The Creating Wealth Blog

The TARP is Leaking

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 05 Nov 2009 16:23:00 +0000

It seems I have been a bit too positive of late... as American taxpayers just took a $2.3 billion hit in their public investment portfolio. Yes, we were all told that the "bail out" could offer significant returns for the American taxpayer, and there was a good deal of hope flying around the country that the economy would get back to the good old days sooner rather than later.

CIT Group's failure and subsequent filing for protection under US Chapter 11 bankruptcy laws prove only that the economy, and the banking industry specifically, is far from stable. Their failure to pay dividends to the US government in the third quarter makes them the largest institution that accepted TARP (Troubled Asset Relief Program) funds to do so. And CIT was only one of eight banks behind on dividend payments.

What really is the American taxpayer getting for their investment? That's what the bail out in essence was sold as. According to the Huffington Post, three major issues have been left unresolved. Top executives at banks have not had their salaries cut, even after the government takeover, but have rather been given long term stock options and had their base salaries raised, so that they will not seek work elsewhere. The "too big to fail" financial institutions that are rather "too big to exist" need to be broken up to ensure that there is never again a need for another AIG-style bailout, but there has been no mention of trust busting. Also, when is the government getting out of the banking industry? Where's the exit strategy? The strategy of the federal government towards US banking institutions is beginning to look more and more like the war in Afghanistan!

So, what about the auto companies? Daimler Chrysler and GM both came under TARP. It is now looking as if:

Taxpayers are unlikely to recover their full investment in General Motors or Chrysler, U.S. government investigators said Monday in the latest review to cast doubts that the government will recoup the $80 billion it poured into the two automakers.

GM used part of its bail out to buy Delphi, an auto parts maker. With 61% of the company now owned by the American taxpayer, it is unlikely to be nimble enough to show a profit any time soon. The federal government has become the majority shareholder in GM, and purchases of $100 million or more must now be decided by the Feds. That is not any way to run a profitable business.

Now there is further news that TARP is going on steroids, as the White House opposes a proposal that would limit TARP funds to $1 trillion. All this while some of the best and brightest minds that oversaw the collapse of the US financial system are now in positions of economic leadership in the Obama administration. Yes, the government needs an exit strategy, and fast. But with these insiders doling out money to their former associates, there is no sign of TARP ending.

On a more positive note, E*Trade withdrew its request for TARP funds and Bank of America (BOA) wants to pay back the TARP funds it borrowed to allow it to take over Merril Lynch, thus allowing it to pay its workers as it deems fit. Seems BOA may be one of the few big banking institutions that may get through this crisis.

Networking at Social Events

darupprecht@gmail.com (D. A. Rupprecht) — Sat, 31 Oct 2009 12:07:00 +0000

With what is referred to as the silly season fast approaching in South Africa, I wanted to offer a little advice on how to network at social occasions. While a good portion of your business may come your way because of an ad in the yellow pages, a website, or even via word of mouth, one shouldn't look at the various social gatherings that inevitably fill people's calendars throughout the month of December as a waste of time when it comes to gleaning business. Such occasions can help provide business networking opportunities.

Now, I'm not talking about social networking, as in Facebook, MySpace, LinkedIn, Twitter, and other social networking sites on the Internet. This new type of networking is becoming ever more important in the business world, but that topic's for another day. I'm talking about meeting people in real life at social occasions and turning these potential meetings into money making opportunities.

I've always been of the persuasion that anyone I meet can offer me an opportunity, and I just have to keep aware of these opportunities. So often at parties people ask what you do for a living. This little exchange of information can lead to something else. Say, for example, you meet a real estate agent at a social function. You may not be looking to buy property at the time, but you may have a friend or relative who is. Perhaps you are a building contractor, and start up a conversation with someone who is looking into renovating. Perhaps you are a financial advisor, and meet someone who has just inherited some money that they want to invest. Or perhaps you are a dentist, and come across someone who is looking for new caps. Whatever the occasion and whoever you meet, there's a distinct probability that you could help the other person out or they could help you, or either (or both) of you know someone who could benefit from knowing the other.

Remember, however, that it's not just about you. A conversation at a holiday party should be a two way street, and exchanging ideas with someone you've just met can leave a lasting memory. A big part of marketing is just that. Leaving a lasting impression. If you can do that, you're halfway there.

If you're an owner of a business, or someone with a slew of business clientele, you may want to look into hosting a holiday party. A good holiday party can create greater cohesion between your employees and improve morale, something that may be necessary in these uncertain economic times. Inviting clients to a party during the holidays can also show how much you appreciate them, and a Christmas party - to which we had been invited a couple years back - was a favorite way for RattleWalton Property Professionals to wrap up the year.

Hosting a party doesn't have to be stressful. Often it's more about the people than the refreshments, though one shouldn't skimp too much, especially if trying to impress potential clients. If you're planning a party in today's every more environmentally conscious business world, it may not be a bad idea to make it green.

Networking needn't apply to just social events, either. Serendipidity can offer the same advantages. Talking to someone on the train or bus on your way to work, or conversing with someone in line with you at the supermarket can develop contacts that sometimes result in new business.

Above all, don't forget your business cards! Even in this digital age, a small piece of paper with your contact information on it will allow the person to whom you've given it to be able to contact you. Without a business card or some other means for a person to remember you (and a slip of paper with your number and e-mail addressed scrawled on it just isn't the same), there's no way for someone you meet to contact you. Edward Glass tells about just such an occasion:

A couple of years ago while doing some volunteer computer work at a local non-profit, the Director had a Christmas party and invited the entire staff. She was a wealthy lady (and)... she had directors from other non-profits. (S)he introduced me as her computer guy, (said) how great I was and how I fixed all their computing issues, etc. Some of the other directors expressed an interest in having such a skilled computer person, which would have presented some good side job opportunities... it could have lead to other opportunities as most of the people at the party were wealthy business owners... A couple of them asked me for a business card. Much to my dismay, I had to reply that I did not have one, (and) they replied by saying, "Oh, maybe we will get with your boss to get your info". Needless to say, I never heard a thing about it and what could have been a good opportunity went down in flames.

All in all, parties and other social occasions during the holidays offer not only a fun time but a means by which you can market yourself.

Investing in Art & Antiques

darupprecht@gmail.com (D. A. Rupprecht) — Sat, 31 Oct 2009 05:56:00 +0000

There are some things you should know before you start investing in art or antiques. According to Stephen Welz, director of South African auctioneers Strauss & Company, art is not an investment in the purest sense of that word. It does not offer dividends or interest, and may even cost an owner money in upkeep and restoration. It is best for a person who wishes to get into investment such as that with antiques or artwork to think of it as more of a hobby.

Yet having artwork or antiques as assets can offer tremendous returns for those who are patient. In the past couple of years, investments in artwork have even outperformed equities. Virginia Wilson, an Australian art consultant, says this about art investments:

"Art has been an attractive investment for centuries and is becoming increasingly recognized as it has outperformed more conservative investments over the last few decades. It is an alternative investment earning capital gains rather than a dividend."

Now, there is a vast difference between investing and speculating when it comes to purchasing art or antiques. Art and antiques generally will increase in value over the long term rather than the short term, so speculation should very rarely come into play. That said, it is not impossible to find an exquisite piece at a garage sale or even in an antique shop, and then turn around to sell it for a quick profit. This is the exception rather than the rule, however.

Most art and antique collections begin more as hobbies than investments, but those considering artwork as investments ought to look at a period of ten years or more. Though these types of investments will never completely lose their value, as is possible with certain equities, there is an element of risk. Often, art and antiques shift with what is popular at the moment, though according to Wolfgang Wilke in his report 'Investing in Art':

"The long-term trend in inflation adjusted art prices follows the general economic trend, i.e., art prices rise above average compared to the prices of other goods. However, lower priced categories react quickly to worsening economic environment. An economic slowdown causes drop in demand and an increase in supply (plummeting assets and income trigger offloading), leading to forced selling. This, however, does not apply at all or only rarely to artworks in the top price category."

Considering antiques specifically, it is generally best to buy only investment grade antiques, according to Ed Welch, who has been in the business for over 40 years. He says this about collecting antiques:

Collecting investment grade antiques is similar to investing long-term in the stock market. Investment grade stocks, if held between 10 and 30 years, will make money. Everyone knows the big companies whose stocks are considered investment grade (General Motors, IBM, Coke, just to name a few). Buy the stocks when you are young and sell them when you retire, and common wisdom has it that you will make a lot of money. This method of investing somewhat like watching grass grow. Nevertheless, it often works. Collecting investment grade antiques is a bit more exciting, but not much. About one-tenth of one percent of any category of antique is of investment grade. If you want to make money collecting antiques, buy the best art glass, the best period furniture, the best paintings and sculpture. Keep these items 10 to 30 years and you will make money.

It is certainly possible to buy and sell antiques and artwork like other , according to the 31 Club's Daryle Lambert. His personal wealth building group started with a checking account with $125, and after six months this had grown to about $7500, with other items still waiting to be sold. This is a 6000% profit in six months!

That said, it is important to remember, as with any form of investment, that knowledge is the key to success. The more you learn about fine art and antiques as well as the market for these items, the more likely you will be able to be able to successfully create wealth from buying and selling them.

It should also be noted that if you are going to get into collecting artwork or antiques that are worthy of investment, you will have to travel elsewhere to buy them, and will probably also need to ship and store them. There are companies that specialize in both art shipping and antique shipping. When you need to ship valuables that can be easily damaged, such as art work or antiques, it is imperative that you use a reputable company to transport these very valuable assets.

Relocating for Work

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 29 Oct 2009 13:45:00 +0000

There is a trend emerging more and more in this current (dare I say post-recessionary?) job market that makes corporate housing even more important for employees who are relocating for work.

A recent USA World & News Report article gives a clearer picture. As the recession begins to fade, the percentage of people who relocate for work has more than doubled since early last year, from 8.9% to 18.2%. There are a number of reasons why people are more likely to relocate now than last year. First of all, the recession, which has lasted 20 months, has left many skilled people out of work for periods of over a year. Many people have also had their houses foreclosed upon, ridding them of an impediment towards moving. Chief executive John Challenger says this about this recent trend:

“While job seekers are no less likely to lose money on the sale of their home and the job market is only marginally more stable than it was six months ago, the overwhelming desire to get back to work appears to be outweighing the perceived risks."

Often in the past it was corporations who needed people to move to set up a new location or to otherwise do work in a place where the company needed veteran employees. This is still happening, and on a personal level, my wife's brother-in-law decided to leave the cool (some say cold) and wet climate of England - Kent to be more precise - in order to take up a position in Sydney, Australia with Bose. Now, I do not know the details, but it seems as if the Australian market for Bose has been suffering considerably, and they need someone who can fix it.

Advice on Relocation

That said, there are a few common sense issues that Kristen Fischer talks about before making that move. If you have a family, relocating becomes increasingly more complex. Children will have to leave friends and school behind, and talking to them, as well as the other parent, is necessary so that there is less stress on the family. If it is a corporate move, make sure that you negotiate the best deal possible so that you are paying out as little as possible. If you have children, think about when you are moving, as it may disrupt schooling. Sometimes it is better for the parent who is relocating for the job to move first, while the other parent stays behind until the end of a school term, or even to wait until the house sells.

Dimitri A.C. Ly also gives some good advice on relocating for work. These include advice on cost of living, climate, and other living conditions in the potential new locales as well as advice on visas if relocating overseas. Investigate everything about a promising location to ensure that there are few surprises. As there is only so much you can glean about a place over the Internet, it is best to do some reconnoitering in person. Budgeting a move is equally as important, as it can put considerable pressure on a person's finances. Perhaps most importantly, however, is determining whether this new place offers a better chance of advancement for a person with your set of skills.

Where to Move?

If the relocation is not due to a your company asking you to relocate, but you are rather moving on your own accord to take advantage of job opportunities in a new area, you may want to look at this map of the US, which gives an idea of the income growth potential throughout the US, as well as showing some of the best urban areas for salary growth.

Here is a list of places with the most job listings per capita:

Washington, D.C.
Baltimore
San Jose, Calif.
Austin
Hartford, Conn.
Seattle, Wash.
Salt Lake City
Denver
Boston
Las Vegas (Charlotte, NC came in with the same number of listings per capita)

For those who work in creative fields, there are a number of cities who need people with skills in certain areas:

San Francisco: actors
Dallas: chefs, writers and authors, singers and musicians, and floral designers
Provo, UT: top location for graphic designers
New York City: photographers and chefs
Minneapolis: architects, chefs, singers, and musicians
Cleveland: chefs
Milwaukee: architects
Los Angeles: fashion designers and choreographers
Virginia Beach: bartenders
Las Vegas: hairdresser or cosmetologist

Once you are in a secure job situation once again, then you can start creating wealth, and saving for your future...

Timing is Everything

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 29 Oct 2009 10:41:00 +0000

There are a number of reasons why real estate investors should consider trust deed investments as one method to help raise capital to finance real estate investments. One of the best reasons is easy access to cash. Not so long ago, we saw the credit market practically dry up during the recent economic downturn, with many people unable to obtain mortgages, even if they had good credit.

Real estate investment necessitates having easy access to large amounts of capital to close deals, and often times mortgages through banking institutions take weeks or even months before they are approved. This time lapse can kill a deal. That is why savvy real estate investors so often choose private financing through trust deeds over bank mortgages, at least in the short term.

Consider, for example, that you are an investor and have found a property that is on the market at a considerably discounted price. These days, with the flood of foreclosures on the market, it can seem easy enough to find a good deal. However, there are others out there also trying to purchase these same foreclosure properties, and by having easy access to cash an investor can often clinch a deal ahead of someone who is relying on a bank loan. That is one of the main reasons why borrowing through the use of trust deeds works so well for those involved in real estate investing.

As a borrower, making use of trust deeds to finance a purchase can mean the difference between closing and losing a deal. Having access to cash with which to seal a deal will enable the investor to take advantage of the discounted price, and enable the investor to either quickly sell it on, also called "flipping" a property, or using it as a bridging loan in order to obtain a mortgage through a bank.

Any real estate broker can enable a trust deed transaction, but an investor in trust deeds should be knowledgeable about all aspects of any property in which he or she invests. This goes for both the borrower, who generally is also an investor, and the investor in the trust deeds.

As a borrower utilizing a deed of trust to secure a property, you will likely be paying considerably more in interest, so you should ensure that you get the property at a significantly discounted rate, as normally a deed of trust will cover no more than 60% of the property's real value.

Say, for example, an investor (borrower) spots a house that is about to be foreclosed upon. The value of the house is $200,000, and the current owner, the seller, has a mortgage on it of $100,000. Due to circumstances, such as job loss, the seller may not be able to hold onto the property long enough to realize the price it is worth, so may be willing to accept a lower bid on it as long as the seller can come out of the deal with a bit of cash and a clean credit rating, something that would be destroyed if their property were to be foreclosed upon.

The investor makes an offer of $120,000, which gives the seller $20,000 in cash, and pays off the seller's mortgage. The investor then in turn approaches a real estate broker (in reality the investor would already have contact with a reputable broker) to guarantee the purchase of the property with a deed of trust.

The investor may then do one of two things. Either flip the property or rent it out. By flipping this property, the investor could still accept a price significantly below its real value while still pocketing a nice chunk as profit. Conceivably, considering the property above, the borrower/investor could make a profit of $80,ooo, less payments made towards the holders of the deed of trust.

By renting the property out, the investor can gain not only through the appreciation of the price, but can also bring in a steady monthly income. With this second option in which the borrower keeps the property on a more long term basis, a mortgage with a lower interest rate is usually sought to replace the deed of trust.

Deeds of trust are one way real estate investors can get around the shortage of credit and take advantage of the current foreclosures that are still coming on the market.

Negotiating Away Debt

darupprecht@gmail.com (D. A. Rupprecht) — Wed, 28 Oct 2009 12:22:00 +0000

Last week I wrote a post about debt settlement, and how it could be a solution for some people to get out of debt so that they can start creating wealth for themselves and their families. Americans and others in Western countries these days are struggling under a mountain of debt, partly the result of a culture that taught people to consume at all costs.

This consumer culture created a false aura of wealth, as people spent borrowed money on unnecessary goods and services. This culture of spending helped create an atmosphere in which people spent and did not save, building debt instead of wealth. The result of this debt culture psychology culminated in a world wide recession that nearly brought about the collapse of the current economic system.

While there are companies that can help negotiate unsecured debt, often it is not cost effective for these companies to deal with lesser amounts of debt. In these cases, it may in fact be better to deal with your creditors directly. It is possible for an individual to negotiate with his or her creditors, and it is definitely better to talk to them than to ignore the situation.

The first thing to do once you find yourself falling behind on bills is to contact your creditors before they decide to go to court to attempt to collect the debt. K. D. Garrow offers some good advice about negotiating settlements with creditors:

If you try negotiating settlements with creditors yourself without any help or advice, it is highly unlikely that you will manage to get very good agreements. Much depends on knowing about the procedures that different companies work to, which will dictate how you plan your actions and approaches. When you choose to make an offer to a creditor can significantly affect the result you achieve. A good guide to debt settlement negotiation will tell you exactly how and when to make your approaches, tell you exactly what you need to say and even provide scripts for phone calls and drafts of letters you need to send.

Once you have decided to deal directly with your creditors, there are a number of different things of which you should be aware. Knowing your rights is perhaps the most important investment you can make to get out of debt. "When you know your rights, debt collectors know they can't get away with certain things," says Gerri Detweiler, author of 'The Ultimate Credit Handbook.' "They're less likely to try aggressive tactics."

In the United States, there is a statute of limitations on debt, after which creditors can no longer attempt to collect on a debt. Usually, this will be somewhere between three to six years, though in some states it can be as long as fifteen. Be careful, however, as making a payment on an account will start this statute of limitations all over.

Candace Gillingwater brings up a number of other good points about negotiating with creditors.
It is a smart move to start budgeting for a lump-sum payment, as this is the best bargaining tool a debtor can utilize. Contacting a debt collector towards the end of the month will also tend to make a creditor more malleable, as collection agencies work on quota systems, and towards the end of the month they will be trying to meet their quotas. It is additionally important that the creditor take all negative information off your credit report in exchange for the lump-sum payment. Also, ensure that there is an agreement that keeps your creditor from selling on the remainder of your debt, otherwise you will be going through the process all over again. Perhaps most importantly, always insist on a written agreement before you pay a cent.

Once you are out of debt, do everything possible to keep yourself out of it. Do not go back to spending frivolously. As the old saying goes about history, "Those who cannot remember the past are condemned to repeat it."

Here Comes the Sun: Don't Count Out Solar

darupprecht@gmail.com (D. A. Rupprecht) — Tue, 27 Oct 2009 11:15:00 +0000

I wrote a p ost back in January about how I thought solar and other alternative energy producers would get a big kick from the Obama administration's plans to incentivize solar and other types of alternative energy. This is a long term trend, and certainly will not happen overnight. Expect to see solar and other green energy go in the opposite direction of oil and other carbon based energy sources. In other words, when oil prices slide, you can generally expect solar companies' stocks to sink with it. When they rise, expect them to do better. If you look at the price of crude over the past year and look at solar stocks over the same period, you can see a pattern.

That said, keep in mind, as with any stock, that the company must look to the future. Remember when the dot com boom went bust? Look to companies that can provide investors with a concrete plan. And yes, I think this is why First Solar (FSLR) recently took a hit of 11% in its stock prices. They do not yet have a coherent strategy for how they will move forward, and investors sense this.

The cost of getting energy from the sun will remain a factor until solar energy becomes cheaper. Consumers, and especially businesses, will gauge their energy usage according to their bottom lines, especially in the current economic climate. When solar becomes more economical, you can then expect businesses to jump on the bandwagon. That may come sooner than we think, as early as 2012 photovoltaic solar cells are slated to provide cheaper energy than gas.

So why are solar stocks like First Solar (FSLR), SunPower Corp. (SPWRA), and MEMC (WFR) down when oil prices are rising? There are two reasons. Firstly, the credit crunch snuffed out considerable demand for ALL energy, including solar, which is why since the middle of 2008 stock prices for these companies declined along with oil prices. Another reason is because a new player has entered the solar panel market.

China is now in the solar panel market, and because of heavy subsidies Chinese companies have halved the price of solar panels to consumers. Chinese companies Suntech and Yingli Solar (NYSE:YGE) intend to build manufacturing plants in the US in order to circumvent any anti-Chinese backlash from American consumers. They are set to assemble panels from solar wafers that are made in China, which cost a fraction of those made in the US and other Western countries.

The good thing is that this will make solar power more affordable. The bad thing is that it will put extreme pressure on the nascent US solar industry, and will inevitably cause some American solar companies to fail. Expect mergers and bankruptcies for those solar companies that cannot compete. One should not count out First Solar, however, as its technology has allowed it to be the only profitable solar power company in the US:

The company recently signed a memorandum of understanding with the Chinese government to build a 2 gigawatt solar power plant in Ordos City, Inner Mongolia, China. In August, First Solar announced that it will build a 550-megawatt solar power generation facility for Southern California Edison, a unit of Edison International by the end of 2015. California has aggressively pursued energy efficiency. Recently, California Governor Arnold Schwarzenegger approved a new subsidy for solar power.

If you are going to invest in solar power, my advice is to buy a solar water heater. It will save you money. But if you have the money to risk and a gambling spirit, investigate which solar company seems to have the best plan for the future. Buy it and hold it. This is a long term investment, and the winners of the price war will become the next energy giant, as GE became in the 20th century. The price war with the Chinese is set to keep profits of American companies down for the foreseeable future, but I expect from what I have read about First Solar that it will become an international player in the long term.

Marketing Through Business Cards

darupprecht@gmail.com (D. A. Rupprecht) — Fri, 23 Oct 2009 19:04:00 +0000

One of the key factors in any new business endeavor is marketing. A business needs customers, and it needs a means by which customers can easily find it. In any business marketing strategy, you have to get your name out there, telling people briefly what you do and how to contact you.
Marketing is a fairly straightforward process, and need not be expensive. In fact, business cards still make an ideal platform from which to market products and services, even in this digital day and age.

Business cards date back to fifteenth century China, when they were used as a means to exchange information at social occasions, and was at that time referred to as a visiting or calling card. The idea came to Europe in the 17th century, and quickly caught on in both France and England, where it morphed into what was called a trade card, which in essence told what a business did and where it could be found. As there were no phone books, newspapers, or even numbered streets in those days, the most important aspect about these cards were the directions to the business.

Now, just having a business card will not necessarily bring in customers. Any savvy business owner should have several on hand whenever he or she goes out in public, as chance meetings can often turn into impromptu marketing opportunities. Striking up a conversation with someone at a social function, a person standing in line with you at a bank, or even someone who is simply waiting for a bus or train may win you a new customer. Even if the person you talk to does not have need of your products or services at the moment, that person may know someone who does, or may need them in the future.

There are a few pitfalls with business cards that should be avoided, however. Patricia Schaefer goes into these in her article, Avoid The Nine Most Common Business Card Blunders. In brief, here is some advice she gives on the matter:

Make your business cards stand out from others.
Use high quality materials. Skimping on materials can repel customers, as they perceive your services as substandard.
The design should immediately identify the products or services a business offers.
Show how you are different from others offering the same products or services.
Do not get too clever with sizing, as a card that will not fit into a wallet will often end up getting thrown away.
Ensure that the print is easily readable.
Do not print too much on the card, as this will make it look cluttered and unappealing. Contact information, however, is the most important.
A pleasing and colorful design that catches the eye will make a potential customer look more closely at your business card.

It is not a bad idea to take business cards a step further. There are a number of other types of innovative visual marketing tools that can work separately or in conjunction with business cards. I am looking at one now: a mouse pad that advertises the website www.venues4africa.com. Another example is refrigerator magnets, which can ensure, for example, that a person has the local pizzeria's number readily available. Personally, we have had a notepad with Rattle Walton Property Professions, my wife's uncle's real estate firm from which he recently retired, prominently displaying the phone number and address at the top of each slip of paper. Free coasters offered by restaurants or bars also offer a means by which any time someone places a drink, that person will see the name of the business.

Marketing is all about getting customers to come to your door so that they can buy your products or services. Simple, inexpensive solutions such as business cards may be one of the best investments a business person can make.

A Brief History of Trade & How it Relates to Packaging for Your Business

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 22 Oct 2009 19:01:00 +0000

I had a conversation... well, actually more of an online chat, with Anthony, the founder of The Creating Wealth Blog, in which he said to me, "The stock market, as you know, is not the only wealth creation vehicle. It's one of many."

I found this intriguing, especially as many of his past posts deal specifically with the markets. I bring this up purely to juxtapose one of the more ancient methods of creating wealth, and a variation on one of its modern inceptions in the movement of goods.

Trade, which includes the trade in shares of companies on various world stock exchanges, has been going on since before civilization really began. People who lived near oceans traded shells for pretty rocks other people dug up in mountains. People traded ochre for painting, flint and later various metals for tool implements, dried medicinal plant products, grain and other food sources, and all manner of other commodities. Trade routes became established along shorelines, through mountain passes, and along routes that could be easily traversed by humans. Overland routes became highways for caravans while water trade routes spread along the coasts of the world's seas and oceans.

I can see the importance of the trade routes around Africa every day, as I look up onto the slopes of Devil's Peak, where the Kings Blockhouse, built in the late 1700s on Devil's Peak. Ruins of fortifications from this period are scattered throughout the Cape, remnants of an English presence that controlled most of the trade between Europe and Asia that went around Cape of Good Hope until the Suez Canal was built in 1869.

Trade today can be instant, as software and other information can pass from one point on the globe to another in an instant. Yet there is still a need for companies to package and ship various kinds of goods. These days, however, most equipment shipping is done by specialist companies like Navis. Navis specializes in delivering items that require a bit more care than normal, with one of their specialties being computer shipping.

Navis operates international, and offers crating services, including international crating, to enable businesses to ship their products around the world. They not only ship but package products for their clientele to ensure that it will arrive at its destination intact. Yes, there may be other shipping companies, but no other carrier can boast that they have 99.6% claims free deliveries, which is the lowest in the industry.

Old fashioned trading consists of shipping goods to where they are scarce in order to maximize profit. Anyone with a keen understanding about what is needed and where can profit by shipping goods to or from where they live. Becoming an importer or exporter is easy. Succeeding at it, and creating wealth through such an endeavor, takes diligence and hard work, though a bit of luck will help too. So, if you are thinking about getting into this ancient trade, think about what people need where you live and where you can buy it more cheaply. Think too about products made locally, and where they might be sold for a profit. Explore your options on the Internet and, as with any business venture, do thorough research before you jump in.

Traveling for Business

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 22 Oct 2009 16:08:00 +0000

This is a little off the subject of creating wealth, but this is a subject about which I know quite a bit: accommodation. Now, so often people need to relocate temporarily for business purposes. They may need accommodation for several weeks, a few months, or maybe even longer. Hotels are impersonal places, and most do not have cooking or laundry facilities. Or, if they do, they are woefully inadequate. When in a situation where a person is working far from home for an extended period, you need a home away from home. Corporate apartments can provide this.

I came across the PC Housing website, and could not help but investigate where they had accommodation available, and was impressed at the ease with which I could investigate their properties in different cities in which I have lived throughout the US. I found properties in Lincoln, Nebraska; Trenton, New Jersey; Asheville, North Carolina; Eugene, Oregon; Austin, Texas; and even in Santa Cruz, California. Now, I will most likely not be making use of their services any time soon, as I am pretty well planted here on the tip of Africa, but I liked the nostalgia of being able to visit places, if only vicariously, through their website.

I know personally how people sometimes move about the globe for work. Oftentimes, consultants come to Cape Town, where I live and help run a self-catering accommodation establishment. Consultants from Sri Lanka, India, England, the US, and elsewhere have come to stay with us for work at various businesses in the area, or for research at the University of Cape Town. South Africans from upcountry, particularly Johannesburg, the financial capital of the country, often find themselves in the Cape on extended business trips. Some South Africans are even emigrating back to South Africa as well, as things get more difficult in the US, Europe, Australia, and elsewhere as jobs there have become ever more scarce.

These are some of the types of people who come to my mother in law's establishment, Rondebosch Guest Cottages. She offers fully furnished cottages with laundry facilities, broadband Internet access, fully equipped kitchens, and countless other amenities. Basically it is also a home away from home.

Everybody has become more mobile, and companies need people who can work in far flung places, often with very little notice. Hotels are expensive in comparison, have less space, and offer fewer amenities. It is no wonder that people and businesses are moving more towards corporate apartments to house consultants and temporarily relocated staff.

Oh, and if anyone is looking for this type of accommodation in New York City, you should look into Platinum Stays, in which Anthony Dadlani of The Creating Wealth Blog has an interest.

The Basics of Trust Deed Investing

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 22 Oct 2009 09:16:00 +0000

Want a low risk, high return on your investment? Perhaps trust deed investments are something you should look into.

So... what is a trust deed investment? It is:

A trust deed, or deed of trust is a document that is used to secure the debt on a home acting as a mortgage. A trust deed is recorded as a lien on real property.

In this sense, it is very like a mortgage. However, there are differences. Where there are only two parties involved in a mortgage - the lender and the borrower - there are three parties involved in any trust deed investment - the lender, the borrower, and the trustee. Also, if the borrower is unable to pay on a mortgage, there is usually a very lengthy (and thus expensive) foreclosure process, as it must adhere to the laws of the state in which it takes place. With a deed of trust the process for foreclosing on a property tends to be quicker and non-judicial.

Since a deed of trust is a loan secured by property, there are a number of fairly straightforward tips about investing in them. Brad Evans offers up some very sensible advice on the matter, and gives those considering investing in trust deeds 37 tips about this method. I will summarize a few of the more important

Though generally trust deed investments are safer, any investment carries risk, just like flying in an airplane, driving a car, or even walking across the street. That said, it is important to understand how you can mitigate these risks.

As when a bank loans money for a property, an investor should ensure that the borrower has ample insurance on the property. The borrower will pay for it, just like with a loan from a bank, so there is no need to skimp. After all, unforeseen events can and do happen. Earthquakes, fires, floods, hurricanes, etc. can destroy a property and lessen its value, or even make it worthless.

It is additionally important to read all the fine print in any agreement, and to have a knowledgeable and professional broker involved to ensure everything goes smoothly. Also, unlike mortgages, investing in trust deeds does not require keeping your money tied up for 15, 20, or even 30 years. Many times, borrowers are also investors and developers, who may not wish to go through a bank because of the stringent requirements for securing a bank mortgage. Many of these kinds of borrowers may only need the loan for a year or two at most, and sometimes only for a few months before they flip the property.

It is also imperative to establish the property's value, especially after the recent free fall in the US housing market. Look at the valuations of similar properties in the area and for how much they were sold. Loaning more on a property than what it is worth is sheer stupidity, and it is what caused the sub prime meltdown that in turn helped cause the economic chaos from which the world is just beginning to recover.

Again, Brad Evans offers some sound advice on how much to lend:

Never lend more than 60% LTV (Loan To Value Ratio) on even the most prime of owner occupied homes, and not more than 50% LTV on non owner occupied speck' homes. 60% LTV means that your loan should never exceed (approximately) 60% of an owner occupied property's appraised value (or purchase price within 18 mo., whichever is lower) as collateral for any money you lend.

The reason for this is simple. If an investor needs to foreclose on a property and sell it quickly to recover the investment, the price will more than likely have to be discounted. Even with a discount, the investor may be able to recover a nice return on his or her investment.

Finally, it is important to establish a few things about why the borrower wants to take on a deed of trust loan. If the borrower is trapped in a loan cycle, and is trying to simply pay off another loan, the likelihood of a foreclosure will increase dramatically, and thus the risk to the trust deed investor's investment.

Basically, if an investor does his or her due diligence, investing in trust deed investments can be both a lucrative and safe way to invest.

The Markets Go Sideways...

darupprecht@gmail.com (D. A. Rupprecht) — Wed, 21 Oct 2009 08:50:00 +0000

This market belongs neither to the bears nor the bulls. It is a roll coaster right now, and those with queasy stomachs should stay off this ride. On Monday, the 22nd anniversary of Black Monday, everything was roses, and the earnings reports for industrial machinery manufacturer Eaton and the Gannett newspaper group were up, while both Apple and Texas Instruments also reported earnings that beat forecasts. The S&P, DOW, and Nasdaq were all up, and traders were talking with confidence about the economic recovery.

Then came Tuesday, when US markets fell after a report that housing starts were down, even though earnings reports continued to come in as better than expected. The rate of foreclosures on the market still remains considerably higher than normal, and we will have to wait for these foreclosures to get soaked up by property investors before we will see any real change in the US housing marking.

Probably will also be seeing much more of these ups and downs as investors decide to take profits after market rallies like the ones we have seen in recent days. Meanwhile, a stronger dollar sent energy and commodity stocks lower.

Medical stocks will continue to yo-yo as investors speculate how the current health care reforms will affect companies that profit from the current state of the medical system. Look at health insurance providers particularly to take a hit in their stocks, though the way the talk is going, health insurance may become like car insurance. Making health insurance mandatory will mean buying stock in health insurance providers could be a very good buy at the moment. That said, now is not a bad time to invest in health stocks, just so long as one is prepared to hold them for a time, until the reforms are in place and everyone knows what to expect. Overall, health care will continue to be a good investment, as the baby boomers are growing older and the health care industry is set to grow because of it in the long term.

In Mumbai and throughout Asia, markets reacted to this downward shift in the US markets on Wednesday, as commodities weakened with the strengthening dollar.

The dollar's strength will be fleeting, as all the bail out money sweeps through the economy and creates the specter of inflation. The weakness of the US dollar for the foreseeable future will make American products cheaper overseas, and this is why we were seeing the US manufacturing sector, of which Eaton is a bellwether stock, leading the way in the current economic recovery. The American worker is the most productive in the world, and with American goods being cheap, the US may again become a major exporter, and less of a consumer.

This bodes ill for much of the rest of the world's economy, which has depended on the US to buy its goods in recent decades. Other countries that have had export driven economies, particularly China, will have to induce consumer demand in their own countries. Not a bad thing for consumers in these countries, where wages will have to rise to allow people to buy many of the consumer goods that have been going overseas.

Looking briefly at a few key stocks and company earnings in the third quarter. Pfizer posted a $2.88 billion profit, up 26% from last year, an indication that investors do not thinkk taht pharmaceutical companies will take a hit with the new health care reforms. Coca Cola's profits were slightly higher, though not changed much from last year due to lower consumer demand. UAL Corp., the parent of United Airlines, took an over 20% hit to its revenues, though this was less than expected, as people stayed home or went to nearby destinations rather than flying to their vacation destinations. Yahoo is still struggling, with Google crowding it out of the browser market, and their revenue fell 12% this quarter. Sales for Caterpillar were down 44%, not a surprise as the housing and construction market in general lingers in the doldrums.

And then today the US markets took another turn upward, though a more modest turn. The dollar went lower, gold futures and oil futures rose, and the markets in London, Frankfurt, Paris, Tokyo, Hong Kong, and Shanghai all ended lower. So... sideways, up, down, and upside down is what we should expect from the markets in the near future.

Negotiating Away Debt in Order to Create Wealth

darupprecht@gmail.com (D. A. Rupprecht) — Wed, 21 Oct 2009 08:06:00 +0000

Now, I've written a bit about debt on occasion on The Creating Wealth Blog, primarily because having a great deal of debt generally does not allow a person to easily create wealth, especially when that debt is not attached to something that can help a person increase their wealth, like property. Before you can start creating wealth, it is imperative to look at your debt. Whether it is student loans, credit cards, hospital bills, or some other kind of unsecured debt, it is important to deal with it so that it does not become an impediment to wealth creation. In some cases, a person must even consider a debt settlement.

What exactly is a debt settlement? Simply put, a debt settlement, also known as debt arbitration or debt negotiation, allows a person to pay off a debt for less than what was originally owed. It is not the best way to deal with debt by any means, but it can get a person out of debt more quickly, and if a person's credit rating is not particularly important to their plan for creating wealth, then it may be an important tool to quickly shed debt and thus put a person on a path to wealth creation.

There are a number of ways to approach your creditors to reduce your debt. However, it is highly unlikely that any creditor will accept a debt settlement if a person is still making minimum payments. After all, in such cases the creditor is getting money in any case. Lowering the debt for someone who makes regular payments is considered bad business. Only when a person stops paying on a debt will there be a chance that the creditor may negotiate, particularly if the person owing is in a position where he or she would file chapter 7 bankruptcy, which would wipe out all a person's debt.

If you are going to use debt settlement as an option, it is important to do research. First, ensure that the company with whom you are dealing is reputable, and will do what they say they will do: reduce debt. Florida Attorney General Bill McCollum has filed lawsuits against five debt settlement related companies, who through nefarious practices that put many of their clients in even more dire financial situations.

Legitimate debt settlement companies are in favor of reforms proposed by the Federal Trade Commission, and there are a number of proposals put forward by Michael Bovee, an industry panellist on the FTC board:

* Debt settlement firms will be required to make specific up-front disclosures to consumers before they accept any money from consumers or perform any work on their behalf. The required disclosures include:
* the amount a consumer can expect to save by settling a debt
* that a consumer may be sued by a creditor during the debt settlement process
* the tax implications of settling a debt
* that creditors are not required to agree to a settlement
* how settling a debt will affect a consumer's credit history
* the success rate of the debt settlement firm a consumer contacts Bovee believes that having this information up-front will make it easier for consumers to evaluate all of their debt management options
* participate in a debt management plan, file for bankruptcy, or settle their debts -- and make an informed choice based on what is best for them given their particular circumstances.
* A significant number of the sales centers (stand-alone call centers and telemarketers) currently generating leads for a large percentage of debt settlement firms will be weeded out. Individuals working for such centers are salespeople who are motivated by the commissions they stand to make, not by a desire to help debt-stressed consumers. As a result, many consumers are steered into settlement when it is not the right option for them. "The proposed rules will make the sales-oriented business model financially untenable for most debt settlement firms,” says Bovee. "Although this change will reduce the amount of choice consumers have, it will help protect them from being victimized by unscrupulous companies who misrepresent their services and will help ensure that the debt settlement firms consumers do work with will help them and charge them fairly. In other words, consumers will no longer be 'sold' into debt settlement."
* Consumers will have a much greater chance of succeeding in the debt settlement process. This is because more of their money will go toward funding their creditors' settlement offers rather than toward paying the high up-front fees that that so many settlement firms currently demand.

Debt settlement is not the best solution for everyone, but it is a tool that can help eliminate a person's debt more quickly. While it is best not to get into debt in the first place and to live within one's means, life's circumstances can sometimes cause an individual or business to find themselves in deep financial trouble. Even the most stolid of individuals or even wealthy business people at some point may require restructuring of debt, as evidenced by the recent bailouts of major banking institutions in the US and Europe.

Just Another Number...

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 15 Oct 2009 08:09:00 +0000

The Dow Jones Industrial Average again flirted with the 10,000 mark earlier this week after spending more than a year wallowing below 10,000. While it certainly indicates traders on Wall Street are more bullish on the markets' future - for now - this benchmark is relatively meaningless, and much less important than a number of other factors that motivate the markets.

Still, the psychological effects as the numbers turned yesterday caused traders to cheer on the New York Stock Exchange, bringing it up 53% from its low in March. Even so, the DOW did not stay above the 10,000 mark, dipping down into the 9990s before finally closing above 10,000.

The DOW may have got to this psychological boundary a few days earlier, had it not been for a worse than expected Johnson & Johnson earnings report. Other health care stocks also tumbled, as the new US health care bill moves to debate in the Senate. This is an unfortunate result of uncertainty. Investors and traders in health care stocks, including those of pharmaceutical companies, which did so well in recent years, do not know how this new government health plan will affect them. So health care stocks will probably fluctuate significantly based on this uncertainty until investors and traders know exactly how this will affect their investments.

Another factor was retail sales, which were expected to be down, though they were not as far down as expected. Discount retailer WalMart, whose stock is only up 4% during the current rally, is likely to do well coming into the holiday season. Though forecasts are for a flat or moderate decline of retail sales by about one percent over the Christmas season, because consumers have not been buying as much for the past couple years, it is likely that Christmas sales will be better than expected, particularly for stores like WalMart that offer value for money. I expect this pent up demand to surprise retailers, and would not be surprised if the 2009 Christmas season will be better than expected, and even surpass 2008's.

That said, a post earlier this year by Adam Feinberg on this blog considered technology stocks to be good investments for the near future, as investment in the nation's technological infrastructure, particularly in regards to software for hospitals and electricity providers, would drive a steady yet slow increase in these stocks. Feinberg is proving to be right, as Intel helped lead the DOW's upward movement, with the largest computer chip manufacturer providing a better than expected forecast for sales.

Even with this good news, investors and traders are cautious.

Rich Hughes, co-president of Portfolio Management Consultants in Los Angeles, says that "by all technical indicators [the market] is completely overbought, just like back in March it was completely oversold."

Editor-at-large for CBS MoneyWatch.com Jill Schlesinger is a bit more cynical:

"Companies cut costs, they fired people, stopped spending money and the government pumped trillions of dollars into the economy. That is really the source of the move back up from those March lows."

It is true the obscene amount of money pumped into the US economy, as well as economies in Europe, certainly contributed to this upwards trend, but the signs of recovery are still there. What is perhaps the most important indicator of a healthier stock market, and thus a healthier US economy, is the fact that US bank stocks are doing better, which is some relief after the massive bail outs of banking institutions earlier in the year. JPMorgan was up 3.6%, while both Bank of America and Wells Fargo were both up 2.8%, with BOA at its highest price since November 2008.

Ted Weisberg, head of Seaport Securities and a trader on the floor of the NYSE says this about crossing the 10K threshold:

"I think it is a psychological number that folks like to get focused on. It is significant in that it certainly is a milestone in the sense that we have had this dramatic [market] recovery, very far, very fast over a relatively short period of time... the market is a forward-looking indicator, and clearly the market is sending a message that things [economic conditions] are going to get better in the fourth quarter and into 2010. The market clearly looks like it wants to go higher."

How is this news of economic recovery and exuberance in the US stock markets being met by the rest of the world? Well, the world, or at least Africa, is a bit blasé about the matter... there was no mention of the magic 10K number in the Cape Times business section, though they did report that the DOW had reached a significant milestone.

That said, looking beyond the markets and into currency issues, the weakened dollar will certainly improve US exports, improving the forecast for the US manufacturing sector as American imports get less expensive. We see now that the manufacturing sector in the US is leading the US out of this recession, as per one of my recent posts in August. With a stronger US economy, this will tend to improve the economies of other countries, though countries in the European Union will find that because of the relative expense of European products, due especially to the strength of the Euro, will keep the European economy on its back feet for some time to come.

The same goes for South Africa, which went into a recession nearly a year after the US, thought the strength of the Euro and the improving world economy will tend to bring more Europeans here on holiday, strengthening the tourist sector, especially in advance of the 2010 Soccer World Cup.

Gambling With Options: Does the House Always Win?

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 08 Oct 2009 07:43:00 +0000

My brother is a gambler. He goes to the casino across the river from where he lives in Omaha, Nebraska and regularly wins money playing 21, what is more commonly referred to as blackjack.

Would I advise this as an option for someone who wishes to create wealth? Of course not!

Gambling is a good way to lose money. The house always wins in the end. Yet the stock market, and particularly the trade in stock options, is not so far from gambling. In fact, the use of words such as "spreads" and "call" when doing a little research on the subject almost made me think I was reading posts written by bookies.

Option trading is definitely not for the faint of heart. While re-familiarizing myself with options trading, I came across the following quote, written in bold face, on a page on TradeKing's website:

Options involve risk and are not suitable for all investors.

My brother has a system that allows him to make money or to mitigate his losses, similar in a sense to what stock options are all about. He continues to play as long as he wins, keeps to a rule that if he loses a specific amount he quits for a certain amount of time, and only risks an amount of money that he would be comfortable in losing. It is a fairly straightforward and logical approach to what can be an emotionally charged thought process. As long as he sticks to his rules, he will keep winning... or at least not lose too much. At this point, he is up about $1000, but has not been back to the casino lately, as his winning streak ended.

That said, though options trading is very much like gambling, if you have knowledge of the stocks you are optioning, this will increase your odds of winning - or rather, to get away from gambling terms, making money. It takes discipline and indepth knowledge of the stocks, and in turn the companies that these stocks represent, though every seasoned trader knows that just because a company is making record profits doesn't mean it will be a good investment, even in the short term.

Confused? That's okay, it's just part of the business.

Knowledge helps lessen the risk of trading, and the more you learn, the better chance you have of not losing your shirt. You might even become a millionaire through savvy trading in stock options. That said, stock options are not for novice traders, and certainly not for those adverse to risk. While there is great potential to make money in options, there is a good chance that option traders will end up losing big.

Essentially, stock options are contracts. The person buying the option, known as a call option, agrees to pay a certain price, known as the "strike price", before or by a certain date, known as the "expiration date". If a stock is worth more at the time than what the buyer agreed to pay, then the buyer makes money. If it is worth less, than the buyer loses money. The buyer has the option, however, not to purchase the stock, thus the term "option", though the would-be buyer will have to pay a penalty. Essentially, the buyer is betting that the price of a stock will either increase or decrease during the period the trader has agreed to buy it, and then hopes to trade it on at a profit. The same goes for the seller, though the seller's option is known as the put option.

One of the most attractive parts of options trading is the fact that you can leverage much more money than you put in, from 100 to 1000 times the amount of capital, but this can also be a trader's undoing, as the money to cover the trade must come from somewhere, so it is essentially borrowed and the entity that covers the rest of the cost is due interest. This is essentially similar to currency trading, in which one can leverage large amounts of currency for a small fraction of what it is worth.

As with gambling, timing is everything in trading options. Brian Overby brings up some really good points about how to trade in options. It is important to have a plan before you start trading, and to follow through with this plan. He also points out that just because an option is cheap, it does not mean it is a good buy; there is usually a reason why something is selling for a bargain price. Options are meant to be liquid as well, so it is best to stay away from those that will be difficult to trade onwards. But I especially like Brian's sage advice about options, which "offer possibilities for profit in up, down, sideways AND volatile markets – but only if you’re educated on the subject". Again, the key to creating wealth in any business endeavor is knowledge.

There are also a number of myths about stock option trading, according to Ravi Prakash. While it is thought in some circles that when a stock option expires, it usually becomes worthless, this is only the case in 30% of all options. Also, since a trader can leverage more stock with less money, the risks to a trader's capital are considerably less than if buying and selling stocks outright, meaning a trader can make a far higher profit as a percentage of the money invested. Like with anything else, systems can be learned, and if these systems are adhered to, the chances of making money are increased. Other common mistakes include not doing your research, bad timing, and putting too much money into one trade. A combination of these mistakes can easily dissipate a trader's capital.

Nick Proffitt's points on trading mistakes were are an eye opener as well, and show how easy it is for a less than savvy trader to lose big. There must be a valid reason why any trader should buy, or else why buy at all? To do so without reason is just gambling, but to buy stock in a company that is undervalued is the way to go. Just ask Warren Buffett, who made his fortune doing just that. Inevitably traders in options will have to take losses, and it is better to take small ones than big ones. Knowing when to pull out of a trade takes discipline and keen insight. Diversification is also a key to mitigate losses, and the phrase "putting all your eggs in one basket" is more than just a cliché when it comes to trading stock options. So too when it comes to following the lead of others that are chasing a stock that is going up.

There are so many mistakes a trader can make, but mostly they fall into three categories: bad timing, lack of research, and following the pack instead of thinking. So... with timing, research, and a cool head an option trader just might be able to become a millionaire in a short span of time... or, if an options trader's timing is off, research is wrong, or the trader fails to keep emotions out of his or her decisions, that trader just might find out what it is like to live in a cardboard box in a back alley somewhere.

The Future of Residential Housing: Supply & Demand

darupprecht@gmail.com (D. A. Rupprecht) — Wed, 07 Oct 2009 07:56:00 +0000

There is still a dearth of affordable residential housing in many countries, even with the dip in prices of residential properties in most parts of the world. This crash of world housing markets, especially in what had been considered the world's wealthiest countries, ground production of housing nearly to a halt. This situation cannot continue of course. As the population of the world increases, so too will demand. It gets down to simple economics, really. Supply and demand. The more people there are, the more housing units are needed.

Using the United Kingdom as an example shows how both private housing and what is referred to as "council housing", housing in the UK that is subsidized by the government, has fared during this period of economic turmoil. Even though owner occupied housing has nearly doubled to 70% since 1938, the price of a house has more than tripled since 1990, even taking into account the crash of the UK housing market. Now the average price of a house in the UK is nearly £200,000.

As the UK is set to add nearly 20% to its population, or about 10 million people, by 2031 there very well may be a problem with having adequate housing for every citizen. These trends are beginning to play out especially with the housing that is subsidized by the UK government. The stock of this social housing has already slipped by some four thousand units over the past year, and only three hundred new houses were built to meet this growing need.

I see similar evidence of this lack of affordable housing in the city in which I live. The differential between rich and poor is even more evident here, as South Africa has the biggest gap between its wealthiest and poorest citizens than any other country. Slums full of makeshift dwellings spread about the perimeter of Cape Town, many of these makeshift structures made of wood, plastic, iron sheets, and anything else those living there can find. Just minutes away from these townships, small residential houses sell for hundreds of thousands of dollars, and along the Atlantic seaboard - and in some more exclusive areas - houses sell for the equivalent of millions of dollars.

The South African government continues to build housing for its poorest citizens, but the increase in population compared to the rate at which new houses are built means it may take close to half a century to house the entire population in the most basic type of housing. This government effort is based at least partially upon addressing historical issues that stunted the economic growth of the majority of South Africa's people, but it also creates a dangerous precedent of entitlement, a precedent that is already destabilizing the country, which has in recent months been racked by numerous strikes about low wages and protests concerning the slow pace of housing development for the poor.

It is essential for those who are at the bottom rungs of any free society to know that they can, through their own efforts, improve their situation and the situation of their children. This should be the reason why parents save and create wealth, whether it is through investments, building up businesses, through diligent savings, or through other means. When people feel that they have no chance to improve their way of life, they give up and cease to be a relevant part of the country's economy. It is for this reason that any government assistance made to the poor should not tie them to their poverty, but enable them to improve their situation and to create wealth for themselves, so that they and their children may have a better quality of life.

Innovative solutions must be found for housing, as has happened in India's Punjab province. The situation there is similar to South Africa, in which a vast number of people live in urban slums. There people are advocating a public/private partnership to develop housing for the hordes of people who come flocking to the cities from the countryside. President of the National Real Estate Development Council Rohtas Goel states, “It's time for the public as well as private sector to come together and work on practically feasible models (so that) houses become more affordable and the shortfall can be addressed...”

Private entities have long been the best at creating wealth, which could then be used at least partially to meet social needs. In this current economy, it is imperative to create jobs so that people can afford housing. Moana Mackey, an MP in New Zealand, states succinctly that "jobs... are the key to affordable home ownership." The housing market is inevitably linked to the job market, as is its cost. If people do not earn sufficiently to afford to own homes, the housing market will suffer.

The generation of Americans to which I belong is muted to have a lesser quality of life than their parents had, as incomes have been generally stagnant compared to other costs, and especially in relation to the cost of housing. These "Echo-boomers", the children of the vast generation known as the Baby Boomers, have significantly less spending capacity than their parents. Because of this, the types of housing in which this generation will live must become more affordable.

I mentioned in a blog post earlier in the year about investing in manufactured or prefabricated homes, but little did I realize that I may indeed be on to something. Pre-fab homes are not only less expensive, but can be built much more quickly. This may in the end be the solution to housing problems that are endemic in developing countries. Higher density housing also seems to be the wave of the near future, as in a recent report it was considered that people will migrate from the suburbs back into the cities, where there are more amenities in closer proximity to residential areas (pages 3-4).

That said, in another, more current post I went into possible recent signs of recovery in the US housing market, and how first time home buyers were benefiting from a government tax credit, and how this was affecting the housing market and driving up the number purchases. This is all related. People now generally will have less buying power and credit is tight, so inevitably the types of homes will become more simple, based on need rather than preference. Right now the stock of foreclosed homes allows people to buy deals, but once these go, and they eventually will, there will be a move towards economy. And after August's dip in housing sales, this may not be the end of road for the US housing market's woes, as even prime real estate in Manhattan is currently being sold off at a discount...

The Continuing Soap Opera of the US Housing Market

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 01 Oct 2009 07:16:00 +0000

Is this the big turnaround that everyone has been waiting for in the United States housing market, or is this just an upward blip caused by hundreds of billions of dollars in government intervention? Will the US Congress manage to pass a bill to keep the $8000 tax credit for first time home buyers? Will Congress decide to raise the tax credit for these buyers, or will they allow the tax credit to lapse? Or will Congress perhaps extend this tax credit to others who are not buying a home for the first time? And, if this tax credit does lapse, will it dramatically affect home sales? Further, will this upswing in housing sales be sustainable, and will residential home sales increase if the tax credit is taken away? Tune in next month for the ongoing saga...

The US housing crisis and the sub prime loans helped spur on the current global economic malaise and contributed significantly to our current economic soap opera, so it is fitting to look at this potential recovery of the US residential housing market as an indicator of an overall economic recovery in the US. First, let's look at what the IRS says about this tax credit and to whom it applies.

First-time home buyers may be able to take advantage of a tax credit for homes purchased in 2008 or 2009. The credit:

Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.

Applies only to homes used as a taxpayer's principal residence.

Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.

Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

A number of different credits against taxes had been enacted to help generate consumer spending and to lift the US economy out of its malaise. Included in this was a related tax credit to make homes more energy efficient, something I mentioned a few weeks back. Home sales spur consumer spending in a whole host of other areas, including furnishings and appliances that may have been supplied previously in a rented property. It is because of these potential spending dynamics associated with buying a first home and how they would reverberate through the economy at large that is why the US Congress has 20 bills on the table to either extend or expand this home buyer tax credit.

Time is quickly running out, however, as the November 30 deadline looms. I most certainly do not advocate running out to buy a $200K home just to get $8000 back from the US government. But for those who are already planning to buy their first house, it is certainly an incentive to move forward with purchasing a home more quickly. It seems too as if this end date of November 30, 2009 may have had an impact on the housing market, as house prices have risen for the third straight month. This may just be due to the economic recovery and the fact that prices have fallen so low that investors are starting to buy property again, but it is likely that the tax incentive played some role in this upswing.

Now, before anyone starts to think that it is okay to go back to spending frivolously on credit and buying investment properties with no money down, please remember these past couple years. Just like a headache after a hangover, everyone should learn something from these past couple of years. I also wish to point out that the US economy is far from being back in boom times, and there are factors, such as the huge deficit that the US government has taken on, that may dampen any recovery.

A recent article on consumer confidence says as much. People are still worried about losing their jobs, and the expectations that the consumer confidence index would improve on August's optimistic showing proved unwarranted as it slipped from 54.5 to 53.1 in September.

This will create a softness in the housing market, particularly if the tax credit for buying homes goes away. Don't expect boom times to come again in the housing market for quite some time.

Whatever the US housing market may be doing, however, it is a great time to buy, as house prices are now back to what they were in mid-2003. If you have an income that is not too adversely affected by the current downturn and a bit of cash saved up for a deposit, this is the time to start creating wealth with real estate. Now is when the real investors roll up their sleeves, sort through the best available deals on the market, and plan for the future. Now is the time to make shrewd decisions and get deals. Real estate prices have dropped so far that even though they have been climbing recently at a rate of 8% for the year, there is plenty of room to maneuver. Yet now, when the housing market is down, is an ideal time to buy.

Markets, including the housing market, will inevitably go back up. Those who invest for a living in real estate, or any other market, know this. There are entrepreneurs still out there who are slowly building their fortunes and creating wealth for themselves and their families, even in these uncertain economic times. It is these people, these entrepreneurs and self-starters, that will help the economies of the world lift themselves out of this slump.

I became re-acquainted with a member of my graduating high school class not so long ago. He recently started a real estate investment company with his brother and bought two houses in Brighton, CO. He knows the housing market there intimately, and studies valuations in his local area, so has become something of an expert on residential property in Brighton. The company they started bought the houses for cash, meaning that the credit crunch did not affect them. As they bought them as investment properties, however, they did not qualify for the tax credit. They have a plan to create wealth by purchasing twenty houses, and a key to their success relies on Section 1031 of the IRS tax code to avoid paying capital gains taxes on the property. He hopes Obama doesn't change the rules on him...

The soap opera in the US real estate market will continue for now, as real estate in Las Vegas, Detroit, and Seattle are still plummeting. Perhaps the United States Congress will pass some bills to heat up the housing market, or perhaps the Congress will focus instead on paying down the nation's debt. Whatever happens, the economic situation is no longer dire for most people, though there will be plenty of hardship for many Americans, and others around the world, for years to come.

Of Cheap Tires, Chicken Feet, and Online Gaming

darupprecht@gmail.com (D. A. Rupprecht) — Sat, 26 Sep 2009 08:05:00 +0000

The world markets are now just beginning to slowly rise from the abyss into which they had sunk, but now a trade war looms on the horizon between the world's biggest economy and the world's second fastest growing economy. Now, it may not come to war between the United States and China, but that is certainly the way it is heading.

The possibility of a trade war, however, is something that is more than a little scary for any student of history. It was the protectionism of the 1930s that helped to extend the Great Depression as countries slapped high tariffs on imports to attempt to keep what jobs remained after the crash. What it did rather was cut off avenues to recovery through exporting. Let us hope that does not happen here.

Now, a trade war could have begun because of the lead paint in Chinese toys, the tainted Chinese powdered milk, or the Chinese pet food that killed dogs and cats around the world. Instead, this was about jobs, or at least on the surface it was.

This particular spat started with tires in an effort that was slated to help save American jobs. Chinese tires are almost 20% less expensive than those made in the US, and so they gained considerable market share, from 3% to 11% of the US market, in a space of four years' time. Under a rule by which China was allowed to join the World Trade Organization, President Obama was able to place an initial tariff of 35% on all Chinese tires that enter the American market for the first year, with the next two years at 25%. This tariff is placed solely on Chinese tires, so this by itself will not save the jobs already lost in the American tire industry, and may well spur imports from other countries. Rather, it is probably a warning to the Chinese against their aggressive trading policies, which undercut prices of all kinds of goods from around the world.

But it does concern the Chinese, as the Americans are their biggest trading partner. The Chinese fear that measures will be taken against other Chinese products. It is for this reason why the Chinese representative at the G20 conference in Pittsburgh, President Hu Jintao, urged President Obama to back away from such tariffs.

Yet, because of this measure enacted by the US, the Chinese government is now looking at the US chicken industry to examine dumping of chicken products by US producers on the Chinese market. This could hurt US chicken manufacturers hard, as their biggest market for exports is China, particularly for chicken feet, a delicacy in China. If this becomes a tit-for-tat tariff trade war, then it could spread to other countries in an effort to help save jobs, negating efforts that have been made to help lift the world's economy out of its deepest recession in decades.

China is by no means innocent of protectionism. The Chinese have been blamed for unfair trade policies, particularly in regards to their currency, which they have kept artificially weak. This creates high demand for Chinese products while at the same time dampening the market for foreign products in China.

This is not the first time that the Chinese have been confronted with the World Trade Organization's rules either. The WTO came down firmly on the side of the US in a recent finding by the WTO in regards to media products, and China is now appealing the WTO's decision.

There are a number of reasons why importing products to the Chinese market is difficult, particularly when it comes to media products like movies, music, and books. This happens because any such products must pass through a strict process to review media for objectionable content, a process that takes considerable time. Because of these policies, cheap pirated versions of American movies and music often are on the market in China well before the copyrighted versions become available.

Now... here is where it becomes personal. My brother plays World of Warcraft, an online fantasy game played by some four million Chinese and tens of millions of others around the world. The makers of WoW, Blizzard Entertainment, changed the Chinese company with which they operated online, something for which they had a right to do but which no other foreign company had yet done. This created an issue, as they then had to get a new permit. Though it was the same game as before, Chinese regulators have stalled the issuance of a permit to review its content.

The world should hope cool heads prevail on both sides of the Pacific, because the ramifications of a trade war between these two giant economies will not be a pretty one...

Borrowing Money For University Education: Is It Worth It?

darupprecht@gmail.com (D. A. Rupprecht) — Tue, 15 Sep 2009 11:48:00 +0000

It is has been many years since I have been a university student. When I was in university, I thought the costs were high. They kept on rising after I left for the real world, and classes at universities the world over are more expensive than ever. Now, this topic was discussed earlier in the year by Carl Goldenthal, who gives some good advice to parents who want to save for their children's higher education.

What I want to talk about is the debt many university students accrue on their way to getting a degree, and whether it is in fact worth borrowing money to get a university degree. Let's take a look at what has happened recently. Last year, according to HSH Associates, the money dispersed for student loans in the United States increased by 25%, yet fewer young people are attending university. The US now ranks seventh in the number of 18-24 year-olds attending colleges or universities, with a bit over a third of young adults in that age group taking university or college courses, while more than half of young adults in South Korea and Greece are enrolled in universities.

Getting back to debt, borrowing money for higher education is not just something that has become part of the American way of life. While the average student debt after earning a degree is a bit over $20 thousand (the average was $13 thousand twelve years ago), average student debt in the UK stands at £21.5 thousand, which is over $35 thousand dollars. It is no wonder that there have been calls recently, especially after the hundreds of billions of dollars spent on bail outs of some of the world's biggest financial institutions, for student loans to be forgiven. There is even a group on Facebook that has as of this date nearly 230 thousand members supporting cancellation of school loans. If big banks and corporations can get a bail out, why not university students?

At a recent question and answer session with US Education Secretary Arne Duncan, Ms. C. Cryn Johannsen, the promotional writer for Robert Applebaum's Forgive Student Loan Debt Movement, said this:

"We're asking for help with this student lending crisis. There are too many student burdened with debt. Our group has well over 228,000 supporters. Robert and I receive terrible stories from people who are in really bad financial situations as a result of their loan debt. You're familiar with these stories, too. I've also reached out to the Reverend Jesse Jackson. I know that this issue concerns him, too. Mr. Applebaum's proposal makes a lot of sense, and is in line with Main Street ideas. It is my hope that you will be willing to sit down with us to discuss this proposal further."

Now, I am not advocating another bail out necessarily. Yet the increased borrowing that has been taking place among those attending institutions of higher learning seems rather reminiscent of the sub prime mortgages that helped grease the downward spiral towards this current recession out of which the world is trying to pull itself, albeit on a smaller scale. As with sub prime loans, institutions that loan to students have a motive for doing so. Many of these loans are guaranteed by the government, and if a student does not pay back a loan, the institution will not lose. Rather, it will be the taxpayer.

Financing a higher education should not create a debt out of which a student finds it so difficult to climb that they have to live at home. But that is exactly the situation in which many young professionals are finding themselves, living back with their parents. Debt does not encourage creating wealth. Rather, it leeches future wealth and inhibits savings.

It seems as if consumers of higher education may be seeing the disadvantages of borrowing for a college education, and this is a good sign. Fewer families in the US are borrowing to finance higher education. The Gallup Organization recently did a study that found that 58% of families did not borrow to fund college for the 2008-2009 school year. This is up from 52%. This may be surprising, but it is also heartening. There is new hope on the horizon for those who want to save for their children's university educations, with targeted savings incentives specifically set up to pay for university education. It may at this point just be a start, but we know now what we should have always known: debt is not conducive to creating wealth.

If You Look at It Right...

darupprecht@gmail.com (D. A. Rupprecht) — Sun, 30 Aug 2009 10:04:00 +0000

There is often good news that can be found amid bad news. Sometimes, to quote the Grateful Dead, "it can be found in the strangest of places if you look at it right".

The news out of United Kingdom in regards to personal insolvencies is like this. More people are becoming insolvent in the UK, and this is indeed bad news, but the rate at which people are going bankrupt or utilizing Individual Voluntary Arrangements (IVAs) to keep from going bankrupt did not increase by as much as expected. This means that the slowdown in the world's economy may in fact finally be coming to an end. This may be the start of signs that the most widespread economic downturn since the Great Depression in the 1930s is at last winding down.

Even in the United States, where bankruptcies surpassed one million last year and are expected to reach nearly one and a half million this year, the signs of economic free fall have slowed considerably. The fallout from the sour economy over the past few years has certainly added to the number of bankruptcies, and it is doubtful that these will decrease any time soon. There will continue to be a number of consumers who will still lose their jobs, businesses that will go under, and very slow growth for the foreseeable future, but the worst of it looks as if it is over.

Now, while there may not be light at the end of the tunnel for everyone, if you have no debt and have cash in hand, you are in a very good position to increase your wealth. As I mentioned a couple weeks back, the housing market seems to have bottomed out, and there are some great buys for those who are able to raise the needed funds. Housing sales across the US have picked up, and home sales in August are 12% above what they were last year. The housing market has increased, but a slowdown in government projects and commercial construction meant the construction industry was down again overall in July.

It may be that the manufacturing sector will drive the economic recovery in the US. News from the US manufacturing sector showed growth, and orders have outpaced the goods that are being produced. There is still plenty of backlog in warehouses, but this is indeed positive news. Philos Technologies, which manufactures for the aerospace, auto, electronics and energy sectors, has gained twenty new customers in the last two months. President of the company Sam Ko also said that, "Some companies we haven't heard from in six months started calling us for orders."

In the Midwestern state of Ohio, part of a region slated as the "rust belt" for years due to stagnating manufacturing production, V&M Star Steel’s proposed expansion and investment of nearly a billion dollars will bring welcome business back to an area hit hard by auto manufacturers downsizing and shutting their manufacturing plants.

The weakened US dollar means that trade of manufactured goods may very well drive growth in the US economy, helping it inch towards recovery as other countries buy cheaper American goods. This spells bad news for countries like New Zealand, where the kiwi (aka the New Zealand dollar) has strengthened by nearly 25%, meaning that trade is unlikely to help New Zealand out of its recession. Asian currencies have also risen against the greenback, and trade will inevitably help the world's largest economy come out of its worst recession in three decades.

Recent environmental policies that have been put in place with the encouragement of the new Obama administration are also helping to drive growth. A variety of tax incentives have driven sales of plumbing equipment, heating and air conditioning equipment, and other building materials used for home and office improvements. These tax incentives are for products that meet or exceed federal environmental and energy consumption standards. Jimmy McGreevy, a contractor who installs heating and air conditioning units said, "What's helped us out this year is the $1,500 energy tax credit."

Now, the world is far from being out of this mother of all recessions, and it is not yet time for people in the business world to celebrate, but the signs of the times certainly show improvement. It is definitely a good time to shop around for bargains, whether they be in the property market, stock market, or elsewhere. It is a time to invest wisely, albeit cautiously, but these are the sort of times when people are able to create or increase their wealth substantially.

As Carl Goldenthal put it earlier in this year on this same blog:

"We must remember that we have faced similar economic and political scenarios before and that no period in our history has been without uncertainty. Our success is purely dependent on our own strength and resilience. My advice for you is to stay with the time-tested investment strategies and determine your own success. Be proactive, not reactive. And, let’s always remember that our futures are created by ourselves."

We are perhaps just now seeing the fruition of his very wise perspective on the markets and the economy at large. Let us hope that it continues.

Depending on Our Children for Retirement?

darupprecht@gmail.com (D. A. Rupprecht) — Sat, 29 Aug 2009 14:23:00 +0000

Saving for retirement has become more difficult for many people in lower income brackets in the United Kingdom, especially in the current economic climate. This is not surprising, as most lower income earners throughout the world tend to spend their earnings on current expenses, seeing saving for retirement more as a luxury. This in essence makes many people dependent on state-sponsored social security plans. Already, four workers in the UK support every one retiree, and the statistics are similar in other industrialized countries where birth rates remain relatively low. In the UK, this lack of savings for retirement over the course of time has contributed to the fact that 30% of British citizens aged 65 and older live in poverty, according to European Commission statistics.

Failure to save adequately for retirement inevitably puts a burden on the younger generation, as current wage earners make up the shortfall through their taxes, which support social programs and government pensions. The Social Security system in the United States, as an example, will be able to pay full benefits until 2037, but by 2016 it will be paying out more in benefits than it will bring in through taxation. While most Americans no longer depend on social security to do anything more than supplement their retirement, the recent bear market has shown that private retirement savings plans like 401Ks that depend on the stock market to grow can be dangerous propositions, even with employers matching funds. Those who are retiring in the next few years and who have invested in such plans may very well find their retirement savings inadequate.

As a result, many pension funds in North America and Europe have switched their investment focus towards bonds rather than the stock market to avoid the market's fluctuations. There are still a few major pension funds in the US that are keeping the percentage they have in the markets steady, and Norway too has kept its stake in foreign markets at the same rate to help stave off potential inflation that would inevitably occur from revenues earned from its petroleum reserves.

It is very interesting to note too that two of the major Japanese pension funds also held their investments in the markets steady. The Japanese pension funds are perhaps in the best position to ride out the current market fluctuations, as they have been here before. Also with an aging population and with growth stagnant in the world's second largest economy, the Japanese experienced nearly a decade of stagnant growth with considerable deflationary pressures from the mid-1990s to 2003. Japanese pension funds, with the acquiesce of the government, lowered requirements for funding levels as well as reduced benefits in order to stay afloat. In better economic times, this situation is reversed. Both the Japanese government and fund managers have recognized that economic cycles will inevitably affect them, and they look at long term strategies to keep them solvent. European governments and pension fund managers could definitely learn from this experience, as they are now going through the same thing.

In Canada, insurance companies are suggesting that they be allowed to help fix the underfunding of government sponsored pensions. Though with ample experience in hedging their bets, big insurance companies are not infallible when it comes to investing, as evidenced by the near collapse of AIG late last year.

Like those children who count on the older generation to die and leave them an inheritance with which they can retire comfortably, those who count on government support in their retirement years are doing the exact opposite. In doing such, the younger generation are supporting their elders through the taxes collected on their incomes. Children in First World countries will inevitably be paying more of their income to support the older generation in their retirement. In such, we have come in a circle, with younger wage earners helping to support not only their parents, but all those in their parents' generation. For the sake of the British elderly population, let us hope the youth do not decide to emigrate to warmer climes, such as South Africa or Australia!

So... it may be best not to count on your children, or anybody else's children, and to put away as much as you can for when you retire to ensure that your retirement is as comforable as possible. Also, the closer to retirement age you get, the less risky your investments should be, so that you do not have to work at the age of 70 in order to keep food on the table.

Buy Now If You Can

darupprecht@gmail.com (D. A. Rupprecht) — Fri, 14 Aug 2009 10:14:00 +0000

Well, I did expect this. It looks as if the housing market in the UK is recovering. With a population of 60 million squeezed into a land area just slightly bigger than the US state of Minnesota, the need for housing is pushing prices back upwards. It is a simple case of supply and demand. Demand is now outpacing supply and pushing prices higher.

Friends of mine in the UK are looking to buy after emigrating back there from South Africa, and it is a good time for them to do so. They were able to get a good price for their South African property, as they managed to sell before the South African property market began to crash about a year and a half ago. They made a healthy profit, but they did not bring the proceeds over at that point. That was a good move on their part, as at the time the value of the rand had sunk dramatically because of the perception of South Africa's political instability in the lead up to the election last year. Now the rand has stabilized at about £1:R13.3 after being close to £1:R20 not even a year ago, so they will be able to bring over a hefty sum as a deposit, almost 50% more than if they had not waited. Seems like they are not the only British ex-pats to do so, however.

Most people are not in a position to play both the money market and property market at the same time, but putting your money into an investment instead of paying rent is almost always a good move. Now is the time for people to purchase residential property, whether they are in the UK, Europe, US, or here in South Africa. That is, if they can afford to.

That said, the residential property market in the UK is far from having recovered fully. Lack of lending and the uncertain unemployment rate there means prices could dip again. That said, I believe that residential property there will at worst hold steady. There are just too many people in the UK for the available stock. Even if people are not prepared to buy properties in which to live, at current price levels investors will snap up the stock and rent out the properties.

There are signs in other parts of Europe that are telling the same story. Sweden's residential property market seems to be recovering after nearly grinding to a standstill some ten months ago. The cost of a residential unit in Bulgaria rose nearly 35%, the highest in Europe. Meanwhile, residential prices in Sweden, Lithuania, Cyprus and Estonia all rose between over 10% to almost 20%.

With the cut in interest rates in South Africa, mortgages are some 25% cheaper than they were in December 2008, though demand has not improved as a result. The fact that my wife's uncle just sold his shares in his 20 year old real estate agency is telling. South African residential real estate agents have been hit hard, and Andrew Golding, CEO of one of the bigger property groups in the country, states that "unit sales have not materially improved, and there is still a great deal of stock on the market at present." He does, however, point out that it is winter, traditionally a slow time for South African residential property market.

So... now is the time to buy residential property... if you can afford it! With people still losing their jobs, however, it is imperative that a buyer ensures his or her employment or other stream of income is secure before taking on a mortgage.

Unemployment May Help Create Internet Microbusinesses

darupprecht@gmail.com (D. A. Rupprecht) — Sun, 02 Aug 2009 16:51:00 +0000

Unemployment in the UK is up to just over 7% officially, with no sign of letting up anytime soon. It seems too that over one out of every four people of working age in the UK are no longer working for wages. On the back of this news, the US unemployment rate has risen to nearly 10%, the highest level since the early 1980s. It is not approaching the levels of the 1930s yet, but there are metropolitan areas where the unemployment rate is much higher. Agricultural areas like El Centro in California are feeling it, with 27% of the population unemployed at present.

This is a worrying trend, as it means less income will be coming into these households where someone has lost a job. This then means less disposable income spread throughout the economy and as a result will inevitably extend the recession. The stock markets around the world understand this, and have nosed dived once again with the increasingly bleak employment news out of the world's largest economy along with worse than expected employment news from the Euro zone countries.

Still, people need to make a living. In South Africa, where the official unemployment rate is approaching 25%, more people have taken to the streets as vendors, selling whatever they can to make money to survive. As an aside, I sincerely doubt that the ANC will be able to live up to its promises to create a half million jobs in South Africa amid the current global recession.

This approach to unemployment may mirror itself more and more in the First World through online hawkers, with new Internet-related businesses that sell things through their websites and individuals utilizing eBay, or other online sites, as platforms from which to sell goods and services. I know personally two artists, Mike and Jaime, who utilize free social media sites to advertise their wares, which they also have been known to sell online through eBay. This seems not to be such an outlandish method for promoting art, as I found another unemployed artist advertising her conceptual artwork.

Online micro-businesses may indeed become the wave of the future rather than jobs at traditional businesses, and not just among artists either. It is relatively inexpensive to set up a website, and there are options available that allow you to develop a website virtually for free. With such things as Google AdWords and affiliate marketing, people can even generate residual income. Unlike much of the hype surrounding making money online, the world of Internet marketing requires hard work, just like any other business, but it can be done even in these difficult financial times.

According to Joel Orr, there are a number of businesses that a person can start online:

writing and promoting e-books, recordings, or video online
finding other people's products to sell online (aka affiliate marketing)
opening an online store - listing products that can be drop-shipped to keep inventory low
finding items at garage or yard sales and selling them online

Social networking sites, which I mentioned earlier, can essentially become free advertising tools for those who know how to use them. Sure, they can be incredible time wasters, and I have yet to figure out how to increase my following on Twitter, but developing networks of potential buyers is essentially the same thing as traditional advertising. It's all meant to drive traffic to your business. A good resource I found would be a site called "gainfully employed", which deals with Internet marketing and web-related business.

With this positive spin on unemployment in the UK, US, and around the world, it is indeed an exciting time for many of us to be alive. Those with the creativity and gumption to make it work will survive unemployment and possibly create a bit more wealth than they would have by staying in their nine to five jobs...

Is the Housing Market Finally Recovering?

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 23 Jul 2009 12:30:00 +0000

There is some good news these days in the UK housing market. Due to legal changes in how houses are foreclosed upon, the number of foreclosures in the UK has declined by over 40% for the first three months of 2009, compared with the same period in 2008. As it usually takes eight weeks to file a possession order in the UK, this coincides with the new pre-action protocol for mortgage possession claims that was put into place on November 19, 2008. Through these new rules, the government intended to make it more difficult to remove those who were delinquent on their mortgage payments from their homes. This still does not mean the UK housing market has recovered, as the last down period in the housing market, from 1989-1996, shows that there were rallies followed by ever steeper declines until the first quarter of 1996. Home builders, however, have noted that there has been an increase of 60% in home sales over last year as prices and interest rates declined. Banks, however, have still not been eager to lend, and that is what is keeping residential property sales in the UK from increasing more rapidly.

Now, turning towards the US, the news unfortunately is not so good. Housing prices have fallen by about 2% per month in 2009, and nearly a quarter of Americans now owe more on their homes than they are worth. Sure, interest rates and tax incentives have made buying a home right now more affordable than in many years, but the lack of lending due to stricter controls and more stringent lending practices, the highest levels of unemployment in a quarter century, and continuing waves of foreclosures will continue to keep residential property prices down.

Andres Carbacho-Burgos, an economist with Moody's Economy.com, says this about the US housing market:

‘We have a lousy job market and an excess of around 1 million extra homes that has to be worked off. The housing market is not going to hit bottom before mid-2010.”

There is good news, however. The US property market is not just a single entity, and certain areas have been less affected by the plummeting housing prices. There are many nuances to it, and in some major metropolitan areas, housing sales have actually increased. Still, there is a glut of at least a million residential properties, which will mean that it may take another six months before the stone reaches the water in the bottom of the well.

Now, here's a little secret. While property prices in other parts of the Western world sank like a certain luxury liner in the North Atlantic, residential properties in Israel have actually increased. This has happened even as Israel goes into its worst recession in years, with its economy expected to contract by about 2% this year. This is due to two factors. Banks in Israel generally have been conservative, requiring a down payment of 30% from purchases, meaning that they are not saddled with a great number of bad loans like their counterparts in the US. Also, there is a shortage of homes in Israel, as many developers scaled back because of the global economic malaise, meaning that the available stock now commands higher prices, at least for the foreseeable future.

Now... on to my own locale: South Africa and the fairest Cape. Property prices here were rocketing out of control until right before the subprime mess emerged in the US and, while residential property prices have dropped by a good 15-20% in the past year throughout South Africa, they have dropped less than 5% in the Cape Town metro, meaning most of the gains made by speculators in the area will be kept. All in all, the housing market dipped by about 8% nationwide. That is good news for locals, who will not have to deal with anything like the disappearance of trillions of dollars of property wealth that vanished in the US and other Western housing markets.

Everyone is Looking for More Money

darupprecht@gmail.com (D. A. Rupprecht) — Mon, 13 Jul 2009 17:07:00 +0000

I just read today that the minimum wage is being raised in the UK by nearly four percent for all age groups. On July 24th, the US will follow suit, with 29 states affected by the increase in the federal minimum wage to $7.25 per hour. Other countries like Morocco are also raising their minimum wage, which went up last year and is set to rise again for a total rise of 10%. Other countries too are talking about raising their minimum wages to keep people out of poverty.

While this may all sound like good news, for the world's economy as a whole it may not be. Although it is good news for those who are already employed and who are working for minimum wage already, it will not encourage job growth in a stagnant job market. Employers are inevitably going to hire less as their costs for labor increase. That means fewer jobs will be created overall.

Now, the argument is that minimum wage jobs are essentially entry level positions, and should therefore not be seen as positions that are meant to support a family. There are plenty of families in the US and other countries that do have families dependent upon the minimum wage. Besides which, what about the teenagers and college students who need jobs to gain experience so that they can get ahead? Current US unemployment figures for teens are at 24%, the highest in a quarter of a century. The rise in the minimum wage will only exacerbate this problem.

Peter Schiff explains in detail how employers will tend to use higher skilled workers who are able to produce more in less time than workers with lower skills, and how some workers will even be replaced by machines. The last time I was in the US I saw an increase in automated cashiers, which means jobs are being lost among these types of low wage jobs. Sure, the people who manufacture and repair these machines are getting more work, but I have a feeling that they were getting more than minimum wage anyway. It is for this same reason that fast food establishments use throwaway cutlery, plates, and cups. In so doing, they have no need to hire a dishwasher. This is the same for other unskilled positions, such as movie ushers or baggers at grocery stores. Those jobs have been essentially lost due to the minimum wage laws.

There is another cynical effect of the raise in the minimum wage, at least in the US. It will keep people off of welfare programs. As it stands, a worker on the bottom of the pay scale will benefit from various government programs, which help to feed, house, and provide medical coverage for the poorest in our country. By raising the minimum wage, some workers will no longer get these benefits and will actually be worse off. Now, while this is good for government coffers, which are in the red after massive bailouts to large corporations, it may in fact cause more suffering as families are cut off from needed food and medical aid. Obama's plan to ensure medical coverage for all Americans may end part of that argument, but people must still eat and have a place to live.

Now, I am not advocating that there should be no minimum wage, but in the current economic climate in which we find ourselves, is it not better for a person to have a job than not? Raising the minimum wage, whether it be in the UK, the US, or South Africa, will not solve anyone's problems, least of all the unemployed.