Business advice

The California legislators have run amuck
April 22, 2009, 6:05 am
Filed under: Blogroll, Business Advice

Stop hurting the little people.  Things will not go right.  I’m sure the pressure of the ongoing budget crisis has pushed their reasoning powers to the limit.  The latest article on the issue was front page news April 14 in the Sacramento Bee.

The time it is not only SSI disbursement but what is allowed under Medi Cal.  They are talking about taking out our trips to the eye doctor and the dentist.  This is a very big part of life for those who will go without if this is removed.

The percentage of monthly checks this time around is 2.3 percent.  In case you are not up-to-date on the issue, there is already one cut scheduled for May 1.  Yes I, too, am a SSI recipient.  However, my monthly disbursement is now divided between retirement benefits and the disability fund.  Translated, this means the cut for me is smaller.

The example used in the Bee talked of a man who was going to lose more than $20 a month and for him that was a big thing.  For me, that’s a week’s worth of groceries.

It isn’t easy earning SSI benefits.  It can be a fight that lasts two or three years; and now, we find out the fight isn’t over yet.

Now, this isn’t the whole picture.  When it comes to who is cutting what, I always turn the California State Controller’s website: .  According to a small piece on the homepage, California has enough money to pay its bills for the rest of the year.  Ok, so what’s going on?  I have found conflicting information more than once on this site.  If anyone knows, they aren’t talking.

Now, let’s get realistic about the budget issue.  There are only so many cuts one can make and continue to have a budget work at all.  If cutting allowances was the answer, the budget crisis would have been over years ago.  It’s time to start thinking more realistically.  The biggest contributor to any state’s budget is the businesses that call the state home.  California hasn’t been a friendly place for business for years.  All you have to do is look at any Chamber of Commerce’s roster of businesses and see how many were there five or ten years ago. I am talking about increasing revenue.

It is simple: start a committee whose sole purpose is to seduce businesses back to the state.  I don’t care what it takes.  Promise them no taxes for six months.  It doesn’t matter.  More business means more jobs; more production; more sales tax; more buying and a large increase in the state’s GDP.  It means that things, economically speaking, will improve and show the rest of the world how to conqueror a budget problems.  Cuts only work in the short run.  What I am proposing will change the long run picture and the positive effects will be here long after the current state legislators have retired and turned the reins over to the next bunch.

In the meantime, stop picking on the little guy.  It’s a shame and it should embarrass those currently in office.  How are they going to explain themselves to any parents or relatives who are on SSI?  This whole pattern needs to be revamped.


Laura Bell



Let’s look at the 30s compared to our current economic state
January 21, 2009, 6:25 pm
Filed under: Blogroll, Business Advice

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Let’s look at the 30s and our current economic state

Are we going down farther than we already are? Even though I couldn’t find a reference to farmers burning their crops during that time on the Web, they did. When they couldn’t get any money at all for their hard work, they set their crops on fire. They did hold onto corn since it could be used as fuel. If markets go down so far, then the goods are either handed over or destroyed. That is what we are seeing. The reins of corporations are changing. Let’s hope other businesses, like Enron aren’t abandoned and closed completely. Those who held the reins violated the principle of economic efficiency. If you don’t use those resources to run a profitable business, you lose them.

Hopefully, we wouldn’t get to that point during this downturn. We don’t want to see people burning their homes in lieu of turning them over the sheriff when they come calling.

There is much talk about how Obama is going to jumpstart the economy either via tax cuts or another private economic stimulus package. This is short term money dealing with day-to-day expenses and purchases. We have much bigger problems to churn over.

We had an economy that was running on hot air, sort to speak. It was all based on the premise that prices and value would continue to go up. If value, on real property, durable goods and the stock market, continued then escalating prices would continue. Someone came up with the idea that we needed business plans. Inherent in this concept is that sales will increase dramatically. A limited article on Wkipedia pointed out how much trouble that caused during the explosion. New business owners all envisioned tons of money coming their way. When it didn’t happen, problems; well, you know the story.

Ok, everything, price wise doesn’t go up by large percentages. The price of homes in the 50s rose only about 10k by the end of the decade for the medium range. Prices were stable. There were no inflation worries and we had few sources of credit in that time. We didn’t need them. Stable wages and stable prices make for a happy group of people. No one had informed us yet that we should buy things, other than homes and cars, and pay for them later.

To keep an economy going with the constant use of credit, there has to be a belief that salaries, values and prices will continue moving up into the stratosphere. We also need a population of consumers willing to go along with this vision. All this is to say that we have seen the end of unheard of rise in the value of real property. There is more to this than just real estate. The value of autos has to be also included. I have a feeling that car dealers are going to be about as popular as someone selling sand on a beach. The value on this product is decreasing, and the terms of the alleged dealers are getting more sleazy as the days goes buy. I have seen commercials by a guy hawking cars in the greater Los Angeles area with the promise of selling to anyone for a $95 down payment.

Times aren’t even going to be back where we were even with the promise of tax breaks and more refund checks. Those promises only deal with the short term. They say nothing about the other values we have discussed here. It also doesn’t deal with the fact that businesses are still caught up in the track of projecting gigantic increases in sale volumes. That’s how they were able to pull in investors. If things got, better, than everyone gets paid off, big checks and everyone is smiling. Sales projections are going to have be downsized for future projections.

Ok, what’s next and how are we going to deal with it? The biggest problem in my humble opinion will be acceptance. Can we deal with the idea that things are not going to back seeing the profits that we did with flipping houses, etc.? This is not to say that those folks will die out. There will be a smaller amount of folks trying to make a profit in this market niche. Profits will also diminish in other market niches.

Everything will be in disarray for quite awhile. There is really only one way to deal with all this rationally, one step at a time. Plans for spending, housing, employment and business expansion need to be looked at in a while new manner. Look at what you can afford today with the realization that there may never be more money in the future. There may not be raises coming down the tube. Businesses may continue to shrink. Sales may stay stable, no new growth, at least for quite awhile. Do not make a move in any part of your financial life that will ask for money you may or may not have down the road.

Keep your eyes on the economic forecasts and ongoing changes in the economy. Keep yourself informed like it was a matter of life or death. And, it is, your financial life.

Change is still coming in big waves. Exactly what and how is anyone’s guess until the new president has a chance to settle in.


How does the government mess with the economy?
December 28, 2008, 7:47 am
Filed under: Blogroll, Business Advice | Tags: , ,

We have all heard that our credit problems are because of the government. I don’t think so. Prior to the depression, the government’s attitude towards the economy (aggregate market), was to leave it alone. We all know the results.

Now we have a government that uses fiscal policy (public spending) to adjust the economy. If you have never heard of this, simply Google the term and you will get a brief definition. Previous to the government spending aspect, the only way governments could get money if they needed it was either taxation or seizure of private property.

Fiscal policy/government spending is a tool used by the Federal government. You know the government allocates a good portion of money every year to government contracts. If all this was left to the private sector, things would be worse than they are. Now, I am not saying that I endorse the way the government awards contracts. I’m just saying that they do.

They also have the right to either lower or raise taxes and institute new ones if they are able to get such a law through Congress.

The other side of this coin is monetary policy. Monetary policy refers to how the Federal Reserve’s use of interest rates and the money supply to guide economic growth.

The overall theory goes like this: once interest rates go down; there will be more activity in the aggregate. If interest rates are down it is a green light for borrowers to go ahead and apply for more loans. It also makes it easier for the lenders to get customers to sign on the bottom line. It is an encouraging sign for the stock market. If there is more borrowing, there will be more corporate expanding and an increase in products sold (GNP). When such announcements come out, they, the stock market, respond by having a day where there is more buying than selling.

The Fed has other tools by which to expand the money supply. An expanded money supply encourages growth. (In case you are wondering the definition of the money supply is so complex, it takes an economist to try and explain it. There is also controversy over which figure the Fed uses to make its decisions. Enough already.)

When the Fed feels there isn’t enough money in the money supply, they can lower the banks reserve ratio. All banks have a reserve ratio. The rest of the money they take in, they put out in loans to earn money. You really didn’t think they kept all that money right there all the time I hope. When they are allowed to loan out more, then there is more money in circulation.

Then there is the business of government securities. You have all heard of T-bills and other treasury bonds. The Fed has the right to buy and sell them. If they want more money in circulation, they issue a buy order. Customers with bonds they had been holding go to the nearest Federal Reserve Bank and sell their bonds. They are issued a check, which they are going to go and deposit in their bank. This money prior to this deposit never existed. There is, as we know, nothing to back it other than the full faith of the United States government. The bank, on receiving the seller’s deposit, only keeps its reserve requirement portion of the deposit. The rest is circulated to others who apply for loans. They then take the loan check and deposit in their personal bank. The same thing is repeated until that original check for the sale is exhausted. Now, that money is in circulation, less whatever the reserve ratio was for the individual banks.

As bad as things are in the current economy, if the government didn’t have the tools of monetary and fiscal policy, we would be a lot worse off and have fewer options. When things are bad, we always tend to blame the government. They are doing all they can to keep the wildfire that’s sniffing out our financial system from causing a complete collapse. As I said, the only thing that keeps the monetary system going period is that we have confidence in the United States government. Once that confidence is gone, everything will collapse and we will be looking at a situation that makes the depression of the 30s like child’s play.

The only thing we can do now is take care of our own personal finances and write to the legislators if we don’t like what they are doing at their end. Their adjusting the system is not what caused the mess we are in. We had a bunch of greedy corporate bigwigs who thought they could do what they want and we had a whole financial system that came very close to mirroring Enron.

If the government didn’t have the tools it did when those banks collapsed, we would be looking at a situation close to the end of the movie, “Rollover” in 1982. The whole economic system collapsed and there were worldwide riots.

The title of this article was me being factious. We better be glad that the government ‘can mess’ with the economy. This doesn’t mean that we shouldn’t be watching their actions. There is more on the horizon. We need to be dutiful watchers.

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The wealthyput their money to work
December 27, 2008, 11:17 pm
Filed under: Blogroll, Business Advice

However, the only thing we are teaching our children is how to spend money. What if anything have you done to show your kids that money can make our future better? We need to learn how to put our money to work.

There are a few ways to go about this in a way that the kids think they are just having a good time. Monopoly has been a family favorite for many generations. It teaches anyone willing to listen and apply the logic, how to make your money to work. It also shows that if you invest wisely, you will then be collecting rent.

There has been an addition to this mix. “The Rich Dad Poor Dad,” game teaches cash flow basics. You can get more information about this game and related reading materials by Googling the title.

The majority of people look at money as a way to pay for their daily living expenses. The problem lies is that viewing money this ways means one thing. You will be spending the rest of your life working to do just that.

You need to look at what you can possibly do generate cash flow for the future that doesn’t require you showing up at a ‘normal’ 9 to 5 job. Reasonably speaking most of us are strapped for cash and worry about making bill payments rather than what we can do to change the future.

Let’s start small. As a matter of act, let’s start with a project the kids can also be involved with. Of course, if they do part of the work, they will get to keep part of the profits. After playing a few rounds of these games, sit down and have a chat with the kids.

As a group, you are going to try and put a few of your dollars to work. If it is in the warm weather, suggest that you will help the kids build a lemonade stand. You might also add that you are going to add a batch of cookies for extra sales. You do some research and find out if anyone else in the neighborhood is doing anything similar. I bet you can put your collective brains together and find some innovative ways to make this lemonade stand different from others; and as such draw customers.

It just might be that this is such a success that other kids get the idea to start a similar one. If you register this lemonade stand as a business, actually filing a DBA, doing business as, with the state, then other kids will not be able to use the same name. If such an opportunity does open up, you might have found a door to start a franchise of specialized lemonade stands.

If there are no kids to bring into mix, here are a couple of fairly easy ideas for adults to start out with. They will also be easy on the budget. Take a look at Penny Stocks. They are labeled such because of the low cost. Find someone who is an expert in the field and decide if this is a road you wish to take. Do your own reading before deciding to go with an advisor.

If you work in an office, I bet you could find out very easily what types of baked goods are favored with your co-workers. I know who wants to bake in this day and age? If you are good at pastries, cookies, brownies, bake up a sampling of what you think might appeal to your coworkers. Have a plate by your desk, labeled ‘free samples.’ Be explicit in letting them know, the free samples are one time only. Find a price, if successful, that will cover costs and let you pocket some money, profits.

There are also investment clubs. A group meets, along with the help of a financial advisor, to layout the goals of the group. Don’t join a group unless the monthly dues are something you can handle. I had a friend involved once. The dues were $200 a month. The idea of the group is to gather a pool of money and invest larger amounts than you could possibly do on your own. It cuts down on potential risk when it is divided among club members.

Before a club like this launches, the group usually meets and decides what types of investments they are interested in. Are you going to invest in socially conscious areas? Are you staying in one particular industry? Also to be decided are monthly dues, the frequency of meetings and then penalty for non attendance. These are the very basics.

Do not be fooled into thinking that at least Social Security will be there for you on retirement. I have a son in his mid 30s who told me his recent letter from Social Security about his potential retirement had a cautionary note. By his retirement age the fund will be broke as it is in the red already. There are more people retiring than in the workforce, so this situation is going to get worse.

If you don’t grasp the fact now and put a plan in action about putting your money to work, you can plan on the fact you may never be able to retire. It isn’t easy to change your way of thinking. The only way is one step at a time. You will begin thinking like the wealthy.

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Can we benefit from the subsitution effect?
December 27, 2008, 3:31 am
Filed under: Blogroll, Business Advice | Tags: ,

There has been a lot of substitution going on during the Christmas holidays. I have never seen the discount stores so crowded.

The substitution effect comes into play by consumers when their previous favorite good is now priced so high that continued purchases hurt their budget. Some go along with the increase for awhile and cut back in other areas.

Finally, the Southern California gas guzzlers cut down on their driving and we finally saw the results. Public transportation numbers reached record highs.

So, ok, how does this benefit individuals? Well, there are two issues, if you are running a business or thinking about starting one. Can you introduce a product line that could be thought of as ‘generic’ compared to what customers are used to. Generic drugs are probably one of the biggest expanding product markets internationally. There are more people retiring than there are in the workforce. This translates to millions on Medicare who can’t afford to pay for brand names. The expansion of the $4 dollar drug plan in local pharmacies is every where in Southern California. (For those are unaware, these programs are only viable if your prescriptions have a generic equivalent.) This is an international trend, as generic drugs also sold in Canada.

Nobody has labeled this trend generic, but it amount to the same thing. Television stars are big on their wardrobe for special events. Up popped consultants promising to provide the same thing for other consumers at an ‘everyday price.”

Certain dress designers decided to take their talents to a ready-to-wear market niche. This can’t be labeled generic, but has the same effect. Those who would love designer duds can shop at the discount department stores to get the same label.

Business owners, find a way to incorporate some of these tactics in to your product line. If there isn’t an available addition, then package your services and label it “discounted.”

Give discounts for: early payments, referrals who purchase, payment by a deadline, and those who order more. Customers now are used to hearing: 0% interest for a year, no money down, no interest payments for a year and mail-in rebates. Customers want to shop where they are told they are getting a break.

Look at similar market mixes and see how you can apply these premises to how you run your business. Customers have been cued to these triggers and as long as they are looking to deal with their wants when they can’t afford such goods, there is money to be made when understanding this valuable economic lesson.

Investors also have an opportunity to use this same guideline for stocks they pick. I would not advise anyone on a specific stock pick. But, if I did, I would choose a company selling generic drugs. The next would be a retail clothing store that offers designer labels at every day price. The next on my list would be any form of public transportation. Despite the fact that gas prices have gone down, people are still going to be using their cars less as the hard times continue.

Use this new understanding of what the substitution effect is to increase your bottom line in your own business as well as your investments.

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Let’s take a look at present versus future value
December 27, 2008, 3:11 am
Filed under: Blogroll, Business Advice

Value has been a hard concept to grasp since so many investment products (stocks, commodities and real estate property) have had their prices decrease so much.. The changes we are currently seeing are enough to confuse even veteran market watchers. I am not an analyst, but I can give you a good picture of how to get a handle on this.

Understanding present versus future value is a necessary if you are ever going to earn money investing. One basic concept of investing well is buying low and selling high. There one alternative is short selling. This is when an investor gambles on the idea that his stock, bond, etc., is going to go down in price. There are more ins and outs of this, but that is the basic principle.

The investment markets are more detailed since stocks are not only down in value, they are down so far as to make one wonder if and when they will ever rise again. Washington Mutual, before its takeover did fairly well. Currently, its stock is $.03. (One has to wonder why it is still being traded.)

Real estate and other potential investment products are so far down; it feels as they are not at zero, but in the deficit. There are properties in Southern California that have lost almost 50 percent of their previous value in less than three years. Yes, they still have a price tag in the positive on them by virtue of the tax assessor’s office, but they are down so far that it makes one wonder if the value is going to stay under the previous level permanently. (And, well, it might.)

So, you want to buy. It doesn’t matter what. Unless you are into gambling on options, another story, or shorting stocks, you want your purchase to climb in value. With the stresses pressed on our current economy, the values related by the tax guy, and listings, are a value that has been distorted because of outside circumstances that have never existed before. To top that off, there doesn’t seem to be anyone willing to hazard a guess as to when these ‘things’ are going to start going the other way.

So, let’s agree to conclude that current, present value has been distorted. We have to call it a real value because that is what the market is saying these investment options are currently worth. But are they? Are they only showing up this way because investors have slacked off their buying in many markets? When buyers hold back on buying for a time period, no matter what the reason, the market ends up with what the economists call pent-up demand. No one knows the whole story behind all the factors that make buyers do what they do. At some time, buyers will be tired of holding off. Then the prices will move up.

If you want to jump in the market, are you willing to wait until buyers start jumping in? Can you stand to wait until those prices move up? Then, comes another viable question that doesn’t seem to be addressed very often. How long are you going to hold your investment? It starts moving up. Great. Do you sell now? Once any item starts moving up in price, there is always a chance that it might move back down.

Many investors love to buy in when stocks plummet if they feel this is still a viable company and it will come back. Those are not wise gamblers today. Some of those stocks will either stay in the hole or disappear off the trading floor altogether.

Real properties may still be still standing in the lot, but do you want to be holding on to a devalued property if situations don’t change quickly? You could lock on to what you consider a great deal and end up holding it for years with little upward movement.

The overall wisdom is buy if you have finances that allow you to take high risks. Those who can gamble like this will come out like pirates eventually. The key word is eventually. Those who only hope the shift will change quickly and want to take a chance might be looking at a bigger wipe out than those left holding Washington Mutual’s stock.

What we have learned is that even though the market isn’t saying it, investment products are in a deficit in many niches. Before you can make profits anywhere near what’s happened in the past, an investor will have to wait for the selling price to come back up to what might be called a break-even point. (This does not mean a price we have previously seen.) Recognize this and take it into account when you invest.

Oh yes, if prices do decrease even more, you haven’t lost money, because you are not currently selling. Present values go up and down all the time. We just haven’t seen this much down. If investing, do all you can to keep your eye on the market. Make this decision before investing a penny. When are you are going to sell if it moves up and when are you dumping it if things get worse. (It meaning an investment product.)

All investors are envisioning a higher future value than the current price for their holdings. In our market, it is just going to take longer. It doesn’t mean you should stop investing. It just means that you should do more homework before buying and take a harder look at what you can afford.

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People are still investing in real estate
December 26, 2008, 8:50 am
Filed under: Blogroll, Business Advice

Are they nuts? Have they not read the headlines that scare the rest of us away from real property for years?

Real property is not a viable option for those whose budgets can’t stretch to include investments that may be sitting for several years before bringing in a rate of return. If you have been seduced into going to a free seminar that is going to make you a gob of money, you are in the wrong place.

There are no quick answers any more. Real property investment is no longer the answer to the need to ‘get rich quick.’ If there hadn’t been so many gullible people who thought it was, we might not have the mess we do.

Ok, here is the skinny on what you can do. There are good deals to be had. But to find a deal that will be profitable eventually is going to take more homework and patience than ever. This is a new real estate market.

You need to put down enough money to make a dent in the overall value of any property. There is no more no-money down nonsense. Well, there can be, but don’t expect you will live a profitable life after going through with it.

The good deal is no longer just in the price. There are more details that have to be taken into consideration. A good deal is whether or not you make a profit or can resell when you want.

You have the cash, either from your home equity, or other sources to make a nice size down payment on a home you wish to rent out until its value reaches a level where you would consider selling. First you check out the neighborhood. What are the most recent comps? (Comps are recent sales prices in the neighborhood of similar properties.) What’s happened in the past six months? Are other properties still going down in value? Is the neighborhood dotted with foreclosed and vacant properties? If this is true, this is not going to turn out well. Even if you bought a home in such a neighborhood, and can afford to fix it up, who is going to want to either rent or buy in a neighborhood I have described.

Also, ask more than one real estate agent for comps. You want to get the big picture of what the values have looked like and how they might be looking in the next few years. If there are other for sale signs up, try and find their asking prices. How long have they been on the market? The old axiom for doing well in real estate has never changed: location, location and location.

So, you find a neighborhood you have investigated thoroughly and go ahead with the deal. You get the key and you are starting to work with your investment. What’s next? Set a time frame on how long you can carry this mortgage before you either have to rent it out or pay two mortgages yourself

Ok, I purposely wrote in this order to see if you got the point. This is the wrong way to go about it. You need to ask yourself these questions first. Not, buy and hope you can get some money back before my own finances are going to be in danger. Set a limit for what you are going to do in the way of fixing up and how much effort you are going to put into this as far as marketing. Do not depend on realtors. They are too busy holding the hands of foreclosure victims trying to work out short sales. Oh and one new caution. You are not going to rent to have those dollars pay your total mortgage. You are going to rent to subsidize your mortgage. If have a time lag between rentals, what are you going to do? Look at all aspects before jumping. A tax write-off might be the only benefit in the first few years. Can you afford it?

There is a big push to sell the public on the idea that foreclosed homes are the way to go. After all everyone wants their piece of the American dream. Ok, hold it right there buddy, advertiser, that is. That’s how we got into this mess to begin with. We want the American dream, but it has to make financial sense. I have been reading some advice about this on the Web.

Here is the nutshell. Buying foreclosures is an iffy proposition and takes a whole lot of patience. There can be liens on the homes from previous nonpayment of taxes, etc., which you might not be able to find out before you buy. There also may be repairs that you can’t see because you are not allowed to have an inspection if it’s sold at auction. If failing at auction, it will go back to a realtor. One can put in a bid, but it may be in with others. Good prices always bring too many buyers.

Why are you are interested in wanting to buy a foreclosed property? Is it going to be your primary residence or you are buying it in an attempt to flip it? Flipping houses takes longer now and may not see a rate of return for quite awhile. Foreclosure homes more than likely are going to be in a neighborhood with other foreclosures. So, set you goals before jumping in. Do you have the patience? Have you done your homework? Are you willing to put in the sweat equity and not give up if your hunt for a good value takes many months instead of the weeks you envisioned? Then if the answers are affirmative, then do your studying and map out a plan. There will be some great deals in the foreclosure market. Is this the kind of deal that is right for you? Can you afford the energy and the money?

There are other properties, all of which require the same planning, due diligence, and study before plopping down any money. Real estate investing is not for the quick of heart. It will take a good set of nerves for quite a time to come. But there are good deals out there.

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