Can ordinary people manage the risk in the stock market for their retirement?

I am beginning to think there is no way an average American can invest in the market and make any money for their retirement in a 401K. I was reading this morning that 5 and 10 year returns in the portfolios of most mutual funds are negative now when they calculated in the huge losses from recessions in 2001 and 2008 and the beginning of 2009. (Q1 hasn’t been kind) 

As an investor (for my 401K) I look at that and say: yuck! Why would I put my money in something that has no long term value?

My fiance sent me this article saying that now 20 and 30 years are the benchmarks for best overall performance in mutual funds and stocks in the market. Yikes! 20-30 years? Who has that much time before retirement? Who can invest for that long anyway?

When you consider that most people’s salary starts dropping when they reach their 50′s (because employers don’t value old employees and can’t spend time/money updating their skills) you really have 25 years max to work with as far as investments for retirement.

You start your first real paying job with a 401K at age 25 and you may not be fully employable by age 50 although you will likely live to the age of 80 or 90.  There’s your 25 years to save and invest for 30-50 years of retirement.

I also think there is something else going on here affecting the 20-30 year market profit numbers. The US Markets benefited from a long term technology/innovation and growth curve from WWII to the 1980s. Personally, I think that was a one time deal and we will never see that kind of long term prosperity again.

Why? 1. Because we don’t understand enough about technology to innovate on that level again to create that much growth. 2. Because the US has higher paid workers than anywhere else in the world and everything gets manufactured and produced (and serviced) somewhere else. 3. Because we’re too complacent and have too much entitlement as a country of workers. Work creates wealth, not shell games with securities.

That brings up another point: We’ve been playing a shell game with our economy since the 1980′s. De-regulate, re-regulate, stimulus, fix, fund, trade, outsource, sell, leverage, whatever… It’s all a shell game to us worker bees and the internet has been the only significant improvement in technology to create new industries and jobs in the last 20 years. We need more than that to survive and prosper as a nation and a world.

I don’t know about you but I can’t stand to take that much risk with my money. I have some in a 401K but mostly my retirement is locked in a 5 year CD IRA at 5.25% that was a promotion this fall when banks wanted more cash reserves. I changed companies in 2006 and rolled over the old 401K to a bank in 2007 because I knew the 10 year recession was coming soon and I didn’t want to risk timing it.

There will always be people who game the market and come out ahead, but those of us without finance degrees, huge money to invest in undervalued markets or inside scoops will never really profit on the whole. Many of us will get out exactly what we put in and maybe less considering our lack of  investment prowess. So, in that level of risky why not just put it in the bank? Positive 3-5% sounds a lot better than negative 40%.

I hate the inflation argument that says that 3-5% isn’t enough to make money after inflation. Guess what? Inflation has been very low and inflation doesn’t stop when you have negative returns either. I’d rather have some money dependably than none at all when prices are higher. 

You may be asking why I want more innovation and less investment in the market? Doesn’t investment in the market lead to more innovation?

NO. Most of the mutual finds and stocks you can buy that are highly rated are in huge old (one trick pony) risk averse companies that have already peaked and can’t figure out how to do anything new. They sell shares to raise cash and then have old people make decisions like the old days. Venture Capital,  new small businesses and Universities are the place where innovation happens. If I could invest in those, I would. But then again I don’t have millions of dollars and apparently I won’t any time soon.

What are the best proven ways to fund your retirement and create wealth then?

1. Have a side job for extra income you can save (part-time weekends or evenings a few nights a week)

2. Own rental property for extra income (you need to live near it for this to work)

3. Have fewer kids if you’re contemplating having a family (ok we don’t always control this, and we love kids, but nobody is going to debate that they are expensive) 

4. Own a smaller home (smaller mortgage = smaller amount in interest paid (lost) to the bank)

5. Don’t go into debt on credit cards or car loans (hello! 25% interest, MONTHLY! on some cards)

6. Live frugally generally, keep your cars 10 years, don’t buy new clothes every month and don’t buy big ticket items like TVs and Computers every few years. Spread out the expenses over the long term.

7. Share what you have with others. Seriously, knowledge, help with projects, donating time and donating items you no longer need, as well as hand me downs between families help kids and neighbors live better within their means and help the community live better too.

8. Take care of your health. Eat less junk, lower fat, lower salt, lower carbs. Exercise daily. Take vitamins. Don’t work in an industry that has a side effect of cancer. Visit the doctor regularly and if something comes up treat it early, it will cost so much less in the long run. Heath issues start in your 30′s and get more frequent in the 40′s, 50′s and 60′s. Expect to pay more every decade for health costs in your life/budget.

These are all real tactical changes we can make to save more money monthy and yearly that will get better returns than the stock market and help prepare for inflation. What else do you think can help?

Chicago CTA Rant – Where are the Busses? Commuting Problems

I have been a commuter in Chicago for about 3 years now. I was initially excited to abandon my car in it’s parking space during the week and walk to the EL train and then to work every day. I have saved a bucket-load of cash not paying for gas or parking downtown since I have worked in that area. I was able to get to work in 1 hour from door to door, and it would be faster if I caught the CTA Train right when I got to the station. It was never more than a 10 minute wait for a green line though.

All these things changed recently when I moved in with my Fiance in Warrenville. (I had been living in Oak Park for the last 7 years) Now I am only tied to downtown Chicago by the METRA trains. Which is very frustrating since the BNSF only comes in to Union Station which is all the F way over west of the loop and not walkable to Michigan Avenue. 

This means you have to fill that gap with more public transport since cabs are too expensive to take every day. Your choices are the CTA elevated Trains which aren’t really by Union Station or Michigan Avenue either or the CTA Buses. Everyone said the Buses were the way to go. And for all the ranting about Metra, the CTA Buses have ended up being far more problematic than the Train. (although the train has been so packed the last 2 days that people have been standing in the isles in all the cars)

This morning for example it was a 1/2 hour wait for a 121 bus by Union Station. WTF? They are supposed to run every 12-15 minutes per the CTA Site. Last night was no better. I caught the 151 bus to Union Station for a change (most days I wait a 1/2 hour for that at 6 pm also) and then there was no Train until 6:50 pm. I spent a 1/2 hour sitting in the train station doing nothing. Where was the 6:20 BNSF?

That is the first time a METRA train has been missing but the CTA buses are there at about a 50% rate . I can walk to the train station in a 1/2 hour, but if I can get a bus it only takes 15 minutes (even stopping on every block). But if I knew there would not be a bus for a 1/2 hour I would just F-ing walk.

I get to start working from home on Fridays this week. I won’t miss the 1.5-2 hour commute each way.

How have your experiences been with Chicago CTA & METRA commuting?

We Can Save Washington Mutual and other Banks by Overpaying our Mortgages

Washington Mutual Home Loans Logo - My Mortgage Company

I think we, the mortgage holders and general citizens might be able to help in the credit crunch going on right now in the news. I am hearing so much about the Lehman bankruptcy and the AIG de-valuing today. Certain sectors of the economy are in shambles due to over leveraging and greed on the part of the top level executives in these banks and financial institutions and we really don’t know how deep this will go.

As much as I hate their greedy asses for getting us into this mess, (just to get another bonus to buy another yacht) I think you and I may be able to help so things don’t get worse. I think that if everyone that has a Washington Mutual (WAMU) Mortgage (like me) pays extra principle over the minimum ammount every month the cash on hand will rise above expectations and help keep the company running. I am currently paying $150.00 over my minimum now and my brother pays $250.00 over his minimum payment also.

The thing is it benefits you too! If you pay extra on your mortgage now it cuts payments off at the end of the mortgage and that saves you the interest that you would be paying on those payments. So, in my book this is a win-win situation. And don’t give me that line about mortgage interest tax deductions, that is only 25% back in credits on your money. It’s not like you get all of it back from tax deductions. Its still better to not pay the interest all together and save 100%. Duh.

You may be “saving” that money for when “financial armageddon” happens but really… those of us savers have been saving for years and have plenty of “cash on hand” now. We should pony up and get these mortgages paid down. It seems like the responsible and needed thing to do. Plus it gets a better return than a new handbag.

If 1,000 people pay $100.00 extra on their mortgage that is an extra $100,000.00 a month and an extra $1.2 Million a year for WAMU to keep afloat. If 5,000 people pay $150.00 extra on their WAMU mortgage that is $750,000.00 extra cash per month and $9 Million more per year. And 10,000 people paying an extra $200 a month is $24 Million a year. (which should do some good)  This may be small potatoes for a banking snob but it all adds up and is scalable since WAMU must have thousands upon thousands of mortgages out there.

Anyway, take it for what its worth and see if you feel like making a contribution to the capital that banks and mortgage institutions have on hand in this economy.

Now I do need to add a few disclaimers to this idea:

1. If you are having trouble making ends meet, this post or idea is not for you. Keep paying the minimum each month and move on to cash saving strategies pronto.

2. It is no one’s individual responsibility to do this especially if the job market is not good and they say to have a year in cash living costs on hand if you loose your job. Make sure you have that reserve first to protect yourself. 

3. We don’t owe those rich asses anything extra beyond minimum payments, but it might help the general economy and us all in the long run. And if you know one of those greedy financial execs, egg their car or something. Make it personal.

 

Update; um, this didn’t work. WAMU got bought, eaten and taken over by Chase bank. Poo.

TIME Magazine Article – The Social Contract in America

I was reading my parent’s TIME Magazine this week (that I usually swipe to read on the train) and they had polled Americans on the state of the economy and their take on how they plan to personally ”get by” in the coming years. You can read the survey results and the article about this concept of a social contract online at TIME.com.

I had never heard of this concept of a “social contract” that business and government have with America. I work in a recruitment related field so if it existed, I thought I would know about it. As a human being I was aware of it as a colloquial dream we have perpetuated by the stories told by our parents and grandparents.

My family history doesn’t go back that far here in America. My great grandparents arrived from Poland and the Ukraine pre-WW1 and went to work in the gritty factories of Chicago because it was a better living and opportunity than they had back in Europe. (poor peasant potato farmers I usually say) and the economic opportunity has kept us here in Chicago ever since.

My grandparents generation went on to slightly boring but consistent blue collar jobs with pensions and my parent’s generation went on to white collar jobs after getting college educations. Some of them got a pension and health insurance and others did not. My generation doesn’t even get a shot at a pension. Companies have found that they can hire good people without it and they tell us that a 401K is really the same thing. (for reference I am 33)

So, we have these 401Ks that seem to never make money fast enough to accrue enough funds to equal what a pension would. They plummet in value every 10 years or so in recessions, and someone changes the funds available without asking or telling us. Most of us have health insurance through our jobs. We pay handsomely for it, between $100 and $300 per month per person.  And then when something happens that requires medical care, the insurance only covers 1/2 the costs. It is totally possible to go bankrupt with health insurance coverage these days because most coverage is crap compared to what my family had back in the 1980′s.

TIME says that there is an “implied” social contract in America where you give a company (or number of companies) your time and energy and they give you “a basic level of economic security provided you work hard and took responsibility for your family”. (direct quote from TIME July 28, 2008 p 42) And I think things have changed. This contract implied or not doesn’t really exist anymore. I see businesses every day making decisions to give workers less and people have to get more creative trying to survive.

I think the social contract is more like this now.

1. A company promises to pay you as little as they can for your time. This sounds pessimistic but I have seen the proof on paper that you are paid what they can get you for with your experience rather than what you are worth or how much “the job” pays. You have to wait years to work your way up the ladder to make a good wage and then marketers and your neighbors taunt you daily to buy everything in sight to keep up with the Joneses. 56% of the people who made over 100K a year said even they can’t expect to afford health care, college or a secure retirement anymore.  And 100K a year is a lot of clams. (I don’t make anywhere near that. ) I do realize that these businesses have to keep costs low in order to compete with India and China, but somehow I’d rather see the cuts come from other areas that don’t erode the culture in America and impede our ability to raise families. 

2. Marketers will prey on you from every direction. A lot more people could make it through hard times if they had savings but the national savings rate is negative now. All the “stuff” and services you “must” have seems to replace the financial security your grandparents achieved. Just say no didn’t work for reducing drug use in the 80′s and I think that the disposable consumer culture will probably continue here too.

3. Health Issues will cost you. Most young people don’t need much care because you haven’t gotten to the age where things start falling apart yet and we don’t have any concept of how much it costs to survive a serious health issue like cancer or bypass surgery. Both my parents had heart surgery in the late 1990′s and they were 50 & 60K each. We paid about 10K each of those costs and the insurance paid the rest. I just heard someone at my dad’s workplace had bypass surgery last month and it cost $100K. I know they have really poor health insurance there, and I can guess that the guy might have had to pay 50K out of pocket. Even dental issues are expensive. I need have needed a crown for about 5 years and because there is no pain or damage being done since the root canal and filling, I am holding off on the $1,000.00 price tag since dental insurance is only going to pay 1/2 and I would rather save the $ for a real emergency like fixing the 7 year old car I have or paying for the radiator heat to be fixed in my condo.

4. Retirement is going to be difficult. Very difficult. Some people wonder if social security will be around in 2040 when I turn 65. I personally, think it will be. It may not be nearly enough though. Most of us will have some 401K savings but as the Frontline Retirement special found, most people make crucial mistakes with managing their 401K and end up loosing a lot of money and getting little out at the end. (and then have to go back to work) Some tips include, never take a lump sum benefit, due to the tax penalty, never just let it ride and not watch the performance and watch for trading and management fees eating up your money. It also helps not to own a McMansion when you retire and live within your means before retirement. Saving money (like 10% of after tax income) on the side and investing it in some low risk but higher than inflation yields is also a smart way to prepare. And well let’s hope medicare still exists in 2040 also, and that doctors and hospitals still accept it as payment.

5. Creativity & Leverage are the new working hard. Money makes more money, it’s all who you know and being clever with side jobs or side businesses usually helps. Yes, saving a large percentage of your income by living simple and investing it can help you have the “power of compounding interest” as they say. Keeping in touch with people and maintaining your network helps with job opportunities and side opportunities to make some income. Starting weekend jobs or part time businesses online or otherwise helps too. I find people living simply and leveraging clever ways to work in more than one place are the ones that will have what they need later on. Getting into an industry that is doing well in the economy also helps but that may take pro-active skill re-training. Paying off your mortgage early and not moving also helps. You loose thousands of dollars on the services and fees associated with that transaction every time you move, and  we all know you pay 3x the value of your loan in interest if you really pay your mortgage over 30 years. After that you are seriously in the hole.

The only contract I think we really have now is that everything will change by the time the 30 somethings reach retirement age. The only thing we have to rely on is ourselves. In general business is struggling because the US has passed it’s peak and we will be in a pack of “also rans” soon. Companies in the US will not see the skyrocketing growth that they saw post-war in the last 60 years with China, India and Eastern Europe emerging as super-economic powers. This coupled with dwindling natural, energy and food resources will make the next 50 years a post US dominant era that will be much harder and more global.

I actually believe if the US was more competitive with skills and education we would do well in a world economy but I haven’t yet seen the expertise or drive to innovate. All I see every day is the drive to reduce expenses and cut resources in business and make short term gains with little or no thought about long term survival. I feel like the country is being run by the lowest common denominator MBAs right now and the next 10 years for us commoners are going to be difficult as a result, as we all lack the jobs/growth that they sucked/poached out in the short term and ran off with the profits.

So, enough about all that negativity.

How do you plan on coping with the changing game living and working in the US in the next 50 years?

Making New Year’s Resolutions Stick

According to the FiveCentNickel money and finance blog and CNN these are the top consumer money resolutions of the year in 2008:

 1. Pay down debt (33%)
2. Save for retirement (23%)
3. Build an emergency fund (11%)
4. Buy real estate (11%)

I think that last one must be some seriously mis-informed people.

I also think building an emergency fund means that people feel the recessing coming. I know I do. It is looming around every corner in every shopping mall in America.

It may also be a telling statement about debt, that the levels are higher than ever before on average and people have that as their biggest issue and therefore rated #1. I have felt for about 6 months now that the consumer economy is wiped out. The people of the US can’t keep supporting the economy, they are maxed out and mortgaged to the hilt. And we don’t need more stuff, cheap or not. They owe more than they are worth and can’t spend more to finance this country’s economic growth anymore. We have to get big business and industry back operating and manufacturing in this country to support the economy with spending and supply jobs in order to get people and the economy back on track.

The list last year in 2007 looked like this:

1. Saving more (32%)
2. Paying down debt (25%)
3. Making more income (15%)
4. Spending less (13%)
5. Investing more (10%)
6. Saving for a large purchase (4%)
7. Don’t know (1%)

Woah, it’s window washing day here in the high rise,  and we’ve got guys on ropes swinging-about on our windows while washing them from the 31st floor outside. Fwamp! It’s a bit weird when you have meetings going on.

My New Years Resolutions for 2008 (goals) Happy New Year!

This year has been a trying one for me. Both for personal and non-personal reasons especially early in the year. Seriously, it’s not good when TopGear is a highlight of your week. There were some good things later in the year though and I appreciate them a lot. Anyway, here are some of my resolutions for 2008. Hopefully 2008 will be a better year than 2007 was overall.

1. Loose 20 lbs. It’s a necessity. It has been creeping on for 3-4 years and it’s time to take it off again. In real terms this means no deserts, walking or running regularly and no snacks from the vending machine or otherwise. I also have to help my cat Zeus loose some weight. He is also a bit overweight for his size and is equally lazy at the moment.

2. Save 5K more in savings again. I did this in 2007 and intend to do it again in 2008. To have some kind of safety net is important and I took the dependable cash flow from work for granted for too long. I am in ok financial shape now but it can always be better. Then eventually it would be nice to have some money invested again but that might not be until 2009.

3. To keep things going along well with Steve. This isn’t as much a goal as a hope.

4. To keep up the HPV  Cervical Pre-Cancer Dysplasia health related follow ups and surgery again when it’s needed later in the year.

5. To take some kind of web or HTML class. I have been saying this for years and there is only so much you can learn through mucking around right? I feel like I need it for work.

6. To be better at time management. This means to get to bed early and get up early first of all, and otherwise just try and be more conscious of the clock. I get into tunnel vision and loose all track of time and space. I am also a huge daydreamer and distracted easily person. Lots to do better here.

7. To learn to cook some things. Not a real specific goal here, but in general cooking at home is intended to be cheaper, healthier (less processed) and a learning experience so I don’t have to rely on takeout and pre-prepared foods all the time.

8. To get back into being more career goal oriented again. I have been happily sitting in the role I am in here for more than a year. I think it’s time to innovate it or change somehow to get to the next level again. This could be a new role or just more changes within this one. I feel antsy again, and that happens about every year or so.

 So that’s it and it’s published publicly so I have to follow through now. Happy New Year to all of you too.

What are some of your 2008 Goals?

Radiohead Album Downloads Average Price Paid: $6.00

comScore released some data yesterday about the new Radiohead album that was only distributed through their web site and the price was not set and they did not enforce any pricing at all so people could download the album completley for free if they wanted and didn’t have the money or feel the responsibility to pay.

What they told us is some very interesting information about the music business and the music consumer market. With over 60% not paying anything at all and an average cost paid of $6.00 from just those who did pay (40%), it tells us a few things about the real value of music to consumers. When you average that out over all people it makes the average cost spent by someone $2.26 per album download. (which is higher than my guess of $0.99 cents)

Most people don’t think it is worth a 15 dollar CD or a 10 dollar iTunes download. They think its worth $0. No money at all, it should be free. Is this because they think it’s cheap, easy to create and plentiful? Or is it because radio has been free forever? Or because the Internet made downloading it for free accessible in a way they could copy it and share it? Personally I think it is because of 2 reasons:

1. The average age for the interest in music and online music is very young, these kids don’t have the money (and may not see the value) for paying for entertainment yet. Older folks would think differently on average.

2. Radio has set the standard for eons being free. Why can I listen for free all the time there, and not online or on my ipod? Free is free, and the ad supported radio model is still telling us that music isn’t worth paying for.

Here is the data from comScore: 

    Radiohead “In Rainbows” Online Album Downloads                      

    October 1-29, 2007                                                  

    Total Worldwide – Home/Work Locations                                

    Source: comScore, Inc.                                              

                                                           Worldwide       U.S.      Non-U.S.

    Percent Who Paid for Download                38%           40%         36%

    Percent Who Downloaded for Free            62%           60%          64%

    Total Downloaders                                 100%         100%        100%

    Radiohead “In Rainbows” Online Album Downloads                      

    October 1-29, 2007                                                  

    Total Worldwide – Home/Work Locations                               

    Source: comScore, Inc.                                                

                                                     Worldwide       U.S.      Non-U.S.

    Average Dollars Spent                                               

     per Paid Download                           $6.00        $8.05        $4.64

    Average Dollars Spent                                               

     per All Downloads                                $2.26        $3.23        $1.68

What are Vampire Electronics? Do I own any?

Vampire Electronics?

Ok, the topic of saving electricity either for the purpose of saving money or saving the environment or both is getting more popular. I just read in TIME magazine about this new term called Vampire Electronics. They are electronics you have in your home that still suck down electricity and energy while they are not in use. Things that are in this category according to the blurb were coffee makers and cell phone chargers. I would also think that computers in sleep mode (better than being on though) DVD players, external hard drives, radios and your kitchen appliances would fit in this category too since they all have led lights, clocks or some kind of process running in the bakground at all times. Some of these things are necesities (you can’t unplug the fridge when you leave to go to work) but others are not. Unplugging the toaster, coffee maker, cell phone charger and dvd player when not in use can add up to $2-$5 bucks savings in a month by my best guess. If you have many of them (and a lot of electronics in general) you may save a lot more if you just shut down completley and unplug them.

Kids and allowances have evolved to PayJr?

When I was a kid I didn’t get an allowance. I just had to do what my parents wanted me to, regardless of whether there was money in it for me or not. (there usually was not any incentive except to not get in trouble) I know though that in the 1980s a lot of kids did get allowances and the amount varied more by how much money your parents made than by the chores you did around the house. Now I think paying kids allowances is even more mainstream than it was then. And apparently there are consumer products built around it that I was not aware of. Apparently parents no longer give a kid cash, they give them these rechargeable credit card type cash cards good at certain stores. I guess the point is that you know your kid can go out and buy video games with it but not use cash pay for drugs or something. This new payJr company lets you select how much to pay your kid per chore and reimburse the card in savings and in cash that can be used at Target or other retailers. This is all still just a little foregin to me. I can’t figure out why kids would ever do anything just because it was the “right” thing to do if there was no money in it for them?

Wake Up WalMart – Chinese food product recall update

I just got this information in an email from Wake Up WalMart and wanted to pass it along because more people should know about what lengths WalMart will go to in order to make more profit. Nothing is sacred, so don’t spend your money there if you want to have any control over our U.S. Economy at all:

Wal-Mart is the #1 importer of Chinese goods. So, after the spree of high-profile recalls and outright bans on dangerous Chinese products, wouldn’t it be logical for Wal-Mart to take the offensive against unsafe imported goods? Shouldn’t Wal-Mart stand up for the safety of American consumers?

Wouldn’t you?

The truth is that Wal-Mart is putting profits over people – again – by blocking laws requiring disclosure of where food comes from. Instead of looking out for consumer safety, Wal-Mart is watching its own bottom line.

That’s why we put together a new ad to expose the truth about Wal-Mart and China.

Click here to watch our new ad and send it to five friends:

http://www.wakeupwalmart.com/feature/foodsafety

Even among nations, Wal-Mart is China’s sixth largest trading partner: it buys more Chinese goods than industrial giants like Germany and Britain. This gives Wal-Mart the power to demand safer products from its Chinese suppliers. Unfortunately, it has demanded nothing more than lower prices, and has tried to cover up the consequences of its race to the bottom.

As consumers, we have the right to know that the products we buy are safe. Don’t let irresponsible corporations like Wal-Mart cut us out of the loop. Please watch our new ad today, and send it to five friends:

http://www.wakeupwalmart.com/feature/foodsafety

The more people learn the truth about Wal-Mart, the more public pressure grows for Wal-Mart to change.

You – together with more than 402,000 fellow supporters of WakeUpWalMart.com – have the power to make Wal-Mart put people first.

Amidst seemingly endless recalls of dangerous products, Wal-Mart has tried to keep American consumers in the dark.

Let’s shine a light.

http://www.wakeupwalmart.com/feature/foodsafety

Thanks for all that you do,

The Team
WakeUpWalMart.com

Family Fun

I was at a family function today and it was fin to see everyone there and catch up a bit. It is always interesting to see what people have been up to although I am not the best person at being social. I admit I am more like my dad in that I am quieter and don’t like to get into heated discussions, which sometimes happen at these functions. But even my dad is better at socializing now than I am. I just really wonder how much I have in common with these people? They’re nice and we’re related, but I wonder how many know what I do for a living? And how many would really be around if not the connection through my parents? Maybe some, I don’t know. Families aren’t nearly as close as they used to be in past generations and I can see why. We’re all busy working and we have a ton of things we have to do. And most of us don’t live anywhere near one another. I wonder what creates a bond between people now? I have been told through research that the most important determining factor in who your friends are and who you marry is proximity. So, without proximity can family stay close? We don’t have family businesses or professions in common anymore, and the lifestyles we lead is more and more diverse. In fact I don’t think many people I am related to share many of my views or would really want to know that I differ from them on a lot of them. But then again maybe that’s why I don’t speak up at these functions…

Advertising and Economic Growth Dissertation

advertising-and-economic-growth.pdf

Ok, back to the serious stuff again… (ugh) I have been reading this study on advertising on economics, while I am on the train. (it keeps the crazy people away) Advertising and Economic Growth by Maximilien Nayaradou and prepared by the World federation of Advertisers. (I guess there is a federation for everything) It is very interesting, and as always I am looking for clues and insight into my own market and analysis category by way of these theories and research. I am only 1/2 way through it but 2 things have struck me thus far.

1. The consumption trend for the US is crazy high compared with the rest of the world. The people here are really living on thin ice financially. There is very little saftey net if you spend 70% of your income (considered consumption in the chart). The formula is More Advertising $ Spent = More Consumer Consumption. But notice the law of diminishing returns, and how high the spending had to get just to move the needle that little bit between the UK and the US which are already at the highest end.

2. The correlation they talk about between higher advertising rates and higher economic growth rates are not really true in my opinion. I do not think extra advertising raises growth rates, I think it speeds up and condenses a product life cycle in a shorter time. The result is that things get old faster, out of fashion faster and people want new stuff faster. Therefore excessive and mass advertising would condense a product’s lifecycle from 5 years to maybe 2 at best. You train people to want something new every 2 months and your product won’t sell at all in 3. It all leads to a faster churn of companies growing booming and later failing and going under. That’s not new growth, that’s growth that would have happened anyway, you just made it faster, and it will drop off just as fast when people get tired of it and stop buying. No one talks about the downward slide on the other end, or how this creates a turblulent economy where people get laid off from jobs every 2 years and companies have to get bailed out all the time.

Don’t get me wrong, I like advertising in general. I have always been fascinated by it and love it’s news like ability to reach consumers and inform them about new priducts, information and entertainment when it is relevant and benificial. But I HATE over-advertising spammy companies that think that with enough money spent plastering their name on everything that moves, they will be able to keep that upwards growth trend going. You have to realize that people are over sensitized and will block it out after a certain point, and if they have a bad experience with the product they are not going to be very willing to give it another chance. Unless they aren’t that smart, but then as a country we have even bigger problems.

Rebuilding Your Credit

Crdit cards are so prevalent these days, they start pursuing kids when they are in High School to get them. The problem is that by the time someone gradates college they are most likley in debt both with school loans and the credit card companies. So at the ripe old age of 22 you have bad credit and have to start over again. What are we teaching our kids by letting these companies take advantage of them like that? Someone recently said that if you owe money with interest payments you are effectivley their slave, and I am beginning to think that is true.

Bolingbrook, IL Red Light Speed Cameras – Tickets

I just found out that there is a town in the Chicago suburbs (Bolingbrook, IL) that is ticketing people via camera for running red lights when they just don’t stop completely behind the white line at intersections or don’t stop completley behind the white line before making a right hand turn on a red light. You don’t know it’s happening and you just get a $100.00 ticket in the mail. This is ludicrous. Those types of things don’t endanger anyone and aren’t worth ticketing usually. It’s that these local towns have heard how much money that is made by these Bolingbrook red light cameras (between $20,000 and $30,000 dollars a month of $100.00 tickets) when they are approached by the camera companies (who want to make sales) and since they always need more revenue for their pet projects and their budget, they always say yes and install them. Then they get all the revenue benefit of a property tax or sales tax increase without the public debate of a tax referendum. Sneaky bastards!

Take action today and make sure your town doesn’t end up like Bolingbrook, IL.These high priced and ridiculous red light camera tickets are going to keep people from paying what they need to in order to meet mortgage payments and afford health-care. Bolingbrook government and police should be ashamed of themselves for taking advantage of good citizens like this. I am not going to spend any money there at all anymore. They don’t deserve my sales tax dollars. They are acting like mafia, just taking whatever money they want for reasons that would otherwise be considered an invasion of privacy.

Thanks to the comment from Dennis I found this Tribune article about a lawsuit regarding the cameras around Chicago. It cites the truth that we all knew that these cameras were installed by Red Speed for revenue reasons and not safety purposes and how Bolingbrook and Schaumburg have both shut them down. I live near Warrenville though, and they choose to leave theirs up, which is scary to drive through every day, but they also publicly state that they review all photos by hand and only write tickets if they see something illegal and they don’t just let the system automatically write tickets. Those seem more reasonable.

And for all the politicians that like to rally support around the idea of keeping people from running red lights: Who ever runs red lights? If this is a problem how come I have never seen it happen? If this was an issue, the people who live there would be asking for help controlling it, but nobody ever sees red lights run because it doesn’t happen, and in fact there is no red light running problem at all. It is just a thinly veiled excuse to tax people without their approval by vote or referendum by dishonest politicians. Bravo to the Trib or printing this.

Save money around your home

I got this in an email today and wanted to share it with all of you. I think these are some good tips. I previously blogged about saving money and spending wiser a few months ago. It is a topic I am paying more attention to since I am trying to build up some more savings so I can buy a better place in a few years. 

There are many simple ways to save money around your home. And some even help you save the environment, too. Here are some of our favorites:

1. Replacing an old dryer with a new, energy-saving model equipped with a moisture sensor can save you cash, up to 15% per load (after the cost of the dryer. this is only good if you already need one)

2. Use warm or cold water instead of hot when washing your clothes.

3. Turn the thermostat on your water heater down a few degrees, and add some insulation to the tank itself, to help it retain its heat. Insulating the tank costs about $20 and can save you $25 a year.

4. When the fireplace is not in use, don’t forget to close the flue damper. Chimneys are designed to let smoke escape, which means heated or conditioned air escapes, too.

5. Use linear fluorescent and energy-efficient fluorescent compact lamps. They last many times longer than old-fashioned incandescent bulbs and use much less energy.

6. Use solar pathway lights outside your home to eliminate the use of electricity for exterior lights.

7. If purchasing a new refrigerator, consider one with the freezer on the top—they’re more efficient

8. Cut out expensive directory assistance calls by using 1-800-free-411. This new service is made possible by thousands of national and local businesses whose brief audio advertisements are played to callers who request businesses in their yellow pages category.

9. Clean inexpensively, and with common household products. For kitchen counters, add four tablespoons of baking soda to one quart of warm water. It cleans and deodorizes. Add equal parts sudsy ammonia and water for another all-around cleaner. Use vinegar (white or apple cider) mixed with water to remove soap and hard-water buildup.

For more information, check out The American Council for an Energy Efficient Economy’s website, and ENERGY STAR’s website.