In the 1950s, the saying went "As goes General Motors, so goes the nation." We've inevitably heard this phrase over and over again during the last month or so first with the news of Chrysler's bankruptcy and now with the fall of GM.
Well it certainly has been some time. As the Nationwide commercials say - "Life comes at you fast."
Politics are still a major interest of mine, but the economy, both personally and for that of the country have far surpassed the petty political jabs lobbed back between the two parties. The two parties, which I might add have worked in conjunction to bring us to the brink of collapse we are at today. In any event, I've shifted from politics to economic matters. My core beliefs have not changed, but the intricacies have been refined and have evolved.
From a personal standpoint, I've fully embraced the financial planning of Dave Ramsey. He is the quintessential guide to personal finance and getting out of debt. Ironically, much of the criticism levied against him is that his solutions to complex problems are often too simplistic. But isn't that the case most of the time? We overcomplicate everything as a way to justify our own action, or to place the blame on others. The first tenant that Ramsey speaks of is the "Baby Steps" to get out of debt.
- $1000 Emergency Fund
- Pay off all debt using the "debt snowball"
- Expand the Emergency Fund to include 3-6 months of expenses
- Invest 15% of household income into Roth IRAs and Pre-Tax retirement
- College funding for children
- Pay off home early
- Build wealth and give - invest in mutual funds and real estate
In addition to the Baby steps listed above, there are a couple ideas that I consider to be core principles. The first is in relation to home mortgages and of buying "too much house." Dave's rule of thumb is to get a 15 year mortgage that is no more than 25% of your take home pay. This succeeds in doing two things - First, you aren't burdened with a 30 year mortgage that will cost excessive amounts of interest over the term of the loan. Second, the payments are low enough that you have the ability to save money for the future, be it retirement, college funds etc...
The other core principle is one which hits close to the heart of my fellow Michiganders and is in relation to the automotive industry and that is to avoid buying new cars, and more importantly - leasing cars, or as Dave refers to them - "fleecing" cars. I'll quote Dave's book directly on this to put car payments into perspective:
Taking on a car payment is one of the dumbest things people do to destroy their chances of building wealth. The car payment is most folks' largest payment except for their home mortgage, so it steals more money from the income than virtually anything else. USA Today notes that the average car payment is $464 over sixty-four months. Most people get a car payment and keep it throughout their lives. As soon as a car is paid off, they get another payment because they "need" a new car. If you keep a $464 car payment throughout your life, which is "normal," you miss the opportunity to save that money. If you invested $464 per month from age 25 to age 65, a normal working lifetime, in the average mutual fund averaging 12 percent (the seventy-year stock market average), you would have $5,458,854,45 at age sixty-five. Hope you like the car!
So while I come off as boring to many, I'm simply using logic and looking to the future. It is human nature to want it and want it now; it is also a sign of immaturity. Being willing to delay pleasure for a greater result is a sign of maturity. However, our culture teaches us to live for the now. Don't live for the now, but rather, the future.
Newspapers have existed for thousands of years dating back to the time of Julius Caesar, although perhaps not in the form that we are familiar with, which didn't exist until movable type was invented with the first modern newspaper being published in 1605.
A little more than four-hundred years is quite a run I'd say. The sad truth is that newspapers are becoming obsolete, both as a medium for information and as a business model. As nearly everyone has access to the Internet, television or radio, the printed newspaper just doesn't cut it.
Environmentalists can celebrate the reduction in the usage of paper. Impatient folks can jump for joy with not having to search through the paper for a story and the techies can be giddy with the advancements made during the last few years.
Newspapers hold some nostalgic value - I recall saving papers of important sporting events when I was younger - Championships by the Red Wings and Pistons, Presidential elections and record setting events. People naturally want to hold on to things and not embrace change, but that is, unfortunately, what we must do.
Newspaper circulation is down across the board, Senator Ben Cardin's proposed Newspaper Revitalization Act simply delays the inevitable. In a nutshell, the bill allows newspapers to become a tax-exempt non-profit organization, prohibited from making political endorsements.
What's puzzling is that Senator Cardin agrees with the same logic I'm using, but still finds the bill to have merit:
"We are losing our newspaper industry," Cardin said. "The economy has caused an immediate problem, but the business model for newspapers, based on circulation and advertising revenue, is broken, and that is a real tragedy for communities across the nation and for our democracy."
Like anything else, the newspaper industry needs to find a way to reinvent itself. Many papers are voluntarily reducing circulation or moving to an online business model. Singling the industry out for something like this makes no sense. When looked at from afar, it can be substitued with other industries such as the horse and buggy manufacturers or steam engines - both of which seem preposterous - but are valid comparisons because all of the industries are obsolete from a technological perspective.
Perhaps it's the cynic in me, but I'm also skeptical of the political endorsement clause as well. Lets face it, the newspaper media isn't known for being unbiased in reporting stories, so the lack of an endorsement would simply make the message more covert. In addition, when government funds and tax-exempt status is placed upon a private industry or institution, it opens the door for corruption. A puff piece here or some extra digging here to receive extra funds and completely twist and distort the media's purpose from checking government to working hand in hand with them as a mouthpiece to further an idea. The same works for rich donors offering a tax-deductible donation for writing or not writing certain stories.
Corruption, technology, whatever - The newspaper industry should be allowed to succeed or fail on its own merits, rather than be supported while failing as that only enables the same poor decision making to continue and pushes back the inevitable failure.
Think back to October 2007, when we hit the all time high of 14,164 - quite different than the economic climate of our country and world today. At 6547.05, we're at forty-six percent of only seventeen months ago. Back when we started this downward spiral, all the experts were in a state of denial, and to some extent, still are. They kept saying how things were only going to get better, even though all of the signs said otherwise.
So while I don't want to be a bringer of doom-and-gloom, I'm here to say that the worst is yet to come, and by that I'm talking sub 5000 numbers, possibly as low as 3000. Back when we hit around 12,000 I restructured my 401K and got out of anything with stocks and moved into the low risk bonds. The transaction fees cost me less than what the market swings in my account seemed to be doing daily and was therefore well worth it. I've had family, friends and co-workers look at me puzzled when I first brought this up, only to see them distraught over their retirement savings.
One person told me I was stupid and should wait it out because I'm so young and could then be there when the market hits the low point to buy again for my future. While this holds well traditionally, with the losses we've had and the losses I expect to continue it would basically be throwing my money down the toilet. A good rule of thumb is as follows - if the money you are losing in the stock market, percentage wise, is less than the amount your employer contributes, then you should re-invest that money, either by paying down debt, or moving it into an alternative market that has minimal gains and at the very least reduces the amount being lost.
I've seen my company's stock drop nearly $70 from its all time high along with that of my wife's. Other companies like Citigroup have gone from over $55 per share to under $1, with Citigroup hitting a low of $0.99. At $93 in the year 2000, GM has, on the verge of bankruptcy, nearly bottomed out as well to $1.68 today and a 75 year low in price when it hit $1.51.
There is no joy from seeing the retirement funds of others magically vanish, or that of companies failing and workers losing jobs. There is, however, a way to be proactive when seeing such trends and by taking our head out of the sand, we can prepare for the worst case scenarios, so that if they come, we are ready, and if they don't, we'll be that much better off. The government and top economists aren't doing anything to help us right now. President Obama isn't worring about the ups and downs about the stock market, but in fairness, that isn't his job. Rather, the economic advisors should be focusing on policy to work with those on Wall Street and the investor class. The rich aren't the only ones losing money here and many middle class Americans are relying on a robust 401k and possibly a pension to supplement any menial amount that Social Security may provide as safety net come retirement.
There's plenty of blame to go around - Politicians on both the left and the right in the legislative and executive branches, "greedy" fat cat Wall Street types, CEOs and mortgage companies to name a few, but also us, Americans who've lived beyond our means by purchasing too much house, refinancing one too many times and racking up excessive debt on plastic. The next decade is going to be a tough one. Lets start by doing as much as we can, person by person, family by family to get back on track as soon as we can.
After much thought and many delays, I've finally made the commitment to get an MBA. I've scheduled my GMAT exam for March 7th, which depending on who you ask, is either more than enough time, or not even close in terms of studying.
First, I'll go into some background details. The degree is (at least partly) being paid for through my company's tuition reimbursement program. With my work schedule, not to mention the only way I was able to have the degree approved was to take courses which were fully online and would not interfere with my various travels. This limits me to only a handful of ACCSB accredited schools, and even less of which have any name recognition. On the positive side, very few of the top online schools have a mean score of 600.
While I haven't determined which school is at the top of my list, I have narrowed it down a bit:
Surprised that University of Phoenix or other online schools aren't listed? I was somewhat happy with the number of prestigious schools offering online programs.Right now, I'd say Michigan is at the top of the list, with the only caveat being that they charge so much for online classes that it would take me a long time to finish the program, so I'd either need to pay for classes myself, or spread out the program longer than desired.
Now, with March 7th quickly approaching, I have a total of six weeks from when I first started preparing, until my GMAT exam. In preparing, I'm doing something that was rarely done in college - intense studying. While a 600 would probably be good enough, I'll be disappointed if I can't raise my scores much closer to 700 or higher.
My weakness going into my preparation is easily verbal. With two engineering degrees, the quantitative section shouldn't give me too much trouble. I've mapped out my strategy over the next few weeks as follows, working one book from cover to cover each week, while doing practice exams:
I took the first GMAT practice exam to give myself a baseline and it confirmed my suspicions:
My quantitative score was above average, and needed a quick amount of refreshing, but my verbal was terrible. After looking up the percentile, it was at 51%. Were I able to raise it to a 38, I'd get a 670 and a 41 would net a 700, assuming I could maintain my 44Q.
Based on this data, I'm even more certain that it will be easier to raise my score if I focus more on the verbal to understand some of the intricacies involved with the GMAT. While the bad news is that I was very low verbally, the good news is that nearly every question I got wrong was a sentence correction type problem, which will help narrow down what I need to focus on.
My first week is now over as well, and I'm done with the Princeton Review book, which was mostly a disappointment. Either I've set the bar too high, or they've set the bar too low. For instance - they have a diagnostic exam to take which then tells you what level of questions you should be working on to improve your score. Sound fair, right? Well, in both the quantitative and verbal sections, I was in the top levels, where I was recommended to practice in the harder pool of questions, known as "bins 3 and 4." The problem that I saw was that my preliminary GMAT score was expected between 450-550. Even if I had gotten every question right, I would have been given the designation of 550+, which I looked at in one of two ways:
The first few days of the new Administration have been quite eventful. There's been some highs, some lows, and some holes that we can't see the bottom of yet.
Let's start off with some of the good things done since Obama took office last week. First, Obama has taken great strides in improving technology, pushing the executive branch into the 21st century. In addition, the Obama Team made an announcment to denounce lobbyists and any role they would play in the Administration.
With that said, a dark cloud covers these early days. After all the technology advancements, Obama made a puzzling move by pushing to delay the transition to DTV on February 17th to sometime in June. Then, after announcing the move against lobbyists, the new treasury secretary - Timothy Geithner - hired one to be his top aide. That's not all though - Geithner, who happens to be in charge of the IRS in his new position, failed to pay $34,000 in taxes to the aforementioned IRS due to not understanding TurboTax. This is the person who is supposed to rescue us from the financial abyss? Furthermore, while Geithner gets a pass, does anyone recall the furor over Joe the Plumber for owing $1,182 in taxes because he asked a question.
Finally we arrive at the $819 billion "stimulus" package. The outcry over this bill existed - and still does - but was not nearly that of the first package at $700 billion. I contend that this is due to a few reasons:
The package isn't going to stimulate anything except the pockets of those at the top of the ponzi scheme pyramid. Think for a second how much $819 billion dollars actually is - If you had a stack of $1000 bills, four inches thick, you'd be a millionaire. A stack of $1000 bills totaling $819 billion would be 51.7 miles long. So imagine those in close proximity to this. How many of them think "Nobody will miss an inch here or an inch there...after all, it is 51.7 miles long. A couple inches isn't anything."
Corruption aside, the details of the stimulus package are less than desirable. Please, someone explain how this pork will stimulate our economy:
Lets consider that you believe either of these programs, or sums of money is justified. Fine, but that's for another discussion. The purpose of the stimulus package is to stimulate the economy. Furthermore, wouldn't stimulating the economy require immediate action and a quick infusion of funds into the market? If so, why is only 20% of entire package being used in 2009? No, this isn't a stimulus package - this is a vast expansion of government to push through pet projects of those in power. The vote was mostly a straight party line, although 11 Democrats had the courage to vote against something that will hurt our country. So a nice pat on the back for the following Democrats:
Allen Boyd - FL; Bobby Bright, AL; Jim Cooper, TN; Brad Ellsworth, IN; Parker Griffith, AL; Paul Kanjorski, PA; Frank Kratovil, MD; Walter Minnick, ID; Collin Peterson, MN ; Heath Shuler, NC; Gene Taylor, MS
If any other persuasion is needed on this stimulus package, look at the numbers given by those in charge of it. They predict that it would "save or create 3 million new jobs over the next few years." Lets give the benefit of the doubt and assume that it won't simply save jobs, but will only create new jobs. At $819 billion, the math works out to $273,000 per job - the average salary of Americans, right?
"I'm a liberal. I was born a liberal. I'll be one until I die. What else should a reporter be, when you see so much and when you have such great privilege and access to the truth."
Just a thought, but I'd shoot for neutral, unbiased and fair. Which of course makes me a crazy right winger, as shown by the reporter's followup question.
"But you know, it's interesting because I'm sure if somebody from the right was sitting here, they would say, if you asked the question what else should a reporter be, they would say 'Oh I don't know, how about objective."
Ms. Thomas responded the way the elite liberal media often does:
"You're not asking people not to think, not to care are you? But you are asking them to give a fair reporting, both sides and so forth, and I did it, for 57 years I was never, never accused of bias in my copy, but I had a right to be angry and unhappy. It's a trend that I saw in my country that I was close enough to see."
Does this not strike at the heart of liberal bias in the media? Take a close look at the highlighted portions of the quotes. First, Helen Thomas claims to be a liberal, and then makes the conclusion that a reporter should be nothing else. Next, you've got the interviewer coming back with a completely logical assumption, but then insinuating that only someone on the right would say that - not with the tone that suggests only the right believes in objectivity, but that only the right would be silly enough believe it wasn't objective. Finally, in response Ms. Thomas touches on one of the staples of liberal philosophy. Rather than responding to the question honestly, she turns it around on the interviewer and has a delusional notion that reporters cannot be objective if they only think. The problem is that thinking is only allowed if the thoughts presented agree with the viewpoints of the left. Think all you want, as long as it agrees with us.
Feel free to watch the video unless you have a weak stomach. The main portion starts around 3 minutes 45 seconds.
So it turns out that Joe Biden was given the choice to be either Secretary of State, or Vice President. Of course, like the typical hollywood gossip, we get the part where he initially tries to stop his wife from spilling the beans, and the natural spokesperson denying that was the story to the media.
Truth be told, I'd have done the same given the opportunity (one can only dream!) but as much as the handlers will deny the truth behind it, you can believe that the Hillary team is secretly seething.
As turmoil between Obama's team is already in place with the battling between cabinet members and czars, another fight between the number two and the Secretary of State is the last thing the new administration needs.
Tomorrow is a new day for America - For or against Obama/Biden in the 2008 election, we are moving in a new direction, and should work together, rather than against the other side.
As the drama winds down with the appointment of Roland Burris by Illinois Governor Rod Blagojevich to President Elect Obama's Senate seat, the Democrats have been put in a no win situation by the embattled Governor.
The appointment of Burris by an allegedly corrupt Governor has caused a furor from both Republicans and Democrats alike. Anyone who is as blatant to not only be caught on tape trying to sell a Senate seat, but to also dare law enforcement to monitor him is clearly delusional, and in Rod Blagojevich's case - The poster child for political corruption.
In a common sense move, Democrats refused to seat Burris to the Senate due to the corruption scandal surrounding Blagojevich. This isn't necessarily an implication on Burris, but on Blagojevich.
I'm of the belief that Blagojevich knew exactly what he was doing by appointing Burris. First, it takes the heat off of him somewhat and spreads it out to Burris as well. Second, if Burris is seated, it gives Blagojevich a sort of legitimacy, because if he is truly guilty, the appearance is that he wouldn't be allowed to appoint someone. Now, remember that President Elect Obama was the only black Senator in the country. By selecting another African-American to replace Barack Obama, it turns the appointment into a race issue - even though it is not one.
The Democrats who originally blocked Burris did so without considering race, but rather, the corruption of the Governor. However, a feeling of being considered racist, in my opinion, is what has caused many Democrats to switch positions. The African-American voting bloc votes roughly ninety percent of the time for Democrats, and is a major reason why the Democrats have been able to win elections in not only 2008, but in years past. To even give the appearance that they are going against someone who would continue to be the only black Senator is a political fear they aren't willing to risk.
This is where the no win situation presents itself. If Democrats take a stand against Burris, they have the possibility of alienating a group of voters who have staunchly supported them. By supporting Burris however, they then associate themselves with the corruption brought on by Governor Blagojevich. Unfortunately in this 24/7 news cycle, keeping a voting bloc happy is more important than taking a stance and sticking with it, because the public will forget the details if you change the subject for long enough.
