No, the title is not about another stock market crash - it's about crashes in the past. This one is a one-pager about the Nikkei Index collapse that began in the early 1990s. I remember being in college at that time, and the Japanese stock market was going absolutely nuts (on the bullish side). I think it got to nearly 40,000!!!

Only to fall to less than 10,000 and stay there for over 15 years!

By the way, the site below has articles on a handful of financial crises that have occurred over time. They're worth studying because there's one sure thing:

Humans aren't very good at learning from our mistakes. In fact, it's highly likely that we'll repeat them again and again. Often times, we make the same mistakes over, but bigger and more catastrophic.

The Nikkei Bubble

Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.

The stock market has rebounded quite well since it hit the 6,000 range (Dow). The question is, will the rise continue, or will it stall. OR worse yet, is this the classic "dead cat bounce?"

It all remains to be seen, of course. Too soon to tell. But I'm going on record to say that this, even with today's announcement by the Fed that it's officially fueling inflation by printing money, is not a dead cat bounce.

Oh, the market may tumble for a few days. But I think we've bottom. Just note that the bottom of the ocean has peaks and valleys, too, and that we might see 6,000 again. We may be here a while. But we're not gonna go any lower than 6k.

In fact, it is my gut feeling that we're on the upswing. I believe the end of this decade and the first few years of the next decade will be banner years for stock markets all across the land.

After all, we're at levels here in the US that we haven't seen since the mid-90s. The housing, credit, and mortgage messes weren't even in place then.

So we've fallen further than logic would dictate. John Hussman, in his newsletter, says,

As for the stock market as a whole, I continue to view the market as undervalued, but not deeply undervalued. So over the course of a 7-10 year holding period, I do expect passive buy-and-hold investors in the S&P 500 to achieve total returns somewhat above 10% annually.

But he also says,

Shorter-term, however, investors may demand much higher prospective long-term returns in order to accept risk, and that's a problem, because the only way to price stocks to deliver higher long-term returns is to drive prices lower.

After all, even a dead cat will bounce.

Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.

Welcome to the March 18, 2009 edition of Kids and Money. There were a lot of good posts. There were a lot of "spammy" posts, too, which I deleted. Remember, folks, I approve 99% of the posts here, but this week I probably weeded out 30-40 percent. That's way too much.


So, please, let's keep this focused on Kids and Money. Not Kids OR Money. But Kids AND Money and how the two are inter-related. Okay?

KCLau presents Learn Money Tips playing iMafia posted at KCLau's Money Tips, saying, "About iMafia, an application for iPhone. How it is connected to real life in terms of personal finance and how to play the game."

jim presents Teaching Kids About Money: Tessy and Tab Money Manager Kit posted at Blueprint for Financial Prosperity.

nickel presents Visualize Your Savings Goals posted at fivecentnickel.com.

The Smarter Wallet presents Blu-Ray DVD Player Review: Pros and Cons posted at The Smarter Wallet, saying, "Are blu-ray players worth the money? Should you get one for your family?"

Concerning Kids presents Raising A Street Smart Kid posted at Concerning Kids.

Save Money presents Frugal Frauds Revealed posted at How I Save Money.net.

Julie Guarnizo presents Teaching Money Management Habits to Children posted at Beef Up Your Piggy, saying, "As a mother of two small children, teaching life lessons about money and personal finance is crucial is raising children."

David presents The Safety of Your Accounts posted at Personal Finance Ology, saying, "With the uncertainty in the banking industry, learn where the safest places for your money are!"

Nate Desmond presents 12 Ways to Waste Money in College posted at Debt-free Scholar.

Steve Patterson presents ISMagazine.com - Blog - ATM Skimming Leads to 1 Billion in Losses for Consumers posted at ISMagazine.com, saying, "Great story about ATM safety and something to present to your bank to make sure their ATMs are safe."

Debbie Ducker presents Your Children and Grandchildren Must Learn to Save Money posted at Ducker Promotion Ezine, saying, "Teach your children how to save money at an early age and you will save them a lifetime of heartache."

Justin Hall presents How to Find a Job posted at Justin Hall.

Patricia Turner presents The Ultimate Guide to Ponzi Schemes: Oldest and Biggest Scams, Madoff and More posted at Bankling.

Stephanie presents The Wii Fund posted at Stop the Ride!, saying, "Teaching the kids to save."

jim presents Deducting Miles for Charitable Volunteering posted at Blueprint for Financial Prosperity.

Matt Sherberg presents Choosing the Best Debt Solution posted at Debt, saying, "When you have mountains of debt piling up and you have debt collectors waiting at your doorstep, it is time to get off the couch and find a debt solution that will work for you. The right debt solution can help you reduce your debt."

Jeff Rose presents 29 Good Reads About Kids And Money posted at Jeff Rose.

Savings Toolbox presents The UnTruths About Saving For College posted at Savings Toolbox.

Silicon Valley Blogger presents College Advantage: Ohio 529 Savings Plan Offers $25 Cash Bonus posted at The Digerati Life, saying, "529 plan for your kids!"

The Smarter Wallet presents Budget Your Money and Control Your Spending Using This Simple System posted at The Smarter Wallet, saying, "Thanks!"

Sam presents NEW !! Job Interview Tips and Questions. Get the Job You Want. Job Interview Tips and Skills. ! Surfer Sam posted at Surfer Sam and Friends.

Concerning Kids presents How To Handle A School Yard Bully posted at Concerning Kids.

Dating321 presents Breaking Up Tips posted at Free Dating Advice, saying, "Breaking up is difficult to do, but it is important you go about in a mature and respectful way."

That concludes this edition. Submit your blog article to the next edition of Kids and Money using our carnival submission form.

Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: kids and money, blog carnival.

Money isn't everything. It's the only thing. Wait. That's only for football.

Enjoy life. Spend time with your family.

I've seen a lot of stories about what caused the Mortgage Meltdown, the Credit Crunch, and the recession (some are even calling it a depression). On the drive in today, the REAL answer finally came to me.

As in all complex things in life, there wasn't one specific cause. Here's my general thought process on this topic.

People who want to get to the root of any cause always use a root cause analysis to determine the true cause of any issue. One of the practices that process improvement folks use is the fishbone diagram, where if you keep asking "why?" to a question you'll get to the root of it.

But this simple approach often neglects the contributing factors to an issue or a failure. For example, a barn might have caught fire and burned to the ground. The root cause might have been determined to have been a spark from a passing-by freight train.

But the contributing factors were that there was damp hay in the barn, along with kerosene, dry timber, a poorly-maintained exterior, and weeds that had grown rampant over the course of several years.

All of these things led to the fire. Of course, the fire could not have started if not for the spark. But the weeds, hay, timber, etc. allowed the fire to spread at such a rate that the fire crew could not stop it before the entire barn burned down.

Such is the case with the economy. There were many contributing factors: Declining home values, rising bad debt, companies trying to stay afloat cutting staff, phoney financial instruments dreamed up by mathematicians rather than business folks, etc. The list is literally endless.

But what was the root of it all?

As in any mania, it was the madness of crowds. Adam Smith's "invisible hand" and "pursuit of self interest" was the downfall.

Home buyers thought, "If I don't buy this house now, somebody else will."

"Or, if I don't buy this house today, it will cost me $60,000 more to buy this house in 6 months." (By the way, this was the rate of price appreciation for a below-median home price in the Bay Area in California in 2003-2006.)

Lenders said, "If I don't fund this mortgage, somebody else will."

Insurers surmised, "If I don't insure this asset, somebody else will."

Bottom line:

If I don't _____ this, somebody else will!

It was all about getting "it" before somebody else got "it." Or, in other words, what I call "relative greed."

It wasn't that everybody was greedy, in and of itself. It was more along these lines:

Scenario 1

You get a 10 percent pay raise. Your neighbor gets a 15 percent pay raise.

Scenario 2

You get a 5 percent pay raise. Your neighbor gets nada.

Do you know which one most people would take? Yeah, #2. It's getting "more" than your neighbor, co-worker, competitor.

That's what happened here, in my humble opinion.

It's also "the market" filling in voids. If Bank of America doesn't do this mortgage, Wachovia will. And Wachovia did. And did, and did and did and did.

BofA saw this and said, "We're losing market cap. And we're the biggest and baddest bank around." So, they got into the game, and then some!

People did it, too. If I don't buy a house now, I may never be able to afford one.

"Investors" did it, too. If I don't buy this duplex now and flip it, I may never get another golden opportunity like this.

Do yourself a favor: Read Extraordinary Popular Delusions and the Madness of Crowds You only really need to read any one of the stories. They're all the same, really.

Market goes up and up, creating self-fulfilling prophecy. Something happens. Market goes down and down, creating self-fulfilling prophecy. What stops it? Who knows?

Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.

The Bernard Madoff scandal is making the news again today. I haven't written much about financial scandals, rip-offs, and white collar crime, so now's as good a time as any, I suppose, to fill you in on a few things.

First off, let's just say that Bernie Madoff is a jerk. He took people's money in an elaborate Ponzi scheme and made off with BILLIONS. Gone are the days when MILLIONS of dollars ripped off will make the news circuit!

Madoff simply needs to be tried, sentenced, and forgetten about. "Investors" - you will NEVER get your money back.

IT'S GONE.

I put "investors" in quotes because a lot of those folks weren't investors. They were rich dreamers who wanted even more money than they already had.

They had an "In" to a supposedly too-good-to-be-true financial "system."

NEWSFLASH

If it's "too good to be true," it's too good to be true! Run - don't walk - away from stuff like this.

For as long as man has lived, there have been schemes concocted by shrewd, yet immoral and dispicable, people that seek to separate YOU from your MONEY.

The most famous, of course, was made famous by Italian immigrant, Charles Ponzi. He promised "investors" a 50 percent return on their money in a matter of days and he made good on his promise.

For a while.

He took new investor money and returned it, plus the 50 percent, to the gullible folks who gave Ponzi their money first. The last suckers got the shaft.

Of course, Ponzi went to jail and died poor. Just like Madoff ought to.

There are some lessons to be learned here.

1. The aforementioned, "If it's too good to be true" lesson. 
2. Invest like Warren Buffett - if you don't understand a "business," don't invest in it. Ponzi had no business other than taking people's money for himself.
3. If you hear about a scheme on a golf course, get in your golf cart and go home. Secure your money. Make sure your pockets weren't picked.
4. If it sounds like an "insider's secret," treat it as such. Insider trading is illegal for many reasons.
5. Invest in YOUR own business. Nobody else gives a damn about you or your financial plight. 

One last thing: There are legal Ponzi schemes, the most notable of which is Social Security. Yes, you read that right. It's a government-enacted program that is exactly a Ponzi scheme.

The reason that Social Security will go broke is that there are fewer and fewer "new investors" and the old investors want their guaranteed returns.

I'm not making any moral judgements here. In fact, I support Social Security. In its original fomulation, it was to be used as a social safety net that had more new investors than old. As long as that was the case, the system was sound and good.

But now that the demographics have turned upside down (many more collecting nowadays, not as many contributing, relatively speaking), the system is in peril.

Stay tuned for my solution to the Social Securty nightmare in a coming post. And don't get me started on Medicare! It's in a much more precarious state than Social Security ever will be, but you don't hear much about it.

Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.

That's my "bold" prediction. The basis for this? The increased FDIC insurance on bank deposits of $250,000 laspes on that date, as if everything will be fine by then.

Don't count on it! There's a lot more downside to this economy, I'm afraid. But now might be a great time to get your ducks in a row and be ready for the upturn. It will happen just as things look their worst.

Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.

With all the talk about the souring economy, job losses, bank failures, and the like, the recession of 2009 is on the minds of everyone.

But I'd like to posit that we never fully recovered from the recession that officially spanned 2001-2002. And that, my friends, puts us into a possible discussion of Great Depression proportions!

Now, before you run off and withdraw all your money from the bank and bury it in your back yard, hear me out!

Typically, after a recession, jobs, sales, and revenues (as well as profits) rise, most often quite rapidly.

Didn't happen last time.

Here's a picture to illustrate what I'm trying to describe. The red arrows represent the year of the respective recession. See how unemployment rises after a recession, then drops until the next one, from 1991 to 2001? And see how the unemployment rate dropped below the rate during the year of the previous recession? That is the typical behavior of the labor market. But look at what happened from 2001 on.

Now, I'm not saying we're in another depression. But we're approaching Great Depression longevity, if not to the same depths. The Great Depression started in 1929, the economy made a few attempts at reviving itself, and then WWII came along. America wasn't fully involved in war preparations until 1941. So we're talking 12 years, at the most.

For this last round of economic downturns, the duration has been 9 years. We're getting there.

Of course, we've yet to see 25 percent unemployment. But also remember that we fudge the numbers nowadays, and there's a different sort of mindset for what constitutes "employment." In the 30s, if you didn't have a full-time job, you were unemployed.

Now, if you're no longer looking for work, you're not even counted. Perhaps you've been out of a job for 3 years, got fed up, and started selling all your worldly possessions on eBay. You're no longer "unemployed." This set of circumstances didn't exist in the '30s.

So, I'd say that whatever level of unemployment you see today, raise it by 30 to 50 percent. Yeah, I think it's that bad. But even at an official 8 percent, we're no higher than 12 percent. Not that that's a good thing. But it's not 25 percent, either.

However, for some pockets of America, where there's 12 or 13 percent unemployment (take San Joaquin County, California, for example, where home foreclosures are at all-time highs), that figure could easily be over 18 percent. I submit to you that those folks feel like they're living in a depression! If you don't believe me, ask them!!!

One last thing: If we hadn't spent $1 trillion on a war (or something else, for that matter), the economic picture during the 2000s would be even bleaker.

I said all that to say this: We got out of the last depression and we'll get out of this one (whether you believe it's a recession or depression).

But our way of life may have to change and that in itself may be the most uncomfortable part of it all.

Jobs you would have never considered before...you may now consider. Wages you hadn't thought about since high school...you may now reconsider. Hours you thought were only for hookers and security guards...they may be under consideration!

Things "I cannot live without" - you may have to live without them (like computers, cell phones, video games, cable, the list is endless).

All of this will break up some families and ruin lives of countless people. But the silver lining is that dire situations may bring us closer, may give us thought for conserving what he have, and give us a greater appreciation for all those things "I cannot live without" once we get some of them back.

It's a bitter pill to swallow. But swallow it we must.

One last thought: There may never be a better time to go out on your own. Consider starting your own business. The Internet being what it is, with low overhead costs, fast deployment capabilities, and only your own mental limitations ("I can't do it," "I don't have time," "I am not that smart" among thousand of other excuses), the sky literally is the limit to your income potential.

It may not come fast, but it will come. And in the end, you'll have more time, more money, and less stress. Get some ideas here. No pressure, no strings.

Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.

This is classic! Microsoft apparently "gave too much" in severance to some (all?) of the employees it recently laid off. Of course, this was the first mass layoff MS ever did, so they didn't have any practice!

Not sure how I feel about this from the employees' perspective...it would seem the ethical thing to do to give it back. But sheesh, MS, can't you make your internal software work right?

Microsoft seeks money from laid-off workers - U.S. business- msnbc.com

Microsoft, lay offs, severance, overpaid

Is this anything like Mutual of Omaha? As a kid, I looked forward to every Sunday afternoon and the wildlife show...

No?

Oh well, pretty cool anyway!

Bank of Obama: Send a Bailout Check to Your Friends

As the Mortgage Meltdown spills over into the Credit Crunch and recession, most of us who own homes (or at least live in homes where we pay a mortgage) have seen the value of our home decline precipitously. Where prices rose the highest and the fastest, they've come down the farthest and the fastest. In some areas, real estate values have dropped by over 50 percent.

Side note: If you can get a loan, start thinking now about buying a home if you don't already own one. Prices may drop further, but not by much -- if, that is, the economy doesn't go into free fall. If it does, all bets are off.

In trying to cope with falling values, I suggest you look at your house purchase as a two-part purchase, the first being the intrinsic value of the utility a home provides (shelter), the second being the investment value.

I submit to you that in years past (prior to the run-up in house prices), the investment value of your real estate purchase was trivial, whereas the past few years it held the majority component of your purchase.

Let's use an example. The discussion below assumes you paid cash, for simplicity. Nobody does this anymore, so the leverage is much higher, and your return on investment is considerably higher than this cash method suggests. Keep that in mind.

Say you bought your house in 1990 for $100,000. Back then, in a "normal market" you could expect the value of your house to rise by 2-5 percent (depending on where you lived). I'd estimate, then, that 95% or so of your mortgage was the intrinsic value of the shelter you purchased, and 5% was the investment component. So, if your $5,000 "investment" rose in value to $105,000, you made 100% on your investment.

Not bad. In fact, excellent!

But how much did your "shelter" component rise? Let's say rents rose by 2% in a year. In a market where rents and mortgages were in line (we'll call it equilibrium), the value of your shelter, by definition, rose 2%. That is to say, if you could rent out your house, you could rent it out for 2% more this year than last.

So, in fact, the gain on your $105,000 house was $3,000 investment and $2,000 intrinsic value.

Still, a 60% gain on your "investment." Not bad at all.

Fast forward to 2005.

Your $100,000 house is now $500,000. If you bought it in 2005, I'd estimate that your investment component was around $390,000! In other words, at 2% per year growth in rents, your shelter component is only worth about $110,000!

That leaves a lot of room for investment losses!!!

In fact, if house prices fall by 50%, it is my contention that your shelter component barely moves. If anything, it has risen, simply because rents should be increasing as everyone moves out of "too expensive" homes to apartments -- the demand for rentals has risen dramatically through this mortgage debacle.

So, if your house declined in value by 50%, down to $250,000, I am suggesting that all of it was comprised of the investment component.

But, the intrinsic value of your house has risen.

I know, money is money. And you've lost a lot. But if you felt that your house was worth $500,000 in 2005, what makes you value it any less today?

Your loss is only on paper. If you truly believed that your home was worth the half a million dollars you paid for it, then it truly has gone up in value since then.

Of course, you cannot realize that gain right now. Or for quite some time for that matter.

Think of your house for a moment as you would the purchase of a stock. There's the future cash flow (dividends) and the capital appreciation. If the stock does not rise in price, but keeps paying out the same dividends, it's still worth what it was when you bought it.

It may be worth more to somebody else right now, or it may be worth less (this is all based on price). But to you, it is worth just the same.

If the price falls on the stock, yet the dividend remains the same, then isn't the stock intrinsically worth more?

That's what I'm saying about your home.

On paper, you may be suffering a "wealth effect."

But in real life, your home is providing the same utility today as it did when you bought it. In fact, it may be providing more. Rents have not fallen, they've only gone up in the real estate "collapse." Therefore, the shelter component of your purchase is worth more today than yesterday.

It is only the investment portion of your purchase that has taken a beating. Try to set that aside for a while. In time, you will recoup your investment, and then some.

Especially with the rapid inflation the Fed is building into the system. Don't be surprised, if in 5-10 years, your investment will be reaping positive returns!

Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.

President Obama and his team are in the midst of designing a plan to reduce mortgage foreclosures. A big part of the plan is to give some relief to existing homeowners (or, more appropriately, people who live in houses that were purchased through borrowed money called mortgages. Not many people really own their homes) by making loan modifications for "responsible homeowners."

Before you get your panties in a bunch (they borrowed too much money in the first place), let's just think about this:

As your neighbor loses his house, and the value of that house declines because the bank that now owns the house doesn't want it and sells it low just to get out from under it, what do you think is happening to the value of YOUR house?

As almost everything goes in economics, Adam Smith's "Invisible Hand" is at work! People do the things they do for self interest.

So give this one a try: If your neighbor can somehow keep his house, it won't decline in real value (it may decline in perceived value), but until it hits the market, "comparable sales" will not show a decline in your neighborhood, and that's GOOD FOR YOU!!!

Stop foreclosures --> stop bad loans --> start credit flow --> people buy stuff


Got that? 

Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.

The story below takes the reader on seriously scary ride.

It's about the economy and how it nearly collapsed. I am not so sure that we'd be living in Escape from New York or Terminator land, but estimates of $5.5 TRILLION being pulled out of a $11 Trillion economy scare the snot out of me.

Zero Hedge: How The World Almost Came To An End At 2PM On September 18

Goes to show you. Fool me once, shame on you. Fool me twice - we won't be fooled again.

Until the next time.

Notable members:

• Sandy Koufax
• New York Mets owner
• Madoff's own lawyer
• John Malkovich
• Larry King
• Senator Frank Lautenberg

Madoff Client List Is Disclosed in Filing - WSJ.com

Remember the Grand Slam from Denny's? It was $2.99 for scrambled eggs, bacon, and pancakes.

Well, Denny's has one-upped themselves. Today, until 2PM, Grand Slams are FREE!

Yee-haw!!!

Denny's free breakfast offer hits the spot - On Deadline - USATODAY.com

Microsoft has been able to weather past economic storms without laying off significant numbers of employees, always having layoffs in the "hundreds," at most. This time, they're thinking about thousands, perhaps 10 to 17 percent of its 95,000 employees. That's a lot of displaced workers, and it's not getting better for the Seattle, Washington area, what with all of WaMu employees in Seattle now looking for work.

An interesting tidbit from the CNET article:

Meanwhile, Google said Wednesday that it is cutting 100 recruiters from its payroll as the company significantly slows its once torrid hiring pace.

How big is Google to be able to cut 100 recruiters? That's a lot of recruiters!

Microsoft eyeing significant layoffs - iMedia Connection
Wall Street Journal
CNET

If you like Suze Orman (I don't, but it's not her advice, it's her delivery. She annoys me, so maybe she's better in book form!), go ahead and grab her 2009 Action Plan here.

Suze Orman's Free Book Download

The site gets hit pretty hard when there's a free book, so you may have to keep trying until you get through. There's a Spanish version there, too.

O M G -- the economy is imploding, sucking in other aspects of society. I mean, it has to, right? How can anything shrink more than 100 percent?

Economic Headlines Stretch Limits of Imagination - The Inside Job (usnews.com)

In perhaps the biggest stimulus program EVER considered, Congress is mulling over a plan to spend over $800 Billion, none of which it has. Kinda what got us here in the first place...

"Congressional Democrats are planning a stimulus package with a price tag that could approach $800 billion over two years. It will include a tax cut, aid to state governments and funding in five main areas: traditional infrastructure, school construction, energy efficiency, broadband access and health-information technology. Meanwhile, top Republican lawmakers are positioning themselves as guardians against excessive spending rather than outright opponents of the Democrats’ plan." (from Scottrade's "Tomorrow's News Today")

I like their style (I say this facetiously)! Seriously, I think the right things are getting the focus. Our decrepit infrastructure is in serious need of overhaul, and in this classical Keynesian economy, it's high-time the federal government talked seriously about a stimulus program.

I know, we don't have the money. But it's in this time where the government has to step in and take the place of private investment (who's doing NOTHING to help resolve the issue).

Once it's apparent we're heading out of the woods, the government then needs to step out of the picture and let private enterprise reap the benefits. That growth will undoubtedly trickle down to the individual level.

Might as well spend some dough on education, alternative energy, and the like. It's all on the table.

What do you think? Tell me in the comments.


Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.

From the latest email newsletter of Whiskey and Gunpowder:

The tipping point seems to be the Bernie Madoff $50 billion Ponzi scandal, which represents the grossest failure of authority and hence legitimacy in finance to date in as much as Mr. Madoff was a former chairman of the NASDAQ, for godsake. It’s like discovering that Ben Bernanke is running a meth lab inside the Federal Reserve.

They're saying the economy is surely well on its way to disaster. I'm not so sure. YET.

But the quote is funny. And might be true. Stranger things have happened. It (the economy) keeps getting weirder. Stay tuned.

Retail reports will be out soon regarding the crappy shopping results. I'm sure it will be worse than expected.

Now may be the best time in our lifetimes to buy stocks. Or it could be the 1970s and 1930s all wrapped up in one not-so-nice little "Holiday bow."

Which is it? Tell me your view in the comments.

Happy holidays. In spite (or because of?) it all.


Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.

This week's group writing project at The Finance Blog Network is to give President-elect Barack Obama advice on what to do about the economy, energy policy, education, health care, small business, and retirement/social security.

The Economy
Obviously, at least to me, the most pressing concern is the economy. It's been wallowing in deep doo-doo for at least a year now. In fact, it is my firm belief that we never fully recovered from the recession we suffered in 2000-2001. Jobs never really roared back, and the three things made it appear as though we had pulled out of the slump:

• Housing
• Stock market
• Commodities (oil and gold, most importantly)

As you know, all three of these markets have taken severe lumps. In fact, housing and commodities suffered bubble-bursting, while the stock market, whose bubble burst in 2001, only got back up to its pre-2001 highs, and then fade, then fell precipitously by nearly 50 percent. Just look at your 401k. It's now a 201k, if you know what I mean.

That said, what to do? I think there are several things a president can do to boost the economy. One is symbolic. It's something our current president either can't do, has tried to do and has failed, or simply doesn't want to do, and that's instill confidence in the American public's psyche. US Treasury Secretary Paulson has had difficulties in this area, too, and he's a money-man. He looks truly scared out of his wits whenever I see him on TV.

So, in short, it won't be an easy row to hoe for Obama. He does have in his favor history. While the Great Depression lasted more than a decade, it did end. And ushered in a BOOM time for nearly 50 years (save for a part of the 70s, which was largely led by external forces out of our control (but of course not beyond our sight, though we chose to avert our eyes!)).

The second thing that Obama should do is begin a MASSIVE fiscal stimulus package. I know, it feels wrong to widen the deficit now, since it seems to be rising out of control and our national debt has doubled in 8 years. But economically speaking, it's the right thing to do.

I'm not talking about a repeat of the feeble "stimulus" package pushed through earlier this year, where folks got $300 to spend on...well, does anything you don't need cost $300 any more? The idea there was that people would spend the money on junk they didn't need (people will always spend money for things they need, or they'll steal them. That's the definition of need.). However, not much "extra" spending occurred with this aid.

No, what Obama needs to do is re-build our eroding infrastructure (highways, bridges, docks, energy grid, pipelines, rail) and create new infrastructure in the form of wind, solar, and other "alternative energies," broadband, and other high-tech (but labor-intensive underpinnings). He should also focus on farming. I know, I've pooh-poohed the farm bill, but that was aid for the sake of aid. Nothing productive comes out of giving people money for nothing. This is why welfare, while a necessary safety net, has been a miserable failure and should be a temporary crutch, not a lifestyle.

But I digress. A public works project would get stuff built in return for wages that a lot of people aren't getting right now, because they don't have

J - O - B - S

Jobs are the underpinning, the bedrock, of any healthy economy. A massive government system of projects would employ people, who would then go out and buy YOUR stuff. The money multiplier would be back at work. Consumerism would come back to life.

Did you know our economy is 70-80 percent consumer spending? If that continues to decline, we face issues that no president could rectify.

Energy
I've already alluded to a public works program that includes energy, specifically so-called "alternative energy." Wind and solar are free sources of energy. We just have to get better at harnessing that power. It's easier said than done, though. Just look at fusion. Right. You can't. The only fusion we've been able to effect is destructive (nuclear fusion, or bombs). It's been nearly 70 years. But we have to start somewhere.

Now is as good a time as any. Don't think that just because oil is in the sub-100 dollar range that it will stay there. Oil is becoming more scarce every single day. Remember, "They're not making any more of it." This is a short-term deal. Oil will surpass $100 in less than a year. And that's okay. Because at the end of the day, the price of oil will be whatever the consumer will bear, and if he can bear higher oil, it means (most likely) that he's earning a living again and wages might actually be rising!

So, put on your "incentives" hat, Barack, because you're going to have to convince private enterprise to invest capital (that it doesn't have right now) in these emerging industries. You might want to think, "Co-op" or (shudder) regulated markets with regional monopolies. Gurantee GE that it'll get an 8 percent margin on a 300 million person population base for energy, and I can guarantee that they'll be on board. When things are cookin', open the market.

Education
As you might have guessed with my Kids and Money carnivals, I believe that we don't teach our kids about money. But I'll go farther than that. Our kids have fallen behind nearly every industrialized country. We could be confused with a third-world nation if you looked at our education base. In short, our education system sucks. Here's what needs to be done.

Drop "No child left behind." It's been an utter failure. Go back to the way things were 50 years ago. Reading, writing, and arithmetic. Everything else is gravy. Mashed potatoes are better with gravy, but gravy by itself is pretty gross. That's our education system today.

Turn the pay scale upside down. Administrators, who add very little, if any, value make more than double what senior teachers make. Forget trying to recruit top-notch educators to inner-city schools. Encourage college graduates to become teachers by paying off their student loans over the course of 10 years, raise the starting salaries, and boot out ineffective administrators. Give teachers housing incentives, sign-on bonuses, and other carrots that private enterprises have been doing for decades.

Health Care
One of my main areas of disagreement with the Obama camp is on the subject of health care. They frame it in terms of health insurance, that everybody should have access to affordable health insurance. I disagree. There is no god-given right, nor constitutional right, to health insurance. In fact, if you're in your early twenties, single, with no dependents, you may not need health insurance.

You may want catastrophic health insurance, but do you need a $10 co-pay for a once-a year doctor visit? Seems silly to me to force people who don't want or need insurance to pay for it.

The most pressing issue in the health care industry is rapidly rising costs. I don't know the root of the problem, but I can tell you from personal experience that it's ridiculous for a Tylenol tablet to cost $10, but it does. I don't pay that, but my insurance company does, so you can bet my employer and I ultimately share that cost. It's a waste.

That seems to me to be the root of the problem. Waste. Drug companies seem to be getting richer, but at everyone else's expense. It's a zero-sum game: What the pharmas get, we give.

Small business
Nothing needs to be done here, in my opinion. Unless, that is, you want to talk about eliminating taxes altogether. I don't agree that any business should pay corporate taxes. The shareholders get taxed on profits; taxing the business is double-taxation, and when shareholders go buy something, they pay sales tax.

I really wish somebody of influence could effect the change that needs to be made in our tax system: A tax on consumption. But only for non-necessities. Don't want to pay taxes? Don't buy a boat. Simple.

Social Security
Social security taxes are currently taken out of your pay check as a payroll tax. It's highly regressive, made even worse by the income limit on which it's based. I'm too lazy to look it up, but it's something like $90,000. If you make $1 million, you pay no more than I do in payroll taxes. That, to me, is ludicrous.

• Eliminate the income cap.
• Raise the retirement age.
• Do a means-test. 

All three of these things are politically off-limits. But, as our leader, you have chosen to take the mantle and lead us down the right path. Solving social security (and the even-worse Medicare deficit) is a simple math problem.

Social security was not meant to be a retirement system. It was a safety net. It's been bastardized over time to be a public 401k plan. That's wrong-headed.

I don't believe we should privatize social security. It really should be a small government program that helps retired folks meet ends. It is not a be-all end-all program. And if you're wealthy, you don't need the funds. Yes, I know it's socialism (hence, the "social" part of the name), but this is a case of "Pay me now is cheaper than pay me later."

Sorry for the long diatribe. Probably more than you wanted to know about my "policy prescription" for President-elect Obama. I'm confident that he and his really smart advisers will come up with the programs and policies necessary to get us out of this mess. And if they can't/don't, we can always invade Canada and Mexico.

Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.