All Entries in the "The Dope On..." Category

Economic Indicators 101 - Part I

Economic indicators are statistics that tell us how well the economy is doing.

The most important American Economic Indicators are published monthly by The United States Congress.  Here’s a link to the indicators for August, 2008.

These indicators effect the market in 2 ways:

Procyclic indicators - have a direct relationship to the economy.  As they go up, the market goes up.  An example of this is Gross Domestic Product (GDP.)

Countercyclic indicators - have an inverse relationship on the economy.  As they go up, the economy is likely to be going down.  Examples of this are unemployment rates and inflation rates.

Their effect can be

• leading - the indicator change occurs before its effects on the economy
• lagging -  the indicator change occurs as a result of what’s happening to the economy, or
• coincident - it changes as the economy changes

“The indicators fall into seven broad categories:

1. Total Output, Income, and Spending
2. Employment, Unemployment, and Wages
3. Production and Business Activity
4. Prices
5. Money, Credit, and Security Markets
6. Federal Finance
7. International Statistics

Each of the many statistics in these categories helps create a picture of the performance of the economy and how the economy is likely to do in the future. Investment strategies are adjusted depending upon current indicators.  Mere rumors about economic indicators often have a strong effect on Wall Street.

In my next post in this series I’ll look at each of these categories in more detail.

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The Dope on National Debt Revisited

In light of the gloom and doom IOUSA movie released last week, I thought it relevant to repeat my post from March on National Debt.  Check out these statistics.  You think you have debt problems.

The post:

Are you sitting down?

The US National Debt is 9.5 trillion dollars. If you divide that by the U.S. population, that means each American owes 31 thousand dollars. We are all paying interest on this money through our taxes.

The government adds to the national debt by not balancing the budget each year. Its current budget deficit is growing the national debt at a rate of 1.66 billion dollars per day. That’s about 1 million dollars a minute. Click this link if you’d like to see the history of how the national debt has gotten so high. National debt has increased during Republican administrations, and decreased during Democratic administrations. Financing the wars in Iraq is not cheap. Nancy Pelosi states that “right now we pay in interest four times the amount we spend on education and four times what it will cost to cover ten million children with health insurance for five years.”

Who do we owe this money to? 2.4 trillion dollars is currently owed to foreign countries. The major holders of this debt are Japan ($587 million) and China ($493 million). 40% is owed to the Federal Reserve. The Federal Reserve is actually privately as well as publicly owned. The remaining is owed to social security, individuals, corporations, and states through various bonds.

Will we actually ever pay back the national debt? There is controversy over whether or not we even want to. Many analysts argue that reducing this debt would create a bizarro deflation scenario so acute that the readjustment period would create havoc.

Some say it would be impossible to do. ” Stephen Moore wrote in the Wall Street Journal:

Here’s an experiment. What if we were to try to pay off the $4-plus trillion national debt by having Congress put one dollar every second into a special debt buy-down account? How many years would it take to pay off the debt? One million seconds is about 12 days. One billion is roughly 32 years. But one trillion seconds is almost 32,000 years. So to pay off the debt, Congress would have to put dollar bills into this account for about the next 130,000 years—roughly the amount of time that has passed since the Ice Age. Even if we were to require Congress to put $100 a second into this debt-buy-down account, it would still take well over 1,000 years to pay the debt down.

But much of the money is borrowed in the form of guaranteed loans, so it has to be paid back. And taxes will continue to increase as the interest increases. And what happens if we don’t pay back the money borrowed from Social Security?

It is a complicated problem, and we are in deep. Where is our current administration? They have let the deficit spiral out of control. In fact, the government is borrowing money for our upcoming tax rebate. What’s wrong with that picture?

Are you looking forward to November as much as I am?

For more information on the IOUSA movie, see the N.Y. Times article “Tackling Our Unsexy National Debt.”

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The Dope On Stagflation

(This is a repeat of an article I published March 1st, with some modifications)

From 1969-1982 the United States experienced its worst economic slow down since the depression. Deemed as a period of stagflation (stagnation + inflation),Richard Samuelson, in a recent Newsweek article, described it this way: “a spiraling combination of high (or rising) inflation, high (or rising) unemployment, and economic slow down over a long period of time.”

What spawned and then fed this lengthy economic struggle? Continued attempts at improving an economic turn-down by increasing government spending. Through a combination of government programs and tax reductions over a period of time, the feds worked to ease the pain of struggling Americans. This not only fueled inflation, it swelled the US deficit. The government kept sinking deeper, as it struggled with burdensome loan interest.

It wasn’t until 1982, when the hard decision was made to reduce the federal deficit, that things started turning around. The government tightened its belt and raised taxes.

“Americans stopped spending and businesses stopped borrowing. The country fell into a deep recession.”

But, as difficult as this year was, the destructive economic cycle finally broke, and in 1983, the economy finally started turning around.

Does any of this sound familiar? The government gave us rebate checks, in spite of the national deficit reaching record heights. The government is making the same mistakes made in the 1970’s. If we are to turn our current economic problems around, officials need to look at history, and make some unpopular decisions.

Samuelson describes it this way:

“Naturally, no leading politician is willing to acknowledge the self-evident implication: that recessions, though unwanted and hurtful to many, are not just inevitable; sometimes they’re also necessary to prevent the larger and longer-lasting harm that would result from resurgent inflation.”

Greenspan and Burnanke.
Apple, Tree?

For more information on the National Deficit, see my post The Dope on National Debt.

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The Dope on CEO Blogs: 41 Blogs By, About, or For, the Great and Not-So-Great CEOs

Who would have thought that Lee Iacocca would sit at his bells and whistles lap tap and blog? And why does Jack Welch not have one?

Is it real, or is it their personal secretary? Or perhaps they have become philanthropic in their old age. Who can really know. But, nevertheless, I’m enjoying getting into the minds of some of the most financially successful people in the world today.

Here’s the ones I’ve found so far. Anyone out there want to add to the CEO blogroll?

Lee Iacocca

Donald Trump

Bob Parsons, founder of GoDaddy

Zappos CEO and COO Blog

Dave Kellogg does the Mark Logic CEO Blog

A blog called Marketing Nirvana has multitudes of links to CEO blogs, categarized in various fashion to meet your interest. Here’s a couple of his lists:

Top Ten CEO Blogs (July, 2006):

1. Jonathan Schwartz (President & CEO, Sun Microsystems)
2. Craig Newmark (CEO, Craig’s List)
3. Mark Cuban (Owner, Dallas Mavericks)
4. Ross Mayfield (CEO, Socialtext)
5. Matt Blumberg (CEO, Return Path)
6. Alan Meckler (CEO, Jupiter Media)
7. Kevin Lynch (Chief Software Architect, Adobe)
8. Robin Hopper (CEO, Founder - iUpload)
9. Jason Calacanis (CEO, Weblogs)
10. John Dragoon (CMO, Novell)

Top Fifteen Corporate Blogs. These are not CEO blogs, but reflect the views of the CEO(May, 2008):

#15. Boeing - Authority: 67
#14. Monster - Authority: 73
#13. Kodak - Authority: 105
#12. Delta - Authority: 252
#11. Yahoo! - Authority: 297
#10. General Motors - Authority: 364
#9. Ask - Authority: 364
#8. LinkedIn - Authority: 591
#7. Digg - Authority: 641
#6. Dell - Authority: 799
#5. Yahoo! Search - Authority: 1130
#4. Facebook - Authority: 1478
#3. Flickr - Authority: 1744
#2. Adobe - Authority: 1797
#1. Google - Authority: 8492

Source: New PR Wiki, provides the listing of corporate blogs, which I then rank.

 

How about a list of Fake CEO Blogs (November, 2007) published on Thought Beans?

http://fakerichardbranson.blogspot.com/
http://fakelarryellison.blogspot.com/
http://fakebill.wordpress.com/
http://fakeschwartz.blogspot.com/
http://fakesteveballmer.blogspot.com/
http://fakesteve.blogspot.com/

Debbie Weil is a famous CEO blog writing advisor, with her own blog, BlogWrite for CEOs. Check out this witty blog written for CEOs to read.

One of the most intriguing and colorful CEOs ever, Jack Welch, does not have a blog, but he has written a book in the blogging style, Debbie Weil says, and he is also the subject of countless blogs, including Business Week’s recent post entitled Jack Welch on Jeff Immelt, outlining what is turning out to be a soapratic story of a retired CEO invading his old turf once too many times. The Bing Blog by Stanley Bing at Fortune Magazine gives another side to this story in Jack Welch: His Final Transformation Isn’t Pretty.

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The Dope On Lists - How to Make a List That Will Help You Get Things Done

Not to brag, but, I am The Master of The List.

See the man in the picture on the right? He’s still in training.

After reading Trent’s article at The Simple Dollar entitled “Dealing With Things Left Undone“, I was inspired to share my knowledge on this topic, and also, perhaps, start a discussion here on how others organize their lives.

There are many reasons to organize my day. For instance, I didn’t become a Master of The List for nothing- as my grandmother used to ask me repeatedly as a child-and I quote here-

“How could you forget that, honey? Did you fall off the turnip truck?”

In fact, their are many reasons to make a good list:

Reasons for Lists

• They help me remember. How many times would I have forgotten that birthday card if I hadn’t written it down?
• They help me organize. Efficiency is everything. I can save a lot of time planning my errands ahead. For instance- is the library near the grocery store? Is the liquor store near it? OK, three trips becomes one trip with three stops.
• They help me prioritize. 1) liquor store, 2) library, 3) grocery store (so the ice cream doesn’t melt on the way home.)
• They give me a feeling of accomplishment, every time I get to check something off.
• I save time and money when I am organized. I remember my coupons and cloth bags for the grocery store. I use less gas by planning my errands. Etc.

Things I Have Been Guilty of When Making Lists

• I have added things not on the list, so that I could then cross them off. This is not the best situation, as it means I have not followed my prioritization, but, never the less, at least I did something.
• I break down a task into multiple activities. I get to make more cross offs, while actually accomplishing a lot less. When I’m feeling particularly lazy, this is a good way to get me moving. For instance, liquor store might be broken down into two separate tasks: 1) Purchase three bottles of favorite wine on sale, and b) get two Boston Red Sox scratch tickets with savings from sale.
• I have removed things from my lists. I figure this is ok if I can justify it. List are all about logical thinking.

Now, with the introduction complete, let me settle in on the task at hand:

How to Make a Great List

Tools required-

• An excel spreadsheet is preferable, but if you prefer paper and pen, you can just put numbers next to each task to prioritize it. It is hard to make a list in the right order from the start.
• Cup of strong coffee, or other means of waking up-

Make the List- (best done at the start of your day)

1. Transfer all the tasks you didn’t do on yesterday’s list over to today’s list.
2. Add any new tasks.
3. Assign all jobs that absolutely have to get done today a “1″. Then rank them in order of descending importance with letters: “A” is the first thing you’ll do, “B” is the second thing, etc.
4. Next, find all the jobs that you would like to get done today, and assign them a number “2″ status. Again, rank them just as you did with the “1″s.
5. Finally, assign everything else to the “3″ category. I call this the “Dream On” section. I hardly ever get to these things, so I don’t rank them. If you think you’ll get to them, though, you can also prioritize this section.
6. Now, take an overall view of the list, and ask yourself these questions:
   1. Do you have enough time to accomplish all of the “1″s? If you realistically can’t get through them all, move those you can’t get to over to the “2″s right now. May as well. It alleviates the guilt at the end of the day, when all your “1″s aren’t crossed off.
   2. What am I missing? You can always add later. too.

I guarantee that if you do this for a few days you’ll see yourself getting more accomplished.

And remember: 21 days makes a habit.

Another Great Master: Manny Ramirez

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The Dope on Credit Card Debt

There’s a statistic floating around saying Americans carry an average of nine thousand dollars in monthly revolving credit card debt.

Sound bad?

The good news is, this average doesn’t reflect the reality. According to Liz Pullium Weston at MSN Money, it’s not as bad as it sounds. “Averages don’t reflect a true picture,” she says. “Say 20 people were in a room with Warren Buffett and Bill Gates. The average net worth of the people in this room is 4 billion dollars. The other 18 people could make 100,000 dollars, or even 1 million, or 10 million dollars, but this is not reflected in the average.”

She goes on to say that if you look at the median, the average household has just $1900 dollars in debt. Median is the midpoint where 50% of the households have more debt, and 50% have less debt.

She also states some healthier statistics:

23.8 % of American households have no credit card debt at all.
31.2 % have credit cards, but pay them off in full every month.
Only 1 in 20 households (or 5%) have credit card debt of $8000 dollars or more.

The credit card debt problems, it turns out, lie in specific sectors of the population. For example, undergraduates average $2300 dollars in credit card debt, graduate students, $5800 dollars. Getting your first credit card has become a right of passage for young adults, like getting your driver’s license, being able to vote, or buying your first beer at the local pub.

And 36 % of those who owe more than $10,000 dollars make less than $50,000 dollars per year. Of those, 13% make less than $30,000 dollars per year.

If you have high credit card debt, there are some things you can do:

Start living within your means. Don’t buy anything until you have the cash, or can pay off the card before any interest accrues. If you must pay for something over time, and we all need to at some point in our lives, don’t stretch yourself beyond the point of no return. Don’t buy that $2000 dollar stereo if you can only afford the $1000 dollar one. Never charge a vacation.

Come up with a plan to eliminate your debt. As you reduce the amount of interest you’re paying, that money becomes yours.

Pay off the higher interest rate cards first.

Be sure to pay more towards the balance than the amount of interest accruing each month.

If you can’t pay off the higher interest rate cards quickly, transfer their balance to cards with lower interest rates. This could save you hundreds of dollars. Be sure to read the fine print. Transfer fees can be high.

Consolidate all your cards on to one low interest card. This keeps it simpler.

Seek outside counseling. If money management is not your forte, get some advice. You can start by checking out this website: http://www.nfcc.org/, or by calling (800) 388-2227.

Go for getting to zero debt. And once you’re there, stay there.

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The Dope on National Debt

Are you sitting down?

The US National Debt is 9.5 trillion dollars. If you divide that by the U.S. population, that means each American owes 31 thousand dollars. We are all paying interest on this money through our taxes.

The government adds to the national debt by not balancing the budget each year. Its current budget deficit is growing the national debt at a rate of 1.66 billion dollars per day. That’s about 1 million dollars a minute. Click this link if you’d like to see the history of how the national debt has gotten so high. National debt has increased during Republican administrations, and decreased during Democratic administrations. Financing the wars in Iraq is not cheap. Nancy Pelosi states that “right now we pay in interest four times the amount we spend on education and four times what it will cost to cover ten million children with health insurance for five years.”

Who do we owe this money to? 2.4 trillion dollars is currently owed to foreign countries. The major holders of this debt are Japan ($587 million) and China ($493 million). 40% is owed to the Federal Reserve. The Federal Reserve is actually privately as well as publicly owned. The remaining is owed to social security, individuals, corporations, and states through various bonds.

Will we actually ever pay back the national debt? There is controversy over whether or not we even want to. Many analysts argue that reducing this debt would create a bizarro deflation scenario so acute that the readjustment period would create havoc.

Some say it would be impossible to do. ” Stephen Moore wrote in the Wall Street Journal:

Here’s an experiment. What if we were to try to pay off the $4-plus trillion national debt by having Congress put one dollar every second into a special debt buy-down account? How many years would it take to pay off the debt? One million seconds is about 12 days. One billion is roughly 32 years. But one trillion seconds is almost 32,000 years. So to pay off the debt, Congress would have to put dollar bills into this account for about the next 130,000 years—roughly the amount of time that has passed since the Ice Age. Even if we were to require Congress to put $100 a second into this debt-buy-down account, it would still take well over 1,000 years to pay the debt down.

But much of the money is borrowed in the form of guaranteed loans, so it has to be paid back. And taxes will continue to increase as the interest increases. And what happens if we don’t pay back the money borrowed from Social Security?

It is a complicated problem, and we are in deep. Where is our current administration? They have let the deficit spiral out of control. In fact, the government is borrowing money for our upcoming tax rebate. What’s wrong with that picture?

Are you looking forward to November as much as I am?

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