Say Goodbye to Those Big Banks

Wescom Credit Union has been making me nervous for at least a year. It’s a large organization based in Pasadena, California. The have had 43 branches in Southern California from Santa Maria to San Diego and inland to Temecula. They have been rated poorly, are losing millions of dollars and now will close 12 branches. They got in trouble lending to those who could not afford to repay their loans. Just like Citi Bank, Wachovia, and all the rest.

Arianna Huffington has been running a campaign to encourage people to move their savings to good quality community banks. Arianna writes “The idea is simple: If enough people who have money in one of the Big Six banks (the four we mentioned earlier, plus Goldman Sachs and Morgan Stanley) move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it’s meant to be.”

It’s hard to find the link but here it is at http://moveyourmoney.info/. Just enter you ZIP Code to find the good banks in your area.

Investing is all About Risk

Smart people sold their S&P 500 Index accounts, other equity mutual funds, and many of their stock holdings when they saw the market had dropped 10% to 15% from its peak. Were you asleep or what? The S&P 500 Index peaked at 1576.09 on October 11, 2007. Don’t tell me you didn’t notice the market was going down.

As you read the various articles about the change in our wealth over the past decade you come to the conclusion that all your savings and high earning investments in the stock market were for naught. On average you would have been better off putting your money in bank CDs because you would have at least earned some return. This simplistic view assumes that no one looks at their investments. Those writers think that most people just follow the broker’s advice and never question anything.

I contend that most people are not that lazy. After all, almost every news broadcast includes stock index averages. We all know their names. Dow Jones Industrial Average, Nasdaq, and S&P 500. Most of us looked at our investments. Each of us made decisions about those investments. I do not accept Ali Velshi’s assumption that most of us were dunderheads who simply followed broker advice without question. I am sure some people did blindly follow the “buy and hold” pitch given by the brokers.

Initially I did accept the notion that all of us blindly followed broker advice. Wait! We all did do some analysis. Most of us did read the newspapers. Many did make mistakes but some of us did the right thing and earned large amounts of money.

When the DJIA hit 666 last March I was skeptical that the bottom was there. I promised myself that after the average had grown by 20% I would reinvest. Then I looked at my earnings in GNMA and decided the market was too volatile. My decision. I made a mistake. I could have grown some of my money by about 63 %. My decision.

We read, we listen and we decide. There is still money to be made but we all take a chance. The poorest among investors simply can’t afford too much risk.

End of Free Press?

Many years ago I subscribed to a magazine titled “Home Office Computing.” It was an informative monthly that really provided excellent advice for those people trying to start and run a business from an empty bedroom. Scholastic, Inc. was the publisher. For reasons not divulged to its readers the magazine was sold to another publisher. Almost immediately thereafter the magazine was discontinued. That was 2001.

Newsweek changed its format this past year. Rather than news, the magazine has become an outlet for essays and columns. No reason for the change was ever published in the magazine. Interesting idea but how many readers have been lost during this past year?

BusinessWeek has been sold by McGraw-Hill to Bloomberg. Ownership was transferred on December 1, 2009. The result so far has been the loss of at least three outstanding writers: Jon Fine, Maria Bartiromo, and Steve Wildstrom.

The Los Angeles Times has lost most of its great writers and reporters. Those remaining are probably looking over theirs shoulders. This was newspaper that earned 39 Pulitzer Prizes since 1942.

Other national newspapers and magazines are struggling to survive. Many have already folded.

Significant lost advertising revenue is the reason for these changes. The internet is to blame as well as the overall economy.

It’s a sad ending for one of America’s most vital segments. The free press will no longer be free and now will be controlled by very large media companies. That translates to a controlled press.

More Signs of Economic Recovery

A Parallel Turkey Universe?

from http://www.guy-sports.com/humor/pictures/picture_thanksgiving.htm

Green shoots of economic recovery can be found in many unusual places. This was brought to my attention by LogisticsTODAY. They are reporting that UPS (United parcel Service) is raising their rates an average of 4.9% in 2010. This is not an isolated event. The airlines started doing this early in 2009. American Airlines charges $20.00 for each checked bag. Some airlines even charge for coach seats that provide more leg room. Homes in my neighborhood had dropped in price byaas much as 50% just two months ago. From that low point the asking prices have increased by one third or more.

Finally the unemployment situation has improved with the drop in new claims for unemployment benefits to 466,000 per week from 501,000 last week. That is the first drop below the 500,000 mark since the week of November 1, 2008. This is a 7% drop in new claims. It won’t be straight line down but it is a significant decline from the high of 674,000 new claims last March 28.

In the area of politics this drop in new claims will be a White House argument that their stimulus strategy has worked. Republicans will contend that the recovery was the result of private enterprise doing its thing. Regardless of the cause, more of us will be celebrating a Happy Thanksgiving than was anticipated. The green shoots are a good thing.

Gold is not so Valuable

The price of gold has risen substantially in recent weeks. It was hovering in the mid $900 range for quite long time but now has reached $1,100 per ounce. The increase has occurred in a rather short time. I then checked Morningstar premium service and Eric Tyson’s web site. Both of them DO NOT recommend buying gold.

Eric Tyson says “gold is a dismal long-term investment.” Morningstar points out that “the sharp gain should only remind them of how volatile this sector is because it follows a painful 23.8% decline in 2008.”

Both of these web sites suggest alternate investments. Unless you are really convinced that the United States government is going bankrupt, you will be better off investing in inflation protected securities or perhaps the S&P 500.

The Lowest Cost Means the Highest Net Income

The average hourly pay rate in the state of Washington is $22.32. The average hourly pay rate in South Carolina is $17.33. So Boeing Company has decided to build their new 787 Dreamliner in a North Charleston facility in that Southern state. Of course there is also an incentive package by South Carolina that sealed the deal.

The lesson learned is that free enterprise always looks for ways to lower its cost of doing business. The state of Washington does not own Boeing. There is no pact that requires their allegiance to that state’s population. Lockheed moved from Los Angeles to Atlanta. Technicolor has moved its CD and DVD manufacturing facilities that was located in Virginia and California to Mexico. Many companies have outsourced their manufacturing to other countries.

Let me put this another way. Stock holders are not interested in providing welfare. They are interested in net profit. This too is part of America Incorporated. Any questions?

America Incorporated

The United States is borrowing a page from Red China. China has adopted a model that includes both free enterprise and government control. Red China actually is copying the American model that was partially implemented by the United States until President Ronald Reagan said “government is the problem.” Ronald Reagan was wrong.

Reagan’s impact lasted until the election of Barack Obama. The dismantling of many laws put in place after the Great Depression has caused the Great Recession.

The economic model that works best is one of both government and private enterprise working in unison to provide for continued moderate growth without creating a super wealthy class and reducing poverty.

Republicans and conservatives will fight the intent of this course because they believe it will destroy the nation. They are wrong. The United States is a consumer driven economy that is based upon the purchase of product. It cannot thrive without employment of most people at salaries that enable that continuing purchasing power. The public correctly objects to CEOs earning 200% to 300% more than the average wage earner.

The government’s investment in companies like Fisker Automotive is the kind of step that the Chinese government makes to improve society by employing thousands of people.

Why Not Los Angeles?

Thanks to my father my family moved from Philadelphia to Los Angeles after WWII. There are many reasons for not bringing your family to Los Angeles. Most of them are poor arguments.

Metropolitan Los Angeles spreads across five counties. Traveling north to south it spreads across a distance of about 75 miles and from the beach to inland cities and towns and spreads east about 50 miles. Many people travel a distance of 30 to 35 miles just to go to work. For most people a car is necessary for the commute to work.

Homes are relatively expensive. Even with the downturn in housing prices for a home of 1700 to 2000 square feet will cost at least $350,000. Those least expensive homes are in lower income neighborhoods.

What makes the city desirable are the following features:

1. Total annual rainfall averages 16 inches. Snow is a rarity. Temperature today reached 87ºF/30ºC at my home (October 26, 2009). Winter temperatures drop below freezing at night for about a week every January. How far below freezing? One to three degrees.

2. The entertainment facilities are second to none. Live theater is in neighborhood venues, the Hollywood Bowl, L.A. Live, Staples Center, Disney Hall, comedy clubs, etc.

3. Medical facilities include UCLA, City of Hope, Cedars Sinai Hospital, etc.

4. Universities are too numerous to list but include UCLA, USC, California State University has four campuses.

5. Beaches include Santa Monica, Malibu, and Laguna.

6. Amusement parks include Universal City, Disneyland, Knott’s Berry Farm, and Magic Mountain.

7. The largest port in America and the entertainment industry brings lots of job opportunities.

8. There is also the zoo, museums, gardens, and wonderful shopping malls.

What’s wrong with this picture? The people are too liberal, many races and ethnic groups are intermixed throughout the city. West Hollywood is an internationally known gay and lesbian community. You may have to wait an hour and a half to be seated at Miceli’s and parking at the Beverly Center is always a challenge.