What does the sub prime melt down mean and who gets the blame

Right now all we seem to hear about in any economic news is the subprime meltdown and how it is responsible for everything. Now the sub prime meltdown is bad but it is also misunderstood in both cause and effect. Let’s look briefly at both sides

The Cause - Everyone wants to blame the lenders for this. To me they get say 20-40% of the blame at most, sure they were stupid and sure it is biting them in the ass right now, as it should but they are not the real ones to blame. Our nation is so fixated on passing the buck and not actually blaming the person who is guilty our grandparents may not recognize our nation if they were with us today.

So who should get the blame for taking rapidly accelerating ARMs, hybrid mortgage loans and borrowing to the absolute limits of their budgets? Doesn’t really take a genius to figure it out does it? The people that took out mortgages that were too high or had bad terms are to blame. That is your fellow Americans and or you yourself if you took out these loans. It is so ever loving easy to blame corporate America but in the end if you borrow money and can’t or don’t repay it the blame is on you, not the company that loaned you the money.

The Effect - The news about the subprime market makes me think of El Niño. Remember El Niño the weather pattern back in the 90s that we blamed for everything. To me that is the sub prime meltdown today. A stock goes down, blame the sub prime lenders. A company lays off workers blame the sub prime market. To many illegal aliens are crushing our educational and health care systems, blame it on the subprime market. Our nation has over spent and is in a 58 trillion dollar hole just for social security alone, blame it on….OK you get the point.

The reality is the subprime bust is bad, very bad but it is also being used as an excuse for other problems in the market. Even the lenders are probably more effected by toxic unsecured (credit card) debt then bad sub prime loans. Yet make no mistake lending institutions are going to loose an estimated 300-400 billion or more before the whole thing comes to an end. Some banks will get bought by other banks, some will flat out shut down and all and all this is going to be another reason for the coming recession or more accurately depression.

Yet when it hits don’t let the talking heads on the idiot box tell you it all because of the greedy sub prime lenders First they are taking a bath you would not believe right now and getting what they deserve, lost money and some going under. Next the real reason for our recession is the US Government is spending far more money then we have and has been for 35 years, the bills are coming due.

So what can you do about all this?

First I advise you to read my post from yesterday about the overall weakness in the economy and watch the video with Comptroller General David Walker to get some specific understanding of what our real problems are and to learn some ways you can protect your assets.

Second I recommend you visit MorCap Fund Advisors, LLC and read their excellent article on the subprime meltdown to better understand it and its’ impact our our economy.

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Cut your health insurance costs

I was asked to take a look at a new health insurance website called, Peoples Health Insurance and I have to say I was impressed with their offering. These guys are not a broker but an actual agency that can help you find the best rates and the best plan for your needs. I took a look specificly at health insurance Florida programs because I know by and large Florida is a high market for all insurance needs.

Health insurance costs are something I suggest you take a look at every year whether you are a self insured individual or a business owner, either way health insurance costs tend to be one of your biggest single expenses.  So now is the time early in 2008 take a moment and evaluate your current insurance program and its’ costs.  Take a look at the service they provide and what they cover and don’t cover.  You know my view if you can get the same or better for less money then do it.

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Thoughts on gun ownership and the second admendment

I am going to be brief on this post and just tell you how I feel and what I think about it along with what the Constitution and its authors actually said.

First you have to understand what the “Bill of Rights” is all about. Many of the authors of the Constitution did not want a “Bill of Rights” as they were afraid any right not included might be infringed upon.   Believing that such a list could become justification for future restriction upon right. As in “it isn’t in the Constitution so it isn’t protected”.   You see you and I are not granted rights by the Constitution, no it simply protects what is seen as a “God given right” to all humans including those around the world, not just Americans.   Such is the nature of being a “shining light on the hill”.

In other words our founders believed all men had the right to arms and did not grant anything, they only sought to preserve that right from tyranny.   Next I am tired of the crap about how the 2nd Amendment applies to the “national guard” or other such nonsense.   While the “militia” is mentioned in the Amendment the “right” is bestowed upon “the people”.   No one doubts what the clear words of “the people” means in the other amendments so why would we doubt it as it is used yet again in the second Amendment.

Further one of the very authors of the Constitution, George Mason stated, “”I ask, sir, what is the militia? It is the whole people, except for a few public officials.”   Yes the only people the founders did not see as protected by this amendment were “a few public officials” in other words the government is excluded in favor of “the people”.   Understand in this Republic we are not “granted rights” or even “granted privilege” by the government, we grant privilege and power to the government at will and at will we are empowered to remove it.   Sound like “revolutionary language”, hell it should the authors were all revolutionaries and considered traitors by the British because they sought and were willing to die for liberty.

My point is you and every other American has an absolute right to keep and bare arms and more I believe the founders saw it as a civic duty to do so.   Think about how you were told in school you should vote simply because you are fortunate to have that right protected and due to that fact you should vote in order to protect that right.   Well, how is gun ownership different?   If you don’t own a gun the thought of someone taking guns away may not bother you.   Go buy one, get trained on it, be safe and understand the empowerment of not waiting 10-30 minutes while your home is being invaded and the lives of your loved ones is in jeopardy.   Do that and then think about a law taking that gun away from you. It will change the equation.

So do I think everyone should be able to own a gun?   Not exactly I think that anyone who has not taken an action to warrant giving up that right should retain it. Just like jail, you have a right to freedom, steal from someone, violate their right and you loose your right and go to jail.   So prohibiting felons, the criminally insane and clearly nuts individuals from getting guns makes sense.   Anyone else should be permitted to quickly establish their identity and buy any gun of their choosing.

I also believe it is your civic duty as a healthy adult American to own a gun of some type.   If you have no experience first take a course and learn safety and proper use. Then spend time once in a while at the range and know how to use your gun effectively.   The more of us that do that, the harder to take away our right it will be for our government. Further let me ask you what would happen to our crime rates if say 80% of home owners had guns, knew how to use them and were willing to do so?

I am a big believer in concealed carry too but that is another post.   So what does this all have to do with building wealth, cutting costs, etc. It has everything to do with it. Proper planning involves “protecting your assets” and let me ask what greater assets you have then,

• Your Home
• Your Family
• Your Health
• Your Possessions

It is a sad state that there are vermin that will take these things away from good people but there are many such scum in our world.   In your home a gun in the hand of a properly trained adult can protect those things. Either that or dial 911 and wait!   That option isn’t good enough for me, I worked hard for what we have, I love my wife, I love my son and anyone that threatens them by entering my home unwanted has a very good chance of leaving in a horizontal position.   I make no apologies for that and neither should you.

I just thought it was a good time to point some of these things out.   I am amazed how many people think we are “granted rights by our constitution” or by the government.   No one is “granted” a right, a right by its’ very nature is inherited and should not ever be taken away from any man unless he violates the rights of others.

Just remember the law that a right left unused is often lost doesn’t just apply to voting.

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Consider a business coach

You know every great athlete, ever great performer and ever great competitor had a coach. The very best of the best had coaches that helped them to get better. Well did you know that just like pro athletes have sports coaches there are also business coaches that help business owners do a better job at running their companies and managing their time.

There are a lot of advantages to having a coach in your business.  The biggest one to me is that a coach is on the outside, they are not married to your ides, your internal dogma or your internal convictions that what you have always done has been good enough or is the only way.   I was recently asked to take a look at a website for a company called ActionCoach and I must say I was impress with them and their free resources.

One thing you might really want to check out is their Business Health Check, I ran through it and it was quite eye opening to say the least.   Remember it is a new year, time to really make things happen in Q1 so you don’t struggle in Q4.  So consider getting a business coach to help make it happen or if nothing else check out their free resources over at ActionCoach.

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What are you doing now that 2008 is here?

Don’t worry this isn’t one of my “get your financial butt in line” posts, well mostly not. I am just wondering what everyone is up to in general, like what you are watching on TV, etc. Personally I have been enjoying Celebrity Apprentice quite a bit. Check out this video showing what a snake that Omarosa is. Got to be one of the biggest sleezes known to man in my book. To me this is why so many people are looking to build a business of their own, to buy a business or just to find some way to be independently employed. I mean who really wants to deal with a corporate environment that has far more then its’ fare share of Omarosas.

I have also started out on a diet. Last year I elected to not go Elk hunting because honestly I was afraid I might die somewhere alone on the mountain. The last time I went I had a great but tough time. I came home with blistered and even bloody feet and was sore for a week. Back then old CostCutter was in much better shape. This year going out into the unforgiving wilderness alone seemed like a big risk. Since I am way to young to give up that type of life I am getting back in shape. Who knows, perhaps when I loose my weight I will come clean and say who I am.

Additionally I am breathing some new life into a few of my businesses with some creative ideas and looking to hire a few new creative and talented people. The search for talent is really tough right now, I just listened to this podcast on the shortage of talent in the market today and I have to really agree with the guest speaker. While real estate investing today seems to be a buyers market there is no question that in the talented and skilled employee market it is a sellers market. If you are good, have a proven track record and can deliver then today you call the shots. If you are in the market for a new position and are not finding a lot of opportunities I recommend you get in touch with a good executive recruiting firm.

On another note all together I really think the 2008 presidential race is off to an interesting spin. Ron Paul still seems to be shunned by the media despite basicly finishing in a three way tie with 10% of the vote while Rudy was at only 4%. Typical!

Today we focus on New Hampshire, I predict the following for the republicans.

1. Rudy does aweful and everyone says it doesn’t matter.

2. John McCain wins and his national numbers rock because people are lemmings.

3. Mitt Romney does OK and comes in second and they say it is over for him.

4. Ron Paul does far better then the 8% the polls say he can expect. Comes in third and gets ignored again.

Such is the stupidity of our media and the political process.

Moving on the the Democrats - Hillary has had a break down practically coming to tears because she was asked how her day was mostly because Barock Obama is now surging in New Hampshire and she is on track to loose again. Of course the news is making a huge deal of Barock’s massive support. His followers indeed love him, they laud his speeches and vision yet the news people can’t seem to find a single supporter that actually knows his position on any of the big issues. America, please wake up, support who you want but for the love of God know why you support them.

My personal view I think Hillary is a disaster for this country as our President, her health care plan, tax hikes and some other policies will only serve to make worse a recession that is flat out coming to hit us hard over the next few years.   That said Barock is worse, he want to tax more, spend more and make government even bigger and more intrusive then Hillary.  However he can speak very well, avoids the issues and is very likable.  This is why Hillary is in trouble, even her supporters realize Barock is going to be harder for any Republican to beat and are picking the best candidate to win in November.

I personally think Hillary is unelectable and if she looses the primary (which I predict) Barock is probably a 2 to 1 favorite just in odds to win the presidency.  In other words a Hillary loss in the primaries is bad for the republicans while her victory would be very good indeed for them.

My predictions for the Democrats in New Hampshire are as follows.

1. Barock wins by at least 10% of the vote and we hear all the liberal papers cheer how it is finally time, “for an African American president”. When the country has been “ready” for a long time and we are all really tired of being called racists in subversive ways by the communists running our press.

2. Hillary gets slammed, perhaps even damn near ties with Edwards. This is spun as the “end of Hillary by the right” and some how a “right wing conspiracy” or “anti women” thing by the left. The left leaning media will hold out all hope for Hillary and talk about how New Hampshire and Iowa “don’t really matter”. Of course they really don’t it is just that the media just spent the last 30 days convincing us how much they do indeed matter.

3. Edwards does ok in 3rd but the media talks about how that is “hope for his campaign” even though there are only four Democrats in the race. Idiots.

4. Bill Richards gets a clue and drops out.

So what are you up to in 2008? What do you think of our coming elections?

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Why Ron Paul and low taxes are good for the economy

You hear liberals all the time discuss how the tax cuts by Bush were reckless. Now look I am not exactly pleased with Bush myself right now and I think his spending (and that of our both the Democrats and Republicans in Congress) is absolutely reckless and disgraceful. Yet cutting taxes makes a lot of sense, further I think we should keep cutting lower and lower.

In fact if I had my way Ron Paul would become our next President and completely cut the income tax to zero. Think that is unreasonable? Well if we cut spending to where it was just 7 years ago we could eliminate the income tax. Yea your read that right, just cut spending to 2000 levels and we do not need an income tax. That should make you really understand just how many other taxes we already pay.

I digress though, lets just talk about an easy way to understand why lower taxes are good for our economy. Now I could go into Economic theory and formulas and such but that is not necessary. I can instead explain this in a very simple and easy to understand way, think of it simply like having a “sales”. If you ran a store and wanted to sell more products would you do it by raising prices or by having a sale?

Now that is about a stupid question isn’t it? Anybody knows when stores have sales they sell more and when they jack up pricing they sell less.

The important thing to understand is that employment, investing and spending is what drives our economy. So to understand why lower taxes drive better economies from here is really easy. Let’s look at how taxes going up or down effect each of these three factors.

Employment - When taxes are lower businesses keep more of their profits rather then giving them over to the government. When a company has more money in profit they grow. As they grow they have more needs for personal and of course they hire more people. In short a lower tax is like a sale on hiring talented people. When you tax a business higher of course we have the exact opposite effect. Companies keep less profit, there is less funding available and they grow slower and hire new people at a slower rate.

Investing - This is simple to understand. If you invest money that inherently comes with risk. So if I put 50,000 dollars into an investment I could loose much of it. On the other hand if the investment does well I end up with a profit but I only keep the part I don’t pay as taxes. For me to take a risk the upside has to be attractive so of course the lower the tax on investment profits the more attractive investments are. Now if you want me to do something incredibility risky like fund a new business I better get to keep the lion’s share of my profit or there is no good reason to take the risk.

You see when taxes are low on capital gains it is like a sale on investments. Effectively I am paying less money to make more money. Did you know that at one time tax rates were as high as 90% for some income brackets. 90%! Don’t believe me look at some historical tax rates here. Now let me ask you why would anyone risk say 100,000 dollars to fund a start up business as a part owner. End up making 200,000 dollars for the investment and then have to pay all but 10,000 of it as taxes? Why in the hell would anyone take such a risk for so small of a true return? Again when this tax goes up it is like when a store raises its’ pricing and when taxes go down money flows in a “sale like” environment. Simply put when investments go on sale more investors buy more investments.

Spending - Now I am all for saving money but if no one spends any money the economy grinds to a halt. This one is the easiest of the three to understand. Tax Joe and Jane America at a lower tax rate and they keep more of their money, when people have more they spend more. In short for the average consumer lower taxes are a “sale” on everything. You just have to do a bit of inverse thinking to understand this. Joe works 10 hours a day and makes 250 dollars for his day of work. Each day he pays 100 back in tax so he profits an actual 150 dollars.

So Joe values money according to that formula. Hence he “pays” 10 hours of his effort for a 150 dollar item. Now tax Joe only 50 dollars and he now profits at 200 dollars for the day. Now a 150 dollar item only “costs” him 7.5 hours! In short by taking less taxes Joe is now buying everything at a 25% discount.

The combined effect

The reality is the economy is like an ecosystem composed of these three factors of spending, investing and employment. None can sustain themselves with out the other two. There is far more complexity then this but a basic understanding is simple.

• When more money is available to business from profit and from investors they hire more people.
• When more people are employed they have more money to spend, hence they spend it.
• When people spend more money it drives business and results in more profits
• When people can find jobs and get paid well and are taxed lower they also invest more
• Investments then feed business

It is really a circle of economic life. In this circle low taxes are like good fertilizer that makes everything healthy and grow faster. Higher taxes are like salting the earth, they lay waste to the ecosystem and stall growth. Now democrat or republican should not matter this is mathematical science and math does not lie.

Debate the role of government if you like, support a guy with an R or a D after his name or if you are smart perhaps an I. Yet don’t ever be fooled by how there is any good to come from higher taxes. Don’t let the government pitch class warfare on you saying only the “rich” are going to see higher taxes. Right now most American’s work till April 30th to pay all taxes, that is enough, more is not the answer.

Oh and yea I really meant it that we could totally eliminate the income tax, watch this video on Ron Paul for more about that.

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