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Archive for the ‘Politics’ Category

Bailing out the big three auto makers is like giving new pipes to crackheads

Friday, November 21st, 2008


Blue collar workers are the heart of America and (and a good portion of my readership) so I understand the fear that the big three automakers going under would mean massive unemployment.  I also want American businesses to succeed, especially ones such as GM that employ thousands of workers.  The problem is the big, bloated car giants spend money like there is no tomorrow.  Giving them more money will simply give them more to waste.  The proposed government bailout is not going to fix their problems and here are some reasons why:

1) It would not fix their flawed business models
GM workers earn and average of $70/hr in pay and benefits.  That is simply too much.  Thats more than (in the US) the average engineer, construction worker, teacher, project manager and blogger (ha!).  Its not just assembly line workers either, the CEO Richard Wagoner makes about $24 million a year.

GM goes through $2 billion a month.  A month!  What good would 8 billion do them?  Then there are the huge pension plans that no other industry could possibly afford to give.

2) Their cars aren’t very competitive
Guess which of the big three are on Kelley Blue Book’s top 10 brands?  That’s right, none.  They don’t hold their value and don’t stand up for the most part to similar foreign cars.

3) The idea that it would help American workers is a sham

The automakers are already outsourcing.  See Ford’s 3 billion plant they are going to build in Mexico city. (The biggest foreign investment in Mexico’s history).

4) Government car bailouts have been tried and they DONT WORK
In England Leyland car company has having problems identical to our big 3.  They owned over 1/3 of the entire market share.  The government put in 16 billion to keep them afloat. So who here has heard of Leyland?  Any takers?  That’s because they went out of business anyway.

The time is coming – we WILL have to pay the piper at some point

Saturday, August 16th, 2008

One of the candidates for president has a plan for more economic stimulus. Mr Obama has a plan that is outlined as follows:

1. Forcing big oil companies to take a reasonable share of their record breaking windfall profits and use it to help struggling families with direct relief worth $500 for an individual and $1,000 for a married couple. The relief would be delivered as quickly as possible to help families cope with the rising price of gasoline, food and other necessities. The rebates would be fully paid for with five years of a windfall profits tax on record oil company profits. This relief would be a down payment on Obama’s long-term plan to provide middle-class families with at least $1000 per year in permanent tax relief.

2. $50 billion in immediate measures to turn our economy around and help prevent more than 1 million Americans from losing their jobs:

  • $25 billion in a State Growth Fund to prevent state and local cuts in health, education and housing assistance or counterproductive increases in property taxes, tolls or fees. The fund will also ensure sufficient funding for home heating and weatherization assistance as we move into the fall and winter months.
  • $25 billion in a Jobs and Growth Fund to replenish the highway trust fund; prevent cutbacks in road and bridge maintenance and fund new, fast-tracked projects to repair schools – all to save more than 1 million jobs in danger of being cut.

For those of you who are unaware (which I would doubt is many of my readers) this is terrible economic policy. I guess neither party realizes what out of control spending will mean for our country long term.

How is this going to be paid back?

Supposedly with taxes. There is just one problem with this. Tax revenue is NOT proportional to tax rates. Tax revenue is and has been for the last 100 years DIRECTLY proportional to GDP.

I encourage open mic on this because this is a non-partisan blog, but part of being non partisan is recognizing what is best for the country and more handouts is not good for anyone.

Gas prices – is the dollar weak, or is oil too high?

Wednesday, June 25th, 2008

Before we talk about anything else remember this one thing: price of crude oil is directly related to price of gas.  So from now on when I talk about the price of crude oil, you know exactly what it means to you.

A few months back there was a big whoopee about the first person to trade oil at over $100/barrel.  As the price of a barrel of crude oil continues to rise unrelentingly past $135 a barrel, one begins to wonder, Is the price of oil primarily rising due to the strong global demand for oil, or due to the U.S. Dollar (USD) falling so much in value?

One way to solve this riddle is to travel back in time to the 20th Century when after World War II the USD was considered ‘as good as gold’ because the exchange rate between the USD and gold was fixed by U.S. federal law at 1 USD = 1/35th of an ounce of gold; that is, until President Richard M. Nixon shocked the world by unexpectedly yanking the USD off the gold standard on August 15, 1971. Or, travel even further back to a time centuries ago when men and women the world over used gold as a medium of exchange, a store of value, and a unit of account. Back then, prices of almost all goods and services were quoted in units of gold. Looking at the price of oil from this historical perspective, a new question arises: Would the price of crude oil be rising so much if the world were paying for a barrel of oil with ounces of gold instead of the currently ‘goldless’ USD?

Thankfully, we can use readily available historical data on gold, oil, and the U.S. Dollar to answer that question. The key is to transform the data — and our thinking — such that one ounce of gold becomes the currency (or, unit of exchange) that anyone could use to buy and sell a barrel of crude oil or to buy and sell the currently ‘goldless’ U.S. Dollar. Applying this data transformation and then using 1991 as a normalized index point (January 1, 1991 = 100) for both oil and the USD, there is a hidden truth: starting in late 2001 — around the time of the September 11 terrorist attacks on the U.S. — anyone could use one ounce of gold to buy an ever-increasing number of U.S. Dollars, or anyone could use one ounce of gold to buy an ever-decreasing number of barrels of crude oil.

An American today is having to spend 3 times the number of U.S. Dollars he had to spend back in 1991 to buy a single ounce of gold (May 7, 2008 = 242). This is confirmed by comparing the USD prices of one ounce of gold in 1991 and today: $362 and $1000+, respectively.

Anyone today using an ounce of gold as a currency can buy only half as much crude oil per ounce of gold as he could in 1991 (May 7, 2008 = 50). In other words, anyone must now use twice as much gold as he could in 1991 to buy one barrel of oil.

So, a barrel of oil has doubled in price in terms of gold ounces since 1991 and, at the same time, an ounce of gold has more than doubled in price in terms of ‘goldless’ U.S. Dollars. Thus, gold solves the riddle: the price of crude oil is high and rising primarily due to the ‘goldless’ USD losing its purchasing power, and secondarily due to the strong global demand for oil. As the U.S. Dollar in his pocket becomes increasingly worthless, the average American is forced to cough up more ‘goldless’ U.S. Dollars to convince a seller of a barrel of oil to make a fair trade. Who can blame the oil seller if she believes “fair” requires ever more increasingly worthless U.S. Dollars to complete the sale of an increasingly demanded barrel of oil?

Perhaps the riddle that the average American should be trying to solve has less to do with the price of oil going up and more to do with the purchasing power of the USD going down. Perhaps the real questions that Americans should be asking are:

* Why is the USD losing so much purchasing power?

* Why are our elected representatives in Washington, D.C. failing so badly in their constitutional mandate to provide We the People with a stable currency — a currency ‘as good as gold’, or at least a currency actively managed by the Fed to within a tight range of gold prices?

* Why do We the People continue to elect representatives who think nothing of devaluing our currency through profligate printing and spending, rendering us all poorer and poorer as time goes by?

* When will We the People say ‘enough is enough’ and finally elect representatives who will honor their constitutional mandate to provide all Americans with a stable U.S. Dollar?

Until We the People take action and demand real change in our federal government — especially its monetary policy (stable dollar) and fiscal policy (balanced budget, lower debt) — we will continue to watch  in dismay as the price of oil climbs higher and higher on the world market.

Think rate cuts are to help you? Think again.

Wednesday, May 28th, 2008

I want to have one million dollars. One million dollars is a lot of money. Many Americans would love to have $1 million sitting in their bank and brokerage accounts. A lot of Americans do have a million dollars…but many more do not.

Yet, do Americans really love money? For many, as soon as we get money in our hands, we spend it like it is on fire on some new toy, or on some new experience that, for a short while, distracts and entertains us. So, do we love money, or do we love what money enables us to possess and experience? It is probably more the latter, though you could debate that for hours.

Regardless, note what money gives us – freedom, opportunities, security, flexibility, and power – stems not from money’s quantity, but from its quality. It matters not how much money we possess or how impressive the rate at which we bring it home if our money steadily decreases in value over time.

So, is $1 million really a lot of money? It depends – how fast is the dollar decreasing in value? There’s one simple way to tell: price inflation. As consumer prices increase, a dollar buys less than it used to. Thanks to America’s average annual inflation rate of 2.7% over the past seven years, $1 million in 2000 was worth only $829,864 by the end of 2007. In 2008, inflation has jumped to 4.1%, degrading the dollar faster still.

What is causing price inflation today? It’s a two-fold problem. First, through deficit spending, the U.S. Congress spends today hundreds of billions of tax dollars borrowed from our future. This acceleration of future tax dollars into the present increases the supply of dollars sloshing around our economy in 2008, increasing demand for – and prices of – goods and services.

Second, the Federal Reserve swells the U.S. money supply with credit. By lowering short-term interest rates – as it has consistently over the past few months – the Fed encourages banks to loan money to borrowers looking to spend their future earnings today. The result is more dollars sloshing around the economy, further driving up prices of goods and services.

How can we stop the Federal government’s willful degradation of the U.S. dollar? Vote. Write. Call. Demand that your elected officials in Washington, D.C. practice sound fiscal and monetary policy: a balanced Federal budget each year; a lower Federal debt outstanding; and inflation-fighting (e.g., higher) short-term interest rates.

But aren’t they lowering rates to help us?

Unless you are the owner of a bank, the answer is no. Its a major misnomer that just because the fed lowers rates, the banks will lower rates. This just doesn’t hold: in times like these there is no promise that banks will lower their rates. They reap the reward of lower fed rates while keeping rates steady or even raising rates to help themselves out of the hole they dug themselves with bad lending practices.

Think rate cuts are to help you? Think again.

Oh boy, here comes inflation

Friday, April 25th, 2008

Well, the federal reserve has done it. As I was in the store today I realized “holy cow, things cost a ton more than they did a year ago.” And they do. What on earth has happened?

Well, for years now Americans have been going to town buying things on credit, getting crazy loans and spending like its going out of style. Unfortunately, exuberance extracts a price. The housing bubble has bust, and there is a debt crisis. The fed keeps pumping cheap money into the economy but the thing is, consumers, already strapped for cash, aren’t spending as much.

At the same time, politics and violence in the Middle East, Venezuela, and Russia keep adding to the global uncertainty that is pushing up the price of oil and natural gas. Breakneck growth in the developing economies of Brazil, Russia, India, and China continues to put upward pressure on prices of other key input commodities as well.

To make matters worse, the U.S. dollar has weakened severely against other major currencies over the past year. The U.S. dollar just doesn’t buy as many Euros, Yen, and Pounds as it used to. So, Americans must use more dollars this year to buy the same imported goods from Europe and Japan that they bought last year.

Perhaps most damaging of all, our elected officials in Washington, D.C. keep spending hundreds of billions of our hard-earned tax dollars – from both this year and, through debt financing, many years to come – like drunken sailors on shore leave..

In short, we have a U.S. economy awash in cash, a U.S. dollar beaten down by foreign currencies, and global commodity prices near record highs. The specter of a dastardly economic demon – inflation – rears its ugly head.

So the fed has been cutting and cutting and cutting and we have a nasty bit of inflation.

What does this mean?

 

Over time, inflation degrades the purchasing power of a $1 bill. Decades ago, the price of a loaf of bread was a mere nickel. Back then, you could buy 20 loaves of bread for $1. Today, the price of a loaf of bread is at least $2.00. For a $1 bill today your baker will hand you back just half a loaf. The bread didn’t change; the value of the $1 bill declined.

The erosion of purchasing power caused by inflation is why investing for the future is an absolute requirement for a financially successful life. For your investments to maintain for the future the purchasing power you enjoy today, the average annual rate of return on your investments must exceed the average annual rate of inflation in the general economy. To get ahead financially over the long term, your investment returns must trounce the rate of inflation by a wide margin.

Lets hope we get this beast under control (no more rate cuts fed!) or else things could get really nasty….really quickly.

How to Fail completely – Failing 101

Wednesday, April 16th, 2008

How would you like to be completely and totally poor? Do you enjoy cardboard boxes? Does the idea of living and sleeping on the streets of a major American city sound appealing to you? Would you like to grow old and penniless, spending your final days on this Earth barely getting by on the meager checks sent to you by some large government bureaucracy? How about living in a van down by the river, eating government cheese? Well, my friend, do we have the program for you.

The program is called “Fail 101” It is a simple, four step program even you can follow. It is fast and effective. Plus, it is easy to learn. Best of all, you can start applying the program in your own life today! So, are you ready? Are you excited? Alright then, let’s get started by taking a look at the first step of this amazing program.


Step #1: Life totally and completely outside your means

This step is so easy. Simply fail to save any money. That’s right, spend every penny you earn on living the good life today. Do you want to own something you just have to have right now? Well, what are you waiting for? Go buy it! After all, it is yours to be had, so why not just have it? The important thing here is to stay in line with the average American who currently saves less than 1% of his or her personal disposable income. Any money you save above 1% is money that you could have spent. So, go spend it.

Now, to do Step #1 the right way, let me let you in on a little secret: Once you have spent all your income such that you have saved next to nothing, simply borrow money from others so that you can spend even more. At first, borrowing money from others might sound a little challenging. After all, the average American is out there in the economy spending almost every last dime he or she has, so they have no money to lend to you. Well, thankfully, there are companies out there that will give you a little plastic card called a “credit card” that allows you to borrow money from them whenever and wherever you want to spend their money. Just take that little card everywhere you go and charge it up. Don’t worry too much about paying back what you borrowed — you’ve got all the time in the world to do that.

If you are lucky, some credit card companies will allow you to borrow money from them for only 18.9% interest and an $85 fee per year. Importantly, be sure to allow the interest charges to roll over from month to month, year after year after year. Let those compounding interest charges work their magic on you. Still, be careful. You only want to charge up your credit card on things that have little to no lasting value after you have paid for them. Services like restaurant dining, airplane travel and professional dry cleaning are safe bets here. You do not want to buy anything that might increase your personal wealth  the value of what you own minus the value of what you owe. Buying and accumulating items that increase your wealth only delays your reaching the pinnacle of this very special program: bankruptcy.

Bankruptcy occurs when you borrow so much money from others that you cannot go out and earn enough money or pawn enough things you own to pay it all back. In 2006, over 2.0 million Americans reached this pinnacle by filing personal bankruptcy. That is what you and Step #1 are all about: doing exactly what many Americans do, spending all the income you earn plus spending the money you borrow from credit card companies to maintain a certain lifestyle you want to live before you can truly afford to live it. It is an excellent way to fail financially.


Step #2: Fail to Maximize Your Earning Power

Be sure to keep your income low. Earning too large of an income only delays your need to borrow from others to outspend your own means. After all, if you make too much money, you might run out of month to spend it all. In that case, you would have to put the remaining money into savings and defer the gratification of spending it all today. This behavior runs counter to the spirit and intent of the program.

To keep your income low, avoid asking for raises at work or switching jobs
to land a higher salary. If you must ask for a
raise, try to give your boss little reason for doing so. For example, do not go into your boss’ office with a list of new responsibilities that you would be willing to take on to the benefit of the company in exchange for a higher salary. Instead, go into your employee performance review with clear evidence that you merely did what you agreed you would do as part of your employment agreement when you joined the company. Then, defiantly demand a raise without offering to contribute anything beyond what you are currently doing for the company. That should keep the raise to a modest level.

Whatever you do, don’t go off and start to generate a second income from your own business that you start in your spare time. The last thing you want to do is have your own business on the side grow so large that you are making more money from it than you are from your current job. After all, why try to make extra money on the side when you can just borrow the money you need from the credit card companies?

Step #3: Always pay the federal government first

Another counter-productive aspect to starting your own business is that it only reduces and delays your income tax payments to the U.S. federal government. When you own your own business, you only pay income taxes on your profits –€“ the amount left over from your sales after you have paid out all of your expenses related to running your business. Since your business’ profits will always be less than its sales, you will always pay income taxes based on a smaller dollar amount.

In contrast, when you work as an employee, you pay income taxes directly on your full salary or wages –€“ in effect, your “sales” from selling your personal time to your employer… before any related expenses reduce what you pay in income taxes. That way, you will always pay income taxes based on a larger dollar amount. Plus, the U.S. federal government requires your employer to take out your income taxes from your pay check before you can get your hands on your own hard-earned money. Now, that is convenience!

Finally, as an employee, more of the money you earn goes to the politicians in Washington, D.C. This makes sense: career politicians earning six-figure salaries in our nation’s capitol can spend your money much faster than you could ever spend it yourself. It is simply more efficient to give these politicians your money up front. Otherwise, you might be tempted to go out and spend your money on things to improve your own life instead of giving your money to federal politicians for society’s “greater good”. After all, the politicians in Washington, D.C. feel confident that they know how to spend your hard-earned dollars better than you do. Some examples include, but are not limited to, the failed “War on Poverty”€, the failed “War on Drugs”€, the perpetually bankrupt Amtrak rail service, and other pork barrel projects and federal bureaucracies of little or no value to American society.

Step #4 Don’t contribute to a retirement fund

It would be a shame if you came this far and screwed everything up by accidentally contributing to a 401k because then you might have money at retirement. Whats worse is that it allows you to retire at all. This is totally counter productive to the program and should be avoided.  The only way to ensure that you work until you die is to make sure there is nothing to retire on.

Live to fail, fail to live

Even you can follow this easy, four step program. In fact, if you think about it, you may be following this program already. How can you tell? Check your savings account balance –€“ how much money do you have tucked away for emergencies and investing? Count the number of credit cards you have  when will you have the balance on each of them paid off? Take a look at your job  when was the last time you asked for an increase in your salary or wages in exchange for an increase in responsibility? Hows your 401k, what are you on track to have at age 60?  Finally, look at your most recent pay stub  do the politicians and government programs in Washington, D.C. really deserve so large a chunk of the money you rightfully earn each month before you can even get your hands on it? If your answers to these questions lead you to feel that you are living a life that you cannot yet afford to live, that you are failing to maximize your earning potential, and that you have no retirement savings, you may be part of our get-poor-quick program already.

Nevertheless, is our program right for you? Indeed, it is not for everyone. Some people do not like being poor. Others simply wish they had a lot more money than they do now. How about you? Would you prefer to have more money than you do now? Would you like to be rich beyond your wildest dreams? If so, you are in luck — you live in the United States of America, the richest country in the history of the world. Unlike in most other countries, opportunities for the average person to get rich are plentiful in America. Real-life, rags-to-riches stories abound. Moreover, financial freedom is a marvelous reality for literally millions of people in America. It could be your reality too.


Or you could not follow our program…

Whats that? You want to succeed? Well then, here is a tip: stop following our get-poor-quick program immediately. Stop living a lifestyle you cannot yet afford to live –€“ cut back on your expenses; save the difference; pay off your debts; invest and hold your money in sound, reasonable investments for the long term. Stop failing to maximize your earning potential –€“ ask for more responsibility at work in exchange for higher pay. Do what it takes to increase the amount of money you bring into your household every month. Try to avoid paying the politicians in Washington, D.C. first –€“ contribute to your 401(k) or comparable retirement program at work that reduces your taxable income today and builds up a portfolio of investments on which you can live later in life. Start that small, profitable business on the side that, unlike a job, enables you to pay taxes on net profits, not gross sales. Write your state’€™s elected officials in the U.S. Senate and the U.S. House of Representatives and tell them you want them to stop wasting so much taxpayer money on unnecessary federal programs so that the budget necessary to run a smaller federal government and the significant taxes they take out of your paycheck every pay period can go down — way, way down. After all, your elected officials in Washington, D.C. are there to serve you, not the other way around.

As you stop following my get-poor-quick program, you will see and feel changes in your financial situation. You will see less and less of your hard-earned money going out of your pockets and checking account to be spent on frivolous services and items of little long-term value. You will see more money coming into your household from better pay at work and from the profits of your small, on-the-side business. You will see your credit card balances and car loan balances decrease quickly, all the way down to zero. You will see less and less of your hard-earned money separated from you in the form of federal income taxes. You will see your savings and investment account balances grow nicely, bringing you long-term wealth, stability, and comfort. You will feel infinitely more confident and secure about your financial station in life. You will feel happy and extremely proud of what you have accomplished financially for you and those you love. Plus, you will be rich… a little older perhaps…but rich all the same

Why I don’t give a damn about the environment

Monday, March 24th, 2008

I am writing this in response to this article entitled “Why Dont more Americans give a damn about the environment.”  Actually I should have titled this article “Why I dont give a damn about people telling me to give more of a damn about the environment” but then, thats not nearly as hooky is it?

Now, the truth is I love The Dough Roller, so before anyone gets too upset Ill preface with that….but now it is time to be a hardass devil’s advocate.

I hate to interrupt the touchy feely America hating, green loving fest but I have some news, America is headed in the right direction, and most of the world is not.  Many American businesses are voluntarily doing things to help …I remember when working at HP the amount of time and money that went into computer recycling.

Whoa wait, America consumes <numbers about what we consume> and pollutes <numbers about polluting>! but the truth is Americans as a whole are actually becoming greener and greener.

In 2006, total U.S. greenhouse gas emissions were 7,201.9 Tg CO2 Eq. Overall, total U.S. emissions have risen by 14.1 percent from 1990 to 2006, while the U.S. gross domestic product has increased by 59 percent over the same period (BEA 2007). Emissions fell from 2005 to 2006, decreasing by 1.5 percent (111.8 Tg CO2 Eq.).  All of this while global warming is suddenly in question again because it is now cooling, and the polar ice caps that had melted regrew this year.

China on the other hand is rapidly increasing its CO2 emissions as well as other pollutants.  India is doing the same.  I have been a couple hands worth of European countries and guess what: a lot of them are a lot less concerned about doing environmentally sound things than we are here, the difference is often overlooked:

America is a big space with less people and we have the ability to spend more resources than anywhere else in the world.  It boils down to that.  A lot of individuals in places in Europe, if they could drive SUVs and live in 5000 SQ foot houses, would.  For trucks to bring food to Colorado from the coasts, they have to drive a LONG way.

The truth of it is, many Americans are trying very hard to be green but still enjoy a nice standard of living.

Its true there are problems.  I do believe the oil industry has stifled alternative technologies for many years now and I do believe many people are much too wasteful. My family owned a solar business and my dad went out of business due to oil companies lobbying against the solar industry.  I have no love for them, nor our dependence on oil, nor our production of CO2 or pollution.

On the other hand, all of the talk about Americans being the least caring, etc…  Much of it has been used to advance political agendas from George Bush hopping on the bandwagon to Al Gore who, despite his famous movie and prize he got lives in two properties: a 10,000-square-foot, 20-room, eight-bathroom home in Nashville, and a 4,000-square-foot home in Arlington, Va. (He also has a third home in Carthage, Tenn.) while flying around in a private jet. AND according to public records, there is no evidence that Gore has signed up to use green energy in either of his large residences.

Here is what it boils down to: I have faith in all of you that you are being green, while remaining economically sound.  Do not do things that will put your finances in jeopardy if you cannot afford it.  While putting up solar panels would be great, if it will damage you financially, wait until you can afford it.

For those who are steaming angry right now, I have some bad news if you are wanting to flame me about my selfish environment killing self: I live in 1400 sq foot house, and my water is heated by two large water drainback solar collectors (designed by my father who owned a solar business).  My bulbs are all CFLs, I ride a 60 mpg motorcycle in the summer, and my yard is filled with four 75 foot trees, as well as 3 pines, 1 crab apple, 2 maples, 1 green apple and a bunch of bushes and I recycle.  I will even include a google maps picture below:

jesses house

Recession proof your 401k? Forget that, recession proof your life…and learn my golden rule.

Thursday, February 14th, 2008

How many articles have I seen in the past month about how to recession proof your 401k? I can think of a couple on MSN, and a bunch on random blogs. Apologies to any of my bloggy friends if you have written on it. Actually I can understand the feelings of panic people are having over 401k, especially those getting ready to retire. If you are getting ready to retire, you can pretty much disregard this article. If not, read on for recession proofing your life, something much more important than worrying just about your 401k….

So I am opening with a disclaimer: I STILL DONT THINK WE SHOULD PANIC OVER RECESSION. Come on people, wheres the widespread unemployment, we are in a frigging correction, not a recession. Though things could get nasty if the fed keeps cutting rates. Inflation is much scarier than a correction. But I digress. But assuming you are scared of the recession, lets look at the effects and how to protect yourself from them:

First what is a recession?

­A recession is a prolonged period of time when a nation’s economy is slowing down, or contracting. Such a slow-down is characterized by a number of different trends, including:

-People buying less stuff
-Decrease in factory production
-Growing unemployment
-Slump in personal income and salary growth
-Stock Market goes down/doesnt grow

Mind you all of this has to happen for 6 months straight to be considered a recession. Now lets see what you should do to your life to handle ICOR (In Case Of Recession)… I just made up that acronym, but I like it so tell your friends and when they don’t know what you are talking about, tell them “What, you don’t know what to do ICOR? In Case of Recession?” And then tell them to visit my site.

Before we go into specifics here is the golden rule: It is not your duty, your responsibility or any other word that implies obligation to SPEND to help the economy recover. Let me repeat that. It is NOT your duty to spend money or acquire debt to help the economy.

1) Make sure you have an emergency fund.
You should have an emergency fund anyway. Start with one month’s worth of expenses and work up to two months worth. Then three months. If you have a family, up it to five to six months if possible. If you’re young and single, or a young couple you can probably find ways to work bizzare/crappy jobs with crappy hours to make ends meet in a worst case scenario. If you have kids, obviously you need to be extra careful because you want to make sure they have stability, shelter, you present as much as possible and have good food. If you have dogs, they will probably eat anything so no problems there.

2) Work harder, work faster, work smarter
This is by far the most important thing to recession proof your life. If you master this one, the rest of them wont matter. If there is a downturn in the job market, employers for the most part are looking to trim the fat, though there are exceptions. Ask yourself, if I were a food to fuel my company, would I be kobe beef or a chunk of spam? So how do you improve? Get involved in more things that are core to your company. Outlying projects can be cut, so too can people working on them. Get yourself into a position where you are generating revenue for your company. Work IN the office. Network with people. Update your resume. This should probably be its own article.

3) Take advantage of the lower interest rates
Refinance, then instead of paying the lower amount due every month, keep paying the same amount and shrink that debt down or use it to grow your emergency fund. The less you owe in principal per month the less your payments will be.

4) Be Frugal
Do I really have to say it again?

5) Look for great bargains
If you are having to do something like buy a house, chances are you can get away with offering much much less than you otherwise could. If you have to buy something, be strategic about it.

6) If you are investing do NOT try to cash out
Trying to time the market is dumb. There are is 50% chance of being wrong each time. I don’t care how much research you did. Im not saying you shouldn’t be strategic but playing stock trader during sketchy times is a bad idea.

7) Keep building your 401k/IRA, DONT panic
Unless you are close to retirement, a downturn in the market just means you can buy cheaper. If you are really worried, mix in some (more)bonds. When the market’s at the bottom, buy buy buy.

When personal finance blogs go bad…and why capital gains tax is your enemy

Friday, February 1st, 2008

I recently read an article on Advanced Personal Finance and though I have been reading him for quite a while and I like a lot of his articles, I wanted to pull my hair our when I read his article on Phantom Capital Gains. For a quick background on what he was talking about I will paste his first paragraph as he does a good job of explaining it:

Phantom capital gains
The term ‘phantom capital gains’ refers to the fact that when you sell appreciated assets (e.g. stocks), you pay capital gains tax based on your basis (the price you paid for them whenever you bought them). Since then inflation has likely eroded the buying power of the dollar. So now that you’re selling them, the cash proceeds you receive are worth less in ‘real’ terms. You must pay taxes on any gains, regardless of that gain’s real buying power. With me so far?

Rudy Giuliani and other anti-tax advocates think people should not be taxed on the full nominal amount of those capital gains. In Giuliani’s plan, the capital gains that are subject to taxation would be indexed for inflation.

Great explanation, I love it and I actually did not know that was part of Giuliana’s plan. So I read on.

…So who would benefit from an indexing of capital gains to inflation? Drum roll please. Not surprisingly, the wealthy will be the overwhelming winners if a plan like Giuliani’s becomes law. Doing something like this is the opposite of progress, to me. It increases rather than decreases wealth inequality.”

Uh oh. Though I find it admirable that APF personally wants to help people with less invested in the market than himself, I find it immoral to take more away from people who are planning for the future and have taken control of their financial life.

Capital Gains taxes drag the economy down

More and more people are realizing that social security is not something to bank on and are investing in their future themselves. Aside from that, one of the great things about America is that generating wealth is available to anyone, its not just the rich investing in the stock market anymore. Though you can debate the morality of the top 1% holding so much wealth, it makes no sense to do something just to punish them that might also hurt the middle class. Those that take the time to manage their finances WILL come out ahead. And if you are reading this right now, that is YOU. Remember there is nothing immoral about increasing your wealth, eliminating your debt, and taking advantage of the country you live in.

The long short of it is: capital gains is your enemy here…and not just for those reasons.

Reducing Capital Gains taxes would bolster the economy by encouraging invest­ment in promising enterprises and by making div­idend payments to stockholders more attractive to companies. Dividend payouts allow companies to reward shareholders in a way other than just trying to focus on increasing the stock price.