Tuesday, October 28, 2008

The age of prosperity is over.

About a year ago Stephen Moore, Peter Tanous and I set about writing a book about our vision for the future entitled "The End of Prosperity." Little did we know then how appropriate its release would be earlier this month.
Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness."
David Gothard
When markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses.
No one likes to see people lose their homes when housing prices fall and they can't afford to pay their mortgages; nor does any one of us enjoy watching banks go belly-up for making subprime loans without enough equity. But the taxpayers had nothing to do with either side of the mortgage transaction. If the house's value had appreciated, believe you me the overleveraged homeowner and the overly aggressive bank would never have shared their gain with taxpayers. Housing price declines and their consequences are signals to the market to stop building so many houses, pure and simple.
But here's the rub. Now enter the government and the prospects of a kinder and gentler economy. To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy. And the government doesn't create anything; it just redistributes. Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.
If you don't believe me, just watch how Congress and Barney Frank run the banks. If you thought they did a bad job running the post office, Amtrak, Fannie Mae, Freddie Mac and the military, just wait till you see what they'll do with Wall Street.
Some 14 months ago, the projected deficit for the 2008 fiscal year was about 0.6% of GDP. With the $170 billion stimulus package last March, the add-ons to housing and agriculture bills, and the slowdown in tax receipts, the deficit for 2008 actually came in at 3.2% of GDP, with the 2009 deficit projected at 3.8% of GDP. And this is just the beginning.
The net national debt in 2001 was at a 20-year low of about 35% of GDP, and today it stands at 50% of GDP. But this 50% number makes no allowance for anything resulting from the over $5.2 trillion guarantee of Fannie Mae and Freddie Mac assets, or the $700 billion Troubled Assets Relief Program (TARP). Nor does the 50% number include any of the asset swaps done by the Federal Reserve when they bailed out Bear Stearns, AIG and others.
But the government isn't finished. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid -- and yes, even Fed Chairman Ben Bernanke -- are preparing for a new $300 billion stimulus package in the next Congress. Each of these actions separately increases the tax burden on the economy and does nothing to encourage economic growth. Giving more money to people when they fail and taking more money away from people when they work doesn't increase work. And the stock market knows it.
The stock market is forward looking, reflecting the current value of future expected after-tax profits. An improving economy carries with it the prospects of enhanced profitability as well as higher employment, higher wages, more productivity and more output. Just look at the era beginning with President Reagan's tax cuts, Paul Volcker's sound money, and all the other pro-growth, supply-side policies.
Bill Clinton and Alan Greenspan added their efforts to strengthen what had begun under President Reagan. President Clinton signed into law welfare reform, so people actually have to look for a job before being eligible for welfare. He ended the "retirement test" for Social Security benefits (a huge tax cut for elderly workers), pushed the North American Free Trade Agreement through Congress against his union supporters and many of his own party members, signed the largest capital gains tax cut ever (which exempted owner-occupied homes from capital gains taxes), and finally reduced government spending as a share of GDP by an amazing three percentage points (more than the next four best presidents combined). The stock market loved Mr. Clinton as it had loved Reagan, and for good reasons.
The stock market is obviously no fan of second-term George W. Bush, Nancy Pelosi, Harry Reid, Ben Bernanke, Barack Obama or John McCain, and again for good reasons.
These issues aren't Republican or Democrat, left or right, liberal or conservative. They are simply economics, and wish as you might, bad economics will sink any economy no matter how much they believe this time things are different. They aren't.
I was on the White House staff as George Shultz's economist in the Office of Management and Budget when Richard Nixon imposed wage and price controls, the dollar was taken off gold, import surcharges were implemented, and other similar measures were enacted from a panicked decision made in August of 1971 at Camp David.
I witnessed, like everyone else, the consequences of another panicked decision to cover up the Watergate break-in. I saw up close and personal Presidents Gerald Ford and George H.W. Bush succumb to panicked decisions to raise taxes, as well as Jimmy Carter's emergency energy plan, which included wellhead price controls, excess profits taxes on oil companies, and gasoline price controls at the pump.
The consequences of these actions were disastrous. Just look at the stock market from the post-Kennedy high in early 1966 to the pre-Reagan low in August of 1982. The average annual real return for U.S. assets compounded annually was -6% per year for 16 years. That, ladies and gentlemen, is a bear market. And it is something that you may well experience again. Yikes!
Then we have this administration's panicked Sarbanes-Oxley legislation, and of course the deer-in-the-headlights Mr. Bernanke in his bungling of monetary policy.
There are many more examples, but none hold a candle to what's happening right now. Twenty-five years down the line, what this administration and Congress have done will be viewed in much the same light as what Herbert Hoover did in the years 1929 through 1932. Whenever people make decisions when they are panicked, the consequences are rarely pretty. We are now witnessing the end of prosperity.

great piece on the cause of the current financial crisis.


Friday, October 24, 2008

The breakdown for Boy Meets World.

Grade 6-Grade 12
The story begins with Cory Matthews and Shawn Hunter as two Philadelphia students who would rather be anywhere than in Mr. Feeny's sixth grade classroom. Cory’s older brother, Eric, is a very popular tenth-grade student. During the second season, when Cory and Shawn start high school, they meet Mr. Jonathan Turner, a non-conventional English teacher, who is the sometimes-enemy of Mr. Feeny, who is the new principal. Shawn becomes cool and popular at school, but still keeps his friendship with the less popular Cory. Shawn’s mother, Virna, deserts Shawn and his father, Chet, which upsets Shawn greatly. Chet then leaves to find Virna, and Shawn moves in with Mr. Turner. During the third season, Cory begins dating Topanga Lawrence, a girl who, in the first season, was mocked by Cory and Shawn. The two had been close friends as children, but when they were seven, Eric told Cory that girls had cooties, which ended their close friendship. The couple breaks up later in the season but get back together a few months later, when Cory follows her to Disney World to win her back. Eric graduates high school and takes a year off to figure out what he wants to do with his life. Cory and Eric then spend the summer on a road trip. When they return, their father, Alan, decides to quit his job and open a sporting goods store, with Eric as his partner. Topanga’s mother is transferred to Pittsburgh, which is over 300 miles from Philadelphia. The news devastates Cory, but Topanga runs away from her new house and returns to Philadelphia. Topanga’s parents decide that she can live with her Aunt Prudence in Philadelphia until she graduates. Later that school year, Mr. Turner gets into a severe motorcycle accident in which he almost dies. The next year, Eric moves out of his parents’ house and begins college at Pennbrook University. He moves into an apartment with Jack, who turns out to be Shawn’s half-brother. Shawn moves in with them, but he has nothing in common with Jack, which causes a lot of tension. A new student, Angela Moore, moves to Philadelphia and she and Shawn begin dating. Over winter break, the students go skiing on a school trip. Cory breaks his ankle and Lauren, a ski-lodge employee takes care of him. The two kiss, but Cory lies to Topanga, and tells her nothing happened. When Topanga finds out that he lied, they break up. Cory, upset about the breakup gets drunk and is arrested, along with Shawn. The two agree never to drink again, but Shawn breaks the promise and shows up at school drunk. With the help of Angela and Jack, Shawn realizes that alcoholism runs in his family and that he needs to stop drinking when he still can. Cory and Topanga reunite and attend prom together, where they are named King and Queen. On prom night, Cory's mother Amy announces that she is pregnant. Mr. Feeny decides to retire at the end of the school year and decides to move to Wyoming. Topanga gets accepted to Yale, but Cory doesn’t want her to leave him. At Graduation, Topanga tells Cory that she decided not to go to Yale because she wants to be with him – then, she proposes. The couples' parents are upset that they got engaged so young, but Cory and Topanga decide to elope. However, at the last minute, they decide that they want to get married “the right way”, in front of family and friends.

[edit] College
Shawn, Topanga, Cory and Angela join Jack and Eric at Pennbrook. Rachel McGuire, a new student from Texas, moves in with Eric and Jack, causing tension as both boys have crushes on her. Angela and Shawn break up and, despite Cory’s efforts, decide to stay just friends. Mr. Feeny returns to take some classes, but then is offered a teaching job at the university. During their freshman year, Stuart, one of their professors, hits on Topanga, causing Cory to shove him through a window. Cory is almost expelled, until the Dean realizes what the motivation for the shove was. Shawn writes a poem for a contest, but decides not to read it. Cory reads it without his permission, upsetting Shawn because the poem was about how he still has feelings for Angela. Shawn and Jack’s father, Chet, then comes to visit and tells the boys he will stay this time. Shawn doesn’t believe him and, during an argument, Chet has a heart attack and dies. Shawn, devastated about his father, goes on a road trip and decides not to go back to Philadelphia. Cory can’t convince him to come back, but Chet’s ghost helps Shawn to make the decision. Amy gives birth to a son, Joshua, but he is in an intensive care unit due to a lung defect. The family is very nervous, but Joshua makes it through. Mr. Feeny has had a crush on the Dean since he arrived at Pennbrook and decides to ask her out. The couple eventually gets married. Jack and Rachel begin dating, so Eric moves out. Topanga’s parents show up and tell her that they are getting divorced. Topanga, who is devastated, calls off her wedding to Cory because she doesn’t want to end up like her parents. Angela’s father shows up and Shawn tries to impress him so that he will put in a good word with Angela. Angela, however, doesn’t want to get back together with Shawn because she is afraid she will leave him like her mother left her father. The couple, however, reconciles. Cory and Topanga reconcile as well, and begin to re-plan their wedding. The couple finally gets married, after a huge fight between Shawn and Cory in the middle of the wedding. When the couple returns from their honeymoon, they realize they don’t know where they are going to live, because the dorms they had planned on living in are off-limits to married couples. They move into the married dorms, which are disgusting apartments, but Cory fixes up the apartment for them. The friends then get into a friendly war, with two teams – Cory, Shawn and Topanga against Jack, Angela and Rachel. However, when the war is taken too far, the friendships end. Mr. Feeny and Eric attempt to bring the friends back together, and after a flash into the future shows what life would be without each other, the friends reconcile. Topanga and Eric then decide to go on a diet, but Cory and Shawn misinterpret Topanga’s change in behavior and appetite as her being pregnant. Word gets out, and soon everyone thinks she is pregnant. She finally announces, at her surprise baby shower, that she isn’t expecting. She and Cory discuss having children, but decide to wait until they are ready. Angela’s father shows up again, this time to ask Angela to go to Europe with him, where he will be stationed for a year. This news greatly upsets Shawn, but he tells her to go because he wants her to have time with her father, something he never had with Chet. Eric, Rachel and Jack graduate from college. Topanga gets an internship at a prestigious law firm in New York City, but decides not to take it for Cory’s sake. Cory, however, decides to move with her to New York because he wants to be a supportive spouse. Eric and Shawn decide to move with the couple. Jack joins Rachel in the Peace Corps after Jack’s rich stepfather stops sending him money. Before Eric, Cory, Shawn and Topanga leave for New York, they make one last stop in Mr. Feeny’s classroom, where he gives them one last piece of advice for the real world.

Thursday, October 16, 2008

Success & Motivation by Mark Cuban.

With almost 4 years of Blogs in the hopper, I decided to bring back some of my favorites and republish them… Here is the first:
Success and Motivation, Part 1
Apr 23rd 2004 9:37AM
Success and Motivation
I did it too. I drove by big houses and would wonder who lived there. What did they do for a living? How did they make their money? Someday, I would tell myself, I would live in a house like that. Every weekend I would do it.
I read books about successful people. In fact, I read every book or magazine I could get my hands on. I would tell myself 1 good idea would pay for the book and could make the difference between me making it or not.
I worked jobs I didn’t like. I worked jobs I loved, but had no chance of being a career. I worked jobs that barely paid the rent. I had so many jobs my parents wondered if I would be stable. Most of them aren’t on my resume anymore because I was there so short a time or they were so stupid I was embarrassed. You don’t want to write about selling powdered milk or selling franchises for TV repair shops. In every job, I would justify it in my mind whether I loved it or hated it that I was getting paid to learn and every experience would be of value when I figured out what I wanted to do when I grew up.
If I ever grew up, I hoped to run my own business some day. It’s exactly what I told myself every day. In reality, I had as much doubt as confidence. I was just hoping the confidence would win over the doubt and it would all work out for the best.
I remember being 24 years old, living in Dallas in a 3-bedroom apartment with 5 other friends. This wasn’t a really nice place we all kicked in to move up for. This place has since been torn down. Probably condemned. I didn’t have my own bedroom. I slept on the couch or floor depending on what time I got home. I had no closet. Instead I had a pile that everyone knew was mine. My car had the usual hole in the floorboard, a ‘77 FIAT X19 that burned a quart of oil that I couldn’t afford every week.
To make matters worse, because I was living on happy hour food, and the 2 beers cover charge, I was gaining weight like a pig. My confidence wasn’t at an all time high. I was having fun. Don’t get me wrong. I truly was having a blast. Great friends, great city, great energy, pretty girls. Ok, the pretty girls had no interest in my fat and growing ass at the time, but that’s another story….
I was motivated to do something I loved. I just wasn’t sure what it was. I made a list of all the different jobs I would love to do. (I still have it.) The problem was that I wasn’t qualified for any of them. But I needed to pay the bills.
I finally got a job working as a bartender at a club. A start, but it wasn’t a career. I had to keep on looking during the day.
About a week later I answered a want ad out of the newspaper for someone to sell PC Software at the first software retail store in Dallas. The ad was actually placed by an employment agency. The fee was to be paid by the company, so I gave it a shot.
I put on my interview face, and of course my interview suit, which just happened to be one of my 2 polyester suits that I had bought for the grand total of 99 dollars. Thank god for 2-fer, 2-fer, 2-fer madness at the local mens clothing store. Grey Pinstripe. Blue Pinstripe. Didn’t matter if it rained, those drops just rolled down the back of those suits. I could crumple them. They bounced right back. Polyester, the miracle fabric.
I wish I could say the blue suit and my interview skills impressed the employment agency enough to set up the interview with the software store. In reality, not many had applied for the job and the agency wanted the fee so they would have sent anyone over to interview. I didn’t care.
I pulled out the grey for my interview at Your Business Software. I was fired up. It was my shot to get into the computer business, one of the industries I had put on my list!
I remember the interview well. Michael Humecki the Prez, and Doug (don’t remember his last name), his partner double-teamed me. Michael did most of the talking to start. He asked me if I had used PC software before. My total PC experience at the time was on the long forgotten TI/99A that had cost me 79 dollars. I used it to try to teach myself Basic while recovering from hangovers and sleeping on the floor while my roommates were at work. They weren’t impressed.
I was trying to pull out every interview trick I knew. I went through the spiel about how I was a good salesperson, you know the part of the interview where you are basically begging for a job, using code phrases like “I care about the customer”, “I promise to work really, really hard” and “I will do whatever it takes to be successful”. Unfortunately, I was getting that “well if no one else applies for the job, maybe” look from Michael.
Finally, Doug spoke up. He asked me. “What do you do if a customer has a question about a software package and you don’t know the answer?” All of the possible answers raced through my mind. I had to ask myself if this was the “honesty test question” you know where they want to see if you will admit to things you don’t know. Is this some trick technology question and there is an answer everyone but me knows? After who knows how long, I blurted out that “I would look it up in the manual and find the answer for them.” Ding, ding, ding…Doug just loved this answer.
Michael wasn’t as convinced, but he then asked me the question I was dying to hear: “Would you not go back to the employment agency at all, so when we hire you we don’t have to pay the fee?” I was in.
What does all this mean? Nothing yet. It was just fun to tell. You have to wait till part 2, if you care, and if there is a part two. Right now, it’s much more important that I go play with my daughter.
Success and Motivation, Part 2
Apr 25th 2004 3:41AM
So my career in Dallas begins. I’m a software salesperson with Your Business Software in Dallas. $18k per year. The first retail software store in Dallas.
I have to sweep the floor and be there to open the store, but that’s not a bad thing. When I tell my future ex-girlfriends that I sell software and am in the computer biz, I’m not going to mention the sweeping the floor part. Plus, I had to wear a suit to work, and the 2-fer madness specials looked good at happy hour after work. Better yet, the store didn’t open till 9:30am, which meant if I had a fun night, I had at least a little time to sleep.
I bet right about now you are questioning where my focus was? Where was my commitment to being the future owner of the Dallas Mavericks? Please. I was stoked I had a good job. I was stoked it was in an industry that could turn into a career. At 24, I was just as stoked that the office was close to where the best happy hours were and that I might finally have more than 20 bucks to spend for a night on the town.
Since I’m talking about partying, I do have to say that my friends and I were very efficient in that area. Beyond living off bar food and happy hours, we literally would agree that none of us would bring more than 20 bucks for a weekend night out. This way we all could pace each other. At least that was the way it was supposed to work, and it did until we figured out the key to having a great night out on the cheap. They key was buying a bottle of cheap, cheap champagne. I can’t even spell the name, but it was a full bottle, and it cost 12 bucks. Tear the label off and as far as anyone knew it was Dom. Each of us would grab one, and sip on it all night. It was far cheaper than buying beers or mixed drinks all night, and we never had to buy a drink for a girl, we just gave them some champagne! Of course the next day was hell, but since when was I responsible enough to care about a hangover…
But I digress. Back to business. As fired up as I was about the job, I was scared. Why? Because I have never worked with an IBM PC in my life. Not a single time, and I’m going to be selling software for it. So what do I do? I do what everyone does: I rationalize. I tell myself that the people walking in the door know as little as I do, so if I just started doing what I told my boss I would do, read the manuals, I would be ahead of the curve. That’s what I did. Every night I would take home a different software manual, and I would read them. Of course the reading was captivating. Peachtree, PFS, DBase, Lotus, Accpac… I couldn’t put them down. Every night I would read some after getting home, no matter how late.
Of course it was easy on the weekends. After drinking that cheap champagne, I wasn’t getting out of bed till about 9pm, so I had tons of time to lie on the floor and read. It worked. Turns out not a lot of people ever bothered to RTFM (read the frickin’ manual), so people started really thinking I knew my stuff. As more people came in, because I knew all the different software packages we offered, I could offer honest comparisons and customers respected that.
Within about 6 months, I was building a clientele and because I had also spent time on the store’s computers learning how to install, configure and run the software, I started having customers ask me to install the software at their offices. That meant I got to charge for consulting help: 25 bucks an hour that I split with the store. That turned into a couple hundred extra bucks per month and growing. I was raking it in, enough that I could move from the Hotel (that was what we called our apartment) where the 6 of us lived, into a 3 bedroom apartment across the street, where instead of 6 of us, there were only 3. Finally, my own bedroom!
I was earning consulting fees. I was getting referrals. I was on the phone cold calling companies to get new business. I even worked out a deal with a local consultant who paid me referral fees, which lead to getting a $1500 check. It was the first time in my adult life that I was able to have more than 1k dollars in the bank.
That was a special moment believe or not, and what did I do to celebrate? Nope…I didn’t buy better champagne. I had these old ratty towels that had holes in them and could stand on their own in the corner, they were so nasty I needed a shower from drying off after a shower…I went out and bought 6 of the fluffiest, plushest towels I could find. I was moving on up in the world. I had the towels. Life was good. Business was good and getting better for me. I was building my customer base, really starting to understand all the technology, and really establishing myself as someone who understood the software. More importantly no, most importantly I realized that I loved working with PCs. I had never done it before. I didn’t know if this was going to be a job that worked for me, or that I would even like and it turns out I was lucky. I loved what I was doing. I was rolling so well, I was even partying less… during the week.
Then one day, about 9 months into my career as a salesperson/consultant, I had a prospect ask if I could come to his office to close a deal. 9am. No problem to me. Problem to my boss, Michael Humecki. Michael didn’t want me to go. I had to open the store. That was my job. We were a retail store, not an outbound sales company. It sounded stupid to me back then too, particularly since I had gone on outbound calls during the day before. I guess he thought I was at lunch.
Decision time. It’s always the little decisions that have the biggest impact. We all have to make that “make or break” call to follow orders or do what you know is right. I followed my first instinct: close the sale. I guess I could have rescheduled the appointment, but I rationalized that you never turn your back on a closed deal. So I called one of my coworkers to come in and open up, and closed the deal. Next day I came in check in hand from a new customer and Michael fired me.
Success and Motivation, Part 3
May 7th 2004 1:48AM
Fired. Not the first time it’s happened, but it reinforced what I already knew; I’m a terrible employee. I just had to face facts and move on. So rather than getting back on that “how the hell am I going to find a job” train, the only right thing to do was to start my own company.
My first act of business? Pile into my buddy’s 1982 Celica, nicknamed Celly, and drive to galveston to party. Of course we stayed in only the best $19.95 a night, plug the hairdryer in the wall and the circuit blows, motel. Nothing but the best as I prepared for my journey into entrepreneurial territory again. I could say I was preocuppied with how to get my new business off the ground. That while my friends got drunk, did stupid tourist tricks and ate at greasy spoons, I sat by the pool on the 1 chaise lounge chair with rust on the clean side and wrote up my businessplan. I didn’t. I got just as drunk and ate the same disgusting food. Then we faced the road trip terror that everyone knows exists, but refuses to admit, the ride home. It wasn’t until we pulled up to the apartment that it hit me. No job. No money. No way to pay the bills. But I had nice towels.
Fortunately the hangover didn’t last too long, and I realized I had to get off my ass and make something happen. First day, first task, come up with a name. This was the start of the microcomputer revolution, and I wanted a name that said what the company was going to do, which was sell personal computers and software and help companies and individuals install them. I was going to offer microcomputer solutions. So after struggling with different names for about 30 minutes, I chose MicroSolutions Inc.
Now came the hard part. I had to call all the people I had done business with at my last company, and let them know that I had been shitcanned and ask them if they would come do business with me at MicroSolutions. I got the expected questions. No I didn’t have an office. No I didn’t have a phone yet other than my home phone. Yes it was just me. No I didn’t have any investors. The only question I dreaded was whether I had a computer to work with. I didn’t. Fortunately, no one asked.
I made a lot of calls, and got some decent response. We love you Mark, we want to give you a chance. A lot of lets stay in touch. I got two real bites. One from a company called Architectual Lighting and the other from a company called Hytec Data Systems.
Architectual Lighting was looking for a time and billing accounting system to allow them to track the work with clients. I don’t remember the name of the software package I told them about, I think it was Peachtree Accounting, but after going out to meet with them it came down to this. I offered to refund 100 pct of their money if the software didn’t work for them, and I wouldn’t charge them for my time for installing and helping them. In return, they would put up the 500 bucks it would take for me to buy the software from the publisher, and I could use them as a reference. This was my “no money down” approach to start a business. They said yes. I had a business.
My 2nd call Hytec Data, was run by Martin Woodall. I met with Martin at the S&D Oyster House on a beautiful June day, and I remember sitting there and him telling me, “I graduated in Computer Science from West Virginia University. I have 50k in the bank and I drive a brand new Cadillac. I know technology better than you. We can work together”. I had a customer, and now with Martin’s help, I had some hope. Hytec Data sold multi user systems. The old kind that used dumb terminals. He bundled it with accounting software and he and a contractor named Kevin, would make modifications to the Cobol source code. They were the hardcore geeks that could help me when I needed it. I was still just 10 months from my first introduction to PCs, and had zero clue about multi user systems. If I came across prospects that could use their system and software, I would get referrals. That was good.
Even better was Martin’s offer of office space. He and Kevin shared office space with the distributor of the computer systems he sold. They had this one office, that when the CEO of the distributors son wasn’t using it to study his spanish, I could use it to make calls, and keep my folders and paperwork. Still no computer, but hey, I had an office and phone. I was bonafide…
At some point I’m going to have to go back and look at my appointment books that I kept from those days to remind myself of who my 2nd, 3rd and on from there customers were. They were small companies that I got to know very well. People that took me under their wing and trusted me, not because I was the most knowledgeable about computers, but because they knew I would do whatever it took to get the job done. People trusted me with keys to their offices. They would find me there when they got in in the morning and I was there when they left. I made 15,000 dollars that first year. I loved every minute of it.
As time went on, my customer base grew. I got my friend and former roommate Scott Susens to help with deliveries. Scott was working as a waiter at a steakhouse at the time. I remember asking him over and over, would you please help me out. I have a customer that had bought a bunch of Epson dot matrix printers from me, and I had to sell Scott on how it wouldn’t be hard to learn how to hook a parallel cable to a pc and printer, and how learning all of this would be a career move compared to working at the steakhouse. Unfortunately, I couldn’t pay him as much as the steakhouse. My good fortune was that Scott worked nights and weekends and decided to take some time in the afternoons to help me out. Not long after that, he was working fulltime installing PCs, learning whatever he had to figure out before an install.
Martin also began to play a larger and larger role. His company was growing, and he was watching my company grow. I would get the PC based stuff, he would get the accounting system stuff. It was a nice split. The better part of the relationship was based on Martin being the most anal retentive person i had ever met in my life. While I covered my mistakes by throwing time and effort at the problem, Martin was so detail oriented, he had to make sure things were perfect so problems could never happen. We could drive each other crazy. He would give me incredible amounts of shit about how sloppy I was. I would give him the same amount back because he was so anal he was missing huge opportunities. We complemented each other perfectly. It would only be a matter of time before we both knew we had to be partners and work together instead of seperately.
That first year in business was incredible. I remember sitting in that little office till 10pm and then still being so pumped up, I would drive over to the gym I belonged to and run 5 to 10 miles on the treadmill going through that day, and the next in my head. Other days I would get so involved with learning a new piece of software that I would forget to eat and look up at the clock thinking it was 6 or 7pm and see that it was 1am or 2am. Time would fly by.
It’s crazy the things that you remember. I remember when my accounts receivable got up to 15k and telling all my friends. I remember reading the PC DOS manual (I really did), and being proud that I could figure out how to set up startup menus for my customers. I remember going to every single retail store in town, BusinessLand, NYNEX, ComputerLand,CompuShop, all those companies that are long gone, and introducing myself to every salesperson to try to get leads. I would call every single big computer company that did anything at all with small businesses, IBM, Wang, Dec, Xerox, Data General, DataPoint (remember them?), setting meetings, asking to come to their offices since I couldn’t afford to take them to lunch. I didn’t need a lot of customers, but my business grew and grew. Not too fast, but fast enough that by the time MicroSolutions had been in business about 2 years, I had 85k dollars in the bank, a receptionist/secretary, Scott helping me out, and a 4 room office that I moved into along with Martin and Hytec Data Systems.
Then I learned a very valuable lesson. Martin had done a great job of setting up our accounting software and systems. I got monthly P&L statements. I got weekly journals of everything coming in and everything going out, payables and receivables. We had a very conservative process where Martin would check the payables, authorize them and then use the software to cut the checks. I would then go through the list, sign the checks and give them to Renee our secretary/receptionist to put in the envelope and mail to our vendors.
One day, Martin comes back from Republic Bank, where we had our account. He had just gone through the drive through and one of the tellers who he would see every day dropping of our deposits asked him to wait a second. She comes back and shows him a check that had the payee of a vendor, WHITED OUT and Renee Hardy, our secretary’s name typed over it. Turns out that in the course of a single week, our secretary had pulled this same trick on 83k of our 85k in the bank. As Martin delived the news, I obviously was pissed. I was pissed at Renee, I was pissed at the bank, I was pissed at myself for letting it happen. I remember going to the bank with copies of the checks, and the manager of the bank basically laughing me out of his office telling me that I “didn’t have a pot to piss in”. That I could sue him, or whatever I wanted, but I was out the money.
I got back to the office, told Martin what happened at the bank, and then I realized what I had to do about all of this. I had to go back to work. That what was done, was done. That worrying about revenge, getting pissed at the bank, all those “I’m going to get even and kick your ass thoughts” were basically just a waste of energy. No one was going to cover my obligations but me. I had to get my ass back to work, and do so quickly. That’s exactly what I did.
Success and Motivation P4
May 25th 2004 11:01AM
You never quite know in business if what you are doing is the right or wrong thing. Unfortunately, by the time you know the answer, someone has beaten you to it and you are out of business. I used to tell myself that it was ok to make little mistakes, just don’t make the big ones. I would continuously search for new ideas. I read every book and magazine I could. Heck, 3 bucks for a magazine, 20 bucks for a book. One good idea that lead to a customer or solution and it paid for itself many times over. Some of the ideas i read were good, some not. In doing all the reading I learned a valuable lesson.
Everything I read was public. Anyone could buy the same books and magazines. The same information was available to anyone who wanted it. Turns out most people didn’t want it.
I remember going into customers or talking to people in the industry and tossing out tidbits about software or hardware. Features that worked, bugs in the software. All things I had read. I expected the ongoing response of “Oh yeah, I read that too in such-and-such.” That’s not what happened. They hadn’t read it then, and they haven’t started reading yet.
Most people won’t put in the time to get a knowledge advantage. Sure, there were folks that worked hard at picking up every bit of information that they could, but we were few and far between. To this day, I feel like if I put in enough time consuming all the information available, particularly with the net making it so readily available, I can get an advantage in any technology business. Of course my wife hates that I read more than 3 hours almost every day, but it gives me a level of comfort and confidence in my businesses. AT MicroSolutions it gave me a huge advantage. A guy with little computer background could compete with far more experienced guys just because I put in the time to learn all I could.
I learned from magazines and books, but I also learned from watching what some of the up and coming technology companies of the day were doing. Its funny how the companies that I thought were brilliant then, are still racking it up today.
Every week a company called PCs Limited used to take a full-page ad in a weekly trade magazine called PC Week. The ad would feature PC peripherals that the company would sell. Hard Drives. Memory. Floppy Drives. Graphics Cards. Whatever could be added to a PC was there. What made the ad so special was that each and every week the prices got lower. If a drive was 2,000 dollars last week, it was $ 1940 this week. For the first time in any industry that I knew of, we were seeing vendors pass on price savings to customers.
The PC Limited ads became the “market price” for peripherals. I looked for the ad every week. In fact, I became a customer. I was in Dallas. They were in Austin.
I remember driving down to pick up some hard drives that I was going to put into my customers PCs. I had no idea up to that point, but it turns out that they had just moved from the owner’s dorm room into a little office/warehouse space. I was so impressed by this young kid (I was a wise old 25 at the time), that I actually wrote a letter thanking him for the great job he was doing, and…I’m embarassed to say now, I told him that if he kept up what he was doing he was destined for far bigger and better things.
I kept on doing business with PCs Limited, and Michael Dell kept on doing what he was doing. I dont think he really needed my encouragement, but i have since told him that I thought his weekly full page ads with ever declining prices, changed the PC industry and were the first of many genius moves on his part.
Michael wasn’t the only smart one in those days.
One of the PC industry’s annual rituals was the Comdex trade show in Las Vegas. Every November, it was the only 3 days I knew I would get away and get a break from the office. It was work during the day. Visiting all the new technology booths. Trying to get better pricing from vendors. Trying to find out where the best parties were. If you could believe it, back in those days, the number one party was the Microsoft party. I sold some Microsoft products, so I could get in.
One particular year, I was on my way to having a memorable night. I had met some very, very attractive women (I swear they were). Got them some tickets to come with me to the big party. All is good. I’m having fun. They are having fun. Then we see him. Bill G. As in Bill Gates dancing up a storm. I’m a Bill Gates fan, so I wont describe his dancing, but he was definitely having fun.
At that point in time, Microsoft had gone public and Bill Gates was Bill Gates. If you were in the business you knew him or knew of him. The girls I was with were in the business. Long story short, I went to the bar to get some drinks for all us, I come back, they aren’t there. Come to find out the next day, Bill stole my girls. As I would learn later in life, money does make you extremely handsome.
Bill G also taught me a few things about business. Put aside how he killed IBM at their own game by licensing PC DOS to anyone that wanted it. What MicroSoft did to knock Lotus 1-2-3 and WordPerfect off their thrones was literally business at its best.
At that point in time, software was expensive. WordPerfect and Lotus 1-2-3 both sold for $495 and their publishers were proud of that fact. In order to be able to sell Lotus 1-2-3, you had to go to special training to become authorized. How crazy does that sound now going to a special class to be able to sell a spreadsheet. WordPerfect wasn’t quite as bad, but they had their own idiosyncrasies as well. Meanwhile, Microsoft was on the outside looking in. Excel, Word, Powerpoint were all far down the list of top sellers until lightning struck.
Microsoft decided to go against industry protocol and package those 3 programs as a suite and offer them as an upgrade to competitors’ products for the low, low price of 99 dollars. Of course you needed to have and use Windows for it to work, but in a time when people were buying new PCs with every dramatic increase in power and decrease in price, it was a natural move for us at MicroSolutions to sell the bundle. It made the effective price of the PC and software together far, far lower. We loved it. It also taught me several big lessons.
Always ask yourself how someone could preempt your products or service. How can they put you out of business? Is it price? Is it service? Is it ease of use? No product is perfect and if there are good competitors in your market, they will figure out how to abuse you. It’s always better if you are honest with yourself and anticipate where the problems will come from.
The 2nd lesson is to always run your business like you are going to be competing with Microsoft. They may not be your direct competitor. They may be a vendor. They may be a direct competitor and a vendor. Whatever they may be to your business, if you are in the technology business, you have to anticipate that you will in some way have to compete with Microsoft at some point. I ask myself every week what I would do if they entered any of my businesses. If you are ready to compete with Microsoft, you are ready to compete with anyone else.
Watching the best taught me how to run my businesses. Along the way I taught myself a few things those come next blog.
Success and Motivation, almost Part 2
Apr 25th 2004 2:42AM
This isn’t quite a continuation of part 1, but I happened to stumble across an interview I did last year for Young Money Magazine that covers a lot of the things that I probably would have included in part 2.
YOUNG MONEY TALKS TO CUBAN: During an exclusive interview with YOUNG MONEY, billionaire Mark Cuban shared his thoughts on using the fear of failure as a motivator, beating the competition, and why investing in the stock market may not be such a good idea.
YM: What is the key to recognizing a profitable business opportunity?
CUBAN: Knowing the industry very well. Most people think it’s all about the idea. It’s not. EVERYONE has ideas. The hard part is doing the homework to know if the idea could work in an industry, then doing the preparation to be able to execute on the idea.
YM: What personal characteristics should a person possess in order to become a successful entrepreneur?
CUBAN: Willingness to learn, to be able to focus, to absorb information, and to always realize that business is a 24 x 7 job where someone is always out there to kick your ass.
YM: Did you set career goals for yourself while you were in college? If so, what were they?
CUBAN: To retire by the age of 35 was my goal. I wasn’t sure how I was going to get there though. I knew I would end up owning my own business someday, so I figured my challenge was to learn as much as anyone about every and all businesses. [I believed] that every job I took was really me getting paid to learn about a new industry. I spent as much time as I could, learning and reading everything about business I could get my hands on. I used to go into the library for hours and hours reading business books and magazines.
YM: Do you consider yourself an innovator? Why?
CUBAN: No. I don’t really have new ideas, but I manage to combine information in ways most people hadn’t considered. They aren’t new ideas, it’s just that most people don’t do their homework about their businesses and industry, so there is usually a place to sneak in and do something a little different. You just have to make sure what you want to do can sustain a business and make it profitable rather than be a niche that can be crushed [by the competition].
YM: What advice would you give young adults just struggling to move up in the business world?
CUBAN: There are no shortcuts. You have to work hard, and try to put yourself in a position where if luck strikes, you can see the opportunity and take advantage of it. I would also say it’s hard not to fool yourself. Everyone tells you how they are going to be”special,” but few do the work to get there. Do the work.
YM: What types of opportunities would you pursue if you were starting over today? CUBAN: I just started a business called HDNet. There never is one area that has a door open to everyone. Try to find an area with something you love to do and do it. It’s a lot easier to work hard and prepare when you love what you are doing. YM: What would you tell entrepreneur hopefuls who are afraid of failing?
CUBAN: It’s good [for them]. I’m always afraid of failing. It’s great motivation to work harder.
YM: What is the most important piece of advice you could offer someone who’s just starting a business?
CUBAN: Do your homework and know your business better than anyone. Otherwise, someone who knows more and works harder will kick your ass.
YM: Did you have to sacrifice your personal life in order to become a business success?
CUBAN: Sure, ask about five of my former girlfriends that question… I went seven years without a vacation. (from the time I got fired from a job, and started MicroSolutions) I didn’t even read a fiction book in that time. I was pretty focused.
YM: Do you have any general saving and investing advice for young people?
CUBAN: Put it in the bank. The idiots that tell you to put your money in the market because eventually it will go up need to tell you that because they are trying to sell you something. The stock market is probably the worst investment vehicle out there. If you won’t put your money in the bank, NEVER put your money in something where you don’t have an information advantage. Why invest your money in something because a broker told you to? If the broker had a clue, he/she wouldn’t be a broker, they would be on a beach somewhere.
Success and Motivation - You only have to be right once!
May 30th 2005 1:46AM
In basketball you have to shoot 50pct. If you make an extra 10 shots per hundred, you are an All-Star. In baseball you have to get a hit 30 pct of the time. If you get an extra 10 hits per hundred at bats, you are on the cover of every magazine, lead off every SportsCenter and make the Hall of Fame.
In Business, the odds are a little different. You don’t have to break the Mendoza line (hitting .200). In fact, it doesnt matter how many times you strike out. In business, to be a success, you only have to be right once.
One single solitary time and you are set for life. That’s the beauty of the business world.
I like to tell the story of how I started my first business at age 12, selling garbage bags. No one ever has asked if I was any good or made money at it. I was, and I did…enough to buy some tennis shoes :).
I like to tell the story of how I started up a bar, Motley’s Pub when I wasn’t even of legal drinking age the summer before my senior year at Indiana University. No one really asks me how it turned out. It was great until we got busted for letting a 16-year-old win a wet t-shirt contest (I swear I checked her ID, and it was good!).
No one really asks me about my adventures working for Mellon Bank, or Tronics 2000, or trying to start a business selling powdered milk (it was cheaper by the gallon, and I thought it tasted good). They don’t ask me about working as a bartender at night at Elans when I first got to Dallas, or getting fired from my job at Your Business Software for wanting to close a sale rather than sweeping the floor and opening up the store.
No ever asked me about what it was like when I started MicroSolutions and how I used to count the months I was in business, hoping to outlast my previous endeavors and make this one a success.
With every effort, I learned a lot. With every mistake and failure, not only mine, but of those around me, I learned what not to do. I also got to study the success of those I did business with as well. I had more than a healthy dose of fear, and an unlimited amount of hope, and more importantly, no limit on time and effort.
Fortunately, things turned out well for me with MicroSolutions. I sold it after 7 years and made enough money to take time off and have a whole lot of fun.
Back then I can remember vividly people telling me how lucky I was to sell my business at the right time.
Then when I took that money and started trading technology stocks that were in the areas that MIcroSolutions focused on. I remember vividly being told how lucky I was to have expertise in such a hot area, as technology stocks started to trade up.
Of course, no one wanted to comment on how lucky I was to spend time reading software manuals, or Cisco Router manuals, or sitting in my house testing and comparing new technologies, but that’s a topic for another blog post.
The point of all this is that it doesn’t matter how many times you fail. It doesn’t matter how many times you almost get it right. No one is going to know or care about your failures, and either should you. All you have to do is learn from them and those around you because…
All that matters in business is that you get it right once.
Then everyone can tell you how lucky you are.
Possibly related posts: (automatically generated)

another post from Mark Cuban.

Let me get this straight. In 2008, funds trying to squeeze out another basis point or two thought they were being conservative buying insurance on heavily leveraged portfolios of sub prime loans and other debt. Once those loans started to default, it created a cascading deleveraging event which lead to major financial institutions failing and the “smartest” minds on Wall Street being forced to dump everything to raise cash, which in turn lead to a crisis of confidence and deleveraging that created the worst week in the history of the stock markets. Did I get this right ?
In 1987, funds, trying to squeeze out another basis point or two thought they were being conservative, buying insurance on leveraged stock portfolios. Once the stock prices on those portfolios started to drop, their insurance programs pushed them to dump everything AND sell stock index futures to raise cash, which in turn lead to a crisis of confidence and deleveraging that created the worst single day melt down in the history of the stock markets. Did I get this right ?
Think it wont happen again ? Of course it will. Whatever money the Fed makes available to stimulate the economy will be used, as intended, by entrepreneurs and businesspeople to create and grow businesses.
Unfortunately, it will also be used by financial engineers to try to find a way to make HUGE profits from highly leveraged,risk laden financial packaging. Why wouldnt they ?
If you can borrow cheap money , invest in some asset that can be marked to an increasing market, borrow against the gain and buy something else and do it as many times as possible, wouldnt you ? Its exactly how homeowners In a bull market drove up real estate prices with a few making huge money.
If you could do the same thing, but instead of with houses, with stocks or asset backed securities, and instead of with thousands, do it with billions so you could profits in the 10s of millions or more, wouldnt you ?
Hell yes you would. You certaintly arent going to tell yourself that you could be creating the next big bubble that could rival 1929, or for future generations, would rival 2008, so dont do it. You would go for the money.
Which is the genesis of our problem in the US. Its not wrong to run with bull markets and leverage to the hilt. That can be a very good thing. But we have to make the upside based on investments, rather than financial engineering. Which is exactly why we have to change our tax code. We want to encourage investment, not financial engineering.
The financial markets were originally defined as markets that created capital for businesses to start and grow.
Today, that is rarely the case. Sure companies do come to the markets for cash for growth and that should be encouraged. But those examples are a tiny percentage of the market. When a stock turns over its float multiple times in a day, those are not investors buying and selling the stock. Those are traders or financial engineers.
Investors should be rewarded for actually owning companies and gaining returns on their investments. Financial engineers should have to pay a premium for the risk they introduce to the entire financial system. It was not investors that brought on the last 2 crashes. It was the financial engineers.
The beautiful thing about this country is that we like to work hard, and we like to take chances. Unfortunately, over the last 15 years, the incentives have been to take chances as a financial engineer rather than as an entrepreneur. We give far more money to people who play games with financial instruments than we give to people who come up with ideas for the next big thing. That needs to change if we want to remain a leader in this world.
Here is what I would do to change things
I would change to zero the taxes on any gains from the sale of stock or bonds purchased during an IPO and held for 5 or more years. All dividends/interest paid by that stock/bond would be tax free. If you sell it prior to the 5 years, you are taxed at your personal regular income tax rate.
In addition, I would not allow the stock to be borrowed against in any way. If it was, it would be considered an effective sale. Which means you couldnt borrow on it tax free until you have held it 5 years. Bottom line, if you hold the stock/bond , like a real investor would, you are rewarded for it.
For purchases post IPO, in the open market, the same rules apply, except I would tax a personal income rates the dividends/interest for the first 5 years of ownership.
For all other transactions, whether they are options, derivatives, stocks, bonds, whatever, all gains and losses would be taxed at personal income rates.
If you are a great financial engineer and make tons of money at what you are doing, more power to you.If you are good at what you do, you pay more to Uncle Sam, but you still make a boatload of money.
I would keep taxes on private transactions, just where they are. Private transactions are less liquid and harder to value, which in turn makes them harder to borrow against. Which reduces leverage in the system and encourages investment. Its hard to financial engineers a private company. I would tax gains and losses in private companies at capital gains levels, but I would extend to 3 years the marker to not be considered a short term investment. I would keep the active vs passive rules.
Next there is the issue of leveraging. No one ever complains when cheap cost of funds creates leverage and drives a market up. And no one ever will. So we have to set strict leverage limits. We set margin/leverage limits on day traders as the tech bubble burst. The only difference between the day traders of the tech bubble and the Investment Banks and AIGs of the world that cratered in this bubble is that the big guys started with more chips at the table. And they picked their own credit lines and there was no pit boss to watch over them. I would limit to 2x the leverage available on any asset that is insured by the government or is offered by any organization that is elgible for government insurance or tax incentives of any kind.
Of course, I would still levy a fee of anywhere from 1c to 10c on every transaction of stocks or bonds which would go into a general fund, that I will call the “Oh Shit We Missed It Fund”. It will be there to fund the inevitable situation where someone figures out how to work around whatever regulations and tax code that is created.
As an entrepreneur, I can tell you that this would not change how I ever started or invested in any business. As someone who trades stocks, It would impact my investment decisions. I would only trade out of necessity. I would be willing to take lower yields on my investments, making it cheaper for companies to raise funding.
I also recognize that it would mean that the chances of the Dow ever hitting 14k in 2008 dollars is about as likely as my catching my elbow on the rim playing basketball. I dont think thats a bad thing.

Mark Cuban's most recent post.

Where To Put Your Money Right Now
Oct 15th 2008 9:24AM
This is for anyone who has under 250k dollars in stocks and bonds and also has debt.
If you listen to me, I GUARANTEE YOU that you will earn a greater return than 90pct of the richest, supposedly smartest money managers ON THE PLANET. All those Wall Street fat cats, they can’t earn as much on their money for you as I can help you earn.
Sound too good to be true ? Read this and decide for yourself.
First thing to understand is that Wall Street wants you to believe that if you give them money, every month, forever, to buy stocks, that you will most likely will earn 7 or 8pct per year. When compounded, your money will double every 9 or 10 years. Sounds great, right ? One problem with it. You know what you would call someone on Wall Street who made you 7 or 8 pct a year, every year without ever losing money in a year ? Non Existent. Those managers don’t exist.
You can however do what they can’t and even better if you do the following:
1. Write down a list of every penny you owe to anyone and the interest rate that you pay on that amount. Your mortgage, your car payment, your student loan, the Rent A Center TV and Dell Computer Loan, your loan shark, your uncle or grandparents and most of all your credit cards
2. I’m willing to bet that you have absolutely no idea what your true, effective interest rate is on any of the above. Between penalties for using the wrong type of stamp, being 37 seconds late, and moving interest rates that are triggered by every crazy thing, its hard for anyone to know. However, a glance at Citibank Platinum Select Mastercard details as an example, would tell you that if you are late on your payment, your rate is:
“All default APRs equal the greater of (1) the Prime Rate plus up to 23.99% or (2) up to 28.99%. PLUS LATE FEES of 10pct OR MORE ON BALANCES UNDER $250 !!!! (There may be something in the fine print that asks you to bend over too, but my eyes couldnt focus on print that was that small….) “
All of Wall Street would give you the choice of either testicle to be making returns that high. A quick glance at IndexCreditCards.com tell us that not only are the average rates for any card, higher than the biggest promises from the best Wall Streeters, but they have been trending higher.
So in a nutshell, while the interest rate on your credit cards is going up, the return on your investments has been going down. You know what they call someone who keeps on giving money to their stockbroker, mutual fund or 401k, but doesn’t pay off their credit card balance in full every month, BROKE AND STUPID !
The first thing you do with your money is if you have money market funds, you take the money out and pay down your credit card debt. If that doesn’t pay it off. This is what you do next:
You make a list of every stock, bond, fund, whatever you own, and mark what your cost is, the current market price, the current dividend yield on your cost basis, if any and whether it is in a 401k, fund or brokerage account. For any stock or bond at a brokerage account that is yielding less than what you are paying in interest rates on your credit cards, and for which the current price is less than what you paid for it. YOU SELL IT. When you call your broker to get the prices, you do not let them give you a bunch of BS about why you shouldn’t. YOU SELL IT.
You dont hold it to see if you can make money with it. If you love it, you immediately fall out of love with it. ITS A FRICKING STOCK, not a family member, and you sell it. You take that money and you pay down your credit card debt.
Then you start with the stocks/bonds you have made money on. Beginning with the stock/bonds you have made the least amount of money on, if it isn’t yielding you more than the interest rate plus late fees that you pay, you start selling, and selling and selling. Sell as much as you need to until you can pay off your credit card balance.
Once you have sold enough to pay off your credit card balance, you RIP UP YOUR CREDIT CARDS and replace it with a debit card. The only way Credit Cards cost you less than 9pct, or possibly as much as 40pct or more is if you pay it off monthly. Debit cards make that happen automatically. You cant afford to pay 9pct, 40pct or more. Both are far more than you can expect to make in the stock market, or any market. If you have gotten here to this point, and you just tore up your credit cards, YOU HAVE JUST EARNED A GREATER RETURN ON YOUR MONEY IN THAT PERIOD OF TIME THAN ANYONE ON WALL STREET COULD EVER EARN YEAR IN AND YEAR OUT.
If you still arent to the point of paying off your credit card, its time to borrow against your 401k. Switch all your money from whatever funds to insured, guaranteed funds like money markets. Then find out the rate of interest you pay, how long you have to pay it off (usually 5 years), and then borrow the money to pay off your credit cards. I have never seen a 401k that charges more than credit cards in interest. Credit cards accrue interest and penalites a lot faster than you can earn and accrue interest and returns in your 401k. So borrow the money, pay off the credit card, and start paying back your 401k with what your credit card payments were. You will have your 401k loan paid off a lot faster than you could ever pay off your credit cards.
Once your credit card is paid off, then you go to your debt list and pick out the next highest interest rate and start the process all over again until all your debt except your mortgage is paid off.
If after paying off all your non mortgage debt, you still have money left, then you need to sit down with someone who knows your tax situation. Since mortgage loans are usually deductible, ask them to help you figure out what your effective interest rate is on your mortgage and what your outsanding balance is. If you are fortunate and your net effective rate is less than 7 or even 8pct, and you can make the monthly payments, then you probably don’t need to do anything with your mortgage.
If you have a mortgage that is variable in any way , shape or form, you are probably paying more after tax in effective interest rate than you can earn on your money anywhere that is legal. With this information in hand, you and your accountant or whoever you turn to for help (and please make it someone who really knows what their doing, not someone who got a refund using some tax software) can set up a meeting with your banker, or whoever happens to own your mortgage if you can find that person, and start discussions on how to buy down, pay down , buy out, or pay off your mortgage. They may say no, but if you can get them to renegotiate, and these days thats a very real possibility, you should be able to get a greater return from this process than you can get from the money being in stocks, bonds, or any thing else for that matter. This is particularly applicable if you have a subprime , ARM, or any type of variable rate mortgage.
If you have read this far you have hopefully picked up on the basic principle of debt vs investments. The people who lend you money can guarantee you that they are going to charge you a ridiculous percentage, and throw on top of it, any and every fee they can, thereby increasing the effective interest rate you pay. They can do it every year forever.
On the other side, no one in the universe can guarantee you that they can earn you more than what Consumer lenders like credit card companies charge you in interest. No one. If they could, the lenders wouldnt lend the money to you, they would give the money to those people to invest, right ?
If it takes selling every stock, bond and whatever you have to pay off your debts, do it. If it means borrowing against your 401k and paying back yourself instead of the credit card or finance company, do it. It is a far better return than you will ever make putting that money elsewhere.
If none of this applied to you. You kept your debt at levels that you could afford and at rates that were fixed and low, congrats. Hopefully this just reinforced what you already knew.
If on the other hand, this set you on the right path, and you still have money in stocks and bonds, you are fortunate. You probably need to make sure that what you own is very, very safe and not at risk. My recommendation is 6 month CDs, you can probably go to your bank and convince them to pay you 4 or more percent. If you havent heard, there is a bank liquidity crisis. Banks want your money. They have been ripping you off with credit cards all these years, go take some of their money…
One last point. It would not be out of the realm of possibilities to see a collapse of credit card debt like we saw in mortgage debt. Default rates are going to go up. That means credit card company income is going to go down. You know what banks do when their income goes down ? They try to figure out more ways to charge you more money to make it up. Which of course pushs up default rates. Its a viscious circle and you pay the price.
Get out now while you can.

Winning People Over (14 days to power and confidence)

The central theme is pretty neat.

"you can't become what you hope to be by remaining what you are"

Why I love Lou Holtz...


Monday, October 13, 2008

The Smartest Guys in the Room

Currently reading "The Smartest Guys in the Room". Realizing it took so much more than just Enron to commit such crimes, deceit, willful manipulation of accounting practices. It took the banks, Arthur Anderson, good ol' Wall Street, analysts, and the handful of very very corrupt executives they had. wow. enron's power reminds me a lot like wal-mart's (sam walton many times acknowledging they've become very powerful and had to keep that in mind so they wouldn't abuse it) except Enron abused it badly. and made terrible terrible bets.


I remember when I lived in Hazel Park GM just lost it's "largest most profitable company" in the world to Wal Mart. On Thursday GM went below $5 a share. It's pretty unbelievable really. We'll see if they can rebound from this fall from grace, I'm betting they can, I'm now a proud owner of 900 shares of GM.

Friday, October 10, 2008

100 years, Five for fighting.

top ten song of all time.

Currently reading "The Smartest Guys in the Room", the rise and fall of Enron.

I'll keep you posted.

Money. Power. Respect.

Just read "The Wolf of Wall Street". Really interesting book. It's about a guy who started off cold calling for a brokerage firm, became big time, started his own firm, and became very very corrupt. At age 26 he made hundreds of millions, by 36 he was federally indicted. Late 80's, early 90's he ran a pump and dump scheme hyping up a mid-cap stock, some that he ipo'd, and then shorting or selling it at it's high, screwing many of the investors and clients. He began money-laundering, drugs, and other immoral activities. It's always interesting reading or watching a story like this unfold. They usually come from modest means, work their way up, become embarrassingly rich, too rich for their own good, and think they're bullet proof. It's funny how money and/or power can change someone. Bill Clinton, John Kerry, Elliot Spitzer, Kenneth Lay, and in this story Jordan Belmont come to mind. Some are politicians, some are elite business men. But they all share the same characteristics. It starts off slow, it always does, and then once the line becomes blurry, they do the most unbelievable things. Since the beginning of time people in power have done this. What's unbelievable to me, is that what Jordan was doing was actually legal. He was ripping off hundreds of millions of dollars from business owners/investors across america and if he didn't become flagrant with it, or lose sight of the line, he could've stood to make hundreds of millions more. It's almost depressing thinking that our government and regulators have more holes in the laws and regulations "than swiss cheese" as he puts it. He ended up serving 22 months for hundreds of millions. Isn't that worth it? Many people would do that crime for that time in a minute. I just don't get how so many white collared corporate criminals get away with it. He says he believes 90% of wall street is good and 10% might be bad. Well, 10% could definitely kill the market. i believe it has. It's even worse than the 80/20 rule. It is even more destructive to our economy and my psyche. I can't even phathom all the criminal activity on wall street, all the schemes, all the profit from lawless activities. Hedge funds definitely come to mind, naked short selling, pump and dumps, ipo's. Where is the moral fiber in the successful man? Is the temptation too great? The will power to weak? Is this the culture our most successful men have created or is the culture something that created the man? Once the money comes, once you get everything you ever wanted, is there nothing more to life? Dale Carnegie has said, "It's not who you are, or what you have that determines your happiness, it's what you think about." It's all about attitude, perception=reality. Rockstars, millinoaires, athletes, those who become bored turn to drugs, hookers, and even suicide. Where is the light at the end of the tunnel? The thrill of the chase or the thrill of the kill. Once the chase ends, what's left? I would hope a loving family, children, religion. Something to work for, something to hope for, someone to love, and something to believe in. This new prolonged youth phase of 23-30, that didn't exist a generation before us, has my generation reach new heights of boredom, selfishness, instant gratification. Are our generation's moral threads coming untied from these new years of youth. Are we worse off? Are we better off? More imporantly does anyone "Know Thyself" anymore. What's the purpose of your lifetime? I guess only you can answer that.

Speaking of being an RA, i know random stats like this.

18 Facts Regarding Alcohol Use In College

College students drink - it’s a known fact. But the statistics regarding the level of intoxication in the future leaders of America seem to slip just beneath the radar. How much are you drinking? How much is everyone else drinking? Find out here.
1. Seventy-two percent of college students report that they used alcohol at least once within the 30 days prior to completing the Core survey. Within the last year, 84-percent of students report they drank alcohol.
2. Among college students under the age of 21, 82-percent report using alcohol within the past year and 69-percent report using alcohol within the last 30 days.
Check out all the stats after the jump!
3. According to a survey conducted by the Core Institute, most students who do drink, do so responsibly. On average, college students report they drink less than six drinks per week.
4. According to the Harvard School of Public Health College Alcohol Study (CAS), students more likely to binge drink are male, white, under 24 years of age, involved in athletics and residents of a fraternity or sorority. If they were binge drinkers in high school, they were three times more likely to binge drink in college.
5. Seventy-eight percent of college athletes report that they used alcohol on at least one occasion in the past 30 days prior to completing the Core survey. Within the past year, 88-percent of student athletes report using alcohol.
6. One in five athletes believe others students drinking adversely affects their involvement on an athletic team or in other organized groups.
7. Student athletes are more often the heaviest drinkers in the overall student population. Half of college athletes (57-percent of men and 48-percent of women) are binge drinkers and experience a greater number of alcohol-related harm than other students. College athletes are also more likely than other students to say that getting drunk is an important reason for drinking. (Dying to Drink by Henry Wechsler, Ph.D.)
8. According to the Core survey, 86 percent of college students involved in the Greek system report that they used alcohol on at least one occasion in the past 30 days prior to completing the survey. Within the past year, 93 percent of Greeks report using alcohol.
9. An overwhelming majority of college students feel drinking is a central part of the social life of both fraternities and sororities (79-percent and 72-percent, respectively. Specifically, Greek-involved students feel drinking is a central part of the social life in fraternities (88-percent) and sororities (78-percent).
10. Sixty-seven percent of college freshmen report that they used alcohol on at least one occasion in the past 30 days prior to completing the Core survey. Moreover, eight out of 10 freshmen report using alcohol within the past year.
11. On average, college freshmen report they drink more than five drinks per week (5.7 drinks). Forty-five percent of college freshmen report they engaged in binge drinking at least once during the two weeks prior to completing the study.
12. Fully one-third of freshmen students report their alcohol use has increased within the past 12 months.
13. Freshmen students who began drinking and/or reported being drunk before 16 years of age were more likely than other freshmen to binge drink in college. (Harvard’s College Alcohol Study, Journal of Adolescent Health, 2003).
14. According to Core survey, on average, female college students drink almost four drinks per week compared to their male peers who drink nine drinks per week.
15. Overall, 35-percent of college females report their alcohol use has remained about the same over the past 12 months and 22-percent their alcohol use has increased over the past year. By comparison, 33-percent of female freshmen report their alcohol use has increased and 26-percent report their use has remained about the same over the past 12 months.
16. According to the 2001 Harvard School of Public Health College Alcohol Study (CAS), about three out of ten college students drove after drinking. Study results also indicate drinking and driving increases in directproportion to binge drinking. Fifty-eight percent of frequent binge drinkers, 40-percent of occasional binge drinkers and 19-percent of non-binge drinkers reported they drove after drinking.
17. According to the National Highway Traffic Safety Administration (NHTSA), young drivers are over represented in both alcohol- and non-alcohol traffic related fatality rates. Alcohol-related traffic fatality rates are nearly twice as great for 18-, 19- and 20-year olds as for the population over 21.
18. A young person dies in an alcohol-related traffic crash an average of once every three hours.
Percent of students who report they used alcohol in the past 30-days/past year.
Student Groups 30-Days / Past YearAll college students: 72% / 84%Under 21: 69% / 82%Athletes: 78% / 88%Greeks: 86% / 93%Freshmen: 67% / 80%Female college students: 71% / 85%

Thursday, October 2, 2008

The Vice Presidential Debate...

I was really impressed with the debate. Again, you gotta hate when they don't answer the questions, when they deny their own track record, and when they don't actually "talk" to each other, when they don't actually "argue", and all the use are talking points. Palin's experience credentials were very impressive to me as a business owner and her other professional history. The fact that Palin held her own many would give her a win. Joe Biden has been my favorite democratic since John Edwards (old johnny boy had the clinton syndrome, damn morals! now i'm just disgusted with that guy). Joe Biden had to work very hard as a senator to not be condescending to his opponent. It is very hard debating against a women and he had to smile extra, soften his tone, and not speak above her, rather to her. He needed to show forebearance and patience. His demeanor and body language were very impressive. His strategy had to be not to offend women in general based entirely how he treated Palin. He also used "George Bush" many many times, 9 times in 9 sentences at one point. His name has a negative connation, and he wanted to directly link her ticket to the past cabinet. He needed to pin John Mccain's actions and strategy to those of Bush. Palin did a great job from the opening dialogue, used his name Joe. Made it folksy. She delivered a good homespun strategy. The fact that she didn't embarrass the Republicans was a plus, but she did more than not embarrass them, she did very good. She spoke to the American public instead of the media or the mediator. NBC coverage has stated Palin absolutely knocked it out of the park, ABC says Biden easily won and is talking about how Palin could've done better. CBS, seemed to be by far the most partial, having analysts choose each side, even more they had analysts who were split. I think I will start watching Katie Couric now. As far as who I would vote for the last couple elections I liked the Democrats more. I am a huge fan of Bill Clinton. At heart I'm a republican, I've come to realize that the last couple weeks. I'm for less socialist reform, I'm for less government, less taxes, and I'm for a more capitalistic society. But this current cabinet is ridiculously corrupt. I hate all the rules the Bush cabinet have broken, bending the very constitution itself, I'm for less regulation, but this current cabinet has shown no regulation in manny matters. Last but not least the PATIOT ACT! I feel like I'm the only one who cares that this thing passed. That the GOVERNMENT CAN TAP ANY PHONE, SPY ON ANY E-MAIL, OR INTERCEDE ON ANY COMMUNICATION YOU HAVE, for basically any reason they want. Or as they put it "if they suspect you of terrorist activities." that is so 1984. They have gotten so many bills passed on fear and fear itself. My feelings on the war is we have to get out, we can't say that if we retreat they won, their way will spread all over the world, this is just like the vietnam or north korea, we feared if we were to withdraw our troops communism or the evil axis of power would spread over the world and defeat democracy, and that just wasn't the case. Do I feel like we should withdraw right away? No, too many people would be slaughtered in our wake, but we do need to develop a plan, not just say, "as long as it takes we will be there." That doesn't solve anything, that just drives our deficit higher and higher. War is good for the economy I get it, fight elsewhere, move it to afganistan, darfur (burma), or sourthern africa. Don't tell me we're there because their society is inhumane, there's much worse going on throughout the world. More deaths do to fighting, insurgency, hiv, lack of hygience, government oppression. Iraq is bad, but don't act like we dont' have a huge vested interested in that oil bearing region. I don't like Mccain's foreign policy, I absolutely hate Bush's, it's so assinine it's ridiculous. I don't know which is worse the BUSH DOCTRINE or THE PATRIOT ACT, actually it's like getting killed from 99 shots of an uzzi or just blown up by a stick of dynamite, you're f'd either way. I'm a republican at heart but the last 8 years of Bush have been terrible, and i'm not talking about our economy a lot of it was handed down to them from the prior administration. I'm talking about KNOWINGLY BREAKING RULES AND BEING CORRUPT LIKE THE NIXON ADMINISTRATION. Everyone is talking about the lack of experience of Palin, that's the hot topic, show me that Obama has more experience. He's a lawyer so is Biden their great debaters, arguers, public speakers, but that doesn't translate to experience. I might as well be from Missouri, SHOW ME. Obama doesn't have the experience, and Mccain's isn't necessarily good. I'm still on the fence. Taxes and war are really the two fundamental issues that are so inherently different. on the fence for now...

Wednesday, October 1, 2008

Keys to happiness

1) Something to do.
2) Someone to love.
3) Something to hope for.
4) Something to believe in.