THIS IS MY 82ND BLOG ON UNDERSTANDING MONEY TOOLS
It seems that to arouse my interest to write one of two
things has to happen, something peaks my interest, or irritates me. In this
blog we’ll hit both.
Irritation. A
neighbor and friend of mine talked to me last week about their son, age 50,
surprisingly being laid off from a very senior management position with a major
company. To help you on your
employment quest and career I want to address this issue as it is all too
familiar. This “son” had been devoted
to a major publicly traded company for years and believed job security existed,
and that he someday would retire from the company with a beautiful pension and
health benefits forever; wrong.
I believe we have covered most of this in prior blogs, but
let’s cover it again so that it is fresh. Today, there is no such thing as job
security. When you reach the age
45 with the big companies, watch out. A few things are occurring: you’ve
reached a high salary level, you are closer to vesting in your pension, you are
getting older and health issues may start happening thus lost days at work,
workman’s comp, liability and health insurances are higher with more aged
employees, and more. Unless your talents fit a select position with another
company, human resources is most likely not going to consider you for a
position if you are over the age of 50. Discrimination, yes, against the law,
yes, but that is the way life works.
The bigger the company the worse it gets. Everything is
about stock price with public companies. Who usually owns a great deal of
stock? The wealthy and the Board
members. Who selects the Board of
Directors? The stockholders. What does the Board do in hiring the very top
management, favoritism. Right below the very top management are the
“expendables”.
It is quite unfortunate that America has turned out to be
this way. What happens many times with an “expendable” is at that age they
can’t find employment equal to what they had, and many times not in the same
capacity. Many of the big public companies own several hundred small or
subsidiary companies and you are “blackballed”. If you don’t know the
expression, it means untouchable. Why is that? You carry so much information in your head and out the door,
other companies are afraid to hire you. If you use similar information, design,
marketing, business paradigms, etc. with a new employer you and that company
could be sued. Many times lawsuits
are brought forth only to impede progress for another company, or that
individual.
This same situation happened to my youngest brother who was
the youngest employee ever to head up an international division of one of
America’s biggest companies. The company had him downsize the division
worldwide over a couple years, laid him off, and everyone was afraid to employ
him as his former company owned over 300 other companies and his knowledge
would be carried into a new company. He had to change careers later in life.
Another prime example was a good friend and my financial planner working for
one of the major US banks. Around
40 years old he had an opportunity to buy into an investment group under a
broker/dealer being a competitor of the investment side of his bank. He had a
family with four children and needed to grab onto the opportunity. He left the bank,
did not solicit any of his clients, however I, and many others, followed him
out the door. As you can surmise the bank sued him and the broker/dealer for
“stealing” clients. It was ludicrous, but took about a year to resolve with
legal assistance. They impeded his progress in this profession and tried to
starve him out.
What can we learn form this? Foremost in life, a very good education or training is
necessary. Then, try to structure your life somehow on a “flowchart”. Unless you are lucky, or unlucky,
enough to have family money you need to work to make money. I referred to “unlucky” because easy
money may take away healthy stress and pressures that make you need and want to
be successful on your own, and max out whom you are as a human being. The two avenues you have are to be an
employee or an independent contractor. These are in your earning and learning
years. On your “flowchart” you
should have two other elements that cover your ass later in life around that
45-50 age bracket. One is to start
your own business to leverage your time and knowledge, and two is to have
accumulated enough money that you can live from investments. Sometimes easier said than done!
Savings for investments. Unless corporate America wakes up
and pays employees more, people in America will not be able to purchase
product. There is an old story
regarding something similar. Many of Henry Ford’s friends couldn’t understand
why he paid his employees more than anyone else. His retort was simple, but
truthful, “so they can buy my cars”!
As mentioned by me several times, two very important Acts of
Congress have disappeared over past years, the 1890 Sherman Anti-trust Act and
the 1933 Glass Steagall Act. Both
these Acts protected smaller companies, the welfare of the Middle Class and
competition in business and pricing.
The Anti-trust Act prohibited monopolies in business and large companies
getting so large they could destroy small businesses through pricing. The Glass
Steagall Act was created after the financial crash of 1929 separating banking
and commercial activities. Specialization in the financial arena, and the idea
of too big to fail. (As we all saw and felt in 2008.) Big business and the large banking/finance corporations
lobbied until politicians and Presidents cratered and these Acts no longer
exist.
Okay, so the above are my irritants, let’s get on to
investments and something a bit more interesting.
Wall Street continues to amaze me with their dribble. The
weakest world economy since the Great Depression and all seems to be fine at 11
Wall St, New York City. The
market’s strength is held up with basically fewer than 6 companies, those being
the likes of Amazon, Facebook, Google, Netflix and let’s toss in Twitter. Well over $1 trillion in market cap,
and so little to show.
Junk bonds and bonds from emerging countries that borrowed
far too much based on their commodity assets are coming to terms; the most
bankruptcies since 2009, every company and country went out to borrow money.
Emerging countries hard asset commodities like gold, silver, copper, and oil
all through the floorboards. Many of these bonds will never get repaid. Some
countries in order to maintain their interest payments have had to increase
yields 200-300% and sell more bonds; Ponzi schemes at their best.
Here is what many don’t realize. Let’s take oil as the
commodity of choice. Oil is hovering around $41 per barrel. Perhaps some
countries can break even at that price for production, however many need the
price to be $70 to over $100 per barrel to pay their debt and bonds. It doesn’t
bode well for them. The same goes
for copper and precious minerals.
The next thing that is current and I find interesting is the
expected increase of interest rates by the Federal Reserve and consequences to
the economy, stock market and world trades. Interest rates are normally raised if the economy is very
strong. This time rates have not increased in years and it has hurt the elderly
living on fixed incomes; no interest paid by banks on savings. Even Ralph Nader has gotten into the
mix on this issue.
Along with the expected increase in interest rates, the
strength of the dollar should go up.
This will hurt our exports, and increase bond defaults if refinancing is
necessary. Also, it will be of
interest to watch the International Monetary Fund to see if they admit another
currency or two to their existing basket. With China being the supposed second
largest economy in the world their currency, the Yuan, may be admitted joining
the likes of the US Dollar, European Euro, Japanese Yen, and Britain’s Pound
Sterling.
So much for this trivial pursuit.
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