investing

SVB Bank, Another Go Woke And Go Broke

/ John / Leave a comment

Woke ruins everything it touches. ESG investing is also an attempt at controlling the masses with lies.

FAFO when you hire losers and have woke policies.

While Silicon Valley Bank collapsed, top executive pushed ‘woke’ programs

A head of risk management at Silicon Valley Bank spent considerable time spearheading multiple “woke” LGBTQ+ programs, including a “safe space” for coming out stories, as the firm catapulted toward collapse.

Jay Ersapah, the boss of Financial Risk Management at SVB’s UK branch, launched initiatives such as the company’s first month-long Pride campaign and a new blog emphasizing mental health awareness for LGBTQ+ youth.

“The phrase ‘you can’t be what you can’t see’ resonates with me,’” Ersapah was quoted as saying on the company website.

“As a queer person of color and a first-generation immigrant from a working-class background, there were not many role models for me to ‘see’ growing up.” (there is the announcement of “everything I touch is going to fail”)

Her efforts as the company’s European LGBTQIA+ Employee Resource Group co-chair earned her a spot on SVB’s “outstanding LGBT+ Role Model Lists 2022,” a list shared in a company post just four months before the bank was shut down by federal authorities over liquidity fears.

It’s time to stop hiring people like this and eliminate this group of initials, ESG, CRT, DEI and anything woke

Jay Ersapah

In addition to instituting SVB’s first “safe space catch-up” — which encouraged employees to share their coming out stories — and serving on LGBTQ+ panels around the world, Ersapah also spent time over the last year serving as a director for Diversity Role Models and volunteering as a mentor for Migrant Leaders.

“I feel privileged to co-chair the LGBTQ+ ERG and help spread awareness of lived queer experiences, partner with charitable organizations, and above all, create a sense of community for our LGBTQ+ employees and allies.” (how do you feel about it now knowing you screwed the pooch?)

Ersapah couldn’t immediately be reached for comment.

SVB was abruptly shut down Friday by the California Department of Financial Protection and Innovation shortly after it disclosed it had taken a $1.8 billion hit from a $21 billion fire sale of its bond holdings.

It faced a cash crunch due to surging interest rates, and a recent meltdown in the tech sector led many customers to pare their deposits.

More coverage:

Was the Silicon Valley Bank Collapse Caused by Climate Activism?

“… SVB recognizes the significant societal, ecological and economic threats of climate change. … We enable entrepreneurs with inventions and new businesses that reduce greenhouse gas (GHG) emissions and take seriously the responsibility to reduce our own. …” – SVB ESG Report 2022 Section 8

Pinkerton: Green, Woke, and Now Broke — How SVB Became the 2nd Biggest Bank Failure in U.S. History

Go Woke, Go Bust

Oh so woke, oh so green, oh so diverse Silicon Valley Bank (SVB) just went bust.

One can go to its website—still up for who knows how much longer—and see that it claimsassets of $212 billion. But as they say, the bigger they are, the harder they fall; and so SVB makes for the second largest bank failure in U.S. history.  

…

Speaking of ‘splaining, SVB officials will need to answer a lot of questions, including, What role did wokeness play in SVB’s failure? 

Another term for wokeness, of course, is ESG, which stands for environmental, social, and governance. ESG is a pertinent question, as there’s a considerable body of economic literature showing that woke investments aren’t good investments. For instance, one study by professors at the London School of Economics and Columbia University finds that:

ESG funds appear to underperform financially relative to other funds within the same asset manager and year, and to charge higher fees. Our findings suggest that socially responsible funds do not appear to follow through on proclamations of concerns for stakeholders.

…Read more: https://www.breitbart.com/economy/2023/03/11/pinkerton-green-woke-and-now-broke-how-svb-became-the-2nd-biggest-bank-failure-in-u-s-history/

Of course, it wasn’t just the woke policies of SVB which might have contributed to the disaster. One of the biggest sources of damage to Silicon Valley Bank was the bank’s mistaken belief that fixed rate securities were a safe harbour for depositor’s money.

How Musk Used F/U Money To Tame Twitter

/ John / 1 Comment

When your 5th car is a Ferrari that you only drive when you are at your “other” vacation home, it’s called F**k Y** money. Look at all the bankrupt 1st round draft picks in the NFL who were paid millions. Their past is littered with F/U mistakes.

Elon Musk has taken it to a new level though. $44 Billion is the king of F/U buys so far. He’s smart enough that it might work.

I know he is trying to stop child porn, spam bots and is fighting for free speech the best since 1776, but how many people can afford to take this gamble?

He’s unloaded (not enough of) the woke employees, made fun of their business model, challenged Apple (remember Parler), exposed the child porn trafficking and was able to suffer the loss of advertising revenue from the woke. Those being corporations being those who kowtowed to the race hustlers and woketards who ruin everything they touch.

He’s showed the one sided censorship platform for evil and hate that Twitter became. See the link below where it took orders from the DNC.

I don’t know what it will become, but Musk does have a track record for success. Even if it’s not as big as Space-X or Tesla, he rescued social media (except for fake book) from being a cesspool of bias and hate against good or God.

Twitter was a one-sided censorship platform that had to be killed so that it could survive.

Either way, I enjoy all the time I got back from getting off of useless social media.

DNC Giving Orders To Pre-Elon Twitter – Twitter Saying, “Yassuh, Boss!”

TWITTERGATE: Elon releases Twitter’s private comms revealing the dark truth behind censorship of Hunter laptop story…

Bezos Trying To Buy Immortality Through Reprogramming

/ John / 2 Comments

Everyone has to face the fact that we have a limited lifespan. Steve Jobs found that out 10+ years ago with over $7 billion. How much is that money helping him now?

Bezos has more than anyone at this point, although Elon Musk is giving him a run for his actual money. These guys like Gates, Buffet and others have more than they can spend. As I’ve pointed out before, their currency becomes control, power and the search for meaning.

The one thing you can’t control is mortality. That’s not going to try to stop them from trying. It’s why I found it interesting that Bezos is investing in this.

Here is his take:

“Staving off death is a thing that you have to work at,” Bezos wrote then, adding, “More generally, if living things didn’t work actively to prevent it, they would eventually merge into their surroundings, and cease to exist as autonomous beings. That is what happens when they die.”

He’s invested in Altos Labs to try and reverse the aging process.

The new company, incorporated in the US and in the UK earlier this year, will establish several institutes in places including the Bay Area, San Diego, Cambridge, UK and Japan, and is recruiting a large cadre of university scientists with lavish salaries and the promise that they can pursue unfettered blue-sky research on how cells age and how to reverse that process.

Excerpt from the link above:

Among the scientists said to be joining Altos are Juan Carlos Izpisúa Belmonte, a Spanish biologist at the Salk Institute, in La Jolla, California, who has won notoriety for research mixing human and monkey embryos and who has predicted that human lifespans could be increased by 50 years. Salk declined to comment.

Also joining is Steve Horvath, a UCLA professor and developer of a “biological clock” that can accurately measure human aging. Shinya Yamanaka, who shared a 2012 Nobel Prize for the discovery of reprogramming, will be an unpaid senior scientist and will chair the company’s scientific advisory board.

Yamanaka’s breakthrough discovery was that with the addition of just four proteins, now known as Yamanaka factors, cells can be instructed to revert to a primitive state with the properties of embryonic stem cells. By 2016, Izpisúa Belmonte’s lab had applied these factors to entire living mice, achieving signs of age reversal and leading him to term reprogramming a potential “elixir of life.”

Mid-life crisis?

It’s been said that young people dream of being rich, and rich people dream of being young. That paradox is one that people like Milner, age 59, and Bezos, who is 57 years old, may feel acutely. Forbes currently ranks Bezos as the world’s richest person, with a net worth of around $200 billion. Milner’s wealth is estimated at $4.8 billion.

Young and rich

Bezos is said to have a fairly long-standing interest in longevity research, and he previously invested in an anti-aging company called Unity Biotechnology. Rumors of the billionaire making a seismic-sized splash into the field have swirled for months.

The article goes on to mention that there are “side effects”.

The results of such mouse experiments, while tantalizing, were also frightening. Depending on how much reprogramming occurred, some mice developed ugly embryonic tumors called teratomas, even as others showed signs their tissues had become younger.

“Although there are many hurdles to overcome, there is huge potential,” Yamanaka said in an email, in which he confirmed his role in Altos.

I’VE GOT NEWS FOR YOU JEFF

Just like Jobs’ money is not doing him any good right now, Jeff can buy whatever he wants, except a few more breaths.

While the soul may be immortal, the body will never be.

How many days do we have left? I don’t know. No one does, except God. He knows the exact number of years, days, hours and seconds that I will occupy my address on Planet Earth; the exact moment that death will occur.

For those of us who believe in God, here is what is said in Psalm 139:16

Your eyes saw my unformed body; all the days ordained for me were written in your book before one of them came to be.

In other words, all that money you have isn’t going to buy one more second. You also won’t take it with you.

Maybe you should try a little harder on your soul than your body big guy.

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

/ John / Leave a comment

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.

Rick, with whom I went to school with since 7th grade, gave me a ton of grief when we were in our late 20’s. He was serving cokes for a living (stewardess) 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 for free, 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 to accomplish it. 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 16 years of experience. I had owned my own business shortly after that conversation. FWIW, I played golf this week and have enjoyed a long retirement while he was in tech support.

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. I knew I would be financially set and stuck with it in life. Every day is Saturday for me now and he is living off of Social Security.

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.

No going back, how Covid has changed us

/ John / Leave a comment

Covid has changed our lives for good, and possibly/probably not for the better. Let’s take it by activity.

Travel

Here is some history. Flying used to be fun, economical and had good service. We used to like going on an airplane until some jag-off decided to try and light his shoe bomb on a plane.  Then another tried to blow up his underwear. We now have to queue in a long line  and I’m not all that sure that it’s stopped anyone other than the average Joe traveler. It hasn’t stopped the TSA from copping a feel on strangers.  The food sucks now and isn’t free anymore. Flying is more like the line for enlistment (including your prostate exam by the TSA) than to get on a plane.

With Covid, we can now add a temperature check, face masks and the the fear of catching anything from being in a tube for hours with little to no service.  The airports are petri dishes for bacteria.

Given the losses on travel companies and equipment manufacturers, it doesn’t bode well for the travel industry or the travelers.

Going to the office to work.

The requirement to be in person at work not as necessary as thought.

Before remote working, we had to be in the office or no one could be fully sure that you were earning your pay. Travel and working remotely eased that but there still are some bosses who didn’t trust their employees.   I had one piss-ant manager named R. Gorman when I worked at Thinkpad who didn’t trust anyone. He  sent a memo called rules of the road where you had to be in the office. All that got him was no trust or loyalty from the team. We were technologically equipped to work from anywhere and always did on business travel, but there still was some requirement to be in the office otherwise.

Employees want to be empowered to succeed. When that happens, they find ways to be creative and accomplish their goals. Conversely, when you treat them like school children, many will act that way. Just like with Ray, our productivity went down and the Ray jokes went up.

Now, no one can go in to work while we are socially distancing, and most jobs (non-manufacturing) are still getting done. It’s easy to reach anyone at anytime (too easy and too intrusive) but the oversight of said taskmasters is not needed. In a way, the people are now empowered and they still get the work done.  This one could be a benefit of Covid.

The downside is that a lot of empty buildings will lose their real estate value as there is no need to be in the office with the exception of essential workers.

How it affects the home

For us introverts, I thought it would be a time that we could cancel and/or avoid engagements until Zoom invaded our lives. Now even virtual happy hours are like a meeting. I’ve noticed that it’s hard to get privacy when kids and dogs are in the room or yelling in the background. Spouses or parents have been caught parading nude in front of the camera by accident.

When you meet in person, it’s easier to read body language and have someones attention. I tend to drift during Zoom meetings and have multiple devices that I often look at. I’ve noticed that I’m not alone.

Trouble for Introverts

Normally, we would be in pig heaven not to have to go to the office. In addition to the invasiveness of Zoom/Skype, we are stuck in the house with extroverts who won’t leave us alone. It’s like being trapped in hell. You want the quiet and the peace you got when the extrovert was in the office, instead your personal space is invaded and you can’t escape the dreaded small talk.  The place that used to be your refuge has been invaded and there is no escape.

How are you supposed to recharge your social battery when an extrovert is constantly draining it all day?

Schools

The school model is now exposed, especially at college level. No more extortion for dorms when you can do 90% online. College professors are no longer as essential. Recorded classes, especially at the 100 and 200 level are adequate. Online testing and submitting required homework is routinely done online even well before this virus.

It turns out that colleges are a Breathtakingly overpriced product.

https://www.thegatewaypundit.com/2020/05/breathtakingly-overpriced-product-mike-rowe-says-covid-19-revealed-college-really/

According to Mike Rowe: “They’re gonna’ find big thinkers with easily accessible ideas who are exponentially more interesting than professors, and soon, I hope, our obscene love affair with credentialing is going to stop, and we’re going to pause in every imaginable way, and look at what is essential – not just in workers or in work, but in education, in food, in fun. Everything is going to be forced through a different filter,” he said.

Colleges will also be exposed on their sports programs. Sports are a bank fund that pays for a lot of other school expenses and is a recruiting tool for enrollment. The schools will now have to rely on actual academics as a draw for students instead of March Madness or Bowl season. Maybe the students will now get an education instead of an indoctrination to Marxism.

Conversely, this is a big positive as the cost of education has the opportunity to go down (but so far the colleges are still extorting the same ransom from parents). Room and board are a large part of the cost of an education. Combine that with the lack of a requirement for many classrooms and there is the road to cutting costs.

It is not in the best interest of the Major institutions to charge less, but the cat is out of the bag that you can get almost as much done online. I hope that the masses will overcome and help this opportunity for cost cutting.

For elementary, middle and high school, I think it will hurt our youth.  There is a need for hands on in basic learning and kids have the attention span of gnats.  Sometimes you need to snatch their asses back to attention when it’s learning time.

New paradigm for getting essential needs like groceries.

Essential services like cancer, emergency rooms are same, but will change. Non-essential Dr. visits are now handled over the phone or via video. Dr.’s can now dedicate more of their time to real emergencies or necessary in-person visits. A person using the Emergency Room for healthcare because they don’t have insurance is going to go way down.

There is no downtime for paperwork and other overhead that comes with any job, but that got handled off-line mostly anyway.

Rely on technology more, but the risk is that you can take down a society like the virus did. Beware of hackers though, where there is opportunity, there will be bad guys looking to make your day worse.

Shopping

Groceries have taken a turn for the better/worse/something different. Now that we went through the great toilet paper shortage and people have enough to wipe their asses for the next 5 years.   They can realize that a little planning can condense 5 shopping trips into one, or one delivery or pickup.

A lot converts have been made for grocery delivery. There are a few kinks that need to be worked out though. I’ve gotten stuff I didn’t order, but mostly I rarely get everything I wanted, even if I put in what the substitute would be product. There is no shopping for the store brand that is a whole lot cheaper.

We have gotten used to queuing a lot more now. It used to be the end of the world for some people who had to wait for more than one person to checkout. Now, we’re standing on X’s taped to the floor like kindergartners waiting to go potty.

As is the trend, online shopping has picked up and the downside is retail stores are less needed.  Again, this is a loss in real estate value and will leave a lot of square footage available.

So all in all, some of this is good, but a lot of it was unnecessary. If it wasn’t an election year or if there were different political leaders, a whole lot of people wouldn’t be losing there freaking minds over every little thing that they look for to be offended by.  HCQ would be over the counter like it is in a lot of countries and we wouldn’t be held hostage for masks as no one really seems to know whether it truly helps or hurts us yet.

I’ll remain optimistic that society will adapt.  I’m pessimistic that this is a political power opportunity to control the masses and we should beware.

Improving Your Credit Score, Continuing Personal Financial Principles

/ John / Leave a comment

 

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.

 

Should You Pay Off Your Mortgage?

/ John / 4 Comments

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.

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

/ John / 5 Comments

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

/ John / Leave a comment

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.