Here are some false assumptions!
- Our health-care system has failed.
- Government-sponsored health care is more efficient.
- Profit is the problem in health care today.

These statements are simply not true! Centuries of evidence from governments around the world prove that government involvement reduces effectiveness and innovation and increases costs. Health care will be no exception! The collective genius of millions of people is best harnessed through the self interest of the free markets. This is not to say that free markets are perfect; However, they are more effective than any individual or group, no matter how well intentioned, in managing the myriad implications for any decision on behalf of the public.

There is a better direction: Expand health savings accounts. Move toward catastrophic care insurance. Individuals pay for health maintenance themselves. Reward individuals for managing the costs of their own medical expenses. Promote competition for medical procedures through accurate reporting of quality and costs.

A lie is a lie no matter how many people come to believe the lie!

–Steve Vanderwey

I stole (with permission) this entire post from a recent email my brother Steve Vanderwey sent out today.  You can visit Steve anytime by clicking here:  www.stevevanderwey.com

Nothing about this person’s credit was good.  There were a number of small medical collections totalling around $800.  Then came the unpaid utility bills – around $2000.  After that we had four credit cards that totaled over $20,000 – all charged off by the credit card companies for lack of payment.

Two past landlords filed a suit for non-payment of rent and the state of Michigan has a lien filed for non- payment of taxes.

I scheduled a time to talk with this person to hear her story because my client was considering a “rent to own” situation (which I obviously cautioned in this particular case).

Some notable quotes from the phone call:

“Some of my debts are mine and some are from someone else who stole my credit.”

“I’m considering filing bankruptcy (for which she will represent herself) but I will only wrap in those debts that are mine, not the ones that this other person took out, because I’m a Christian person and I’m not like that.”

(Christian enough to go into debt and to file bankruptcy)  Don’t get me wrong, I don’t think all debt is unchristian, but come-on, this is sounding a lot like justification for bad behavior, but it gets better!

She kept saying that her situation was because of a medically related problem she had, so naturally I asked her for the amount of medical bills she paid that caused her to go behind on so many other bills.  She informed me that Medicare covered everything except for the amount on the credit report (remember, this came to $800 and she plans to file bankruptcy to avoid paying this).

Then I asked her for her proof of income, because she must have lost time at work; that must be the reason she went behind on all of these accounts.  Nothing there either.  She was employed – and paid full time – right up to the point that she was approved for disability (did I mention the lawsuit against her employer) – she was recently awarded over $30,000 cash and was then given a disability income of 60% of her net pay – really not skipping a beat.

“Getting this disability was a Godsend” she said, relieved.  “I’m hoping to make a little bit of money from home while I take care of my sister’s kids for her, my sister will pay me under the table and I’m allowed to make a certain level of income with out losing the disability pay” (Oops, don’t tell the Christians at church about this one either – good thing for privacy laws!).

Next time you hear a politician sell you a costly health care bill because 50% of all bankruptcies are related to someone’s lack of health care – which is the box this woman checked on her self prepared bankruptcy filing – think of her and vote for a different plan.

The plan that’s currently on the table makes this kind of behavior standard.  Why would I pay for something if other responsible citizens will pay for me?  I guess now even the Christians can’t be trusted on this one.  Go figure that into the cost of the bill!

1. What is the S & P Case-Shiller 20 City Housing Index and what does it tell us?
2. How is the information on the cover of the WSJ today relevant to us in Lansing MI?
3. What are some helpful conclusions we should draw from this information?

CASE-SHILLER 20 CITY INDEX

Your city’s “Case-Shiller number” (index) is a measurement of the appreciation over time of home values as a percentage above or below the national inflation rate.  Think about that sentence for a minute.  How much more or less has the value of my home appreciated – than inflation?  This is a good question, and if you live in one of these 20 cities, you can find out.

Very simply, if this month’s number for your city is 100, then the value of your home, since the index began in 1890, did not go up any more or less than inflation.  (Inflation has on average been around 3% since that time.)

An index under 100 means that your home would sell today for an amount less than it would have IF the value had tracked right with the national inflation rate.  Your home’s value has less than kept up with the inflation rate.  According to the index, your home is under valued.

An index of 100 means that your home is worth exactly what it should be IF homes in fact appreciate right along with inflation.  If you bought your home in 1890 and there had been no inflation since that year, then you would sell it for the same exact price you paid for it back then.

If the index is currently over 100 for your city, then your home is currently worth more than it would be if the home value tracked right with national inflation numbers since 1890.  According to the index, your home is over valued.  Detroit peaked in 2006 at 127.

Remember though, this is only a guide.  Different areas of the country can track differently from inflation for decades, and in fact do.

The May 2009 number for Detroit is 70.47 and no index is tracked for Lansing.  Let’s say that you could have purchased a home in Detroit for $5000 in 1890 (which you could have).  Today, your home should be worth around $165,000 if the index was 100 – but because we are currently at only 70% of full value (GM, recession, etc), you can buy that home for $115,000.  Remember though, if you had bought that home in 2006 when the index was 127 – you would have paid around $200,000 for it.  So, if you paid $200,000 for a home in Detroit in February 2006, you could get $115,000 for it today.  These numbers are pretty much right on with the Case-Shiller estimates (if you don’t believe me, forward this email to a Realtor in Detroit and they’ll tell you).

So, how is the information on the cover of the WSJ relevant to us in Lansing MI?

If you haven’t seen it.  The WSJ posted gains in the last month in 13 out of 20 major cities – Including Detroit!!

We are, at the same time, both like and unlike Detroit.  We likely “peaked” a few months later than Detroit, and our number likely did not get as high as Detroit’s so we are not JUST like Detroit.  However, our turns have tracked along the automotive lines and our numbers show that we too are very likely well below our inflation index.  Bottom line – we dropped like a rock in home values over the past two years just like Detroit did and just like Detroit, our average home values had only risen 20% – 40% during the 2000 to 2005 run up in prices rather than more than doubling in some of the worst off markets like South Florida, Southern Cal and Nevada.

From here on out it’s a still a jobs issue – because it’s always been a jobs issue.  When more people go to work here, then more families buy homes here.  When more families buy homes here, then the supply shrinks.  We are already down to an 8 month supply of homes – once we get below a 5 months supply, we will see the prices go flat.  At three months or less, the prices will rise.

It’s important to draw a distinction at this point between two types of home buyers:  Speculator and Investors.  Speculators are seeking a fast profit on the quick turn of an investment and need to see that happen in less than a year or two.  An investor is seeking to realize a large gain over a long period of time by increasing total holdings.

If you are a speculator, this may or may not be the time for you.  Be prepared to hold longer than you want to; jobs are coming back to Michigan, but may take some time.

If you are buying as an investor, you will do well if you buy now.  You might do a little better next year, you might do a little worse next year, but if you buy now you will make very good money in the long run.  Think about it – not only will you get the rate of inflation which is a 3% growth in the asset, you will also get to see the numbers rise faster than that at some point in the future to get to the 100 index again – 30% over inflation!  And, you have to live somewhere.

What are some helpful conclusions we should draw from this information?

1. Relative to the years 2000 through 2007, when the Detroit index number was over 100% topping out at 127% in February 2006, TODAY is a great time to buy a home in Michigan.  The Detroit Case-Shiller index is 70%!
2. If you want to move but have a home to sell.  Consider renting your current home to a family who needs a good home to rent (many out there right now) and then buy another home.  If you qualify for this and can take a little added hassle up front, you will enjoy a rising index on two homes rather than just one.  Buying low (by moving up now) and selling high (by selling your home later) in Michigan has never been more of a reality!
3. When you buy a home, make sure that you can afford it.  The debt and income percentages set by FHA and Fannie Mae are still excessive in my opinion.
4. If you have any other consumer debt (credit cards and car loans), consider paying it off before buying a home.  If you do buy a home first, make a commitment to eliminating your consumer debt as fast as possible.  You will be able to save more as a result.  Your home will appreciate with inflation, and as you pay it off there will be a lot of equity in it when you sell it down the road.  But, you won’t be able to retire on the equity in your home, so you need to make sure you can make your mortgage payment AND save money each month.

You can find new Case-Shiller information for yourself every last Tuesday of the month on the following site:

http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html

This morning I caught a short conversation from someone filling in for Walt Sorg talking to the head of the Michigan Film Initiative.  She was reporting a 100% increase in the number of films being produced here in Michigan.  Some 35 works were shot right here, in PURE Michigan, last year in 2008, and this year we are on pace to increase that again!

This, she went on to explain, is good for area business and our general economy.  “If people only knew” she went on to say, “just how many area businesses benefit when just one film is filmed here - It’s hard to add it all up actually.”

Clint Eastwood (filmed Gran Torino here) said that he believes Michigan will be the next Film Capital of the World!  Go ahead Clint, Make our Day!!  We love the business.

The host then asked a good question of his guest.  Why, do you suppose, are we getting all of this new attention from film makers?

You will be shocked (my tongue is planted firmly in my cheek now) at her answer.  Ready?  It’s monumental!  Here it comes… She said:

“We gave them a 42% tax credit.”

Wow, who would have thought!

You let an entrepreneur keep more of the earnings from projects and they will decide to do business here.  THEN, when they get here, they spend some of their earning HERE, in Michigan.  They may even begin to enjoy Michigan.  Maybe they will buy a PURE Michigan home and put some of their money into a PURE Michigan bank and eat PURE Michigan grown food in our restaurants.

If anyone reading this knows the Governor, send her a memo for me.

You better get with the program and understand that raising taxes (much less, creating a tax on a tax) is NOT a good way to promote PURE Michigan.

We spend MILLIONS on PURE Michigan adds around the country.  Yet we have an Iron Curton of taxes at the boarder keeping out anyone that isn’t on the “we want to give you a temporary tax credit” list.

Temporary tax credits create temporary results.  Permanent tax reductions create lasting results.

“Economics is more than a way to see patterns or to unravel puzzling anomalies.  Its fundamental concern is with the material standard of living of society as a whole and how that is affected by particular decisions made by individuals and institutions. One of the ways of doing this is to look at the economic policies and economic systems in terms of the incentives they create, rather than simply the goals they pursue. This means that consequences matter more than intentions - and not just immediate consequences, but also the longer run repercussions of decisions, policies, and institutions.”  (emphasis mine)

~Thomas Sowell, Basic Economics – page 1

Enough said.  At some point, enough good businesses will pack up their home offices (where all the employees are) and move to Texas where the weather is always warm and the tax forms are short (and, incidentally, where home values have risen through this entire crisis).

Do I buy a half gallon of milk or a full gallon?  We leave for vacation in two days.  I find myself staring at the milk for more seconds than this decision should take; nevertheless, I need to decide.  In the end though, this decision will not impact my future, the well being of my kids, or anything else that I hold dear.  I buy the gallon – we like milk and with 8 mouths in my house for breakfast every morning, we will burn through a half gallon for sure just in the cereal!

You may have heard this before, that when it comes to building wealth just a few right decisions over the course of many years of investing are all it takes to be successful in that endeavor.  I agree with that statement.

The job of your investor coach–if you’re fortunate enough to have one–is to help you understand if the question or decision you face is one of those right ones or not.  Is the question or the information relevant to my success as an investor?  Or will it amount to nothing in the grand scheme of things?  What impact will a less than “perfect” choice have on my future?  Will this question and its answer contribute positively or negatively to my confidence and peace of mind when it comes to my investments?

Part of being a mature investor is learning how to discern the difference between the important and the unimportant.

One (and there are 20 total) of these questions for investors is:

Are you INVESTED in the MARKET?

There are two reasons that this is an important question: the first is easy to pick out and answer, and the second is imbedded in the question a little but is just as important.

The answer that will give you the greatest level of peace of mind with respect to investing is – YES.  You will have less peace of mind in the long run if you are not invested in the stock market.  We teach an hour class on how to do it and how not to do it, but here’s a short answer: if you are not in the market, then the cost of living will grow as fast if not faster than your nest egg.  The stock market has predictably added 6% return OVER the rising cost of living (inflation), so investing in it gives you the return you need to grow your wealth in real terms.

A note of caution: Life insurance and annuity products that offer “guarantees” or “tax benefits” don’t count, even if they say they are indexed to the market or investing in stocks.  The insurance company or “the house” always wins.  The only thing they really guarantee, if you think about it, is a substandard rate of return.

The second reason this is a good question is more implicit then explicit.  You must be INVESTED in the market.  Market participants often get speculating confused with INVESTING.  You will get no peace of mind from activities that amount to speculation.  Hyperactive stock picking and market timing (getting in and out of the market multiple times in a year to try and win some short term profits) are techniques used by money managers all the time.  Clear your portfolio of all such activity!

INVEST in the MARKET.  Get this one really right and you will go far.

This got me thinking. This young guy is starting his investing education – is he getting more than just a set of contextless facts?

A few decades ago we NEVER received any information with out a context. Our preachers preached sermons from a context. Our teachers gave us lectures from a context. Our parents taught and raised us in their context. These things all still happen.

Today, however, there is much more information out there that comes without context.  Just Google GOOGLE and see what you come up with.  Is any of the information really helpful in deciding on the stock?  Don’t get me wrong. I’m not saying that the information we are getting is neutral – far from it!  Everyone giving facts has an angle.  I’m simply saying that for most of the facts we get today, the context is not clear or given along with them.

So, is Google a good buy today?

This SHOULD beg more important questions, like:  What is the best criteria for a good buy in the stock market?  Even better: How should I own stocks?

Without these questions, Google will give you a bunch of “facts” about GOOGLE – none of which will help you form a sound opinion.  These types of questions begin to form a helpful context from which to gather facts.

So Chris, here is what you need to know to make your decision – we’ll start with the truth about investing and then move to the facts:

1. No one can predict the future of Google stock (or any stock).  You will find an opinion to match almost any action you might want to take, but no one can KNOW what will happen. You will find that many will spend a lot of time and money speculating about it, giving you a lot of useless information.

2. The price of Google today is the best representation of the value of Google today. Free Markets have exchanged information about this company – and the market as a whole – more efficiently in these times than in any era before. All of that information is already factored into the price of Google today. ONLY NEW AND UNKNOWABLE INFORMATION WILL CHANGE ITS FUTURE PRICE UP OR DOWN.

3. There are five deadly investor mistakes. The first one is this: TOO MUCH MONEY IN ONE STOCK.

So let’s wrap up this lesson – if your context is entertainment – then the facts you will read about when you google GOOGLE will fuel the fun.  You might even get lucky along with some mutual fund managers and increase the value of your portfolio for a time by owning it.  But be careful, both the praise and the money is addictive. Don’t get trapped by it.

If your context is the more important work of investing, then invest wisely.

Buy GOOGLE, and wisely diversify it along with holdings of over 12000 or more companies in over 40 plus free countries in 10 plus different categories.  In this context, you can look at GOOGLE for what it is:

1.  A large US company that when taken as a class (all large US companies) you will out earn inflation by 6% over any 30+ year period in history. So yes, buy Google (and every other large US company you can find).

2.  As a stock asset class, large US companies are the worst performing class of assets that you can choose from.  So yes, buy GOOGLE, along with every other large US company, but don’t own very much of it.  It’s not all that exciting compared to the other classes you have to choose from.

3.  As an asset class, GOOGLE and other large US companies tend to act very dissimilar from other asset classes, like emerging markets for example whose companies’ share prices are up over 40% this year as opposed to large US companies (including GOOGLE) which are barely positive year to date.

4.  As always, remember that market timing (trying to get into and out of the market quickly to make a profit) is a losing proposition for the investor.  The AVERAGE return for the market timer is just under -1.0%. Yes, negative one percent.

Remember that every week the lottery turns out a winner.  The same will statistically be true of the stock market.  Every decade, someone will become famous by winning that loser’s game by getting a return that exceeds the market return – with the millions playing every day, it is statistically impossible for it not to happen.

However, no one has ever repeated their winning results – ever.

The return the market gives for free always beats the expensive lesson that is learned by those who try to beat it.

Buy GOOGLE – as an investor, as a part of a wise investment strategy – and then hold onto it no matter what they tell you.

I recently finished facilitating a Dave Ramsey Financial Peace course at my church. One of the things I like best about Dave and his material is that he is very good at getting his students to HATE credit cards and car loans. If you have debt, then I agree with Dave who suggests a level of motivation to pay it ALL off that matches the intensity of this gazelle as it narrowly escapes being lunch to a cheetah! Ask yourself: “would this gazelle make this purchase if it might mean stopping or slowing down for even a moment?” Many have found great motivation in this short video. RUN! RUN! RUN!!!! Don’t let it catch you!!” Resolve to pay off all of your debt, and this time for good!