You're the chief financial officer of a multimillion dollar company.  You report that earnings have been solid, despite the economic decline, and determine that, unless spent soon, you're going to incur significant tax burdens.  The CEO asks, "Where's the safest place we can put the money, even in today's market?"  Your answer, "United States Treasury Bills."  AKA, T-Bills.

 

Here's how this works.

 

Tags: Economy | Investing | Financial

I found this article over at Bloomberg.com to have some pretty good information summarizing recent political steps regarding the economy, the bailouts and the auto industry.

 

President-elect Obama made a statement about his plans to forge a huge infrastructural investment strategy to help curb the economic crisis starting sometime next year.  Other than that the program is going to be a sizable, there are not enough details to determine what effects this will have on both the short term and long term time scales.  What one can rely on is that there are going to be plenty of entrepreneurial opportunities for companies to help with the process.  This correlates with my own experience talking with investors and entrepreneurs who survived the S&L crisis.

 

Tags: Economy | Financial | Current Events | Real Estate

I don't know Henry Paulson.  Is he a decent guy, trying to do the right thing in difficult times?  Probably.  Is it just a coincidence that, as a former Goldman Sachs executive, he oversaw the demise of three of Goldman's biggest competitors, Lehman Brothers, Merrill Lynch and Bear Stearns, while Goldman lives on?  Probably.  Is it relevant that the vast majority of his wealth is held in Goldman Sachs stocks?  Probably not.  But there is no mistaking that the actions that led to him being dubbed "Mr. Risk" is a strong indicator that his philosophy of extensive leverage is part and parcel of the current crisis facing the financial institutions.

We're facing a unique problem in that those who are advocating extreme measures of government intervention in this crisis are doing so not because they necessarily want a socialized economy, but are acting in order to preserve a free market.  In this article from CNN, Paulson himself admits to such a way of thinking.  His rationale is that government intervention is necessary now because it wasn't implemented earlier.  Meaning, the current businesses needing a bailout need it because they are too big to fail and that the government should have come in and prevented them from ever being too big in the first place.

Tags: Current Events | Economy | Financial

Although this article from CNN seems to want to talk about retirement, what it really underscores is the philosophy the modern American adopts towards investing.  And what is the generalized American investment strategy?  It goes like this; don't take risks, save, and keep equity in your house.

 

The problem I see here is that this strategy is only being compared to its antithesis of taking risks, not saving and destroying the equity in your home.  Yes, compared to that strategy, it is far superior.

Tags: Real Estate | Financial | Economy | Investing

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Tags: Investing | Economy | Financial

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Tags: Investing | Economy | Financial

It is now policy for the federal government to bail out large corporations.  While the bailout of Chrysler in 1979 seemed egregious from a position of federal policy, the $4.2 billion (calculated for inflation) spent to save it seems like pennies compared to what the government is planning on spending this time around. 

Adding up the $1.4 trillion expected to assist the FDIC, the $2.4 trillion used by companies to pay bills and other short term commitments, and the $3.18 trillion to bailout the financial institutions, the total bailout comes just shy of $7 trillion.  Now we have to add another $300 billion because of the bailout of Citigroup which brings the total to about $7.3 trillion.

Never has Congressman Everett Dirkson’s words been so accurate when he said, “A billion here, a billion there, and pretty soon you’re talking about real money.”

$7.3 trillion.  That’s $7,300,000,000,000.  That’s $24,000 for every man, woman and child in the United States.  That’s 50% of our GDP.  That’s 12 times the cost of the Iraq war.   And, surprisingly, it’s probably about $6 trillion shy of what the total bill is going to be if this bailout strategy is used for the totality of the economic losses suffered.

This strategy of curbing an economic decline through inflation and taxation by making the entirety of the public pay for the mistakes of the few is not limited to our borders.  Japan, China, Russia, Germany, UK, France and others are all engaged in bailouts of their own.  And while I can talk at great length about the legality or constitutionality of such a bailout being preposterous, the overarching point is that the government is going to do this, whether we (or I) like it or not.

An interesting ramification of this policy is that businesses now have a reason to become giant conglomerations more than ever before.  If Google, Microsoft and Yahoo merged to form an information-age mega-giant, and a sudden economic downturn jeopardized their success, precedence has now been set forth that the American people will pick up the tab.

Hopefully you can all see that a company in which their profits where private and their debts were public is going to be rocked by malfeasance and corruption.  No doubt, this is exactly what happened to Fannie Mae and Freddie Mac and is exactly the catalyst for this whole debacle.

It also sends the message that it is in the public’s best interest not to buy products and services from industry leaders.  Helping the big companies become bigger gets them one step closer to having the ability to purge your earnings through taxation upon making incredible financial blunders. 

While the concept of the federal government bailing out a company isn’t exactly new, the scale of which it is occurring marks a decided change in the purpose and relationship of the federal government to the public sector.  The total implications of such a change cannot be accurately forecasted or ever reversed.

-beasley

Tags: Investing | Economy | Real Estate

Stocks are plummeting, the auto industry is on the brink of collapse, Iran almost has the bomb, pirates are attacking, and now it’s even too deadly to flush toilets!  What are we to do?

From my point of view, ever since mid-October when the stock market went through its worst week ever and officially redirected public interest away from war in Iraq to the economy, there seems to be no end of ever increasing bad news.  The election of a new president seemed to stop fears, but only temporarily.  Now it seems like we’re back to counting down the minutes of a doomsday clock worthy of Biblical proportions.

But we can’t just hide under our desks and hope we’ll be fine when this all blows over.

As the economy contracts, one must realize that the way it contracts is not by eliminating excellent businesses or excellent investments.  On the contrary, the market is quick to severe the ties of the most unstable and poorly executed businesses and investments first.  Even though it upsets me that Congress would even consider taking my money and giving to a private company like GM, I am at least somewhat relieved that they are reluctant to do so unless it is accompanied with serious overhauls. 

But that’s not my main point today.

Today, it’s important to look at the companies that are not being bailed out.  It’s a great time to look at investments and ask, “Why is that one not defaulting?”  This economic “collapse” (as they like to call it) is separating safe businesses from risky ones, and investors from speculators.  It is a necessary cleansing.

And now we all are faced with two options; either we can continue with our old habits that we call investing and blame corporate malfeasance for destroying our nest eggs, or we can become serious, attentive investors who are not pounded by economic declines, but are rejuvenated.

It's a crazy world, but we can still act within it.

-beasley

Tags: Investing | Economy | Financial

Looks like we've been featured in a front page story on the Bloomberg website.  Apparently, the nation is pretty interested in our little community down here.

For those of you who don't know, Austin had a new retail development go up called The Domian.  It currently has a Neiman Marcus, Nordstroms, an Apple Store, a Starbucks and few other major retail names.  It's like a little outside mall and, so far, it looks likes it is a powerful draw for consumers.

Tags: Business

Any followers of my blog here will have recognized that the quantity of updates has diminished.  This is primarily because I make a sincere effort to find relevant articles covering business and investing to comment upon.

Unfortunately, since the economic crisis has dominated the headlines for the last 4 weeks or so, very few articles are appearing on these topics that haven't already been covered in previous articles.  There's just not a whole lot to comment on beyond what I have already covered.

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