The Creating Wealth Blog

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.

Abandon the Culture of Poverty: Changing Attitudes on Wealth Creation

darupprecht@gmail.com (D. A. Rupprecht) — Mon, 06 Jul 2009 12:21:00 +0000

I look around and see a lot of poverty in the city where I live. And no, it's not because of the current global economic meltdown. Cape Town has one of the highest differentials between rich and poor of any city in the world. On the Atlantic seaboard, there are properties worth tens of millions of dollars, some of them bought by Hollywood stars and people of influence from around the world. Just a few miles away, there are people living in shacks, many living without plumbing, electricity, or running water. And from my experience, though the people in the First World arguably have it better, the poor can be found in every major city throughout the world, even in London, New York, Paris (remember the riots there in 2007?), and other major cities...

Why am I talking about poverty on The Creating Wealth Blog? Isn't poverty the antithesis of wealth? That's exactly why I'm talking about it. It was Michael Harrington who initially wrote about a culture of poverty that prevailed among America's poor back in the 1960s, and it is this way of thinking about wealth, and the lack of it, that needs to change. In a nutshell, it is the idea that poor living conditions create poor health, creating a cycle that keeps people in poverty for generations.

Creating wealth, however, is really just about making intelligent decisions with the resources you have available, and creating wealth is not just for millionaires and billionaires. It is for anyone who wants to improve their lives, and the lives of their children, and the lives of their descendants. It can happen a dollar, or even pennies, at a time. Creating wealth is altruistic in that the wealth that is created for the next generation, whether it be for a person's own children or given to worthy causes, such as is the case with Bill Gates or Warren Buffett.

In this sense, the American government has been failing its citizens for decades, as it has spent more than it takes in since the 1970s, except for a couple of years around the turn of the millennium. The United States has been spending the wealth of the next generation, and in doing so will create a generation for which life is not better than it was for their parents.

That said, the United States has also been a beacon of hope for many who came to its shores penniless. Horatio Algers, Jr. wrote about such hope in his novels in the nineteenth century, about impoverished children who "made it" through sheer determination, hard work, courage, and a concern for others. These rags to riches stories are the basis for the optimism in American culture and for the idea of the American Dream. That is what America offers. Hope. And if that offer of hope can indeed be turned to a reality by some, it can be turned into a reality for all.

Perhaps someday in cities like London and New York and elsewhere in the First World, people will find a way to end the cycle of poverty that keeps people from achieving all that they can in life. Perhaps after that we can then even solve the problem of poverty where I live... in Africa and elsewhere in the Third World.

A Very Brief History of Consumer Debt & a Bit of Good News

darupprecht@gmail.com (D. A. Rupprecht) — Fri, 03 Jul 2009 11:21:00 +0000

I recently went looking on the Internet for some UK debt news for an article I am writing about how people are dealing with debt around the world. Normally when I research on the Internet, I make parameters so that I do not get any old news. Today was different. I just forgot, and in so doing came across an article from 2005 that sounded eerily familiar. This report from the BBC warned years before the credit crunch struck about consumer debt, and how it could drastically affect consumers in a downturn.

"Debt is a time bomb which could be triggered by any number of shocks to the economy," Lord Griffiths, a former head of the Bank of England, was quoted as saying in the article.

Well, that time bomb has now exploded, and we are living in the aftermath of a financial Big Bang. As an astute student of history, I know that it is imperative that we remember these warning signs, which in some cases occurred years before the current crisis. History will only repeat itself if we do not learn its lessons and follow the same paths to financial ruin.

Now, not unlike the Big Bang that brought the universe into being, this financial crisis is bound to bring about some very positive changes in world economics. Being in the explosion, we just may not see this right now. But already we are seeing a more conservative view of how money should be handled. People are seeing now how money, and wealth, should be respected and used wisely, just like any tool. That means not using a credit card to go grocery shopping or taking out a loan to go on an overseas holiday. Living a simple life is making a comeback.

As I've stated in earlier articles on this blog, companies that offer debt solutions, alternative energy producers, and others who are looking forward to where the world is going will generally do well. Being one step of the rest of the world is a recipe for making money.

And it seems as if I am in a good location to weather this credit crunch. Africa generally has escaped the worst of it. Kenya's banking system is doing well, as is South Africa's, the product of a decent regulatory system. I think the First World could use some lessons about fiscal responsibility from the banking sector here in Africa. Yet on the flip side, many African countries' mining sectors have hit some countries hard. South Africa and other countries on the continent depend far too much on mineral wealth, and mining companies across Africa are finding it difficult to get credit. So yes, it has been easier here, but no place on this planet has been unaffected by the crunch.

Still... there are good points. As I mentioned in an earlier post, more people are taking university and community college courses to improve their skills and to make themselves more attractive to employers. UK landlords are also finding that their business is booming, as younger people who would normally have got home loans are not qualifying, so are increasing the ranks of renters.

I foresaw this possibility in earlier this yea r, and still believe that buying properties to rent out will be a good thing. A localized trend here in South Africa is taking place before next year's Soccer World Cup. People are being offered over $1600 a day to rent their houses out for the duration of the sporting event that starts in 11 months. My mother in law certainly is not seeing any downturn in her business, and I am just hoping that she may offer me a bonus for plugging her business online...

Kublax: A New Way to Budget Finances

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 02 Jul 2009 13:17:00 +0000

Budgeting your finances is a key step to creating wealth. For those of us who like to keep track of our finances, there is a new tool that has just arrived on the Internet called Kublax. This personalized money management tool allows people to more easily keep track of where their money is going. As a personalized money management system, Kublax does much the same thing as Mint, though its context is more in line with people living in the United Kingdom than the United States. Though Mint is actually more geared towards the United States' financial system, both it and Kublax otherwise mirror each other as to what they do. And perhaps the best news for cash-strapped consumers about these services is that both of them are free to use.

Kublax allows people to keep track of all their spending and income online, and in one place, making it easier to budget and to see where their money is going, thus keeping waste to a minimum. It keeps track of balances of credit cards, in bank accounts, of mortgages, and for a variety of other accounts. This tool can even remind people to make payments on time to avoid late fees, thus saving money.

Like it's counterpart in the United States, Kublax offers visuals like graphs to show how a user's finances compares to others. For example, if you want to see the difference in how much the average Londoner spends on expenses compared to someone in the West Midlands, you would see that though the main expenses for both are rent or mortgage, there is a whopping £320 difference between them. Looking at the fact that housing costs are nearly 50% more, someone from the West Midlands who is looking at increasing their salary by 10% by taking a job in London would definitely have to think hard before accepting a new position there.

Besides the cool graphs and comparisons between the British Isles' different regions, Kublax tracks spending in specific areas and informs users if they are going over their allotted budget in any area. In these recessionary times, everyone is counting their pennies. With budgeting back in style, Kublax's appearance on the scene as a free online budgetary tool comes at just the right time.

Reading the five reasons why a person should use Kublax, utilizing this or another free online service like Mint seems like a no-brainer:

A person can manage all his or her accounts in one place.
Through its categorization software, Kublax automatically separates expenses into groups, and then will track them by day, week, or month.
With all accounts in one place, and seeing income and expenses, it makes it easier to set up a budget and to live within one's means.
With e-mail and texting alerts, late payments can become a thing of the past.
By comparing a person's expenses to what others are spending, a person can budget so that he or she is able to plan his or her finances more carefully.

Like its counterpart in the United States, Kublax boasts an online security system that makes each user completely anonymous. So there is really no reason why someone living in the U.K. should not at least try it out. It looks to be a simple yet all-encompassing budgetary and money management tool, and since it is free, there is no reason for someone not to try it. It makes me wonder, however, if there will be something like Kublax coming to South Africa soon...

Frugality is Back

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 25 Jun 2009 16:56:00 +0000

My mother in law would be proud. Apparently, seventy percent of the elderly population in the United Kingdom are reverting back to the frugal methods for conserving funds that many of them learned during and immediately after World War II. My mother in law never forgot those lessons. She was a toddler when the London blitz began, and her formative years were spent in a country where what we would consider basic necessities, like soap for example, were considered luxuries.

Since then, she has always believed in cutting costs and finding bargains. As a single mother raising three children in South Africa, this was essential. Sure, she came from an upper middle class family, and her parents could have and would have helped her more than they did, but in so doing, they might have made her dependent on them rather than the independent entrepreneur that she later became. Now, we don't see eye to eye on every issue, but the lessons her own life teaches us about living a frugal life have begun to resonate among younger generations.

Risk takers have been vilified where once they were held up as heroes. We see this in an American culture that venerated those who made easy money and relegated those who worked hard and saved as fools. You would never find something like this article I just read online about an elderly woman who had put all her savings into the stock market. The author talks about her with disdain, and perhaps this is for good reason. It is because of the ever greater risks that people took most recently in the US housing market that the world economy began to fray at the edges.

But attitudes are changing , and the idea of cocooning, spending more time at home than out spending money, has come back into vogue. The home is becoming more of a haven for entertainment with the Internet and electronic gadgets. You don't even have to leave home to shop anymore. Retail clothing outlets in the US have been closing as people stop spending and consumers become tighter with their money. Even people who work in the financial sector are seeing their companies being frugal with their money, questioning small purchases and getting tighter with their funds. To quote an asset manager in London: "All our expenses are being looked at down to the last penny – someone was questioned the other day on a claim of 75p for a newspaper. It’s as bad as being an MP."

While other retailers are cutting back, discount stores like Wal-mart are seeing new customers come into their stores as they abandon other, higher priced retail outlets. These new shoppers spend some forty percent more than the typical Wal-mart shopper. As a California lawyer that has become a regular Wal-mart shopper said, “If I am able to get good stuff at Wal-Mart, and I am able to save money, why would I change?”

I am full of hope for the future. I believe this new/old way of thinking that is now making a comeback will take us towards where we want to be as human beings, building a sustainable lifestyle based not on plundering the world's resources but on finding ways to reduce, reuse, and recycle. There are new ways we can invest in the future, and technology holds the key.

An article by Shel Horowitz advises those who have never lived in poverty on how it can be ended, and in this article he lists a number of things that not only the poor, but all of us, should be encouraging. He pushes for the massive introduction of alternative energy sources such as solar and wind, decriminalization of offenses for illicit drug use that takes otherwise productive citizens out of society and puts into prisons, revitalizing mass transit on which the poor depend for transportation, organic gardening, and a number of other things that would make us wealthier as a society. The days of greed being good are gone, and there is a storm brewing on the horizon. People are angry that the very people they view as causing this economic crisis, the bank executives and speculators in the financial markets, are the same ones that are now getting bailed out. Again, Shel Horwitz quite fittingly lambasts those who took the bailouts and praises the Obama administration for freezing the salaries of executives of companies that have received bail out money.

It is time for us to get back to the basics, and to get back to a world view espoused by mother in law. One of her favorite sayings is "Cut your cloak according to your cloth." This essentially means that we should take what we have and make from it what we can rather than wishing we had more, or borrowing to attain it. Creating wealth does not entail taking on loads of debt. If you can save a buck by making your own food from scratch, rather than going out to eat or eating prepared meals, then that is what you should do. Leftovers should be eaten, clothes should be mended rather than buying new, and growing vegetables in a garden, something my father taught us to do as children, is something we should start doing again. We should all look at what we do and the way we spend our money, because it is through hard work and savings that real wealth is made.

The Credit Crunch Continues...

darupprecht@gmail.com (D. A. Rupprecht) — Tue, 16 Jun 2009 15:29:00 +0000

People are still finding credit difficult to obtain in the UK. Proof of this is the 3.5 million credit card applications and 1.6 million unsecured loans rejected over the course of the past six months. Even people with security are being denied credit, as over one million loans were declined even though the person requesting them had collateral.

Personally I think this is a good thing. Reliance on credit during the boom years allowed people to grow their debt until it got unmanageable, and the pendulum these days is merely tipping in the other direction, and this is so even here in South Africa. Not even two years ago, banks were throwing around money as if it were almost worthless. In the current situation, credit is something that even those with money are finding hard to get. It is almost as precious as gold.

Speaking of gold, even those countries with massive amounts of natural resources, like Ghana, are finding money tight. Ghana last year had been able to raise $750 million to prospect for oil in a newly found field in the west of the country. Today, there is no way the Ghanan government would be able to raise that amount of funds.

In the US, the federal reserve's aggressive actions have kept the credit market relatively strong, with the exception being the housing market. The policies that the US government has taken have allowed banks to lend, and interest rates have remained generally low. Interest by investors in the Asset-Backed Lending Facility has picked up in May and June to levels not seen since last fall. This is good news for the biggest economy in the world, and perhaps a ray of hope for the future of the entire world economy.

Africa generally has not been hit hard, though unlike the South African economic guru Trevor Manuel's opinion about the economy earlier in the year, South Africa has dipped into a recession during the last two economic quarters. People here are talking about the World Cup next year, and the building of infrastructure can be seen everywhere here in Cape Town. People are generally optimistic, and looking forward to the next year, when an influx of tourism in an otherwise weak part of the tourist season is slated to bring in billions of dollars.

South Africans are taking the credit crunch in stride. There has even been a new book called "Beat the Crunch," which gives hints to consumers on how to save and cut costs during this recession. That's one way to make money in the current economy: by explaining frugality to a generation that has never known it.

Now... the credit crunch in Cape Town, South Africa brings on a whole different meaning. Though banks here have begun to keep a tighter reign on their money, it has given one comedian here material for a show called simply "Credit Crunch." So among all this dismal news, there is still a reason to laugh...

Following the Plastic Road

darupprecht@gmail.com (D. A. Rupprecht) — Wed, 10 Jun 2009 11:08:00 +0000

Some people continue to put their heads in the sand when it comes to their debts. Denying debt, however, can lead to bankruptcy or even to a person's home being repossessed. The mountain of debt consumers in Western countries took on is a big part of what led to the current worldwide economic downturn in the first place. Giving credit to those who could not afford it, especially as was the case in many of the sub prime home loans given in the United States, created a knock on effect that caused the sub prime home loan market to collapse. Much of this debt was bought and sold internationally and, like a cancer or other debilitating disease, it spread to banks around the world, erasing trillions of dollars worth of paper wealth and affecting vast swathes of the world's population.

The use of credit cards and other forms of debt taken on by consumers, often to fund lifestyles that were not sustainable, created an unreal world in which valuable products and services could be easily obtained on credit. The party is over now, and it also left us with an economic hangover that will be felt around the world for years to come. This is the ruin we have created. To quote Peter Davidson of Bankrate.com: "The road to financial ruin is paved with plastic."

In fact, a study in the United Kingdom revealed that one out of every six people believe that they are not able to keep up their commitments to paying debt payments, with this figure moving up to one out of every three people in the survey when asked this question in relation to the near future. This means one in three people are seriously concerned with their current or near future financial situation, and this sort of attitude is becoming more endemic.

Darryl R. Schoon of the Market Oracle has this to say about debt:

"Debt, in capitalist systems, is a wondrous device. That is, until it can't be paid back. Under capitalism, credit fuels expansion but it does so at a cost. As capitalism expands, credit becomes debt and the greater the expansion, the greater the debt."

Interest rates around the world have plummeted to their lowest levels in decades, making debt seem as if it could be manageable once again. Lest we forget, repossessions of homes are still happening at an alarming rate, and have increased even here in South Africa, one country that was supposed to be only residually affected by the economic downturn.

To quote a previous article I wrote on the Creating Wealth Blog, we need to rid ourselves of this debt culture. We need to live within our means and not spend beyond what we can afford and, if this means more people go to consultants to help them budget their debt, so be it. Debt counselors will do well in the coming years...

Pessimism about our current economic debacle is not a new thing, and I do not wish to sound too pessimistic. There is hope on the horizon if we choose to see it, but we must get our respective houses in order and deal with the debt that many of us built up over the long party prior the current serious economic downturn.

Retirees & Recession

darupprecht@gmail.com (D. A. Rupprecht) — Wed, 27 May 2009 12:54:00 +0000

The lowering of interest rates are generally a good thing for most people, many of whom are attempting to dig their way out of debt. However, when it comes to those who have already retired, there may be a different story.

As pensions are often tied to longer term investments, the amount of money retired people have at their disposal is actually declining. In the UK, the expected yearly income for a retiree has gone down £884 to £17,779. While lower interest rates tend to make life less expensive, certain costs, such as those fuel and food, are actually rising. In addition, the lower cost of home loans and borrowing money does not tend to help retirees, but rather hurts their pensions, which are tied to interest rates and the markets.

In the United States, more people are claiming their social security benefits earlier, as people are let go from their jobs and employment becomes more difficult for everyone to find. Many of these people will find themselves in financial difficulties later, as the ramifications of taking social security benefits early means they will get less on a monthly basis. In the past, older workers were cushioned from lay-offs, but in the current economic downturn, this seems not to be the case. This may also be due to the steady loss of union jobs, which protect experienced workers from job losses. Meanwhile, some US companies such as Yahoo are taking the step of freezing company 401K contributions.

Here in South Africa, where skills are in scarce supply, retirees are actually seen as an asset, and so may weather the recession a bit better. Jan Coetzee, Managing Director at Manpower South Africa sees cutting those close to retirement as naive. "In a recession and consequent downturn, the core business areas need to be tightened and made stronger, and experienced staff are therefore central to this process.”

But then all may not be so bleak for some retirees. A few retirees who are either not ready to quit working or cannot afford to are turning to franchises, at least in the US. A franchise offers a tried and true business plan for experienced workers. Those who put money into starting franchises tend to be older and have savings enough to grow the business, as it takes from $20,000 to as much as $150,000 to buy into a franchise. Perhaps another silver lining in all this mess is that people are saving more for their retirement, so that the next generation of retirees will be better off than those who are retiring now.

Still, the majority of retirees are finding it difficult to survive in the current economic climate. Prices of petroleum and other carbon-based energy are likely to stay high due to increased usage in China and India of automobiles, and if there is an upturn, prices for such fuels, as well as commodities that require transport, are likely to increase even further.

Internet Reputations & Bass Fishing

darupprecht@gmail.com (D. A. Rupprecht) — Wed, 22 Apr 2009 13:50:00 +0000

Carl Sgro fixes reputations. Carl Sgro also likes to fish for bass. Both of these elements of who Carl Sgro is are congruent... and here's why...

The Internet, while becoming a tool that more and more people are using to conduct business, has a dark side most people tend not to contemplate. Anyone with access to a computer and time on their hands can spread negative commentary around the world in an instant, spoiling people's reputations and causing people and businesses to lose money.

"It's sickening to me that anyone with an ax to grind can go online and destroy people's lives," says Carl Sgro of I.R.M. Consultants in Bloomingdale, New Jersey.

I know what Carl Sgro means.

My mother in law, a small business owner in Cape Town, South Africa is in the accommodation industry here, where she has a number of properties she rents out on a short term basis. My wife and I help with her business. Now, although I sometimes have questions about her customer service skills, she is generally very professional in the operation of her business.

Recently, she had several younger Americans stay at her establishment for a couple weeks . They were nice people, but they were also hard work. And they took advantage. They tried to barter down everything, even the $2 a day charge for usage of the Internet, which in South Africa is paid for by how many gigs are used.

Towards the end of two of the guests' stay, they left town and returned four hours late, leaving all their stuff in their rooms. As there was no other accommodation available should someone arrive and request a last minute booking, they were charged a fee of some $30 (at the current exchange rate). Now, they became difficult about paying this late departure fee, but that was to be expected, considering their behavior throughout their stay. Then one of them threatened to plaster negative commentary all over the Internet about the establishment. In spite of this, I (who happened to be around to deal with the situation) stood my ground. Fortunately, I have not found any negative comments about Rondebosch Guest Cottages online, but there very well could have been. I did my best to assuage the guests, even going so far as to call a taxi for one.

So... I guess my mother in law will not need to call on Carl Sgro this time. I will, however, continue to urge my mother in law to provide the best customer service possible to her clientele, as ethical online reputation watchdogs like Sgro say to people who deserve their bad reputations, "I could help you, but I won't."

And so we get back to fishing. Carl Sgro offers a service not unlike that of a fishing guide. He takes companies as well as individuals, and guides them to places where they can catch something good, rather than a pair of old rubber fishing boots or an ancient tin of baked beans. In the same respect, a fishing guide takes someone someplace where they can catch fish, and catch them abundantly. A fishing guide is a bit like a search engine, showing their clients the best places to fish, based on their intimate knowledge of the area. So too do people like Sgro, whose business it is to ensure that reputations are not sullied, except with good cause.

Rising Unemployment Brings Rising Numbers of Students

darupprecht@gmail.com (D. A. Rupprecht) — Tue, 31 Mar 2009 16:03:00 +0000

Yes, things are bad all over, and unemployment in the United Kingdom is adding to the stress of consumers there. But there may be a silver lining to this cloud. Application for enrollment in universities in the UK have increased dramatically, as people of all ages become increasingly pessimistic about employment opportunities and instead turn towards furthering their educations. The Universities & Colleges Admissions Service (UCAS) has indicated that applications increased by over five percent from twelve months previous, and the University of Dundee in Scotland saw applications increase a whopping 16.5%.

A better educated populace will no doubt give the UK an edge in the future, though when an economic recovery will come is still a mystery to most everyone, economists included. The down side is that it will also burden many young people with debt. Such debt hopefully will not be as dangerous to the economy, as the skills learned through universities, colleges, and technical schools will make graduates more employable. Still, the severity of the recession may mean many companies will not be hiring even three years from now, when most of this year's UK graduates will get their degrees.

Similar things are happening on the other side of the Atlantic pond, as the privately operated ITT Technical Institute's stock rose over 46% in a year as demand for their programs remained incredibly strong. People with jobs are educating themselves to be more valuable employees, and those who become redundant (laid off in U.S. terms) are needing to increase their skills in order to make themselves more attractive to companies in the increasingly competitive job market.

As funds for higher education are cut at public institutions, private colleges and universities are picking up the slack. The president of the Career College of Northern Nevada, Nate Clark, noticed not only a rise in applications, but fewer drop outs as well. Students who before could find employment easily without finishing their programs now discover that employers are becoming more picky in the tightened job market, choosing candidates with degrees over those without.

Online education is also seeing an upturn. American Sentinel University saw enrollment increase by 78% last year. Overall online enrollment has increased by more than 12%. A survey conducted by 4collegedegrees.com, from which many online universities and colleges recruit, indicated that two thirds of those who enrolled in online or traditional institutions of higher learning did so because of the economy.

Still, the report on debt in the UK does make one wonder if students will have jobs waiting for them when they graduate. It will be many years before they will know, and it is likely that UK students will share the fate of their counterparts in the US.

Frank Hanna on the Love of Money

darupprecht@gmail.com (D. A. Rupprecht) — Tue, 31 Mar 2009 10:28:00 +0000

We have heard a lot about how people such as Warren Buffett and Bill Gates have given the majority of their fortunes away to charity. While many people with fortunes not so vast as theirs may see this philanthropy as a good thing, what has not really been explained are the reasons behind such philanthropy.

Frank J. Hanna III is a philanthropist in his own right, who belongs to the Philanthropy Roundtable, a group of individuals, corporate representatives, and members of foundations who gather each year to discuss their objectives for charitable donations. He writes in his book "What Your Money Means" about the importance of using your money to make the world a better place. In his book he discusses what it means to have money and the responsibilities inherent in possessing wealth.

Frank J. Hanna has had ample experience in creating wealth, having started Hanna Capital LLC, of which he is CEO, with his brother David Hanna in 1989. The company invests in other businesses and by 2007, it had over $4 billion dollars in assets. Much like Warren Buffet, Frank Hanna and his brother base their decisions on the real worth of a company before investing in it.

In an interview with Deal Hudson for InsideCatholic.com, Hanna rejects greed as the motivator of those who helped bring about the current economic crisis, but rather puts forth the idea that the West's culture of materialism led to the meltdown. He explains how credit, the flip side of debt, can be used to create wealth through investment in business and education, and that credit has been used instead to allow people to live beyond their means.

Hanna believes that the market economy is the best way to create wealth, and the reliance on the government to put things right is perhaps not the best policy. With the wealth created from the market economy comes prosperity, which creates jobs and other business opportunities. He quotes an ancient Jewish philosopher who stated that the best form of charity is to help people help themselves. He believes government cannot solve the problem alone, and that all of us are part of the solution.

"This is a crisis, but embedded within any crisis is opportunity," states Hanna.

Hanna does not see wealth as independent of the community, but sees it as a tool that can be used to better the lives of people in the community. As an entrepreneur and philanthropist he has invested much time, energy, and money into education. Much of his philanthropic giving goes towards improving education. Frank J. Hanna's book offers ample advice to those who have made money and wonder what to do with it.

The book is a moral guide to today's billionaires as well as the wealthy of the future, providing a moral compass that many of those who chase wealth in these times have forgotten.

Selling Virtual Real Estate

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 05 Mar 2009 12:48:00 +0000

While the housing market is down in the doldrums and the stock market is tanking, what else can someone invest in that will make money?

Well... I've been looking into domains lately, as I will soon start up an author's website. But in the process, I've come across some interesting things. Sure, business.com was sold for $7.5 million and bingo.com for $1 million, but really how much cash can be generated by owning a domain name?

A lot, but like all things, it takes work and knowledge. It's not a bad time to buy, either. While live auctions for domain names are quickly going out of fashion, online auctions for domains are quietly bringing in money, and websites that deal in domains, such as GoDaddy.com, and others such that deal with expired domains and deleted domains can be readily found. In the .com.au Australian market, domain investment is actually picking up.

A domain is like real estate on the Internet. It's someone's shopfront to the Internet world, and if you own a shopfront on a busy street, where there is a lot of traffic, then that piece of real estate can be worth a lot of money. Also, the cost of being online is a fraction of what someone would pay for a physical shopfront. So... it is likely that some businesses that close shop in the real world because of lack of business can still do well in the virtual world online.

A domain can be bought for as little as $10. These sort of websites, of course, do not have the traffic of walmart.com or microsoft.com, for example, both already well-branded companies. But with Search Engine Optimization (SEO) any site can bring in traffic, and get customers knocking at your virtual door. You just have to know what people are looking for.

This is where the Internet is a very exciting vehicle for businesses. Imagine a store in a backwoods area, in the middle of nowhere. It won't get much traffic. Sure, the people living in the neighborhood might utilize it, but no one else, because it just isn't very convenient. With the Internet, the equivalent of a superhighway can be built for a nominal fee, bringing traffic right to the business's door. And a business can open up an offramp from the Internet's superhighway just by using the right words, bringing in a flood of customers.

But I also came across something very interesting, that is more like real businesses:

The key advantage of buying an existing domain that has been indexed is that it is often easier to optimize that site for certain keywords than it is for using one that is a brand new domain. If you believe the stories of Google's sandbox rule, then all new domains will take 6 to 12 months to rank well which means for a business that is purely internet based that could send you bankrupt and I can assure you I have seen that happen. Whether or not you believe or do not believe that the Google sandbox rule exists, in most search engines, the age of the domain in the index does play a role in your ranking. I have seen webpages in the index that have been there for 10 years and have less than 20 back links on extremely competitive terms and rank in the top 5 of those competitive keywords.

Essentially, the longer domains have been around, the more likely a search engine is to find them. And thus, the better traffic it will have. But one must also be wary of sites that have been utilized for fraud, and have been blacklisted, as these are essentially worthless. Kind of like someone buying Enron.com, for example.

Now, I found an article on niche marketing, where domain investors concentrate on domains for which they have specialized knowledge. Like a football referree buying footballrules.com or a florist buying flowerarrangements.com, for example. Some people even think that these days the development of a website, essentially bringing traffic to it, will increase its worth. That makes sense, as in non-virtual real estate, a property that has been developed, even marginally, will be worth more than a vacant lot.

So... I don't know if I'll actually go into investing in domains, though reading about it does make me want to dabble, but I am certain that very soon I will be buying a domain, more as an online billboard for my services as a writer and a method for promoting my books.

Individual Voluntary Arrangements (IVAs): A Tool for Consumers in Debt

darupprecht@gmail.com (D. A. Rupprecht) — Thu, 05 Mar 2009 11:15:00 +0000

As I have stated previously, in the current economic climate, businesses that help free people from debt are going to be doing well for years to come.

Part of the problem in much of Western society, and particularly in the United Kingdom and the United States, is that consumers have been spending more than they have been earning, and digging themselves into a hole of debt. In both countries, spending beyond one's means can often result in bankruptcy.

In the United Kingdom, there is an alternative solution, the IVA. Individual Voluntary Arrangements with creditors are similar to Chapter 11 Bankruptcies in the US, and are looked at with more favor by creditors, though they still affect a person's credit rating. They essentially entail the consumer paying off a portion of their debts, with the creditors writing off the rest. They are private arrangements made through insolvency practitioners and a person's creditors, so that a person does not have to file for bankruptcy. Unlike Chapter 11 Bankruptcy in the US, IVAs are geared towards individuals rather than businesses.

An individual thinking about an IVA as an alternative to bankruptcy must have a debt of at least £15,000 and must be regularly employed, so that they can make agreed upon payments on the debt. As with everything, there are pros and cons.

The benefits from IVAs are that individuals can protect their positions of employment. Anyone who has had financial issues inevitably would have problems keeping or getting a job that requires handling money. In the UK, people with bankruptcies in their past cannot work in the civil service, police, or the military. Consumers are also protected from further action by their creditors and their property is safeguarded. Payments usually last only five years, individuals have control of their finances, can open bank accounts, and they only pay a set amount equal to an agreed upon payment that they can afford.

The disadvantages are that it cannot be used by someone with less than £15,000 in debt. Also, if the terms of the agreement are not met, creditors can take further action, including being forced into bankruptcy. Though a person gets to keep their house, towards the end of the debt period, equity must be taken out of it in the form of a new mortgage that is released to their creditors. IVAs do go on a person's credit history for one year, though in most cases they are seen as preferable to bankruptcies. Sometimes too, in about one out of twenty cases, the period of debt repayment is extended to six years. During the period of repayment, a person is also not able to borrow.

Debt must be dealt with before anyone can create or build wealth, and IVAs offer many consumers in the UK who are in financial trouble an opportunity to do just that.

Socializing the "Free" Market?

darupprecht@gmail.com (D. A. Rupprecht) — Sat, 28 Feb 2009 13:02:00 +0000

I began thinking about socialism a few days ago when I read a blog entry that suggested the nationalization of banks. Now, socialism has more commonly been identified as an evil, especially by politicians in the United States, and perhaps they had a point. Nazism was essentially "national state socialism", a type of government that curtailed the freedoms, including economic freedoms, of all the citizens of Germany and the countries that were under its control The Union of Soviet Socialist Republics used the word "socialist" in its name, and it too restricted radically the freedoms of its citizenry. So too does China, which describes itself as a socialist state, and in which all of the major industries are controlled by the state.

The idea of socialism is, in fact, a broad set of economic theories that advocate state ownership and ownership of the means of production. And, looking at the majority of Western societies, particularly those in Europe, there is a tendency towards a form of democratic socialism in part of the economy, where certain industries, particularly the health care industries, are nationalized and controlled by the state, which is in essence seen as the representative of the people.

I just read an interview with Noam Chomsky, a professor at MIT and also a prolific writer about economics and its use in the power structure of the world. I have read a number of books by Chomsky, most that deal frankly with the economic inequalities that exist in the world, and in particular exposing many of the hypocrisies that modern Western states propagate. Chomsky describes himself as a libertarian socialist, and gives accolades to such individuals as Juan Evo Morales Ayma, who rose to power through non-violent means through democratic elections.

What intrigues me is how Chomsky says that the U.S. economy was never really a free market economy, and how deregulation, which has played a major role in the current financial crisis, has actually made it worse. As someone who has an avid interest in history, it is interesting to note that the rapid growth of the United States' economy in the latter half of the nineteenth and early twentieth centuries was during a period when the US economy was at its most protectionist. The railroads that opened up the West to settlers in the latter half of the 19th century were, in fact, funded by the government. It is the government, Chomsky argues, that has actually aided growth of the economy during certain periods. Following World War II, for example, the government funded housing and schooling for war veterans. Corporations have from time to time needed "bail-outs", such as a the savings and loans in the 1980s and the auto makers and banks today.

Take the Great Depression and World War II, for example. It was the war and its increasing demand for manufactured goods, and not Roosevelt's policies, that actually brought the US out of the Great Depression. And a lot of people have been comparing this current downturn to the Great Depression of the 1930s. It is like it in a lot of ways, as it was brought on by speculation in the real estate market, with people borrowing in order to create wealth, which essentially just existed on paper.

But the way in which Western societies are dealing with this debt is exactly the opposite of what, for example, the World Bank dictates upon those who make use of it. Those countries who go through the World Bank and International Monetary Fund to get out of national financial emergencies must follow austerity measures that curtail investment in social structures.

But Chomsky says it better:

It is striking that the ways that Western countries are approaching the crisis [entirely contradict] the model that they enforce on the Third World when there is a crisis. So when Indonesia has a crisis, [or] Argentina and everyone else, they are supposed to raise interest rates very high and privatize the economy, and cut down on public spending, measures like that. In the West, it is the exact opposite: lower interest rates to zero, move towards nationalization if necessary, pour money into the economy, have huge debts. That is exactly the opposite of how the Third World is supposed to pay off its debts. That this seems to pass without comment is remarkable.

The question that few people are asking is whether piling on more debt, which is what the government is doing, will help solve a problem essentially caused by too much bad debt. Naked Capitalism tells how Sweden solved a banking crisis during the recession 1992, when a number of its banks were on the verge of collapse. Sweden closed the insolvent banks and put aside their assets, essentially quarantining them so that they could not negatively affect the rest of the economy. This resulted in a devaluation of Swedish currency, which stimulated the economy by making Swedish exports cheaper on the international market.

But this is not the path taken by the biggest economies in the world during this current crisis. Instead, they are borrowing to help "save" the banks from their mistakes, and the bail-outs have not ended with them. If this means the American people will now "own" banks, and perhaps other industries, for a time, and then be able to sell the nationalized shares in bailed out industries for a profit at some future point in time, it is not such a bad prospect. Perhaps we will see a democratization of the economy, with citizens having more economic say in the direction large businesses will go.

Chomsky has been talking about this inequality for years, as real wages for workers have stagnated. It is no secret that the wealthiest have benefitted most from the past three decades of economic expansion in the US.

So... how does one create wealth in such a chaotic and panicked atmosphere? The only answer I can give to you is... very carefully. And perhaps we shouldn't get so fussed about things, as after all, these are just economic cycles, as recovery follows recession and what goes down must come up.

Putting Our Times of Market Turmoil in Perspective . . .

carlgoldenthal@yahoo.com (Carl Goldenthal) — Fri, 27 Feb 2009 04:16:00 +0000

By, Carl Goldenthal

Many of us watched President Obama this week address our nation. Foremost on his list of priorites, it seemed, was to quell our fears to whatever extent possible and provide hope for our, and our children’s, economic futures. Our president’s address reminded me of a quote by a former President, Franklin D. Roosevelt. Roosevelt once said that, “The only limit to our realization of tomorrow will be our doubts of today.” Although that quote was made many years ago, maybe never was it more true than now.

With that, lets take a look at some of the events that we have encountered in other Presidential election years and how the markets have responded for you if you invested $10,000 in 1936 under Roosevelt’s term as President:

1936 – U.S. still recovering from the Great Depression
Word of Nazi’s rising in Europe

1940 - Germany menaces Europe and France falls.

1944 - President Roosevelt’s health questionable.
World War II rages on.

1948 - Berlin blockade accelerates Cold War.

1952 - U.S. detonates first hydrogen bomb.
Attempts at truce at Korean War fail.

1956 - Egypt seizes Suez Canal.
Soviets invade Hungary.

1960 - American U-2 spy plane shot down in Soviet airspace

1964 – Gulf of Tonkins signals Vietnam involvement.

1968 - Vietnam protests and civil rights issues abound at Presidential conventions.
Bobby Kennedy and Martin Luther King, Jr. both assassinated.

1972 - Watergate scandal surfaces.
Equal Rights Amendment fails to be ratified.
Vietnam War rages on.

1976 - President Ford issues Watergate pardons.
New York City threatens bankruptcy.
Recession in full-force.

1980 - Economy still slumping
Iran hostage crisis still plagues nations.
Olympic boycott.

1984 - Budget deficit worsening.
Stock market plummets over 30% in less than four months.
Amidst Mideast troubles, Marines withdraw from Lebanon.

1988 - Savings and Loan crisis at height.
Bombing of Pan Am Flight 103.

1992 - Los Angeles riots heighten civil unrest.

1996 - 19 American servicemen killed in Saudi Arabia bombing.
United Nations arms inspectors repeatedly turned away in Iraq.

2000 - Supreme Court steps in to determine outcome of Presidential election.
Tech bubble bursts – sends stocks plummeting for three years.
USS Cole attacked.

2004 - Oil prices skyrocket.
War rages on in Iraq.
Abu Ghraib photos appear.

And that’s just the events in Presidential election years! Now, throw in these other key events that caused concern:

· the Soviets detonating the A-bomb in the 1940’s
· the Korean War, the U.S. seizing steel mills, the Dow topping 300 and considered “too high,” President Eisenhower’s illness, Castro seizing power in Cuba and recession in the 1950’s
· The Berlin Wall going up, the Cuban Missile Crisis, President Kennedy assassinated, and North Korea captures USS Pueblo in the 1960’s
· The United States invades Cambodia, Watergate fiasco causes President Nixon to resign, U.S. withdraws from Vietnam, the energy crisis, Three-Mile Island nuclear crisis, and massacres in Cambodia in the 1970’s
· Abscam scandal rocks Congress, President Reagan shot, the Pope shot, worst recession in 40 years, Soviets shoot down Korean airliner, U.S. becomes a debtor nation, U.S. bombs Libya, record-setting stock market decline, bank failures, and junk-bond scandal in the 1980’s
· Iraq invades Kuwait, recession hits U.S., Soviet Union dissolves, floods ravage the Midwest, Fed raises interest rates six times, Dow tops 4,000 and is thought again to be “too high,” Asian markets fall hard, and fears arise of impending “Y2K” in the 1990’s

In this decade of the 2000’s, we have seen terrorist attacks on U.S. soil, multiple corporate accounting scandals (Enron, etc.), the U.S. invading Iraq, oil prices soaring then falling back, hurricanes hitting the southern U.S., and our subprime credit crisis. But, after getting a glimpse of our history, do you really still believe that things are different than ever before? Not me.

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. And, oh yeah, by the way… that $10,000 that you could have invested in the S&P 500 in 1936? Well, if you just left it alone, through all of those "troubling times," and just let your dividends and interest reinvest, it would have been worth $26,675,637 after 2007, averaging a return of 11.2% per year for you. Now, are you really ready to give up and pull out of the markets because “this time is different?”

Nationalize Them Banks!

imdaad.sattaur@gmail.com (Imdaad Sattaur) — Wed, 25 Feb 2009 13:59:00 +0000

Much ado has been made over the past week about the possibility that the US Government, by force or choice, may have to nationalize quite a few of its top commercial banks to preserve the financial system and markets. A lot of individuals, including Jim Cramer on The Today Show yesterday morning, were critical of the idea but if done correctly, nationalization of some US banks can yield the taxpayer pretty sweet returns, especially in a time where the government is trying to cut the deficit in half by 2013. Let me explain how…

Basically, the concept of the Troubled Asset Relief Program (TARP) was to purchase toxic, illiquid assets from banks, hold them for a period of time until the markets recovered and to sell them for a profit. The banks get rid of the toxic assets on their books, are able to lend again without fear of losses from further write-offs and liquidity problems there from, and return to profitability. The credit market unfreezes and consumers and businesses are able to borrow again and the American taxpayer makes a pretty penny when the assets are sold. What I am suggesting is that the concept behind TARP should be applied to whole banks and not just their toxic assets. It is banks that are toxic to the financial system right now and why, despite all the measures taken by the Federal Reserve to unfreeze credit, the system is still frozen like the Antarctic tundra. But then if global warming could possibly melt the tundra, certainly action can be taken to unfreeze the financial system.

Now I am not advocating that the US government manage these banks. That would be crazy! They should leave the management of the banks to specialists. However, by obtaining controlling interest – 50.1% of the voting shares – they can direct bank policy. The government would be able to instruct the bank to start lending again to businesses and consumers. The mistakes of the past are known and the banks would not be continuing their bad lending practices.

This is going to hurt the other 49.9% of shareholders unfortunately as share prices will likely take a beating. However, should they persist, great returns can be had when the economy turns the corner.

Nationalization is one of the few viable options that remain to unfreeze the credit markets and the US government should not be afraid to use it wisely to move its economy, and by extension the world economy, closer to that elusive recovery for which everyone is hoping and waiting.

POSTSCRIPT
A good long-term investment opportunity would be to invest in banks that are too big to fail, which the government would prop up no matter the cost, because they will return to profitability eventually. Share prices are dirt cheap right now and will remain so for some time to come so only invest if you have the money is available for a long time to come.

Response to CNBC’s Rick Santelli “Rant of the Year”

acfeinberg@aol.com (Adam Feinberg) — Sun, 22 Feb 2009 07:38:00 +0000

CNBC reporter Rick Santelli made an on-air statement the other day that irked the White House. The statement was in response to the solution to the mortgage crisis that President Obama announced this week.

Mr. Santelli was reporting from the floor of the Chicago Mercantile Exchange and said
“How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills- raise their hands? President Obama are you listening?”. The traders on the floor responded loudly with boo’s. Then Mr. Santelli called for a Chicago Tea Party in July.

I have to both agree and disagree with Mr. Santelli due to the complex nature of the problem. No one wants to pay for bills that were not incurred by them- so why should we accept the President’s solution for every American to pay for this Mortgage bailout package? Well the answer is not so simple. Had the banks realized, as I did several years ago, that this crisis would be rather significant, perhaps they would have cut back their risk and not offered mortgages to those that were unqualified or not offered products that were extremely risky. The reality is that they didn’t realize this fact- and they didn’t realize that this was not business as usual. In fact, I told many people 3 years ago that if the banks did not stem the tide of coming foreclosures it would just spread like wildfire to those that were good, hardworking responsible people- through job losses and rapid deterioration of the value of their own homes. If just one or two homes in a neighborhood are foreclosed on- no one realistically thinks that it will significantly impact the value of their home…but that is not what is occurring right now in most neighborhoods throughout the country. Now the banks have foreclosed on so many homes in some neighborhoods that the good, hardworking, responsible owner now has a home that is no longer worth a fraction of what it was just a few years ago- and perhaps even less than what they owe on their mortgage. After all, if you have 10 homes on a block, and 4 have been foreclosed on, wouldn’t you be reluctant to buy a home on that block? Perhaps if the price was low enough- you might consider it…but that is just my point. Some neighborhoods have been affected so badly and are so abandoned that wildlife is starting to encroach – such as coyote’s and bobcats (Seriously!- A reporter from California captured this on video).

What if Rick Santelli was that responsible borrower and his neighbors weren’t? If I was living in his home I would want some help to come to my neighbor’s aid- because one way or another- Rick is going to have to pay for this- whether it’s in the form of taxes via the stimulus packages or whether the cost is a bit more hidden- when it comes time to sell his home- with a strong possibility that it would sell at a loss or stagnant prices for a long time out into the future. Either way, Rick is paying for his neighbor’s problems. Now personally, if I realized I was going to have to pay for this regardless of whether it’s from tax money or out of the sale of my home- I would rather pay for it via tax money. Why? The answer is simple…if you keep people in their homes it will stop home prices from freefalling. The other answer is also simple- would you want to live on a block with lots of abandoned foreclosed homes? I know I wouldn’t.

Rick also made the point that even if you brought the mortgage to negative two percent (which was an exaggeration because the bank would be paying you to have a mortgage) that people still couldn’t afford to keep their homes. Well on this point I have to agree…but this is also the reason why the banks must be willing to cut principal amounts and take some responsibility for the lousy loans that they made. After all what good is it for the bank to own the property if they can’t sell it unless it’s a loss anyway. More importantly, this whole crisis began because banks made lousy loans. JP Morgan Chase CEO was interviewed by CNBC shortly after the housing plan was announced and he called the plan elegant. When the reporter asked if the bank planned on giving principal reductions- the answer was a flat out no, that reductions in interest rates would be sufficient. I realize he is trying to calm his shareholders- but after that, I wouldn’t be surprised if they suffer more pain by refusing to cut principal amounts.

Foreclosure creates chaos for the homeowner, the bank and the community- particularly acute during periods like now when the banks are foreclosing on entire communities at a time. The economy has deteriorated to a point where simply fixing the mortgage problem won’t be enough – but action did need to be taken. I feel the stimulus bill was not bold enough, but I applaud our government for moving in the right direction.

An open letter to the Republican members of Congress that didn’t approve the stimulus bill

acfeinberg@aol.com (Adam Feinberg) — Sun, 22 Feb 2009 07:24:00 +0000

I should start by saying that I am not anti-Republican, nor am I a Democrat. Officially, I do not represent a political party. I vote for the candidate that best represents my long term interests- regardless of party lines. Did you notice I stated long term interests in that statement? Congressional candidates might only be in office for a short period of time- but decisions that they make often impact people for years after their term ends.

There is no better time than the present to reboot the way our members of congress think…which has been business as usual for decades. Let’s not bog down this conversation too much by discussing the irresponsible spending in the last few years- I think that has been discussed to death. Instead let’s talk about the present and future. The President proposed that we break free of our standard way of doing things and to re-invent ourselves. It seems that we need to do this every few decades or so- and has been the secret to our success. Resistance is futile (ok, perhaps I have seen one too many sci-fi shows this week). But on a more serious note, now is the time to be bold and set the tone for decades to come. I know of at least a couple of Nobel Prize winning economists that see this as a prime opportunity. If we invest properly in our infrastructure, something that has been lacking for decades, we can start establishing the building blocks for our future growth. I haven’t seen all of the line items of the spending portion of the bill- but I have seen each of the broader categories- while I don’t entirely agree with the way each category received its allocation of money; I probably wouldn’t have fought too hard to change much of it either.

Several vocal Republicans have stated they don’t want to burden our children with the debt of the stimulus bill that just passed. I would say that it was incredibly short sighted of these individuals to think that way. Let’s say we didn’t approve to spend this money now or in the next couple of decades (since they were worried about burdening our children). I would easily argue that much of the spending is inevitable- and would be spent incrementally anyway…after all, are we going to wait for more of our bridges to collapse or wait until our water systems are so desperate for upgrading it takes us to a point where we spend four times as much to hurry the projects along? As to some of the other projects that don’t seem as time sensitive- well they are. Spending on energy alternatives to oil should have been done decades ago- and we waited- so that my parents generation would not have to pay for it…THANKS MOM AND DAD (and the politicians that represented them)!!! Well, I am not actually blaming my parents…but it was their generation that opted to do what the opponents of the stimulus bill were suggesting we do during this crisis- ignore the efficiencies by spending money now and saving later.

Another reason why it was better to spend this money now rather than later is because then we can at least start paying for these debts ourselves. We may pass off a large portion of these debts to our children- but at least they will not have to entirely bear the burden alone.

At some point these investments pay for themselves- and no one can imagine their lives without them. Think about it from a personal perspective. Imagine you own an old home- it is very energy inefficient. Heating and cooling it costs a fortune every year…but you have some extra cash in hand, and start thinking about how to invest this money so that it saves you money every year- so naturally you think about making sure the house is as properly insulated as it can be. The project will be expensive- but when you calculate the cost savings- the reality is that the cost of the project will pay for itself after just a few years- after that, you will save a bundle every year. After 7 or 8 years you start taking for granted the fact that your investment is saving you money. The same holds true for government projects (assuming they are managed within reason). In the 1950’s President Eisenhower approved the national highway system…50+ years later we take it for granted- but could you imagine how different life would be if we didn’t think progressively. Or how about NASA? Many people think NASA is a drain on our budget. What they fail to realize is the sheer number of inventions and innovations that the average American uses in their lives all due to NASA. Kidney Dialysys machines, CAT scanners, water purification technologies, Cordless power pools and about 1,400 more inventions have redefined the lives of people throughout the world because of NASA. Imagine how the world would be different without this innovation.

No bill proposal will ever be perfect- especially one that had to be designed in a hurry, but much of the spending portion of the bill would need to be spent anyway at some point- why push this off yet again?

I was also unhappy with the tax cuts in the bill. I would be glad to see more money in my pocket than the government- but is that money being put to good use by the American public? I doubt it- Americans have squandered their money for decades by living beyond their means. Unless this recession becomes another great depression, it may not be enough to have a long term effect on how people manage their money. Ultimately, the bulk of the money in the stimulus bill dedicated to tax cuts would be better off in infrastructure, technology or education- adding to our long term growth and prosperity. It doesn’t help all of those people in need now- but it will surely protect the children of the future that the Republicans were so worried about.

My final word is this…if you are so worried about the costs- why not proposing to help cut government costs by offering to cut your own salaries (Which is in the neighborhood of $170,000/year). After all, that is what you are proposing that executives in private industries do that are in trouble. Why shouldn’t they? If you want the credibility of the American public behind you- it would seem to be the right thing to do.

Bougie On A Budget: Buying Black Art!

noreply@blogger.com (Kellea Tibbs) — Sat, 21 Feb 2009 18:04:00 +0000

In keeping with the spirit of Black History Month, the inspiration of our new President Barack Obama, and our need to continue to save money, I thought it might be a good idea to talk about other ways to invest our hard earned money besides stocks and bonds, and that might also help you stay in tune with your social consciousness. And giveen the scandals nowadays with high priced investors and the risk we run with placing our money in the hands of the "Bernie Madoffs" of the world, it's nice to have some hands on alternatives for investing our money. One such alternative investment idea is art, and not just any art, but art created by African American Artists.

Perhaps this notion of investing in Black Art was never made more prominent than it was on a particle episode of, one of America's all time favorite family shows, The Cosby Show. There was an episode when Claire Huxtable purchased a family heirloom, perhaps one of the most famous prints, "The Funeral Procession", by T. Coleman ( view this print at http://www.lowcostprints.com/prints/picture.asp?idProduct=85) .

It was about this time, the late 1980's/early 1990's, that I recall, my parents and many other middle class African Americans began to invest in items, that were not only valuable monetarily, but perhaps also of value historically and ethnically. In purchasing Black art, many African Americans feel like they are recapturing a piece of their long lost history, which makes for not only a profitable investment but also a socially conscious investment.
A few years ago, Bill Cosby and his wife Camille actually wrote a book on the topic of Black Art, it's history, and its popularity, as well as highlighting readers about their own personal collection. The book is entitled, The Other Side of Color: African American Art in the Collection of Bill O. and Camille H. Cosby available at Amazon. com (http://www.amazon.com/Other-Side-Color-American-Collection/dp/0764914553/ref=sr_1_2?ie=UTF8&s=books&qid=1235237860&sr=1-2).

According to Black Art Prints.com, before you decide to make a major purchase and investment such as Black Art, you should first know the difference between the different types of art that can be purchased and what to look for:

A lithograph is a print that has been produced using lithography. Most commercial lithographs are created on large offset lithography presses.

A giclee print is created by a special printer that sprays ink onto the paper.

A poster is technically a print designed to be "posted" on a pole, wall, or other (usually) outdoor location to announce an event or point of view, usually printed on fairly thin paper, often in the 24x36 inch size.

Finally, a print is any of the above - print is the large, general category that includes lithographs, giclees, engravings, even photographic prints.

All of the prints sold by most major Black Art publishers are lithographs. A few small independent boutique publishers may offer giclees, usually as limited editions.

Also, according to Black Art Prints.com, Limited Edition prints are printed in a limited, known quantity and are not reprinted. The quantity produced may be very limited, such as 50, or may be one to two thousand. Limited edition prints are often personally signed (and sometimes hand numbered) by the artist.

A special category of limited edition prints, called Artist's Proofs, may also be available. Traditionally, artist's proofs were the very first prints off the press and used by the artist to judge print quality and acceptability. They were also the highest quality, since the plate was new. On modern offset lithography machinery, virtually every print is the same as first, so artist's proofs (usually in quantities of 10 to 50) do not add measurably to a print's desirability.

If you are interested in looking for Black Art, there are a few options for finding it.

1) Art.com - Sites like this are often affiliate websites operated by independent owners.

2) Barewalls.com - A large retail site like this offers a wide selection of art, although it may not specialize in Black Art, so you might have to do an extensive search.

3) Black Art Galleries - This option offers the art enthusiast the opportunity to explore art at your leisure, visit an actual gallery, often both land based and online, and maybe even meet the artist at a gallery showing. Some examples include www.JamesLoveless.com or www.LRoss.com

4) Google Search - More options can be found by simply doing a Google Search and here is a list you can visit for yourself, http://www.google.com/search?q=black+art+prints

Black Art collection is a hobby for many and, even in a recession, can be a great avenue to explore as a future investor. It will not only enhance your portfolio, but it will also allow you to provide your children with historical items to inherit and cherish for years to come.

Want to Save on Your Taxes and Build Your Retirement Fund? Here's Two Easy Tips On How To Do Both . . .

carlgoldenthal@yahoo.com (Carl Goldenthal) — Fri, 20 Feb 2009 03:04:00 +0000

By, Carl Goldenthal

It's no secret that many investors have been shaken by the turbulent markets and economy that we are seeing today. Two things, though, must be kept in mind no matter what the times are.

First, it is undeniable that, if you are still in the "accumulation phase" of saving for your retirement, you must be able to turn a blind eye to the markets, stay true to course, and keep contributing to your retirement investments. As bad as these times seem, we will see a rise in the markets and it will be very, very, lucrative for those of us who believed. Let me paraphrase Warren Buffet, perhaps the greatest individual investor of all time, who said that times like these are when people who don't believe that there has ever been a time like this before sell their stocks cheap to those of us who know that there has been. What Mr. Buffett is really saying is: Don't make the commonest novice mistake of buying your investments high and selling them low. And, above all, don't think that you can outguess the market by timing it. Quite simply, you can't.

Second, you should try to cut your tax burden (legally, of course) as much as possible so more of those dollars that you worked for can be invested for you and are not given away to Uncle Sam. Here are two tips for you to use to help you accomplish both of these objectives:

Tip # 1: If you have contributed the most that you possible can to your retirement plan at work (401k, etc.), you can still contribute an additional amount up to $5,000 per year ($6,000 per year if you are over age 50) to your own IRA. The only difference between contributing at work and contributing to your own, separate, IRA is that if you contribute to a plan at work, you can usually deduct that amount from your gross income for an instant tax advantage. If you have a plan offered to you at work and you contribute to an IRA on your own, you can't deduct your IRA contribution from your gross income. Since it's always nice to get that deduction, I would advise always funding your retirement plan at work first. Either way, though, whether you contribute to your company plan or your own IRA, your contribution will be allowed to grow tax-deferred for your retirement. Why in the world would you ever want to invest outside of your IRA where you know that taxes will be owed each and every year on any interest or income that it generates? The only time that investing outside of a tax-favored account could be better is if you wanted to make sure that you could access your investment before age 59 1/2. (With an IRA or company retirement plan, you must wait until age 59 1/2 to avoid penalties).

Here's another idea: If you are within the prescribed income limits allowed by the IRS, you may even be better off contributing to a Roth IRA over a traditional IRA. With a Roth IRA, you cannot deduct your contributions from your income at all but, on the other hand, you never have to pay one penny of taxes ever on what your account grows to. Also, you can leave your money growing tax-free in your Roth IRA for your lifetime as Roth IRA's have no Required Minimum Distribution every year as traditional IRA's do once you reach age 70 1/2.

Tip # 2: As mentioned above, really try to max out your contributions to your retirement plan at work! Not only will you be putting that money to work for you long-term in the markets but you will pay less taxes NOW as your contributions are deducted from your gross income. Throw in the added bonus that many employers also provide a match for part of your contributions and you have an instant gain. The money that you receive from your employer as a match is literally free money with no risk!

Now that you're armed with the knowledge that could allow you to create a wonderful retirement fund and boost your take-home pay today, just think of how much you could build up over time. If you are age 45, for example, and you start with nothing at all saved today and you save just a modest $50 per month for 20 years earning only 6% per year, you will amass about $22,000! That's $22,000 that you'll have for your total contribution of $12,000! Now, imagine if that $50 per month was put away into your retirement plan at work and you not only had that gain but you were also able to deduct it from your income today!

Please remember that we're seeing example after example today proving that there is very little loyalty on the part of corporate America toward its workers and and social security is anything but "secure. " It could very well be entirely up to you to fund your own retirement. Knowing that, you must build up your own retirement fund to provide your income during your "golden years" and you must get started now.

Is This the End of the Debt Culture?

darupprecht@gmail.com (D. A. Rupprecht) — Wed, 18 Feb 2009 15:48:00 +0000

Is it just the winter in the UK that's bringing out more grim news? Ever more people are becoming insolvent and declaring bankruptcy in the United Kingdom.

I just signed up last week to get a sort of weekly heads up on the economic situation in the United Kingdom, because as we are all aware no economy will escape the effects of this mother of all recessions. I suppose there's some "good" news, as the rate of personal insolvencies, which rose 8.8% in the third quarter of 2008, only rose 8.2% in the last quarter. And the Bank of England dropped its interest rate to one percent, the lowest in three centuries. So... if you're wanting to borrow money and have impeccable credit, you can do so for almost nothing.

But then, according to the Guardian, insolvencies are set to rise to a record 150,000 people this year. That would be a 50% increase on 2008, which had 104,000 people declaring insolvent, more than double the 46,650 who did so in 2004.

Now, not all of these people are getting their entire debts written off. Like Chapter 11 Bankruptcy in the States, about a third of the people declaring themselves insolvent in 2008 signed an IVA, an agreement debtors sign with creditors so that they can make payments they can afford.

And most of this debt is the result of spending on lifestyle items like holidays or to meet household expenditures, not spending on business or job creating opportunities. It comes from the debt culture that citizens of the UK and other western countries have bought into. Instead of waiting for what they want, citizens borrowed to get it, and by doing so paid much more than a product or service was worth in interest payments.

The UK and the US are perhaps the two most guilty societies of this culture of debt, and their national credit ratings are set to suffer for it. While Moody's thinks the UK has "adequate reaction capacity to rise to the challenge," it still thinks the United States will recover more quickly because it "exhibits an unrivalled capacity for innovation." Such optimism about the US economy may be premature, according to the Christian Science Monitor, which sees the over reliance of debt as a weight on any potential recovery. With the $14 trillion dollars Americans owe on mortgages, credit cards, and car loans, more than the yearly GDP of the US economy, they do have a point.

Perhaps the future lies with companies who help people with their personal debts. There's also a new video game called Celebrity Calamity, developed for women between the ages of 18-32 to help people increase their financial skills. I suspect we'll see more products geared towards helping people become more financially savvy.

Whatever happens, remember that markets are cyclical, whatever anyone else says, but also remember that this cycle is going to be a long and exceptionally painful one. In my humble opinion, it's about time we rid ourselves of this culture of debt.

The World Is Standing Still

imdaad.sattaur@gmail.com (Imdaad Sattaur) — Mon, 16 Feb 2009 14:19:00 +0000

INTRODUCTION
When I thought of the headline for this post, I was reminded of the Keanu Reeves sci-fi movie, “The Day The Earth Stood Still” that was released in December of 2008. While there is no alien menace threatening the destruction of the world, life as we know it has changed. The days of easy credit are gone, world trade is plummeting and most of the developed countries are facing prolonged recessions. Japan, the second largest economy (?) behind the United States, just recently announced a 3% contraction in their economy over the last three months of 2008.

This was made all the clearer to me last week when the 2009 National Budget was announced here in Guyana. There were no ambitious plans, no cuts in taxes and the budget was the largest in the history of the country as the government took up the slack in spending. Many commentators here were critical, calling the budget unimaginative and lacking direction. While this may be true, how is it that you can make big plans in the face of a bleak forecast and such staggering uncertainties?

PERVASIVE FEAR
Most people can appreciate this fact, but this is the crux of the problem that is plaguing the world and national economies. This is the problem that is facing companies and individuals. It is the problem of FEAR. The fear of failure, the fear of loss, the fear of foreclosure…it is pervasive and having an effect on the most stoic of us.

Banks are refusing to lend money although they are aware of their mistakes in the past and can avoid them, companies are laying off workers in droves to protect themselves from losses, individuals are hoarding their money to prevent foreclosures and bankruptcies and governments are being cautious over the stimulus needed to jolt the economy towards recovery.

I do not deny that there are weaknesses around but these are being exacerbated by the fear that people feel and allow to influence their decisions.

SUNK COSTS
In economics, the term for past costs (put in here mistakes) are called “sunk costs” and should not be taken into consideration when making future decisions. However, this is exactly what is being done all over the world. The costs of the past 4-5 years are what have been put to the forefront of decision analysis and it is hurting us all.

Unfortunately, in this time when aggression is needed, too many are cowering in the corner waiting for the world economy to turn the corner.

CONCLUSION
To get out of the downward economic spiral will not be easy. It will take courage from the few individuals and companies that have the wherewithal to take advantage of the situation and circumstances. Will you be one of them??? Review your position and as long as you have the resources, take advantage of this time.

The Future of Online Advertising

darupprecht@gmail.com (D. A. Rupprecht) — Mon, 16 Feb 2009 12:19:00 +0000

Forget about Google AdWords and those annoying ads that pop up when you go to some commercial sites. I came across a site called "Hired to Blog" in my search for freelance opportunities online. It's about getting paid to blog, as per the name.

Now, why would anyone want to pay someone to spill their own opinion onto a page?

Advertising. And it's a relatively new, and cheap, form of website marketing . By paying someone to blog about your company in a positive way, you are able to reach people who might not even know about your products or services, as they may have been looking for something totally different when they stumble across your blog.

It's a great way to advertise, as it is more personal... but not too personal! Kind of like those promotional ads that radio and talk show hosts promote a product through their shows. But it's the same concept. Get someone with the skills to communicate, who already has an audience, and who can articulate why people would benefit from using your product or service, and you have a ready made ad maker.

Most people blog as a hobby, and to offer money just for doing something they like to do is a good way for someone who blogs to make a bit of extra pocket cash. But for companies, there are numerous reasons why a company should have a blog presence. It all comes down to promoting your product, and one way to do that is to hire bloggers to write positive articles about your business.

As a matter of fact, there are a number of bloggers on The Creating Wealth Blog who are doing just that. Carl Goldenthal, David Pham, Adam Feinberg, and Anthony Dadlani all work in the investment field, and by writing for this site, they are essentially advertising their services, just like I am advertising their services right now!

Bougie On A Budget: How to Buy Diamonds At A Discount & Be Socially Conscious

noreply@blogger.com (Kellea Tibbs) — Sun, 15 Feb 2009 22:11:00 +0000

So, now that Valentine's Day is over, the pressure is off of the fellas to be creative and romantic. And if you didn't get to pop the question of proposal like so many of your counterparts did, you now have exactly one year to get the ball rolling and find that perfect ring. Two things to consider when purchasing a diamond, nowadays, in our social awareness focused world today, is whether or not the diamond comes from what is known as a "conflict diamond" area, found mostly in Africa. And, since we are in a recession, some of you might need a year (or two) to set this stressful decision making process in motion. But while you are thinking about it, here are a few pointers.

According to eHow.com, one way to check to see if a diamond is conflict-free is to ask the store for it's policy regarding conflict diamonds. You can also ask for a certificate of authenticity that ensures that the exchange from mine to consumer was legitimately conflict-free. Large chain jewelry stores, usually have their policy posted online.

As for the qualities of the perfect diamond, I have been instructed to make sure that all men know what to look for. According to Arlice Nichole, the editor of A Woman's Worth blog (http://awomans-worth.blogspot.com), men should look for what she callse the 4 C's of diamonds: Color, Cut, Clarity, and Carat (preferably the F Class). The first "C", the Color of a diamond, has to do with the amount of light that bounces off of the diamond. Arlice says, "There shouldn't be any yellow in the diamond" and according to the 4C's Diamond Guide at the Kay Jewelers website (www.kay.com), an important component of Color is the Class of the diamond (see the Kay Jewelers chart), and Class D, E, or F are the best, most clear classes to consider as it relates to quality. The second, "C", the Cut of a diamond, has to do with how brilliant the diamond appears. Cut also has to do with the shape you choose which can be round, emerald, or pear shaped. The third "C", the Clarity of a diamond, has to do with the amount of inner flaws or what is known as inclusions in a diamond. The less number of flaws there are in a diamond, the more highly valued the ring is to professionals. The fourth and final "C", the Carat of a diamond, has to do with the weight of a diamond. Carat weight is, according to Kay, is the easiest of the 4 C's to measure, because it is measured on a diamond scale (the lowest, 0.25 all the way up to the highest, 4.00). All of these factors, the 4 C's, can vary with each diamond so be sure to seek an expert opinion before making, what some consider to be, the purchase of a lifetime.

One more factor, that is important during a recession is the price of a diamond. We are all trying to save money in this tough economy and according to eHow.com, there are several ways to save money when looking to invest in a diamond. The options are: 1) Diamond Wholesalers, 2) Wholesale Clubs like Costco, 3) The Internet, 4) Pawn Shops, and the option most women dread, 5) Cubic Zirconia. Now men, if you have to even think about getting a CZ ring, then, speaking on behalf of women everywhere, don't do it. Just wait until you have the money and the time to take your time to look around and make the best decision for yourself and the one you want to spend the rest of your life with. Believe me, she might not say it, but it will matter to her, more than you know.

How You Can Get A Guaranteed Fixed Rate Above What CD's Are Paying! - Part Two

carlgoldenthal@yahoo.com (Carl Goldenthal) — Sun, 15 Feb 2009 17:58:00 +0000

by, Carl Goldenthal

Hopefully you all saw in the first part of my article why a fixed annuity may be a good investment for the fixed-income portion of your portfolios (and why it may not be). You saw that you can get a significant higher guaranteed fixed rate of return much in excess of what CD's are currently paying and that, among other benefits, your interest earned is tax deferred until you decide to take it. You also learned that, on the down side, you can not access your capital until age 59 1/2 because fixed annuities carry with them much the same IRS rules as Individual Retirement Accounts (IRA's). Should you decide to take money out of your fixed annuity before age 59 1/2, IRS penalties (and possible surrender charges) would apply. In part two, let's take a look at a few more pros and cons of the fixed annuity.

How Much Can You Really Gain by Deferring Taxes on Your Principal...

Here I have been pushing the benefits of your taking advantage of deferring taxes as long as possible. Remember that with a CD, you MUST pay taxes the year that your CD matures. With a fixed annuity, you can decide when you take your money out thus putting off your taxes on your interest until you decide to pay them. How much does that tax bite really affect you over time? Take a look...

Say you have $50,000 that you put into an account that will earn you 5% per year and you pay taxes on it each year as interest is earned (like you do with a 12-month CD, for example). Assuming that you pay a federal income tax rate of 35%, your total amount that your account will have grown to at the end of 25 years would be $111,230. Not bad. However, now let's say that you leave your money alone for 25 years to compound until that same 25-year period is up. Your tax-deferred capital would now total $169,318! Would you rather have that additional $58,088 for yourself and your beneficiaries to keep compounding or not? That's right - you could have earned an additional 52% if you could have let your investment grow tax-deferred!

How Much You Can Contribute...
Unlike many tax-deferred programs, there's pretty much no cap to how much you can contribute to a fixed annuity on an annual basis. This makes a fixed annuity a terrific way to contribute over and above what IRA's normally allow while giving you virtually the same tax benefits. And, if you have a large sum already sitting in an IRA or rollover IRA, you are allowed to transfer it over in full to a fixed annuity with absolutely no tax implications!

What If You Are Over Age 59 1/2 and Need Income from Your Fixed Annuity...
If you decide that you want to draw an income stream from your fixed annuity, your fixed annuity company will allow you to set up automatic distributions for you so you can look forward to getting a check for a either a specific period of time or guaranteed for life. You will then have the guarantee that no matter what the markets do, you can never outlive your income. How much peace of mind could that bring in times like these?

What Happens to Your Account if You Should Pass Away?
If you are comparing pros and cons of a fixed annuity with a traditional CD, chalk up a huge advantage to the annuity if you're keeping score at home. Should you pass on, your annuity will pass to whomever you designate as your beneficiaries (or contingent beneficiaries) without being subject to probate. That's right - there is no waiting for your beneficiaries to receive their inheritance while your estate goes through probate. And, your beneficiaries each get to select how they wish to receive their inheritance. They can each select if they want it all at once or they can choose to take it over a period of time options allowing their account to continue growing tax-deferred.

All in all, you can see that fixed annuities can offer a very nice alternative to the traditional CD.
Just remember to check the independent ratings of the insurance company providing your annuity from sources such as A.M. Best, Standard & Poor's, and Finch. Also, make sure that you are capable of leaving your investment in your fixed annuity until you are at least age 59 1/2 to avoid IRS penalties. Lastly, make sure that you know how much the insurance company will let you withdraw per year with no surrender charges and are fully aware when your surrender charges end to know when you will have 100% access to your account.

Don't feel pigeon-holed into the non-producing investment vehicles. There is no reason why you have to be tied to traditional bank products even if you don't want to put your money in the markets.

Carl Goldenthal is a Registered Investment Advisor in New York and has been successfully managing his clients' investments for 17 years. Carl has been nationally published numerous times in financial industry trade journals and is available for speaking on a wide variety of topics to groups of all sizes. Feel free to contact Carl with questions or topics suggestions for future blogs at carlgoldenthal@yahoo.com