Sunday, December 10, 2017

MONEY 127 - BUSINESS ADVICE



THIS IS MY  127TH BLOG ON UNDERSTANDING MONEY TOOLS

Recently, two people asked me a similar question: but with completely different perspectives.  One person, a successful district manager of a major US company, asked if I would put down my ideas on how younger people in the business world could make themselves better.  The other person was a young female employee asking how to become successful.  Wow, a real challenge. I put on my thinking cap and came up with this short blog.

This is like asking a blind person to explain what the color green looks like.  You can give the basic elements, colors blue and yellow, but can’t give a definitive answer.  I’d like to start out with a common element for success and that is passion or desire for something.  Working alongside many young people, I find they don’t have a passion or interest in anything.  This is our first challenge.  Find a passion!  

The best way I can suggest is to immerse yourself in many things and try to find your passion and zest for life.  Talk to people with varied backgrounds. Take classes on various subjects about things you are interested.

The next thing is to ask yourself, “what is success in your mind?”  As ideas, this could be something modest or extreme.  It could be academic success, financial success, sports success, political success, helping others including the medical field……on and on.

I hate to say this but the point is to start, don’t procrastinate. Start working the mind.  Life can be short.  The sooner you start the process, the better.

Let’s move on with some thoughts. I’ll list ideas below in fragments to shorten this blog, yet hopefully make it meaningful.
     -    Number one is dumb luck, or being in the right place at the right time!

  -1.    Education is all-important.  Continue with education and learning.  Those people who stall will find themselves out of work, or by themselves, in this fast changing world.

  -1.    Develop social skills/communication.  Even in this world of technology, to advance in most cases, social skills are needed.  Those who relate, get along, etc. will advance quicker than those who lack these skills.  Have a temper?  Cool it!  Moderate, accept, think, then act.  Avoid trouble.  You catch more bees with honey than vinegar!

  -1.    Discipline is imperative.  Constantly try to improve upon creativity. Most of the large company CEO’s are right brained, thinking of the big picture, versus left brain analytics.

  -1.    Dress for success.  Even though you may be young and your peer group has a certain dress “thing”, hair “thing”, tattoo “thing”, dress a certain way so that the people who can help you in life relate to you.  Always be clean and groomed.  This doesn’t necessarily mean suit and tie!  I have a good friend who is a technology and communication consultant.  I always recommend that he wears tan or gray slacks, casual “in” shirt and loafers or “in” shoes and socks that his clients who pay the bills can relate to.  Again the people who pay the bills need to easily relate to you.

  -1.    Be a problem solver.  If there is no need, chances are you are not needed. Move on until you can find a needed place.

  -1.    Put yourself in places where you will be noticed by the “right” people.

  -1.    I have mentioned this before in blogs, however again if you are interviewing for a job, know everything about the interviewer and company.  If you have done your homework, try to get the interviewer to discuss their passion(s).  They will tend to run with it and dominate the conversation away from you.  And, they will remember you!

  -1.    Learn language skills.  Don’t use the word “but” as it indicates  finality/closure, use the word “and” which opens up and supplements the conversation.  Don’t use the word “honestly” and do use the word “candidly”.  If you use the word “honestly” in context, it indicates sometimes you may not be honest.
  -1.    Your conversation: Let’s say you are interviewing someone. Try to find a chair or place where you have a higher position to gain control.  It is known that most very successful corporate leaders are taller and bigger.

  -1.    If you can tactfully do it, answer a question with a question of your own.  It mitigates the situation and takes back control.

  -1.    Stay away from overspending and debt.  Mortgage debt may be okay if your home is going up in value. Credit card and car loan debt is terrible and can sink you. Cars depreciate in value.  Don’t feel you need to “keep up with your peers”.  Invest in your mind and body; stay in shape, eat right. Something to be said about moderation!

  -1.    If you want to get somewhere in life, you need to seek out a “profession” where you can advance versus a “job”.  A job usually pays a minimal wage and has little room for advancing. There most likely is little room for your “passion” with a job, however there is with a profession that can last a lifetime.

  -1.    Plan out where you want to be at different times in your life. As an example, when you are age 25 you want to be where?  At age 35 you want to be where, etc.?  You need to plan your work, and work your plan.  You can’t build a house without a plan.  The same holds true with your life.

  -1.    You will have life setbacks. Live with them and move on. The quicker you can move on is a measure of success.  Most younger people don’t know the baseball player, Babe Ruth.  For a long time he hit more home runs than anyone else.  He also struck out more than any other baseball player in his time.  What I refer to is that if you set your sights high you are going to have failures and setbacks. Live with it.

  -1.    Read and keep reading. Stay tuned in with what is happening locally, nationally and internationally.  Be “smart”!  There are so many variables that may set you backward.  The game of life is to eliminate as many of these negative variables as possible.  This strategy can be applied to everything in life; driving a car, co-workers, motorcycling, travel, selecting stocks and bonds, etc.

  -1.    If you are already in business management, employ people who are smart and make you look good. Some of the most successful people I have known were not that smart, but they were great at employing the right people for certain positions. If you aren’t familiar with the business expression “The Peter Principle”, go Google it. It was created by Laurence J. Peter.  I love the way he spelled his name “Laurence”!

  -1.    Decision making:  Most people you talk with are very close to agreement; a range of 48 to 52 in yes or no.  Few are either 1’s or 10’s.  Avoid politics where this may not apply!

  -1.    Target Stores spends a lot of money on market analysis.  They have found that people shop places for fun, pleasant experiences and service.  Products and lower prices can be had at so many places that these come in second.

  -1.    Park your big ego if you have one.  There always will be someone better, smarter, etc.  It’s just a matter of time before they surface.

  -1.    Always have empathy for each other.  Whether a person is normal or handicapped in some way, each is an equal.  We are here for a reason.  If there are 100 entrants in a running race there are 100 winners.  An individual or two may be faster, but because you participated in the race you are a winner!

I hope these thoughts will be of some value to you.


Friday, November 10, 2017

MONEY 126 - REALITY


THIS IS MY 126TH BLOG ON UNDERSTANDING MONEY TOOLS.
November, 2017

We are going to take a look again at real value and perceived value.  It appears to me that people in the USA as well as the world are not looking at real values and are disconnected.  This can take so many forms from tangible hard assets and money to morals.  For this blog let’s discuss tangible assets that will reflect on your monetary well-being, now and in the future.  Morals?  I am not the one to judge.

It is impossible to differentiate between what is the truth and what are un-truths/slanted or blatant lies coming from companies, advertisements and the government.  I get information from what I consider reliable sources and academic friends and then put my opinion into that matter.

Let’s take a look at some things to get the mind working.  First observation is that there are “bubbles” about to burst, or should burst, all around us. 

Let’s start with the biggest in dollars, the stock and bond markets; trillions.  We’ve been crushed before, it will happen again.  Bonds are debt, right?  Wall Street takes money from households around the world (private money) and creates instruments of debt.  No brainer.  Now, a good deal of this money has been lent out by Central Banks around the world to countries that don’t have a chance to ever pay off the debt. A big bubble problem.  The “perceived’ value that there exists assets behind these countries has become a big problem, and a “real” value of next to nothing.  As an example, let’s take our Territory, Puerto Rico.  They have huge bond debt, into the billions.  Hurricane damage has destroyed the island and it has no chance of paying their debt. (Side track:  I love this.  Goldman Sachs was sent down to restructure Puerto Rico’s debt.  From what I read their fee was, in my eyes, an incredulous $1.6 billion.  These were the same “boys” sent to Greece to restructure, and Greece won’t be able to pay back debt either.  Here is my take on it.  Goldman Sachs knows that Puerto Rico can’t pay their fee.  However, the highest corporate tax in the USA is 35%.  Goldman stands a better return on their time to say that the fee is an uncollectible receivable and write off the fee against legitimate income; thus benefiting by $560 million.)

Stock markets:  Yup as you know up 20% year to date since Donald Trump came into office.  All Democrats should be thanking their investment advisors at this point for voting Trump.  Total “perceived” value as President Trump has nothing to do with it other than the thought that one day down the line finances will come into order. Has there been much change, no.  Can alignment of debt happen, no.  The markets believe he is a miracle worker, but in actuality he can’t change much.  The US government works on a fiscal accounting basis rather than calendar.  This means our annual accountability on money happens September 30th of each year and a new year starts October 1st of each year.  As reported recently 2017 government debt rose another $666 billion, much higher than most years since the great recession.  (I wonder if the government purposely stated this number  symbolic to the devil?)  The government reported Gross Domestic Product or growth in the USA rose 3% at the same time, but it doesn’t take much intelligence to assume that our growth came from easy lending practices and government spending. A bit false that real growth came about, especially private sector versus government spending.  Today, history is repeating in that you can buy a house with little or no money down, the same with cars and furniture.  Ads are abundant that loans are available with no credit.  This means “you have no credit, no money and shouldn’t be buying in the first place”! None of our politicians seem to read history books!

Stocks remain at all time highs and the same goes for Price to Earnings ratios.  The top financial gurus gave up giving statements about stocks and bonds a little over a year ago.  They realize none of this makes sense and will not stick their necks out to be cut off. “Hocuspocus”!

Real estate, our next big industry to look at.  Real estate should have real value.  “Perceived” value abounds. People trying to sell real estate in such places as Los Angeles, San Francisco, New York, etc. for over $100 million.  Real value of this tangible asset is pretty simple economics.  An assumed market value in a suburb for a stand-alone home is about $350,000.  You take the builders costs plus options and that is about $300,000.  The difference of about 14-15% is their profit. Simple.  Now, a dump of a home in San Francisco can cost $1 million or more. Yes, there is supply and demand, but also “perceived” value.  There are people today who have jobs in San Francisco living in their cars because they can’t afford housing!  As I have mentioned for a long time in blogs commercial/retail centers are coming way down in value with on-line buying increasing.  Watch out for  REIT’s (Real Estate Investment Trusts).

Figures show that housing rentals in the USA have greatly grown since the Great Recession.  Rents have gone up.  Many people don’t want to own, especially after the banking debacle of 2008.  Now, non-payment of rents and late payment of rents are sharply on the rise.

Let’s take the oil industry.  Great example of erroneous statements and miscalculations of true values and hype.  Many of the commodity industries have great fluctuations in pricing.  One miscalculation has come from supply and demand.  50 years ago engineers stated that the world would run out of needed oil by the year 2000.  We have new technology that has discovered huge deposits of oil all over the world and drilling capabilities to extract much more than we did 50 years ago.  When President George W. Bush was in office oil briefly hit about $145/barrel. What many people didn’t realize at the time was that Wall Street energy traders accounted for about 1/3 of this price in futures trading on speculations oil would go higher.  Oil is now in the $50/barrel range, most likely still too high as alternative sources for energy continue to come to the market place.  Recently, the turmoil created in Saudi Arabia with a new King has caused oil to rise (the unknown).  Saudi Arabia is a different tribe and religious faction from Iran, another huge oil producer.  Both countries are Muslim, however many people don’t know the number of distinct differences within the religion and various tribes. Sunni is the most common making up 75-80% of the religion.

15 years ago I made these statements that debt kills every empire and nation on earth.  This collapsed the Greek and Roman Empires. More recently the expansionism of the English, Dutch, Spanish, French, etc.  Reading books on Napoleon Bonaparte, he made one statement I will always remember and that was, the best way to unify a country is a war, the easiest way to destroy a country is a long war.  Debt comes from it.  Our hegemony has done the same here, and we doubtfully can pay down our debt let alone pay off our debt.  Our wars in the past 15 years has increased our debt about $5.6 trillion.  This helps our defense industry and thus our economy.  Sad way to prosper!  (Our US debt was approximately $6.5 trillion, without future obligations/entitlements in the year 2000, now it has crossed over $20 trillion.)  This is reality.

Here are two more of the biggest bubbles and we have not seen much news on them.  One is auto loans.  New car sales have been coming down over the past couple of years.  The auto industry is subsidizing loans to people who should not be receiving loans just to keep the industry afloat.  It is now over $1 trillion.   Student loans are right up there with auto loans at over $1 trillion.  Many of these loans are being restructured or not being paid.  There is an economic impact here if the government pushes too hard on collections.  If loan repayment is adhered to how can these young people buy homes, cars and have money to spend on staple goods?  Education has gone from truly educating an individual so he can become a professional and earn a good living to a business endeavor to make money.

I could go on here with more concerning illustrations. Reality versus perceived values. Bottom line, I think the world has gone crazy on materialism, borrowing, and morals.  The younger generation has not experienced hardship and sacrifice.  Too many people have copied Hollywood and our politicians.  The attitude is that if the one percentile can do it, I can do it and get away with it.  Not good for the future.

I am not pessimistic with my blogs, but a realist.  “2 plus 2 needs to equal 4”.  “Cause and effect”.  “ We will reap what we sow”.  That in “reality” is what the outcome will be.  Love those old expressions!

MONEY 125 - GLOBALISM


THIS IS MY 125TH BLOG ON UNDERSTANDING MONEY TOOLS
October 3, 2017

In this blog we are going to discuss the pros and cons of globalism/globalization. 

Many people lump the two terms together.  I differentiate between the two.  Globalism to me is the theory or ideology of bringing together countries for a commonality/ideology on an international scope of trade and mutual understanding including product, pricing, tariffs, taxes, currencies, politics, transportation including importation/exportation of goods and much more.  Globalization is the quantitative measurement of globalism.

There are so many terms bantered around on this subject including globalist versus nationalist.  I am afraid globalism will destroy our heritages and allegiances to the country we were born; this is the nationalist within me.  Personally I like uniqueness and not for world homogeneity. True nationalism and being self-sufficient in today’s world is long gone.  A big start in the direction of globalism happened with the passing of NAFTA, North American Free Trade Agreement.  It was drafted under President George H. W. Bush and passed through the Senate under President Clinton in 1993.

I was not an advocate of NAFTA, nor am I a proponent of globalism.  As much propaganda as you hear on how wonderful it is let’s take a look at the benefits and deterrents. The hard cold truth of the matter is that globalism mainly helps the big corporations, wealthy and Wall Street.  There is no such thing as “trickle down” and helping the poor and lower class citizens in any country.
Pros of globalism:
-       Free trade, reduced barriers of trade.
-       Agreed upon taxation, although may differ country to country.
-       Cheaper goods.
-       Opening up new markets for product.
-       The thinking that it creates jobs.
-       Great for multi-national companies.
-       Larger profits for companies favoring stockholders.
-       Increased competition, although we all price set and subsidize products.
-       Infused capital to emerging countries.
-       Possibly more democracy.
-       More understanding of the varied cultures.
-       Countries more quickly connected on information, including the internet and manufacturing of products.



Cons of globalism:
-       Even though the media states that globalism is good for emerging      countries and the lower classes, this is false; it benefits the wealthy and large corporations.
-       Large corporations use emerging countries to skirt environmental protection laws like we have in this country and many of the G20 countries.  As an example, Monsanto uses chemicals to control weeds in these countries and in South America that are recognized to be cancer producing.
-       Large companies create agreements with these emerging countries so that they have complete control, and produce goods in very poor worker conditions that would normally be banned in the G20 countries.  These include sub-human working environments and child labor.  OSHA type laws do not exit that would protect and improve workplace safety.  There are essentially no worker rights, few lawsuits representing workers, no insurance, no disability compensation if injured in the workplace, no set hours, no overtime pay and no set vacations.
-       Taxes including “value added taxes” as in the European Union have not been diminished but increased.
-       Currency wars have only increased to make a country’s products seem less expensive.
-       No question about it, it has robbed American workers of their jobs.  We have become a service economy, and other than technology and pharmaceuticals we produce little.
-       Countries like China welcome our technology and companies, then steal proprietary patent rights and copy product.
-       Globalism doesn’t work for most of the world.  Inequality and discrimination have only increased over the past 30 years.
-       Countries that have borrowed from the International Monetary Fund and World Bank owe heavily.  If these countries can’t make payment, settlement is normally having to sell off their country’s best assets to the wealthy and big corporations. We have seen this with Goldman Sachs Investment Banking firm being sent to countries for restructure of debt.  Prime examples are Greece and most recently Puerto Rico.  With the recent financial disaster caused by hurricanes in Puerto Rico I have no idea how they will ever make themselves whole.
-       Perhaps the spread of diseases which were not common in many of these countries prior to globalism, with international travel made easier. 
-       An excuse for large companies to set up off-shore trusts so that earnings and profits do not filter back to the USA, nor do they pay taxes on these monies providing they set up the trusts legally with good law firms.

Since 1993-1994 when NAFTA took a foothold in agreement between Mexico, the USA and Canada, you witnessed inexpensive, subsidized American corn go to Mexico displacing thousands of Mexican agricultural workers.  No wonder Mexicans have flooded into the US! Our dairy farmers see inexpensive milk come in from other countries like New Zealand.  Plentiful lumber comes across our northern border from Canada.

I hope this gives some insight as to why I am against the euphoric thinking that many have on this subject.

Wednesday, September 27, 2017

MONEY 124 - MATURED INDUSTRIES


THIS IS MY 124TH BLOG ON UNDERSTANDING MONEY TOOLS

In this blog we will look at industries that have reached their peak, and don’t have a great deal of upside in our ever-changing world.  If you are young, starting college, or perhaps older looking at changing a profession you might take notice as to what is happening.

It is my intuitive nature to look around at how we are living and quickly moving changes.  I am one that does not like change and is quite rooted, but notice changes in how we do things.

If you are ready for college I am sure you are seeing a school counselor for advice; you need to.  The liberal arts degrees have been useless for quite some time.  You most likely have heard to shy away from history, philosophy, sociology, art, photography, perhaps architecture, retail, etc.  It is true. You are going to end up needing very advanced degrees in these subjects to perhaps teach, or will be out of work.  Always look to see what will be needed in the future, not what is needed now.  As an option to college tech schools and learning a trade may be a wise decision pending the right fields.

The following statement will not be shocking to you, but sometimes we fail to believe it.  Looking around there is less and less need for humans to work.  Since 1980 most pay scales have dropped in professions.  The greatest note is in manufacturing.  Unions at one time held power, and could structure great contracts to favor the middle class worker; then we went abroad for manufactured goods.  Big corporations have re-structured pay scales downward.  Instead of W-2 employees and managers receiving a salary more companies are going to a lower hourly rate and then quarterly bonuses based upon performance, not equating to a good salary level.  A few quarters of under-performance and you are out the door.

Let’s look at retail.  Manufacturing, the start of retail; unless it has a unique niche they are going to be out of business.  In retail there are many stores including J.C. Penney, K Mart, Sears and more that lack a strong identity and probably not going to make it.  This is the inexpensive market place competing directly with on-line stores.  There has to be desired uniqueness.  A mistake troubled companies make is they sell off their best assets or subsidiary companies as those are the ones that will sell.  The problem is then they remain with crap.  If opening retail, make it a “destination type” of business where people will be willing to drive distance to your location because you are unique/necessary and stand out.

I see misleading financial public relations with company growth.  As mentioned many times before, retail companies are expanding with cheap borrowed money from Wall Street, issuing bonds, expanding in secondary and tertiary markets.  They promote that gross sales will increase significantly this year.  Not hard to do when opening new stores.  What we need to watch is “same store” net pre-tax, bottom line or earnings.

In jewelry I see inexpensive items flooding retail.  A lot of merchandise comes out of the Far East including China.  The millennials  aren’t desiring fashion jewelry and watches.  For hourly time they look to their cell phones.

In general retail stores are having a tough time. Shopping centers are going to various means to keep customers coming to malls, this includes entertainment like music/bands and little treats like food.  I have noticed that movie theaters in malls now open their food/drink area to the public.  Normally it was after you bought your movie ticket you came into the food and beverage area.  Now food/beverage sales come first, then you buy the ticket to the movie.  Smart, opens up the market.

Elon Musk has brought a very interesting concept to the auto industry with his Tesla cars.  He avoids the dealership concept and goes directly to the customer.  One place he sells cars is in shopping malls.  To test drive a car you typically go with a sales person to parking and find a separated enclosed area with his demo cars.  As you most likely know, dealers are not in favor of him, he’s breaking from tradition!

Automobile mega centers are the new thing; one-stop shopping for all.  Very competitive and saves the interested buyer time.  The fast food industry went to this long time ago.  McDonalds had the best market research, so then other fast food companies centered around McDonalds; one stop shopping for each taste.

In the auto industry I question the long term for the auto parts industry.  It has been growing rapidly with the availability of low interest rate money from Wall Street and banks.  Dealerships will put pressure on manufacturers to sell only component parts for cars to hurt this industry, and favor their dealership service departments. They want people to buy new cars.  The second thing I see with auto parts is that there are three types of buyers: wholesale to the repair shops and the older cars, older people who still can and want to work on their cars/classic cars (they are dying off), and thirdly people who can’t afford repair shops and “need” to work on their cars. As cars age parts get scarce.

I’m going to include home building in the mix of matured industries.  We, like much of the Western world, have an aging population.  Married couples are not having the expected 2.2 children to meet the demands of the attrition. The Western world is resting upon immigration to hold the numbers. The big housing market is in the $300,000 and under price range where government loans like FHA and GI (military) play a large part.  Older people won’t be buying homes, however moving into assisted living places and nursing homes.  These are very expensive and can cost $3,500 to $7,500 per month and more for specialty care.  I am not sure how many elderly can afford this, and no one seems to know what we are going to do nationally to bear the costs. 

There is not much room for the small, private financed homebuilder in major popular spots competing against the big public companies.  In residential subdivisions,  sometimes referred to as “track” housing, homebuilders expect a net pre-tax profit of about 9-10%, and then perhaps another 3-4% when options are added in.  The publicly traded companies borrow upon issued bonds with Wall Street, thus paying about 3-4% for money.  You, and I, as small builders need to go to a bank and the going rate is 10-11%.  Yes, that is on an annual basis and you can build such a home in 90-160 days, but you will be way behind the major builders as they normally have tied up the best workers in various trades like framers, plumbers and electricians.  They purchase materials in quantity, you won’t.  If you are building homes go to areas of demand where you aren’t in competition with the big builders.

As retail in cities and towns weakens there is less need to build shopping malls and retail space.  Large urban downtown cities may be different.  Be careful of overbuilt office space for the same reasons.

In the nature of matured industries you can take hot industries and pick them apart.  There are both good and sketchy areas even in technology and medical.  As an example, in the technology area stay away from website design in general unless very specialized.  Just a couple years ago friends working in this realm were making $75 to $150 per hour, but not any longer.  Companies like Google and GoDaddy offer free consultation and photos.  Hard to compete with free!  If you want a person to do a website there are “honest” sites where you can contract with a foreign individual, let’s say in India, and have them do the work.  These sites rate the workers.  A top rated tech person can be had for about $3.50 an hour.  You make payment to an intermediary party like PayPal.  After you are satisfied with the work, payment is made.  Here too, I have a couple friends still doing website work, and they use such trusted labor.  They mark the project up to $85 per hour when billing clients.  Not bad leverage if you can get the work!

Computer hardware is going smaller and compact.  Cell phones are getting a bit larger with more functions replacing computers for everyday use.  In tech the need for software design against theft and fraud will only increase.  The government and finance industry will be good employers.

Think outside the box example:  In 1990 after the oil and gas business took a dive, my old partners and I looked into missed opportunities.  We found out that theft and lost cars in the auto rental market was enormous, multi-million dollars. These cars most likely were rented under false ID’s and autos headed out of the country for Mexico and South America.  We had meetings with Avis and Hertz.  Our business plan had a tracking device that could be attached within a car.   For a locator we had investors willing to launch a satellite to spot cars. There was one big deterrent.  In those days instead of a chip, which would be used today, our implant in a car was the size of a large battery.  We did not move ahead with the project.  The reason I tell you the story is that if you look, you can find needs.  Then, one needs to resolve the situation.

Quickly, I will add in the obvious waning industries of paper newspapers/magazines and industries where the young are shying away.  Printing on paper product is the same.   Companies can send information to  China and have the printed product back in a couple days.  I will include sports here.  Except for country clubs the younger people aren’t playing golf and tennis like years back.  Public tennis courts are growing weeds!  The cities and counties don’t have the money to pay for maintenance.  Golf is rather expensive for the average person.

I hope this helps in your thinking process and determining the right path.  Everywhere I look I see matured industries that no longer will be here or needed in 3-5 years.

Cheers!

Thursday, September 21, 2017

MONEY 123 - ECONOMICS


THIS IS MY 123RD BLOG ON UNDERSTANIDING MONEY TOOLS
August 20, 2017

While walking with a friend last week he asked me questions about economics covering inflation, deflation, depreciation, money….on and on.  I started covering these basic topics and more and realized how little most people know, or perhaps care, about how the system works.  We’ll talk about the basics of only one form, how we handle capitalism.

Basic supply side “Milty Friedman” economics is pretty understandable until you get into the “uber” Keynesian economics we have become intertwined in, and manipulation of money.  Is it a false system? Yes.  Has it been favoring the rich and select few?  Yes.  Has there been a greatly diminished middle class over the past 50 years? Yes.  Can the middle class sustain down the road and carry the ball?  I doubt it.  In light of this, number one you need to be aware and two, try to find ways around the ever changing system in place.

The very first premise to understand is that capitalism exists on the perception of scarcity.  People worldwide need to believe that there is scarcity. This scarcity can be played as in the manipulation of food and potable water.  Because of this theory, prices can be set.  Some industries limit production to hold prices.  Lets take the auto industry for one.  A good example is Bugatti autos owned by Volkswagen.  Every Bugatti is sold before it is produced.  At prices between $1.5 and 2.5 they are ordered and bought by the wealthy, many from the Middle East.  They could produce more, but don’t.  Now with auto manufacturers pumping out less expensive cars like Ford, Hyundai and General Motors we have excesses all over the world.  Listening to advertisements on TV they can’t tell you sales are down again this year.  They have years of supply on hand.  Similar goes to clothing, jewelry, etc.  The impression given is “get it while you can”, they are going fast and hot.

Next, let’s start with a short explanation of inflation and deflation. We have covered so much of this topic in past blogs and in more detail; you will need to refer to them.  With inflation things go up in value, deflation they go down, depreciation (can be an accounting term)/devaluation things go down. Devaluation is generally related to currencies. Why does our government want things to go up?  It is an incentive for consumers to buy, manufacturing to spend on new equipment, etc. Gross domestic product goes up supporting the strength of our dollar (Fiat Currency) and profits are taxable.
Normal supply side economics is the healthiest in the long term, and with this go the normal business cycles including recessions.  These should happen every 6 years or so.  Sequentially this happens through business growth (expansion), oversupply, stagnation (peak),  downturn (contraction/recession), then shake out….and over again.  9 years now we have had tepid growth around 2% or less with no significant recession, very unusual.  Of course, the lack of good growth needed in the 4-6% range cannot happen with our debt, as an inverse relationship to growth, downsizing of companies, automation and so much more.  When was the last time the government told you reality?

I have been very wrong on this last business cycle since 2008-9 and let me make assumptions why.  I could be wrong, but the facts stand.  Our Federal Reserve Bank (Central Bank) intervened to what “will” happen during the period 2008-9.  Getting back to the walk with my friend.   He asked what the difference was between the Bundesmark/Reichsmark hyperinflation in Germany in the 1930s and our government printing $4 trillion in something referred to as Quantitative Easing measures 1, 2 and 3.  The printing of a lot of money in the 1930s destroyed Germany with inflation, how about us?

In understanding this I will use the expression “float” which is used in stock market terms.  You can print all the money you want, however for it to be deleterious to a system a couple things need to occur, these being that the newly printed money needs to get into the hands of the general populous (middle class float) and there needs to be circulation of money, or turnover (sometimes referred to as “V” for velocity).  In the case of our $4 trillion Quantitative Easing money it was graciously handed out to select banks so they could survive and meet capital requirements while many went down.  In July, 2017 there was only $1.56 trillion US currency in circulation. Loans from private parties, many middle and upper middle class people, were called and these assets sold to wealthy investors at $.10 on the dollar.  Ask me how?  I was one losing a multi-million real estate project with two appraisals at $150 million net dollars. 12% debt to equity!  No one would finance.  Banks could not lend as they were still under government controls.  The very wealthy would lend, however they wanted 30-35% interest, and a percentage interest which doesn’t work.  Two billionaires bought the loan.

In the investment banking arena I had many friends with small regional firms and with big firms like Bear Sterns and Lehman Bros. Our US government decided they should no longer exist.  Unfortunately, “Anti-trust”, was pushed to the wayside.  So this was the new free market!  Corrupt as hell.  Big business and big banks getting bigger.  Ever since President Reagan and the 1986 Tax Reform Act every president crushed the Anti-trust Act, would have prevented many of these happenings. The “big boys” got their way!  A select few control the masses!

Continuing on, why no major inflation? We explained above that printed money did not make it into the hands of the general public.   The government reports stats the way they want (they manipulate or change accounting principles constantly).  If inflation were stated accurately they would have to adjust standard of living indexes like social security.  The government wouldn’t’ want to pay out more money and increase national debt. (Indexed Social security has risen only 2% over the past 10 years as an example, really penalizing older people.)  Older people should be buying fixed instruments that are safe as in certificates of deposits (CD’s) from banks and A rated bonds.  They have yielded nothing in terms of interest rate.

What did big business and the wealthy do with this “almost interest free” money the past 9 years?  Big business borrowed money and issued corporate bonds.  With this action companies have increased their debt about 30%.  What happens when they do this?  This decreases their stock  “float” thus increasing control of their stock.  This is referred to as wise “leverage”. They hope to return more on the borrowed money than what they are paying back to banks.

What did the wealthy do with their borrowed money?  They increased their stock holdings in all these big companies.  Today, the wealthiest 1% control between 83% and 87% or all corporate stock.  That said, they can manipulate the stock markets.  The DOW and S&P Markets have been overpriced for 2-3 years now and keep going up.  I believe the money still coming in is from suckers, and at some point a major correction is bound to happen.  In advance of a significant downturn, the investment banks and wealthy will have established sound “short positions” in the markets.  They don’t gamble, they control!

The stock markets have gone up 20% this year under President Trump; perception of things to come, not reality, makes this kind of move.

One final observation and then I will end.  The government reports that debt is not out of control.  US debt has now gone over $20 trillion.  We are  second in personal debt to GDP (perhaps first); Japan taking honors in this department.  Here is the catch.  In 2008-2010 many people lost their homes and assets.  These assets mainly ended up in the hands of the top 1% wealthy.  Today, many people are renting apartments and leasing autos. (Auto debt now $1.3 trillion and a fairly high default percentage.)   This monthly financial obligation is not included anywhere on government calculations of personal debt to GDP! 

Tuesday, September 12, 2017

MONEY 122 - REMINISCE


THIS IS MY 122ND BLOG ON UNDERSTANDING MONEY TOOLS.
September 14, 2017

This blog is totally different than anything I have done.  If you have ever snow skied, or have an interest in the history of that sport you hopefully will find this of interest. 

I start by saying a good friend and father figure once told me to be successful it is wise advice to hang out with those who can help you.  For me he recommended associating with the wealthy at yacht clubs, elite golf and tennis country clubs and top ski resorts.

Early on in life, I doubted if I was going to keep up with top academics so I went to my strong skills becoming a teaching pro in 3 sports; snow skiing, tennis and later in life Taekwon Do and Hapkido.  Living in Vail, Colorado, and being good at sports I was welcomed into this circle of elite and eventually permitted me to become a millionaire.  Retiring in 1992 from this world I found that it was easier to make money than to invest it with the USA/world economic cycles and keep the money.  Today, instead of using sports, as many are waning, it might be better to associate with people in the technology industry.

Recently, the Farwest Ski Association asked me to write my history in the sport recapping the decades 1950s through 1970s for an article in their 2018 Ski Guide.  This is to be published and presented at their annual meeting in Banff, Canada in February.  I was a member of the Rocky Mountain Ski Instructors Association and Professional Ski Instructors of America for 27 years.  Many of the people who were instrumental in the evolvement of the sport have passed away and history is being lost.  At recent meetings it was noted that most of my photos and newspaper clippings are 40-50 years old and cannot be used for quality purposes in the magazine.

Here is the rough draft I have written for the magazine.  Hope you find it interesting.  It is quite long

REMINISCE AND REFLECT

I thought I would write a personal summary of how one industry greatly had an impact on my life and it’s outcome, that being snow skiing.  Snow skiing in the early days was very much concentrated to the Europeans and a few wealthy, or Hollywood individuals in the USA.

I wished for a pair of skis for Christmas in about 1954, which would have made me 8 years old.  Skiing was encouraged by a friend of my aunt who was a member of a local ski club and offered lessons.  We were living in a suburb of Milwaukee and had a county park, Curry Park; close at hand where they placed a rope tow lift in the winter on one of the golf fairways and lighted the slope at night, not exactly Mt. Everest!  I believe the cost to ski was $.25 in those days.

I had my Christmas wish come true, a pair of skis, bamboo poles, no ski boots but wore what we called galoshes.  The skis had no metal edges and bear trap bindings held the foot.  That was the start of my addiction to the sport.  The local areas of Little Switzerland, Wilmot  and Alpine Valley offered night skiing with lighted slopes. Young and old could enjoy skiing at night, which I certainly took advantage of on a regular basis.  For a larger slope a person would drive to Wausau, Wisconsin, and ski Rib Mountain.

In 1959, my grandmother and an aunt took my brother and I to Aspen for Christmas. By then, we had graduated to better skis with metal edges, leather ski boots, better bear trap bindings with “long thong” leather straps to  stabilize the boot. Aspen ran a single chair lift from the base, and you could protect yourself from the elements with a tan canvas tarp.  Great times, no grooming of slopes, big moguls carved out from the long skis. The wealthy were at hand. I remember one evening we had to share a table at a pizza place that being with fashion designer, Oleg Cassini and his daughter.  I only became more addicted to skiing.  Aspen was a small town, no one expected skiing to take off and change the old mining town.  The block in downtown Aspen that is now a park used for rugby and soccer was offered for sale to a friend in the early 1950’s for $800, they passed and the town bought it for a park.

The Aspen Ski Company was started by wealthy industrialist, Walter Paepcke. With his cultural inclinations he also started the Aspen Music Festival and School in 1949.  Today, Aspen is well known for its summer music and cultural events.

Walter built the first ski lift in Aspen in 1947.  (This started taking Aspen from a dead silver mining town to a ski town.)  Up until this time in the West the only other areas that had major lifts were Sun Valley in 1936 and Alta in 1939.  Winter Park Ski Area, an actual Denver City Park, installed a J Bar lift in about 1939.  With the old T Bar and J Bar lifts a person hooked the bar around their lower backside and it would haul you up the slope with your skis on the ground.  (A-Basin had a couple single T Bars, one from the base up the mountain, another on the beginner slope.)  As I remember sometimes the Bar from the base would jerk you a couple feet in the air when the lift attendant pulled the “go”.  Better than a chiropractor, or one was needed afterwards! In Gunnison, Colorado, their ski club also fashioned a primitive lift about the same time.  Klaus Obermeyer was one of Aspen’s first instructors.  He went on to become one of the best in the manufacturing of ski clothing.  Another player in Aspen to improve the lift capacity was well known, Friedl Pfeifer. (A good look back at early Aspen can be found through Anne Gilbert’s writing at the Aspen Historical Society; they have a website.)

My brother, Ron, was also addicted to snow skiing.  During high school vacations we talked our parents into letting us take the train to Glenwood Springs where we would catch a bus to Aspen.  We found a very inexpensive place to stay called Ed’s Beds which were bunk rooms shared by several, however sufficed as no one was ever in the rooms except to sleep.  As I remember the cost was $2 per night.  The next obstacle was ski tickets.  The Aspen Corp. had trail crews to stabilize the snow on steep slopes.  This preceded snow grooming equipment.  Aspen hired ambitious people like my brother and I to join others to sidestep up, then down, steep slopes.  If you see old photos and wonder why you might see horizontal lines packing the new powder on slopes this is how it was done. If my memory serves me right, we received 2 lift tickets for a half-day of packing.  Hard work, but we looked at it as improving our thigh muscles which are so important for good skiing.  One must remember that before ski lifts side stepping was how a person went up slopes and then skied down in minutes.

Let’s fast forward.  I was accepted to the University of Denver and attended 1964-1969.  The University in those years under ski coach Willy Schaeffler won most of the NCAA Championships.  By then I thought I was a very good skier and went out for the team in the fall of 1964.  No way.  Trained the fall season with all members of the team.  Unless you were already on an Olympic team, mostly US or Norwegian, a person didn’t stand a chance.  Willy Schaeffler and I got to know each other quite well because of the daily training.  He was also ski school director at A-Basin Ski Area then owned by Larry Jump.  Willy asked me, like many D.U. students, to join the ski school.  We taught weekends and all school vacations.

Several well-known skiers had their roots at A-Basin.  One ski instructor I taught with in the late 1960’s was Ed Lukes.  The Viet Nam War was going strong and many soldiers were returning as amputees.  Ed started devoting his teaching to instructing amputees and taught them a new world on snow.  As I remember, Ed eventually took these teachings over to Winter Park.  A-Basin was noted for its challenging slopes and Winter Park was most likely more accommodating to Ed’s needs.

At Vail we started teaching the blind.  Most instructors had some training in regard to this teaching, and then certain instructors specialized in this arena.

(A brief comment here. Many of the original well known people who started the modern ski industry came out of World War II.  Willy fought for the Germans, the founders of Vail were in our infamous 10th Mountain Division.  Many, like Pete Seibert and Willy Schaeffler were severely injured in battle.  After the War they stayed with what they loved and knew best, skiing.)

At this point I want to write in honor and memory of members of the 10th Mountain Division.  Working in Vail in the inception years I heard of the history connected to one of its famous runs, Riva Ridge.  Riva Ridge is a black diamond run, and was used in the early days as the downhill course for some of the international races.  Pete Seibert and many other 10th Mountain men fought at Riva Ridge in the Apennines, Italy, in 1945 against the Germans. The battle was one of the toughest fights in the mountain areas of Europe.  In 1942 the US Government started a training camp for elite soldiers to fight in Europe.  The training camp was called Camp Hale and remains a historical site today.  The location is just south of Vail between Red Cliff and Leadville on Colorado State Highway 24.  The soldiers were outfitted in all white uniforms as well as white skis, poles, etc. to blend in with the white snow conditions.  Most of these soldiers were good skiers before they trained at Camp Hale, and came from families that were  financially “well-off”.

In December 1967, while a student and part time instructor at Vail I was asked if I would participate in being the first to ski the runs, not yet open, at a new resort called Snowmass.  I candidly don’t know why they chose me when they had many instructors to choose from at Aspen.  Snowmass Ski Area was opening Christmas that year.   They wanted a public relations news article with photos.  I was to include a couple students who were excellent skiers, able to ski virgin powder conditions.  The couple who went with me were from New York City, Mr. and Mrs. Alan Slifka.  I also included my then girlfriend and instructor, Jain Davis.  The Aspen Times newspaper sent a photographer with us.  We took off by helicopter from the top of Ajax Mountain in Aspen and landed for a good day skiing on the top of Snowmass.  After this helicopter skiing took off as a commercial endeavor.

Copper Mountain, Colorado, is another ski area and opened in 1972.  In 1971 before any lifts were constructed one of the original founders of Vail, John and Mary Hobart asked if I would like to go with them and their family to ski the original runs and virgin powder snow.  They rented a snow cat from Copper Mountain for the day to take us up the slopes for fine skiing all day.  How could I resist such a trip.

The United States Ski Association has/had separate divisions.  I was part of the Rocky Mountain Division. In those days it extended from Vail, Aspen, Steamboat Springs and Winter Park in the north down to Taos and Santa Fe Ski Basin in the south.  In Taos, owner Ernie Blake ran Taos very well.  He named the steep run coming down to the St. Bernard Lodge Al’s Run.

I was stage one certified in 1965, my number was 367.  Today, there are thousands of certified instructors.

 Jerry Muth took over as ski school director at A-Basin.   In about 1966 he was asked to assist Roger Staub as director at Vail.  A bit on Vail:  Vail was started in 1962.  Three or four members of the 10th Mountain Division from WWII were working in Aspen after the war.  Pete Seibert being one would drive past the mountain that is now Vail on his way down to Denver.  He noticed the areas potential, put together very wealthy families who he knew from skiing and a talented architect, Fitzhugh Scott from Milwaukee.  They wanted a conforming pleasant architecture they found in Switzerland and Austria and Vail was started.


As Jerry Muth moved to Vail he asked if I would be interested in teaching only private lessons during the long vacation breaks from college, and I started working for Vail Associates.  I was then fully certified with RMSIA.  After my graduation from college in 1969 I moved to Vail, already had a solid base of wealthy people wanting ski lessons and got into real estate. Skiing was my occupation, real estate was my avocation!

Part of my skiing was to test and experiment new products coming out.  During the 1960’s ski equipment changed for the better.  Howard Head invented a metal ski, boot maker Henke put plastic over a leather boot shell (they came in colors blue or red). One individual I was friends with was Bob Lange with Lange boots.  I tested proto-type boots not on the market for Bob as well as ski manufacturers.  There are good marriages between sports and business and I think skiing and real estate was one of the best in those days.  Along with real estate licensing I picked up Security Exchange Licenses which enabled me to raise money via my wealthy contacts for large projects.

In about 1971, the US Ski Association decided that the country should have a definitive “American Ski Technique”.  To this point, and especially in the 1950’s we copied and taught either the Austrian technique with severe counter rotation, skis together or the more moderate French Technique. Prior to these techniques it was the Alberg technique with ski hero Hannes Schneider.  Partly due to the primitive type of equipment the technique used a severe rotation of the body. 

Terminology changed.  Instead of referring to a beginner “snowplow” position we called it “the wedge”.  We redefined the German “wedel”, linking quick parallel turns together, as “shortswing”.

I was one of about 7 or 8 ski instructors selected to evaluate skiing and various aspects of the sport to come up with a new national manual serving to upgrade what we were using and with little standardization.  We approached the challenge quite seriously looking at visualization, kinesthetics, audio, emotional, biometrics and more.  We wanted a final resolve so that skiing would be more natural and comfortable for all; e.g. a man’s normal physical structure is different from a woman.  Most likely a  woman has a wider hip structure thus her angulation won’t be enough when needed on a very steep slope.  A woman will need to counter rotate more to get the same result and keep weight over the skis or slightly downhill.  We also moved the ski’s position a bit apart more shoulder width, away from the severity of keeping the skis right together as was the discipline of the Austrian technique.  (When I was a kid learning skiing from the Austrians, I would wrap my long thongs around both boots as a training technique to perfect my technique and balance.)  We moved the pivotal point for a turn back from the shovel of the ski with the Austrian technique to over the ball of the foot or the toe piece of the binding.  With the improvement of skis and edges we started using more weight on the uphill ski not just downhill ski, let’s say 60/40.   We all read the book Psycho-Cybernetics by Maxwell Maltz from 1960.  In this he proves the mind can accomplish almost as much through visualization as one can when actually doing the physical event.  A person can also overcome fears such as speed and steepness of slopes.

With the completion of the manual, I can only give my highest regards to the writer, a perfectionist totally dedicated to the ski industry and good friend, Horst Abraham.

After the manual was completed we had a judged competition to select 6 top skiers to represent the US and show off our wares.  I was one of the 6 on the US Demonstration Team, also known as the Interski Team, however did not make the top 4 that would travel internationally.  As I remember we had one of the first exhibitions at Vail and it included some of the top ski countries like Germany and France.  The international 4 went on to Japan as their first stop.

As an examiner for the Rocky Mountain Ski Instructor’s Association from 1972 until 1976 I came in contact with so many great people who continued with dedication to improving skiing.

In 1990 Professional Ski Instructors of America awarded me with a nice plaque for 25 years of dedication to the sport and industry.

In association with the ski industry, I was a realist that one needed to make money.  Through the ski industry and contacts this was achieved both in the real estate industry and oil and gas industry.  Success has a great deal to do with contacts!

In summary, I could never have outlined a life as I had.  I came in contact with so many great people, many better skiers and many smarter.  This was my baseline.  The industry has totally changed as big business has greatly changed it.  It will never be the same, however younger people will have a new baseline to measure things.