08/04/2009

Where does socialism start and capitalism end? And where does capitalism end and socialism start?

The other day I was listing to talk radio. Just as the show’s topic drifted to Obama’s health care plan, my car passed through the I-93 Boston Tunnel, notoriously known as the Big Dig. The tunnel swallowed the radio’s reception and I was left with a few quiet minutes to reflect.


No doubt you have heard that many are nervous about Obama’s plan; specifically that the quality of medical care will decline and that there won’t be any money to pay for it. Critics often site the Big Dig, with its cost overruns and flawed construction as a concrete example (no pun intended) of the dangers of letting the government run the show. An interesting question, is where to draw the line between capitalism and socialism.


John Stewart asked this question when he had Bill O’Reilly on the Daily Show. Forgive the paraphrase, but Stewart asked O’Reilly at which tax bracket do we cross into socialism? Is 30% a capitalist tax rate but 32% socialist? Or 34%?

Or consider this. Many hard core capitalists argue we shouldn’t subsidize wind or solar power, when nuclear is already a profitable venture (and a carbon cutter too.) But ‘twas it not the government that financed the original research for nuclear power? If the government funds the first X billion of a capitalist project, is that socialism or capitalism?

How about the Panama Canal? There’s a huge government project that has boosted capitalism by making oceanic trade easier. Hasn’t Eisenhower’s highway system, another mammoth government project, allowed millions of businesses to flourish? Or even a small business that receives a government loan. Is that capitalism or socialism?

This is not an argument for capitalism. Nor is it an argument for socialism. It isn’t even an argument at all. It’s a question:

Where does one draw the line? Send me your thoughts.

07/28/2009

The Stock Market Doesn't Repeat Itself But It Does Ryhme

The short answer is kind of.  There is a saying on Wall Street that the market never repeats itself but it often rhymes.  While the media loves to preach the doom and gloom sermon when the market takes a plunge, Wall Street is no stranger to scams, plummets and reckless greed.  Join me for a stroll down memory lane:

·         2000 The internet bubble bursts.  Many people claim it is the end of college kids starting billion dollar corporations in their dorm room.  Of course a few years later we have YouTube, facebook and twitter.

·         1998 The hedge fund Long Term Capital Management collapses.  Treasury Secretary Robert Rubin calls it the worst financial crisis in 50 years (perhaps he was in a coma for 50 years?)  Many demand it should be the end of hedge funds.  What happened?  A roaring market and more hedge funds. 

·         1997 The Asian currency crisis sends a hammer stroke to the financial world.  One that lasts only two years.  Afterwards Asia explodes into an economic boom.

·         1987 On October 19th the stock market has its largest single day loss in history.  The well respected economist John Kenneth Galbraith worried we were headed to another Great Depression.  Many experts believe the crash was due to the freshly popular computerized trading, a form of trading that some argued should be illegal.  What happened?  The market quickly recovered and computerized trading became common place.

·         1970 In June the railroad conglomerate collapses creating at the time the largest bankruptcy in US history.  Years later we have quasi government run Amtrak and the private commercial shipping company Conrail.  Did the sky fall?  (Yes, yes I know Amtrak is always late but it still runs.)

·         1938 For those who think Madoff has never happened before check this out.  In 1938 NYSE Chairman Dick Whitney (known as the “White Knight” of Wall Street) is convicted in one of Wall Street’s most notorious scandals.  President Roosevelt himself, upon hearing the news cries out “Not Dick Whitney!” 

There are plenty of other dates in Wall Street’s history where experts and journalists have cried that the sky is falling.  But we are still here.  By the way, scams, plummets and reckless greed will all happen again.  And we’ll still be here. 

07/21/2009

The Best Kept Secret For Entrepreneurs

After my speeches I get this question all the time:  "What advice do you have for me if I am starting my own business?"  In 5 years of speaking not ONCE has anyone ever heard of this organization.  So it appears to be a best kept secret.


The organization is the Senior Core of Retired Executives or SCORE.  Not to be confused with the popular NYC strip club of same name SCORE consists of a bunch of retired executives (lawyers, accountants, CEOs, CFOs, marketers, PR experts-everyone)  They offer free (yes FREE) advice to entrepreneurs.  SCORE has offices in most major cities.  You can make an appointment with say a former CEO and ask him to look at your business plan.  They also have a nationwide business plan library.  Want to start a pizza shop?  They have a pre written biz plan for that?  Want to be a wedding videographer.  Got that too!  They also have a network where you, living in say Akron, OH, can talk with a biz owner, successful in the very gig you want to enter from Tempe, AZ. 


If there isn't an office within catapult firing distance of your house just go to www.score.org.  They can help over the web.

If you had your sites on running your own shop, SCORE.org is your first stop.  (I seriously didn't realize that sentence would rhyme until I typed the period.) 

07/14/2009

Credit Score Credit Report Secrets

 

Three companies dominate the credit reporting world.  Equifax, Transunion, and Experian (a.k.a. the Big Three) handle about 80% of the credit reports in the world.  Wherever I am giving a speech, one question I get asked a lot is, is there one bureau that is nicer/meaner/cooler/more user friendly/more organized than the others?  The short answer is not really.  The long answer is..well…

 

While the Big Three handle 80% of the credit reports, the Fair Isaac Company handles 80% of the credit scoring with their classic FICO score.  What I mean is if you go to a lender and they check your score there is an 80% chance it will be the FICO score.  But contrary to popular belief, there are over one hundred different credit scores out there.  Here’s where I am going with this, if you go to www.annualcreditreport.com to check your credit report (and you should) only Equifax will sell you your FICO Score.  Transunion and Experian have their own scores they offer, which look and smell like the FICO, but they are NOT the FICO score.  So when someone wants to buy one score at annualcreditreport.com, I suggest they buy it from Equifax because that will be their FICO score.  (www.myfico.com can help you get FICO scores from the other two)

 

I do have some compliments for the other two.  I’ve found, after looking at hundreds of credit reports, that Experian boasts the most user friendly site (purely my opinion, mind you.  What’s yours?)  And for business credit reports, Transunion rules that game.

 

So while no one bureau stands above the rest, each offers some interesting perks to know about.

 

07/09/2009

What do inflation and swing flu have in common?

 

Inflation is a bit like swine flu.  There’s a lot of talk about it but no real solutions as to what average Joes and Janes can do about it.  When it comes to swine flu you can’t follow Joe Biden’s advice and not interact with crowds (damn hermits have the upper hand again!)  And when it comes to inflation you can’t vote out Ben Bernanke (Fed Reserve Chairs, with their immense amount of power are appointed.  A scary thought for another blog.)  My advice for swine flu?  Dammit Jim I’m a financial author not a doctor.  But I do have some simple steps to protect your pocket book from the seemingly inevitable rise in the cost of goods.  As prices go up, your dollars get less and less valuable since more dollars are needed to purchase that IPod. 

 

At the end of it all there are three basic ways to protect yourself from inflation.  You can buy real estate, you can buy precious metals, or you can buy an investment that comes with some sort of inflation protection built in (and there ain’t many of these.)  Let’s forget real estate.  If you can afford to buy it you would have done so already.  Real estate’s pricey, even in a down market, so I don’t consider that a “simple” solution to inflation.  Let’s also forget gold for the moment.  Indeed it is the precious metal everyone thinks about, but at $1000 an ounce, that’s not really simple either (though we’re getting closer.)  Instead consider owning a few silver coins (maybe selling for around $15 as I write this.)  Historically silver has done a bit better than gold and it requires less of a commitment.  While stocks have beaten precious metals over the long term, silver has never gone to zero (I’m looking at you GM). Worst case you can give your niece a coin or two for her birthday (now that’s a hedge.)  Where does one buy small quantities of silver coins?  Your local jeweler is happy to rip you off, so check his prices against www.apmex.com, which is happy to fulfill small orders.

 

Another rarely mentioned investment that’s essentially inflation proof is the I bond.  These are the new generation of savings bonds like grandma used to give.  You can buy them at your local bank for as little as $50, no commission, no fees.  They pay an interest rate AND an inflation adjusted rate, so the value of these bonds rises with the inflation tide. 

 

You won’t get rich buying a few silver coins or an I Bond every month.  But you won’t go broke either.  Those who didn’t read this may not be able to make the same claim.