Gang-
Here is a GREAT article that explains in real basic terms many of the events at AIG that got us into this financial mess. It is written by Matt Taibbi of Rolling Stone Magazine. There is some R-rated language (the sixth word begins with an "F") and some analogies that could be offensive to some, but if you can get past all of that, it proves to be an excellent analysis. And a great novel too - if it all were not so real.
Financial Organizer sales at Juggling Ducks have been going great - thanks to all of you who have supported our objective to help people dig out of the financial mess!
JM
http://www.rollingstone.com/politics/story/26793903/the_big_takeover
Sunday, March 29, 2009
Saturday, March 7, 2009
Jimmy's Story: How we got here and what to do about it!
Here is a little analogy that came to me this week while I was listening to someone talk about the economy....
Take the case of Jimmy who graduates high school or college and sets out on his own. He gets a job and starts a family. Like everyone else, he pursues the American dream - a house, a boat, a motorcycle, regular trips to Disney, etc etc etc. He doesn't always have the cash to pay for these things, but credit card companies are more than willing to lend him the cash - at 25% interest rates, of course. Jimmy doesn't know that the interest rate is 25% - he just sees a low minimum monthly payment. So he has no clue that his $10,000 credit card balances are costing him upwards of $2,500 per year. But times are good - he has a job - so the future will take care of itself.
Flash forward....the economy enters a recession and Jimmy loses his job. He doesn't have much of an emergency fund, and he still has to make payments on his mortgage, as well as pay for all of those trips, gifts, and motorcycles he bought over the last 20 years. As he starts to fall behind, he turns to his parents for money. His parents take pity on their son, and attempt to "solve the problem" by lending him money. But Jimmy is addicted to his lifestyle, so he continues to rack up credit card bills even though he is getting an cash infusion from his parents.
Now, what Jimmy does NOT know is that his parents are actually in worse financial shape than him. They too have been racking up huge amount of debt over the past 25 years. Except they do not have any family members to borrow from. So they have turned to, let's just say, some "non-friendlies" who certainly don't have their best interests at heart. Up to now, these "unfriendlies" have been willing to lend money to mom and dad at reasonable interest rates, but now mom and dad need more money, and the interest rate has started to go up, making it even harder for mom and dad to make the payments.
Jimmy promises to pay mom and dad back their money "someday", but that will be very difficult so long as Jimmy does not have a job and won't alter his lifestyle. That is going to put mom and dad in an even harder spot, and it is likely that their lenders may not be so understanding (consult 1920's and 30's Chicago for examples of potential consequences).
Relating this back to today....Jimmy represents all of the American consumers who have spent the last 25 years incurring huge amounts of debt to finance their consumption. Mom & Dad represent the Federal Government who, like us, have spent the last 25 years incurring debt. The "unfriendlies" represent foreign governments - many of whom are at least partially hostile to the US - that have been lending the government money to finance its borrowing.
The American consumer entered this recession in pretty bad shape - the average credit card debt per household was over $10,000. Now, close to 10% of the workers are unemployed, and everyone is looking to the Federal Government to help them out. The federal government is going to borrow more money, mostly from foreign governments, to pay for it. Connect the dots.
What does this mean for us? Use the recession as an opportunity to take control of your money.
1. If you have debt, develop a plan to pay it off. Make a list of all of your credit card balances and loans, as well as the interest rates associated with each. Start by paying off the cards with the highest interest rates and work your way down the list.
2. If you are largely debt free, save more - build an emergency fund.
3. If you have been lax about managing your cash flow, use the recession as an opportunity to align your income and expenses so that you are saving money on a monthly basis.
If you need help doing this, please visit the Juggling Duck web site at http://www.jugglingducks.com/. We have a simple, easy-to-use solution that will step you through the process of taking control of your finances. I guarantee that it will help you.
-JM
Take the case of Jimmy who graduates high school or college and sets out on his own. He gets a job and starts a family. Like everyone else, he pursues the American dream - a house, a boat, a motorcycle, regular trips to Disney, etc etc etc. He doesn't always have the cash to pay for these things, but credit card companies are more than willing to lend him the cash - at 25% interest rates, of course. Jimmy doesn't know that the interest rate is 25% - he just sees a low minimum monthly payment. So he has no clue that his $10,000 credit card balances are costing him upwards of $2,500 per year. But times are good - he has a job - so the future will take care of itself.
Flash forward....the economy enters a recession and Jimmy loses his job. He doesn't have much of an emergency fund, and he still has to make payments on his mortgage, as well as pay for all of those trips, gifts, and motorcycles he bought over the last 20 years. As he starts to fall behind, he turns to his parents for money. His parents take pity on their son, and attempt to "solve the problem" by lending him money. But Jimmy is addicted to his lifestyle, so he continues to rack up credit card bills even though he is getting an cash infusion from his parents.
Now, what Jimmy does NOT know is that his parents are actually in worse financial shape than him. They too have been racking up huge amount of debt over the past 25 years. Except they do not have any family members to borrow from. So they have turned to, let's just say, some "non-friendlies" who certainly don't have their best interests at heart. Up to now, these "unfriendlies" have been willing to lend money to mom and dad at reasonable interest rates, but now mom and dad need more money, and the interest rate has started to go up, making it even harder for mom and dad to make the payments.
Jimmy promises to pay mom and dad back their money "someday", but that will be very difficult so long as Jimmy does not have a job and won't alter his lifestyle. That is going to put mom and dad in an even harder spot, and it is likely that their lenders may not be so understanding (consult 1920's and 30's Chicago for examples of potential consequences).
Relating this back to today....Jimmy represents all of the American consumers who have spent the last 25 years incurring huge amounts of debt to finance their consumption. Mom & Dad represent the Federal Government who, like us, have spent the last 25 years incurring debt. The "unfriendlies" represent foreign governments - many of whom are at least partially hostile to the US - that have been lending the government money to finance its borrowing.
The American consumer entered this recession in pretty bad shape - the average credit card debt per household was over $10,000. Now, close to 10% of the workers are unemployed, and everyone is looking to the Federal Government to help them out. The federal government is going to borrow more money, mostly from foreign governments, to pay for it. Connect the dots.
What does this mean for us? Use the recession as an opportunity to take control of your money.
1. If you have debt, develop a plan to pay it off. Make a list of all of your credit card balances and loans, as well as the interest rates associated with each. Start by paying off the cards with the highest interest rates and work your way down the list.
2. If you are largely debt free, save more - build an emergency fund.
3. If you have been lax about managing your cash flow, use the recession as an opportunity to align your income and expenses so that you are saving money on a monthly basis.
If you need help doing this, please visit the Juggling Duck web site at http://www.jugglingducks.com/. We have a simple, easy-to-use solution that will step you through the process of taking control of your finances. I guarantee that it will help you.
-JM
Thursday, March 5, 2009
Do better than Congress
Great editorial today from Maureen Dowd in the NY Times entitled "Stage of Fools." It talks about how John McCain of Arizona had proposed an amendment "that would have shorn 9,000 earmarks worth $7.7 billion from the $410 billion spending bill", including things like:
- $2.1 million for the Center for Grape Genetics in New York.
- $1.7 million for a honey bee factory in Weslaco, Tex.
- $1.7 million for pig odor research in Iowa.
- $1 million for Mormon cricket control in Utah.
- $819,000 for catfish genetics research in Alabama.
- $650,000 for beaver management in North Carolina and Mississippi.
- $951,500 for Sustainable Las Vegas. (McCain, a devotee of Vegas and gambling, must really be against earmarks if he doesn’t want to “sustain” Vegas.)
- $2 million “for the promotion of astronomy” in Hawaii, as McCain twittered, “because nothing says new jobs for average Americans like investing in astronomy.”
- $167,000 for the Autry National Center for the American West in Los Angeles. “Hopefully for a Back in the Saddle Again exhibit,” McCain tweeted sarcastically.
- $238,000 for the Polynesian Voyaging Society in Hawaii. “During these tough economic times with Americans out of work,” McCain twittered.
- $200,000 for a tattoo removal violence outreach program to help gang members or others shed visible signs of their past. “REALLY?” McCain twittered.
- $209,000 to improve blueberry production and efficiency in Georgia.
When you consider that the federal budget ends with a "T" for trillions ("why have billions when you can ..... trillions?"), these line items are chump change. And perhaps that is why the Senate resoundingly rejected McCain's proposal.
Before we criticize Congress for not making hard choices, perhaps we need to look at our own spending. For better or for worse, Congress *has* a budget; it is bleeding red, but at least they know where the money is going. Which begs the question do you have a budget? Do you know how much money you are bring in, how much you are spending, and how much you expect to have left over each month? And if you do have a budget, have you been able to identify the "pork" in your own budget - the household equivalents of Mormom cricket control, beaver management, and blueberry efficiency measures? Are there things you are spending money on that perhaps you should not be in this recession?
Let's face facts - no one wants to spend their time building a budget, in the same way that no one wants to watch what they eat or wake up at 5 am to work out at the gym before work. But the fact is, those that do these things typically have a better quality of life. So if you don't have a budget or spending plan, perhaps it is time to build one. If you need help doing so, the Juggling Duck Financial Organizer has an entire section devoted to building a budget and, more importantly, sticking to a budget. Feel free to check it out!
Monday, February 16, 2009
Pitchers and Catchers Report!
The weekend marked the first passage of spring here in the New York metropolitan area - NY Yankee pitchers and catchers reported to Spring Training! We are 6 weeks away from baseball season!
I am a Yankee fan. And not one of those bandwagon hopping fans that jumped aboard in the 1996-2000 World Series runs. I go back to 1976 when my friend, neighbor, and childhood idol ("Bobby W.") declared that my early allegiance to the NY Mets was irrational (I believe the phrase was "the Mets stink; you like the Yankees"). And the rest was history - I immersed myself in Yankee culture and Yankee lore. Whenever my family took trips, I secretly tried to route my dad through the South Bronx so I catch a glimpse of Yankee Stadium up close. (I don't think I ever succeeded in tricking him). My dad, who was never a baseball fan, finally took me to game on 7-7-1977 against the Cleveland Indians, which they won 8-2. Lou Piniella hit a two-run home run in the 5th and Catfish Hunter got the win. I also remember one of my best friends ("Mara P") throwing my Yankee hat out the bus window on a school field trip later that year; I only recently recovered psychologically. (She *said* it was an accident <--Joke. Note: Mara bought me a new hat with what little she had in her allowance which, ironically, is probably the 4th grade equivalent of mustering up the cash to take your kids to a Yankee game...read on!)
I still remember walking into "The Stadium" that night - I'll never forget the green grass, the smell of hot dogs, and the crack of the bat as Munson and Reggie took batting practice. It was a great memory, and one that I look forward to sharing with my four boys.
So with baseball season right around the corner, I decided to look into tickets for the new Yankee Stadium for me, my wife, and three of my four boys who will be 9, 6, 4 this summer. *Decent* seats (mid-tier loge) for Yankee Stadium are $70. So, let's do the math:
Me/wife + 3 kids = 4 x $70 = $280
Parking = $ 50
Hot Dogs = 9 x $8 = $ 72
Soda/Milk/juice (5x2x$5) = $ 50
Other snacks = $ 20 (It's a long game)
Souveniers = $ 75
Babysitter for #4 = $ 0 (parents)
-------------------------------------------------
Total = $ 542
That's a lot of dough....and imagine blowing $542 on a 10-2 losses to the Kansas City Royals on a cold, rainy April day in the Bronx.
So I think my dream will be put on hold for a couple of years. I can take my kids to 5-10 minor league games for that price, and the games run a lot shorter too. I have no idea who buys these tickets, but it leads me to believe that there is a lot of money in the world, and I have none of it. :-)
Visit us at http://www.jugglingducks.com
I am a Yankee fan. And not one of those bandwagon hopping fans that jumped aboard in the 1996-2000 World Series runs. I go back to 1976 when my friend, neighbor, and childhood idol ("Bobby W.") declared that my early allegiance to the NY Mets was irrational (I believe the phrase was "the Mets stink; you like the Yankees"). And the rest was history - I immersed myself in Yankee culture and Yankee lore. Whenever my family took trips, I secretly tried to route my dad through the South Bronx so I catch a glimpse of Yankee Stadium up close. (I don't think I ever succeeded in tricking him). My dad, who was never a baseball fan, finally took me to game on 7-7-1977 against the Cleveland Indians, which they won 8-2. Lou Piniella hit a two-run home run in the 5th and Catfish Hunter got the win. I also remember one of my best friends ("Mara P") throwing my Yankee hat out the bus window on a school field trip later that year; I only recently recovered psychologically. (She *said* it was an accident <--Joke. Note: Mara bought me a new hat with what little she had in her allowance which, ironically, is probably the 4th grade equivalent of mustering up the cash to take your kids to a Yankee game...read on!)
I still remember walking into "The Stadium" that night - I'll never forget the green grass, the smell of hot dogs, and the crack of the bat as Munson and Reggie took batting practice. It was a great memory, and one that I look forward to sharing with my four boys.
So with baseball season right around the corner, I decided to look into tickets for the new Yankee Stadium for me, my wife, and three of my four boys who will be 9, 6, 4 this summer. *Decent* seats (mid-tier loge) for Yankee Stadium are $70. So, let's do the math:
Me/wife + 3 kids = 4 x $70 = $280
Parking = $ 50
Hot Dogs = 9 x $8 = $ 72
Soda/Milk/juice (5x2x$5) = $ 50
Other snacks = $ 20 (It's a long game)
Souveniers = $ 75
Babysitter for #4 = $ 0 (parents)
-------------------------------------------------
Total = $ 542
That's a lot of dough....and imagine blowing $542 on a 10-2 losses to the Kansas City Royals on a cold, rainy April day in the Bronx.
So I think my dream will be put on hold for a couple of years. I can take my kids to 5-10 minor league games for that price, and the games run a lot shorter too. I have no idea who buys these tickets, but it leads me to believe that there is a lot of money in the world, and I have none of it. :-)
Visit us at http://www.jugglingducks.com
Friday, February 13, 2009
A-Rod and the Economy
Two big stories this week - A-Rod took steroids and the Obama administration got their stimulus bill passed. How are these related?
So A-Rod had a secret - he was juicing. A reporter named Selena Roberts uncovered the evidence and went to press. So how did A-Rod deal with the crisis? He immediately went public and got all of the bad news on the table: yes, he took steroids; he took them from 2001-2003; he was stupid to do them; he has been clean since '04. (Hopefully he is telling the whole truth here). It is not yet known how long A-Roid will remain a story, but it should be considerably less than the steroid allegations surrounding Barry Bonds and Roger Clemens who, despite a mountain of credible allegations, have refused to come clean and are now facing jail time.
Moral of the story....if you have some bad news to tell, get it out there.
So let's talk about our economy....One of the positive impacts of a recession is that it provides the opportunity for all constituents to air their bad news all at once. For all of you Catholics out there, it's kind of like the sacrament of reconciliation; tell the priest all of your sins, express sorrow, and your sins are forgiven and you move on with your life, hopefully a better person.
Unfortunately, despite waves and waves of bad news over the past 4 months (feels like 4 years), we still have not gotten all of the bad news on the table from the most important player in the economy - the banking sector. This week we had CEO's from all of the major US banks in Washington, fresh off paying billions in "performance" bonuses to their management teams for posting combined losses of over $100 billion in the fourth quarter alone (imagine what they would have earned if they did a *good* job). For all that was said in the sessions, the one thing that was not said - but seems to be understood - is that no one knows how bad the problem in the banking sector really is. (The Bank of America CEO was supposedly blindsided by the $15B fourth quarter loss at Merrill Lynch, the company he had just acquired).
This week, the Obama administration pushed through an $800 billion stimulus package. The big question is whether it is enough to jumpstart the economy. Most economists, including Nobel prize winner Paul Krugman, agree that it will come up woefully short (see link below). You get the sense that those people in the know do not want want to go public with a number that quantifies the extent of the problem. To me, that either means that (1) they have no clue how big the problem really is or (2) the problem is so big that they don't want to cause mass panic.
Either way, it does not make you feel optimistic about where we headed.
Visit us! http://www.jugglingducks.com
So A-Rod had a secret - he was juicing. A reporter named Selena Roberts uncovered the evidence and went to press. So how did A-Rod deal with the crisis? He immediately went public and got all of the bad news on the table: yes, he took steroids; he took them from 2001-2003; he was stupid to do them; he has been clean since '04. (Hopefully he is telling the whole truth here). It is not yet known how long A-Roid will remain a story, but it should be considerably less than the steroid allegations surrounding Barry Bonds and Roger Clemens who, despite a mountain of credible allegations, have refused to come clean and are now facing jail time.
Moral of the story....if you have some bad news to tell, get it out there.
So let's talk about our economy....One of the positive impacts of a recession is that it provides the opportunity for all constituents to air their bad news all at once. For all of you Catholics out there, it's kind of like the sacrament of reconciliation; tell the priest all of your sins, express sorrow, and your sins are forgiven and you move on with your life, hopefully a better person.
Unfortunately, despite waves and waves of bad news over the past 4 months (feels like 4 years), we still have not gotten all of the bad news on the table from the most important player in the economy - the banking sector. This week we had CEO's from all of the major US banks in Washington, fresh off paying billions in "performance" bonuses to their management teams for posting combined losses of over $100 billion in the fourth quarter alone (imagine what they would have earned if they did a *good* job). For all that was said in the sessions, the one thing that was not said - but seems to be understood - is that no one knows how bad the problem in the banking sector really is. (The Bank of America CEO was supposedly blindsided by the $15B fourth quarter loss at Merrill Lynch, the company he had just acquired).
This week, the Obama administration pushed through an $800 billion stimulus package. The big question is whether it is enough to jumpstart the economy. Most economists, including Nobel prize winner Paul Krugman, agree that it will come up woefully short (see link below). You get the sense that those people in the know do not want want to go public with a number that quantifies the extent of the problem. To me, that either means that (1) they have no clue how big the problem really is or (2) the problem is so big that they don't want to cause mass panic.
Either way, it does not make you feel optimistic about where we headed.
Visit us! http://www.jugglingducks.com
Saturday, February 7, 2009
Tips Meant for the Waist, but Perfect for the Pocket
Gang-
This article appeared in today's New York Times. It hits on a topic that I will now refer to as "Mruz's Theorem" (because if it gets picked up, perhaps I could make a bundle on it :-) ). For you non-geeks out there, I refer to it as a "theorem" because it has not been proven as an absolute truth - in which case I would call it Mruz's Axiom - but there does seem to be enough evidence and hearsay to justify the statement).
Mruz's Theorem :-) says this: The amount of money you have is inversely proportional to your waistline. ("Inversely proportional" means an opposite relationship - i.e. the heavier you are, the less you have).
Now, BEFORE I get comments back about being insensitive, let me be clear about something. I do NOT subscribe to the belief that being tall, handsome, rich and thin is the model for happiness and success in life - just look at the celebrity trainwrecks in People Magazine to disprove that myth.
So hear me out. RATIONALLY, we all know that it is healthier and, therefore, better for us to be in shape than out of shape. We also know that, given the choice, we all would like to have more money if, for no other reason, to have greater security in down times. These are both RATIONAL thoughts. And indeed, if we all always acted rationally, everyone would be at their ideal body weight with normal blood pressure, normal triglyceride/cholesterol counts, with 6 months of cash in the bank in the event we get laid off.
But for the vast majority of people, this is not the case. Why? Because there are these exciting, wonderful inventions called cakes, pies, cookies, and soda that serve as our reward for getting through a bad day, or perhaps give us something to look forward to during an otherwise boring period in our life (hence the name "comfort food"). On the money side, there are these things called clothes, shoes, DVDs and electronic gadgets which serve the same purpose (without the calories).
Food and shopping serve the same purposes: they give us something to do (eat, shop), they bring some excitement to our lives (new things), and let's not ignore the social aspects - it is far more fun to eat and shop with other people. They also have an EMOTIONAL component to them that often overrides the RATIONAL. If our emotions go unchecked, these activities can have some very harmful side effects - excessive eating destroys our health and excessive shopping makes us broke. And worse, these behaviors can be addictive.
[Fact: Sugar is more addictive than nicotine. Okay you got me...I don't know if this is a medical fact, but try this experiment. Go eat a cookie right now. Wait 30 seconds...do you want another cookie? Experiment 2: Take a sip or two of your favorite soda (Coke, Pepsi, whatever)....put the soda down on the other side of the room. Wait 30 seconds....do you want another sip of soda? Test your willpower - how many sips of soda will you take before you spill the rest of the can down the drain?]
Look at yourself as a train. Your emotions represent the engine that drive you faster and faster; left unchecked, you are a runaway train (i.e. spending and/or eating out of control). Your rational side represents the signaling lights on the side of the track - it tells the train to slow down so it doesn't derail and drive off a cliff. What people refer to as "self-discpline" is about training ourselves to listen to our rational side - the control mechanism that cools our emotional engine and prevents us from "super sizing" our fast food and purchasing a $2,000 fondue maker.
Which comes back to the point of this article: managing your eating and managing your money requires the same skills in self-discipline. You need to train your rational side to stymie the emotional side The article gives a number of ideas to help you do both.
Enjoy!
http://www.jugglingducks.com/
This article appeared in today's New York Times. It hits on a topic that I will now refer to as "Mruz's Theorem" (because if it gets picked up, perhaps I could make a bundle on it :-) ). For you non-geeks out there, I refer to it as a "theorem" because it has not been proven as an absolute truth - in which case I would call it Mruz's Axiom - but there does seem to be enough evidence and hearsay to justify the statement).
Mruz's Theorem :-) says this: The amount of money you have is inversely proportional to your waistline. ("Inversely proportional" means an opposite relationship - i.e. the heavier you are, the less you have).
Now, BEFORE I get comments back about being insensitive, let me be clear about something. I do NOT subscribe to the belief that being tall, handsome, rich and thin is the model for happiness and success in life - just look at the celebrity trainwrecks in People Magazine to disprove that myth.
So hear me out. RATIONALLY, we all know that it is healthier and, therefore, better for us to be in shape than out of shape. We also know that, given the choice, we all would like to have more money if, for no other reason, to have greater security in down times. These are both RATIONAL thoughts. And indeed, if we all always acted rationally, everyone would be at their ideal body weight with normal blood pressure, normal triglyceride/cholesterol counts, with 6 months of cash in the bank in the event we get laid off.
But for the vast majority of people, this is not the case. Why? Because there are these exciting, wonderful inventions called cakes, pies, cookies, and soda that serve as our reward for getting through a bad day, or perhaps give us something to look forward to during an otherwise boring period in our life (hence the name "comfort food"). On the money side, there are these things called clothes, shoes, DVDs and electronic gadgets which serve the same purpose (without the calories).
Food and shopping serve the same purposes: they give us something to do (eat, shop), they bring some excitement to our lives (new things), and let's not ignore the social aspects - it is far more fun to eat and shop with other people. They also have an EMOTIONAL component to them that often overrides the RATIONAL. If our emotions go unchecked, these activities can have some very harmful side effects - excessive eating destroys our health and excessive shopping makes us broke. And worse, these behaviors can be addictive.
[Fact: Sugar is more addictive than nicotine. Okay you got me...I don't know if this is a medical fact, but try this experiment. Go eat a cookie right now. Wait 30 seconds...do you want another cookie? Experiment 2: Take a sip or two of your favorite soda (Coke, Pepsi, whatever)....put the soda down on the other side of the room. Wait 30 seconds....do you want another sip of soda? Test your willpower - how many sips of soda will you take before you spill the rest of the can down the drain?]
Look at yourself as a train. Your emotions represent the engine that drive you faster and faster; left unchecked, you are a runaway train (i.e. spending and/or eating out of control). Your rational side represents the signaling lights on the side of the track - it tells the train to slow down so it doesn't derail and drive off a cliff. What people refer to as "self-discpline" is about training ourselves to listen to our rational side - the control mechanism that cools our emotional engine and prevents us from "super sizing" our fast food and purchasing a $2,000 fondue maker.
Which comes back to the point of this article: managing your eating and managing your money requires the same skills in self-discipline. You need to train your rational side to stymie the emotional side The article gives a number of ideas to help you do both.
Enjoy!
http://www.jugglingducks.com/
Thursday, February 5, 2009
Spending the recession at Disney World
From The Onion:
"One of the first things I like to do during an economic downturn is pack my suitcase, get in the car, and drive to Epcot Center to see what the economy will be like in the future."
"One of the first things I like to do during an economic downturn is pack my suitcase, get in the car, and drive to Epcot Center to see what the economy will be like in the future."
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