curing the recession part 2

The contrarian investor of real estate will claim all real estate does not appreciate in value, I claim–with the caveat of non hazardous land or environment–all land appreciates in value.  Those properties that went up in appraised value because of the speculation that went on around them will return to their historical price averages over time and as fewer houses become available, each one will rise in price proportionately.

Houses are NOT being sold for “next to nothing” or for “drastically reduced prices” but instead, they are now being sold for their true cost to build plus a reasonable 25% profit margin.

The current prices that homes are being sold for now, therefore, are closer to their true value based on a greater averaging of prices over 15 years.

Now, briefly touching on the war in Iraq and Afghanistan.

This is a money losing venture and the only way to cut our costs there is to get out; either today or in a few years.  I disagree with our field commanders and our president.

He says we have no ill feelings towards Muslims.  Maybe.  But we sure as hell have ill feelings about the book Muslims call holy!

The war generates war profiteers and for reasons unfathomable to me, when prices rise 25-50% in one industry, which automatically qualifies for a review for violations of the “war profiteering” act, none seem to be on-going and thus, those who raised prices just to extract extra pennies from the war are free to continue to do so for now.  At least, fewer are flagrantly doing so in March 2009.

Corporate and home budgets are created the same way; we write down our presumed income and our expected expenses and as often as we can, we “freeze” our expenses whenever possible if we don’t see huge, unusual revenue coming our respective ways.

Now that gas prices are ½ what they were mid last year, at least our budgets’ money goes further.  However, with the higher prices of last year and the bank fiascos and the car maker messes, people finally got their aggregate home balance sheets together and said “whoa, Nelly!” and they slowed down their buying to save their houses–it worked in some cases. 

 While the purchasing reduction came in time for thousands, it did not come in time for millions who lost their homes or who are now losing them.  Since their budgets went askew, their normal fun purchases [clothing and toy and electronics purchases] were halved and that killed some of the retailers who had backed themselves into a corner.  Also we had too many bland retailers who had forsaken the “Wow Factor” just so they could generate some sales.  With those merchants gone, and their inventory auctioned off, those merchants had to have layoffs.  With more bland merchants and car company lay offs, thousands, and then, hundreds of thousands and then, millions of people got laid off from their once totally secure jobs as people–consumers, are still hesitant to buy as much as they had been buying for the past decade. 

Good or bad as it may be, when the world of/process of lay-offs is used to cut costs, it has a domino effect.  Each company, sensing the environment, stops its normal expenses, stops hiring and ceases to look for opportunity and focuses on cutting expenses.  While it is a given that cutting costs is the fastest way to retain a firm’s profits, if sales stay the same, seeking out new clients or making more sales to current clients is a superior way to gain profits.  That is because of the adjacent consequences of conducting business or what is often called the community impact of businesses.

Fear that comes with caution that also comes with future planning is a good thing as long as it is identified as fear.  Caution without fear is actually even better.  However, if we focus on fear or caution, and ignore or postpone seeking new opportunities for sales, we lose the main objective of business.

This author says the solution for the hiring crisis is far too easy: the FED and state gov has to do for the general public what it did for the moronic banks; lend it money...with few questions/qualifications!  There needs to be direct investing or lending of institutions to individuals who have good biz plan but no capital of their own.  This occurs now only with venture capitalists but of their investments, they only fund 1 in 100 applicants.  VC needs to be made available from a central body or a contracted body and in a timely manner.  Honestly, the money wasted on the banks and car firms could only help out the VC world!  While most firms fail in their first year, they do so because the entrepreneur cannot afford to pay for consulting help and pay back their loans and pay salaries.  If the VC firm also paid for the consultants and the entrepreneur did not have to pay for same out of daily-monthly revenue, the entrepreneur would be more likely to use expert small business advisors.

It is assumed that if VC was made available within 1 mo to applicants with a biz plans but nothing else, and each biz had an assigned, prepaid advisors, most of those VC recipients would succeed instead of fail. Further, if the stipulation was that each VC recipient had to hire x number of people, then shortly the 6,000,000 unemployed would be hired by these boutique specialist new start-up firms!

Further, cutting salary costs by using foreign suppliers comes with trap door consequences; poor quality, delayed delivery times and no such possibility to order on demand–and same day delivery! Costs are what businesses must always try to cut AS LONG as the consumer and employees don’t lose out or get harmed.  And it makes no sense in sending jobs overseas when those individuals are not buying American goods or services, thus creating a vacuum in job growth.

Next; Sarbanes-Oxley Compliance rules for accounting ethics seems to be missing where it counts the most-- in banks and in auditor’s offices of retail firms. Had those rules been in place, it seems as though AIG and all the banks that failed, would not had to fail.  SO was designed to require disclosure by auditors of unsafe business practices initiated by any firm who used an accountant.  Yet, in less than 4 months, the US went from being a nation of excellent, growing and highly profitable banks to losing 4 of our largest ONLY because the CFO and his team were able to by-pass SO.  Somehow, the SO law was ignored or the auditors did not see what we all saw or heard months or years later when it was too late.

IF the fed will monitor the S.O. law, at least the whereabouts of the profits before the fall will be found and returned to the stockholders and the US gov who lent money for the bailout.

Next; illegal aliens who began filling our jails and kidnaping our citizens with impunity.  They take jobs, ignore our laws, drive and park illegally, and demand rights!  The ACLU is even in their pocket.  As we deport more illegals, more jobs will open up to legal citizens, fewer losses will occur to our communities and fewer accidents and insults to our laws will occur.

This author invented the term “Wow factor” in the early 70's to identify why a business draws customers.  They do so by unique pricing [Walmart], “putting on the Ritz”, or by having occurrences along with their product; Disney does that best. If one is from African’s bush and thus, has never seen a retail store, Circuit City would be exciting. When, however, this same electronics buyer then visits BestBuy or Fry’s Electronics, then Circuit City quickly loses appeal.  Same with most women’s fashion stores.

 Now that I have “boiled” down all that I can without converting this paper in a book [wonder if I should?] Let’s connect the dots and see if it logically brings us away from the brink of “financial Armageddon” and to tremendous financial growth for our nation!

Use the old JIT system of inventory control that has been taught in colleges for 40 years-“no product is made till it is prepaid.                        

Invest in new businesses.  Sue those who have committed fraud with investor’s money.  Sue war profiteers.

Bibliography

Hall, T.E., (2001),  The Great Depression: An international Disaster of Perverse Economic Policies, University of Michigan Press, Ann Arbor, Mi.

McComb, M.C., (2006), Great Depression and the Middle Class, Experts, Collegiate Youth and business ideology, Routeledge, NY., NY

Rothermund, D., (1996), The Global Impact of the Great Depression, 1929-1939, Routledge, New York, NY.