Keeping Banks Safer by Avoiding Dreaded Mark-to-Market Bookkeeping

The Mark-to-Market accounting procedure, on which I commented in my recent blogs on financial meltdown, helped cause global damage.

This created havoc among small and large investors in pension and institutional funds, who look to the long-term and are not interested in daily or even weekly pricing. All true investors got run over by this mark-to-market onslaught.

I have always felt that there are two kinds of investors;.traders who need daily quotes which can be unrealistic. And long-term investors who get misled and potentially hurt, if they act on those abhorrent, volatile short-term quotes.

The financial meltdown was certainly an error by government appointed “experts” thinking too short-term and subject, therefore, to panic–driven decisions.(See the Earl J. Weinreb NewsHole® comments.).

Politically-Induced Industry Changes

The Left would prefer that there be restrictions on industry under the premise of climate control, despite apparent scientific doubts and the uncovering of a scientific hoax.

How much has the Left’s position to do with actual climate and how much with the in-gathering of taxes, with which to implement other purposes?

The main goal of the Left is always to control government, to accomplish whatever the Left wants to achieve.

But other so-called international polluters won’t agree to do what the U.S. is asking its citizens to do. They say we ought to tighten our pollution belts because of our past industrialization. China and India are only starting at the industrialization game. They want us to give them some slack.

But the U.S. says China/India are going to pollute hereafter with a vengeance because their populations and industry are growing much faster.

Apparently our left-leaning politicians will eventually concede to Chinese and Indian thinking.(See the Earl J Weinreb NewsHole® comments.)

Extraordinary Peace-Time Budget Deficits

During World War II, American government spending as a percentage of GDP was about 45%. It is over 20% now, with the administration's spending habits. We can, in fact, become another Greece-like world mendicant.

What does this mean for small and large businesses? Especially those who cannot compete with big government competition, in politically-favored industries?

Government spending displaces funds available for the private sector, particularly as interest rates rise. When that occurs, firms seeking funds are less likely to get them. Yet, they are the entities which mainly create worthwhile jobs.(See the Earl J Weinreb NewsHole® comments.)

Looming U.S. Regulatory Problems

There are a number of looming problems ahead for the U.S. economy, all brought on by regulators in Washington.

The U. S. Labor Department has imposed expensive, perhaps needless investment ‘guidelines” on corporate IRAs.

The Environmental Protection Agency continues to use its heavy hand on the auto and mining industries.

The Dept. of Transportation, aside from mileage standards, has become even more imposing in its attempt to limit the use of petroleum.

At the same time, the infamous Dodd-Frank consumer regs are a hydra that is still being fully written and manipulated by non-elected bureaucrats. Those bureaucrats have a fiefdom with no legislative control. (See the Earl J. Weinreb NewsHole® comments.)

Having the Masses Develop Products and Services

So-calledcrowdsourcing theory. has been used with software development for successful ends. It’s a procedure where the public is invited to contribute individual efforts, up to now mostly technical, for an ultimate goal. The U.S. Defense Advanced Research Projects Agency or Darpa project, for example, was involved with the original internet

While the U.S. military  now wants to put it to further use, there’s talk of expanded commercial usage.  However, aside from writing software of relatively simple objectives in industry, I cannot currently see much universal practicality. (See the Earl J. Weinreb NewsHole® comments.)

Inflation--This Is Just The Start

Fundamentals for massive inflation are in place. Enormous budget deficits and heavy government borrowing to meet unprecedented, massive budget deficits, have done that.

But the present recessionary doldrums, despite what the Washington cheerleaders say, will hold the huge inflationary consequences back only for a while. That is, until the economy recovers.

Despite occasional reassurances from government officials, there will be no way to unwind huge debts in an acceptable manner. Therefore, real inflation is inevitable.

Unless we make huge budgetary cuts, soon.(See the Earl J Weinreb NewsHole® comments.)

Are Franchises Wise Options?

Many publications and other media offer advice on how to buy franchises. They are done for two reasons.

The primary one is to fill space. It’s a winner for getting attention. Lots of folks are interested into entering business for themselves. Give them ideas and make it sound easy, while reducing disadvantages to a minimum, and you have attracted an audience.

But the second reason why these articles appear, is the ignorance factor. They are written by those with poor knowledge of practical franchise experience from a franchisee’s viewpoint.

How many tell you how poorly the average franchisee does? How the average franchisee eventually wants out of his or her contract?

Many cost too much at the outset and each year? And fail to provide the promised management assistance. And, in vast instances, offer little name recognition. (See the Earl J Weinreb NewsHole® comments.)

Some Fresh Health Care Ideas

Ideally the U.S. health care system ought to remain entirely private. No Trojan Horse, shadow public plan of any sort should be in the wings as it is now.

Changes should still be made with regard to extensive tort reform and arbitration of malpractice claims.

And most importantly, an arrangement, where citizens get to pay for coverage with direct tax-deductible dollars.

If you want some sort of state arrangement of health care for those with no coverage at all, have each state administer its own system. Damages can then be localized. You can have a central data bank for important medical information, but each state should enforce what it wants for its own citizens. (See the Earl J Weinreb NewsHole® comments.)

Government Health Care Cost Experience

The administration is intent on making the U. S. like the rest of the world when it comes to health care.

Germany leads in universal care. As of 2008, 52% of its employee costs went to government for social services and health care. France was right behind at 49% and Italy at 47%.

The reason why foreign governments are able to operate within strict health budgets is rationing. Such rationing of services keeps costs within the government-construct levels. And that applies for the number of doctors supplied. (See the Earl J Weinreb NewsHole® comments.)

Plaintiff Lawyers Who Pick On Investment Opinion-Raters

Lawyers often want to become multi-millionaires the easy way. A pathway they can all use, is to sue any financial adviser who can make an honest mistake when it comes to advice. That is not allowed in the financial industry according to plaintiff lawyers.

A panel of the U.S. Court of Appeals for the Second Circuit ruled about a year ago to uphold a lower court’s dismissal of a case against credit agencies who had given securities opinions.

That will set back, at least for a while, the ability of such lawyers who have or want to become quick billionaires the easy way. (See the Earl J Weinreb NewsHole® comments.)

The Futility of Higher Minimum Wages

 

Increasing the minimum wage when jobs are scarce is so stupid, it is almost an annual campaign for liberal politicians to unwrap as a new idea.

Gauge how wise such a politician is, when research shows minimum wage increases always cost jobs of entry level workers. It is criminal to impose higher minimums during a recession. That stymies the possibility of stimulating any increase in job opportunities.

Yet, those at lower levels generally leave for higher wages or get raises with time. It’s usually not the same worker remaining at that level. A fact proponents conveniently overlook. The vast majority of folks do not remain at that level forever.

Moreover, minimum wage increases cost jobs. Employers must think twice in estimating the value and affordability of their workers. Especially small businesses who are responsible for the bulk of American employment.

The minimum wage is a ploy of powerful unions whose contracts are then automatically revised up from minimum wage levels. (See the Earl J Weinreb NewsHole® comments.)

How Much is a Brand Name Really Worth?

I have seen discussions on the value of commercial brand names. Moreover, the comments usually give dollar values.

However, accurate or distinct values are extremely difficult to come up with. Each company will arbitrarily set a bookkeeping figure for brand or trade name of some valuable, integral part of their business. It all depends on how conservatively they want to keep their books, and has little to do with the actual brand value. (See the Earl J. Weinreb NewsHole® Comments.)

Buy Bonds With Upcoming Inflation?

I advise everyone to be fully aware of what the principle of "duration" is and how it works when investing in bonds. . Very few media pundits write on the practical use of bond duration and its adaptation for inflation.

Much of the practical value of media portfolio advice, particularly as it applies to bonds, is unfortunately used merely to fill up space and not to truly enlighten. (See the Earl J. Weinreb NewsHole® comments.)

Federal Guarantees Should Be Added To The Budget

This thought has been around but the media never expands its importance.

Marvin Phaup, a research scholar at George Washington University who examined federal budgeting, is the one who is pushing the concept, which I feel is valid.

As an expert on government guarantees, he feels that government bailout costs ought to be measured and should appear in the budget. We ought to budget for possible losses on the tremendous amounts we guarantee everyone.

Mr. Phaup was the researcher at the Congressional Budget Office who in 1996 made the initial effort to assign a value to the implied federal guarantee backing Fannie Mae and Freddie Mac.

Had we done this we would have been far better prepared to meet the resolution of the financial meltdown. And to realize the extent of the risk we were taking with the mortgage markets and in other areas. (See the Earl J Weinreb NewsHole® comments.)

Entrepreneur Odds Are Tough

Highly creative entrepreneurs often build a business from scratch and do extremely well quickly, expand rapidly, only to see their business suddenly fail.

There are three major reasons for such failure.

Many are poor planners from the start. They often lack an efficient business plan, to guide them in their financial start-up planning.

Plus, they lack sufficient funds. Because of poor planning many entrepreneurs are in the dark about the amount of capital they will need.

And relatively few are capable of managing a rapidly expanding business, or getting an adept manager who can. (See the Earl J Weinreb NewsHole® comments.)

Do We Need Childbirth Health Insurance?

A distinction should be made when buying insurance for for catastrophic occurrence; that is coverage for a probable event, as opposed to catastrophic, potential events. You buy insurance should you have an automobile accident and not for the purchase of gasoline.

In the same way, you buy health insurance in case you suffer an illness worse than a common cold. If you get married and intend to have several kids, you are not courting serious sickness. You are anticipating having need just for that. It’s not anticipating an accident or getting chronically ill. Unless childbirth evolves into a medical emergency.

Routine childbirth costs can be reduced under competitive insurance bidding, apart from other insurance coverage, at much lower prices than they are today, without government interference. (See the Earl J Weinreb NewsHole® comments.)

Inaccurate Unemployment Numbers

Unemployment numbers can be very misleading. They can be adjusted after publication because of errors and short-term occurrences. And other considerations must be part of the analysis.

Such as job creation. Look at that alongside the unemployment figure.

Other factors must always be considered as well: The length of time folks are unemployed. The number of those taking unpaid leave from existing jobs. People who have given up looking for work. Those who may have taken early retirement.

The possible diminishing size of the average work week.

All of these affect what we should note as unemployment figures.(See the Earl J Weinreb NewsHole® comments.)

Mergers, Acquisitions and Your Pocketbook

It’s been sometimes said said there are no company mergers, only acquisitions. Think about it.

It’s very hard to blend or merge two companies together and most mergers are not successful as a result; many reasons account for the lack of success.

Most takeovers are overpriced. At the start, there is always a managerial or economic reason that is supposed to make dollar and sense logic.  but in the process of merger or acquisition negotiation, the price tag always appears to inflate.                                        

Very often, the acquirer's market price will fall while that of the company which has been bought will rise. This is the market’s appraisal of an over-priced acquisition..

Yes, the deals are great for investment bankers, whose selling pressures, in addition to company CEO egos, are frequently the reason the deals are made in the first place. (See the Earl J. Weinreb NewsHole® Comments.)

Your Small Business Model

Your business model is always an essential tool, particularly for startups. It can  be a shortcut to your success.

Planning is a road map. True, the road will never be quite the same you thought it would be. But you will be able to adapt more to inevitable twists and turns, once you have a business model in place; you will have the basis on which to make adaptations. (See the Earl J. Weinreb NewsHole® comments.)

Why Predictions are Usually Wrong

Surveys show that forecasts of the future economy made about 25 years ago were usually proven wrong almost without exception. So why do we accept opinions of all the purveyors of future prognostication?

 One prediction ought to be a sure thing for the future of America. Inflation, brought on by unprecedented budget deficits. Deficits that cannot produce a viable economy, especially if politicians look to taxation as a means of reducing them.

 Deficits have never been reduced by taxation before, (See the Earl J Weinreb NewsHole® comments.)

Credit Rate Settings and Hypocrisy

Much has been stated in the media about Libor, what it is and how terrible the “scandal.” I have written about it and mentioned how the media had blown it up out of all proportions. The pricing has always thrown out the topmost and lowest  interest settings and averaged the rest.

Moreover, central British and American bankers wanted rates to be as low as possible and intentionally overlooked any prejudice in keeping rates low during the 2008-09 financial meltdown.

There are other solutions to rate keeping, as I have stated in the past.The market for credit default swaps, commercial paper, and corporate bonds are an example. (See the Earl J. Weinreb NewsHole® comments.)

Crony Capitalism and Benito Mussolini

Many readers who are too young to remember the Italian fascist dictator of the 1920s to 1940s, Benito Mussolini, ought to read up on the rise and rule of this leftist, former newspaper man. It will get Americans, especially, thinking about state capitalism or what may be designated as crony capitalism.

I must point out that the fascism I refer to (and this applies to the German Nazi party), was firmly, all the way on the left in their politics, something completely overlooked in most media commentary.

Then, after such reading, think about ongoing events in the U.S. that may strike you as being similar to crony legislation and acts of that past. (See the Earl J. Weinreb NewsHole® comments.)

Rich “Anti-Capitalists?

Why do many multi-millionaires and billionaires have a common interest in fostering big governments which do their best to meddle with free economic interests, that are the hallmark of true capitalism?

At first blush, you would think all so-called capitalists would want free capitalism.

But, as I have said before, these wealthy individuals, who may call themselves capitalists, are closely involved with big governments and are very influential. They become a part of the contrived system which is often referred to as “crony capitalism.”.

That accounts for their preference for state controls which actually enhance their wealth. Power and influence may be more important to them than the concession of personal liberty. This is not similar to the situation with small businessmen and ordinary citizens. (See the Earl J. Weinreb NewsHole® comments.)

Use of the Terms “Capitalism” and “Capitalist”

The use of the terms “capitalism” and “capitalist” have taken on such confused and even demeaning interpretations, that it’s about time the public got a better understanding of their meanings.

Doing so is essential for the sake of everyone’s pocketbook and well-being.

Look back centuries and you will note that what we refer to as capitalism is tied to property rights. Moreover, property rights are essential to personal freedom. A capitalist is anyone who believes in those basic principles.

You do not have true liberty without property rights. If you believe in liberty in its fullest extent, you believe in capitalism.

Note: There are individuals with huge super-wealth who claim they subscribe to these principles, but also strongly feel that the government can control property rights as government officials in power see fit.

Those governments may be socialistic where all business is run by the state, or a form of fascism, where private companies are closely controlled by the state.

These socialistic and fascistic-oriented, wealthy subscribers, who may call themselves capitalists, are closely involved with the governments and are very influential with these governments. They become a part of the contrived system. That accounts for their preference for state control, which actually enhances their wealth. But they are conceding much of their personal liberty in doing so, in a trade-off for power and influence. (See the Earl J. Weinreb NewsHole® comments.)

Government Employee Training Disasters

Like most everything the government does in the business world, it does a terrible job training the jobless, where they can take on  new jobs with newly acquired skills.

For decades upon decades, Uncle Sam’s politicians have appealed to voters with grandiose job training schemes. They have spent billions over the years with their well-sounding, good intentions. All the while, however, there have been little evidence of true success.

Few projects, in fact negligible numbers, of unemployed workers have ever been actually employed by such government programs.

What training programs have worked have been done by private industry. My own employee contracting firm did training in the U.S. and Canada for special projects and had far better results than most reemployment endeavors of the government.

Yet, to solve the unemployment problem, Uncle Sam continues to undertake the job it generally flubs. (See the Earl J. Weinreb NewsHole® comments.)

Advanced Degrees Are No Job Guarantors

Despite the general need of  high-tech, health care, chemical and science workers, many of these are unemployed or in low-paying jobs. And this applies to new PhDs.

Moreover, many existing skilled science jobs are at risk and are being laid off. The pharmaceutical industry has been hard hit. (See the Earl J. Weinreb NewsHole® comments.)

Privatized Social Security Makes Great Sense

The question of privatizing Social Security will never be resolved if the financial and general media gets away with mishandling the subject.

There are facts which never get through the leftist rhetoric the media helps expound.

Point: It has been tried in other countries and in some states and it works.

Folks get to own their own investments in a genuine lock box. Come hell or hot water, the funds belong to them or their heirs.

Point: The subject should have little to do with the vagaries or the volatility of the stock market.

An option for all is ownership in U.S. bonds, which can be tied to the inflation rate, for those who don’t like to buy stocks. (See the Earl J Weinreb NewsHole® comments.)

The Looming Doctor Shortage

ObamaCare seeks a clinic environment to save costs. That will supposedly reduce the need to overcome the oncoming severe shortage of primary care doctors. Patients will be seeing more nurses when they visit those clinics, being referred to actual doctors only when in dire need.

Physicians are expected to be imported, as they will not be in ample supply from our schools. They will come from countries where education is cheaper and prospective doctors are willing to work for less.

No one can vouch for their educational credentials as a means of ramping up their supply.

 A lowering of certification standards is already underway in the U.S., according to some specialists, to get more doctors into practice, despite official denials to the contrary. (See the Earl J Weinreb NewsHole® comments.)

Comparing College Grads of Today with High School Grads of the Past

 This is not meant to be an exercise in nostalgia but studies have shown a diminution of the quality of eduction in America. 

At the same time, other research indicates inflationary grading of students. The old B and C students of yore are more likely getting A’s these days. All this, despite more spending on K-12 education and smaller class size, and more college graduates than ever.

The bottom line one can surmise: The average high school grad of the past, forced to go to work, may well have been more intelligent and educated, capable of reasoning, than the average college graduate today. (See the Earl J. Weinreb NewsHole® comments.)

How Important is the Gold Standard?

How important is it to have gold backing of the currency? What is essential when controlling the value of currency is budget control and debt size.

What about relying on gold as a backup? The ability to buy gold with currency, or free conversion, is a deterrent to reckless spending but chances are, the value of gold used may not be the true market. The cost of other items may also come into play.

Paper money with no gold backing would be o.k. if very strict controls on budget were in order. Those would have to be safeguarded from political influence, and that can be more easily discussed than put into practice. (See the Earl J. Weinreb NewsHole® comments.)

It Will Be Tough to Break Up The Banks

You hear lots of talk about breaking up the banks and going back to the time when the Glass-Steagall Act of 1933 still existed. The one that supposedly separated commercial banking from investment banking. The idea is to have banks less susceptible to speculation and risk.

Well, parts of the Dodd-Frank Act of 2010 were supposed to get at some easing of speculation, and to-date, none of the U.S. regulators have yet come up with a practical solution.

The truth is, Glass-Steagall itself was rife with contradictions; it allowed commercial banks to underwrite municipal bonds and perform other risk-laden activities. Glass-Steagall had problems  which many prefer to forget ever existed. (See the Earl J. Weinreb NewsHole® comments.)