financial aid and rants and raves

When it's used to repay debts rather than buy stuff. The stimulus package enters it's final negotiations as I type, and the final product will seem to include $600 for any employed individual whether he paid income tax or not. Said worker drone would have paid social security and Medicare taxes, so I can't argue too much, since both taxes are regressive. Still, I cannot imagine the 6 bills helping all that much. Depending on when I receive said check, I will either pay off some random debt or spend it all in Prague. Revealing this to my mother resulted in a stream of recriminations, but what do I care? I'm supposed to spend the money, and since I've heard of no legislative limitations on how I should dispense the lucre, I say screw the American economy. My hard (un)earned $600 bucks will be spent in a Prague brothel.

Although a European house of ill-repute may be an unusual choice for the tax rebate, I doubt I'm alone in stating that I will not be using the money for other than it's intended purpose: buying goods or services in the USA. I know people who will be banking the money or paying down a credit card or something similar. This is another reason the various schemes and programs will not lift the nation out of a downturn. Still, when the check is cashed we'll all feel a bit better, and that has some fleeting benefit.... right? *Gulp*

Quite an eventful week for one anonymous financial aid advisor, who after getting his ass handed to him all last week, fumbled his trusty debit card into the ozone. Literally my brain went blank, and I could not for the life of me find my card. I have a new one, but now I need to update all my various bill paying activities such as my storage unit, gym, WoW, etc. I have much work to do before the end of the month, and honestly I'm not even sure how many bills were attached to my old card. Meh...



Card drama aside (and do not get me started about ********'s inability to get me a new card efficiently....) I'm posting because the economy is on a roller coaster right now, and I was struck at the various business sectors taking a vicious beating. I'm even more struck at the efforts of some hucksters to make a quick buck.



People selling market strategies in both good and bad (and sometimes when up is down and down is slightly sideways) is nothing new. I doubt the advice they're giving is all that new either, save for a different spin depending on which ever way the wind blows. My fave web sites are guilty of this as much as anyone else, and someone has to pay for the web hosting. Thus, I do not begrudge their sales attempts. Who knows? Maybe their advice or stocks picks are even useful, at least those with money to invest. The implication with that statement is that I do not have money to invest, and I don't. Still, let's say I did have money to invest AND have not been taking the advice of said incredibly wise money gurus, AND their advice is sound, which means that although I may have some capital, I'm drowning in debt and and investments (including my home) are taking a beating. Actually, this sound a hell of a lot like me. Anyway, should I use some of that capital to purchase the aforementioned investment advice and lay my financial future at the feet of whomever is hawking the incredible investment opportunity in recycled sneakers? Probably not, and not just because the investment advice is so patently ridiculous.

Truth be told, the monetary strategy I would advise (if I were actually paid to research such things and knew what the hell I was talking about) is use the recent and upcoming rate drops to restructure my debt to lower my payments and either pay down said debts or squirrel away the savings to build up a vulture fund or replenish my depleted bank account, depending on my overall financial health and long term goals. Herein lies the problem: the rate cuts will really only allow people and businesses to reduce the debt service load they already have. There is nothing in either the stimulus package that will allow people to take on more debt. It will cheapen the debt they all ready have (maybe). That will certainly help, but the extent is unknown. When all the bad debts have been wiped clean off the books, the reduction in the money supply will be staggering. If therein lies the problem, herein lies the rub: the economy has been so dependent on both cheap (and perhaps more importantly: EASY) credit and insane levels of consumer spending that even a regression to the historic mean would indicate a recession. Chances are consumer spending will drop far below the historic mean, since the prospect of dropping only to the mean would actually raise the mean to a higher point than the historic number. (Lord, I hate stats...)

Anyway, after waiting several minutes for the stat-induced migraine to pass, I'm back. So what does this have to with me? It is my blog, and waxing poetic about... well.... me is the reason this site exists. Well, after losing my card, I was cut off from spending over the holiday weekend. This disruption in my economic activity allowed me to get a free couch, and prevented me from buying more... lots of stuff I don't need. Specifically, more audio books on business money and investing. Haven't all my recent posts dealth with I don't need to buy anything? I'm trying hard to take my own advice on my own blog, but it is not easy. I get paid on Thursday, and I can't wait to reset all my automatic payments.

I tend to be cavalier when it comes to the troubles in the economy, and Scott and I have been predicting the real estate crash over coffee at Starbucks for quite some time. Others predicted the crash would come earlier than it did, but I could not have predicted nor have I read anywhere the depths of the pain the nation could be facing. Bad news abounds, and I've only recently begun to wonder how severely we could all be affected. I don't mean this in the traditional sense, such as losing a job, or suffering through a foreclosure, or not having access to your bank account. All of these are real possibilities, and yes, access to one's bank deposits is hypothetically imperiled. The S&L crisis back in the early 90's proved this. Hit wiki and come back.

Still with me? Cool. The above mentioned risks are real, with losing your home as the biggest issue. Still, relatively few people will truly face losing their homes, though many will have to sweat through the prospect of an upside-down mortgage, myself included. Losing one's job is also very real, with the financial industry shedding jobs like a husky sheds fur in the summer. This has a trickle down effect here in the NYC area, since moving money around is a huge source of jobs and tax revenue. NYC is bracing for a sharp drop in income tax receipts as Wall Street attempts to right its ship. I believe some of this concern is a bit overblown, with many of the jobs lost originating in Indian call centers, but that's just a hunch. Still, getting another job is easier than buying another home. Accessing one's money in a failed bank should be relatively painless, if stressful and delayed. However, the FDIC has so little cash compared to imperiled banks, I cannot see a mass bailout like the S&L crisis. Essentially, not only is the national credit card maxed, we aren't even getting those letters in the mail offering new cards and balance transfers.

When The Daily Reckoning predicted the "soft slow depression" in the new century, they based the prediction on a study of fiat currencies (those not backed by gold...), debt loads, and the hysteria of the markets, be they stocks, technology, or the Louisiana Enterprise. Since we were drowning is a sea of liquidity, they figured that when the markets crashed, America's economy would become like Japan's, with a strange combination of no interest loans but no growth. What they could not know was the presence of one more asset class ripe for over expansion: real estate. Essentially, they were 5 years too early, but this does not mean their logic was wrong or that the crash would be avoided.

The massive explosion in home values was an exercise in runaway inflation - with a strange twist. Bubbles in stock prices don't really count as inflation, since no one is required to purchase them to live. In other words, you can't eat stock certificates. The increase in housing should have damaged people's standard of living; instead it made them feel richer then they actually were. Inflation is needed in an economy to insure profits, and here almost anyone who owned a home shared in the profits. Further enabling the feeling of wealth was the liquidity previously mentioned. Before the bubble was truly recognized, I remember NPR discussing the then moderate gains in home values. The show was comparing home prices in general and home payments specifically. Back in '82, when interest rates were in the double digits (say 11.5%), the monthly payment on a 200K home was nearly the same as 330K home in 1999 with a rate of 6.5%. (assuming a 30year fixed rate with prime credit...) The focus on the monthly payment is a valid point. I could have bought a much more expensive car if my rate was not 12%. I would love to own a brand new Toyota convertible instead of my Corolla. This isn't a perfect apples to apples comparison, with the tax benefit of the '82 example conspicuously ignored, but also ignoring that a $2000 a month payment is much more manageable in 1999 than in '82. This may mean it all comes out even, but it's 3am on Saturday, so you go figure it out. Anyway, the lower rates allowed people to buy more expensive homes. In and of itself, that would not be enough to cause the bubble that just popped; it needed help in the form of security-backed bonds and exotic financial instruments.

Selling the debt to investors seemed like a great deal for all. The banks received more money to lend, home buyers suddenly owned a home heretofore way outside there price range, and the owners of the mortgage could depend on rising home prices to secure the debt. If a home owner got in financial trouble, he could sell the house with no problem, covering the mortgage and maybe even scrounging up enough remainder as a down payment for something else.

The rising home prices was a fallacy, of course, and the pain is being felt all through the economy. The collapse in home prices coupled with the change in adjustable rate mortgages has put a clamp on the most abused section of the economy: consumer spending. Consumer spending makes up about 70% of the economy, and as such is an important economic indicator. As of right now, people have stopped spending. However, to say it is the result of falling home values is too simple. The holders on the debt mentioned above are mostly overseas, and these dupes have been buying all sorts of debt vehicles: those backed by cars, stocks bought on margins, and credit card debt. Burned (badly) by the collapse in mortgage backed securities, they have been looking at all the bonds available for purchase, and have suddenly stopped lending money. It's hard to blame them of course, I wouldn't lend any more money either. This credit crunch has shown to the light one of the worst aspects of the American consumer: we do not save.

So if we have no money in the bank, and suddenly we cannot borrow anymore money, what are we left to do? Yup, stop spending. With the above set-up, I can now examine the point of this entry: how far will this spread?

I'm asking this question because I received some horrible news. As I wrote a few months ago, finding my place here in Westchester has been difficult; mostly because I don't feel I make enough money to live here. I'm just holding on, and that scares me. As such, the places I feel welcome and at peace are very precious to me: Starbucks, Alive 'n Stepping, Borders Books in White Plains, etc. Unfortunately, the last one that list is closing.

The fact that Borders in WP is closing is not a surprise, merely deeply saddening. I was never convinced the entire Westchester Pavilion would survive, much less one particular store. Also, the store never seemed to be run all that well. It was always a little messy and trashy, and I figured that the reason so little attention was paid to such things was the chance the store wouldn't be around, so why bother? Well, the governor has not called, and Supreme Court did not accept any appeals, so the date for execution is set for 02/02/2008.

I found out about this via the emailed coupons Borders sends me every week or so. this one had a strange heading: "Store closing." I knew the location before I opened the email. My store was toast, and I can buy anything in the store for 25% off. This does not mean the company is going under, as there is a brand new (and hoppingly busy) store/cafe in the Poconos. My opportunistic side wondered if the sale extended to the furniture, cause the leather chairs are quite nice and roomy. Immediately I cursed myself for my greed, but the notion is as old as time: nature recycles all it can. I shouldn't feel too bad; I just wish they had couches.

Boreders in WP closing does not illustrate my point very well, but it's impending demise forced me to look at the potential destrcution this rescession could cause. I know I'm fine, for all my mewling, but what business will die because of this? Actually, what industries will die because of this?

Or is that lain? A random English lesson is popping up from my subconscious. Anyway, I've been reading (read: listening on my beloved I-Pod.....) the new book from Michael Gerber: E-Myth Revisited. He tells the tale of Sarah and her company, "All About Pies." The story is one of their search for what is wrong with Sarah's relationship with her business. They talk of many things, but begin with her writing in a journal. This creative endeavor was co-opted by a sudden urge to write a book. This sudden purpose to her scribblings poisoned her writing, and she hating writing and her journal. I can relate, as I have an agenda with just about everything I do. Even this blog was started with some amorphous goal in mind, although the utter lack of readership has purified my ramblings. As per the book, the addition of this concrete goal to the writing prevented Sarah from enjoying the creative passion of simply writing for it's own sake, causing frustration and ill-managed relationships with all creative enterprises, such as being an entrepreneur, and she would need to reconnect with the wellspring of spirit before she could view her business as something other than a total grind. I've been meditating on this notion since reading (hearing) the passages. With that I requested the time-off needed for my trip to Prague, and I am trying to approach the vacation with a similar blank slate.



I've approached Prague with a certain level of expectation, since it doubled as a Mecca of sorts for guys my age. I've expounded on this before, so I won't rehash my old material. Also, I'm feeling exceptionally old right now, thanks to the movie Juno. More on that in another post. Anyway, I've been realizing, thanks to Mr. Gerber, I've realized I'm setting myself up for massive disappointment. What happened to the little boy who loved to explore? Well, he grew up into someone he didn't expect, or even like that much. At least the adult me is gainfully employed and paying his debts. So the older me wants to go to Prague, but why? Is there any good reason the fly all the way out there and back? Good reasons do not include attempting to recapture my misspent youth or connect with a time and scene long passed. The brothels, while entertaining and an excellent opportunity to observe the seamier side of human nature, are also not a good reason. On the other hand, I would love to explore Prague and possible my father's hometown. (We're Germans, but my fellow Sudetens were ruled by the Austrian-Hungarian Empire. This was not a big deal, since all were staunchly Catholic. It only became a big deal when the Soviet tanks rolled through Berlin.) Cuban cigars are also on the (marginally) acceptable list, as is the expansive English speaking community. Getting hostel chicks drunk on absinthe? Yeah, that's cool too. So the question is as follows: can I separate from the trip all the expectations of a goal reached or some transcendence or enlightenment achieved? I don't know. I do know that I probably would not get whatever I was trying to gain in the first place, so I'm setting myself up for a whopping existential disappointment. This is the last thing I need. If I can convince myself that I am going for no other reason then to have fun in a cheap and beautiful city, then that is enough.

I have so many thoughts and themes floating around my head I have no clue how to begin this entry. Few people like reading a laundry list, but I'm stuck otherwise. With all apologies, here we go.

1) As mention, my brother and I have been discussing buying a place (Middletown, NY seems to be the consensus location) . However, the timing never seemed to be right: property prices were too high, rent to purchase ratios were way out of whack, neither Karl nor I had money, etc. All of the above reasons were a blessing though; they gave Karl and I time to prepare for this purchase and the subsequent responsibilities. The preparation was simple: learn everything you can about the business, learn something about home repair (with Karl and I having set areas for expertise: plumbing for Karl, woodwork and drywalling for myself, etc.) I was to learn as much as I could read, with my friends in real estate assisting us in both finding and purchasing the place, etc. Well, it's been a while since we started discussing these things, and we've made no headway. Karl and I have different processing, and Karl ruminates on a purchase much longer than I do. Still, I'd hoped to have some of the preliminary work done, such as going to Home Depot for their free home improvement lessons, or attending similar classes here at the college under Cont. Ed. Admittedly, I have done only the research portion myself, but I have learned an enormous amount. In terms of this progress and preparation, this winter will be telling. The time is not quite right to purchase a place yet, with property values dropping thorough '08 into '09. I give us one year or so before the bottom hits. It may be even further off, and I'll re-evaluate before making a purchase. If we haven't made any progress in the above areas, I'll consider the plan dead and move on to perhaps buying a place in the Poconos with my dad. My other responsibilities are also worthy of mention, as I'm doing so poorly in meeting them: paying down my debts, especially my car and CC's. TIAA-CREF is also important, since I can access my plan for a down payment even if there's a credit crunch. I'll expand on this more later.

2) Continuing the vein of moving myself forward and improving my eventual lot, I'm considering registering for classes for the Summer '08 term at Empire . It's too late for Spring classes, so my procrastination wins again. I'm questioning the need for further education, and I've said in the past my education is, for better or worse, complete. Still, I would like to apply for promotion, and I still need 7 credits to qualify. This represents the only legitimate reason to return to school. The others are as follows: 1) I could access a little extra student loan money and pay.... some school expenses. Using student loans for reasons than "legitimate educational expenses" is illegal, although the above term is deliberately broad and can include many costs. Using the proceeds to provide a down payment for a house in the Poconos is still off limits. 2) When the economy turns sour, people flock to education like moths to a flame. As per Tim Ferriss, it creates the illusion of forward motion. This is not to say that some people do not need to improve their skills or go back to school when they lose their jobs, but I cannot count myself among them.

3) The business, Brian Joseph Assoc., (and I type with an air of indignation and disgust) is dead in the water. Along with the dawning reality that Karl and I may not buy anything, I understand now that not only was the "business" and painful and pointless exercise, there was no way it would get off the ground anyway. First, I do not have the business owner mindset. I've finally figured this out via the innumerable (and expensive) materials I've collected over the last few years. Michael Gerber, of E-Myth Worldwide, calls it the entrepreneurial mindset versus the technician, who merely wants to have a job with himself as the boss. I was never planning on any side venture being all that big, but I don't even have the time or gumption to begin the "muse creation" as described by Tim Ferriss in the "4 Hour Work Week." Even if I did have the needed discipline and drive, I'd still be vexed by what exactly I'd be selling or why. Both Ferriss and Gerber have similar answers: it really wouldn't matter. Setting up a viable business model is what counts, not the product itself. If you set up the venture correctly, the product will present itself. The two authors would diverge at this point, as the reasons for creating a business are different for each writer. Both wish to add value to the world, increase your bottom line, and expand your free time, but the difference is how you do it.

4) The under current to any of the above economic activities is the gnawing feeling that America is in for a rough patch financially. Cheap and easy credit have disappeared, and the dollar is tanking. The weak dollar has it's advantages, as our exports are cheaper. One could even call it stealth trade protectionism, as our exports are cheaper and imports are more expensive. We may be giving the Fed too much credit (hah!) by stating that was there diabolical plan, but it is the case. Getting one's money out of the country is probably the wisest plan, and I know a few friends who would agree. I understand their apprehension, and even agree with much of the doom saying available at the Daily Reckoning . The difference is this: I have no method of avoiding this blast wave. Also, I have no money to lose. If my TIAA-CREF tanks, it will make up it's value over time. Also, I still have my donations from the college and my paycheck. I cannot be laid off, and as I mentioned above, people flock to college when the economy implodes. I simply need to ride out this storm, and I'm not certain there's a safe place to hide anyway.

5) I can't tell the future, if I could, I wouldn't be where I am today. That could be both good and bad. Still, the omens, portents, signs, etc. do not bode well for the USA. What bugs me is that I have all this knowledge, but no method to take advantage of the situation - AGAIN. This galls me. Such is the story of my life, and another chapter with the same themes is being written. I need to remember the following: we're all fucked. (Maybe..) As per the Daily Reckoning, the winners of his era will be those who lose the least. In this one point I am ahead of the curve. So long as the tax benefits regarding property remain unchanged, I'm in clover. Even if the value of my co-op lost an additional 20%, I've lost a whopping 13,500. This is before the tax benefits are realized. Strange is the benefit of this tiny co-op to my bottom line. True, the apartment is one of the reasons I can't blow town, but could I really vacate anyway? Not really, so while my place is an anchor, it also prevents me from being driven out of a safe port; this is, after all, an anchor's job. So I count myself as one of the lucky ones. I could have gotten into a mortgage and a home I could not afford. Instead the living is easy, and my place is safe and warm, complete with a psycho kitty for company.

# posted by brian @ 11:31 AM 0 comments

Another holiday break come and gone; I'm sitting here in my home wondering if I'll ever fall asleep tonight. Vacations tend to put my sleep cycle in it's preferred state: up 'til 3am, wake up at around 11am. This was great when I worked in restaurants, but not so great when you work in an office. Anyway, I had great plans for the break, and none came to frutition. I should get a few minutes while at my desk to properly update my blog, but I wanted to type something, if only to prevent whatever interal doomsday clock blogger has from closing my site.