Welcome to a new world of electronic security risk.
Now before you start making a stylish aluminum foil cap for your head, consider the many ways in which you are connected to the electronic world.
Most all of us use items such as cell phones, blue tooth, lap tops and home computers. We connect the Internet almost every day and some people, (like me) are connected for more hours, than care to admit. We spend our most critical personal and business data across the net without a second thought. Our security software programs are overrun by hacks and attempts to gain our life information and some if no all of our wealth.
There are many individuals (some say 1 in 100 people) out there making big money from on-line scams. They work by creating lost leaders and sleeper aps which attempt to get to our data. They forward our data to a recipient or use it themselves. Little applications we download that appear harmless, yet contain Trojan horses that send back data to host data collectors. From what we buy, to our most secret information, we all are open to penetration and loss of wealth. If it is on your computer and your computer is connected to the Net, it is vulnerable. If you have a credit card or a reside on a database, you're vulnerable.
On top of the thousands of viscous agents who put spiders on the Net, Uncle Sam is monitoring everything you email, blog, send on-line and say through your cell phone conversations. We are wired in and it needs to stop.
It's time to get off the grid and go below the radar screen.
The only question I have is the remote receiver on the TV really a camera and mic.
Seriously, The technology to process digital and analog using the power grid already exists. I used to own a stereo which sent the sound signal through the power lines to the speakers.
Friday, January 29, 2010
Tuesday, January 26, 2010
Relay: Good assessment of the sub-prime mortgage meltdown and who benefited
January 26, 2010 Wall Street’s Stranglehold on the Economy Is Choking Americans
By Shah Gilani, Contributing Editor, Money Morning
America's Founding Fathers were afraid of any concentration of power in the republic. They were particularly afraid that banking interests could hijack our fledgling democracy.
And yet today, 234 years later, our Founding Fathers' worst fears have come true. Wall Street's stranglehold on the economy threatens our very prosperity, and the future of a truly democratic republic.
It's high time we address the truth about Wall Street's tyranny and set a course for a more secure economic future - one that's anchored by a safe banking system, not a system rigged by banks.
Banks Are the Gamblers ... But You're Taking the Risks
The credit crisis and Great Recession are the unintended consequences of Wall Street's greed. I say "unintended consequences" because - let's face it - Wall Street institutions tipped over their own money pot and bankrupted the public casino they had created to leverage bets with house money.
It all started with the Community Reinvestment Act of 1977 (CRA). This piece of legislation was designed to prohibit discrimination on the basis of race, sex, or other characteristics in the credit and housing markets. Of course, this eventually led to lax mortgage underwriting standards in later decades.
But it wasn't just the Democrats or President Bill Clinton who pushed for an expansion of and greater reach for the CRA in 1999. It wasn't just the Republicans or President George W. Bush who advocated easier documentation terms for homebuyers in a 2002 speech. It wasn't just all the Democrats and Republicans who pushed for Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) to package and buy trillions of dollars of low-quality, mortgage-backed securities.
However misguided they might have been, these policies were all well intentioned. But each of these policies had unintended consequences. It was Wall Street that made sure these "consequences" could be shaped into a giant moneymaking scheme.
Consider, for example, the truth about the subprime mortgage mess.
Default rates on CRA-predicated mortgage loans were a lot lower than bankers had provisioned for. What the bankers realized was that even though they were pushed to make more of these types of loans than they wanted to, they actually made a good profit on them.
As long as housing markets were appreciating, CRA homeowners in distress could actually sell their properties and pay off their loans. Bankers sure weren't complaining then.
After Wall Street pumped and dumped tech stocks on an unsuspecting American public - resulting in the "tech wreck" of 2000 ... and after the horrific terrorist events of 9/11 ... the U.S. Federal Reserve sliced interest rates to record lows and kept them there, much too long.
That's when the subprime-mortgage and easy-credit games took off. Looking at the low default rates on CRA mortgages, bankers figured maybe loan standards were too high and there was room to lower them and still get paid in full. Standards were lowered across the board.
No Intention of Holding onto "Garbage"
Behind the scenes, the big public casino had been readied and the dice were starting to roll. Because Wall Street and its lobbying armies had gutted existing regulations and stifled all efforts to safeguard the public from new exotic derivatives products, there was nothing to stop the juggernaut.
Banks had no intention of holding on to the garbage they were manufacturing. Wall Street securitized all the junk that it gathered together - and then sold it off to anyone who would buy it.
And because not everyone who would buy Wall Street's junk was stupid, the institutions reformulated new products from that junk. The new "collateralized" products were just reconstituted, repackaged loans that redirected internal cash flows from mortgage payers so that some "tranches" of the new collateralized pools looked safe and could get the top "AAA" ratings from rating agencies.
It didn't matter that rating agencies didn't understand the new math; they were in on the game and got rich, too.
To add insult to injury, Wall Street employed another newfangled product. These "credit default swaps" were insurance-type contracts that anyone could offer on anything. But the real beauty of credit default swaps is that these contracts let Wall Street play on every side of every deal: Wall Street profited once when it sold the junk, again when it sold "insurance" on those subprime securities, and over and over again as it traded both the junk pools and credit default swaps.
The best part about the whole scheme (which all the institutions were playing) was that the game was self-perpetuating. As long as finance companies, mortgage originators and banks were able to package and sell their pools of mortgages and other "leveraged loans," the money from the sale of them went back to the folks who originated the individual loans in the first place.
The upshot: Those folks could make more loans and start the entire process all over again.
The more money that was available, the lower rates went. The lower interest rates went, the cheaper it was to finance and hold a portfolio of assets. But because rates were so low, and the return on quality loans was correspondingly low, bankers needed higher-yielding assets to maximize the spread on their "cost of carrying" pools of assets. So what happened?
It became necessary to offer mortgages to lower-quality borrowers in order to charge a higher (and more-profitable) interest rate.
That's how the game snowballed. That's how it became a feeding frenzy.
Where Greed Takes Control
The idea for Wall Street's institutions was to "dance until the music stopped." They all knew they had engineered a housing bubble and that the insane appreciation rates on anything with a roof would eventually fall back to earth. By then, the big players expected they would have found a seat, leaving them to watch the other, less-nimble players stumble and take their lumps.
There was one problem. Wall Street institutions were way too greedy and far too cocky. They believed that they were safe: In their view, they'd either be able to unload their holdings of the junk they'd created, or they had been clever enough to hedge away their risk with their own credit-default-swap-insurance schemes.
Because Wall Street believed it was safe, the institutions didn't see what was really happening. They were all in the same boat ... and that boat was sinking.
That boat happened to be the U.S. economy - and other top economies around the world. Because of their greed, banks actually made the boat and forced us into it. They sunk, along with us, but got bailed out while we were left to drown.
Here's Where Things Get Good
At this point, you might find yourself asking: So what? Most of the banks have repaid the Troubled Asset Relief Program (TARP) money that they so desperately needed. Most are returning to profitability, and some are even reporting record profits and paying out record bonuses to executives.
Yes, some banks have gotten bigger, a lot bigger. Yes, there are more profits to be shared, because a couple of swaggering laggards of the old investment-banking mold - namely The Bear Stearns Cos. and Lehman Brothers Holdings (OTC: LEHMQ) - are gone. Is that so wrong? Isn't that part of financial Darwinism in our capitalist democracy?
The truth is not what it appears to be. Bear and Lehman were ruthlessly crushed by their competition so there would be more business to be had by fewer players.
It wasn't evolution. It was execution.
The bigger banks get, the more they rely on a de facto government guarantee. "Too big to fail" is a doctrine pushed by banks that want to be so big that they crush - or at least absorb - their smaller rivals.
Banks want to be a cartel and to be able to raise fees and the cost of money for their greater profitability, at will. Big banks are making money because the government is keeping interest rates low. Big banks are buying a huge portion of the U.S. Treasuries the government needs to sell to finance the deficit. And that deficit has reached its current size because the money was used to bail out the banks and to mitigate the collateral economic damage that Wall Street caused.
It's a financing game, another bubble to re-inflate bank balance sheets by allowing them to generate a virtually risk-free, high-net-interest margin.
We need to be afraid of what our Founding Fathers were afraid of, too much power concentrated in too few hands - especially banking-interest hands.
We need to break up all the big banks. And then we need to spread their pieces around the country, placing credit closer to Main Street. We need to end all proprietary bank trading ... to eliminate credit default swaps and collateralized debt obligations... and to instill transparency in all capital markets products, trading platforms, and risk-taking businesses that have any systemic impact.
We need a free market, not a free for all.
Competition and free enterprise are the hallmarks of our economic miracle. I'm for less government, less taxation and more power to the people. But this enormous concentration of power that Wall Street and the U.S. banking system have amassed is tantamount to an assault on our very freedom.
It's time to end the tyranny of the banks. And to once again enjoy the financial freedoms that the end of this tyranny will bring.
http://moneymorning.com/2010/01/26/downsize-banks/
By Shah Gilani, Contributing Editor, Money Morning
America's Founding Fathers were afraid of any concentration of power in the republic. They were particularly afraid that banking interests could hijack our fledgling democracy.
And yet today, 234 years later, our Founding Fathers' worst fears have come true. Wall Street's stranglehold on the economy threatens our very prosperity, and the future of a truly democratic republic.
It's high time we address the truth about Wall Street's tyranny and set a course for a more secure economic future - one that's anchored by a safe banking system, not a system rigged by banks.
Banks Are the Gamblers ... But You're Taking the Risks
The credit crisis and Great Recession are the unintended consequences of Wall Street's greed. I say "unintended consequences" because - let's face it - Wall Street institutions tipped over their own money pot and bankrupted the public casino they had created to leverage bets with house money.
It all started with the Community Reinvestment Act of 1977 (CRA). This piece of legislation was designed to prohibit discrimination on the basis of race, sex, or other characteristics in the credit and housing markets. Of course, this eventually led to lax mortgage underwriting standards in later decades.
But it wasn't just the Democrats or President Bill Clinton who pushed for an expansion of and greater reach for the CRA in 1999. It wasn't just the Republicans or President George W. Bush who advocated easier documentation terms for homebuyers in a 2002 speech. It wasn't just all the Democrats and Republicans who pushed for Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) to package and buy trillions of dollars of low-quality, mortgage-backed securities.
However misguided they might have been, these policies were all well intentioned. But each of these policies had unintended consequences. It was Wall Street that made sure these "consequences" could be shaped into a giant moneymaking scheme.
Consider, for example, the truth about the subprime mortgage mess.
Default rates on CRA-predicated mortgage loans were a lot lower than bankers had provisioned for. What the bankers realized was that even though they were pushed to make more of these types of loans than they wanted to, they actually made a good profit on them.
As long as housing markets were appreciating, CRA homeowners in distress could actually sell their properties and pay off their loans. Bankers sure weren't complaining then.
After Wall Street pumped and dumped tech stocks on an unsuspecting American public - resulting in the "tech wreck" of 2000 ... and after the horrific terrorist events of 9/11 ... the U.S. Federal Reserve sliced interest rates to record lows and kept them there, much too long.
That's when the subprime-mortgage and easy-credit games took off. Looking at the low default rates on CRA mortgages, bankers figured maybe loan standards were too high and there was room to lower them and still get paid in full. Standards were lowered across the board.
No Intention of Holding onto "Garbage"
Behind the scenes, the big public casino had been readied and the dice were starting to roll. Because Wall Street and its lobbying armies had gutted existing regulations and stifled all efforts to safeguard the public from new exotic derivatives products, there was nothing to stop the juggernaut.
Banks had no intention of holding on to the garbage they were manufacturing. Wall Street securitized all the junk that it gathered together - and then sold it off to anyone who would buy it.
And because not everyone who would buy Wall Street's junk was stupid, the institutions reformulated new products from that junk. The new "collateralized" products were just reconstituted, repackaged loans that redirected internal cash flows from mortgage payers so that some "tranches" of the new collateralized pools looked safe and could get the top "AAA" ratings from rating agencies.
It didn't matter that rating agencies didn't understand the new math; they were in on the game and got rich, too.
To add insult to injury, Wall Street employed another newfangled product. These "credit default swaps" were insurance-type contracts that anyone could offer on anything. But the real beauty of credit default swaps is that these contracts let Wall Street play on every side of every deal: Wall Street profited once when it sold the junk, again when it sold "insurance" on those subprime securities, and over and over again as it traded both the junk pools and credit default swaps.
The best part about the whole scheme (which all the institutions were playing) was that the game was self-perpetuating. As long as finance companies, mortgage originators and banks were able to package and sell their pools of mortgages and other "leveraged loans," the money from the sale of them went back to the folks who originated the individual loans in the first place.
The upshot: Those folks could make more loans and start the entire process all over again.
The more money that was available, the lower rates went. The lower interest rates went, the cheaper it was to finance and hold a portfolio of assets. But because rates were so low, and the return on quality loans was correspondingly low, bankers needed higher-yielding assets to maximize the spread on their "cost of carrying" pools of assets. So what happened?
It became necessary to offer mortgages to lower-quality borrowers in order to charge a higher (and more-profitable) interest rate.
That's how the game snowballed. That's how it became a feeding frenzy.
Where Greed Takes Control
The idea for Wall Street's institutions was to "dance until the music stopped." They all knew they had engineered a housing bubble and that the insane appreciation rates on anything with a roof would eventually fall back to earth. By then, the big players expected they would have found a seat, leaving them to watch the other, less-nimble players stumble and take their lumps.
There was one problem. Wall Street institutions were way too greedy and far too cocky. They believed that they were safe: In their view, they'd either be able to unload their holdings of the junk they'd created, or they had been clever enough to hedge away their risk with their own credit-default-swap-insurance schemes.
Because Wall Street believed it was safe, the institutions didn't see what was really happening. They were all in the same boat ... and that boat was sinking.
That boat happened to be the U.S. economy - and other top economies around the world. Because of their greed, banks actually made the boat and forced us into it. They sunk, along with us, but got bailed out while we were left to drown.
Here's Where Things Get Good
At this point, you might find yourself asking: So what? Most of the banks have repaid the Troubled Asset Relief Program (TARP) money that they so desperately needed. Most are returning to profitability, and some are even reporting record profits and paying out record bonuses to executives.
Yes, some banks have gotten bigger, a lot bigger. Yes, there are more profits to be shared, because a couple of swaggering laggards of the old investment-banking mold - namely The Bear Stearns Cos. and Lehman Brothers Holdings (OTC: LEHMQ) - are gone. Is that so wrong? Isn't that part of financial Darwinism in our capitalist democracy?
The truth is not what it appears to be. Bear and Lehman were ruthlessly crushed by their competition so there would be more business to be had by fewer players.
It wasn't evolution. It was execution.
The bigger banks get, the more they rely on a de facto government guarantee. "Too big to fail" is a doctrine pushed by banks that want to be so big that they crush - or at least absorb - their smaller rivals.
Banks want to be a cartel and to be able to raise fees and the cost of money for their greater profitability, at will. Big banks are making money because the government is keeping interest rates low. Big banks are buying a huge portion of the U.S. Treasuries the government needs to sell to finance the deficit. And that deficit has reached its current size because the money was used to bail out the banks and to mitigate the collateral economic damage that Wall Street caused.
It's a financing game, another bubble to re-inflate bank balance sheets by allowing them to generate a virtually risk-free, high-net-interest margin.
We need to be afraid of what our Founding Fathers were afraid of, too much power concentrated in too few hands - especially banking-interest hands.
We need to break up all the big banks. And then we need to spread their pieces around the country, placing credit closer to Main Street. We need to end all proprietary bank trading ... to eliminate credit default swaps and collateralized debt obligations... and to instill transparency in all capital markets products, trading platforms, and risk-taking businesses that have any systemic impact.
We need a free market, not a free for all.
Competition and free enterprise are the hallmarks of our economic miracle. I'm for less government, less taxation and more power to the people. But this enormous concentration of power that Wall Street and the U.S. banking system have amassed is tantamount to an assault on our very freedom.
It's time to end the tyranny of the banks. And to once again enjoy the financial freedoms that the end of this tyranny will bring.
http://moneymorning.com/2010/01/26/downsize-banks/
Saturday, January 16, 2010
Pray for Dwight Williams and Family
Last night I lost a friend Dwight Williams when he lost control of his truck returning from getting something to eat in Auburn Alabama. Dwight was planning on coming to Texas to work with me next week.
Dwight was one of the nicest people I have ever known. If you ever met him, you would instantly like him.
Please pray for him and his family in their loss.
Dwight was one of the nicest people I have ever known. If you ever met him, you would instantly like him.
Please pray for him and his family in their loss.
Wednesday, January 13, 2010
Pray for the victims in Hatti
Pray for the victims in Hatti. There is death, pain and suffering on a massive scale and no foreign aid in sight for at least 24 hours. Hundreds of thousands may die over the next week.
....and then there was this stupidly by Pat Roberson in the wake of the tragety... Here it is for those who missed it this morning.
"Something happened a long time ago in Haiti, and people might not want to talk about it. They were under the heel of the French. You know, Napoleon III, or whatever. And they got together and swore a pact to the Devil. They said, we will serve you if you'll get us free from the French. True story. And so, the Devil said, okay it's a deal." http://www.huffingtonpost.com/paul-raushenbush/go-to-hell-pat-robertson_b_422397.html
...I do not care what Pat Robertson said today about God punishing Hatti for making a pact with the devil to overthrow their leaders...Pat is misguided and way out of line for such a comment.
"Hey Pat - Put some of your millions to work in Hatti and please, shut your mouth as you write the check...or better still bsides the check, go over there and minister faith and hope to those who need it most. Leave your camera crew at home here in the USA."
For the rest of us, please find a way to send some assistance, any assistance. You know they will need all they can get...not just now, but for the months to come. Send food, blankets, toys, medicine, anything needed to live.
....and then there was this stupidly by Pat Roberson in the wake of the tragety... Here it is for those who missed it this morning.
"Something happened a long time ago in Haiti, and people might not want to talk about it. They were under the heel of the French. You know, Napoleon III, or whatever. And they got together and swore a pact to the Devil. They said, we will serve you if you'll get us free from the French. True story. And so, the Devil said, okay it's a deal." http://www.huffingtonpost.com/paul-raushenbush/go-to-hell-pat-robertson_b_422397.html
...I do not care what Pat Robertson said today about God punishing Hatti for making a pact with the devil to overthrow their leaders...Pat is misguided and way out of line for such a comment.
"Hey Pat - Put some of your millions to work in Hatti and please, shut your mouth as you write the check...or better still bsides the check, go over there and minister faith and hope to those who need it most. Leave your camera crew at home here in the USA."
For the rest of us, please find a way to send some assistance, any assistance. You know they will need all they can get...not just now, but for the months to come. Send food, blankets, toys, medicine, anything needed to live.
From Unemployment to "Living on the Street"
Let's start with the numbers. Pay special attention to the table row marked U6.
U6 is the true measure of unemployment here in the USA.
It should look like the below.
Using the U6 numbers, we really have 17.3 % unemployment...not some 10% the Fed's love to call out. If reporters were using the right metric (U6) there would be kaos in the streets of Washington D.C. from the millions of Americans (and frustrated Chinese), who would demand the Feds make something positive happen in employment.
Well the Fed's did...they spent 8,000,000,000,000 dollars of your money and mine and our sons and daughters money and maybe even their children's future tax payments too. The shocking thing confirming the stimulus is not working is that the U6 number is returning to pre-holiday levels...
Here is a national average. It takes just under a year for people to lose their homes after the credit and cash savings are gone. In the Great Depression we had a "Farm Holiday", an effort by Government to force banks to leave families in their homes so they could maintain the asset, live there free and pay notes again when they could. The OBAMA administration is doing everything it can to force banks to keep people in their homes no matter what is owed and essentially off the street.
For the fortunate few, pressure on banks by Obama's Banking Regulators to leave people in their homes (under a no mortgage pay system), are the only thing standing between these families living as they are now and under the bridge (or in refugee camps). Program after program are being tried to assist people find a way to stay in their home. This is good and this is bad. Good, in that families will continue to have a roof over their head. Bad, in that the piper must be paid....LATER than sooner...furthering the time it will take to deflate the economic bubble.
Asset recovery (meaning banks taking control of a home for wealth transfer back to the bank...and value migration meaning selling it off to other investors, families, etc. is how banks move the asset from the liability side of the balance sheet to the asset side. Normally, the same bank that owns the mortgage note is not the same as the mortgage servicing bank. So now 2 are involved.
If unemployment is 17.3 percent...at 308 Million people in the USA, that's 26,470,000 people out of work or greatly underemployed. At roughly 40% for ratio of average renters to home owners...that is a whopping 15,882,000 homes that are now at risk of default in less than a year. With an average mortgage of $115K that's $18,264,300,000,000 in play. 18 Trillion Dollars.
Let's do some projections and assumptions...The deflation bubble on real estate is far from over...we lost some 1.4 Trillion to sub prime toxic mortgages. That's only roughly 7% of the "yet to come" mortgage defaults should unemployment continue at this or even higher levels.
We still have a long way to go.
And what about all those derivatives tied to defaulting mortgages that are not sub-prime? I recall only some 45 trillion was in play in sub-prime as derivatives. Yes, the same derivatives that took down Lehman Brothers and a lot of other banks and securities firms. So roughly derivatives exposure is roughly 32 times the default value of the security asset. At 18.2 Trillion, that equals now a whopping $582.4 Trillion left to deflate in investment securities.
And the current administration is focused on stealing 1/6th of the economy in health care....absurb.
Depression anyone....???
When you start seeing you neighbors ask you if they can move in...ask yourself if you trust the Fed's spending another dime of your money on wasteful programs.
They better marshal the remaining credit lines to pay for all the food, shelter, warmth and health care that is going to be needed for the 26 million people who will be living on the street. The Fed's could not even manage Katrina with some 200 thousand....displaced people....now they are going to manage 26 million>>>>
It's time to make plans to march on Washington....
Friday, January 8, 2010
US Debt Clock_What does it all mean
http://www.usdebtclock.org/#
(Our hat is off to this web developer who linked a dash board to national information sources, determined the real time velocity of the numbers and did some running math so we don't have to....good job//)
What does it all mean...(Using this snapshot)
(Our hat is off to this web developer who linked a dash board to national information sources, determined the real time velocity of the numbers and did some running math so we don't have to....good job//)
What does it all mean...(Using this snapshot)
- Overall Comment: It means the US Taxpayer and the Nation are in deep financial trouble.
- Debt: 12+ trillion dollars and growing...supported by a scant one third (1/3) of the population at the tune of $112,000+ per taxpayer. This is equivalent to each taxpayer carrying an additional house mortgage on their back besides their existing personal home mortgage.
- Welfare: More than 1 in 10 or (11.1%) of the population are receiving food stamps. This means that roughly 3 taxpayers are paying for the basic food needs of a single recipient.
- Debt to GDP: At 84.31 % this means that the debt of the Nation is approaching the annual output of the Nation (all domestic companies and individuals within US borders and territories). The only time this has ever occurred was following the Great Depression of the 30's where Government spending approached 50% of GDP. This is an important metric to watch as this is a good heath indicator of the country.
- Unfunded Liabilities: This is active liabilities the Government presently has on the books for Social Security, Medicare Part B and D, etc. Think about the value of 104 Trillion for a minute. There is no way the Feds can pay out these liabilities over the coming decade and beyond. This means Taxes will need to rise substantially for those 109 million taxpayers and benefits will need to come down substantially to meet any level of fiscal responsibility. That's $980,000 per taxpayer. WOW.
Thursday, January 7, 2010
US Debt Clock_Link
I am going to comment on this data shortly across several posts...for now, join me in being overwhelmed by what I see. Enjoy///
http://www.usdebtclock.org/
http://www.usdebtclock.org/
Saturday, January 2, 2010
Treason, Sedation and Eight (8) Trillion Dollars of Government Spend
First some definitions...
"Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort. No Person shall be convicted of Treason unless on the Testimony of two Witnesses to the same overt Act, or on Confession in open Court." http://en.wikipedia.org/wiki/Treason
Therefore...."Any person or persons who preform Treason is then a Traitor" (Rohr 2010)
"Sedition is a term of law which refers to overt conduct, such as speech and organization, that is deemed by the legal authority as tending toward insurrection against the established order. Sedition often includes subversion of a constitution and incitement of discontent (or resistance) to lawful authority. Sedition may include any commotion, though not aimed at direct and open violence against the laws. Seditious words in writing are seditious libel. A seditionist is one who engages in or promotes the interests of sedition." http://en.wikipedia.org/wiki/Sedition
If treason is defined by our Constitution as giving another country "Aid" then there is a lot or "traitors" holding office in our Government. Aid to another country can be interpreted to mean direct or indirect aid. It is reasonable to assume it can also be the result of a direct "cause of action" or "inaction".
In less than 14 months, our Government financial leaders have spent over 8 Trillion Dollars, (that's $8,000,000,000,000.00+), using the credit of the United States. This means they spent money they did not have.
Why spend all that money you might ask? If you are a student of Economics, it's is easy to see why.
This Administration is following Keynesian Theories in which a Government can re-balance the economic equation of Investment, Commercial and Government by spending money equal to the decline in the total economy. If one area slips (declines) such as Investment, the theory proposes that the GDP can be rebalanced through an increase in Government Spending.
The problems created by spending this amount of money are several fold.
In Summary:
"Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort. No Person shall be convicted of Treason unless on the Testimony of two Witnesses to the same overt Act, or on Confession in open Court." http://en.wikipedia.org/wiki/Treason
Therefore...."Any person or persons who preform Treason is then a Traitor" (Rohr 2010)
"Sedition is a term of law which refers to overt conduct, such as speech and organization, that is deemed by the legal authority as tending toward insurrection against the established order. Sedition often includes subversion of a constitution and incitement of discontent (or resistance) to lawful authority. Sedition may include any commotion, though not aimed at direct and open violence against the laws. Seditious words in writing are seditious libel. A seditionist is one who engages in or promotes the interests of sedition." http://en.wikipedia.org/wiki/Sedition
If treason is defined by our Constitution as giving another country "Aid" then there is a lot or "traitors" holding office in our Government. Aid to another country can be interpreted to mean direct or indirect aid. It is reasonable to assume it can also be the result of a direct "cause of action" or "inaction".
In less than 14 months, our Government financial leaders have spent over 8 Trillion Dollars, (that's $8,000,000,000,000.00+), using the credit of the United States. This means they spent money they did not have.
Why spend all that money you might ask? If you are a student of Economics, it's is easy to see why.
This Administration is following Keynesian Theories in which a Government can re-balance the economic equation of Investment, Commercial and Government by spending money equal to the decline in the total economy. If one area slips (declines) such as Investment, the theory proposes that the GDP can be rebalanced through an increase in Government Spending.
The problems created by spending this amount of money are several fold.
- This spending as based on a theory which is unsound and will not meet the objectives of returning the country to sound financial and employment footing. It has been proven that while the theory is correct in a vacuum...macro economic forces are not in a vacuum, they are now global, systemic, and not isolated to a single spending stream no matter how large...including any amount the government might spend.
- Unless Government spend is widely dispersed, it will not have the "rising tide will float all boats" effect that was intended. As we will all witness shortly, the spend has been placed on state pork programs to get the bills passed, community organization projects (Acorn), on large companies in defense and some infrastructure (Boeing, IBM, GE, GD), on programs designed to increase efficiency in health care (more GE), and on propping up the banking system further than TARP (mortgage toxic asset recovery). The point here is that "the spend will not raise the tide", but become highly visible as one sector gains and in opposite, disastrous as other sectors visibly FAIL ON. What is needed is actions which will benefit all..not the few.
- This spend does not adequately address the core need...which is allowing the deflation of the "bubble" to take place in natural order and timing. In a world of inflating and deflating bubbles", in simple English, "the longer it takes for a bubble to deflate, the longer the time to reach inflation and stabilization" (Rohr 2009). Any action or inaction which serves to slow down or change the natural timing and order of things is a wrong approach. If unchecked, the Government could extend the time it takes to recover by literally decades. Many Economist agree that the recovery efforts have served to extend the time to recovery, not decrease it.
- This spend is based on debt. In in 1930's Depression, Government was fiscally solvent, had gold reserves equal to the money in circulation and outstanding credit in the world financial community even though it was recovering from WW1 repayments. In the world we live in today, Government debt based spending is simply good money (secured by making loans) chasing the wrong approach...a potential means to bankrupt the country.
- This spend will not increase base value for all taxpayers...the same ones who will ultimately fund the spend in the first place. All taxpayers should see something for their money...or else why spend the money. It is very hard to find programs which raise value for all taxpayers, but I can think of one simple, yet incredibly effective program which would raise the value for all taxpayers. Return the U.S. Currency to the gold standard. In this action, everyone would benefit and no one state, company or individual would gain over another. All would share in the wealth stabilization. Our nation debt rating would immediately go from damaged to solvent. Your personal wealth will reverse the current decline and increase due to th solid footing. Even countries who hold our paper (our debt), would benefit knowing that their future payments will be on par with the same gold they now seek to hedge the ongoing devaluation of our Dollar.
In Summary:
- This spend will add to the problem...not repair it. From where I am sitting, the outlook is not good for any repair in the immediate next few years. I feel we are on the verge of a US and perhaps a Global Depression...one that will make the 30's look like a "good time". Our economy is 40% of the worlds economy. If we go down, the world economy will go down...inspite of what you are hearing that says China is this, or China is that.
- It is not the Government's responsibility to intervene in normal market actions.
Markets go up, and markets go down...all part of a normal market dynamics as it responds to changes in marketplace demand and supply, efficiency and value. What specific Constitutional power grants the right to spend my money, my son's future income and maybe his son's too, without general voter approval on any bill or program? Is it the article which states "the Government shall maintain the value of it's issued currency?" Adjusted for inflation, you would need $29.50 to buy just one 1906 dollar. It looks like your Government has done a fine job holding up the value of the currency. I want a control over future Government spending that goes far beyond current law. I want the people who are paying the bills to make the final decision. - "If our Government leaders are deflating the value of the dollar through increase in our national debt without Constitutional authority or evidence of clear success, then those same are traitors to our county and have aided the enemy by weakening this great nation...It's that simple" (Rohr 2010).
- Are you becoming afraid of your Government?
- Are you happy with all this "hope and change" you Obama voters wanted?
- Do you want to have a say in how you tax money is determined and spent?
Friday, January 1, 2010
Crisis Cash Management
Preface
This book titled “Crisis Cash Management” (CCM) is a no nonsense, information
resource and “how to” guide for any business in a cash crisis. This Guide teaches the
critical art and skills of crisis cash flow management...a term I created to describe
management of the business when the world is closing in due to cash issues. Call
it a “crisis situation” or a whatever you like. The bottom line is the business is in
trouble and needs to bail itself out. CCM is based on sound principals and “trial
by fire” methodologies. It includes practical advice, roles and responsibilities, cash
control, cash flow knowledge and hundreds of experienced based cash recovery
knowledge lessons you can apply in your business right now...today. You don’t have
a minute to loose.
“Cash is definitely King” in personal and business finance. Only cash can pay for
debts of a business...not inventory, good will or high brow branding. It’s true that
most disciplined Managers can operate a business under favorable cash conditions.
It’s when times are tough that Crisis Cash Management (CCM) can help small and
medium sized business owners and managers survive a daily “make it or break it”
cash crisis.
Crisis Cash Management is not about managing cash in banks to achieve
optimum rates of return, nor is it about dividends, macro conditions, or investing
cash. Instead, CCM helps Managers and Owners take control of business cash and
create cash position certainty and positive cash flow. You will use a very granular time
cycle for reporting, analysis and follow up. You will use a “rolling wave of knowledge”
approach to keep the information accurate and current. This book will help you
produce all the information needed and will manage the recovery of the business
during the crisis and beyond.
Crisis Cash Flow Management skills elude many owners and managers. Crisis
Cash Management is just not a routine condition for most Managers....but it must
be understood if the company is going to survive. “Seat of the pants” cash management
methods are not sufficient to recover a declining cash condition.
Even a bad cash management system works when enough cash is coming in.
Crisis Cash Management is not taught in business schools...even though all Business
Majors receive well focused training on the subject. What they don’t teach is
Crisis Cash Flow Management, a unique set of skills akin to that of a survivalist in the
woods...making do with what they have, finding food wherever it lies. Crisis Cash
Management is an “acquired skill”...developed in battle and tested under fire.
xii PREFA CE
Either you acquire the skills or you don’t. If you do, the business survives. If
not, well...someone else will be buying your assets for nickels on the dollar.
Business depressed financial conditions coupled with global declining markets
are forcing even experienced managers to address and become experts in Crisis
Cash Management for the first time. For those brave few, it’s time to acquire Crisis
Cash Management as a new core competency and as a way of business life. This rigid
discipline of perfect cash flow management is making companies agile, leaner and
in the process, survivors. What company would not want to be more agile and leaner
during turbulent times?
When cash flow margins are declining or negative, managers under fire don’t
need long dissertations on cash flow theory or advance cash management techniques.
They need a “basic guide”. One which provides the key skills and advice for
repetitive and sustainable cash and cash flow management techniques...especially
under poor economic market conditions and when cash is just plain absent,
regardless of reason. “Crisis Cash Flow Management” answers these needs with
heavy emphasis on business survival during negative cash flow conditions or when
the business is just losing control of cash flow.
Is your company in a cash crisis? If it is, corporate wealth is decreasing.
If the cash condition is acute...the very survival of the businesses is in jeopardy.
Organization of this Guide
This Guide is divided into two (2) parts:
Part 1: Crisis Cash Management - Information and Opinions
Part 2: Crisis Cash Management Plan – Template
Please read Part 1 first to gain concepts and suggestions that will support Part 2, Plan
Development and Plan Performance. You have several difficult things to accomplish
quickly to gain control of your cash, so try to read Part 1 in one reading. Then read Part 2
in one reading if possible before jumping in.
You should be able to read this complete book in about ten hours at 50 WPM average
speed. However, implementing the information in this Guide can and will take several
days.
For some companies, it might take only a day or two to achieve cash certainty and
full process control. If that reference does not describe your company, then it may take
days of number crunching and some guess work to perform just a few steps. This is almost
always true when cash based information is scattered, missing, or off site. Either
way, it WILL become accurate and well structured for assimilation and analysis.
Your specific success depends greatly on the level of effort applied by all stakeholders.
Good luck, read on, and get ready to go to work....your business might just
depend on it.
Table of Contents
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Organization of this Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xii
Part 1 1
Crisis Cash Management – Information and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Problem Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Key Guide Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Guide and Plan Distribution Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Basic CCM Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Profits vs Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
The critical aspect of time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
What is a Business Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Cash flow and money axioms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
What will “Crisis Cash Management” do for my business? . . . . . . . . . . . . . . . . . . . . . . . . .8
The Basics: Cash Flow = Cash Receipts – Cash Disbursements . . . . . . . . . . . . . . . . . . . .9
What is a “cash flow crisis?” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Enterprise failure is a vicious spiral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Difference between “Crisis Cash Flow Management”
and a “Business Turn Around” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
What can Business Manager’s control...How about . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
How do I know if my business enterprise is worth saving? . . . . . . . . . . . . . . . . . . . . . . 14
How long will it take to see results? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Who are the stakeholders of crisis cash management? . . . . . . . . . . . . . . . . . . . . . . . . . 16
Three Step Cash Flow “Triage” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Crisis Cash Management Prerequisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Critical Success Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
KPI’s and Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
All good efforts worth doing should begin with a “Plan” . . . . . . . . . . . . . . . . . . . . . . . . 19
Has my business accomplished the mission? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
How can I get stakeholders “onboard” and add their support? . . . . . . . . . . . . . . . . . . 20
Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
viii TABLE OF CONTENTS Crisis Cash Management ix
Emotional times require a “level head” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Decreasing spend velocity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Setting spend priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Cash Inflow (Receipts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Collecting Early . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Late paying customers: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Charging More . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Lowering Costs of Goods Sold (COGS): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Book: “The 10 Reasons Why Buyers Don’t Buy” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Cash Outflow (Disbursements) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Paying Late . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Paying Less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Temporary or Permanent Pay Cuts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
In labor relations, pay reduction is never “free” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Reduction in Force (RIF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Reduction in overhead (non-personnel) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Moving the company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
How should I handle emergency “unforeseen’ expenditures . . . . . . . . . . . . . . . . . . . . 38
Putting in new cash (capital...financial blood) into the enterprise . . . . . . . . . . . . . . . 39
Taking on collateral based debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Leverage of bank and supplier credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Make sales which result in “real profit” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Cost Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Selling off assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Selling off inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Expense Accounts and other traditional outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Part 2 47
Crisis Cash Management Plan - Template . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Part 2: Reading and Application Advice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Overview: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Why is the Plan a “Template”? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
A word about data collection and form creation: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Plan Steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Phase 0: Assemble the team and create a sense of urgency . . . . . . . . . . . . . . . . . . . . . 53
Selecting People for the Core Team: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Extended Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Letters of Commitment: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Sample RACI Chart for ALL Steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Phase 1, Step 1: Prepare an “Income History” for past 12 months . . . . . . . . . . . . . . . . 58
Software based database “Report Writers” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Phase 1, Step 2: Analyze inventory and purchase patterns
(by SKU, category or vendor as required) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Phase 1, Step 3: Debt Detail and Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Phase 1, Step 5: Overhead Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Phase 1, Step 6: Direct Expense Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Phase 1, Step 7: Analyze individual expense account relationships to sales . . . . . . 71
Phase 2, Step 8: Prepare an Income Projection using a “Sales Forecast” . . . . . . . . . . 72
Crisis Cash Management in a “Project Environment”: . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Projects: Income Projection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Phase 2, Step 9: Forecast cash outflow by project or business unit
(including prioritizing as required) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
A) Projected Cash Requirements (including prioritizing those requirements): . . . 77
B) Fixed Cash Requirements (Allocations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
C) Cash allocation for unanticipated priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Phase 2, Step 10: A,B,C Inventory Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Phase 2, Step 11: Reduce Outstanding Debt Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . 85
Phase 2, Step 12: A,B, C, Assets Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Phase 2, Step 13: Overhead and Expense Account Reduction . . . . . . . . . . . . . . . . . . .89
Phase 2, Step 14: Labor Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Phase 3, Step 15: Cash allocation and budgeting in accordance with
known budgets and priorities (customer, project or business unit) . . . . . . . . . . 94
Phase 3, Step 16: Applying the work “real time” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Using the cash position spreadsheet: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Fluctuations in the end numbers and some key questions to ask . . . . . . . . . . . . . . . 99
Daily Work on the Cash Flow Position and Supporting Documents . . . . . . . . . . . . . 101
Phase 3, Step 17: Build a “Cash Cushion” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Phase 3, Step 18: Celebrate the wins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Recognition: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Closing Thoughts: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
The Future: Rising Business Taxes: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Reversing Bad Management and Changing Bad Business Models: . . . . . . . . . . . . . 105
About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Contact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
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