A discouraging Word

I was trying to open my tenant's kitchen drain today when his new 46 inch high definition wide screen television was delivered. NICE TV!
But I wasn't having much luck with the drain. I think it needs the heavy duty electric snake. If you run a lot of water down the disposal, some water comes up in the other sink. That is not good.
But I did manage to improve the function. Water only comes up now if you have a lot of water in the sink.
I asked the tenant to keep an eye on it and see if it will suffice. And to let me know if it doesn't suffice and then I will take the next step.

But is any of this discouraging?

The world we see in the news is just one big funk. It seems everyone is losing a job and a home and going broke etc.

It can't really be that bad. Most people are working. More than 90% who want to work are working. That sounds pretty good.

I see lots of traffic everywhere and I see many new cars when I go out.
So something is still working.
My sister and her husband are visiting from Hawaii. They are staying in a hotel in Culver City. They are going out to restaurants. They are spending money.
So why be in a funk.
And yet I do feel discouraged. I have been a bull for years. I am riding the bull down and yet I want to be hopeful that recovery is just around the corner.
I still believe we will have a powerful rally soon. But what is soon?
Maybe 90 days would be soon.

Stimulating The Economy

Greedy Fools

Should greedy fools be punished?
Or should they be helped.

Why not help them? They are still your brothers and sisters.
Forget the past.
Forgive the mistakes.
This is a new day.
We can thrive together now.

BACK TO WORK

Money is a myth
The reality is people working and producing

But some people do more harm than good when they work!

If you need work
You will get it
If you are ready to serve
And ask a good price for your service

Don't be stubborn
Cut your price and get to work

What if? Nobody had any debt.

Or maybe just a world where nobody charges interest.
Isn't that Muslim law?
Imagine a world where you save money to buy expensive items.
How long would it take to save up for a house?
You could still sell shares so business could raise money selling shares.
A seller could still have an installment plan as long as there is no interest.

It might be a more peaceful economy.
Our tendency to overleverage causes periodic catastrophe.

Alternatively,
Regulations should be imposed to help people avoid overleverage.

NEW PENNY!

WHO CAN WE BLAME?

Who is it that is bankrupting our nation?

The medical establishment

The educational establisment

The housing establishment

The military establishment

The welfare establishment

The immigration establishment

The legal establishment

The food establishment

The transportation establishment

The financial establishment

The entertainment establishment

The travel establishment

Anybody else?

Health Insurance Seems Overpriced

We have a high deductible policy. Blue Shield California
Deductible is $4,800 Family, two adults, two teenagers

Our premiums are based partially on my wife's age. She is now 55 years old.

And our rates have gone up dramatically in the last few years.

This is our monthly rate

2005 $583
2006 $711
2007 $889
2008 $889
2009 $1329 That comes to $15,948 per year
Median income in the USA is around $50,000
Our premium is around 30% of median income
But if you include the big deductible it comes to 40% of the median income
This is really an outrage. Really!

Pretty shocking I think
Increase of 128% since 2005

SUCKS?

Leverage and Reason

My dad was pretty conservative about money. Frugal, thrifty, almost stingy, but also very generous. He didn't need much for himself so he could afford to be generous with his children.

Here is what he taught me about leverage.

To get going in business, when you are young, it is OK to borrow as much as you can. If things go against you and you go broke you can start over.

But as you get older the right amount of debt is 50% of your assests. If you have a business worth a million dollars your debt should be no more than half a million.

If the value of the business increases then you can borrow to expand more.
If the value of the business goes down you need to pay off debt.
Always avoid overleverage. That can lead to bankruptcy.

Finally, as you get older, pay down all your debts. By the time you are around retirement age you should have no debt at all.

so...50% that is prudent,
Who puts 50% down on a house? Hardly anybody.
Usually the first house you use maximum leverage, and you are young, so that is OK.
But the people who keep trading up or refinance and take cash out are
COURTING DISASTER

Greed
Fear

What else is there?

REASON

STILL A BULL

Nice rally today. S&P 500 closed at 869.
Next goal is 878, a recent high. We should take it out.
The recent high to beat is 944. That is another 9% up.
If we go through that it could trigger the short covering panic of all time.

Nowadays 9% happens in a few days, so the big jump could come very soon.

On the other hand, all we need is to stay above 804. We could see another sell-off, but 804 should hold.

And finally, the longer we stay above the old low, the more it looks like this bull is the real thing.

Killing The Goose

My late friend Walter Lutz always reminded me to not get greedy. He would say, "Don't kill the goose."
The context was raising prices. Raise prices too much and the customers go away.
That one principle has always worked well for me.
This year in my business looks to be another very good year. My prices are a bargain for people and I never lack customers.

The goose principle has other applications.

Government has a tendency to kill the goose with taxes and regulations.
Bloated government
Unresponsive government
Rude and overbearing government.

Government totally lives on private business and when government kills business it kills itself.

California is a good example right now. High taxes, hostile to business, big deficit. California looks to be bankrupt. Bankrupted by driving business away.

Little things add up.
I received a compliance order from the Santa Monica Fire Department.
I would like to appeal the order. So far, there seems to be no appeal process. The only thing you can do is talk to a higher up within the department. That is not an appeal process. I would expect a public hearing in front of an impartial board of citizens.
Yesterday I was speaking with a deputy Fire Marshall. She said no one has ever appealed.
Well! If there is no appeal process then how could anyone have ever appealed?

If I don't comply within 30 days I have commited a misdemeanor.

So overbearing government threatens me with fines and jail but gives me no recourse, no opportunity to appeal the order of a department.

Don't kill the goose I say.
I say! Don't kill the goose!

What Really Makes Prices Go Down?

SELLERS
Only a seller can sell. Sellers set the price by accepting offers. That is the bottom line on prices.

If I have something to sell, and I don't accept low offers, then maybe I don't sell, but neither do I set a low price.

Only a seller can set a low price.
And it isn't an auction. I am under no obligation to sell anything.
So why do sellers accept low prices?
Fear mostly

They hear stuff and it scares them and they say SELL!
Foolishness. Buyers can drive prices up.
Sellers can drive prices down.

That is why short selling can be so destructive.