On This Day, 10 Years Ago…..A Momentous Occurrence Happened To Me…..

I retired and enjoyed the heck out of it. If you want to know what I did, go to about and about me.

I started planning for it when I was in my 30’s and knew it would be a long game to have enough. I listened to Larry Burkett of Crown Financial Services, a biblical based ministry that taught me to save and to live debt free. I posted about it a while back on how an average Joe can become a millionaire.

Was it hard?

You bet it was. There were a lot of sacrifices and a lot of learning about investing, managing money and faith in God. It turns out that we were blessed with an abundance of riches, only a small amount of which are financial.

We were alone.

Fortunately, my wife was on the same page. Heck, my Mom even taught me how to save as she lived through the depression. She could make anything last longer than possible. That woman sacrificed for us and I noticed. My siblings however never learned. Mom told me she taught each of us the same lessons, but said no one else listened to her.

I caught a lot of crap from my friends.

Working in the airline industry is very common for my family and friends. We have many pilots and flight attendants in that group.

One of them, with whom I went to school with since 7th grade, gave me a ton of grief when I was in my late 20’s. He was serving cokes for a living (flight attendant) and wasted 15 years of his life doing it. He was broke when he quit.

I spoke to him one Saturday when I was at work. He told me that he only worked 2 weeks a month and was off to Hawaii, rubbing it in my face that I had to work. When I hung up, I knew right then that I was making a short term sacrifice for long term gain. I would be retiring early while being financially safe and knew I would have to work hard. I said to myself that I would make it my goal and I’d be playing golf while he was working. He still is working today, and when he got to the real world I’d had 15 years of experience. I had owned my own business shortly after that conversation. FWIW, I played golf this week.

Did I get even with him?

I chose not to rub it in because the facts show our different outcomes. I’m glad I have mine.

Being an introvert, I don’t want to get into it anyway and he doesn’t want to talk much anymore. I don’t care what happens to others as I can’t control anything other than my destiny. I’m sorry he didn’t listen to me. He told me he resented that job for 13 of the 15 years he did it and hates his current job.

A theme and a pattern.

It wasn’t only my siblings and friends. When I sold my business and went to work for IBM, they were the same. When it came time for me to say goodbye, my house was paid off and we had saved. Almost no one could believe that I was pulling the plug that early. They thought it was some scandal that I had to quit and were very disappointed that the reason I retired was because I could. Most of them were keeping up with the Jones and didn’t save. I looked some of them up and they are still stuck working at the same job when I left.

At the end, IBM was a terrible place to work (see managing executive ego’s, the good, the bad and the ugly). I actually pulled the trigger a year early to get out of that hell hole. To a person, everyone said they wished that they could do what I did, get out. They were too far in debt to do so.

I turned down moving to New York to “climb the ladder” because living there sucks and I didn’t want to raise a family there. People told me when they moved to New York, they got to pay 30% more for everything, for less than I made. Again, I knew that I was making the right decision for my family not to go there to “get ahead” (behind would have been the actual case if I’d gone there).

My Father.

Dad worked until he was 70. Work defined his life. He was lost when he retired.

Working was only a means to an end for me. To be fair, I was fortunate enough to be highly successful and God decided that I should be compensated for it. That helped make it happen, but if you go back to my siblings, they earned more than me at times. They still work though as most of it was wasted on useless stuff.

Dad couldn’t understand my goals, but I had so much going on that work was interfering with my life, so I stopped. I never regretted it.

A lot of the IBM’rs died shortly after retiring because they had to work a long time. I saw that and knew I wanted to enjoy my life. Now, every day is Saturday for me.

I have enjoyed each day these last 10 years. Heck, I’m the president of the how to enjoy your retirement club. Never once did I think about going back because I didn’t have to.

If there is any lesson, it is in the post of how to become a millionaire.

Short term sacrifice for long term paradise.

The Next Financial Crisis Worse than 2008? Which Politician Will Expose it?

I have always been warned of the great wealth transfer from the middle and lower class to the wealthiest.  I first thought it would be through the devaluation, then revaluation of gold, but I didn’t realize that it was engineered through Washington programs, financial crisis, stock compensation and accounting tricks.

I have been reading and found this.  Attribution is below and comments should consider this if you get upset, especially if you lose your shirt.  Here are some excerpts:

Corporate earnings reports for the fourth quarter are pretty much in the books. The deception, falsification, accounting manipulation, and propaganda utilized by mega-corporations and their compliant corporate media mouthpieces has been outrageously blatant. It reeks of desperation as the Wall Street shysters attempt to extract the last dollar from their muppet clients before this house of cards collapses.”

“The previous all-time high in stock buybacks occurred in 2008 at the previous peak. That brilliant strategy led to 50% shareholder losses in a matter of months. No Board of Directors fired any CEO for these disastrous strategic blunders. These cowardly ego maniacs didn’t buy back any stock in 2009 and 2010 when they could have made a killing with valuations at decade lows. After the stock market recovered by 100%, these stooges then began borrowing and buying. It has now reached another all-time high crescendo.

Dividends and stock buybacks in 2015 topped $1 trillion for the first time according to S&P Capital IQ Global Markets Intelligence. As CEOs have borrowed billions to buyback their inflated overvalued stock, they have put the long-term sustainability of their firms at extreme risk.”

The 2008 Wall Street created financial crisis will look like a walk in the park compared to what’s coming down the pike now. We now have a bond bubble, stock bubble, housing bubble, commercial real estate bubble and central banker confidence bubble all poised to pop simultaneously. The negative interest rate and banning of cash schemes will be dead on arrival, driving a stake into the heart of the Fed vampire.”

Even the billionaire oligarch crony capitalist Warren Buffett addressed this despicably flagrant flaunting of basic accounting principles to mislead shareholders in his annual letter last week:

It has become common for managers to tell their owners to ignore certain expense items that are all too real. “Stock-based compensation” is the most egregious example. The very name says it all: “compensation.” If compensation isn’t an expense, what is it? And, if real and recurring expenses don’t belong in the calculation of earnings, where in the world do they belong?

Wall Street analysts often play their part in this charade, too, parroting the phony, compensation-ignoring “earnings” figures fed them by managements. Maybe the offending analysts don’t know any better. Or maybe they fear losing “access” to management. Or maybe they are cynical, telling themselves that since everyone else is playing the game, why shouldn’t they go along with it. Whatever their reasoning, these analysts are guilty of propagating misleading numbers that can deceive investors…. When CEOs or investment bankers tout pre-depreciation figures such as EBITDA as a valuation guide, watch their noses lengthen while they speak.

Buffett’s words are borne out in the chart below. Based on fake reported earnings per share, the profits of the S&P 500 mega-corporations were essentially flat between 2014 and 2015. Using real GAAP results, earnings per share plunged by 12.7%, the largest decline since the memorable year of 2008. Despite persistent inquiry it is virtually impossible for a Wall Street outsider to gain access to the actual GAAP net income numbers for all S&P 500 companies. With almost $500 billion of shares bought back in 2015, the true decline in earnings is closer to 15%.”

I do not support any politician in my blog.  I’m generally not happy with any of the current crop.  One is called out in the following paragraph that causes problems with Wall Street….

The establishment is aghast that Donald Trump is storming towards the presidency. They are blind to the fact their unconcealed felonious actions rise to the level of treason in the eyes of average hard working Americans. The fabric of this country is being torn asunder by a contemptible class of corporate fascists, ego maniacal bankers, shadowy billionaires, and media titans. They have reaped billions of profits since 2009 as the Fed and politicians in D.C. rolled out “solutions” designed to enrich them. They are confident their failures will be shifted to the American people again. The American people may have a different opinion this time. Pitchforks and torches are being readied.”

I found this article from The Burning Platform which was entitled the Great Corporate Earnings Fraud.

Improving Your Credit Score, Continuing Personal Financial Principles

 

This came from Christian Personal Finance, but is in my theme of taking control of your personal finances and helping yourself to use your money wisely and understand successful financial principles.  These days you need to take control of your economic situation and not rely on the government to take care of you as they will take your money in taxes at any chance they can.

If your credit score has fallen recently, due to a missed payment or two, or perhaps you have too much credit outstanding, there are some simple ways you can improve on your credit score that will get it back on the right track. Doing a combination of several of these could see your credit score rise significantly in just the next few months – and that goes for your credit score at each credit repository.

If you’d like to check your credit score,
click to get your credit score for free.

1. Pay your bills on time from now on.

This may sound beyond obvious, but if you have any late payments in the past year or two, they’re having a disproportionately negative impact on your credit score. You can’t fix this overnight, but the best strategy going forward is to make sure that it doesn’t happen again.

One of the more fortunate aspects of credit scores is that the older negative information gets, the less impact it has. This is why it is so critical that you put any negative credit situations into your past as soon as possible. If you have a late payment that you made three months ago, you may not be able to do anything about that now, but if you make your payments on time for the next nine months, you’ll put that late payment one year into your past. By then, your credit scores should once again begin to rise. But this will happen only if there are no delinquencies in the future.

2. Take a time out on credit.

The credit scoring models favor older, established debt. Conversely, they take a dimmer view of new debt. For this reason, if you’re looking to improve your credit scores, it will help to avoid applying for and accepting new loans. This will be even more important if you have taken a new loan or two in the very recent past.

This will help your credit scores on two fronts. First, any time you apply for credit, your credit report will show a credit inquiry. While credit inquiries do not have a big impact on your credit score, the one they have is definitely negative. If you apply for credit with several lenders over a space of one or two months, the combined impact could be more significant. By not applying for new credit, you will not be adding new inquiries to your credit report.

The second of course is that any time you take a new loan, you receive a negative hit on your credit reports because of the lack of payment experience. You’ll avoid this hit by not taking any new loans.

3. Pay off small balance accounts.

Another factor the credit scoring models consider is the number of loans you have outstanding. In general, a person with three outstanding loans will have a better credit score that someone who has ten outstanding loans.

For this reason, you might want to pay off some of your loans starting with the smallest. If you have seven loans outstanding, and you can pay off three of them with combined balances of $1,000, you will have reduced the number of loans with outstanding balances down to four.

While this may not cause your credit scores to rise by a hundred points, it could cause a smaller increase but one that will happen pretty quickly. This is one of the best ways to get upside action on your credit scores in short order.

4. Pay down a few debts.

This one is big time, and is usually referred to as credit utilization. The credit repositories measure the percentage of outstanding debt against your amount of available credit. If you have $15,000 in outstanding balances on open credit lines of $20,000, your credit utilization is 75% (or $15,000 divided by $20,000).

For comparison sake, credit repositories generally consider a credit utilization of 80% or greater to be a negative. Less than 80% is considered a positive. It is of course a matter of degree; the lower the credit utilization, the more positive the impact on your credit scores. The higher the credit utilization, the greater the negative impact will be.

Credit utilization is considered one of the best predictors of debtor default. This is why it carries such a heavy impact on your credit scores. And even if your credit scores are good despite a high credit utilization, a lender may still make a decision not to extend a loan to you.

In order to improve on this critical metric it is important that you pay your loans down to a level in which they will be at least below 80% of available credit. You should try to get each loan account down below this percentage, as well as for the combination of all of your loan accounts. This is another strategy that can improve your credit scores pretty quickly – by lowering your credit utilization, you lower your risk of default according to the credit scoring models.

5. Check your credit report for errors.

You should review your credit report at least annually to look for errors. Many contain errors that have a negative impact on your credit scores. For example, you could have loan accounts included in your credit report that are not yours. This will increase the amount of debt that you’re carrying, and lower your credit scores.

Worse is if you have derogatory credit that is either not yours, or is reported in error. Unfortunately, when you have derogatory credit, the responsibility to clear it up rests completely upon you – even if the entry is in error. You’ll have to contact the creditor to ask them to correct the information reported. Usually, in order to do that, you’ll have to present some sort of tangible evidence that what the creditor reported was in fact an error. If you don’t have this evidence, the creditor will probably not remove the information.

Once any errors are corrected, you’ll have to specifically request that the creditor remove the derogatory information from your credit report. You should also obtain written confirmation that the entry was an error from the creditor. Just in case the creditor doesn’t get around to reporting the corrected information to the credit repositories, you will then have written evidence to do it yourself.

6. Pay off any collections, charge-offs or other past due amounts.

If you have any outstanding obligations – even if they’re well in the past – they will still be having a negative affect on your credit scores as long as they are showing up in your credit report. Make arrangements to pay them off, and make sure that you get a letter of confirmation from the creditor. The creditor should report this information to the credit repositories, but once again, if they don’t you will have to do it yourself.

Never assume that outstanding balances don’t matter because they’re five or six years old. Paying them off is another way to provide a quick lift to your credit scores, especially if you’re paying off more than one.

Take as many of these steps as you can, and you should be able improve all of your credit scores in just a few months, if not sooner.

If you need additional help improving your credit score you can hire a credit repair company like CreditRepair.com or Lexington Law.

 

8 Ways You Waste Money, How To Make $100,000 on $5 A Day

Back to my theme of how the average Joe can be a millionaire, here’s how most people waste money.  If you didn’t do these, here is an extra $100k for your pocket

8 ways you waste money

How Much Income Tax Warren Buffet Pays

Despite his request to pay more taxes and that the rich do not do their fair share, it appears that Mr. Buffet has reduced his tax burden.  While you read the story below, consider if there is a double standard.

From Thomas Stanley, Ph.D.

Warren Buffett is the best of the best at transforming income into wealth.    How did he do it?  Wise investing, you say.  Combine this with his reputation for having enormous integrity and his well publicized frugal lifestyle.  When it comes to consumption he seems to possess traditional midwestern values.  In spite of his substantial wealth he lives in a relatively modest home and drives American makes of cars.  Ah , but there is something else.  As I stated in The Millionaire Next Door,

Millionaires know that the more they spend, the more income they must realize.  The more they realize, the more they must allocate for income taxes.  So . . . adhere to an important rule:  To build wealth, minimize your realized (taxable) income and maximize your unrealized income (wealth/capital appreciation without a cash flow).

You may recall from an earlier blog that the typical millionaire next door has a realized income that is equivalent to only 8.2% of his wealth [median].  But Mr. Buffett is much better at miniziming his income as a function of net worth.  According to the 2012 Forbes 400 list, Mr. Buffett has a net worth of $46 billion.  CNN Money reported that “his taxable income was $39,814,784” in 2010.  That is the equivalent of only 0.087% of his net worth! Translated, the typical millionaire next door’s percentage of realized income to his net worth (8.2%) is nearly 95 times higher than Mr. Buffett’s (8.2%/0.087%).

Also consider something else in this equation:  income tax as a function of net worth.  The typical millionaire next door pays the equivalent of approximately 2% (median) of his net worth in income tax annually.  But here again Mr. Buffett is far, far better in minimizing his income tax.  According to Reuter’s, “[Warren Buffett] paid only $6.9 million in federal income taxes in 2010.”

In a nominal sense, $6.9 million in income tax might appear to be a significant amount of money.  But look at Mr. Buffett’s tax bill as a function of his net worth, that is $6.9 million as a percentage of his $46 billion in wealth.  At this rate he is paying the equivalent of only 0.015% of his net worth.  Compare this with the 2% paid by the millionaire next door.  This rate is more than 133 times greater than Mr. Buffett’s.  In fact, if Mr. Buffett was taxed at the same rate (2%) he would owe the Treasury Department $920,000,000 or nearly $1 billion.  You might say that it is unAmerican not to pay your fair share.  But Mr. Buffett gets special dispensation regarding this topic.  Why?  He has pledged to leave the vast majority of his estate to noble causes.  And according to Forbes, he has already demonstrated considerable generosity.  “He gave $1.5 billion to the Gates Foundation in July, bringing his total giving to $17.5 billion. . . in August he pledged $3 billion of stock to his children’s foundations.

Who is more likely to do an efficient job distributing money from your estate, the government or enlightened eleemosynary organizations?  You know the answer and apparently so does Mr. Buffett.

How Warren Buffet Can Fix the Debt and Deficit Problem in 5 Minutes

It’s worth your read and is worth doing.  We should press for this:

Warren Buffett, in a recent interview with CNBC, offers one of the best quotes about the debt ceiling:

“I could end the deficit in 5 minutes,” he told CNBC. “You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election.

The 26th amendment (granting the right to vote for 18 year-olds) took only 3 months & 8 days to be ratified! Why? Simple! The people demanded it. That was in 1971 – before computers, e-mail, cell phones, etc.

Of the 27 amendments to the Constitution, seven (7) took one (1) year or less to become the law of the land – all because of public pressure.

Warren Buffet is asking each addressee to SHARE this on Facebook or forward this email to a minimum of twenty people on their address list; in turn ask each of those to do likewise.

In three days, most people in The United States of America will have the message. This is one idea that really should be passed around.

Congressional Reform Act of 2012

1. No Tenure / No Pension.

A Congressman/woman collects a salary while in office and receives no pay when they’re out of office.

2. Congress (past, present & future) participates in Social
Security.

All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.

3. Congress can purchase their own retirement plan, just as all Americans do.

4. Congress will no longer vote themselves a pay raise.
Congressional pay will rise by the lower of CPI or 3%.

5. Congress loses their current health care system and
participates in the same health care system as the American people.

6. Congress must equally abide by all laws they impose on the American people.

7. All contracts with past and present Congressmen/women are void effective 12/1/12. The American people did not make this contract with Congressmen/women.

Congress made all these contracts for themselves. Serving in
Congress is an honor, not a career. The Founding Fathers
envisioned citizen legislators, so ours should serve their
term(s), then go home and back to work.

If each person SHARES this on Facebook or contacts a minimum of twenty people then it will only take three days for most people (in the U.S. ) to receive the message. Don’t you think it’s time?

THIS IS HOW YOU FIX CONGRESS!

Fiscal Cliff Put Into Perspective of a Household Income

Lesson #1:
U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000
Let’s now remove 8 zeros and pretend it’s a household budget using the
Same numbers:
* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts so far: $385.00
Easier to understand ??…….OK now,
Lesson #2:
Here’s another way to look at the Debt Ceiling:
Let’s say, You come home from work and find
There has been a sewer backup in your neighborhood….
And your home has sewage all the way up to your ceilings.
What do you think you should do ……
Raise the ceilings, or remove the sewage?

Should You Pay Off Your Mortgage?

This goes with my series of “How and average Joe can become a Millionaire”.

I am not the author, but this is one of the most important financial decisions you’ll make (the other is tithing) The whole article can be found here:

One of my good friends, “Judge Rob,” is a local, elected judge who also owns a small family business. Judge Rob paraphrased Warren Buffett when we were discussing mortgages over a recent breakfast, saying, “If I knew where I was going to live for the next decade or so, I would buy a house with a long-term mortgage.” The idea is that a mortgage is a good hedge against inflation because you pay it off with much cheaper dollars down the road.

Today, many pundits point to low interest rates and encourage people to borrow as much as they can while interest rates are low. While they do have a good point, deciding when to pay off my own mortgage caused a great deal of conflict between the logical and emotional parts of my brain.

In the early days of black-and-white television, much of the programming was old, silent movies. Who can forget the little old widow, confronted by the evil, rich banker, who licked his chops at the opportunity to throw her out as her mortgage payment came due? As the deadline got closer, the piano would bang louder and faster, and somehow Widow Nell would make her payment in the nick of time. Was I programmed by my generation’s version of Sesame Street?

There’s Something to Being “Old School”

I spent a good bit of my breakfast with Judge Rob in “Yes, but!” mode. Here’s why.

When I was contemplating paying off my mortgage, I spoke with a CPA who also happened to be a financial advisor recommended by a good friend. I explained that I was self-employed, so my income fluctuated, and my mortgage was my largest monthly bill. I suggested that there could be some emotional benefit to paying it off. Less stress perhaps?

He insisted that I could invest and out-earn the cost of my first mortgage. He pooh-poohed the idea of paying it off to calm my nerves, and kept repeating that I could easily invest my money and earn more after taxes than the cost of the first mortgage.

When I asked if his mortgage was paid off, he responded with, “Oh, hell yes!” I was flabbergasted. How could he advise me to do one thing when he’d done the exact opposite? He explained that his wife was from Germany – the old school where you pay your bills, don’t borrow money, and stay out of debt.

Then I asked him, “Once you paid off your mortgage, did you sleep better at night?” He pondered a bit and said, “Yeah, I guess I did. I no longer worried about it. No matter how bad things got, we would still have a roof over our heads.”

When I asked Vedran Vuk, our senior research analyst, about when to pay off a first mortgage, he made some excellent points. First, you should no longer view your house as an investment that’s going to rapidly appreciate as it did in the past. A house is a home, and you should look at it that way. Second, right now a mortgage can make sense from an investment perspective. If you can borrow money at 3.5%, invest it, and earn a guaranteed higher return on it, you’ll come out ahead.

The real question becomes: where can you find a guaranteed greater return, even with the low mortgage rates available today? The government is committed to keeping interest rates artificially low for the foreseeable future. Yields on CDs and high-quality bonds are pathetic.

I just checked my brokerage account, and the longest CD they have available is a five-year CD paying 1.15%. A 30-year Treasury bond will pay 2.8%. Neither holds any appeal for me, particularly if I were investing with borrowed money.

If you’ve found an investment that’s a lead-pipe cinch – one that’s absolutely, positively going to pay off – and a low mortgage rate, you may want to roll the dice. However, I want to add one more note of caution.

The upcoming issue of Money Forever‘s premium subscription, which we’re releasing on December 18, takes an in-depth look at reverse mortgages, one of the most controversial ways to help fund your retirement. Our team will explain reverse mortgages in easily understood terms, highlight pitfalls to avoid, and explain how a reverse mortgage is a good way for some (but not all) folks to fund their retirement and maintain their lifestyle.

Before obtaining a reverse mortgage you must go through HUD counseling. While researching our upcoming report, I came across a study of over 20,000 people who had been through HUD counseling between September 2010 and November 2010. A few statistics really jumped off the page!

In 2000, the average age of people receiving reverse mortgages was 73 years old. By November 2010, the average age had dropped to 71.5, and it’s continuing to decline. In other words, retirees are tapping into their home equity at an increasingly younger age, many because they have no other choice.

It was also interesting to learn why these folks wanted a reverse mortgage. In the 70-and-older group, 38% still had mortgage debt. Seventy-one percent owed 25% or more on the current value of their home, and 33% had a mortgage in excess of 50% of the value of their home. Many wanted a reverse mortgage because they could not service their existing debt. A reverse mortgage is based on the net equity in your home. If their homes were paid for, meaning no huge house payment, perhaps they could have put off the reverse mortgage for a few more years. The older the applicant, the higher monthly payment they receive.

I wonder how many of these folks lost money betting on their lead-pipe cinch investment because they had been nudged along by their CPA.

My point is simple. For most baby boomers and retirees, their home is their largest asset. You don’t want to live like the little old widow in a black-and-white film, worrying about getting thrown out of your home, particularly if you’re no longer working.

Nevertheless, if you had a mortgage with a 3.5% interest rate and we were still living in a world where a top-quality bond or CD would pay you 5% or more, it could make sense to take advantage of it. But that’s not the world of today.

Ideally, you would pay off your mortgage and then use the money you’d been setting aside for payments to build a nice portfolio. For many folks, home equity is like a security blanket – and a potential source of income for when they may really need it.

The Judge’s Word Isn’t Always Law

As I left our breakfast meeting, I shared a few parting comments with Judge Rob. The mortgage conundrum has both financial and emotional factors. Paying off your mortgage is a milestone; it really does change your life. I certainly sleep better, and my blood pressure probably dropped ten points. It was the point when my wife and I actually started accumulating true wealth.

Once I paid off my mortgage, I never looked back.

Economy Signs in the USA and EU that WE ARE IN DECLINE, PROTECT YOURSELVES

Two disturbing articles came my way.  I watch the economy and look for trends.  I found two that are similar because of political policies, yet would be so easy to fix if the respective governments would stop spending, handing out money to those who don’t deserve it, stop handing to themselves and stop the regulations.

We are headed into a depression and it appears that is what the governments want.  History shows they can control a distressed population more easily than a productive, self-reliant successful one…so the preponderance of evidence shows it is intentional.

You’ve been warned, get out of debt, get a strong cash position, stock up on supplies (they are much cheaper now before inflation) and do everything you can to be self reliant rather than convenient.  This is against all the pundits who want you to buy into this is just a phase, just like right about 1926.

Here they are.

THE USA

Link to the full article here:

#1 According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001.  That number dropped to 21.6 percent in 2011.  That is not just a decline – that is a freefall.  Just check out the chart in this article.

#2 According to The Economist, the United States was the best place in the world to be born into back in 1988.  Today, the United States is only tied for 16th place.

#3 The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.

#4 According to the Wall Street Journal, of the 40 biggest publicly traded corporate spenders, half of them plan to reduce capital expenditures in coming months.

#5 More than three times as many new homes were sold in the United States in 2005 as will be sold in 2012.

#6 America once had the greatest manufacturing cities on the face of the earth.  Now many of our formerly great manufacturing cities have degenerated into festering hellholes.  For example, the city of Detroit is on the verge of financial collapse, and one state lawmaker is now saying that “dissolving Detroit” should be looked at as an option.

#7 In 2007, the unemployment rate for the 20 to 29 age bracket was about 6.5 percent.  Today, the unemployment rate for that same age group is about 13 percent.

#8 Back in 1950, more than 80 percent of all men in the United States had jobs.  Today, less than 65 percent of all men in the United States have jobs.

#9 If you can believe it, approximately one out of every four American workers makes 10 dollars an hour or less.

#10 Sadly, 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.

#11 Median household income in America has fallen for four consecutive years.  Overall, it has declined by over $4000 during that time span.

#12 The U.S. trade deficit with China during 2011 was 28 times larger than it was back in 1990.

#13 Incredibly, more than 56,000 manufacturing facilities in the United States have been shut down since 2001.  During 2010, manufacturing facilities were shutting down at the rate of 23 per day.  How can anyone say that “things are getting better” when our economic infrastructure is being absolutely gutted?

#14 Back in early 2005, the average price of a gallon of gasoline was less than 2 dollars a gallon.  During 2012, the average price of a gallon of gasoline has been $3.63.

#15 In 1999, 64.1 percent of all Americans were covered by employment-based health insurance.  Today, only 55.1 percent are covered by employment-based health insurance.

#16 As I have written about previously, 61 percent of all Americans were “middle income” back in 1971 according to the Pew Research Center.  Today, only 51 percent of all Americans are “middle income”.

#17 There are now 20.2 million Americans that spend more than half of their incomes on housing.  That represents a 46 percent increase from 2001.

#18 According to the U.S. Census Bureau, the poverty rate for children living in the United States is about 22 percent.

#19 Back in 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for every dollar that they earned.  By 2007, that figure had soared to $1.48.

#20 Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.

#21 Total credit card debt in the United States is now more than 8 times larger than it was just 30 years ago.

#22 The value of the U.S. dollar has declined by more than 96 percent since the Federal Reserve was first created.

#23 According to one survey, 29 percent of all Americans in the 25 to 34 year old age bracket are still living with their parents.

#24 Back in 1950, 78 percent of all households in the United States contained a married couple.  Today, that number has declined to 48 percent.

#25 According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government.  Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.

#26 In 1980, government transfer payments accounted for just 11.7 percent of all income.  Today, government transfer payments account for more than 18 percent of all income.

#27 In November 2008, 30.8 million Americans were on food stamps.  Today, 47.1 million Americans are on food stamps.

#28 Right now, one out of every four American children is on food stamps.

#29 As I wrote about the other day, according to one calculation the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”

#30 Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse.  It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

#31 In 2001, the U.S. national debt was less than 6 trillion dollars.  Today, it is over 16 trillion dollars and it is increasing by more than 100 million dollars every single hour.

#32 The U.S. national debt is now more than 23 times larger than it was when Jimmy Carter became president.

#33 According to a PBS report from earlier this year, U.S. households that make $13,000 or less per year spend 9 percent of their incomes on lottery tickets.  Could that possibly be accurate?  Are people really that foolish?

#34 As the U.S. economy has declined, the American people have been downing more antidepressants and other prescription drugs than ever before.  In fact, the American people spent 60 billion dollars more on prescription drugs in 2010 than they did in 2005.

THE EUROPEAN UNION

Link to the full article here:

The following are 11 facts that show that Europe is heading into an economic depression…

1. The economies of 17 out of the 27 countries in the EU have contracted for at least two consecutive quarters.

2. Unemployment in the eurozone has hit a brand new all-time record high of 11.7 percent.

3. The unemployment rate in Portugal is now up to 16.3 percent.  A year ago it was just 13.7 percent.

4. The unemployment rate in Greece is now up to 25.4 percent.  A year ago it was just 18.4 percent.

5. The unemployment rate in Spain has hit a brand new all-time record high of 26.2 percent.  How much higher can it possibly go?  This is already higher than the unemployment rate in the United States ever reached during the Great Depression of the 1930s.

6. Youth unemployment levels in both Greece and Spain are rapidly approaching the 60 percent level.

7. Earlier this month, Moody’s stripped France of its AAA credit rating, and wealthy individuals are leaving France in droves as the socialists implement plans to raise taxes to very high levels on the rich.

8. Industrial production is collapsing all over Europe.  Just check out these numbers…

You don’t have to be an economic genius to understand that the perpetual uncertainty over the Eurozone’s future has led to a widespread freeze on industrial investment and development. Industrial production is collapsing at an accelerating rate, falling 7% year-on-year in Spain and Greece, 4.8% in Italy, and 2.1% in France.

9. There are even trouble signs in the “stable” economies in Europe.  In Germany, factory orders in September were down 3.3 percent from the month before, and retail sales in October declined 2.8 percent from the previous month.

10. The debt of the Greek government is now projected to hit 189 percent of GDP by the end of this year.

11. The Greek economy has shrunk by more than 7 percent this year, and it is being projected that the Greek economy will contract by another 4.5 percent in 2013.

But sometimes you can’t really get a feel for how bad things really are over there just from the raw economic numbers.

Many people that are living through these depression-like conditions are totally giving in to despair.  Just check out the following example from an RT article from earlier this year…

A 61-year-old Greek pensioner has hung himself from a tree in a public park after succumbing to the pressure of crushing debt. A note in his pocket indicates he is merely the latest in a rash of economic crisis-induced suicides.

The pensioner’s lifeless body was found dangling by an attendant in a public park not far from his home in the suburb of Nikaia, Athens. The attendant also found a suicide note in the man’s pocket, The Athens news reports.

The man, identifying himself as Alexandros, said he was a man of few vices who “worked all day.”  However, he blamed himself from committing one “horrendous crime”: becoming a professional at the age of 40 and plunging himself into debt. He referred to himself as a 61-year-old idiot who had to pay, hoping his grandchildren would not be born in Greece, as the country’s prospects were so bleak.

Best Zig Ziglar Quotes

I heard him speak once, and it was inspiring.  He was late in life but still had much youth in his presentation.  I wish I could come up with such inspiring messages:

  • Money won’t make you happy… but everybody wants to find out for themselves.
  • People often say motivation doesn’t last. Neither does bathing—that’s why we recommend it daily.
  • Money isn’t the most important thing in life, but it’s reasonably close to oxygen on the “gotta have it” scale.
  • Money will buy you a bed, but not a good night’s sleep, a house but not a home, a companion but not a friend.
  • People don’t buy for logical reasons. They buy for emotional reasons.
  • If you can dream it, you can achieve it.
  • Building a better you is the first step to building a better America.
  • Your attitude, not your aptitude, will determine your altitude.
  • Little men with little minds and little imaginations go through life in little ruts, smugly resisting all changes which would jar their little worlds.
  • Sometimes adversity is what you need to face in order to become successful.
  • Every choice you make has an end result.
  • Every obnoxious act is a cry for help.
  • Expect the best. Prepare for the worst. Capitalize on what comes.
  • Failure is a detour, not a dead-end street.
  • I believe that being successful means having a balance of success stories across the many areas of your life. You can’t truly be considered successful in your business life if your home life is in shambles.
  • If God would have wanted us to live in a permissive society He would have given us Ten Suggestions and not Ten Commandments.
  • If you can dream it, then you can achieve it. You will get all you want in life if you help enough other people get what they want.
  • If you don’t see yourself as a winner, then you cannot perform as a winner.
  • If you go looking for a friend, you’re going to find they’re very scarce. If you go out to be a friend, you’ll find them everywhere.
  • If you learn from defeat, you haven’t really lost.
  • If you treat your wife like a thoroughbred, you’ll never end up with a nag.
  • If you want to reach a goal, you must “see the reaching” in your own mind before you actually arrive at your goal.
  • It was character that got us out of bed, commitment that moved us into action, and discipline that enabled us to follow through.
  • It’s not what you’ve got, it’s what you use that makes a difference.
  • Many marriages would be better if the husband and the wife clearly understood that they are on the same side.
  • If you treat your wife like a thoroughbred, you’ll never end up with a nag.
  • People often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily.
  • Statistics suggest that when customers complain, business owners and managers ought to get excited about it. The complaining customer represents a huge opportunity for more business.
  • Success is dependent upon the glands – sweat glands.
  • The foundation stones for a balanced success are honesty, character, integrity, faith, love and loyalty.
  • The way you see people is the way you treat them.
  • When you are tough on yourself, life is going to be infinitely easier on you.
  • You cannot perform in a manner inconsistent with the way you see yourself.
  • People who have good relationships at home are more effective in the marketplace.
  • You cannot climb the ladder of success dressed in the costume of failure.
  • Positive thinking will let you do everything better than negative thinking will.
  • Success is the maximum utilization of the ability that you have.
  • Remember that failure is an event, not a person. You cannot tailor-make the situations in life but you can tailor-make the attitudes to fit those situations.
  • You do not pay the price of success, you enjoy the price of success.
  • You were born to win, but to be a winner, you must plan to win, prepare to win, and expect to win.
  • Remember that failure is an event, not a person.
  • You will get all you want in life, if you help enough other people get what they want.
  • There has never been a statue erected to honor a critic.
  • Expect the best. Prepare for the worst. Capitalize on what comes.
  • If you go looking for a friend, you’re going to find they’re scarce. If you go out to be a friend, you’ll find them everywhere.

The Guarantee of Hyperinflation

Economist John Williams of Watchdog.com describes why we will suffer from hyperinflation that will begin no later than 2014 and why.

Open ended QE will cause treasury debt which leads to long range insolvancy of the US Government.  If they had to report income under GAAP (Generally Accepted Accounting Principles)  rules, we are losing $5 trillion annually.   Taking 100% of peoples income would still not pay for this debt.

We are broke.

Government has been kicking the bucket down the road and the result will be inflation.

The global loss of confidence in the dollar happened with the raising of the debt ceiling last year.

The Fed’s primary goal is to keep the banking system solvent.  They haven’t done anything to stimulate the economy.

More evidence that inflation is just around the corner from the Federal Reserve Bank of Dallas.

Keynesian Policies Keep Failing

It’s not that the Keynesians aren’t smart, nor poorly educated, nor bad economists (at least they studied it to make their economic position), rather it is that they are not students of history.  I may have to argue that they are bad economists later though as it has yet to work and is failing again.

Here are 2 articles:

Moving beyond contorted Keynesian Logic.

From Doug French whom I neither endorse nor hold up as an economist, but there are lessons here to observe.

So what kind of Keynesian world are Bernanke and the other wise ones in Washington shaping for us?

Keynesians see a depression as a lack of aggregate demand — as opposed to Austrians who know a depression is the required cleansing of the malinvestments created by the preceding boom of the government’s making. Policy makers, following the Keynesian playbook, enact policies to stimulate aggregate demand and offset the fall in private investment. On the fiscal-policy side, Keynesians advocate higher government spending. On the monetary side, they insist on lowering interest rates to zero if necessary.

The world has recent experience with attempts at resuscitating a bubble economy. The Bank of Japan cut interest rates six times between 1986 and early 1987 and all that new money caused the Japanese economy to bubble over. As Bill Bonner and Addison Wiggin write in Financial Reckoning Day Fallout,

the problem with all money is that it is as fickle and unreliable as a bad girlfriend. One minute she goes along with the flow. The next minute she turns silly and bubbly. And then, she gives you the cold shoulder.

The prolonged period of low interest rates created one of the largest domestic bubbles in the world. For a brief moment in 1990, the Japanese stock market was bigger than the US market. The Nikkei-225 reached a peak of 38,916 in December of 1989 with a price-earnings ratio of around 80 times. At the bubble’s height, the capitalized value of the Tokyo Stock Exchange stood at 42 percent of the entire world’s stock-market value and Japanese real estate accounted for half the value of all land on earth, while only representing less than 3 percent of the total area. In 1989 all of Japan’s real estate was valued at US$24 trillion which was four times the value of all real estate in the United States, despite Japan having just half the population and 60 percent of US GDP.

“The Japanese asset bubbles were identical to other asset bubbles in the sense that they were essentially inflated by credit,” writes Asian bank regulator Andrew Sheng in his book From Asian to Global Financial Crisis.

Banks lent to highly leveraged developers to buy real estate against inflated collateral values, which then fueled the bubble further. Asset prices bore no realistic relationship to their return on capital, particularly since cost of funding was exceptionally low. The minute the credit stopped, the bubble began to deflate, and the main victims were the banks themselves.

After the bubble popped in Japan, that government pursued a relentless Keynesian course of fiscal pump priming and loose fiscal policy with the result being a Japan that went from having the healthiest fiscal position of any OECD country in 1990 to annual deficits of 6 to 7 percent of GDP and a gross public debt that is now 227 percent of GDP. “The Japanese tried to cure an alcoholic with heroin,” writes Bonner. “Now, they’re addicted to it.”

Japan’s monetary policy was to aggressively lower rates to .5 percent between 1991 and 1995 and has operated a zero-interest policy virtually ever since.

Between 1992 and 1995, the Japanese government tried six stimulus plans totaling 65.5 trillion yen and they even cut tax rates in 1994. They tried cutting taxes again in 1998, but government spending was never cut. Also in 1998, another stimulus package of 16.7 trillion yen was rolled out nearly half of which was for public-works projects. Later in the same year, another stimulus package was announced, totaling 23.9 trillion yen. The very next year an ¥18 trillion stimulus was tried, and, in October of 2000, another stimulus for 11 trillion was announced. As economist Ben Powell points out, “Overall during the 1990s, Japan tried 10 fiscal stimulus packages totaling more than 100 trillion yen, and each failed to cure the recession,” with Japan’s nominal GDP growth rate below zero for most of the five years after 1997.

After five years in an economic wilderness, the Bank of Japan switched, during the spring of 2001, to a policy of quantitative easing — targeting the growth of the money supply instead of nominal interest rates — in order to engineer a rebound in demand growth.

The move by the Bank of Japan to quantitative easing and the large increase in liquidity that followed stopped the fall in land prices by 2003. The Bank of Japan held interest rates at zero until early 2007, when it boosted its discount rate back to 0.5 percent in two steps by mid year. But the BoJ quickly reverted back to its zero interest rate policy.

In August of 2008, the Japanese government unveiled an ¥11.5 trillion stimulus. The package, which included ¥1.8 trillion in new spending and nearly ¥10 trillion in government loans and credit guarantees, was in response to news that the Japanese economy in July suffered its biggest contraction in seven years and inflation had topped 2 percent for the first time in a decade.

Newswire reports said the new measures would include assistance to the agriculture sector, support for part-time workers to find better employment, and rebates on toll roads. Additional spending was also to flow to healthcare, housing, education, and environmental technology.

Just this past April, the Japanese government announced another ¥10 trillion stimulus program. This was after Japan’s economy shrank by a record 15.2 percent annual rate in the first quarter of 2009. This drop was on the heels of a 14.4 percent drop in the fourth quarter of 2008.

Last month, Reuters reported that the Bank of Japan reinforced its commitment to maintaining very low interest rates and may provide even further easing. “The bank said that it would not tolerate zero inflation or falling prices.” The bank left its policy rate at .1 percent and analysts see the rate staying low possibly until 2012.

According to Reuters, the Japanese government “is fretting over the risk of the economy flipping back into recession and is pushing the bank for action.” Economy flipping back into recession? Are they kidding? Japan’s GDP at the end of this year will be no higher than it was in 1992–17 lost years.

“After 17 years of bailouts and stimulus programs, the Japanese should be getting good at them,” write Bonner and Wiggin. “But it’s a little like a guy who’s getting good at suicide — if he’s so good at it, you’d think he’d be dead already.”

But Keynesians are wont to grade on a curve. Nobel laureate and New York Times columnist Paul Krugman, for one, points to Japan’s fiscal stimulus packages as having “probably prevented a weak economy from plunging into an actual depression.”

And finally, here is a video on Keynesian Economics.

How An Average Joe Can Be A Millionaire By Doing Simple Principles

Notice that I didn’t use the words becoming rich.  Having a full life, belief in God, friends, family or a passion for doing something is rich.  Becoming a millionaire is about money.

Next, this subject has been addressed by the more knowledgeable than I, but I’m going to talk to the average Joe like me, which is the likely reader here.

Finally, I don’t claim to know it all, nor do I claim to be in any financial category.  I do observe trends and try to learn from them.  Hopefully I’m eating my own dogfood.

HOW IT IS DONE

It is simple math.  You either make money or spend less, or a combination of the two.  I realize that we have a burdensome government, a tough economy and a next to impossible IRS tax code.  In fact the real unemployment number is not what you read in the main stream media, but the U6 rate which as of this writing is 14.5%.

For the purposes of becoming a millionaire, we will assume employment.  That means get a job instead of living on entitlements, because that will disqualify you from this discussion.

Sure it is easy to have received Facebook stock or have invented Facebook, but the average millionaire doesn’t have that at their discretion.

USE YOUR MONEY TO MAKE MONEY

This means compounding what you have in ways other than just putting it in the bank.  I had a roommate who was a stockbroker and he told me many stories of secretaries making minimum wage who came to him at retirement with 7 figure 401K accounts.  They saved in a way that maximized the return on their investment.  This usually involves a company match and some diversification.  It also assumes that you take risk when you are younger and seek advice or study investing voraciously as it is a mystery to most….despite the fact that everyone thinks they know about it.

Part of your diversification also means not putting everything in the stock market.  As an example, real estate has just undergone a busted bubble (thanks to the Community Reinvestment Act which never should have been enacted), but it means there are properties to be had for a song right now and are ripe for the picking.  They will grow and become more valuable.  My advice is no different from what you’d expect.  Start out small and work your way up.  That process allows you to learn about what value really is, and compound your earnings into larger investments that have bigger payoffs.

There are many other ways, but the concept is the same, save and invest wisely by starting small and growing your profits and portfolio.  You must also study and read or you could throw your money down the drain if you think you know everything.  It also involves patience.  If you recall the story from my roommate, it was saving and investing over a lifetime

HOW TO LEARN

There are articles ad-infinitum to read about the aforementioned.  The other way is to talk to people who have done this.  I suggest that you start with Dave Ramsey or Crown Financial Ministries if you are starting out (or are in trouble, or anywhere in between).  It is a tried and true method of handling you money.

Who you talk to also matters.  There are people who talk in $10’s of thousands, $100’s of thousands, millions or Zuckerberg’s and Gates’.  I suggest you seek out those who are in the highest category possible as you need to think big in making and investing.  I don’t have coffee with Warren Buffet, but his advice is readily available.

Find those who are successful and ask them how they did it.  I’m betting that you’ll find there is no secret code or magic key, they just worked at it and kept their long-term goals of financial independence in mind, and kept check over their human nature.

SAVE YOUR MONEY

The other side of the equation is savings.  In other words you need to spend less and when you do, spend wisely.  Of the people I worked with at my last job, many were high salaried executives who were in debt because they had a keeping up with (or passing) the Jones mentality.  This was especially true of those in the New York area for some reason (but demographics shouldn’t really matter).  They had big houses with unfurnished rooms because they were house poor.  Living within your means is important which is my next segue.

NEED VS. WANT

Including the basics of food, clothing and shelter, one has to look at the way one buys things.  Most buy what they want rather than what they need.  If you adopt the buy it tomorrow instead of now mentality, you likely will realize that you don’t really want it as badly as you think.

There is the adequacy (not delusions of adequacy ;-)) vs. luxury mentality also.  A Casio, Timex or Seiko watch tell as good of time as does a Rolex, so unless you have money to burn, why are you buying the Rolex?  This applies to cars, clothes or virtually any tangible item.  Ask yourself, self do I need this/do I need to have the very best/am I showing off or would what I can really afford what I have?  I have relatives who have to have the very best, but have wasted as much money as I’ve earned on things to show off.

My son said that some people need to wear their paycheck.  You can see them coming down the road in cars that are raised with shiny rims and a 24 thousand watt stereo.  Others have to order the best wine, food and show off at restaurants (my brother-in-law).

Back to the person who knows this better than most, here is a story about expensive car drivers:

But what if Ranger Rich is like many people who define rich in terms of income instead of net worth? Certainly many drivers feel the need to display their socioeconomic achievements by acquiring prestige makes of motor vehicles.  They may think that those who are successful in generating high incomes drive luxury brands.  And correspondingly drivers of more common makes have dull normal income credentials.  But the hard data suggest that the level of prestige of a car and the income of its driver are not anywhere near being perfect correlates. In fact, many drivers of luxury makes have neither the levels of income nor net worth which would qualify them as high economic achievers.

Along these lines, Joann Muller, writing for Forbes.com, poses “what the rich people really drive.” She defines rich people in terms of income, not net worth.

. . . the richest people were the most likely to buy luxury brands [39% for people with household income above $250,000 vs. 8% for those people who earn less than $100,000 a year].

. . .61% of people who earn $250,000 or more aren’t buying luxury brands at all.

Her analysis indicates that those households with high incomes are more likely to drive luxury cars.  But just because someone is driving a luxury brand it does not necessarily mean that the driver has a high income or a high net worth, for that matter.

Further, here is a story about how the average millionaire deals with car buying.

You have to spend on things that will appreciate, not sparkle.  Again, my relatives are the worst offenders who have overspent on toys, baubles, cars and anything else they can waste their money on.  It baffles me.  When they bought real estate, they over paid, over leveraged and bought for show instead of ROI.

DEBT AND LEVERAGE

This gets most people in trouble.  If you can’t pay off your credit card each month, you effectively are paying more for what you bought (because of the interest).  Compounding works for debt in the same way as it does for savings.  It is the accumulation that is the issue.  I’m not just picking on credit cards, anything can be substituted here.  If you saved first, you could buy it for less and your want will likely decrease.

For housing, it used to be that you had to put at least 10% down, but due to the above mentioned CRA (can you tell I loathe that legislation?) one could buy a house they couldn’t afford because they were told they qualified for it…. with no money down.  You were PLAYED for a fool on this.  Living below your means is the best policy.

If you care to splurge on something, it’s OK….just don’t borrow.

The same can be said for leverage.  I’ll stay on housing here.  Banks will always want you to buy more as the more you borrow, the richer they get.  Typically one is paying at least 3 times the amount for a big-ticket item buy leveraging which brings me to my next segue.

PAY OFF YOUR HOUSE

The wisest know that man can not serve two masters.  When you have a huge mortgage hanging over your head, it is your boss/master/slave driver/keep you up at night worry/cause of divorce or many other calamities.  The bank won’t be calling on you to take your home away nor will you have to file bankruptcy (again, my relatives).

Besides owning a house within or below your means, paying it off early is the best way to get out of debt and improve your cash flow.  Take out a mortgage less than 30 years, pay more than the minimum and do everything you can to pay it off early.

Forget the argument that it is a tax deduction.  Congress is aiming at trying to take that away as I type.  Also, any money you get back on taxes is just an interest free loan to the government at your expense.

By doing this, for most people it will likely be one of the best long-term financial decisions they can make.

CONTROL YOUR DESTINY

Note: I am quoting Dr. Thomas Stanley here.  It is better told than I could say it, but it clearly is the moral to the story and what I would have said:

In The Millionaire Next Door I quoted the words of a corporate sales professional, a millionaire whom I interviewed.  He like other self made millionaires said that he had a “go to hell fund. . . just in case my employer suggests (insists) that I leave Austin for corporate headquarters in Rottenchester.”  He never had to leave Austin and he added, “PTL.”  In other words, [the millionaires next door] have accumulated enough wealth to live without working for ten or more years.

I was reminded of these words of wisdom after reviewing an email from Ms. F who currently resides in a lovely community in the Southern United States:

I went to my local library this morning, hoping to borrow The Millionaire Next Door. However, the only available book was in Spanish, so I borrowed “Millionaire Women Next Door” instead. By the time I completed the second paragraph on page 8, I had collapsed in a fit of “craughter” – simultaneously crying and laughing at my sad truth. My newest work assignment is no less than 8,200 miles, 18 hours of flying time and 12 time zones away from everyone who means the most to me in this world. Simply put, the situation stinks, but I had convinced myself that it was necessary to pay the bills. Suffice it to say that I have renewed by concerted efforts to become a cultivator of wealth, and I plan to share my transformation with you soon. Thank you for creating this compilation of evidence-based encouragement!

What precipitated Ms. F “crying and laughing?”  Consider the words from Millionaire Women Next Door:

Aren’t you growing tired of being among the ranks of hunter-gatherers?  Do you enjoy your hyper consumption lifestyle so much that you must fly out of town every week to earn a paycheck to pay your bills?  . . . begin making the transformation to a cultivator of wealth.   Think about that the next time you are ten thousand miles from home, surrounded by strangers, and flying in dreadful weather.   It is up to you.  Do you want to spend your life as a hunter and gatherer of income, earning a million mileage points?  . . . those financially indpendent folks. . . .  They make their own decisions about their next destination.  Right now, you and your career are essentially corporate property.  Neither one of you has the luxury of self-determination.

I also stated that:

The [millionaire business] women profiled herein will not tolerate such an existence.  They are free.  They are cultivators of wealth and satisfied with life.  They are in control of their own destiny.

INCOME AS A PERCENTAGE OF WEALTH

More from Frank Stanley, their income is only 8.2% of their wealth:

People who believe that they will never become wealthy generally fulfill this hypothesis.  I explained to Brit, who was once a member of the ultimate income statement affluent club, that he has an excellent chance of becoming a millionaire next door type and that the typical millionaire next door is 57 years old.  The Bible states that those with faith and hope can achieve a great deal.  Even those with faith the size of a grain of mustard seed will likely reach their intended goals.

The will and discipline that this couple demonstrated in paying off its considerable debt is telling.  The same determination can be used in setting aside at least 15% of their income for savings and investing.

What should you anticipate as a typical member of the millionaire next door fraternity?  One, given the calculation via the Wealth Equation, actual net worth exceeds its expected value by a factor of 2 or more.  Two, the market value of the home is less than 20% of net worth.  Three, debt totals the equivalent of less than 5% of net worth.  Four, annual income tax is the equivalent of about 2% of net worth.  Five, total annual realized income is approximately 8.2% of net worth [median], or the equivalent of $8.20 of income for about every $100 of wealth.

This $8.20 figure from my own research is fairly congruent with the findings of other researchers.  For example, three scholars employed by the Treasury Department, Johnson, Raub and Newcomb, compared the wealth characteristics of millionaires via 36,352 federal estate returns who passed away in 2007 with the incomes of these decedents when they were living.  Those millionaires who were married and under the age of 70 [like the large majority of the millionaire next door types that I have surveyed] realized the equivalent of $8.45 for every $100 of their net worth.  This figure is within approximately 3% of the dollar figure ($8.20) that was determined from my surveys.

IN CONCLUSION

There is no conclusion, just work and keep your long term goal in mind.  I may talk later about other basic ideas that contribute to this like paying cash instead of credit (briefly mentioned here), couponing, buying the store brand instead of the premium name brand and other tricks.  Nevertheless, adhering to the above puts you well on your way to being the average Joe millionaire.

My relatives laughed at me all my life for watching what I spent, how I lived and called me a skinflint.  I knew that I had a long term plan for financial security.  Today, at retirement age, they work just to keep up.  Who’s laughing now?

Facebore – The Facebook IPO Dissapointment

UPDATE: This article best sums it up….If there was any doubt that Wall Street is a sucker’s game designed to take money from stupid people and put it into the hands of bankers and powerful corporations, Facebook’s initial public offering should clear that up.

Well, the facts speak for themselves.  What was supposed to be the next sliced bread was a big nothing except for the insiders who already got their money.

Expectations had it being the next Google, zooming into the hundreds of dollars with overnight millionaires.  While it was the most traded IPO ever, it ended where it started and the big bang for IPO’s are usually at the beginning of a stock downturn. (see the Groupon IPO bust).

In fact it was a BLACKEYE for the NASDAQ:

By Bloomberg

Facebook Inc.’s (NASDAQ: FB) debut on the NASDAQ Stock Market turned into another setback for American equity exchanges, with the $16 billion initial public offering plagued by delays in trade confirmations, crossed quotes and signs that orders were mishandled.

The pricing of the first transaction took a half hour longer than NASDAQ planned. About 30 minutes later, the second largest U.S. equities exchange operator reported an issue confirming trades from the opening auction with the brokerages that placed them. Nasdaq later established an appeals process for investors whose instructions weren’t carried out.

Scrutiny of American equity markets intensified in March when Bats Global Markets Inc., the third-largest U.S. stock exchange owner, withdrew its IPO after failing to trade on its own platform. Nasdaq’s mishaps, on a day when the most anticipated IPO of the year eked out a gain of 0.6 percent, disappointed investors hoping to erase the memory of Bats.

“It certainly wasn’t their best day,” Larry Tabb, chief executive officer of research firm Tabb Group LLC in New York, said in a phone interview. “That said, it also wasn’t a complete disaster. NASDAQ really needs to investigate what the challenges are and fix them quickly. There was a lot riding on this IPO and apparently it didn’t go so well.”

The U.S. Securities and Exchange Commission said it will review the trading. NASDAQ spokesman Robert Madden didn’t return calls and e-mails seeking comment. Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment

BUYERS ARE MORE EDUCATED, OR HAVE BEEN BURNED TOO MANY TIMES

I suppose you could trace this back to the internet bubble. Regular investors have been burned too many times.  Sure Google was a killing, but Facebook had a business model and P/E that didn’t impress.  There was too much hype, not enough value and seemingly not enough surety on the IPO.

The Trader sums it up:

The truth is that Facebook is a toy, a dreamworld, a figment of the imagination. Zuckerberg wanted to make the world a more connected place (and build a huge database of personal preferences), and he succeeded thanks to a huge slathering of venture capital. That’s an accomplishment, but it’s not a business. While the angel investors and college-dorm engineers will feel gratified at paper gains, it is becoming hard to ignore that there is no great profit engine under the venture. In fact, the big money coming into Facebook just seems to be money from new investors — they raised eighteen times as much in their flotation yesterday as they did in a whole year of advertising revenue. For an established business with such huge market penetration, they’re veering dangerously close to Bernie Madoff’s business model.

Worst of All:

Even the NYT notes:

The company’s bankers had to buy shares to keep the stock from falling below its offering price, raising questions about how the stock will fare next week.

YAHOO LAWSUIT

There might be other reasons that held back the success offering, not the least of which was a pending lawsuit:

Actually, Facebook hinted at a pending legal battle with Yahoo in Amendment No. 2 to its S-1 form, filed on March 7.

In that memo, Facebook admitted that it is “involved in a number of lawsuits.” That trend, it acknowledged, is likely to continue as it faces “increasing competition.”

Facebook received a letter from Yahoo on February 27 that “alleged that a number of our products infringe the claims of 13 of Yahoo’s patents.” At the time the second amendment was filed, Facebook was “still in the process of investigating the allegations contained in the letter.”

ARE THEY WAITING FOR A DEAL:
Perhaps the real deal and best price will be waiting for a low of under $20 and picking it up then.  Even if you only make a few dollars per share, it’s better than the few cents that the first day delivered.

THE WORLD MARKETS INFLUENCE

Another speculation is that it suffered from the rest of the world.  The problems with Greece and Spain are well documented.  One thing I didn’t consider was this, An oversold rally is in the works:

From a technical standpoint, our markets peaked in February, yet price drifted marginally higher. As the S&P 500 (^GSPC) rang the bell on our target of 1365 +/- 15 basis point handles, we paused. It was not a shorting opportunity, based upon the persistent bearishness that grew as price moved higher. But after weeks of basing between our levels, the market set itself up for a sprint higher into 1420, suggesting but not reaching irrational exuberance. From that intersection, we saw price decelerate in a downward spiral by 115 handles, or about 9%.

So we must ask ourselves the one question that is more important than Facebook’s (FB) $104 billion IPO: Are we still in a healthy sustained upward move, or are we in a state of bearishness that is being masked by love for Apple (AAPL) or Facebook?

THE OTHER SIDE OF THE COIN

There are some positives with this pointed out by a smarter mind than me, Social Media expert Jeremiah Owyang, read more at this link:

Despite yesterday’s IPO closed at nearly opening price, it’s important to pause and think about how this company’s market cap reached $100 billion (for context, Pepsi is at par at $106b).  We’re already seeing many become wealthy, from newly minted millionaires in brand new M3s at the local car wash in silicon valley, to the investors, VC, and ecosystem that will benefit from the revenues, we need to pause and think why.

So what is so important to pause and think about? Why do I say the Business Model is “Brilliant”?  Facebook’s business model smashed the traditional manufacturing style we see with consumer products, and instead built a  ’consumer platform’ that enabled many around them. In fact, the Facebook business model is brilliant for the following reasons:

  1. Brilliant because the users do the work.   In many companies, hiring paid or unpaid interns is a source of scale, or even off shoring work to developing regions.  In the case of Facebook, there are 900,000,000+ unpaid members that are generating meaningful content and value to each other.   In fact, official Facebook stats indicate that 526b million of them are active each day, many of which are using mobile devices and applications to connect to Facebook as they traverse the world.  While Facebook continues to grow, third parties are observing that the rate of growth may retarding, what’s important to remember  is that most of the commercial base that brands want to seek are likely within Facebook.

WHAT NEXT?

It either goes up or down in price.  The initial IPO money to be made has been made, but the long term money will be made by the savvy investors who can buy a bargain price and wait for it to go up.  The state of the Euro and the EU as well as the debt crisis worldwide may weigh on the price.  I believe that this has changed how IPO’s will be handled in the future as it didn’t skyrocket like it should have (many theories on that).

Further, Exotic car dealers and realtors in Palo Alto are now set to collect a lot of money from the overnight millionaires.

All in all, I congratulate Zuckerberg et al who created a product, jobs, the next new widget and helped the economy.  Bono made $1.5 billion for example and exceeded Paul McCartney as the wealthiest musician.

I’ll bet it still eats at the Winklevii though because as they say, if they could have created Facebook, they would have created Facebook.

POSTMORTEM

It appears that the management at Facebook is suspect also.  While owning 27% of the stock but having 57% control by Zuckerberg is telling.  Most entrepreneurs are good at developing their product, but are bad at running companies.

Further, this from the WSJ on fumbling the IPO:

Less than three days before Facebook Inc.’s FB -9.77% initial public offering, Chief Financial Officer David Ebersman decided to boost the number of shares the company would offer investors by 25%, said people familiar with the planning. His main adviser at lead underwriter Morgan Stanley MS +0.90% assured him there was plenty of demand, they said.

Facebook shares slid sharply for a second straight day as analysts for at least two of Facebook’s lead underwriters revised their financial forecasts for the company while it was holding IPO roadshow meetings. David Benoit has details on The News Hub. Photo: Reuters.

That decision by the 41-year-old Facebook executive may have doomed any real chance the social-networking company had that its stock would jump on its first day of trading—a hallmark of successful IPOs. On Tuesday, the second full day of trading, Facebook shares fell $3.03, or 8.9%, to $31, after falling 11% on Monday. Investors are blaming the downdraft on the last-moment expansion of the offering.

And this:

Interviews with more than a dozen people involved in the IPO reveal that Facebook approached its deal differently than companies typically do. Mr. Ebersman kept a close grip on every important decision on the stock offering, not deferring to his bankers the way many companies do, according to the people familiar with planning.