Wealth VS Rich and How Can I Get Some?

How does one become wealthy?  How do you create wealth?

Not just rich but wealthy.  There’s a big difference, as only the great Chris Rock can explain.  Simply put, there’re a lot of rich people running around in the world but wealthy people, there’s only a few thousand of those in the world.

Sports stars are rich.  I do mean STARS, like Manning, Brady (whose wife makes more than he does per year and has a longer earnings period), Jordan, Kobe, Shaq, Lebron, A-Rod, Verlander, Messi, Ronaldo, etc.  These are the athletes that are truly rich.  Rich as in, their families will be taken care of long time after they retire. 

Presidents are rich.  Some before taking office but most earn their money after they are president.  Through speaking engagements and use of their name alone will get them multi million dollar deals per year. 

Most CEO’s these days are rich.  The income gap between what the average worker makes and the heads of the company they work for grows each year.  Some are in charge of old companies like Bob Iger of Disney or Alan Mulally of Ford and some are upstart kids like Facebook CEO Mark Zuckerberg.  All these guys are rich.  Some are “super” rich. 

Wealthy is a whole other bracket.  Take the Guggenheim Partners.  They just recently bought the Los Angeles Dodgers for 2.15 BILLION dollars.  They’re a firm that manages over 125 Billion in assets.  Wealthy is being able to drop a billion dollars in cash and it not affecting you.

Bill Gates is wealthy, duh…but follow my train of thought.  When you’ve got a company whose products (in some manner) are in 80-90% of American homes, you’re wealthy.  

The Mars Family.  Yes, even something as simple as candy can be the start of an empire.  Why invest in oil or real estate when there is a holiday dedicated to buying and handing out candy?  Halloween, Valentine's Day, Christmas, Easter, etc.  I can't think of a holiday where candy hasn't wedged itself into.  The three Mars family members that are listed on the Forbes 100, are each said to be worth 17 billion.  Each.

When you’re trying to get a table at an exclusive restaurant and they say they’re all booked so you go and give the maitre d’ a blank check and tell him that you just bought the BUILDING, that’s wealth!  Wait…I think that was Bruce Wayne in a Batman movie.  Before I move on, can someone please tell me how Bruce Wayne became so rich?  His dad was a doctor.  Even the best doctors only make a million or so a year.  Thomas Wayne also dabbled in city planning (as doctors usually do) but that alone couldn’t have made him “F-U” money.  Did Bruce’s parent foresee a tragic death for themselves and have the most profitable life insurance policy ever?  The Wayne family seemed to have a long history of only-children which would to avoid diluting the Wayne fortune between siblings.  Somehow I became obsessed with this question and here’s how the Wayne Family is so rich.  I still question the continued viability of Wayne Enterprises.  Bruce Wayne’s “project” of being Batman must hemorrhage money, but yet the company seems as strong as ever.  I’ll leave this for my comic book blog to address…

Anyway, what was the question again; oh yes “How Does One Become Wealthy?”  It’s actually pretty simple.  While rich can be a crap shoot of the genetic lottery (where as you’re the best basketball player in the world) or you come up with an idea that will revolutionize society (create an app or website like Facebook or Twitter); rich can be obtained with a little hard work and a lot of luck.  Wealth is much easier but alas, harder to obtain.  All it takes to become wealthy is Time and Patience.  That’s why most wealth or wealthy people come from “old money”. 

The best and quickest example of this comes from Indiana Jones and the Raiders of the Los Ark, said by Belloq “Look at this. [holds out a pocket watch.] It's worthless. Ten dollars from a vendor in the street. But I take it, I bury it in the sand for a thousand years, it becomes priceless...like the Ark. Men will kill for it.”

If you have Time and Patience you can turn the simplest of things into wealth.  The trick is usually having a bit of money to start with.  The following is a story that was told to me about how a man became wealthy.  All it took was a little bit of knowledge, a little bit of money and then the patience to wait over time which caused him to be extremely wealthy (Keep in mind inflation / worth of money at the time of this story and that this wasn’t the sole investment this guy made.  It’s an example of a wealthy decision.).

During the real estate crash of the late 1980’s / early 1990’s there were more smaller / individual / local banks which held the mortgages against people’s homes.  Now a days this probably wouldn’t happen because 1) banks don’t hold mortgages any longer, they’re mostly packaged in groups and sold on Wall Street as investment instruments, or 2) banks that do hold mortgages are so big, there wouldn’t be a way to go to them with this proposition nor would one person have the power to sign off on this type of plan.  In the crash of the 90’s here’s what one man did.

This investor had connections with a local bank.  The investor was talking to the manager of the bank.  Over the course of their conversation the bank manager told the investor about all the loans that they had which were either “under water” or the borrowers weren’t paying their mortgage.  To the bank, these were toxic assets.  The investor shrewdly saw an opportunity.  The investor inquired to see if the bank was willing to sell him the NOTE on these properties for a discounted amount.  The bank, who saw that the borrowers weren’t making the payments or they were going to have to go through costly foreclosures proceedings, said sure.  They’d sell these “worthless” notes for pennies on the dollar.  So the investor said, “How much can I get for $100,000?”  The manager took him to the basement and said, “For $100,000, take whatever you can carry.”  The investor reviewed a few of the boxes of NOTES.  He didn’t take much time actually going through each file but got a good sense of what these were.  Many of the NOTES were from local houses here in Los Angeles and so he grabbed a few boxes and the sale was complete.  The bank got some capital back and the investor had ownership of these “worthless” NOTES. 

This is where time and patience kicks in.  The investor went through each of the files.  He contacted each borrower.  Some had abandoned the property and some were truly just junk.  There would be some foreclosure proceedings that he’d farm out to companies that handled that type of business and even on the ones that were junk, he didn’t loose too much money on them considering the overall cost.  But the ones he made contact with, he spoke to the borrowers to see what they had planned.  He wanted to find out if these were borrowers who fell on hard times or maybe if these were properties that lost value and to the current owners it wasn’t worth paying the mortgage.  This is when the investor started to play the long game.  He’d already spent the $100,000 to acquire what was between $3 - $5 million in face value of the notes so he wasn’t loosing any additional money.  He didn’t have shareholders to report to so whether the loans performed at a certain rate and time, it didn’t matter.  He told the borrowers to forget making payments.  He told them to not worry about the payments for now, but he’d keep track of the interest that accrued.  He told them to live in the house.  Take care of it.  They were still the owners.  When it came time to sell, that’s when he’d collect at the full face value of the NOTE and include all the interest that accrued over time.

Knowing that real estate will always go up in value over time (especially Los Angeles), the investor knew that one day the properties would regain their previous value.  He also knew that not everyone was trying to “scam” the lenders but the economy was in recession.  People would eventually find jobs and life would get better.  Many would want to move to other homes.  In the meantime, if the borrowers lived in a home that they still owned they’d take care of the home more than if they rented the home or it sat vacant.

Sure enough, the economy turned.  Home values went up.  People either refinanced or sold their homes and that’s when the investor cashed in.  Multi-thousand-dollar (50 – 200k) NOTES that he paid $500, $1,000 or maybe even $5,000 for, eventually were paid back in full and with the accrued interest.  With these kinds of profits, only one out of ten needed to pay off.  I assure you his record was better than that.  From just one $100,000 investment the investor would never have to work again in his life.  All it took was time and patience.

Why tell this story?  Turning 100k into a few million, albeit impressive, how is that “wealthy”?  Mainly because this is a story on how one becomes wealthy.  It’s a mindset and a way of looking at the world.  As I said in the beginning, rich is hard work and luck.  Wealth is something more.  Wealth is something greater.  A few million is not by itself a wealthy man made.  To turn a profit of over 100 times the starting cost, that’s wealth.  The investor barely lifted a finger or broke his back creating this wealth.  The luck needed was minimal.  If you consider what all the outcomes could have been, there wasn’t much luck at all.  Property values always go up.  People take care of things if they own it.  Seeing the economy over the long term and knowing that hard times don’t last forever.  These are all things that the wealthy consider when making their moves.

I remember when I first started doing a little stock trading in the early 2000’s.  This was right before the internet bubble crashed.  While I was trying to learn about what tech stock would make me the quickest profit, I would read about Warren Buffett and Berkshire Hathaway.  There were articles written about him and about his aversion to investing in these internet startups that promised to make people into millionaires.  He was described as a dinosaur that would soon die out in this new technology age.  Needless to say, while I and untold thousands of investors lost billions of dollars on tech stocks, Berkshire Hathaway value has quadrupled in the last 13 years while it’s hard to find a tech startup stock that’s either in business or worth a fraction of their all time high value.  Don’t be confused about a 4x improvement.  This is a stock that was at $45,000 per share and now sits at about $167,000 per share.  It’s not a penny stock that went from a $.50 to $2 based on “good news”. 

To become rich, you’ve got to work for your money.  When you’re wealthy, you’re money works for you.

Is It Time to Refinance or Purchase?

Yes. Refinance now. Don’t be a dummy. With rates averaging around 3.5 – 4% on 30 year fixed money, you’d be a fool not to take it.

This is not an advertisement for anyone to refi, well I guess in a way it is. Seriously, rates are so low that you’re basically getting free money. After conversations with my well respected friends and clients (not just the bums I drink and hang out with) and researching where the markets might go this year and the near future, now is the time to do something.

Forget all the technical talk. Rates are so low in comparison to any time in the last 30+ years. Here’s a basic graph that I pulled just to show what I mean:

There are far more technical graphs around, feel free to search them out, but you’ll find the same information.


To get a rate that’s below 4% is historically impossible, especially for a 30 year fixed loan. This is money that is locked in and will be a close to free as you’re going to get. God forbid rates get lower, you can always refi again. This is cheap money and I’ll debate anyone who wants to argue the merits of waiting.


2013 is going to be a defining time when it comes to politics and economics crossing paths. The country, and the world, is trying to figure out how to come out of this depression we’ve just gone through (and could easily fall in again). Our country’s politics have never changed so quickly and have never been so easily seen. The 2012 elections and analytical data clearly shows where voters are headed and which voting blocks are growing, which are shrinking and what the future generations believe in. By that I mean, we’ve got a Republican base that’s loosing its traditional footholds to a Democratic majority. Clearly, not every issue is the same but a shift is happening right before our eyes.


Again, I can have hours of debate and write pages of why and what both the Dems and GOP are doing to create this shift. Eventually the gridlock in Washington will stop and the country will start to head into a direction (trying to stay non-partisan but facts are facts and we will be going into “a” direction). As both the economy and politics of the day move forward, so will rates. Take advantage of these rates.


It might seem hard to make any payments. (Trust me; I know from personal experience that we’re living in hard times and every dollar counts.) But if you can make it through this rough patch and come out with a house, owner occupied or non-owner occupied, with rates at 3, 3.5, 4 or even 4.5% you will have set yourself up for success in the future.


No one has a crystal ball, but reality tells us that values will go back up and inflation (of some kind) will kick in. A $1,000 payment now will seem a lot less in five to ten years. So take the plunge and refinance or buy your properties now. You’ll be glad you did.

Between Gods and ATMs...

Those are some brave bastards over at Moody’s…

Just the other day I was consulting with a Rabbi. No, don’t jump out a window or think that someone has taken over me or this blog. He’s a client of mine.

As I was saying, I was TALKING to this Rabbi and we were joking around. I’m working on the third of three loans for him over the past year. All of which have been with Wells Fargo. I won’t bore you with tons of details but let’s just say that each loan has been harder to get than the next.

Why? That’s a good question. Nothing has changed with the Rabbi’s / borrower’s credit, income or assets. All that has happened is time. Time has gone by. With time, lenders get a chance to make changes. Sometimes the changes are good and sometimes the changes are bad. An average person who glances at the news, would think, “Hey, I bet they’ve made it easier for people to get loans.” Sure, why not? It’s an election year. Both sides of the isle want to be seen as fighting for the little guy. I’ve read a lot of great (and bad) ideas tossed around, claimed that they’re being pushed forward or mandated into affect. FHA streamlines, HARP, HARP 2.0, HAMP, Freddie / Fannie relief programs, etc. These all sound great and have some great guidelines AND you’d think what would be any risk to the lenders since these all seem to be backed by the government.

Guess what, the BANKS WILL ONLY DO WHAT THE BANKS WANT TO DO. They don’t care what programs come out. “Oh, you think you qualify for the 115% CLTV program, guess what we only do that on loans we originally underwrote. What? You originally got your loan through one of the 200+ banks that have gone under like WaMu or Indymac or Countrywide? I’m sorry, you’re going to have to fuck off.” Actually I made up the fuck off part. They don’t even give you that personal decency. They just say no. Or how about the lenders like Chase, Bank of America or CITIbank who have either discontinued or shrunk their wholesale down so low, they really don’t have a wholesale option. If you thought that independent mortgage brokers where bad, wait until you get a taste of glorified tellers trying to take a loan app and fighting frivolous conditions. They wouldn’t know what a 4506t is from 1120’s are? How about the use of rental in come on exiting properties or cash out / value seasoning on new purchases?

Back to my Rabbi story, we only have one condition left. Wells Fargo never asked for this condition before on the other two loans but now they find it so pressing that the loan has been held up for weeks working on this. I can’t get into details but let’s just say, it doesn’t matter. The question / condition doesn’t have any bearing on the borrower’s ability to pay the loan back, question the quality of the borrower, affect the value of the property, change the borrower’s income in any way. We’ve even shown that this is how the borrower has been conduction transactions for the past 3 years. And again, THEY DIDN’T ASK FOR IT THE LAST TWO LOANS that where done within this year.

So I ask the Rabbi, how about a little good word with the man up above just to get us moved along. To my dismay, he said it doesn’t work like that. Besides, the banks only think they’re god.

That’s been stuck in my head. Same as how which ever brave sole was the person at Moody’s who dared to allow a downgrade in the ratings of 15 major banks, will have an ice pick mysteriously stuck in their skull.

Maybe banks are the new gods. First off, there’s actual proof of the person / people who run the bank. For instance, I could actually touch and see Jamie Dimon, head of Chase. Hell we don’t even get visions of Christ on things anymore, a smear of butter on toast which looks like Tim Teebow has taken that racket over. Secondly, BANKS DO WHAT THEY WANT TO DO and what's best for THEM.

Sure the new HARP 2.0 says you can go unlimited CLTV, which means you have to call up the investor on your second to see if they are willing to subordinate to a 150 – 200 – 200+%? Yeah, that sounds like a bank, let me say yes to extending credit to something where we have no equity percentage (actually that does sound like a bank, only they usually save that for millionaire business).

Including the Rabbi’s loan, I’ve got three or four other loans that are all clear of conditions except one stupid thing. They have the insurance but it needs to have the new bank’s name on it as the loss payee first, which should be illegal because in the few days that this is switched technically if the house burns down the lender loss payee is incorrect, but why get into technicalities. How about another loan that the borrower is worth millions and makes millions and has other loans with this lender but they want to have the quarterly filings of the borrower’s business, even though I’ve given them the tax extension form. If I had quarterly filings, I’d have the damn tax returns. So I give them a P & L for 2011 and even through the first quarter of 2012 but now they want a Balance sheet. I gave them one for the current year, but no, they need one that coincides with the 2011 P & L. And don’t forget this charmer, they now need every page of any bank account listed. If it says 1 of 50, they want all 50 pages. I’m sure those boiler plate pages are what is causing all the fraud in this business. Or better yet, the pages that say, “This page is intentionally left blank.”

This is how I feel by the end of the day. I don’t wonder why anyone in this business doesn’t kill themselves; I wonder why it doesn’t happen more!

Back to Dimon for a second, why are we even wasting our time with him? Congress loves nothing more to make it seem like it’s doing something. Meanwhile if you watch this charade, these government officials are kissing his ass so hard, I’m surprised they don’t make gay porn out of it. Dimon is in charge of a bank that is now one of the largest institutions in the world and was credited for not making the same “bad choices” that these other banks had made. Meanwhile he was brought to share with the world the reasons that Chase has lost (not misplaced and will find again, gone) 2 BILLION – 7 BILLION dollars of their clients money. And he’s the “best” of them!!!!!! Before each committee member starts to ask questions, they address him like he’s god’s gift to banking. He’s just lost 2 BILLION dollars. A monkey with a dart board couldn’t screw up that bad. What’s worse is that they’re not telling him what to do, they’re ASKING him what his thoughts are on what went wrong and what laws / regulations should be in place to prevent such catastrophic losses.

Just to give you an idea, 2 Billion divided by 365 days is a loss of $5,479,452.06 per day. Let’s be generous. Loosing 2 Billion can’t be that easy, let’s divide that over five years and that comes out to be a loss of 1,095,890.41 per day. PER DAY. For five years. If Chase just gave that money to people, you’d have 1,825 millionaires.

To watch these elected officials, who most have no clue on what finance is, kneel down and cater to this guy makes me sick. Why are we even wasting the time and effort bringing guys like this to Washington? It’s like the baseball players that where suspected of using steroids. We didn’t learn anything that we didn’t already know. In fact, most of these players got themselves in more trouble by going. Anyone remember a finger waging Palmero saying he’d never used steroids, only a month later be caught using steroids?

Are banks the new gods? Have all the Rabbis, Priests and Clerics been supplanted by Tellers, Executives and CEOs? It sure seems like it. The government won’t do anything before it factors in the “cost” of its actions. “What will this mean in China / Europe?” No one really cares what China or Europe think, they just want to know what will happen to their respective economies and in return our economy.

North Korea and Iran represent a bigger threat to our country than any other combined factions. Why not just annihilate them? It’s not like we haven’t invaded other countries on less, for less? Because China wouldn’t be happy. Maybe they wouldn’t invest in our country or let us invest in their skilled slave labor force. We could go to Africa, they’ve got poverty all around but they’ve also got uncontrollable Warlords running things around there. Besides, their people aren’t skilled or live in huge governmentally built and funded cities. If the price is the same, investors will always go with the easier to control workforce.

Before I get too far off topic, you want to know a secret.

SHHHHHHH, come closer….

But you can’t tell anyone…..

The Chinese have no choice but to invest and deal with us. That’s what’s so funny!! We don’t even see it.

Oh, yeah, what are you going to do China? Invest in Greece? How about Spain? The Euro was a half hearted idea that works well when times are good but to have no real governing body or control over the different countries, it’s set up for disaster. Good luck Euro Zone over the next 10 years. You think our depression is bad? Our workers don’t take 2 hour siestas in the middle of the day as a part of our culture. You ever heard of a hard working Greek, other than ones that have immigrated to the USA. The Spartans are dead my friends.

We’ll skip over Africa because… really do I have to go into that again?

Russia? “You don’t see piranhas eating other piranhas?” – Rounders, great movie.

So what’s left? South America. Yeah that sounds like a place I should invest my money. With rigged elections and corrupt regimes whose main exports are Coffee, Cocaine and migrant workers? There’s some promise in that but you’re not betting on a strong horse.

The only thing they can do is continue to work with the USA. Now I’m starting to get way off track. Let’s circle this one for a landing.

We saw an extremely brave maneuver by Moody’s today. By downgrading the banks, not only has Moody become target #1 but also probably something that people will soon find or hear is irrelevant. The only prayer anyone is going to hear is the one from when Moody’s wakes up and finds the head of their dead president at the foot of their silk sheeted bed. And the banks will be saying, “Who’s your god now?”

Space and Beyond

Listening to the GOP debates and now the back and forth between the candidates can make ones mind numb. Especially since the two main runners are Romney and Newt (yes I feel that Gingrich has made it to the status of a one name superstar). I could go on forever talking about politics and what I feel about each candidate but there was something said today that reconfirms a mindset that I just can't agree with.

Maybe it's a generational thing. Maybe it's my love for sci-fi. Maybe it's my hope that the world can be a better place and one day the people of earth will see that, like it or not, we are ALL from the same planet.

Newt stated that "in his second term as as president there will be a permanent settlement on the moon, and it will be American".

Avoiding the absurdness of the fact that Newt would have a second term as president, I'm more concerned about this American settlement on the moon. Whether or not we actually NEED this settlement is a different debate that time will tell. What disturbs me is that if we get to the advanced state as to be able to have this permanent settlement and could leave our home rock, Earth, is that we'd still be saddled with antiquated ideals that have held our world apart for at least the last 5000+ years.

I am and always will be a true red, white and blue American. But I also see that our world has become much smaller over the past few decades as technology has brought people from all over the world together. It's amazing to me that in seconds I could be online with people from all over the world. I could jump onto my Xbox and be playing Gears of War with someone from NYC or London or even Iran or China.

I truly believe that as the world becomes smaller, old school war will become a thing of the past. I don't ever think we will have a conflict on the scale and scope of World War 2. We knew very little of what Germany was doing in early 1930. The average person couldn't tell you what countries or providences made up the USSR in the 70's and 80's. Compare that to now, we know when there's the slightest unrest in the middle of an African desert. We might not do anything about it but we know. Twitter and Facebook can topple a corupt regime in Egypt at the same time a lonely man in Calabasas downloads what would normally be illegal porn from his office computer... I mean check soccer scores from the EPL (that's right, whew that was close). Anyway, my point being the world is a much smaller place. I could understand hiding under your desk at school due to the threat of a nuclear attack from a nameless / faceless enemy, but would I go to war with Han from Korea that I play video games with online and who sends me bootleg movies?

How does all this fit into an economic blog? Well, because like it or not, we're in an world economy now. On a day to day basis we feel the affects of what happens in Europe and Asia. We've got 24 hour economic news channels. I can trade stocks all over the world from my iPhone at any time of day. If anything is going to bring the world together it's going to be money.

To have a permanent fixture on the moon would take a massive amount of money. It would also be tremendously risky. What any shrewd person would tell you would be to bring in different groups and spread the risk out. I'd hope that we'd also bring in the best and brightest for such an endeavor and that would mean bringing together people from where ever they may be from.

This is the next step of exploration not just to see who can plant a flag first. The moon already has an American flag. Does that mean we own it? I don't think so. Besides, unfortunately and sadly a corporation will probably claim or be given ownership over anything new that is discovered. More than likely it will be a multi national corporation.

To think that a man who is running for president wants the USA to own the moon scares me. What are we going to do with the moon when we can't even fix the problems we have at home? Or maybe he's thinking of a good place to divorce his 3rd wife and leave her on this moon settlement.

We've learn from the past, that to become great we must work together. A massive undertaking, like living on the moon, is going to take a joint venture. As we are becoming one economy and one society, we certainly shouldn't forget our roots and heritage, but we should put aside old xenophobic fears accept that we need to work together. Instead of an American settlement we should have a human settlement. Believe me, when the aliens come to take us over as slaves or steal Earth's natural resources (the ones we haven't polluted) they won't care which part of the rock we're from.

Lenders / Banks passing the buck.

Well it’s 2012 and this year I promise, or at least one of my goals, is to update you all with the most recent financial and mortgage information with the Bear perspective. The first thing I’ll say is that, thank GOD 2011 is over. 2012 has to be and will be a much better year for all of us. I’m actually excited and encouraged about where the loan industry will go. I don’t think we’ll see to much of a growth or betterment of our economy but there are so many changes that are going on, I can’t help but think one or two might actually help the average consumer.

I can’t say that 2012 is starting off great as far as all you mortgage customers out there. Sure rates are low, and will continue to be low. But I’m going to show you the best example of “the banks will only do what the banks want to do”.

Attached is an actual email that is basically passing the buck to the consumer regarding fees for ALL mortgages. It’s funny that even though they say this increase to rates / fees are due to Fannie Mae and Freddie Mac new regulations, the lenders are continently applying this rate / rebate hike to ALL loans. I wonder who’ll pocket that money? HMMMMM?

The funny thing is that this email from Wells Fargo came out Monday and no other lender said anything. This led to may of my piers speculating that maybe this was just a Wells Fargo thing. Which very well could have been the case. But seeing how this is a copy cat business, I knew other lenders would follow suite. Especially since most “lenders” just sell their loans on money lines to Wells Fargo, Bank of America and Citibank (just to name some big ones). Sure enough today, Tuesday, I started to get the same emails from even the smallest lender that rates / fees would increase.

About two months ago Obama said in a speech that he was going to push for a loan program that would help everyone, even if they where upside down on what they owed, there would be a mortgage for you. I got call after call for about two weeks asking about the new “Obama” loans. Well, two months later and there still hasn’t been a new loan program that has come out yet.

See, Obama is a politician. Like him or hate him, he’s going to say what he wants to happen. All politicians do this and if a republican had said this, the result would be the same. No one will tell the banks what to do. Sure they’ll take our bailout money but they’re only going to do what they want and if by chance there is a regulation that they have to adhere to such as this increase in GFees, they’re just going to pass it along to the borrower. They’re not going to let something like this stop them from making the same money they’ve always made.

When Politics and Economics collide - MEGA POST

After watching the hysteria of today’s 500+ point drop of the DOW, I can’t just sit back and pretend that you can take politics out of our current economic conversation. Forever I was taught to not include my personal political views in discussions of politics because 1) you don’t want to alienate people from what should be a numbers conversation and 2) you don’t want readers and clients to judge you due to certain political views (I’m in the business to get as many clients, not turn off potential or current clients). But things have gotten so bad that it’s time to put some cards on the table.

Let me first say I’m an Obama supporter. I think he’s a very smart man. I like a million things about him, and his family, in a personal and social way. The biggest issue I have with him, which isn’t very different than issues I have with most Democrats, is that he either has no balls, lost them or sold them out. For his 50th birthday I hope he wished for his political balls to drop like a teenage boy going through puberty.

As for Republicans, I don’t even think that word describes the current party that opposes the Democrats these days. They’re so fractured that I’m confused when I hear various groups trying to describe what the Republican Party stands for in 2011. You’ve got Reagan Republicans, right wing religious Republicans, Tea Baggers, Birth-ers, Constitutional and about 10 other descriptions of what a Republican is / are. I don’t think any of these groups actually know what ‘true” republicans stand for. Take a conservative from 40 years ago and ask them to join one of our two parties now, I think they’d make a B-line for the Democrats.

The problem with the economy is huge. So huge that it’s not limited to what was just perceived as a United States issue or just a political ideals issue. What’s strange is that with each new economic disaster, the path to recovery or the question of what can be done seems to be easier to find. Today was a shock to the system when the DOW and almost all other markets took huge hits. Lots of news has come out that is surprising to many but in reality shouldn’t be as shocking as it is. Italy’s economic troubles, Greece’s issues and other EU countries are reporting such economic troubles that there is great fear that the EURO may be headed for a rollercoaster ride to which many felt that the Euro’s creation and the EU would shelter the whole from some of these problems of the parts. China’s eventual slowdown in growth shouldn’t shock anyone. How long can one country continue to grow and grow and the double digit pace that they’ve been growing (especially for a communist country) and not expect the party to finally be over and real governing has to take place. It’s like in sports, there are no problems for winning teams; but as soon as a team starts loosing, fingers are pointed, backstabbing starts and no one is happy with their contract or playing time. Winning, or in this case making money, hides all problems. What happens when the winning (or growth) slows down? How that is handled is even more important than when times where good. Japan, well lets face it, Japan would rather have had an attach from Mothra or Godzilla than deal with tsunamis and nuclear meltdowns right in the middle of their own economic stagnation.

If you’ve been reading my blog or spoken to me, I’m a huge jobs person. Obviously I’m no genius to say that America needs new, better and higher paying jobs. It’s so easy to say, that I hate to even type it, because it shouldn’t even need to be said. Apparently it does need to be said because no one is doing anything about it. Now this is where we start getting political.

What’s clear to me is that the Republican Party wants nothing to do with any success that Obama can have or might have. They’re doing every thing possible to keep our economy as bad as it is so that the jobs numbers and the real “working class” have a revolt against the president in the 2012 election. “They”; the secret “they” that run each side of the Dems and GOP, “They” on the GOP side know that they have no real contender for the presidency. Part of the reason is that the GOP is so fractured that there is no one person that can stand up and represent all the different factions. Especially when some of the factions are just plain crazy, such as the Glen Beck-ians or the Palin followers. “They” know that in the past no president that has had nearly as bad of an economy has every won re-election but the GOP has such a bottom of the barrel group of candidates that for them to win the economy has to be at or heading to an all time failure.

Don’t get me wrong, Obama isn’t doing anything to help himself. I’ve seen better negotiating skills from my five year old niece this weekend when I tried to pay her to make and deliver drinks to me during our family vacation. When GOP leader Boehner says gleefully that he got “98% of what he wanted” from the recent debt limit negotiations AND is still crying (you decided if I’m speaking literally of figuratively) that the Obama Whitehouse is the root of all our problems; he basically handed the president his ass on a plate. I’d rather think that this president is too smart for bully fights. He’s brought a sniper rifle to a nuke fight. He’s trying to involve all sides, thinking that he can reason with the “enemy” and that he’s actually in a debate / negotiation where both sides want what’s best for the country. In reality, the GOP just wants to blow up the president and the democratic leaders and don’t care how it gets done even if that means killing themselves in the process.

There was no question in my mind that we would raise the debt limit. Why, because Wall Street didn’t have a question about it. If there was any doubt, the months and weeks leading up to August would have seen huge shifts in the market to embrace the fact that were where going to not pay our bills for the first time ever. But there where no such signs and when the smart people came to the kids table and told them to quit all this bitching, the debt limit was going to get raised. (Yes, current drops in the Dow and other indices would lead you to believe this was a surprise, but let’s be real; the Dow is still over 10k and if there was a real scare we’d be at 5k) It’s something that has been done many times in the past and will happen again. Debt is a commodity and every country uses it to one extent or another. Just as debt has become a viable stock option that can be bought sold and traded (but this is going to go on too long anyway, let’s not go there). This was a hostage situation where hostage was itself. There was a gun being pointed at the US economy’s head by the GOP. Sure some out there said, pull the trigger, that’s just what we need to get back on the right foot. But these are just morons. Essentially saying, we’re not going to pay our biggest debts so that we can balance our books for a few years, and then once (and if) we do balance our books we’ll start paying back the debt that we ran up. I don’t think that would set well with our investors. Ask any of the banks (whom we should have let kill themselves in 2009) if they would agree to let mortgages slide for a few years and make no money off interest so that the public could get back on it’s feet and then start paying off the mortgage again. This is simple economics or better yet, street economics. Ask a drug dealer if we can have that ounce of pot, smoke it, in the meantime not pay them but when we get our check in next month, we’ll pay them back. I don’t think that would sit well.

But I’m droning on. The point was there was a fake crisis and the GOP was either ballsy or brilliantly using this fake crisis to 1) keep the money flowing to the rich (themselves and their backers) and / or 2) make the president look bad. At the end of the day, as Boehner almost said, they got both.

I’ve got no problem with socialized medicine. I’ve got no problems with raising taxes on people making over 200 – 250k in income by 3%.

*Let me stop right her to make a point that I talk about every week. There isn’t a person in the world whose Net taxable income is over 200k and aren’t in reality making at least double that. Even a half assed accountant will get someone whose making 300 – 400k look like the person or family is making less than 200k per year. Even if you are someone who gets straight W-2’d and taxes are taken out automatically out of your paycheck, there are thousands of ways for you to get some sort of refund; whether it’s housing interest deductions or small business losses or… you know, I’m not even going to get into it. Just look at the tax code book. It’s about 3 inches thick. There’s a reason for that, it’s because there are 1,000+ ways to not give the government money. And if you ARE one of the few that Makes 200k+ per year and have no deductions or creative accounting and your taxes get raised 3% (like the president proposes) then I’m sorry, find another line of work. We’re just talking about 3% or $6,000 on that 200k. If you’re already paying your 20-25% what’s another 3% so that you can live in the “best country in the world”. I think the real problem is that you don’t see what the initial or extra money gets you. I’ll leave this sidebar and topic for later or another post because the waste of tax dollars could fill up another 10,000 words.*

Back to what got me started, Politics and Economics. The politics have gotten so bad that they’re using our current economic problems to push political agendas. As I said, the GOP was holding a gun to our economic future. What the president fell for was the fact that they couldn’t pull the trigger. They had a hostage that needs to be kept alive. They can’t kill it and then give the dead body back. That would destroy their plans as well.

As always, Obama tried to reason with the GOP. Obama even tried to give the GOP a little threatening of his own, but that’s not him. When he set a deadline, it was more of a suggestion. “24 – 36 hours” and you guys better figure something out. Yeah that really scared them. Never does Obama start on the crazy left and work his way to the middle. (No, I didn't steal this from Bill Maher's latest show. I had this going since last week. Great minds think alike) The GOP starts from the crazy right, Obama starts from the middle and we end up in a generally conservative solution. To which the GOP still say they’re unhappy so Obama has to go even further to the right and basically give in to 98% of what the GOP wants. Frankly I think Obama and the Dems are lucky to get the 2% that’s left over.

I heard an economist listing all the troubles that the world economy is going through. It’s clear that the US isn’t the only country that has problems. But what was a silver lining was that they where speaking about how SOMEONE was going to have to be the leader of the recovery. With so many countries failing and others slowing down, there needs to be and will be a country that leads the world out of this mess.

That was inspirational to me because I feel that this is a golden opportunity for the US to regain its spot in the world economy but also regain its spot as the top world superpower. Someone’s going to figure out how to create new jobs and manufacture something that the world wants, why not let it be the good ole USofA?!?!

In my world things are great. Since the Treasury yields are what determine interest rates, the fact that the yields are so low, they are creating record low interest rates. What can we really learn from these low yield and high bond prices (yields and bond prices move in opposite directions)? It tells us that investors are willing to give us (the American people) money at very low interest rates. This means that the people that are investing in Treasury bonds are willing to take almost nothing as interest because they see that as a safer bet than investing in stocks or even in other markets around the world. Can I just say this was another reason we couldn’t just not pay our bills, we have to preserve our AAA credit rating. Even with an AA rating our treasuries are still a better investment than other stocks which are taking hits. With money coming in at such low rates, why not use that to further push along social and infrastructure projects that can put people back to work which would then create revenues via taxes and make the public buyers of goods instead of hoarders of money. Using the money that’s coming in via the treasuries why not earmark that money to fill up the many potholes in the city of Los Angeles? There is no lack of potholes that need filling and I’m sure we could find people to do this work. In a very short time you could see money being worked back into the system. Back in the day, there were endowments for the arts. This wasn’t just a liberal-hippy cash giveaway but an actual way to get creative people out there making money and creating something. During past recessions, photographers where sent to take pictures and make books. This seems like a waste on the surface but you’re giving an artist a job. Someone who would more than likely be unemployed or unemployable in this recession. They’re creating something that maybe will lead them to go out on their own on the next project because they now have proven their talents. They’ve also used their income to purchase cameras and computers to create these pictures. Then they’ve also spent money on the publishers / printers that produce these books. One job that on the surface seems so silly actually can create so many revenue streams for other business and possibly create a new small business owner down the line. And where did this money come from? Treasuries that only need to pay 3.8% as of 8/4/2011. It’s costing the government 3.8% to fund something that can generate 8% in sales tax alone. I’m sure I’m oversimplifying the process but it can’t bet that much further than what I’m talking about.

Why do we need jobs? So that people will spend money. That’s the goal. Forget that if people are working there are tax dollars to be made, the truth is that if people are working they can spend money on goods that then in turn make companies a profit which will hopefully mean that small business need to hire more people… I don’t know how it can be any clearer to how a strong economy grows. It’s not because the rich get to keep a few percentage points. If companies and individuals with great wealth get to keep what they’ve already made there’s no motivation or incentive for them to higher more people or put out that extra money. They’ll just keep it because the economy is bad and they either wants to cash in on that extra money or keep it incase things get worse. The joke is that if they sit on that extra money, things will get worse. Tax cuts do not work to stimulate the economy on the ground level. If anything they do the opposite.

Now giving the average worker a federal tax holiday or small business tax incentives to newly hired workers, that will get people to hire more and spend more. Imagine a tax cut that’s not on money that a millionaire has already made but for the average person taking home a paycheck, there isn’t a federal tax deduction on that paycheck for a month. Wouldn’t that put money directly into the worker’s hand? In turn, logic would tell you that they will spend that money back into the economy. Again, these seem like simple answers. But because politics are involved, things get complicated in a hurry.

The GOP doesn’t want these problems solved, especially by such “socialist” means because they want to be in office. My question to that is, if you screw up the economy so badly, that when and if you take over, what are you going to do if you do end up with the Whitehouse? We’ll be in a worse position than we are now. The only answers that the Republicans seem to want to push are the same old answers of tax breaks for the “job creators” or rich. At that point, we’ll have officially killed the middle class and have a two tiered caste system (which many people believe we’re in now).

The bottom line is that we need adults. The leadership on all sides is pathetic. I’m not very old, certainly not old enough to say, “In my time I remember”. But I can read. And when I read I find that not to long ago the winning or loosing of power was 2nd to what was best for the people of this country. Now it seems that the possession of power is more important to the politicians than the health, liberty and happiness of our country’s people. It’s now about keeping the job rather than doing it based on what the people voted for.

I used to think that the first 100 days of a presidency was important because that was supposed to set the tone for the new president but now I think it’s the only 100 days that a president has before he has to start worrying about the next election.

If anything (if you’ve made it with me this far); I hope you take away that it’s not one side or another that is hurting us right now. Sure there are social sides and ideas that I like better from one party than the other. That’s not what is important right now. We need LEADERSHIP. We need people to put aside their differences and figure out solutions and be able to enact on these solutions ASAP. We’re going to choke on our own political bullshit. I just hope someone smart comes along and gives us the Heimlich.

What Did We Just See?

A 510+ drop in the DOW took place on 8/4/2011. Additionally we saw almost all other major markets take similar dives, percentage wise (approximately 4 – 5%). Another commentary was that we gave back all the gains that we have made in 2011 in just one day. Lastly, over the past week or so we’ve lost a combined 10% off the DOW.

All I have to say is look at what happened over the last two years. We’ve seen much more worrisome roller-coaster rides. Let’s not forget that the DOW has dipped below 7k in March of 2009. Let me say that again, in March of 2009 the DOW was below $7,000. We’re currently over 11k even after this tremendous drop.

I’m not going to freak out just yet. As with a lot of economic news it’s almost better to have things happen dramatically than over a long period of time. We may be down 500k+ yesterday and even have a few more down days but I believe that this is the time when investor hawks will actually buy into the market thinking that they can pick up a stock at a discounted price.

Did any of the companies go out of business yesterday? Did Microsoft go bankrupt? Did Sirius’s satellite fall out of the sky? Did Home Depot lock it’s front doors or Sears stop selling dishwashers? No. Call it a correction. Call it a fear. Call it a million things but certainly do not call it the demise of the stock market.

I think it’s good that the country gets a wake-up call like this every now and then. It gets people to ask questions that they don’t want to be bothered with on a normal day. They get to see what politics can do to the economy. More importantly it shows you who knows what they’re doing in the market and who might be a reactionary / scared investor. If people sold everything when the market dropped below 7k and no one ever bought back; then how did we get back up to where we are over 11k now? Sure there will always be casualties and I hope no one gets caught in those cross-hairs.

I can give you two examples of investments that I’ve made. I’m a huge Howard Stern fan and more importantly hater of regular “terrestrial” radio. Even without Howard, I’d still keep my Sirius because I love it so much more than the commercial crammed and same 5 song loops that “terrestrial” radio spits out. I, almost on a whim, bought shares of Sirius when it was down to around .20 cents. Even when it dropped to about .5, sure I was scared but knew there was value there. Now it’s at $2. I only wish that I had the balls to drop a ton more money into that stock at 5 cents. Conversely, I thought with all this government takeover and stimulus that Fannie Mae was another stock that had taken a beating but would bounce back. Clearly I didn’t do my research enough on this one and now I’m stuck with a stock that I bought at $20 or $30 (I’m so disgusted I can’t even remember but I know it was double digit dollars) and now it’s basically off market and worth 50 cents.

You win some, you loose some. But you’ll never know until you put your money down. You just hope to win a little more than you loose.

But let’s be real. It’s legalized gambling and what’s worse it’s an inside gambling. If you’re telling me that Martha Stewart is the only person who bought or sold a stock based on a tip from someone “in the know” than you’re fooling yourself. It’s a scam but it’s a proven scam that you’re money will increase over the long term better than many other investments. If you’re looking for quick money then you take on a much higher amount of risk.

What can we take away from this news and the upcoming employment news? I’d say not much. We know it’s going to be bad. But as you’ll see in my next post, it’s mainly political. Don’t sell off your portfolio yet. In fact if there was a stock you’ve been watching and the price has come down, you might want to jump on it. Be calm. Let’s see what the next few days bring us. Let’s looking into the numbers, instead of reacting too the numbers. More importantly let’s look into the politics of what’s happening here in the USA and around the world.