Friday, July 31, 2009

Art Made with the Dollar

Yesterday I was browsing the web looking for some cool images for inspiration when I came across the artist Mark Wagner. Mark did a in series which he took the Dollar and transformed into stunning pieces of artwork. He called it Collage With Currency and here is his statement:

The one dollar bill is the most ubiquitous piece of paper in America. Collage asks the question: what might be done to make it something else? It is a ripe material: intaglio printed on sturdy linen stock, covered in decorative filigree, and steeped in symbolism and concept. Blade and glue transform it-reproducing the effects of tapestries, paints, engravings, mosaics, and computers-striving for something bizarre, beautiful, or unbelievable... the foreign in the familiar.

Here are a few examples from his site Smoke In My Dreams All images ⓒ Mark Wagner. Click to enlarge.

I highly recommend you taking the time and check out the rest of his Collage With Currency. These are just a few examples of the great work he has done. Click here to see the rest of his work.

I just hope that we do not have inflation one day where we use the US currency for other reason than the exchange for productive abilities of man, and every once and while some art ;). Let me know what you think of Mark Wagner's art? You guys have a great weekend!

Related Post:

Thursday, July 30, 2009

David Rosenberg on the Recovery

"The government has its hands in 40% of the economy and when public sector officials can influence how banks can value their assets, how mortgage servicers should be doing their business, who shall fail in the financial industry and who shall not; and when we have a central bank that is not just the lender but the market of last resort, even for RVs, and a government willing to run up its deficit to levels that would have made FDR blush, then perhaps we can end up seeing a recovery occur sooner than we had thought." 

- David Rosenberg

Wednesday, July 29, 2009

The Significance Atlas Shrugged

From The Ayn Rand Institute

"I refuse to apologize for my ability -- I refuse to apologize for my success -- I refuse to apologize for my money."

The U.S. economy is in shambles, with every nightly newscast bringing word of new government interventions. Americans are alarmed and desperate for answers: How did we get here? How will we recover? That might sound like a description of today's world, but in fact it's also a sketch of the world Ayn Rand created in her classic novel Atlas Shrugged.

The tea parties testify to the outrage that many Americans feel toward Washington's explosive growth in the past few decades -- especially under Presidents Bush and Obama. Atlas Shrugged not only gives voice to this outrage, it provides both a profound explanation of the cause of today's crisis -- and a positive, radical solution to it.

Why is it that every problem seems to call for increased government intervention at the expense of freedom? Why is it that businessmen inevitably take the blame for any crisis? Why are the most competent, most successful Americans smeared as greedy and selfish? To these questions and many others, Atlas Shrugged gives answers unlike anything you've ever heard.

"Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns -- or dollars. Take your choice -- there is no other -- and your time is running out."

* * *

"If we who were the movers, the providers, the benefactors of mankind, were willing to let the brand of evil be stamped upon us, and silently to bear punishment for our virtues -- what sort of ‘good' did we expect to triumph in the world?"

* * *

'Yes, this is an age of moral crisis. You are bearing punishment for your evil. But it is not man who is now on trial and it is not human nature that will now take the blame. It is your moral code that's through, this time. Your moral code has reached its climax, the blind alley at the end of its course. And if you wish to go on living, what you now need is not to return to morality . . . but to discover it."

Learn the meaning of these quotes -- and the revolutionary ideas behind them -- by picking up Atlas Shrugged. Discover why Ayn Rand held that nothing less than a total separation between state and economics can save this country. Discover Ayn Rand's defense of the individual's moral right to pursue his own happiness -- the indispensable precondition of his political right to pursue his own happiness. Discover a gripping novel that challenges today's intellectual mainstream and provides an alternative to the anti-freedom ideas that are undermining American liberty.

Discover Atlas Shrugged.

©2009 The Ayn Rand Institute

Tuesday, July 28, 2009

Creative way to Settle Debt

I know I have been really down and gloom lately so I thought I would post something that was a little on the lighter side. Check out this viral email that was sent out last year. When I saw this I was laughing so hard I was crying. If I was the company I would have actually settle the debt based off his creativity. I believe that he actually sold the real drawing on ebay for around 10k, google it.

spiderdrawing2spiderdrawing3 spiderdrawing4spiderdrawing5

Even though this was only $234.00 some people get themselves into a pile of debt which they feel they will never be able to pay down. I think personally the best approach is the Dave Ramsey's method. Which is to pile up as much cash as you can and call up the debtor and settle with them. If it is an old debt, they will settle for anywhere between 25 cents to 50 cents on the dollar. Make sure you get a settlement officer in writing and keep it in your records forever. He also recommend never giving them access to your checking/saving account. For more information see The Dave Ramsey Show. Hope you enjoyed that as much as I did!

Monday, July 27, 2009

The Great Reset

This a series of videos that I watched over the weekend and is very interesting. I would take the time and watch for yourself if you have the time. The really small synopsis of the presentation is that America is going to reset. That it is going to be something similar to the Soviet Union collapse, but worse because of our entitlement(as a country) to use the worlds resources and not produce anything except debt. I am not saying agree with him totally, but I like to look at all information that is out there and determine my own conclusion. If I find something interesting I will post it whether I agree or not.

Part 2a - Great Reset - The Unfreezing (click to watch)

Rationalization becomes the watchword of any crisis. The systemic change has occurred yet we cling to old constructs. We are unable to see that things have changed permanently. We resist the truth and we try to get old systems to resurrect themselves. In this phase of change few people see what has been going on but the system clings to itself. We talk about the Iron Triangle which has locked us into the present system.

We move from rationalization to realization. On an International basis we see some anticipation of the change, domestically we have denial. Domestically the largest risk pertains to our expectation that things will remain "integrated." Overall, we have a break in our entitlement system.

We have the opportunity to move towards a new ideal in which the average family can be sustained on 20 hours of work per week. We simply have to switch our value system around to a new model envisioned by the likes of Buckminster Fuller in the 1970's. Since we do not plan for the inevitable we are going to have to move through a phase of crisis the likes of which we have not seen in America.

I would also take the time to read the comments people have made. They talk about why they agree or disagree with the presenter and in the end you come up with your own conclusion.

Friday, July 24, 2009

Thursday, July 23, 2009

Socialized Health Care Example

Ok I know I am taking this to the extreme...

Ask any American 10 years ago if the believed that the government had the power to search telephones, e-mail communications, medical, financial, and other records; eases restrictions on foreign intelligence gathering within the United States; or expand the Secretary of the Treasury’s authority to regulate financial transactions, particularly those involving foreign individuals and entities? See USA Patriot Act

Now take a look at some examples of the Health Care Bill (as of 07/14/09)

Page 58

Page 59
Now just imagine any politician having the power to infringe on our freedom, not just this administration, but future administrations.

Am I equating this Health Care Bill to Armageddon? No, but I think we could be opening pandora's box with allowing our Federal government to have a lot of power and the ability to take our freedoms away. Just something to ponder!

Atlas Shrugged, Health Care, and Collectivism

This weeks quote is from Atlas Shrugged and since one of the main topics being discussed in Washington right now is Socialized health care I thought I would share a story to illustrate the devastating effects of collectivism. The story is about a tramp Jeff Allen, former shop foreman at Twentieth Century Motor Company who had snuck onto the The Comet(train) and Dagny offers him to be her guess for diner. He explains to Dagny how the owner of the Twentieth Century Motor Company had passed away and that the heir had come in and brought a new plan of how to run the factory.

The following is an excerpts from Atlas Shrugged, © Copyright, 1957, by Ayn Rand.

"They let us vote on it, too, and everybody—almost everybody—voted for it, We didn't know. We thought it was good. No that's not true, either. We thought that we were supposed to think it was good. The plan was that everybody in the factory would work according to his ability, but would be paid according to his need.

The Starnes heirs made long speeches about it, and it wasn't too clear, but no body asked any questions. None of knew how the plan would work, but every one of us thought the next fellow knew it. And if anybody had doubts, he felt guilty and kept his mouth shut—because they made it sound like anyone who'd oppose the plan was a child-killer at heart and less of a human being. They told us that this plan would achieve a noble idea.
He goes on to explain how it worked
"Try pouring water into a tank where there’s a pipe at the bottom draining it out faster than you pour it, and each bucket you bring breaks that pipe an inch wider, and the harder you work the more is demanded of you, and you stand slinging buckets forty hours a week, then forthy-eight, then fifty-six - for your neighbor’s supper - for his wife’s operation - for his child’s measles - for his mother’s wheel chair - for his uncle’s shirt - for his nephew’s schooling - for the baby next door - for the baby to be born - for anyone anywhere around you - it’s theirs to receive, from diapers to dentures - and yours to work, from sunup to sundown, month after month, year after year, with nothing to show for it but your sweat, with nothing in sight for you but their pleasure, for the whole of your life, without rest, without hope, without end … From each according to his ability, to each according to his need…"

"We’re all one big family, they told us, we’re all in this together."

"It took us just one meeting to discover that we had become beggars - rotten, whining, sniveling beggars, all of us, because no man could claim his pay as his rightful earning, he had no rights and no earnings, his work didn’t belong to him, it belonged to ‘the family’, and they owed him nothing in return, and the only claim he had on them was his ‘need’ - so he had to beg in public for relief from his needs, like any lousy moocher, listing all his troubles and miseries, down to his patched drawers and his wife’s head colds, hoping that ‘the family’ would throw him the alms."
He goes on to explain how good men were forced to become bad
What was it they’d always told us about the vicious competition of the profit system, where men had to compete for who’d do a better job than his fellows? Vicious, wasn’t it? Well, they should have seen what it was like when we all had to compete with one another for who’d do the worst job possible. There’s no surer way to destroy a man than to force him into a spot where he has to aim at not doing his best, where he has to struggle to do a bad job, day after day. That will finish him quicker than drink or idleness or pulling stick-ups for a living.

“God help us, ma’am! Do you see what we saw? We saw that we’d been given a law to live by, a moral law, they called it, which punished those who observed it - for observing it. The more you tried to live up to it, the more you suffered; the more you cheated it, the bigger reward you got. Your honesty was like a tool left at the mercy of the next man’s dishonesty. The honest ones paid, the dishonest collected. The honest lost, the dishonest won. How long could men stay good under this sort of a law of goodness?

Rand demonstrates the hypocrisy in the behavior of the villains.
Was there any reason why this sort of horror would ever be preached by anybody? Was there anybody who got any profit from it? There was. The Starnes heirs. I hope you’re not going to remind me that they’d sacrificed a fortune and turned the factory over to us as a gift. We were fooled by that one, too. Yes, they gave up the factory. But profit, ma’am, depends on what it is that you’re after. And what the Starnes heirs were after, no money on earth could buy. Money is too clean and innocent for that.
And the downfall..
Well, we got what we asked for. By the time we saw what it was that we’d asked for, it was too late. We were trapped, with no place to go. The best men among us left the factory in the first week of the plan. We lost our best engineers, superintendents, foremen and highest-skilled workers. A man of self-respect doesn’t turn into a milch cow for anybody. Some able fellows tried to stick it out, but they couldn’t take it for long. We kept losing our men, they kept escaping from the factory like from a pesthole - till we had nothing left except the men of need, but none of the men of ability.

To work - on a blank check held by every creature born, by men whom you’ll never see, whose needs you’ll never know, whose ability or laziness or sloppiness or fraud you have no way to learn and no right to question - just to work and work and work - and leave it up to the Ivys and the Geralds of the world to decide whose stomach will consume the effort, the dreams and the days of your life. And this is the moral law to accept? This - a moral ideal?

Well, we tried it - and we learned. Our agony took four years, from our first meeting to our last, and it ended the only way it could end: in bankruptcy.
Pretty powerful writing and would take the time to not only read the book but read this part of the book. I know some might say it is extreme, but Health Care is not right it is a service. And to tax the wealthy to run/make deficit neutral is not right, I'm sorry it just isn't. Why are we forcibly taking someone’s income to the benefit of someone else?I have a problem with the concept of taking the fruits of someone’s hard earned labor simply so that I or someone else may benefit at their expense.

In order to truly reform health care we must unleash the potential of the free market. The reality is that there are over 133,000 pages of health care regulation in the U.S. Code currently. This obviously goes beyond simple consumer protections and begins to invade in business’ and people’s affairs.


I know this is a hot topic, leave me a comment and let me know how you feel? Am I a child-killer? Is the government given us a moral program?

Wednesday, July 22, 2009

Truth Behind Common Financial Advice and Conventional Wisdom

This is a guest post by Mr Credit Card from Mr Credit Card normally writes about credit card reviews, debt reduction topics and his site obviously has got tons of credit card offers. He has also put together a list of the best credit card offers and deals. Please check out his blog and subscribe to his rss feed. Today, Mr Credit Card is going to branch out and write about a topic that we should all be aware of. So here is his post

If you read the mainstream press and even most personal finance blogs, you will have come across many standard common advice. However, if you look deeper into these "standard advice or thinking", you will find that most of them are just not true or that it comes with a few caveats. Today, I am going to highlight some of these and hope that you will be more discerning whenever the mainstream press gives any so called "standard" advice.

The stock market always goes up in the long run - This common statement derived from studies in the US only from 1926 till present day. Some studies went further back to the late 1800s and came to the same conclusion. Based on this "empirical evidence", the common advice now had been to telling folks that in the 'long run', stocks are always the place to be. Problem with this analysis is that there are many assumptions that have been left out.

The first is that this study holds true only in the US because the United States. In countries like Russia (where communism happened in 1917, or parts of Europe, where there were 2 major world wars in the last century, or even in South America), this conclusion is simply nonsense. Germany went through hyperinflation in the 1930s and a change in currency. One that was pegged to gold and one that was not. South American countries went from being the richest nations in the world to one with massive debt problems in the 80s and 90s. If you were living in those countries, this 1926 US stock market analysis is meaningless when your country faces crisis of epic proportions.

Truth - It only went up in the US (and perhaps Britain) from the time frame of analysis. But bear in mind that the US has not been conquered in war in the last century. We have not had massive currency devaluations or flight of capital. Being careful of the definition of long run. There have been 20 year stretches where the US stock markets did nothing. So if you do not have a 20 year horizon or longer, be very wary about putting the bulk of your money in stocks.

US treasury bills and bonds are the safest investments - The US government treasury bills is considered the safest investments because the US government has never defaulted on its debt obligations. And hence, its historical yield is used in calculations. Because of such assumptions, academics have used the yields on treasury bills as the "risk free asset" (for those of you who study CAPM and stuff). However, there are some flaws to this assumptions.

But in the 1930s, President Roosevelt devalued the dollar by more than half when the dollar was re-pegged to Gold. In the 1970s, President Nixon took the dollar off the gold standard after the French President Charles DeGaulle wanted to exchange the French US Dollar Holdings for gold! In the 1950s, interest rates on long bonds was actually capped at 2+%!

Truth - While in many instances, US T-bills can be considered the safest assets, this only holds true if the US currency does not devalue massively. Today, we are seeing signs that countries like China are wary about their US Dollar reserves and also do not like the fact that the US Dollar's role as the international currency of choice means that we can get away with deficit spending. There is no guarantee that the dollar may lose it's reserve currency stature in future and if that happens, the US dollar will have depreciated a long way. Moral of the story is : have some of your other savings in other currencies and study how to keep your money safe. Perhaps, some gold investments would be good for you?

Reaching a retirement savings of a million dollars is a desirable goal - Another one of those myths that floats around the mainstream media. What puzzles me is that nobody questions this number at all. If a great retirement is your goal, I think that you will find that this number is really not enough. Why?

Using monte carlo analysis, it has determined that by withdrawing up to 4% of your retirement nest egg, you have a more than 85% chance of having your portfolio intact after 30 years. 4% of $1mm is $40,000 a year. And this is after tax money. Firstly, I doubt anyone can live with that amount in a high cost city like New York. Secondly, after factoring in health insurance and all other cost, there ain't much left!

What the mainstream media fail to tell folks is that planning for a career in "retirement" is more important than just "saving for retirement" itself. Afterall, savings can evaporate (ask anyone what happened to their 401ks in 2008). Your countries currency can become worthless (ask any middle Argentinian, or Russian). In the 30s, Germany went through hyperinflation.

Truth - With inflationary monetary policy as part of the western developed world for the last century, the whole million dollar is enough notion will face greater scrutiny sooner or later. You'll probably need much more to enjoy the same standard of living as you have now. If you are earning $100,000 a year today, based on 4% withdrawal rate, you'll need $4 million in retirement savings to have a good chance of achieving the same standard of living.

Small Deficits are OK - The US government has no problems perpetually running budget deficits (saying 3% deficit is OK!). All I can say is that if any household runs a budget deficit for too long, they will sooner or later have to file for bankruptcy. Well, I guess developed countries government like the US can run budget deficits for a longer time than most ordinary households. But sooner or later one's past sins will always catch up.

Deficit spending has a nasty habit of being justified by something that is "really needed". We need to provide health care (very expensive) for the elderly. We need massive military spending. We are fighting two wars. We need to spend money on various programs.

But this mentality spills over to our individual's personal financial life as well. Many folks will say it is "OK" to put the plumbing repairs on the credit card, because we'll "pay it off soon"! Problem is that just like the federal government, most folks do not pay it off. Once in a while, certain "freebies" come along that make our debt load easier. In the case of the federal government, easy monetary policy allows US government debt to be issued at relatively low interest rates. The easy monetary policy has trickled down into the consumer world via promotions like 0% financing for cars, 0% balance transfer credit cards, or even low interest credit cards. For quite long periods of time, these easy monetary policies enabled the federal government and US consumers to "fund deficit spending".

Truth - Debt should be shunned at all cost. What starts as a small amount eventually becomes a habit that becomes very hard to kick.

Global Savings Glut by Emerging Countries Responsible for Global Imbalance - Here's another common economist rant. China, and the Asian emerging economies are savers (which everyone actually acknowledges is good). But they save too much! Because global trade is conducted in US Dollars, countries with trade surpluses have excess savings in US Dollars. And the dollars has to be invested somewhere. The most natural home is US treasuries (ie US government debt). Hence, even if the US is running a persistent budget deficit, savers abroad have no where else but to invest with us. The result for all that is that interest rates and mortgage rates remained low even though our debt picture shouldn't have allowed it.

So what do we tell China and the rest of the world's savers? Don't save so much. Introduce social welfare and health care so people do not have to save so much and they can "spend"! This is one of the worst advice I've heard. We have trouble controlling spending in medicare and social security and now we're telling savers to follow our vices!.

Truth - Truth is the problem is not with savings. It is with the fact that the world conducts it's commerce mainly in US dollars. Savings is the only way to wealth. Savings (just like an emergency fund) gives you cushion. China, for example, could pump billions into their economy without having to borrow from anyone! The good old US however authorized over $700 billion in spending (which by the way they printed!) and they actually have to borrow it from the financial markets. And that is the big problem with having debt. You have to keep issuing IOUs! China's billions was simply gotten by converting their US dollars reserves into Yuan! In personal finance, the same principals apply. When you have debt, whether it is a mortgage, a home equity line of credit or credit card debt, you are constantly on the treadmill trying to find a better card or loan with a better rate. Contrast that to someone who, for example, pays his balance in full. That person can actually use a cash back credit card or gas credit cards to earn cash rebates. Unlike the person having to pay down his or her balance, the person paying in full actually makes money!

Term Life Insurance is Always Better Than Whole Life - Here is another phrase that has been hyped up by the Suze Ormans of the world and literally the whole finance bloggers world. Everyone hates whole life. What nobody has ever properly explained is the cons of term life. So let's look at a few here:

Term life insurance ends after a term - proponents would claim that

1. You can save the money on whole life and invest the difference
2. You do not need insurance after 20 or 30 years cos you have saved enough
3. Term is more cost effective

Problem is nobody tells the downside. The first downside is that

1. The annual premium for term life goes up every year!
2. To maintain the same insurance, you have to keep paying premiums every year. When you are retired and have no "work income" but only portfolio income, monthly payments are a really pain in the B***. For whole life, once you have paid up, it really means you have paid up!
3. By the time you are 50 or 60, you may not have saved enough and your beneficiaries still need money from insurance if you pass away!
4. You have a disabled child and whole life or permanent insurance is the only way to fund it (after all, their needs are permanent!)

Truth - Term life may or may not be more suitable for you. It really depends on your particular situation.

I think I'll stop here. I hope this post makes you think harder and question common teachings and assumptions in the world of personal finance, or anything in fact.

Please leave a comment and tell Mr. Credit Card your thoughts.

Tuesday, July 21, 2009

Individuals Net Worth

Sorry slammed today will be back tomorrow! Enjoy the comic!


Monday, July 20, 2009

Milton Friedman on Limited Government

Milton Friedman was an American economist, statistician and public intellectual, and a recipient of the Nobel Memorial Prize in Economic Sciences. I love watching old videos of him and you can tell how much of a deep thinker he was. I have watched a lot of videos of him and no interviewer can seem to stumble him with any question. He is such an intellect, and you can tell that he speaks from his true beliefs, unlike modern day politicians that just completely spin a question without fully answering them. I would recommend taking some time to learn more about Milton Friedman, I personally, have learned a great deal from him.

One thing that is very interesting about Friedman is that he was originally a Keynesian supporter of the New Deal and advocate of government intervention in the economy. Then in the 1950's he challanged the basic Keynesian model(reinterpretation of the consumption function). While he was at the University of Chicago, Friedman became the leader of the first recognized counterrevolution against Keynesianism.

Here is a great quote by Friedman:
"Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property."
Related Links
Milton Friedman "Power of the Market" A series of brief lectures

Friday, July 17, 2009

Debt Cancellation/Debt Jubilee: Would You Be For It?

So you know I have been on the doom and gloom kick lately and have been really diving into it lately. I have probably dove a little to deep as I have scared myself and am worried that we might not be able to make it through this with out a total collapse. I agree with most of these predictions and that one way or another its going to happen. Niall Ferguson, author of the new book, The Ascent of Money, when talking about the stimulus money back in January:
Well, it is better than nothing. I think we have to realize that nothing would be the Great Depression. So it will be a “success” if output only contracts by five or seven percent. It will be a “success” if unemployment only reaches 11 percent, because in the Great Depression output contracted 30 percent, and unemployment went to 25 percent.

The debt burden, as a proportion of G.D.P., is in the region of 355 percent. So, debt is three and a half times the output of the economy. That’s some kind of historic maximum, and those debts aren’t going away.
One of the ideas that some forward thinkers have on how we can save this crisis including Niall is to Cancel the Debt or Debt Jubilee. We have now reached the point of our government starting to talk about another bailout.

Gregor Macdonald thinks there are no good answers and I can agree that there really isn't. I think if in 2006 someone told us we were going to be in a crisis this bad we would have all laughed. (some warned us, but it wasn't our leaders)

Gregor says :
I would point people to the various articles and research that suggests no combination of tax increases, or growth, can possibly catch the debt now. The debt has reached escape velocity.
He goes on to explain his solution—for people to pay down debt, buy stuff to stimulate the economy, and put it in the bank.:
A 150K for every tax paying adult. Then combine it with new federal limits on credit creation, fractional reserve banking, and limits on personal credit extension. It would be like a mass, societal mea culpa. And then we move into a Slow Growth era. Those not in debt get 150K too. But again, restraints would be needed to discourage consumption. Under this type of plan, public policy would move down the spectrum towards Savings. That would be a huge change to American culture.
I am open-minded on this stuff, and largely neutral. Generally I advocate ideas that will work and reduce suffering. I'm not big on moral hectoring and making people pay too much for their mistakes. However, on the other side of that equation, I agree that chaos and hazard increase if people are trained that their mistakes will have few penalties.
It's a mess. All the solutions so far are a mess. I would at least like to see a discussion of a debt jubilee, with a 150K credit to all, and then new onerous credit creation restrictions, and balanced budget laws both at Federal and State levels.
Bottom line though is that I have few solutions.
Niall says:
Well I’ll tell you what you have to do—you actually have to cancel the debt. There are historical precedents for this.

In the past, when excessive debt burdens were accumulated by government, they tended to do one of two things: either they defaulted—this is the Argentine solution—where you say, “Ah, I’m sorry, I’m afraid we’re not going to be able to meet the interest payments this month, and never again will we make the interest payments.”

The other scenario is inflation, where the real debt burden is eroded because the money that it’s denominated in loses value.

I don’t think we’re really going to be out of the woods here until something of that sort happens to the huge debt burdens of the U.S. economy. Either these debts will have to be fundamentally written off in some way, or inflation will have to reduce the real burden.
So my question to you, would you be in favor for a debt jubilee or some other type of reset button? Would you take 150k for the next bailout? Like Gregor says it would turn public policy toward savings, Yay! What do you think we need to do, any solutions? I know what I would do, I would be purchasing a new house and paying off the remaining 12k I have in debt. I would probably use 100k to put down on a home and put the rest in savings.

Of course these are forward thinkers that are really trying to come up with solutions and not power hungry politicians that think they can truly get us out of this mess. So I don't think we would ever see something so radical. I am waiting for the market a little longer and I am pulling the majority out to site on the sidelines. Please leave a comment! And have a great weekend!

Related Articles:
Concerns about the Fed's New Balance Sheet
Niall Ferguson: Bring on the debt jubilee!

Wednesday, July 15, 2009

Alternative Ways To Save a Few Extra Dollars

I have two small ways I save money which take absolutely no energy and doesn't effect my lifestyle the least bit. The concept of saving money is very easy, it is the actual implementation of actually saving it, which is hard. Once I sat down and figured out where I could save, I found more and more places. The great thing about finding small places to save money here and there is that it can help you in other areas of your budget. For example, you might not want to cut out eating out or a similar costly lifestyle, so the more you save elsewhere, the more your budget frees up for the stuff you really want to spend your money on.

One of the ways I save, which is not mind blowing, is that I save my loose change. I have a box by my door and I throw my loose change in it. Once it is full, I will take that money and usually find a goldstar machine(which I get charged 8%) and cash it in. I might take the $40-$80 I have saved up over 6-12 months and either reinvest it by putting in a high yields savings account or if I have a big purchase coming up, I will use instead of breaking into any of my other savings.

Another way I save money is rounding up every dollar when balancing my checkbook/budget. Even if it is $1.01 I round it to $2.00 and so forth with every dollar I spend. This surprising adds up really fast. I have been doing this for about 3 years and I have accumulated close to $400.00. I balance my checkbook every week and base all my numbers off the numbers in my check book, not what my bank is telling me online.

This also acts as a buffer for any overdraft and such. I keep an extra $1000.00 in my checking and use the 1k as my profit line or $0.00. I have a budget and I know where all my money is going so I don't really need it, but it is better than having to worry about getting overdrafted or if anything where to come up. I also take the remaning amount of money sitting in my account that is left over from the month before that is over the $1k and transfer it into my high yield savings account. That way I maximize the money that can be working for me.

I have more small tricks I use, but they are not a easy as these. Like I mentioned earlier, this has never effected me or my lifestyle, it is just a way of life. Again it all starts with the small stuff, I believe this can save you somewhere between $100-$500 a year if you implement these two. If you can find 5 things you can save this much on, you will start to accumulate wealth, which can be saved or reinvested.

Have any saving tips that do not effect your lifestyle? Leave a comment and let me know!

Tuesday, July 14, 2009

How an Economy Grows and Why It Doesn't

Here is a link to the PDF version it is a book by Irwin Schiff. As the title suggest, the book breaks down the simple basics of "How an Economy Grows and Why It Doesn't". Peter Schiff mentioned on his Vlog that the book is going to be reprinted.

The banks could have used this book, along with the majority of American. Read it, study it, pass it along so we can learn from our mistakes. Have a great day!

Monday, July 13, 2009

Housing Happiness

UPDATE: Keep listening to those politicians(esp. the ones that got us here) I am sure they figure something please excuse me while I laugh.

Friday, July 10, 2009

The 4 different Scenarios: Keeping Your Money Safe

I had a conversation with a friend earlier this week about how he see the market playing out over the next 5 years. My friend works in the financial sector and has worked for companies such as GE Financial along with having a finance degree. Some of our discussion was around all the different scenarios that we might see and how bad is everything. 

I also mentioned earlier in a post this week that I was thinking about purchasing some shares in some ETF's that short the financials. After talking with him about this, these are some of his main points and what he is doing with his money*.

*I do not suggest anyone follow his or my advice, we are forming our own opinion and this was just part of our conversation:

Not to say there isn't a chance for deflation or shorting bank stocks or real estate is a bad idea. I also believe banks are in much worse shape than they are currently showing on their balance sheets. I still believe that the government will continue to prop them up and won't let the bankin system collapse. That doesn't mean there's not going to be huge implications for the governments actions.

I think it makes sense to spread your bets around. I see 4 different scenarios that could occur:

Hyperinflation = 10%
Stagflation = 40%
Deflation = 25%
Back to Normal = 25%


Good Investments: Gold, most commodities, very little else. 
Bad investments: bonds, cash, most stocks


Good Investment: gold & staple commodities (oil, gas, food), utilties (maybe, in the 70s utitilies weren't a good investment). 
Bad investments: most bonds, most stocks, cash


Good investments: Cash, treasuries, high grade corporate bonds, high yield staple stocks (utilities), even gold has done well in this environment in the past and could potentially outperfm here as well.

Back to Normal: 

Good investments:Industrials, Tech, Energy, Banking (although I still wouldn't go long here). 
Bad investments: Gold will do poorly here

So my opinion for long term investing is to spread your bets accordingly based off the above. My target portfolio with a 5 year time horizon is:

30% = Precious Metals (includes actual bullion/metal and stocks of PM producers)
30% = USD Cash, FX Cash, Short Term Bonds (this is to hedge by PM trade, have an allocation to cash if there is deflation, and to have as ammunition when the market tanks again (so I can buy what I like)
20% = Energy/Agriculture both the actual commodities through ETFs and stocks (domestic and int'l stocks)
20% = Industrial, Tech, Healtchare, Utilities (domestic and int'l stocks)
He has studies the stock market and his investments for at least 2 hours a day. He has been doing this since he graduated college so whether he is right or wrong, he has put in the research. Again take all this with a grain of salt because no one really know what is going to happen over the next few years. What about me? Well, I still trying to figure it all out...I have a percentage going into my 401k and some going to my Roth IRA(mostly index funds) and the rest right now is sitting on the sideline in cash for possibly a down payment on a home.

So what scenario do you think is going to play out over the next 5-10 years? How are you protecting your investments? Leave me a comment.

Thursday, July 9, 2009

Mistakes Equal Success

This weeks quote of the week comes from a book I have previously talked about by Paul Arden It's Not How Good You Are, Its How Good You Want to Be: The World's Best Selling Book. I think when it comes to every aspects of life we can learn a great deal through our mistakes. Matter of fact how can you become extraordinary if you never make mistakes? I make mistakes everyday and from each of those mistakes I learn something. A majority of the bloggers in the Personal Finance community have some story of how the mistakes they made as young adults helped them turn around their life and ultimately their finances. 

The following is an excerpts from It's Not How Good You Are, Its How Good You Want to Be:© Copyright, 2003, by Paul Arden.

"The Person Who Doesn't Make Mistakes Is Unlikely To Make Anything" 

Benjamin Franklin said "I haven't failed, I've have had 10,000 ideas that didn't work."

Thomas Edison said "Of the 200 light bulbs that didn't work, every failure told me something I was able to incorporate into the next attempt."

Theatre Director Joan Littlewood said, "If we don't get lost, we we'll never find a new route."

All of them understood that failures and false starts are a precondition of success.

Failure was a major contributor to its success. 
This is some pretty powerful stuff, you learn and progress everyday by trying and making mistakes. When I first started budgeting I was constantly making adjustments to it because the first, second, third... ways weren't working for me. I am still making adjustments everyday to this blog. I constantly look at my site stats to see what is working and what is not. Which articles are people reading and which articles people seem to care less about. 

I have made my fair share of mistakes as well with personal finances and I know there will be plenty more mistakes along the way which I can point out and we can all learn.
I was reading the blog I Hope To Retire Someday and his latest post is about a mistake assuming someone was monitoring his retirement/investment. In the long run I think he will be better off because he will have learned from that mistake.

You have to learn from your mistakes though, as Albert Einstein said:
There is nothing that is a more certain sign of insanity than to do the same thing over and over and expect the results to be different.*
I think we as individuals and the government can learn from all these guys. Making mistakes is part of human nature, but understanding that they are a precondition of success is the importance of failure.

*Why is our government doing the same thing over and over and expecting the results to be different?

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Advice to New College Graduates

What has been your biggest mistake and how did that mistake influence you? Leave me a comment!

Wednesday, July 8, 2009

Banking Crisis, Government Regulation and Ron Paul

This is one of the best examples I have seen regarding the banking crisis with the Mid South Bank President and CEO R.J. “Rusty” Clouthier.  I would ask you take 5 minutes of your day and listen to what he says. He says that he saw this coming back in 1999 with the Gramm-Leach-Bliley Act. I believe we cannot solve the problems of today without looking back at what got us here in the first place.

Clouthier says that unless we break up the big banks that pose systemic risk and get back to sound banking, we’re just going to re-live this over and over again. 

The host says an amazing thing "If you cannot fail, the whole system breaks down—then you take to many risk and taxpayer eats it". Clouthier follows up by saying that "Free enterprise has to have the right to fail". Every American should know this no matter their situation. It should be a very solid and understandable principle.

I haven't spend a lot of time studying the subject, but it seems to me that we need to get back to sound banking. The policy that gave us all this trouble isn't going to be the policy that helps us recover. You hear most people say it was the lack of regulation that got us here. We had banking, SEC, FDIC and many more regulations which have failed! WE DONT NEED ANYMORE  REGULATION! Listen to Ron Paul below:

Ron Paul is one smart man, why can't we not have him or someone like him running our country that understands economics and understands policy that is hurting our country. I think one investment idea that I have is to donate to Ron Paul if he runs for president next time. 

If we do not wake up soon the only people that will have wealth will be wall street, banks and the government. Once that happens or if it hasn't already we are in a world of hurt. 

This blog is about my financial journey and it has turned half political because the two are connected. Every cent that the government spends comes out of taxpayers pockets. This ultimately hurts us, the people that care about personal finances. Ronald Reagan said "We are a nation that has a government" and as my father pointed out, it seems like we are a government that has a nation. 

Am I in left field? I know we need a government, but a limited one. Should I stop blogging about political subjects? or stick to PF? leave me a comment!

Tuesday, July 7, 2009

Dr. Doom & Gloom or Sunny Bono

I don't know, but lately I just have been Dr. Doom & Gloom. I have been reading and studying experts about how to keep my money and investments safe during these shaky economic times we are seeing. You listen to me write a lot about how our government is making all the wrong moves with interfering with banks, businesses, wall street, automobiles, and now energy and health care. I truly believe we are going through an extraordinary time in the history of America. I have talked with friends, family, and even strangers and no one can talk me into believing that what our government is doing is going to help out. 

One side I have been studying is the Ron Paul, Peter Schiff, and Jim Rogers outlook. If you are a regular reader of this blog you will know their outlook and their beliefs in that we are going to see hyperinflation and they suggest purchasing gold. I have the most confidence in these guys and I am sure we will see inflation at some point over the next 3-6 years.

Another side I have been studying is Harry DentNick Guarino, and Joe Saluzzi who predict there is going to be another Great Depression and a run on the markets. Harry and Nick think that we are going through a deflationary period and that all the banks are completely broke. I agree with them as well that all the major financials are completely broke. If not, why would our government feel the need to step in and bail them out. Also, just wait till the commercial real estate bubble burst, we will be seeing more banks going under than we already are. They say, eventually it will all collapse and that is probably the case unless we go through a period of hyperinflation because of the government intervention.

I have also been been following a couple energy guys Chris Nelder and Gregor Macdonald that think we are going through a period of Inflation and Deflation. And I tell you what, these guys are thinkers and they factor in energy so I am not ignoring these guys for one second.

So as you can see I have no idea what to do. I think the best thing I can do is hedge against everything in hopes there is no big swing one way or another. I have been throwing around the idea of buying Gold, I just do not know enough about it. Also, lately I have been thinking of buying some shares of  SKF or FAZ (ETF's that shorts financials). I called a friend last night and talked to him about it and he doesn't like it because he thinks no matter how bad the shape of financials are, we do not know what the government is going to do which can ultimately effect the price of these. He mentioned SDS which is a ETF that shorts the S&P and he suggested that more so than the others. I would hedge by investing in money that I would be willing to lose if it did not work out.

As of right now I am still in limbo. I still have money going into my 401k, and Roth IRA. I am seriously thinking about pulling most of my money back into cash and let it sit on the sidelines if A) the market goes to 10,000 or B) if we are still stagnate mid to end of July. I think the market is going to take a long long time to correct itself and as long as the government is making moves I am going to be watching very carefully.

I do not suggest anyone follow my advice because I am forming my own opinion and even experts cannot agree on what is going to happen. How can I sit here though and post about how I think our government is going to do harm to our economy and personal finances without actually living by what I preach.

Again I am not making any drastic moves right now, and it could all change next week. I will keep you posted with the next moves I am going to be making.

Am I just over thinking? Should I be so concerned? What the hell do I do with my money? Who's right, inflation, deflation, or stagnation? Leave a comment

Monday, July 6, 2009

Ways That Banks Take Your Money

One of the ways in which you start to create wealth is to make your money work for you and not against you. Currently I have a 3 different types of banking accounts. 

I have my regular checking account that only has monthly expenses and enough in saving so that I am not charged a monthly fee. (This is one of the mega banks, I keep just the minimum in there because I have connivence with them such as bill pay, ATM locations, etc..) I make no interest from having my money with this bank, if anything, I loss money for not using their ATM's. They charge me $2-4 along with the other bank for taking my money out(so silly). I would consider this bank to be working against me, but having some connivence is worth it to me even though I make no money from it. I can also say that I am really conscious about not getting charged ATM or any other fees with this Bank.

My second savings account is with ING Direct where I make 1.40% interest monthly on my balance for having my money with them. That has dropped from 2.40% at the beginning of the year. I still make a little each month, so overall I can say that my money is working for me in this scenario.

My third type of savings account is a money market account that has an interest rate of 2.35%(down from 4.25%) which I make on my balance every month. In this account I have the bulk of my emergency fund and housing fund. I have around 12-13k and make around $125.00 a month just for having my money sitting with them. This clearly shows how you fully take advantage and start making your money work for you. With my money market I can write a check at any moment as well, so it is fully accessible(I have to write a check larger than $250.00 though). Again, I feel like this is making my money work for me and not the opposite.

These are just some of the ways that bank accounts can work in your favor. There also seem to be a lot of banks that want and can work against you. I came across this article in the WSJ by Jennifer Waters about the 10 Ways Banks Take Your Money. Most of these seem to happen with the mega banks like Bank of America, Citi, etc...

One stat that jumps out at me was how banks generated some of their income:
Late fees, loan-origination fees, over-the-limit and overdraft charges helped generate 53% of banking-industry income in 2008, according to R.K. Hammer, up from 35% of income in 1995.
Seems to me banks have figured out a way to make their money work for them and that we the customers are allowing them to do it right in-front of our eyes. You cannot blame them right? If you do not care about your money enough to know or to change banks, would you expect anything different? Here are a few of ways Banks Take Your Money: (see this article for the all 10)
Checking account: Consumers shouldn't assume their checking accounts are fee-free or, if they are, that they will always continue to be so. Charges vary from a flat monthly fee to one that is dependent on how many transactions you have or on a minimum account balance.

ATM:If you use an ATM that doesn't belong to your bank or doesn't have an agreement with your bank, you could get whacked twice -- once by your bank and once by the bank whose ATM you're using. Fees typically range between $2 and $4. (This has got to be the money maker, esp. in Vegas)

Overdraft: Charges can add up when you unknowingly bounce a check or go over your account balance. Many consumers argue that banks should deny them cash at the ATM if the withdrawal is going to overdraw the account. But most banks don't do so because allowing the transaction to go through and charging the subsequent penalty brings in money.

Tellers: Banks drew fire from consumers in the 1990s when they tried charging a fee if human interaction occurred when depositing or withdrawing money. There are scattered reports of these fees popping up again, mostly for "excessive" use of tellers. Some banks give you two free teller visits per month, but charge you after that -- say, $2 or $4 for each extra visit. (This one is crazy, I have never come across this one?)

Closing accounts: Many banks will charge you a fee if you close an account within 90 days -- and sometimes within six months -- of opening it. Bankrate has seen fees between $5 and $25.

Credit cards: Legislation going into effect next year will put caps on some credit-card late and over-limit fees and on how they're charged against old and new balances. Until then, expect to see them grow. Grace periods also are expected to end or be severely restricted.
By avoiding these types of fees, I believe it is just one more way that you can start creating more wealth for yourself, it starts with the little things, saving $25-$100 a year in fees. It also is about caring enough about your money that you don't waste money. I have to admit I used to not care about this stuff when I was in my early twenties and it was, by far, one of the dumbest thought processes that I have ever had. Once you start cutting cost/fees in every area of your life and reinvesting them, the more your money starts working for you. In the long run 20-30 years from now it all piles up and you will eventually have yourself a nice little nest egg.

Any other tips? or Comments? Let me know...and remember let your money start working for you!

Saturday, July 4, 2009

Thomas Jefferson on Banking Establishments

"I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." --Thomas Jefferson to John Taylor, 1816. ME 15:23

Regulating Banking Institutions

"The principle of rotation... in the body of [bank] directors... breaks in upon the espirit de corps so apt to prevail in permanent bodies; it gives a chance for the public eye penetrating into the sanctuary of those proceedings and practices, which the avarice of the directors may introduce for their personal emolument, and which the resentments of excluded directors, or the honesty of those duly admitted, might betray to the public; and it gives an opportunity at the end of the year, or at other periods, of correcting a choice, which on trial, proves to have been unfortunate." --Thomas Jefferson to Albert Gallatin, 1803. ME 10:437

Thanks to the Daily Bail for these

Thursday, July 2, 2009

Gone Surfing

Wednesday, July 1, 2009

June 09 Net Worth: 32k - 10% Growth!!!

Another month in the books and another 10%+ growth in my net worth. I am not sure how much longer I can keep the 10% jump, but it feels so good and it is the third straight month. Seems we are at a stand still with the stock market at the moment, which is fine with me, just don't start to go downward. This month was just one of those months that everything seemed to pile up on top of each other and I actually didn't make my budget(-$400.00). I spend $50 to go karting, $120 on Chicago Cubs tickets for August, $140 on Insurance(I just set up an insurance fund), $233 for getting my vehicle licensed , and $200 for a weekend in New York. With that being said, I still saved close to 2k! Lets break it down:

Cash & Savings: See above still managed to save some even with not making my budget. The reason mostly because I have a few funds growing in here. It houses the funds for my down payment on house, engagement ring, insurance, auto maintenance, Roth IRA(before I purchase), and vacation. This is why it can be deceiving, it also holds my monthly budget in it. It isn't just sitting there as a savings account even though some is. It is used on a daily bases for covering expenses, rent, food, auto, etc...

Stocks/Brokerage: Gain of $27.00 - I will take over losing $27

Retirement 401k: Slight jump from last month, mostly to the new money going into it from paychecks, as the stock market is sitting about the same place it was last month. I am ok with the steady growth here, especially since we were losing money a few months back. At the end of the day these are long term investments anyways, so no need to stress or get happy if it loses or gain slightly(just no big dips).

Retirement IRA: I actually lost some money mostly because I transfered my Roth over to Vanguard from Edward Jones and I got hit with some penalties for taking them out of certain funds prematurely(lesson learned). I think in the long run though, I made the right choice in moving everything over to Vanguard. I put about 3k in Vanguard Total Stock Market Fund(VTSMX) and the rest into Vanguard STAR Fund (VGSTX)

Debts and Liabilities - Vehicle and Credit still high

Credit Cards: Most of this is still the engagement credit card with a 12 month 0% APR, I am not going to put much a dent into this debt until the 12 month when I will pay it off in full. I have that money going straight into my saving account creating a little interest off of it till I pay it in full. The only other is $99 in AMEX credit card because of my .Mac or Mobile Me account renewed, which I will pay off in full before the interest kicks in.

Car Loan: Still the same...slowly paying it off every month. It has crossed my mind to try and sell it(for a used better gas mileage vehicle), I just have a lot going on and really don't want and have to deal with it at the moment.

So if I can keep it up and have the same type of month without all the extra, July should be nice. I have a crazy August and September coming up so this could be a month I can save a little more. I am also going to be watching the stock market very closely, if the Dow makes it to 10,000 or so, I might pull back into some cash and also rollover my old 401k to Vanguard. Until next month, I am happy and I hope you are growing your net worth as well! 

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