Structural Shifts

There are some changes happening around the world which I believe have already begun, and are important for anyone who wants to understand both the economic future of our country and the implications of that future for jobs, stock prices, and the lifestyles we live. I want to be clear that the events happening around us (this year especially) will greatly affect the rest of our lives, and the lives of our children and grandchildren, so I believe they are important to know about. Let me begin with brief description of a sad event:

In June of 1995, in Seoul, South Korea the Sampoong Department Store was packed with thousands of shoppers. Just after 6PM, the roof gave way, and a large portion of the 5-story structure pancaked into the basement. About 500 people died there that day, another 1000 were injured. The tragic collapse was due to poor planning, construction, and corruption. A building not only has to be designed correctly for the loads and stresses to be placed on it, but that planning must actually be implimented.

How does all of this relate to the economic future of our country? To put it simply, our current level of economic growth and prosperity (the load to be held up) is based on a very real set of supporting principles (load-bearing structures) which hold up the load, and help it resist the regular buffeting forces of bumps in the road. I believe that many of those load-bearing structures have been moved, altered, or weakened, in such a way that we will have to take some of the load off the building, and rearrange the rest in order to keep ourselves from a collapse. Here are some of the structural supports that have held us up in the last century, and how they are changing:

1- Population Growth. World population growth rates have been in decline for 50 years, with Europe leading the way. The US still has the highest population growth rate of any western country (due to higher immigration), but it too is significantly slowing. Growth is important because the more people live in this country, the more people need goods and services. If we had another major baby boom for the next decade or two, the demand for baby goods and children's goods would shoot up, spurring those industries, etc. But when growth slows, there are fewer and fewer new customers for products and services every year. That means less economic growth. Additionally, it means less government revenue growth as well, which has implications for national budgets and deficits.


2- Demographic Shift. The baby boomers are just now starting to retire. Take a look at the chart above and look at those big humps in the middle. Those are the boomers. As they all start to go into retirement, a few very important things happen. First of all, when they stop working and start living off their retirement savings, they stop putting money away every month into stocks and bonds, and start taking that money out so they can have a monthly income. Second, more of them draw on Social Security, which is a huge problem we're all going to have to deal with very soon, because we can't even come close to paying what we owe on that. Third, as people get older they need more medical care, and will spend more of their income on medical care than they did before, and less on other things. That bodes better for the health care sector, and worse for anything discretionary in nature. And lastly, old people die at a faster rate than young people, putting even more pressure on the growth problem I outlined in point 1.

3- Government Theft. More and more of our money is going to be taken by Uncle Sam. With an $11 trillion debt, trillions more pledged for this year's bailouts, trillions that will probably go to Obama's version of the New Deal, and over $1 trillion in deficits projected for next year alone, the debt burden of this country is shooting out of control. Let's be clear that in one way or another the country's spending needs to be paid for. Let's look at the options, none of which are pretty:

• Borrow. The country can issue more debt, on which it has to pay interest. Last year the government spend about $500 BILLION to pay interest on our national debt. At almost $1700 per person in this country, that's a lot of interest to pay. But with the national debt ballooning, you can rest assured that interest bill will go up, WAY up. That takes a bite out of government spending unless more revenue (taxes) are brought in or more spending (programs) are cut.
  
• Cut spending. This is how must of us try to get out of debt. But lower government spending would of course drag on the economy, and the government certainly doesn't want to do that, in an economic downturn especially. This is the long and painful way out as I see it, but the least likely one to happen.
  
• Increase taxes. We all pay more of our heard earned money to Uncle Sam. This isn't just income taxes, but also in the form of higher prices on products (companies have to pay taxes too). Taking more money out of the pockets of consumers definitely slows down the economy, as consumer spending accounts for 2/3 of the country's economic growth. It's hard to make a case for raising taxes when the economy is in the dumps and people are out of work.
• Monetize the debt. Basically this is just printing money. Let me explain. Let's say the government takes in $90,000 but needs $100,000 to do what it does, much like the deficit we're in now. So it issues $10,000 in bonds to the public. But then the government doesn't want to (or can't) pay the additional interest on that $10,000 so they decide to monetize it. They fire up the printing press, print themselves $10,000 in money, and use it to buy back the bonds from the public. So now they have the $100,000 they need, but the total amount of money in circulation has climbed by $10,000. As you may know, this means inflation, and now everybody's dollars are worth a little bit less, and buy a little bit less, and thus the prices you see at the store (and for every other physical material) actually move up. If you end up with lots of inflation, you make everybody more poor. See my article from September 5th to see some effects of too much inflation. So the problem here is that we end up with high inflation to try and wipe away our debt, and in the process we all become poorer in real terms, which is not a very desirable for anybody.

4- Spending orgy. We have, as a nation, gone into immense amounts of private debt in order to finance our grandiose lifestyles. We have lived far beyond our means for a long time now, and it is finally catching up to us. Hard. Look at the chart from my November 19 article to see just how far into debt we're really gotten ourselves. The savings rate in this country is almost zero, so as a whole we spend every penny that we make. And all this during good economic times, when we really should be saving for a rainy day. Now people can't pay their debt, can't buy discretionary items, can't pay their mortgages, are defaulting on loans, etc. Every time we hit a bad patch in the economy, people are forced by the economic gods to remember that they should save, and the national spending rate goes up. But if it returns to a "healthy" level of 5%-8%, where do we get all that money to save? From not spending it! And if we don't spend money, we have a big problem with economic growth. And no growth means more hard times.

Are there any answers? I believe there are, but that it will take pain and hard work to get there. I believe we can take some load off our damaged building, repair the building a little bit, and rearrange what is left, so that the building does not tragically collapse on us. I believe that it will require personal responsability, and a major shift in attitude. It would be very hard for a while, but we're going to have to do it now or later. I believe our leaders should lead us by telling us that we need to spend less, save more, be ready for a rainy day, not by pandering to every group of people that walks through their doors. They should do what their constituents tell them, but they should also be active in informing and extholling them to do things that will benefit them and everyone else. They should be urging us to be conservative and frugal in our personal spending, and lead by example in our government spending. But I've not seen more than a handful out there who have the backbone to do not only what is necessary, but what is morally right AND necessary to get our contry back in the right direction.

The Real Bogeyman - DEBT

As we have watched this year's financial debacle unfold, legions of analysts, political candidates, pundits, and economists have tried to blame the mess on one thing or another. Everyone is looking for a bogeyman on which to blame the current calamity: The housing slump, Wall Street greed, chinese currency manipulation, democrats, republicans, bad luck, economic cycles, etc. Very few have actually named the real root and culprit, the actual bogeyman: DEBT.

This country has for decades been infected with the disease of debt. We use debt to purchase things beyond our means and live ever more lavish lifestyles. We see what our parents have now and want to have it now too, rather than work hard for 20 or 30 years to get it. We view our credit and everything we own as an ATM from which we can borrow and waste (spend) money frivolously. It is a disease that has been transmitted to the rest of the world too. It is the cause of much of the boom times of the last few decades. And it is now starting to catch up with us, big time.

How bad is it? Pretty bad. Take a look at this chart. This shows how much credit we have currently in use as a nation, divided by the nation's GDP (the total production of our country for a year). You can see pretty clearly that the growth and prosperity of the last few decades has been due in large part to the ever increasing debt which we have used to purchase more and more stuff. This is what is meant by leverage, and we, as a society, have leveraged ourselves to the hilt! You can see we are WAY past historical norms, and WAY past even the amount of leverage we had before the great crash and the Depression.

Now, leverage sure feels nice when values are climbing, because it means that we're earning a much higher return than we otherwise would. If I'm leveraged 3 times and prices move up 100%, I make 300%. But the same holds true on the downside, which is what most people forget. If one is leveraged 3 times, the prices only have to move down 33% for the entire investment to be effectively lost. And that's only on 3x leverage. Where do many people have a ton of leverage without even realizing it? Their homes! If you own 20% of your home, and the rest is on a mortgage, you are leveraging yourself 5 times. If you own 10% you leverage yourself 10 times. If you own 5%, you leverage yourself 20 times.

Let's look in a little more detail what happens in this scenario. Let's say you go to buy a $100,000 home and put down a respectable 20% ($20,000) and made interest only payments (for ease of calculation). Let's then say that over the next 5 years the value of your home goes to $125,000 and you sell your home. You used $20,000 of your own money (and $80,000 of borrowed money) to then turn it into $45,000 ($125,000 sales price minus outstanding mortgage), and thus made 125% on your investment. Price moved up 25% and you made 125%. Leveraged 5 times. On the flip side, let's instead say that the price of your home declined by 25% instead, and you had to sell it for $75,000. You have now lost 125% of your investment! You've lost your entire investment plus another $5,000 you have to come up with at closing. Price moved down 25% and you lost 125%. Most people are leveraged and don't even realize it.

Now look back up at the chart... with every big leveraging there needs to then follow a big de-leveraging to get back to normalized levels. So between mortgage and consumer credit, we're going to have to take some serious pain for a while as we get back to more normal levels.

How about the public debt? The US public debt? That's not looking good either. I've taken the debt levels for the last few years, plus some basic projections out to 2020, to come up with the chart you see here. That is pretty depressing to me. What's more scary is the amount of money necessary just to pay the interest off at that point. If we have to pay 6% interest (slightly higher than now, but lower than the historical average payout) on about $23 trillion, we'll have to pay about $1.4 trillion every year just to keep up on the interest, even if at that point we do balance the budget! That's getting close to $5,000 a year for every single person in this country, just in interest payments alone. Have a family of 4? Your share will be $20,000 a year in interest payments to uncle Sam. Even scarier is that if we let it get that big and then want to pay it back down to zero over the following 20 years (to 2040), we will need to pay over $2 trillion a year (close to $7,000 per person, or $28,000 a year for a family of 4) to pay it down.

Oh, and incidentally, about 25% of our public debt is owned by foreign countries, with China now being the biggest holder of that debt. And what do the debtholders get? The interest payments! Our government is now shipping hundreds of billions of dollars out of this country every year to pay interest on our debt, the biggest single portion of it going to China. So not only do we have a massive trade deficit with China that takes hundreds of billions a year from our pockets and puts it in theirs, we also borrow from them too and send them tens of billions more every year! Who else sees a problem here?

So as a country we are in debt up to our eyeballs, both privately and publicly. Savings rates have fallen to basically zero. Debt for spending is what got us into this mess, as we have overleveraged ourselves terribly. But how are our policymakers trying to solve our problems? Borrow more money and let others borrow more money! They want us to borrow ourselves out of this problem, caused by borrowing! That is a TERRIBLE idea!

How come I don't hear our policy makers telling us to be more prudent with out money, save more money, spend less, spend wisely, etc? Because 2/3 of the growth of our economy is now based on consumer spending, that's why. We've gotten addicted to the consumer spending, made possible by the debt we've taken on, and now nobody wants to get off the drug and go through the terrible withdrawal pains that would certainly follow.

But that is the only answer. We must take pain, we must go through the withdrawals. And we should let everyone do it on their own, paying for their own mistakes. Not giving bailouts and handouts and redistributing the taxpayer money from those who made good choices to those who made bad choices. Companies need to be allowed to fail, people need to be allowed to fail. Our government loses credibility with its people every time they punish those who make good decisions and reward those who make bad decisions. The bogeyman is now too big to be stuffed back in the closet and we'll have to shrink him back down to size before we can ever hope to put him back in.

Bailout Nation - A Shredded Constitution

For those who haven't been keeping track, our government has now spent about $3.5 TRILLION dollars on bailouts the last few months. That's right, trillions with a big, fat, T. How can this be? Didn't congress only vote on a $700 billion bailout (known as TARP)? Yes, yes they did. But the Fed apparently has the unconstitutional authority not only to print money out of thin air, but also to make "emergency loans" to companies all over the country without any congressional approval, oversight, or any other form of responsibility. Here's how it breaks down so far:

• $2 Trillion in "Emergency Loans"
• $700B TARP (the official bailout voted on by congress)
• $300B Hope Now (the gov's year-old attempt at saving troubled mortgages)
• $200B Fannie Mae & Freddie Mac nationalizations
  
• $140B Tax Breaks for Banks (which the IRS quietly enacted without fanfare)
• $110B: AIG (in addition to $40B of TARP money)

What? You didn't realize how much money was being spent? Yeah, well... not many people do.

Oh, incidentally... that $2 trillion in "Emergency Loans" that the fed has already dished out (without constitutional authority, or oversight)... yeah, they refuse to tell anyone who they have lent that money to, or what kind of collateral they got in exchange. Talk about scary. That's $6,700 for every man, woman, and child in this country.

And the TARP money? Tens of billions of dollars of that bailout money are being used to pay corporate executive bonuses. BONUSES?!? WHAT?!?

But oh, gentle reader, don't get the false impression that the bailouts are over. Not by a long shot. There will almost certainly be hundreds of billions (if not trillions) more given out to the financial industry. And let's not forget the automakers, who are almost certainly going to get tens of billions of dollars. And what about the government's pension guarantee corporation, which is getting hammered and will likely need additional funds to take all these failed pensions on its books? How about FDIC and NCUA, which insure bank and credit union deposits? They're probably going to need billions by the time this is all over. Then there the airlines, quietly waiting in line for their turn to ask for a handout. And the list goes on. Where will it ever end?

Trying to add up the true cost of the bailouts is very difficult, and won't really be known for years. But just think about the fact that $3.5 trillion is about 25% of the entire US economy for a year, and about 35% of our current national debt, and you may start to be alarmed. Unfortunately, hyperinflation and/or sharply higher interest rates seem to be where we are headed. Hyperinflation is always terrible, and sharply higher interest rates would deal a terrible blow to this already crippled economy. However you look at it, it isn't pretty.

The constitution has in the last 50 years become nothing but a nice idea, a historical note, to be used as a trumpeting call to rally people, but to be completely ignored by our government. There are tens of millions of people in America who still believe in it and want to see our government restored to it original principles. Principles which have been slowly twisted and perverted over time in order to centralize power in fewer and fewer individuals. The governments of the last 40 years are primarily responsible for this mess, as they have moved farther and farther away from the constitution and the principles of small government and personal accountability.

What we need is a charismatic leader to rise and lead the tens of millions who want to return to a government FOR the people and OF the people, not one that is OVER the people. We need leadership to help organize massive (and peaceful) rallies across the country, to get our leaders to pay attention. Our government leaders have long forgotten what it meant to be "afraid" of their constituents, and unless we start reminding them of that, things will never improve. I hope such a leader appears soon.

Obamunism

In 5 days we will elect our new President, along with many of our state and federal representatives. The polls seem to indicate that Barack Obama will likely be elected as President, and that Democrats will make gains in congress. While today's GOP, on average, is not really all that much more fiscally conservative than today's Democrats, I think we will now see the country dive closer to socialism than ever before, and do so faster than we have ever seen it before.

I have already started using a new term for what this era will bring us to...

Obamunism

Yes, Obama has been making promises and comments that would make Karl Marx himself smile with glee. The back door has been open to socialism in this country for a long time... but I think this election will be marked as the date when the front doors were thrown wide open and the red carpet was rolled out in welcome of socialism in America.

It's sad really. This country once was unique in that people had a small and non-intrusive government, they were accountable for themselves, and wanted to work hard to get ahead in life. That was the American dream, wasn't it? That you could come to a place where if you worked hard, you could actually own stuff, and not have the government take most or all of your property from you? Well, the American dream has slowly been pushed aside, and within the next 4 years it is likely to be thrown under the bus.

Aparently it is ok to take from people who work more hours to give to people who actually choose to work fewer hours so they can still qualify for other taxpayer's money. Aparently it is better to be stupid and untrained, and not improve one's self, because if you do you will get punished by higher taxes so that the lazy among us don't actually have to do anything productive. Aparently the American dream is not all that great after all, since the new American dream is centered on how the lazy can get the government to steal other people's money and give it to them.

Welcome to our new country, the USSA. Where Obamunism is the main ideology, and where Comrade Obama is our newly elected dictator. A bloodless revolution that has been 100 years in the making. And one where people still have the illusion of freedoms and choices.

For Good Men To Do Nothing

It is Edmund Burke who is credited with saying, "All that is necessary for the triumph of evil is that good men do nothing." I have never known another statement to be so true, so applicable, and yet so unheeded.

I firmly believe that the majority of the people in this country are basically good people. Yet I also believe that too often all these good people "do nothing" about the things going on around them. Part of it, I believe, is the inherent fact that good people are often busy taking care of themselves, their loved ones, earning a living, doing the everyday things that need to be done. And while that is certainly not "doing nothing" it often means that nothing is being done about the big picture around them. And that is the challenge. How to continue to fulfil our obligations while yet still making a difference for good in the larger world?

Human beings are funny things when we get together in groups. We most often try to act like the group, and take our cues from the group as a whole. When the group doesn't seem to have much of an opinion or action, then the group takes its cues from the 1 or more people who actually speak up and/or do something. Then the group tends to adopt that viewpoint or action. Take politics, for example. In politics it is often the obnoxiously loud minority who is heard the most, and therefore sways many of the fence sitters. It is the relatively few people who will gather for a street protest who gain the attention and the political focus. It is the few individuals who show up to caucuses, party meetings, and primary elections who really guide what happens in their parties.

Is that bad? Sometimes it is. Why? Because it is not always a representative sample of the whole. When an opinion poll is taken, in order to get a result that is 100% correct with 100% degree of certainty and no margin of error, you have to sample every single person. But that is hard and expensive. So we take sample sizes, and with mathematical formulas we determine that if we interview a certain number of people, we can be 85% confident that their answer (plus or minus the margin of error percentage) is representative of the whole. However, 15% of the time the answer is different, and not even within the margin of error. And those numbers go up even higher when the sample is a "self selecting" one. That means people choose themselves to be part of the sample group. So what you end up with, politically, is the most vocal people are seen as a representation of the whole, and the silent majority is assumed to be represented by these people.

In today's day and age, our government is HUUUUUUUUGE! It does many things which most of the country's citizens would likely oppose if they got into the details and saw what was actually happening. For example, I just downloaded our current tax code from a government web site, and to print it out would take 8,590 pages. It contains about 3.7 million words! Now honestly, I have yet to meet a single person, regardless of party affiliation, who feels like we actually need an 8,590 page tax code, nor the hundreds of thousands of employees and contractors needed to maintain it, update it, and (most of all) enforce it. Nobody wants a tax code this long, confusing, and in many cases blatantly unfair to some people.

What's the point? We are allowing evil to triumph by doing nothing! Whether it is bad government, bad people, bad media, or whatever, we sit around and do nothing most of the time. We should be anxiously engaged in a good cause, not just assume that we can let that duty fall on others. The elections are coming up next week, many can vote now. Let's all do our homework, look at the MANY candidates and parties (not just 2) out there for president and for the other offices. Let's vote for the one that REALLY represents us. And what's more, let's be active in promoting those things to the others around us.

Paying the Piper

You have a certain debt. You may have thought you knew about the debt. You were most likely wrong. Your personal portion of the debt: $186,667

Are you surprised? Did you honestly think that the current $10 TRILLION dollar national debt was the only government debt we had? Well, you should probably check your figures, because it is closer to $53 TRILLION as of the end of the last fiscal year. That was the sum of our country's public debt, accrued civilian and military retirement benefits, unfunded but promised Social Security and Medicare benefits, and other financial obligations. And that number was as of about a year ago. By now it is probably closer to $56 TRILLION!!



Can we even wrap our heads around how big that is? If you had to give someone a $1 bill every second (24 hours a day, 7 days a week) until you gave them $56 trillion, it would take you 1,775,748 YEARS to give them that much money. By the time you are done, you have enough dollar bills to stack them (flat, like a regular stack of bills) up from the ground to the surface of the moon more than 16 times! And they would weigh (on earth) almost 62 million tons, which is about the same as 637 fully-loaded modern (Nimitz class) US aircraft carriers. Getting a better picture of how big this number is now?

Your portion of that debt (equal for every man, woman, and child in this country): $186,667

Have a family of 4? Congratulations! Your family owes close to $750,000! What an exciting thought!

Yeah... we're in trouble.

The fact of the matter is that we are going to have to pay the piper sometime. As much as we would like it to, debt will not just go away. At least not without massive war and bloodshed. No, it will not go away. We will have to pay the piper every penny, with interest. All of us will. We must get our country's fiscal irresponsibility under control, and we must do it now. Our country is moving towards communism faster than most of us realize or would like to think. Just think how different we are from that bright time not so long ago when our founding fathers liberated us from such government oppression. Oh, how far we have come from those times.

In the last 5 years I have come to the full realization that the more we are in debt as a nation, and the more services we provide for people, the more we give up our personal liberties to do so. We are brainwashed into believing that we must choose 1 of 2 political parties, and that they are vastly different. But in reality, both of those political parties are very similar. Just 2 sides of the same coin.

I have seen enough to know that as a fiscal and social conservative, voting for anyone in either of those parties is just a vote to slide further into socialism and debt. While no political party can ever match a person's beliefs exactly, the two major parties aren't even close to mine. And honestly, I don't think they are the closest match for most people who vote for them. But we have this desire to fit in with the crowd, to be a winner, to vote for a winner. And so we stay with 2 parties, most of us do. It is like the movie "The Matrix" except that instead of being used to power machines, We The People are being used to power other power-hungry people.

I choose to unplug myself from "The Matrix" and to do the hard work necessary to find the political party that most closely matches my actual opinions. And for me, that is the Constitution Party. Their views center around a return to the limited government instituted by the US Constitution, around family values, and fiscal responsibility. I would be willing to bet that in a blind test, if asked to choose between what the Republican party actually does, and what the Constitution party espouses and does, that most of the registered republicans I know would actually choose the Constitution Party viewpoint.

So in the end, I'm going to stick with the only people willing to bring us back to the limited and controlled government that we started out with. I'm voting Constitution Party.

Welcome to the USSA, comrades!

If any of you haven't heard what is going on right now in the financial world and in our government, you must be hiding under a rock. Many firms are losing great deals of money and failing. Our government has been nationalizing these firms, and bailing them out, and giving them money, and all manner of other help. Why? They claim that if the firms fail, it will be too great a burden on the American people.

And honestly, it makes me sick that our government would do that.

Why? Well, there used to be a place called the USSR, the Soviet Union. They were pure communists. Communism one form of socialism and is the polar opposite of free market enterprise. It is the absolute lack of freedom. If you share my theological beliefs, it represents the plan of Satan as opposed to the plan of God. To me, it really is that simple and that evil.

So now our government is spending TRILLIONS (yes, that was a TR, not a B) of dollars to bail these companies out, claiming that it is in the best interest of everyone.

So let's see... for many years all these very smart people at these firms have been taking on a lot of risk, and making a lot of money for it. Now that the risk is coming home to roost, they want to walk away from the risk, dump it on the taxpayers, and still keep the money they made for taking the risk in the first place. That certainly doesn't sound fair to me!

Why should people who play by all the rules, work hard, pay their taxes, work to be self-sufficient, volunteer in their communities, obey all the laws, and only take appropriate risks now have to pay for those who took too much risk and simply don't want to pay for it?

Remember... if you answer that it is for the best common good, you are a socialist. Socialism takes away your choices and basically puts a gun to your head and says, "you will pay your taxes so we can choose what to do with your money, or you will go to jail." Much of the taxes we pay today is just a system of redistributing wealth. Rob from the rich (often known as the people who are smarter, wiser, harder-working, etc) to give to the poor (often known as the people who are lazy, and thus don't improve themselves or work as hard). This isn't like Robin Hood, where the rich stole from the poor in the first place. This is stealing hard-earned income from the people who earned it, to give it to the poor. Socialism.

Do you know what the US national debt is right now? It is almost $10 TRILLION dollars. That means every single man, woman, and child in this country owes over $31,000 thanks to the government. And it is growing rapidly. Every year the interest on that debt is over $400 BILLION dollars. That's over $1300 per man, woman, and child in the US. So my little family of four owes around $125,000 in debt, and accrues $5200 or more in interest payments every year. Oh, and we keep adding to that debt each and every year.

Enough is enough! I just wrote e-mails to my 2 senators and my representative in congress, and voiced my opinion that this bailout must stop, and that we must get our country out of debt, now. I hope you all do the same, because until they hear it from enough people, they won't listen.

On our current path, we will be calling each other Comrade within 30 years, because the government will have to nationalize everything private in the US just to pay its debt and avoid a complete world meltdown. They will say they have to do it to save the world, and that is how this formerly-free land will become the most powerful socialist state in history.

The government needs to let these companies that took the risk and made the money fail. It will be hard on everyone in the country, but we need to let it happen to save our country in the long run. No good parent would let their child run around doing whatever they want without consequences, and no good government should remove people's consequences either. Let them fail, let their creditors fail, let the whole system come down on itself so we can raise a new one from the ashes that actually takes care of itself.

But the politicians like their power, and won't do it.

Welcome to the USSA (United Socialist States of America).

Where To Park Your Cash

A friend of mine called me up today. He asked me about where he could find a better interest rate on money in a bank account. As I work in the financial field, it also reminded me how many of our clients have similar questions, and how many people leave money on the table when it comes to the money in their banks.

A little primer on inflation: Some people actually still hide money "under the mattress" in a place where it accumulates no interest. They are losing money every single day, in a very real way. Due to inflation, the money you have today will be worth slightly less tomorrow. In the US, annual inflation averages around the 3-4% range. So if it is 4% this year, that means that $1,000 today will be effectively worth $961 next year if it just sits under your mattress. It will still be $1,000 if you count it, but will only buy $961 of today's goods. Thus, in order to keep your money's value stable, you need to earn 4% on that money in the next year. Anything less and you'll be losing money, and anything more and you'll be gaining money.

Some countries have terrible inflation problems due to bad policy (usually from dictators or highly corrupt governments). Take a look at this heat map around the world, and you will see what I'm talking about. The worst inflation by far is in Zimbabwe, and it just reached 2.2 million % per year! In other words, if it costs you $1 to buy a loaf of bread today, it will cost you $2.2 million to buy that same loaf of bread next year. And we panic when we get close to 5%... This horrible inflation is a direct result of the country's president, Robert Mugabe, and his corruption and nationalization campaigns for the last 20 years. What was once one of the richest of African nations is now in financial ruins.

Ok, so you need to keep up with inflation as best as you can. But if inflation is at 4%, and your bank's checking account only pays less than 1%, you're losing at least 3% of your money in the bank each year. How do you stop the bleeding?

One option that I like is the direct online savings accounts. Big real banks start online-only branches that give you very little service and have everything done electronically. Thus they avoid buildings, employees, and most all other costs. Then they give you a higher rate on your savings account than in their regular "bricks and mortar" banks. Right now you can get rates between 3% and 3.5% at some of these online savings accounts. They have links to your regular bank account and you transfer money back and forth as you wish. They typically have no fees, no minimums, and no restrictions.

If you want to look at a few for reference, try www.ingdirect.com, www.emigrantdirect.com, and www.hsbcdirect.com. And if you want to keep at least $1,000 in as a minimum, you can get a little higher rate at www.dollarsavingsdirect.com, which is also owned by Emigrant Bank. Make sure that where ever you put your money it is FDIC insured in case a bank implodes, and always read all the fine print when it comes to putting your money anywhere.

Rankings Or Popularity Contest?

Anyone who knows me could tell you that I am a competitive person by nature. I also enjoy watching others compete. And one thing I love to watch is college football! Unfortunately, every year there are big disagreements between many people about the rankings of those teams, and which teams should be ranked higher than others. No real good answers have been put into effect, as the ongoing (and often heated) argument proves. Currently, college football teams are ranked weekly by 2 major polls, one voted in by members of the associated press, the other by college football coaches. But this presents problems.

Ranking polls and thus all the systems that rely on them (the BCS rankings in part) are inherently flawed due to human nature, greed, a team's viewability, a team's history, and more. Coaches have absolutely no incentive to cast votes in the most accurate and uniform manner, and neither does the press for that matter.

A possible solution to rankings of teams uses one of these very weaknesses in the current system (greed) as the method of really deciding how well a team played each week. And thus, collectively, how it has performed throughout the season. How? Use people with "skin in the game" so to speak: bookmakers. Every week, bookmakers around the world put odds on NCAA football games. All the best odds makers in the world typically zero in on a certain spread, over/under, etc. If they're right, they make money, if they're wrong by much (cumulatively) they'll lose their shirt. So they have a vested interest in getting the spreads as close as possible to the correct result.

So how do we use this? No pre-season polls, first of all. All teams start equally ranked. Before each game, its official spread is locked in. If a team beats its spread (win or lose), it gets bonus ranking points. If it doesn't equal its spread, it loses bonus ranking points. The more it beats the spread by, the more bonus points it gets, and vice-versa. Rankings are then decided simply by team record, with the tiebreaker being how many bonus ranking points each team has. Thus, after week 1, roughly half the teams will be 1-0, and the other half will be 0-1. No 0-1 team will rank higher than any 1-0 team, and the top ranked team will be the 1-0 team with the largest number of bonus ranking points (ie the team that beat its spread last week by the most points). This will incentivize both teams to play hard for the entire 60 minutes of the game.

Of course, you may say, "Wait, would this kind of system entice strong teams to schedule a bunch of pansies, and also penalize teams in supposedly "strong" conferences?" A valid concern indeed. And one that can easily be addressed with one additional numerical modifier. It could be called a "strength of schedule" modifier, much like the one which has been used in the BCS system. For example, the combined winning percentage of all your opponents could constitute the modifier. We just need to get people to sit down and work out the math, and try to take into account all variables.

Sure it has its potential problems, but it is a start. And breaking the status quo is the only way that many great teams and players out there will ever be able to compete (in the rankings) on a level playing field.

Emergency Essential: The Rechargeable Lantern

Last year we had a power outage of several hours, due to a fire on a nearby mountain. I decided to drive to a store that still had power and look for a lantern. Lo and behold, what I found turned out to be one of the best emergency preparedness items we now have in our inventory: A great emergency lantern! OK, maybe that doesn't sound too exciting, but stick with me here.

This lantern has multiple ways to be powered: You can plug it into a regular outlet, plug it into your car, you can put in 3 AAA batteries, or you can charge the internal battery with the hand crank.

What do you get out of it? You can get a nice amount of light off the 20 LEDs, and that light is somewhat adjustable with a dimmer built into the switch. It can also flash a red light to signal for help. It has a built-in AM/FM radio and antenna, and even allows you to use the internal battery (and the crank) to power or charge devices like your cell phone or other small DC devices. All you have to do is buy an inexpensive set of DC conversion jacks somewhere like Radio Shack, and then make sure you have whatever your device requires for charging, and you're set. It has a nice handle, with a hook to easily get it up high where it can brighten a large area.

For less than $40 to get a new one, it is a great item for your emergency kit, or even for camping. It is the Garrity 20 LED Rechargeable Crank Lantern, but there are several companies that make similar ones. I'd give it an 8 on a 1-to-10 scale (which is really high for me) and would highly recommend it to anyone.

A Bright Future For Solar

Much hype has surrounded renewable energy solutions, especially in recent years. But still, the problems with these renewable sources center on expense. They produce power in a way that is just not cost-competitive with fossil fuels.

However, that may be about to change. A California company, Nanosolar, says it has found a way to produce solar cells so cheaply that they can compete with coal. Their technology uses thin-film solar technology, which does away with expensive and bulky silicon, and centers around being able to print these cells (made of a concoction of metals and nano-particles on a foil backing) much like a printing press prints newspapers. They have already sold out all their manufacturing capacity for the next year, and in doing so will become the biggest solar manufacturer in the US.

Some of the richest people on the planet have invested in the firm. And if the technology turns out to be even half as good as they say it is, those people will become much, much wealthier. But it is exciting for all of us peons as well. Soon this technology will be available to anyone, to use on their home. Or even as part of the building materials themselves, such as roofing or siding for homes. Such a huge leap forward could do much to move us towards energy independence and cleaner air in our cities. I, for one, hope Nanosolar is a wild success, and that we can all soon enjoy the benefits of cheap renewable energy.

Cars that drive themselves?

Have we finally reached the point where cars might actually be able to drive themselves, with little or no input from their passengers? It has long been the stuff of science fiction and movies (as in the Tom Cruise film The Minority Report), and has been whispered about in recent years by many scientists and engineers. But now General Motors has come right out and said that they want to make this happen in a decade.

Now, I don't know about you, but most of the time, I am in a car because I want to get to somewhere else, not because I want to be in my car. And if I have to spend my time in the car, I would sure love to be able to take a nap, or read a book, or work on a laptop. But of course, that's not possible for drivers today, and most of us can't afford to hire a driver to shuttle us around. So the idea has a good deal of appeal to me.

There are of course many hurdles, not the least of which are technical in nature. Driving a vehicle really is a very complicated task. A person needs to continuously calculate their speed relative to a myriad of objects around them. They have to respond quickly to unexpected situations in which there are many variables to consider. So getting a computer to see and do all this is no small task. Then there are the legal questions of what happens if a car gets into a wreck when it is driving, etc.

But I for one am excited for the day I can spend my driving time doing something more important or enjoyable. I think the first systems will take care of the driving only on the freeways. But hey, for me that's a great start. When a 1-hour freeway drive can become a 1 hour nap, I'll be a happy camper.


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