “Obama Care”. Out of frustration I thought I would do a blog on it.

First, “Obama Care” and the Affordable Care Act are the same, but many people don’t know this fact.  They hate both, but don’t understand the basics of the Act or why we as a country need to do something about health care.  I can’t say I understand a lot about it myself but will try to say a few things about the facts I do know to help you.  I have heard the entire Act has about 2300 pages to it, and contains a lot of “pork” on both sides of the political isle.

Let’s trace back 50-60 years of health care in this country.  It has come a long way in certain respects, but also continuing on it’s current course will not be financially sustainable.  After WWII a doctor made a modest income and became a doctor because he wanted to help people with their health needs, not necessarily a profession to make a lot of money.  Outside the hospital the doctor made house calls and then you paid him a nominal fee for that service. Today, there are no house calls in the US.  Hospitals such as the Mayo Clinics and other fine hospitals are like staying at the Ritz Hotels.

The whole industry is quite complex.  In the US we spend about 18-20% of our Gross Domestic Product on the industry. 50 years ago this figure was about 5%. The inflation of health care is far greater than our overall inflation rate in other things. We rate overall very poor in the world in health care, about 34^th, and yet we spend so much more and have some of the best doctors in the world.  All the world’s top countries have a national health care program except for the US. The top socialized countries in Europe and Scandinavia spend about 10-12% of GDP on health care.

It is conclusive that if it is the Affordable Care Act or something else, drastic changes need to be made. We need to look at all aspects, and cuts will need to be made to general costs, drugs, employment and other areas. It was on 60 Minutes some time ago about robots in the manufacturing/industry and hospitals transporting items, taking the place of humans. The people in the US need to get healthier and in better shape, that is a great portion of our problem. People in other countries are healthier; they walk, they eat less fast food, and they are more physically mobile.  Hypertension, high blood pressure, diabetes, obesity are some of our biggest health problems. A good majority of the people who have these issues need to help themselves with exercise and better diet. About 30% of Americans are obese, and almost 70% are somewhat overweight.  We are killing ourselves and running to the doctors and hospitals for every reason. The ratio between the number of ill people and total costs is alarming. Pretty dysfunctional. 

America is getting older. Medicare and Medicaid account for over 50% of our health care expenditures.

Reality! Drug companies that push through much of their costs for research and development to insurance companies are going to have to cut back, doctors are going to have to take less and will have set payments for procedures, medical staffs will be cut and less qualified individuals will be taking on work that perhaps a physician’s assistant does now. Hospitals will need to figure out how to operate on budgets perhaps 25-30% less than today.

With a national care program we may add 40 million people to insurance of some sort for medical care. There are several good things about a national care program, and that program may have to have several layers; one layer for the wealthy, one for the common man and one for less financially fortunate, as we have Medicaid today. In general here are some benefits:

-       With a pre-existing illness you won’t be excluded from health insurance and care.  In the past, if you switched from one insurance company to another, or didn’t work for a company that provided insurance you might not have been able to get insurance. I had a couple of Basel cell cancers removed year’s back, however no insurance company would take me without a total exemption from all cancers. Today the greatest reason for bankruptcies with older people is medical costs. The costs overall should be lower and more shared equally, in theory.

-       Uninsured people won’t need to run to the emergency rooms for everything as they tend to do now.

-       The corporate games played now to avoid paying for insurance perhaps will be changed. An example of this that I personally know is a friend’s wife who was pregnant would not be employed by a new company until 6 months after giving birth.

On the negative side to a national health care program are:

     -   Total costs are going up because many more people are added.

-   We will sacrifice in places like number of attendants per patient 

and the experience level of professionals.    

-       Will younger people pay and sign up?  The young say, “I’m never    sick, not hurt, I’ll take my chances, and sign up if anything happens”. Costs may be higher per month than anticipated by government. A person may be eligible to sing up at certain dates.

-       The younger people who this Act is counting on for financial support may take the penalty for not signing up instead of signing up.  From what I understand the government will rely on the IRS to hold back overpayment in taxes for this penalty. If a person isn’t owed money back on taxes they won’t pay a penalty. This comes from a financial advisor friend of mine.

Some of the successful European countries that have national health care have commonalities that we don’t have; these being smaller populations, common cultures, common languages, common focus for the good of the country and it’s people.

The Affordable Care Act is far from perfect and needs to be worked on, however it is my feeling that something major needs to be done as an overhaul to the health care industry in this country and this is a first step.

I hope this gives a simple overview of the some aspects of the health care system.

MONEY 35 - BANK CHECKING ACCOUNTS

THIS IS MY 35^TH POST ON UNDERSTANDING MONEY TOOLS

Recently, a friend said that many younger people know so little about banking that they don’t even understand how to get a checking account, what the numbers are all about and how to fill a check out properly. So, upon this comment I thought I would walk people through the fundamentals of a checking account.  Here goes…..

The first thing we need to do is select a bank that you want to work with, and they want your business.  I would choose one with a location not far from your home or work.  As mentioned prior to in other blogs, with the government favoring the large banks in the 2007-2008 banking debacle, many of the good small banks were forced to close their doors.  The big banks, of which there are perhaps 6 or so now, all look about the same, have the same services and charge the same rates.  It’s too bad that “anti-trust laws” have gone to the wayside with the final spade-fulls of dirt going on top of the coffin in 2000-2001.

Take a look at what a bank gives you in service, and what the fees are.  Typically, today you want a bank that offers free checking.  See if there are any annual fees, hidden fees, minimum balances, etc.  Does this bank have a personal service representative so when you have questions, or need assistance someone will be there to assist you?

Now, you’ve selected a bank and want to set up a checking account. I recommend that you immediately ask for “overdraft protection”.  This is for the situation where you have insufficient funds in your checking account and returned checks today can run $35-50. for each returned check.  So, if you wrote 5 checks and they were returned it could cost you $175 to 250. in penalties.  Banks are making a ton of money on fees, and you must know where these fees come from so it doesn’t cost you money.

Once that is done.  They will ask for information from you, like rough income statement, your earnings, balance sheet, etc.  You will be asked if you want your checks to be duplicate, so there is a carbon copy.  Many pens today when you write a check don’t press down hard enough to show on the carbon copy, so I don’t spend the extra money.  You will be given a few free initial checks until your printed ones are mailed to you at an address you want them mailed to. There normally is a charge for your checks as well as when you reorder new checks; same goes for extra deposit slips. You can get free deposit and withdrawal slips at the bank, of course they do not have your name on them.

Next, you will be given a signature card so that your signature the way you want it is on file.  Your name will be on each check so normally to protect myself from fraud, (if your check book is stolen) is sign differently than how your name appears on the check. For instance, if my name were John S. Smith, on the signature card I might go with only J. Smith.  Most people who steal checks will sign exactly as the name appears on the front of the check.  Therefore, when you sign your checks you will sign exactly as you sign the banks copy of the signature card, and lesson your liability in case of fraud.

The next thing is the number you want to start with.  Don’t start with 1, but perhaps 950 or 1001, so that it appears that you have had a checking account for sometime.

Let’s walk through what is on a check. In the upper left hand corner you will have your name as desired.  I have my full name as it appears on my drivers license so there is a match for identification.  This is followed below the name with your address of street, city, state and zip code. Some people like to put their phone number under this.  I do not.  The less, the better, for privacy in my eyes.

If you move to the far right you will find the number of the check.  In your checkbook the numbers, of course, will be in ascending order. Under the check number is a place for the date.  If you write a date in that is in the future, the check can’t be cashed until that date.

Under this and starting on the left is “PAY TO THE ORDER OF”. On this line you need to put who the check is made out to; who you are paying. Following this there is a box with a $ sign on the left.  Here you write the numbers in for the amount of the check, including the cents.  Below this there is a line with the words DOLLARS on the right.  Here you need to actually write the amount of the check and it has to correspond exactly to what you placed in the $ box. I normally draw a brief line before writing so that no one can add to the left of this, or increase the value.  If the amount is very small, I put in as an example “Only” and then write the amount.  After the written words for dollars you add the cents, if any, in numbers. For example “Only two and 14/100, (which is $2.14.)

At the bottom left of your check you will have MEMO.  Place in this area what the check was written for so you have a record, which will also help at tax time if it is an IRS tax deductible expense.  Following MEMO  is a straight line, and this is for your signature. Again, sign as your signature  appears on the signature card, not as your name appears on the check.

Below this on the left side are a bunch of numbers. Starting form the left is the routing numbers for bank purposes as your check goes through the banking system.  It identifies the bank where the money is drawn from.  The next set of numbers is your account number for this checking account, and the last set of numbers is your check number that will correspond to the number at the upper right hand corner. 

In your check book the bank has given you is a record account so you can keep track of whom you wrote a check to, the date, transaction description, payment amount, deposit column for your deposits and lastly a balance column.

One more area to cover.  Let’s say you want to cash a check to receive hard money, and don’t want to use an ATM machine.  First of all, not everyone or every bank will cash your check.  When you do find a person, business or bank that will accept your check make the check payable to yourself, cash or the person/business willing to give you cash back.  If the check is made payable to yourself or cash you need to turn the check over and endorse it with your signature at the top where most checks today say, “ENDORSE HERE”. If it is at the bank where you have an account, the bank will want you to write your account number below your endorsement.

Assume someone gives you a check.  When you cash it or deposit it into a bank account you will need to turn the check over and sign your name where it says, “ENDORSE HERE”.  You must endorse the check exactly how your name appears on the front.  For instance if the check says made out to, John “Spikeman” Smith, you need to sign it the same way as it appears.  Once you sign a check it becomes legal tender and could be cashed by most anyone, although with all the fraud today it is harder to do so.  Wait until you are ready for the deposit or cashing it before you sign the endorsement.

The bank personnel will tell you how to go about “on line banking” to simplify transfers, auto payments, etc.

If you discard checks I recommend that you shred them or at least rip off all numbers at the bottom of your checks so that others don’t steal your information easily.

Anyway, I hope this helps someone out there.  Don’t forget the objective here is to put more money in the bank than you take out!

MONEY 34 - JOBS 5 AND MORE STUFF

THIS IS MY 34^TH POST ON UNDERSTANDING MONEY TOOLS

ATTITUDE!  Someone at some point made the comment, “ Attitude is everything.” When seeking employment, or once you have a job attitude is all important.  It sets you ahead of competition.  Attitude is an energy, and you give off that energy to others.  With a good attitude people want to be around you, you are positive, you make a difference. Negative energies attract negative energies, don’t let people dump on you and drag you down.

Lately, I heard from a reliable source telling me that some young lady went to a company interview, and while being interviewed she was looking down and texting on her phone.  She was multi-tasking, however I doubt if she was hired.  Do the sensible things in situations; for one, turn off your cell phones ahead of meetings and interviews. Give a smile, shake hands, it shows assertiveness.  With a hand shake don’t be a limp noodle, but  don’t tighten the grip too hard or shake too long. It doesn’t hurt to address men as “sir” and women as “mam”, or unmarried younger women as “miss”.  It is so unusual to have this old fashioned politeness that people remember you. I have a friend who is quite successful in real estate sales and he earnestly uses this all the time, people love him and he sells and makes a lot of money.

You may notice in business many retailers have gone to fun, politeness and service. Target stores as an example realize the customers have choices where they can go to purchase goods.  Their example starts with have fun with the customer and be helpful.  Safeway stores have similar training.  If you are looking for an item and ask the employee they will take you to the item in the store.  Many of the floor employees will ask the customer if they may help with anything.  The impression is that your time is valuable, and they are there to serve you.  I used to be involved professionally in sports.  When writing manuals we stressed in order, 1) safety, 2) fun and then 3) learning. People want to enjoy the experience, not be miserable through the process.

Here are a couple tips that might help in appropriate occasions. An acquaintance who was one of the tops skiers in the world was invited to many influential parties.  When asked how he handled all the well-informed people at these parties his comment was, “the greatest disguise for ignorance is silence.” Sometimes better not to say anything.  Another friend year’s ago was being interviewed for a college scholarship PHD program.  He was one of three candidates.  He told me that what he did in advance of the interview was to learn all he could about the interviewer. It so happened that the interviewer’s favorite pastime/hobby was canoeing.  My friend started the interview process and as soon as appropriate got onto the topic of canoeing. From there the interviewer did all the talking about himself and canoeing, while my friend just sat back and listened. He was selected for the fully paid scholarship.

We live in an incredibly competitive world so anyway you can stand out, please do. Mediocrity will not work.

MONEY 33 - JOBS 4 AND RESUMES

THIS IS MY 33^RD POST ON UNDERSTANDING MONEY TOOLS

Boy, getting a decent job these days is tough.  College graduates aren’t finding work unless they are in the hot industries graduate at the top of their classes. If you are over 45, you are considered old, and that leaves little for the ones over 60 who do not have the financial resources to retire.  Many people just want to work and need more to occupy the days.

We are in a new paradigm, a new world order and everyone knows it.  People contact is mostly out, computers and high tech are in. Social skills are lacking. We are an “ego” society.  Ego is defined as “I, self or identity; caring for self independent of others”. The antonym is physicality and humility.  In my eyes, not good, but that is the way it is, and the world is  going in that direction. 

Let’s relate this to work and jobs. The middle-man position in corporations has been shrinking for years.  Walmart, Target and many companies no longer purchase through distributors, jobbers, and brokers but buy direct from the manufacturer.  Just one example of jobs lost.

Today, when you apply for a job or a position in a company the first thing you will most likely need to do is apply on line. The big black hole. Years back companies would thank you for applying and state a few lines of niceties, not any more. Thousands of people apply for positions, so you won’t hear back unless they like something about you.

We are going to talk about resumes. First, you may want to have several resumes available, all truthful and factual, however aimed at a particular company and position.  Take time and find out about a company, the history, the strengths and weaknesses.  Unless they see something in you where you can add value or solve a problem, they won’t need you.

Resume writing should contain certain essentials.  You can go to the library or go on-line and get differing opinions.  Here’s my subjectivity on this subject. You need to keep things concise and to one page.  Human resources will not read more than that.  At the top give your full name, city, a contact phone number (most likely a cell phone) and email address.  I do not include street addresses as that is private.

Next, the first few lines are the most important. You either will catch the employers attention or lose them.  I go with “Overview and Qualifications”. Here you need to identify yourself as to how many years you worked in a specialized area or profession, your skills and how you benefited your past employer. If you are young and have little history put down what you have done and how your skills transfer to the job opening.

The next heading is “Education and Professional Licenses”. Don’t put in dates for education.  If you are older the company can determine your age and you might be discriminated against…..oops, “discrimination” doesn’t legally occur, however it does.

The next heading I use is “Experience”.  I use a date through present. Again, don’t go back too far. Start with the most recent and go back in time.  Use “bullets” and be brief, no structured sentences. Just like selling any item, sell yourself. With a product you stress the “features and benefits”.  Do the same here, tell them how you improved the company in your position, how many people you managed, etc. If you are older person don’t go back to far in history.  Again, you want to prevent them catching how old you are until they have a true interest and perhaps are willing to interview you.

The only reason to go to a second page is to include something that sets you apart in giving back to the community, or honors/awards you have achieved.  Schools and companies like people who go the extra step outside of employment. I use something called, “ Professional and Civic Organizations”.

If you called by the company to come in for an interview, dress to the occasion.  If you are applying for a blue-collar warehouse position, don’t wear a three piece suit. If you are applying for a position that normally takes a suit and tie, wear a suit and tie. Also, dress to your age. If you are in software design, wear comfortable clothes and nice loafer shoes, don’t wear blue jeans and sneakers.

Bottom line from me is, good luck and don’t get discouraged which is all too easy.  Remember you aren’t the only one out there trying to get employed.

MONEY 32 - JOBS 3 AND STUFF

THIS IS MY 32^ND POST ON UNDERSTANDING MONEY TOOLS

It has been ages since I posted my last blog.  I spent most of the month of March looking at businesses and people in my home state of Arizona and thought I would reflect on my observations….people, jobs, future of the economy.  Meandering mentally through the jungle, with no real point.

Bottom line, sad.  The middle class has disappeared.  Looking at rural areas of Arizona through my eyes, typically I viewed older people in most areas away from the Phoenix Valley.  The reason I say “sad” is that I saw over-weight humans, whether young, middle aged or older, not caring about appearances in any respect, which carries forward to caring at all. They were poorly dressed for the most part, un-groomed, and many not even clean. People are struggling to survive. How do you expect to work when this is the average? Would a company hire you if you were looking for a job? How about your own pride as far as a human being goes?

So many people have tattoos these days. I don’t have anything against them, however many employers will not hire a person unless they cover their tattoos with clothing.  If tattoos are on the necks or hands, how do you cover them up?

Talking to many people I found that if they can find work it is in the $9-12/hour range and a person cannot live on that.  America’s business needs to learn that the only way to survive as a country is to pay respectable wages. If you don’t pay higher wages people won’t be able to buy goods and services, therefore hurting all the businesses out there. Short-term thinking, not long -term. It is said that Henry Ford was asked why he paid his workers higher wages than anyone else, and his remark was “so they can buy my cars”.  This holds true of all businesses. As we know, over the past 13-14 years we have diminished the middle class significantly and increased the assets of the top 1% wealthiest.  In the long run, the wealthy will have a very poor America to live in. We have a had a job-less economic recovery producing outside this country, keeping our corporate revenues in trusts or other vehicles outside the country to avoid corporate taxation, yet corporately we can book the profits here and appease Wall Street and the stock exchanges.

Yes, we have taken our production of goods to other countries like Mexico, India and China.  It has propelled the stock markets to all time highs for now, but what is happening in the USA. Many people are working out of their homes.  This is one reason people don’t care about appearances, they don’t need to look good!  They don’t need to rise every morning at a particular time, eat breakfast, exercise, take a shower, put on clean clothes and interact with other employees face to face.  Unfortunately, today’s world doesn’t need to communicate face to face, but computer or phone to computer or phone.  We are losing social interaction, thus our emotions aren’t the same as they were only a decade ago.

Unemployment really hasn’t changed much in the past few years, being much higher than the stated 8.6%.  College graduates can’t find work, people have lost interest in applying for jobs, job applications are done on line, and for the most part the application falls into some sort of black hole where the applicant never gets a courteous “thank you for your application”.  There are thousands of applications for most open positions.

Where does this lead? What does this tell us?  First of all, we have a world population that continues to grow, and there just aren’t enough jobs.  The world had a population, give or take a couple of people, of about 2.5 billion in 1950.  Today, the world is reaching toward 7 billion.  The World Health Organization does some great work, but we also are creating an older population, and much depends on countries for financial support, health support and food to live.  Many years ago one of my favorite college classes was anthropology and the study of the Eskimo people.  The old Eskimos produced within their society or died.  Older, non-economic functioning Eskimos took it upon themselves as part of their culture to wander out into the cold, and would never come back, as they did not want to be a burden on their families as well as on their community.

Many of the biggest cities in the world have non-productive communities. Most of these people do not interact well, are not educated or trained and therefore cannot find work, nor do they want to.  It has become part of their culture within a culture.  Therefore, the city, county, state and country needs to support them.  As you know, this eventually breaks the system and we fail.

How do I see us going now?  Well, for one, the economic numbers for the world and USA are not getting better, but getting worse.  Europe is slowing economically and has problems, the Middle East is a mess and is spreading.  Who wants to travel to the Middle East as a tourist anymore, so they have removed the tourist dollars, as in Egypt, Turkey and other countries. The USA has relied on the “Q’s” (Quantitative Easings) the past few years, meaning the Federal Reserve is feeding money into the system. The biggest mistake of all is that with this huge supply of money, very little has reached the middle class that supports the economy.  This totally escapes me as far as fundamentals for economic recovery.  The big banks received the money, the big corporations got the money, and the wealthiest can borrow money to leverage their investment portfolios.  You and I know that banks, money and big business control everything, but what I see is so short sighted.  Today, we are looking at stopping Quantitative Easing, and the Federal Reserve is going to cut back on purchasing US debt, meaning US bonds.  In the past couple of weeks, interest rates have been going up on bonds and mortgages.  As of June, 27^th, the interest rate on a 30 year mortgage hit 4.46%, still low in historical terms, however the highest in a couple of years.  The GDP estimate has been lowered from about 2.4% growth to 1.8% growth.  If this continues we will be in another recession in less that 2 years and the housing recovery will come to an end.

Even the price of gold and commodities have dropped.  Gold is down about 30% from highs.  Part of this is due to the dollar gaining strength. Too strong of a dollar hurts our exports to other countries.

Currently, talk is of a weakened Chinese economy, or perhaps even a bubble there.  The Chinese float their currency to stay competitive in pricing goods, have a growing middle class that will want goods, a country that has no debt  and is sitting with about $4 trillion in assets including US bonds, gold and cash. Not that bad.

Anyway, so much for this.  As you can see, if a person analyzes the world and US economies and fundamentals, it is not a pretty picture, and no one has the answers

MONEY 31 - JOBS 2

THIS IS MY 31^ST POST ON UNDERSTANDING MONEY TOOLS

On my last blog we briefly discussed jobs in relation to industries. Let’s talk about employment in today’s market place or creating your own work situation.

Everyone will tell you it’s a tough work environment. Some areas of the country are fairing much better than others. In the last blog we talked about the boom in the oil business and the need for workers in areas like western North Dakota, Wyoming and parts of Colorado.  I now reside in the Phoenix area and our job market is relatively poor and low paying.  We are service economy to the “snow birds”, conventions and people on vacations who enjoy our winter warmth and golf courses. These are low paying jobs.  We do have some high tech companies like Intel and Motorola, however for the most part we are a service economy. When jobs are posted for hotels or companies they actually get thousands of responses from people wanting those jobs.

No matter what age you are, or if you are trying to be employed by a company or starting your own endeavor you need a good resume of your background experience.  There are many professional sites for writing a resume, and consultants to assist you.  As a recommendation here, if you are young with very little experience try to come up with things you have done and relate that to “transferable skills”.  Community service is good.  If you are an older person, don’t extend your resume back too many years, as age discrimination will come into play, even though it isn’t supposed to.

Get some personal business cards made. There are sites where you can have these made for free.  At a minimum include your name, city, state, email address, and phone number. Then, if you have a skill include that, e.g. website consulting, retail management, etc.  For security reasons its best not to include your home street address.

A majority of people in the US live within 50-100 miles of water from Maine down to Florida, the Gulf Coast and then California up to the Canada Border. Go where the population and density is.

To find work you need to add value, and you need population in most cases. Employers interview with the understanding they expect employees to stay with them for several years.  Employee benefits can account for 35% or more money up and beyond the salary. Training an employee and orientating that person to the work environment is expensive. Unless you can definitely show that you can add value to the company, and quickly, you probably won’t be hired. Investigate the company you are interviewing with and identify weak areas where you can add value. 

If you start your own company, you need to take on various tasks like accounting, reporting to the city and state, and health insurance can be very expensive.  If you add employees you need to adhere to laws including them in benefits and retirement plans.

As you get older in age companies won’t look at you, unless you’ve hit “homeruns” in your previous job experience and you are extremely important to a particular situation.  Okay, that leaves creating your own work environment. Here you need to come up with an idea or product that people really need and/or want. There are fewer dollars out there so people have less discretionary income and will be choosey.  They have the money, you hopefully have the product or services.  You need to get the person with money to think that what you have is worth giving up their dollars for. Too many people think it is easy, and it is not. I was taught once that most people are not totally against buying an idea or product but are in that 40-48% range against, and you need to show them enough features and benefits to have them cross over into 51% in your favor.  Then, and only then, have you made the sale.

In today’s worldwide economy one of the problems is that there are so many products and ideas coming in from all over the world and electronically that it is difficult to get attention and then focus on the market.  Almost everyone I talk with these days has the problem of wanting/needing more customers, and customers mean a sale or money.

If you come up with a great idea or product don’t forget about international patent rights and trade marks.  Protect yourself as much as possible although many companies can copy an idea with only small changes and get around protections in place.  Best to take a market where the “big boys” don’t want to play because the market is not large enough to warrant them entering and they leave you alone.

Starting a company can be quite easy.  Don’t forget you only need three essential things, 1) a great idea or product 2) money or financing and 3) people, even if it is just you, or perhaps employees and management.

Some high tech service jobs now can be leveraged on a time basis outsourcing work to Asians and Eastern Indians.  These people are very tech savvy and many do an outstanding job for $3-4/hour.  This works great for you if you can find the work here that will pay you $50-75/hour. You do the final reviews and revisions. You could double, triple or more your production per hour.

Some ideas can sell quickly, but you better get out fast.  The “pet rock” hit a craze, the hoola-hoop years back and others. In our retail businesses we had bought some exotic leather bracelets with stones….trendy, some Hollywood people wore them and a high end department store sold them. It was hot, then cold so quickly we never sold out.  I even told the fellow making these to get in, make some money and get out. We couldn’t get them all sold fast enough.

At the moment, I’m entertaining the idea of getting involved with a long time friend who has put together a product that could be well received in assisted living and nursing homes. Again, here is a well thought out idea in one of the recommended industries (aging people/health care) and serves a need.  He is in the prototype stage and working with a manufacture in China for lower costs of production.  He has well thought out how he wants to distribute sales and keep it tightly controlled.  Great idea.

Surrounding the health care industry there will be opportunities with our veterans returning from overseas in Iraq and Afghanistan. Some of our vets will need to be taken care of in special home care.  With proper city zoning homes can be converted to take care of special health needs.  A person will need certifications to do this, and then apply for government programs.  These programs can pay very well, and on a continuing basis.

How about building a small business or retail store and then selling?  Private companies used to sell for about 3 times pre-tax earnings, however since the banking crisis and today’s borrowing abilities limited this has hurt selling into the market place. A well known business broker evaluated our retail stores and said that unless the business is a bar or restaurant, small retail businesses are very difficult to sell.  The reason bars still sell is the ego. Owners like to be seen in their establishments, and for some reason people think they can take a bar or restaurant and do better than the current owner.

I hope the above information and ideas are a help to you.

MONEY 30 - JOBS 1

THIS IS MY 30^TH POST ON UNDERSTANDING MONEY TOOLS

Recently, someone I know told me that I write all my blogs with the assumption that people already have money.  They asked, “what are your ideas on employment and making money”. Great.  This is the tough one, I guess.  It’s hard to make money, and then it’s hard to keep your money.

Please remember that these thoughts are subjective, and you may not agree, but I love the expression “let’s agree to disagree”.

Now, unemployment is still high considering that full employment in the US is considered to be around 4.5%, as a certain number of people just don’t want to work. The government tosses out unemployment figures just under 8%, however how many people have become discouraged trying to find work and are not included.  Over the past 20 years more and more companies have outsourced work to independent contractors or the self-employed.  In this category a person is most likely not included in the unemployment figures. Therefore, we better at least double the unemployment figures.

If it makes you feel better, I fall into this category!  I’ve had some great jobs, some true successes, lots of education and training, lots of ups and downs and who would employ me today?  Age discrimination is greatly in the picture. When employers view your resume, they can make a determination within a few years how old you are, or can find that answer.

Back to the topic.  Let’s look at reality and the overall picture. The future for employment in this country is not looking good.  We have become a service industry country, not a producer of goods. Even the service industry doesn’t look good.  More companies are going to automation and robotics and unskilled people will not be needed.  Banks are automated, warehouses are automated, retailers are going more and more to on-line sales, and the finest automobile manufacturing plants are robotic.

I think if you are younger and seeking a profession the industries to look at are health care, oil/gas and energy production, and high tech engineering.

With young people graduating from college in general studies they can’t find work.  In Europe and many countries, when a person is entering high school they select if they should go on to college and higher education or take up a skilled trade.  It might be wise to use a similar method here in this country.  The future is for the skilled, not the generalist.

Breaking apart the industries I mentioned, let’s look at health care.  Again, skilled training is what is necessary.  Doctors are using high tech and computerized instruments for operations, so they need to be trained in medicine as well as technology. Physical therapists, nutritionists, skilled nursing is all a part. We probably will have Medicare cut backs in the future, so it will be the educated and skilled that prevail.  60 Minutes recently had a segment where robots were replacing the unskilled labor in hospitals, fewer human beings and more technology. In that program they had an interview with a warehouse manager.  The robots were more efficient and could lift more than the human. On an hourly cost efficiency and with a three year depreciation of the robots they worked at about $3.00/hour (and no need for benefit packages), thus a similar pay scale currently found in China and India.  This is less than half our minimum wage rate.  Even some trained/skilled tech jobs start out at $12/hour.  A person can’t live on this.  That is only $96 dollars a day before taxes and FICA.  To grow a healthy economy we need skilled jobs around $15-18/hour.

The oil and gas business is coming on strong.  One of the biggest concerns here is the environmental issues. No one, especially the wealthy, want oil/gas wells near where they live, frac fluid could be health concerning and visually windmills for alternative energy are unattractive to the eye. Western North Dakota is booming and will continue to do so.  This area including eastern Montana, Wyoming, and western Colorado is all part of the Western Overthrust Belt that comes down from Canada. We have a ton of natural gas and oil in this area.

The Bakken Formation in the Williston Basin in western North Dakota was founded about 1955, however the thin formations of oil made recovery difficult.  This area was not economic until recent years with higher oil prices and better drilling technology. This industry could turn around our dependency on foreign oil, and perhaps someday we could export our surplus oil and liquified natural gas thus eliminating our trade deficits and trade imbalances.  We can’t have a healthy economy with the trade deficits we currently have, and our dollars leaving the country. If you are young and don’t mind migrating and hard work there is a lot of work in North Dakota.

High tech engineering will lead the way.  As an example, the reason we have higher oil and gas production in this country now is that we have drilling technology that permits us to extract far more oil from one vertical drilling and then the ability to drill horizontally.  Several years back we did not have this technology, thus wells were shut in and the industry left a lot of oil behind. We need to remain the leaders in technology.

Don’t forget that timing is essential.  I’ve been in various businesses and fairly big time in oil and gas and real estate.  You can make very good money in these industries, but if your timing is off, it can financially kill you. Many people start a small successful company and assume the success will continue, wrong.  You need to stay ahead of the competition that will follow and stay on the leading edge, or sell out.

Next we’ll look at trying to get employed by a company or creating something on your own.

MONEY 29 - CURRENCIES

THIS IS MY 29^TH POST ON UNDERSTANDING MONEY TOOLS

Money! Money! Money!  Let’s talk briefly about another type of investment, world currencies. 

To date, and recap a bit, we have discussed the economy…..bonds could go down in market value if interest rates go up, inflation down the road is inevitable.  The US is printing money much of it labeled in terms of quantitative easings (QE1, QE2 and now QE3). This money is not ending up benefiting the middle class where it is needed, but instead the big banks and big business. If you don’t need the money, you can get the money!  A country cannot print money as we are doing without consequential affect down the road. The dollar loses value, we pay our debt back in cheaper dollars, etc. Inflation way down the line.  The middle class disappearing. Our country cannot prosper with the trade imbalance it currently has.  Our money leaving the country to China for goods and the Middle East to pay for oil.

Over the past years we have transferred private wealth to the top 1% of people in this country, and when our banking industry was collapsing in the summer of 2008 it was the middle class and tax payers that picked up the tab. This left the middle class with fewer dollars to be able to spend, thus current gross domestic product (GDP) is running less than 2%, and closer to 1.7%.  Yes, our unemployment rolls look better and under 8% right now, but many of the jobs are in the lower paying service jobs. A country cannot grow on service type jobs, it needs to produce real products for it’s own country and to export. Companies are doing better, but robotics is the future, and that has little room for hiring more people at a higher wage level.

Not a pretty picture.

Back on track, let’s talk alternative investment, world currencies.  This might be a nice diversification to your portfolio. You can convert the dollar into, or buy foreign currency.  Unless you are very sophisticated, the recommended way to do this is through mutual index funds specializing in world currencies. As with other mutual fund investments, look at the company, the track record over years, the management fees (expense ratio), and total assets under management.  The largest aren’t necessarily the best. There are several good open-ended funds, such as Lord Abbett (returning about 7%) and Pimco (returning about 5%).  The better ones are running an average of 3-7% annual returns.  As with all returns, the future returns may not be indicative of past/historical returns!

Although you should look at the currencies within a portfolio, a good manager is the person you need to trust.  I’ve always liked Norway’s Krone because of the North Sea oil, and the Swiss Franc (currency backed by gold until recently). Both these countries have little or no debt.  Other countries of growth in recent years have been China, Korea, India, and Brazil.