MONEY 111 - SALES

THIS IS MY 111 BLOG ON UNDERSTANDING MONEY TOOLS

With this blog we are back to sales and corporate structure with the hopes of giving you a better understanding of “what the current system is” so that you can better work around it, or with it.  In previous blogs we discussed sales more thoroughly.

I have part time associations with two large public companies. Similar flaws are obvious with both, so I thought I would give a bit of background as to how we got here, and what you could do to make your work life better.  I love to analyze companies and finance, therefore relating my experiences to hopefully make life better for others.  Sometimes this frankly comes down to avoiding today’s work life, knowing all to well in advance you are heading in a poor direction!  There is healthy stress, where you have control of your life. There is also unhealthy stress where you don’t have control over your life, and that will result in health problems.

The first thing that astounds me is the massive amount of paperwork that is required of these companies and employees. It is so extensive that people can’t direct the needed time to their positions, let’s say sales, to make sales.  The computer was to make life easier, it hasn’t; it has only created another step in the internal workings of companies. Yes, there are good reasons for computers! One is saving data and files, and two, expediency in transferring information.  I blame many issues on the government, lawyers and accountants who meddle in the business sector and have it all screwed up.  With banking and any industry related to finance including real estate, blame it on the Dodd Frank Act and the financial debacle of 2008.

Let’s talk sales.  Most good sales people are “people” persons, they hate paperwork.  We are not giving sales people what they desire.  First, most people spend about 1/3 of their life working, easily with overtime hours required in recent decades.  You better like what you are doing!  Sales people should be happy, and most I see are not, this rubs off on the customer. I see negative, stressed-out employees. As so much retail has gone on-line, you better be good at what you do to save your livelihood!

Simply put, what do I defer to as the make up of a good salesperson? 

-       A combination of right brained and left brained.  A good salesman for technical and financial sales will be more left brained.

-       Observant and a good listener.

-       Will use a combination of verbal skills along with mental skills and “heart”.  True connection to the customer, so he/she knows you sincerely care about his/her needs and wants.  I see few sales people and managers who care about “heart”.  They could care less as long as a sale and sale’s quotas are made.  The younger the people are generally the worst.

-       A happy, content individual.  Many buyers want a pleasant, if not fun, experience through the process as long as professionalism and good products are adhered to.  Many customers are so used to poor sales people they don’t remember the experience; should be fun!

In sales you have only a few seconds to make a very good first impression.  Believe it or not, physical impression is greater than the verbal.  After the first impression you have only another minute or two to create a more lasting positive impression through your mental and verbal skills.  Selling is a skill both inherent and learned.

Today, if a corporation gives sales training I see it more as company policy and procedures than true training.  Sales training needs to incorporate psychological training for skills and role-playing under difficult circumstances, especially for more expensive products.

How did we become robots setting poor standards for the future?  I’m not sure if Sam Walton, who started Walmart, would be proud of his company today.  The same goes for the four founders of General Electric, Edison, Coffin, Thomson and Houston.  Then on the other hand, I have read some unfavorable things about Thomas Edison, so not sure.

I keep hammering the position that Wall Street has forced businesses to become what they are and it is not pretty, all bottom line.  Everything is cause and effect and eventually it will catch up to them.

And then again, we are in a New World Order.  Baby Boomers who related to good salesmanship are dying off, Millennials followed up by Generation Z (the Founders) relating more to on-line order taking, technology and people speaking with strong foreign accents. Perhaps good salesmanship is no longer needed or respected today.

MONEY 110 - STUFF

THIS IS MY 110^TH BLOG ON UNDERSTANDING MONEY TOOLS

In this blog we are going to hit upon a few financial issues that affect everyone so we will call the blog “stuff”.  Please don’t forget I write this blog to the layman and keep the information in simplistic format so it is understandable, and yet you hopefully learn something from it.

On December 14^th,  2016 the Federal Reserve raised the discount rate 25 basis points, which means 1/4%.  Does the economy deserve that rise?  My answer is not really in terms of the health of the economy and average worker, but they needed to in order to halt inflation and show a rise in rates. Rates have been too low for too long only assisting big corporations and the wealthy.  The older generation that used bank savings and fixed income investments like bonds have really been penalized the past 6-7 years.

What impact will this rise have?  In a brief answer, 1/4 % won’t have much affect. The Feds say they may raise interest three times in 2017, we will see. This has caused our US dollar to further increase in relation to other world currencies.  Our large corporations exporting goods will see some sales slowing.  It will be more expensive for other countries to purchase American made goods, e.g. China lowered the Yuan, the Euro is drifting lower as Italy has major governmental problems and debt issues they don’t know what to do with.  France has continuing problems, and their elections possibly going conservative and to the right will prove interesting for Europe and the EU.  For people here it is a benefit with foreign travel and purchasing goods made elsewhere.

What affect will the increase in interest rates have on real estate mortgages?  Here I will give you only facts, not suppositions.  The average US home buyer holds their home 7 years, so the rates are more related to the 10 year bond and perhaps 30 year.  Yes, it is better then to go for a 30 year mortgage if you are now a buyer before rates go up.  If we slip into a recession which I have seen coming for a few years now, rates won’t go up, and you could look at a 5 year ARM (adjustable rate mortgage) as the rate is lower than a 30 year mortgage and you have 5 years to determine what you want to do.

Stock markets?  Insanely high and only gone higher with the election of Mr. Trump.  The raise in rates pulling the normal money out of stocks and more into new bonds hasn’t happened.  I have a far better financial and analytical background than most, and this is all crazy and confusing. There is no such thing as traditional analysis of an income statement and balance sheet. As mentioned before the markets are all driven by volume, trends and trading using computers with fraction second trading.  (I am not sure most people realize that when you buy a stock with something like an 80 price to earnings ratio, P/E, it means it will take 80 years to pay back the original investment!  Better have incredible growth potential.)  In general, with a strong dollar look at companies doing business here on staple goods with high/strong history of dividends, not US companies selling into international markets.  The younger generation is still bouncing in and out of high tech companies, good luck if you have a software program that can parallel the best or beat Wall Street.  If you have been in currency ETF’s (Exchange Traded Funds) holding US dollars you probably saw a conservative return between 4 and 5% this year, which isn’t bad.

Next on to Globalization, which I am not an advocate of.  I will give you my pro’s and con’s.  Many say it is here to stay and will come about no matter what.  Let’s keep this in short statement format.

Con’s:

-       Average worker pay in the USA and top G-20 countries will be lowered significantly.  I had to do some research on these figures, but here is what I came up with.  1/3 of the world’s workers make less than $2.00 per day. I don’t want to work for that!  Another group in a pay-scale above that one would be $1200-1400/month in G-20 countries, however you need to look at the varied degrees of cost of living around the world. That figure will not go far to live on in the USA and European countries.

-       Diseases.  Once many diseases that no longer existed in the G-20 countries like TB are now back with the influx of immigration.  Same for drug resistant bacteria strains.

-       As the world has become more global with manufacturing and trade since the 1960’s inequality around the world has only become worse, not better.

-       Globalization is really being pushed by the “propaganda machine” of the big corporations and wealthy.  Once outside the USA and Europe your work standards and legal repercussions for safety, health, hours worked are essentially eliminated.

-       Total “fat cat” and “big brother” controls worldwide. It has already started with Google and Facebook and will only get worse. You are being tracked and monitored every hour of the day.

-       World control by the world’s wealthiest 1/2% of population and large corporations.  Total political control to the dominating wealthy.  Sounds like an old James Bond movie!

-       No longer unique cultures and nationalism.

-       More intermarriage will create one race in the long term.

Pro’s:

-       More global economic growth.

-       Commercial trading done quickly and easier e.g. currencies, borders.

-       Easier access to products.

-       Rise in incomes for the poorest, providing the wealthy feel the social need to share!

-       Easier travel and between borders.

-       Better world mass communications.

-       Less chance for wars, as the wealthy and large corporations control the world.  There will always be the young, under 30 years old who have the energy, to rebel and seek changes.

If you can refer to the European Union as a mini-example of Globalization you can see how financial disparity doesn’t work.  The Euro is falling apart; first Greece, Britain’s exit and now Italy’s governmental and financial problems.  Perhaps France next.

I tend to favor my roots and uniqueness from my grandparents and before, so hope I will not see Globalization for the reasons I mention above.

MONEY 109 - NEWS FACTS

THIS IS MY 109^TH BLOG ON UNDERSTANDING MONEY TOOLS

There has been quite a bit of news lately on “fake” or false news.  What can we believe?  The media reports and I will include information from Facebook and Twitter may have very distorted facts.  The simple answer is that we can no longer trust what we hear and read, and unfortunately it is only going to get worse.

Along with misinformation, stands “half truths” to slant the results of the news.  In light of this I want to bring attention to the news that came out  around December 3^rd from the Bureau of Labor Statistics.  As I write commenting on what I believe to be accurate facts to assist people in better understanding of money, this is duly warranted.  The main employment headlines were that new hires accounted for 170,000 new jobs, thus lowering the unemployment rate from 4.8% to 4.6%.  I don’t mind giving Mr. Obama kudos as he leaves office, but let’s tell the American people the whole truth.

Just before this release of new jobs it was reported that 268,000 Americans filed for first time unemployment claims.  Then, added to this discouraging news was that Americans who are working age between 18 and 63 and “not working” went up from 94.600,000 million to 95,050,000.  I like to use the word “wow” so I will again here.  2 plus 2 is adding up to 5!  If the media is going to report, report accurately and the whole facts.  Another material fact to note is that wages went down, not up.  This indicates part time service work at lower hourly wages. Don’t forget that if you have two or three part time jobs to make a living you are counted as two or three employees in this statistic.

As I have said before I think Mr. Trump will do as good a job as any businessman or politician.  What he can’t do is realistically improve the employment rolls without reaching into the environmental concerning industries like coal and oil.  Why?  We may build new factories, and place a higher tax as a penalty for those companies leaving, however factories in the future are going to be very automated and robotic requiring few employees.  What are we going to do with all the people? What is the world going to do with all the people?  No one has any ideas, especially good ones. History recounts the ways we have eliminated people in the past with wars and disease…..not good.

Our unions and lawyers have created a very difficult situation and not what we refer to as “business friendly”.  Our corporate liabilities are sky high as with unemployment and workman’s compensation insurance. Doctors will concur that the main reason people don’t go back to work after an injury and remain in therapy or out of work is they prefer to continue collecting money from disability insurance. The system is broken.  In corporate lawsuits lawyers many times tend to go for neurological injuries as they are very difficult to prove in medical testing and in court.

Our educational system is abominable and needs revamping.  The results of international academic testing was released this week.  This included 70 countries.  We scored 37^th in the world in mathematics.  Reading and science were a bit better.  Now pause, and try to think of 36 countries that scored better than us.  Tough to think of 36 countries, isn’t it?  As we all know, our children were born with average or better intelligence, however look what our environment has done with their mentality!

One last point for this blog.

Here is my opinion on investments: 

Stocks:  Insanely overpriced. Has not made any sense for a couple years.  Investment firms like BlackRock and Wells Fargo Money Management are tending more to automation for investment decisions versus human analysis.  The reason being no rationale; market based on momentum theories and trading.  The markets went higher recently because Mr. Trump was elected president, this is not substantial reasoning and does not reflect improvement of corporate earnings.

Bonds:  When the Federal Reserve raises interest, perhaps this month, market values for bonds will come down to equate to market interest rates. If you can hold on to bonds for the duration of the bond, okay.

Real estate:  Most markets are very high or close to a bubble.  Mr. Trump being a real estate businessman may favor real estate which would include protection in tax law.

Gold: Current price has been pretty stable around $1,200/ounce.  It is a hedge against inflation, or bought during trying times.

Cash: Perhaps the place to be.  The dollar has strengthened from it’s already strong position. 

MONEY 108 - BUSINESS GAMES

THIS IS MY 108^TH BLOG ON UNDERSTANDING MONEY TOOLS

In this blog I will comment on some of the games businesses use today, and then as usual make comment on some other issues, like the economy. It’s an eclectic blog!

As in most industries today there is greater supply of workforce than jobs available. Ironic that we want Globalization! The main reason, of course, is pay the employees less.  You see this conflictive reporting daily in the news; unemployment down, tremendous job situation.  94.6 million Americans not working!  You watch segments of the news and so many college graduates unable to find any work except minimum wage and still living at home with their parents.  Yes, student loans are over $1 trillion and without good paying jobs these college grads will never pay down their loans let alone want to get married and be able to afford a home.

I believe Donald Trump will be a good president and attempt to bring through badly needed changes. Will he get the old line in Congress and the Senate to go with him?  First off, lowering taxes should benefit all although in the short term raise our US debt.  The lowering of the highest corporate rate to 15% should help prevent companies from leaving the US.  Building new manufacturing plants here with incentives is very important. The reality is we can prevent companies from leaving and start producing more here, however new companies and renovation of existing plants will provide for more automated and robotic plants.  Technology will be needed but not a large labor force as we needed 20-30 years ago.

One common trend employers and human resource departments are using is requesting managers to low-ball employee evaluations.  This serves two purposes: 1) to keep employees on their toes and get them to work harder and better, and 2) leave justifications to terminate an employee so the employee has little legal recourse against the company.

Silicon Valley is screaming for more HB-1 workers (as we have discussed these are foreigners with working visas).  The tech companies are not that compassionate, they want cheaper employees.  It has been a while since I got the latest figures, but India was graduating 6 times the number of engineers that we were here in the USA, mostly in technology.  India has over 1 billion people, but the ratio of engineers to the population is still very high.  Our American companies will replace American workers at the drop of a hat.  They even go to the extent of sending people over to these countries and train to their specializations.  It is similar in the medical and pharmaceutical fields. Hospitals and drug stores hiring from Pakistan and India.  These people have to have attended schooling and then pass state boards?  For most, the schools they went to are not nearly as good as in the USA.  Secondly, what they do is go to a training school in the USA that teaches how to pass the boards.

I have been watching the news about fast food chains hiring more workers; most of these jobs are at minimum wage.  What is happening especially in the Southwest is that they are replacing current staff and hiring people who are bi-lingual in English and Spanish.  With the influx of people from Mexico and South America many who eat inexpensively at fast food restaurants the employees need to be able to communicate in both languages. The push for $15/hour wages. I see it just expediting the automation of fast food restaurants, corporations working leaner.

No matter who won the presidential election it didn’t really matter as I believe we have already started into a recession.  Americans just don’t realize it.  There has been a temporary bullish blip because Mr. Trump was elected.  Look at corporate earnings. Only a few companies are carrying the markets.  Wall Street controls the companies and it is all bottom line.  No long-term outlook.  Wall Street tells companies what they want and how to accomplish it; also, who to hire and in what positions for higher management, accounting firms and law firms.  The game now is for Wall Street to lower expectations in advance, and then announce a company has met or beaten expectations sending the price of the stock higher.  On average, corporate earnings haven’t increased since 2006 and yet the inflationary spiral has hit the stock markets and real estate the most.

Over the long term presidential decisions will benefit or hurt our country.  Interest rates are creeping up.  It is more likely the Feds will raise interest rates at long last this December and this is going to have a negative effect on bonds.  The longer-term effect of all the money we printed is coming to roost with inflation.  Raising interest rates will affect the world.  Our exports will be diminished; currency wars. As most noted, China just lowered their Yuan for it’s trading benefit.

When George W. Bush was elected we knew oil and gas was going to be the industry as Mr. Bush was going to protect the family assets. Oil prices went up significantly.  Similarly I am guessing Mr. Trump will protect the real estate industry.  Right now we are peaking with very high real estate prices in most of the populated areas in the country, especially those cities within a 100 miles of the oceans.  In real estate, know your buyers.  For foreign buyers of residential homes currently 27% are Chinese buying homes that average just under $1 million, and many are cash buyers.

Oil investments?  OPEC has just agreed to limit production.  My opinion is why invest in a product that has more supply than we will ever need?  The price can only go up because of cartel or futures trading manipulation, and that can give way at any point.  Too many oil-producing countries do not get along, and too many are in dire financial need to sell all the oil they can get to pay debt.  The IMF and Central Banks loved to get these countries into debt, then will force them to sell off assets to the wealthy to pay debt; Greece is a fine example of losing control of assets. The other problem I see here for unification of OPEC’s controls is that similar to the European Union there is far too great a disparity of country wealth to hold a unification together for very long.

So much for this blog!

MONEY 107 - BUSINESS DYSFUNCTION

THIS IS MY 107^TH BLOG ON UNDERSTANDING MONEY TOOLS

In this blog I will continue with more understanding on the dysfunctional economic/employment level as we discussed in Blog 106.  I write this with my thoughts and ideas to hopefully help other people, then again, is the content inconsequential or material to the reader?

First off a little philosophy, a close friend and very successful businessman recently reminded me that the world is never as bad nor as good as reported.  Life goes on.  Keep in mind that you become what your thoughts are.  If we want success we better be positive and think success.  This was intended to be a reminder for me!

We elected a new president November 8^th.  At first the markets reacted negatively, then positively driving the already sky-high markets even higher.   With the recent positive reaction the Federal Reserve is likely to raise interest rates in December.  This reaction has already negatively affected the bond markets. (Bond market value and the market price for bonds are always inversely related to one another.)

Cause and effect.  Permit me to recap a few major issues from the last blog that are financially paramount.  This is not to be negative, however accurate and concerning:

-       The banks around the world have set us up for failure with too long of a period with Keynesian economics, and not a free market. This amount of debt is currently approximately $152 trillion with bond defaults happening monthly.

-       Essentially interest free money in the USA has permitted large corporations to borrow money selling corporate bonds and then buying their stock back.  What this is doing is artificially supporting or increasing stock price while their earnings deteriorate because of additional debt and many have less demand for product. 

-       We are the second largest indebted country per capita in the world, only second to Japan.  Like most countries we are becoming illiquid. With this illiquidity personally, corporately and publically we will be hard pressed to maintain debt levels.

-       The need for human workers is lessening. This will only increase because of driverless vehicles along with robotics in the refurbishment and building of new manufacturing plants.

-       Increased demand from corporations for HB-1 foreign workers at lower wages displacing Americans.

Mr. Trump needs to face many important issues.  Here are a few I believe he needs to contend with quickly:

-       Lower corporate income tax rates from a high of 35% to 15-17%, similar to Ireland to keep corporations here and attract new companies. 

-       Billions of dollars have left the USA.  We are not going to have companies cash come back, however we can penalize and not support companies leaving the USA.  We can stop paying for new manufacturing plants built in other countries.

-       Government jobs are accounting for 10 million more than manufacturing jobs at the moment.  We need to help private sector employment and encourage them to be a substitution for the US government.  As a for instance, highways could be built and maintained by private companies running more efficiently. These companies would charge toll fees for use, especially large trucking lines that eat up and damage the highways.  For efficient and accurate use an electronic vehicle system would be used.

-       Amend and restructure the Dodd Frank Act.  Cut the paper work down, simplification of systems and add efficiencies.  Commercial banks need to make sensible loans to small businesses and retailers, taking a bit of a risk.  Commercial banks are operating incestuously with investment banks and  only lending to large corporations and the very wealthy. Private sector lending is currently at 11-15% interest, and lenders want collateral far exceeding the norm of about 125% of loan value.

-       Negotiate fair and equitable trade and security agreements with countries like Japan, China, and Russia.  Renegotiate NAFTA and eliminate the Pacific Trade Agreement that will only hurt our middle class and further damage jobs here in the US.

-       Attempt to reunite the people of this country and restore nationalism.

-       Hopefully, Mr. Trump can be a somewhat honest politician making his family proud by reforming the current corruption in politics, the industries of commercial/investment banking, pharmaceuticals, health insurance, health care and many more.

On to other things.  The information world and technology companies boggle my mind.  Two that have amazing values are Google and Facebook.  They are driven by accumulating data.  Myself coming from Denver, I knew the people involved in this sort of endeavor in its primitive stages.  In the late 1980’s a couple of guys started a company called National Demographics and Lifestyles (NDL).  They recognized information could be sold to various businesses to target certain audiences.  This is how it worked.  Let’s say you went to Target and bought a hairdryer.  Attached to the hairdryer was a card with all sorts of “likes” (gardening, golf, tennis, music, handyman things, wine, bicycling, etc.).  If you liked certain things there was a box to check.  The card could be mailed free of charge to NDL.  For the most part NDL gathered these cards and data in Puerto Rico, as labor was less expensive, and the information was placed on large computer files and sent back to Denver.  A successful company. 

Today, Facebook and Google sell data on a much larger scale and collect data in ways most people don’t realize.  As a for instance, your cell phone has a “location”.  Big Brother is watching you!  Most techies say to turn it off unless you need it for a purpose.  Here is a specific situation and reason to turn it off.  Until a year ago I had a second home in the suburbs of Milwaukee.  I came home late one afternoon with the police at a neighbor’s home, one house away.  The husband and wife both had routine corporate jobs.  They left each morning at a specific time, came home normally at the same time.  They had their “location” on their phones turned “on”.  Someone probably was able to tap into their location on their phones, see they were 45 minute drives away from home, and burglarized their house using a large truck.  My next door neighbor, between my house and this couple, was at home all day, watched the very respectable fake movers take everything out of the house including appliances, and thought the couple just wanted to keep their move  private not telling any of the neighbors.  Lesson learned.

Here is another example.  About 6 months ago I was interested in cars and pricing.  In the old days a person went to paperback Kelly Blue Book and looked up cars and what the reasonable value was.  Today, it is computers and on-line.  I went on-line, used Google and put in Kelly Blue Book.  I put in my required information, thought nothing of it.  Then, searched Ford and Kia autos.  Within a few minutes I had a call from a local Ford dealer, then another call from a Kia dealer.  This is within minutes from when I first went on-line.  You can’t use your cell phone or computer on-line without the world knowing, if they want to.  As we all know, this information is sold to other companies.  Ad Block is a useful app to avoid ad pop ups.

Another irritant in my life was having my Facebook contact list stolen by someone. Now, I receive phony emails from friends I had in my contact files recommending different products.

I guess most know all about what I wrote above, but for me a learning experience.   What matters to me most is the size of business this has created out of so little.  These companies don’t create a given product nor employ many people.  Wall Street has been in love with these companies now for several years and they are highly overrated….exception may be Google.

Another overly priced company lies in nothing more than distribution and I refer to Amazon.  So far they only distribute other company’s product and yet their stock so overpriced.  A replication of this with unbelievable value is Alibaba in China.  So easy to become a billionaire, and yet so hard to get a job that pays only $10 per hour!

The presidential election is over, thank goodness.  Media has made a financial killing.  Hopefully, the country can somehow unite, find a bit of business honesty once again, report this information accurately and move ahead.  

MONEY 106 - AMERICA DYSFUNCTIONAL

THIS IS MY 106^TH BLOG ON UNDERSTANDING MONEY TOOLS

Because of my pent-up mental stress we are going to discuss America’s economic/employment malfunction, and inevitable outcome down the road.  We will first address the general/macro picture and then give a couple of specifics.  They are in the “hard to believe column”.

We have always been educated toward the philosophy that democracy and capitalism is the best form of government. To set the record straight, our propaganda machine is the best in the world.  Whether you have Communism, Socialism or Capitalism they all “can” work and they all may be miserable.  The key components for success or lack of success in any of the three basic forms of government are honesty, integrity, hard work and the forfeiture to only self gratify.

Things here and around the world aren’t functioning because of the lack of most good measures above.  I keep reiterating “cause and effect”.  Once again this blog is “understanding money tools”.  It is not written to make one successful nor full of hype.  It is to give a person understanding.  Perhaps through better understanding you can see opportunities, or avoid pitfalls.

The “liquidity factor” (available cash or sources to it) is going to come home to roost.  The Central Banks around the world have lent countries approximately $152 trillion and most of this can’t be paid back.  Bankers will be bankers!  Greed, control, politics, ego….should I go on?  Oh yes, lack for long term planning and questionable IQ’s.  Negative interest rates haven’t worked out as exemplified in Japan and Europe, hurting the elderly and retired, and throwing off financial projections.  In a similar vein,  countries are trying to come up with cash to function?  China and Japan are the two largest holders of US government bonds; both have been significant sellers of bonds the past month.  If you watch government “repo’s” (repurchase agreements) we have been very active to get liquidity. Simply put a “repo” is the act of a dealer in short term government securities that sells the instrument to a lender for cash with the agreement that they will purchase them back within a certain time frame. What if they can’t buy them back?  I believe Goldman Sachs is very active in this for the US government.

Boiled down this means countries, as well as individuals, are running short on cash; debt is crushing everyone.  Large debt, no growth…simple economics!  We run second only to Japan on personal and government debt per capita.  China may be third, if you can believe their numbers.  This has given a paltry growth to countries, less employment, higher unemployment, corporations not putting money into rebuilding factories and local governments permitting infrastructure to deteriorate. Are manufacturing numbers aren’t that bad, however we are producing using fewer people.

If we look at this from a different point of view, we went from 93.3 million working-age unemployed Americans this summer to a current 94.1 million. You aren’t alone! Unemployment holds at about 5%, but more people actually out of the work force.  Depends on how you look at numbers and how the media reports facts, especially around election time!  My economic readings of late also brought home the fact that we rank number two of G-8 countries in the lack of upward financial mobility only to the United Kingdom.  I point to how we became different over the past 150 years on this.  After the Civil War was the start of the “industrial revolution” and a person had a fighting chance to gain wealth with hard work.  There were no taxes to be paid.  We now are similar to England as our wealth and assets are controlled mainly by the top 1%, subduing the middle class.  “He who has the gold rules”!  Perhaps it is part of my suspicious mind, but the wealthy are now hoarding cash and I think they would love another hard recession so they could increase their world asset holdings to perhaps 65 or 70% from a current estimated 55%.  By the way, another institutional report stated that the US is one of the top most corrupt countries in the G-8.  This should not surprise many people as fewer than 20% think the government is honest.  I don’t believe it matters who is elected president in that we will most likely join the rest of the world within the next year in a good recession.  Or is that a bad recession?

A quick comment on things that hurt employment for the American middle class:

-       NAFTA

-       Pacific Trade Agreement

-       Masses of immigration

-       Globalization

All the above are desired by the large corporations, and the top wealthiest people who control those corporations through stock holdings.  The US government assists in the building of new/advanced factories abroad, cheaper labor, fewer labor laws and insurance claims.  The increase of HB-1 workers replacing Americans at a lower pay scale. This all contributes to the malfunction/dysfunction of our basic employment structure.

Now, let’s look at two very real employment situations that led me to write this blog, and thus shake my head as to where we are today.  Repeating the words from one of my favorite TV series from the 1950’s, Dragnet, Joe Friday from the series stated, “only the names have been changed to protect the innocent”.

Job #1 applied for in the real estate industry for selling vacation home time-shares.  Again to protect the innocent, or not so innocent, I won’t mention the hotel chain associated with this,  however it is one of the largest in the world. My friend has a very strong real estate sales background with new homebuilders as well as re-sale homes.  My friend walked into one of the largest hotels where they sold time-sharing and asked to speak to someone with that department.  He was addressed by a very nice young man who said he couldn’t speak to anyone, however needed to apply for the position on the company’s website.  Then, in confidence he said that unless my friend had a relative or close friend who could “get him into the position”, it was very unlikely he could get a job with the company.  The real world today!  So started the procedure of applying for the job.  After about 45 minutes into the on-line application, resume, etc. the site wanted my friend to take a test. Fine. Well, as you get far into a job application, you consider your time and effort to that point so you move ahead to the test.  The test was broken down into three parts, each about 1/2 hour.  They even gave you a “potty break” somewhere half way through! Let’s go to bottom line. The young man was correct at the hotel.  Unless you have contacts you aren’t going to get a decent paying job, it is whom you know.  The total agony of applying for the job consumed more than two hours. The hotel did have the courtesy to write a letter of declination to my friend.  The excuse was that they were looking for “home run hitters” who had over 5 years specifically in this type of sales.

Job #2 applied for in a low-level, part-time delivery position for a national public company at just above the minimum hourly rate of pay.  This friend had an “in” with the company and prior to job application this person spoke with the local manager.  Here we go on the ridiculous nature of job applications and what is required to get any job.  This directly relates to why we have 94.1 million working age Americans out of work, or not wanting to go through the procedure for a part time work that pays minimum wage that no human being could live on, and without health benefits.  I don’t think I have to explain to anyone at this point that companies play the “no benefits” game, and therefore only hire part time workers, except the manager.

Well, my friend went into the local store to talk with the manager. Yes, resume received.  Next step was to take two on-line tests at the store.  With this step passed he went through the interview process with the local manager.  The next step was to be interviewed in a week’s time by a manager trainee from a different nearby city.  That came and went.  The next step in the procedure was to be interviewed within a couple weeks by the District Manager.  This interview actually accounted for about 1.5 hours.  The next step in the process was two-fold.  The paperwork for employment would be sent to the Regional Manager for approval and my friend needed to go to a specific hospital for the normal drug/urine testing.  The paperwork for this step was to be printed out at the local store, and the drug test needed to be completed within 24 hours of the printed company paperwork.  Sounds simple, however the store couldn’t get the on-line printer to work for over a week.  At this point we are almost two months into the procedure of getting a part-time job.

Fast forward…my friend is hired.  The next step for work is approximately 30 on-line company tutorials covering every aspect of the company with a test following each tutorial.   Sounds simple enough except that most of the tutorials run about 20 minutes each and then a test follows.  The tests are mostly 20 questions, but the kicker is that each test specifies if you need to get them 100% correct, or only one error is permitted. If you miss two questions you need to re-take the test. Most of the tests mix up the questions and substitute a few new questions.  If you fail some tests twice you need to re-do the tutorial and then re-take a new test.  Fun!  At least at this point my friend was being paid the hourly rate for the torture.  After hours of this tutorial study and testing my friend needed to spend three days as a delivery trainee with a current employee.  Said and done!

This tutorial “thing” and testing goes on and on, weekly.  From a corporate standpoint I can see some positives. It is an umbilical cord between the company and employees.  As my friend is a driver the tests also cover a lot of practical knowledge in reference to driving, and hazardous material information that many people should know if in an auto accident.  Lawyers and psychologists thought these tests up so they could get some nice fees while increasing bureaucracy and paperwork.  My friend almost quit the process several times, but hung in there. How many Americans would have the patience and aptitude to put up with this?

I thought I would give some real life circumstances to you so that you would  relate to current day America, whether you are retired, currently looking for work or will be seeking employment in the near future.

MONEY 105 - R.E. DEVELOPMENT

THIS IS MY 105^TH BLOG ON UNDERSTANDING MONEY TOOLS

In this blog we are going back into the real estate industry with some practical advice.

I have frequent coffee with a good friend who is a major real estate broker for larger land acquisitions and inner city redevelopment.  Recently, he expressed how difficult, time consuming and competitive it is to get these assemblages together for presentation to a builder group. I won’t get into all the levels and stages there needs to be for this to happen but it includes governmental agencies at the federal, state, county and city levels. It also includes rough projections on costs, perhaps demolition of existing buildings and re-zoning.  Been there, done that, and it has only become more difficult with bureaucracies than easier.

I related to the same type of situation we had 35 years ago in the oil and gas industry when it was “hot” in the late 1970’s and up until mid-1980’s.  The same resolve can apply to real estate development and other industries.  In oil and gas it takes many months to years to lease up desirable acreage for mineral rights, and then do proper geologic and geophysical studies, permits, approvals, etc. to prepare for drilling.  What we did was approach the subject from a two-pronged point of view separating the first steps mentioned above from the actual drilling aspect.  In those days we formed a partnership, today it would probably be a Limited Liability Corporation.  Along with major financial partners we raised millions of dollars, then leased up hundreds of thousands of preliminarily analyzed acreage and mineral rights.

When our geologic department had identified drilling sites on certain acreages this partnership turned the mineral rights over to our exploration drilling entity with a carried interest and recouping costs.  The same can be done for real estate.  In my friend’s situation I recommended that he take a fee for brokering the transaction to the first LLC, a management fee and then another brokerage fee when selling the land off to a builder.

In today’s world it is all about control. Without control you can waste a lot of time and money and end up with nothing.

MONEY 104 - BONDS REVISTED

THIS IS MY 104^TH BLOG ON UNDERSTANDING MONEY TOOLS

In this blog we are going to revisit bonds.  I discussed stocks and bonds quite thoroughly in previous blogs written perhaps 2 years ago.

The reason for the recap of what bonds are is that most experts believe the bond market is at it’s high, most likely not trend higher but decline before the end of the year. 

What is a bond?  It is a position of debt, not equity; an IOU at some point in the future.  Bonds can come from various entities, public and private. Some public forms being city, county, state (municipal) and Federal (US bonds). Most private bonds being corporate including publicly traded companies.

Why the feeling that the market value for bonds will come down?  Bonds are interest rate sensitive. Many people think that if they invest in bonds they are safe and can’t lose money, wrong. You can lose just like in equities (stocks) in the stock market, but for different reasons.  How is this possible?  One is that bonds are rated, and all-important is the quality of the bond and the company that rated the bonds (reflect on 2008!).  Another variable is your ability to hold the bond to maturity, did you buy a 10 year bond or the very popular US, 30 year bond that mortgage rates are so related to?  Billions of bonds are traded in the after market each day.

Why might the market for bonds take a big hit?  The Federal Reserve has kept interest rates artificially low since the recession of 2008.  They are eager to extricate themselves from these Keynesian policies, but have been reluctant to raise rates which should lower stock market values as well as the bond market. As a person noticed, the Feds left the interest rates remain low at their meeting August 26^th in Wyoming. They certainly weren’t going to raise rates just prior to a presidential election, however the next logical move upward will be in December.  The bond market and interest rates are always opposed to one another; if interest rates go up, the market value for your bond will go down, adjusting for expected returns.  Logical, yes?

The next question is historically what sort of adjustment in bond price can I expect?  The past formula has been that the drop in value will be the duration to maturity of your bond for every 1% the rates go up. Example:  if I have a 30 year US bond with 21 years remaining and the Federal Reserve raises the interest rate 1%, I can assume the market value of my bond to drop 21%.  If the Feds raise interest rates 1/2%, the drop would be 1/2 of 21% or 10.5%.

Let me place a “caveat emptor” into this piece.  We could be “whipsawed” by the Feds.  Let’s assume Janet Yellen and the Feds raise rates in the near future.  What that naturally does is strengthen the dollar (more foreign money will seek strength), it will diminish our current exports because the dollar is stronger against other currencies and our already weak economy will get weaker (current GDP at 1.1%).  As I have been writing for quite some time on the topic it is only a matter of time before we join the rest of the world in recession.  Almost all major countries are in very poor shape, including all the more powerful oil producers like Russia, Brazil, Venezuela, Saudi Arabia, Iran, etc.  If GDP drops and we have no growth for two or more quarters that is a defined recession.  Janet Yellen will then most likely drop interest rates again, perhaps going negative like Japan, Switzerland and other countries have done.  What would this do to the market value of bonds?  Well, the bonds that hold any interest to speak of would increase in value.

That’s about all for a quick update on bonds.  We will see what the Feds do with rates.  

MONEY 103 - ECONOMY

THIS IS MY 103^RD BLOG ON UNDERSTANDING MONEY TOOLS

In this blog I am going to start by covering recent world financial news, and then speculate on common sense resolves.  Repeating, my basic premise is always “cause and effect”.  Use this information for your “money tools”.

I will start with the broad statement that the American public in general is naïve, non-carrying or dumb.  I should give them more credit, but credit is hard to find.  The reasons for my comments come from my travels around the world.  In other countries people make a concerted effort to stay on top of their national politics as well as what is happening in the rest of the world/world events, not with the people here.

It is increasingly difficult to make a distinction between fact and fiction with what comes out of the media and government. With a presidential election year we are finding slanted facts, and media that should be objective taking definite sides.

Let’s look first as to what I can determine as real financial facts.  Consumerism worldwide is down; people are not buying as expected and projected.  As I have been watching world transportations for over a year it is not a surprise to me to see that South Korean Hanjin shipping, one of the largest world shippers, in bankruptcy protection.  This parallels the problems with other major shippers like Sundt, Hyundai and Maersk.  Maersk is splitting their company into two divisions. Usually this is done to either sell  assets or place troubled assets in bankruptcy/reorganization structure.  Our retail sales, most recent negative .5% when excluding auto sales, which are financed mainly by manufacturers.  Smells of recession.

What do we have? The middle class, the buyers in the world, have pulled in their appetite for consumption.  We see this so well in America as our growth has diminished to a realistic and tepid 1.1% from a governmental projected 2.25% early this year.  I see the trend continuing with the Generation Z kids being born year 2000 and after desiring more technology, but simpler way of life. The latter years of the Millennials being 35 to let’s say 40 year’s of age are still more materialistic like the baby boomers, but younger people have changed desires for style of living.  Demographics are changing.

Rather than ramble at this point I am going to highlight major concerning facts:

-       World debt, debt, debt.  A lot of it corporate and not being paid off as with countries like Greece, Italy, Spain, Puerto Rico, Brazil, Argentina, Venezuela and the third world.  Zero interest rates were to assist and now look like nightmares.

-       Auto sales for August substantially down.  Ford Motor sales down 9% with the average manufacturer negative 5%.  Ford is moving their smaller car manufacturing out of the USA; most recently to Mexico.  Mexico doesn’t have the OSHA safety mandates, legal issues and an average worker pay is $3.50 per hour.

-       State and local pensions are “under funded/upside down” $1.9 trillion. Managers of pensions need to restructure their paradigms/projections from their expectations of 6-8% returns.  The Fed Pensions can rely on the government to print money, state and local governments can not.  Don’t expect the monthly pension checks you were promised year’s ago!

-       Walmart stores laying off 7,000 jobs bringing higher wage people from the “backroom” to the front of the stores at low paying minimum wage.

-       Technology is projected to lay off 100,000 workers, salivating to employ HB-1 foreign workers at a fraction the price.

-       Driverless autos, buses, and eventually trucks predicted to cost 4 million jobs.

-       I have a doctor friend head of a department in the Phoenix, AZ, area who estimates that 60% of the new hiring is HB-1 workers mainly from Pakistan and India.

-       McDonald’s laying off accountants and hiring HB-1 employees.  I didn’t know there was a scarcity of accountants in the USA!

-       Incomes were stated to rise 5.2% for the middle income, however that was the first increase in wages since 2007, and we are still way behind the average factory worker hourly pay, even from 35 years ago.

-       Two weeks ago the Federal Reserve Bank had a meeting in Jackson Hole, Wyoming, along with their 12 Federal Reserve Districts.  I doubt if any increase of Fed interest rate will happen before elections, perhaps in December. (Watch out bond holders!)  Although the Feds would love to get us off Keynesian policies and more onto a realistic free market, they know that any increase in rates will throw us into a recession; the stock markets and perhaps real estate, will take a dive.  The Feds discussed two possibilities for a recovery of recession that I thought interesting.  One was negative interest rates.  Don’t screw around like Japan and Switzerland are doing very ineffectively but force people to buy things and go negative rates 5% or more for holding money in banks. (This is one reason worldwide that companies building home safes/vaults are doing exceptionally well at the moment.  Also, countries are looking at doing away with large paper currency, like our $100 bill, so that it would take a lot of paper to fill a safe with small denominations!)  The second thing the Fed discussed was buying in the debt (bonds) of US corporations. Yes, instead of another Quantitative Easing just become a Fascist country and become quasi partners with corporate America.  At the moment, the S&P 500 companies are averaging an outgo of money of 112% negative to earnings. That doesn’t mean all companies are in dire straights but many are.  They are trying to hold dividend payouts to support stock prices and maintain bond payments, while their earnings are dwindling. American corporate bankruptcies have increased 50% over the last fiscal year.

Okay, I could keep going with stats, none of which are to be proud of, but let me draw logical conclusions to all of this.  With our enormous public and private debt, second only to Japan, there are only three possible resolves I see; restructure debt with world creditors, default on debt and bonds (which we won’t do) and kick the can down the road until we implode (debt and growth are inverse in relationship to one another!)

The big push right now is globalization.  Who is behind this?  Big corporations and big money.  They want cheaper labor. Do you think for one second they sincerely care about people in third world countries when most don’t care about their fellow citizens?  The only way globalization could stand a chance of working is if the top 1% wealthy gave up their money and assets as they control over 50% of the world’s assets. They would share, and that isn’t going to happen. 1% of the world’s population that we are talking about is 70 million.  What are we going to do with the rest of the world’s 6.93 billion people?  We are talking future robotic factories, driverless cars, buses, trains, trucks and then perhaps airplanes.  With any resolve to all the billions of unemployed people not needed I can only see three possibilities, none of which are a pretty picture.  One as history has always proven is a major world war, two would be selective breeding controlled by the wealthy for the most intelligent and genetically capable or three, a man-made, worldwide disease with no cure to eliminate most of the world’s population.

(I think we are playing a very risky game building up nuclear weapons near the Russian border. We are the key player in NATO and the UN.  We would never permit such an encroachment if Russia did this to our border. Look at Cuba.)

I think big corporations and money have shot the “golden goose”.  If you don’t pay higher wages, our people can’t afford the goods produced by the big companies!  Read up on Henry Ford!

With all of this said, I think I will go have a scotch!  Everything is cause and effect and we have caused these messes.