Trouble ahead for the greenback

Imagine buying a commemorative plaque that included a certificate of authenticity and had been issued in a limited quantity to uphold its future market value.  However, what if the plaque manufacturer then started freely distributing without limit, and possibly even giving the plaques away after you've been one of the earlier purchasers of the special commemorative piece - what do you think might happen to that value for the one you're holding?  If you said it would drop in value, then you are correct!  It wouldn't take long for those holding such plaques to realize they've become practically worthless or at least certainly diluted in value to the point of being much less than the price originally paid to acquire it.

Well, that is what is happening with our once mighty greenback.  Yes, the US dollar, being the reserve currency of the world, and no longer backed by huge quantities of gold but the good faith and trust of the US government and its people.  Yet, once again, we are squandering that trust with our monetary policy to print dollars to buy US Treasury bills and bonds on the open market. Our policy makers are of the belief that diluting the value now to stimulate the economy will provide greater rewards for dollar holders in the future by way of increased economic activity, a more economically stable America and therefore a stronger greenback.  Unfortunately, we all know better than to trust such large scale trickory and in particular its attempt to manipulate human behavior without much of any substance behind it.  Just because the government wants everyone to feel good and start buying/hiring, etc. doesn't mean we're going too!

The US continues to act as poor stewards of the world's reserve currency and I believe we will pay the price for it.  Not only will QE2 not work with stimulating the demand of the American economy but it will further depress the value of the dollar in the not too distant future.  Basically, the US dollar is being secured by IOU's of the US which is like being insolvent and acting as the guarantor of your own debt as security for others.  For now, it's not likely to have much more impact of depressing the dollar after its widely anticipated $600 billion purchase announcement unless the Fed decides to do more than that.  But, in subsequent years, when the true ramifications of the measures come into play, it will wreak havoc on the currency. 

For now, there is much hope that it will stimulate demand in America but likely there will be soverign debt issues of other countries in Asia and Europe that will provide support for the US dollar before such debt troubles spread to the US and cause the selling of US dollar like there is no tomorrow.  Just be prepared to diversify when the dollar gets much of its strength back momentarily.

Is this behavorial change generational?

Behavorial change has started for many Americans since the onset of this economic downturn labeled the Great Recession.  For many, gone are the days of splurging on exotic vacations, luxurious homes, expensive toys, eating out regularly and shopping til you drop weekends.  People have had to let such items go and many have started to adopt a new lifestyle of less is more, save over spend, conserve rather than waste and be happy with what you've got.  Clearly, children of such households are adapting to this new lifestyle change and are making some mental notes for their adult years.  But much of what our culture has become overextends this isolated short-term despair likely diluting the true behavioral change agent it would be.

For the most part, people are creatures of habit or conditioned behavior and certainly products of their environment.  It takes considerable will power to avoid doing something that is appealing or satisfying even when the longer term consquences are not favorable.  Smoking is a classic example as we all know the health risks long-term.  Also, overspending and not saving or investing can play havoc on one's retirement years.  Unfortunately, our society is centered around short-term thinking, materialism and going to the extreme at all levels for the moment without regard for the longer-term impact.  This includes our governmental policies.

Generally, it takes severe loss or great pain to actually break free from unwanted, unhealthy or destructive behaviors including those that come from short-sited governance.  To change a culture or a nation of people, and for that matter future generations, significant pain and suffering across nearly all facets of society must be endured.  This is the stuff that molds future generations and alters policies of whole nations if not a world.

The Roaring Twenties was a fabulous time for most Americans of that era only to be forgotten a few short years later with the great equalizer of all the Great Depression.  It's been nearly 80 years since such a fate hit on such a mass level.  However, the impact for those that endured those times and even the children of children that survived held onto the strong behavioral changes that took place for generations to come. 

Today, it would seem that this is an important process once again to offset the imbalances and excesses that have been floating about within our society chiefly from poor govermental policies and self-interest.  If it gets that far, it will be like a Tsusnami that is impossible to stop. I only hope that our leaders of this nation and for that matter the world can figure out how to regulate and govern for the common good and not what has come of the past.  I'd hate for our children to endure something as so tragic as children and families did of the 1930's.

American employment picture is bleak

There is not a lot of good news for Americans looking for work.  Already hovering at 9.7% unemployment for several quarters with an under-employed figure many believe twice that rate raises much cause for concern.  Unfortunately, the ability for America to create and even save jobs has been severely compromised.  The excesses that have been experienced (dare I say “enjoyed”) at all levels within our society (households, local, state, federal) are just starting to take their toll on America’s payrolls.  Despite great resilience from past recessions, this one will be different!

Today, every child born in the U.S. is indebted to the tune of $43,000 and this is just at the federal level.  Other under-funded obligations of social security, public employee pensions, education, health care and non-job creating entitlement commitments places that figure much higher north of there.  Yes, this is owed on a child’s first birthday!  Heavy debt burdens only impede progress and growth. 

In addition to this heavy public debt burden, there are a number of other forces that will impact job creation in America moving forward.  Such as:

The Internet – This revolutionary, borderless super-highway that spawned thousands of new companies and created hundreds of thousands of new jobs is now The Great Equalizer.  It’s possible to perform a wide variety of technology, service and support work in countries far less expensive than America.  CEOs of American corporations can achieve greater profits by maximizing use of cheap labor around the world rather than just within our geographical borders.

Mergers & Acquisitions – The same CEO’s and private equity funds will look to drive profits by consolidating companies and eliminating workers based on economies of scale and greater efficiencies.  Much of the M&A activity could come from foreign investors strengthened by the weak U.S. dollar and looking to secure a greater presence in the U.S.   Foreign based companies will look to streamline U.S. operations and use their own national workforce to remotely manage as much as possible of the acquired companies.

Automation – Similar to what M&A activity and the internet are doing, companies will look to other high technology and process automation tools to replace workers and reduce labor costs.  We are already seeing this in play and it will only accelerate as more regulations, higher taxes and burdensome facility/employee costs spiral out of control. We have kiosks used extensively in the travel industry; self-checkout registers at stores, check deposit by phone, ATMs everywhere, etc.  There are very few industries that can’t be improved through automation and the elimination of jobs.

Fear – American workers have increased their productivity at commendable rates over the past twenty years predominantly because of the advent of the internet, mobile communications, super-fast computers and other high-technology productivity tools and software.  What hasn’t truly been exploited is the ability for the common worker to actually work harder, faster and longer during a normal work week.  This will come about through increased job insecurity and the fear of losing one’s primary source of income.  Fear will be a huge motivational factor that will fill the gaps left by downsized companies and keep future job creation at bay;  at least temporarily.

Government Layoffs – Layoffs and attrition are the only feasible economic solutions to battling the burdening debt and pension obligations of governmental entities.  Large numbers of local government employees have already been given pink-slips.  These numbers are expected to swell when state governments and the federal government begin to utilize such measures to control spending.  Not all ex-government workers will have sufficient pensions to retire thereby swelling the ranks of the unemployed workforce.

I’ve touched on a few key areas that will have a profound impact on American jobs into the future.  There are many others as well as we work our way through the excesses of the past having built an economy widely dependent on consumption and debt.  Unfortunately, America’s employment picture is looking bleak.

Are bank owned sales now as uncertain as short sales?

With all the recent news about Old Republic Title Insurance Company having stopped writing title insurance policies for J.P. Morgan Chase and GMAC Mortgage foreclosed properties because of objectionable issues about their foreclosure processes, one wonders if things could get any worse.   Couple this with Bank of America having already frozen foreclosures in certain states because of concerns over the preparation and execution of foreclosure documents, it seems only a matter of time before BofA puts their own freeze on foreclosed properties already on the market for lack of insurable title. 

Can this happen to one of our country's largest sellers of bank owned properties and would it apply to all states including California which is a non-judicial foreclosure state?  Absolutely!  It seems this epidemic is spreading with more banks being concerned over their foreclosure processes.  I have just been informed of my client's escrow relative to her purchase of a bank owned property is being frozen today!  And, it's not an asset held by BofA.  PNC Bank, the nations fifth largest bank based in Philadelphia, has made a blanket policy to freeze all current sales until such time as they can sort out whether they have followed all appropriate laws and practices for "clean" foreclosures whether in judicial or non-judicial states.  Wow, this is going to really create concern amongst buyers.

So, now which is better for a buyer, the short sale that needs lender approval or the bank owned property that could be frozen for an internal review or have uninsurable title declared prior to close of escrow?  I'd hate to be a buyer today trying to buy as there just aren't enough traditional sales to look at on the market if you really want to get a home to live in with much certainty after signing the contract.  Distressed properties are uncertain - the discount to market comes at a price to the buyer.  Time will tell what happens next.

Let's Start a New American Revolution!

Here's my letter to the Editor of the El Dorado Hills Village Life Newspaper regarding the articles written about El Dorado Hills Firefighter Compensation dated September 29, 2010:

Wow, to be young again and exit college with my same 4 year business degree and land a job at the EDH fire department!  At the risk of going out on a limb and speaking out against what many consider a sacred cow in the community, it’s time the absurd abuses of unionized and non-competitive self-governing practices be challenged at the most basic level and yes, against our beloved and adored fire department. 

Based on the figures from the firefighter compensation article, a FIRST YEAR firefighter with an unrelated 4 year degree can earn annually over $100,000 including base salary, degree bonuses, education pay, paid unused sick time, retirement and medical/dental/vision benefits.  This is not factoring in overtime pay.  Engineers, Captains and others do even better.  According to the article 83% of the 2010-11 budget ($13.5 million of $16.3 million) is firefighter related compensation.

This compensation payout is ludicrous given many factors including a good percentage of their time “at work” is sleeping, eating, socializing and the like.  According to the article, they respond to an average 1.5 calls per 24 hour shift with what I would bet are calls predominately between 6am and 11pm.  So stating they “work” 70% of the time on a 24 hour shift is generous when the reality is probably even less.  Granted they are at the firehouse and not free to do other things elsewhere but does that justify an equivalent “working time” compensation level of greater than $142,000 per year!  Surely they risk their lives but do their job hazards really compare to that of the American soldier earning far less?

Come on, firefighters have 4 free days/nights after every shift to earn even more money should they choose to do so if they’re not feeling they make enough.  It’s quite conceivable for a young college degreed firefighter to make $150,000+ per year working some overtime and maybe another job.  I would guarantee that there is a way to cut 50% of the funds going to compensation and not change the level of fire service one bit within this community.  There’s too much collusion and self-interest here with excessive tax dollars being assessed against our real property that perpetuates uncontrolled compensation spending.  After all, what governmental entity ever said their budget was just too much and it was time to refund taxpayers?!

The unions, the firefighters association, the fire board of directors and many others are in cahoots as to how to keep things looking that they are being fairly negotiated with the public’s best interest in mind.  This is an absolute false pretense.  The fox is watching the hen house here!  There are no competitive forces in play or sufficient independence from other agencies to make this form of governing work.  Their counter argument goes something like:  You don’t understand, we need to stay competitive with the Folsom fire department and others locally to attract the very best fire talent to provide the level of fire service you’ve come to know and take for granted. What’s a life worth by the way?  Don’t you just hate scare tactics like this!

A new American revolution needs to take place in every town, city and county in this country that focuses on the perpetual self-interest of all local governmental entities to throw out the status quo and bring balance and independence to their governing structure.  In my own backyard, our fire district is the simplest level that I can have a say in what can be done to effect change in our society. 

I challenge everyone to do the same in this community and let’s turn what is believed to be a great asset into an even better one by speaking out against how things are being done.  Please don’t take this personal EDH firemen and women but I would bet my life that you’d each do the same work for far less compensation if you knew all other agencies were doing the same to cut compensation levels down to some form of reasonableness.  AND, you’d still think you were well compensated compared to practically anything else you could’ve done with your life.  Let’s get real here!  Let’s speak up!

Ready, set, blog!

People want information yesterday and someone today to help guide them through the maze.  Information is what empowers us but it also can be overwhelming in many regards.  So much to know and understand – we can’t possibly always know what to do even with the best information at our fingertips or know which information source to fully trust and believe. 

Therefore, people need other trustworthy people with uncompromising integrity they can consult and rely upon.  People that place the interest of others before oneself.  People that will speak out against abuses, unreasonableness, unfairness and self-interest for the betterment of the majority rather than the select few.  People that can speak a common language and relate to the people that follow them.

Given that I have the highest integrity and have aspired to live my life in this regard regardless of the consequences, I feel blogging is one of the best ways I can try to connect with more people to give back to the community in which I live.  I’m doing this because I want to and love to not because it might lead to more business.  I feel I have much to share and society will be better off if I find a vehicle such as this to communicate my values and to help people that need a trustworthy source.  A go-to person of sorts! 

I will not speak outside of areas that I do not know much about.  I will mostly blog about real estate, business, the economy and ways to improve our form of government.  I cannot possibly please everyone and of course, that would be contradictory to my earlier statements.  But, I will speak to what would be helpful to the majority and try to put things in perspective.  I believe in transparency, doing the right thing, integrity, honesty and working hard.  I aim to inform, protect and enrich people’s lives with all I have to blog!