Econ For The African

Trust Me, we need Pyramid, & Ponzi schemes: When Blackfolk will know that they have Arrived Financially!!!

2009-12-29T16:06:00.000-08:00

I have previously written on my views of practices, policies, & celebrations that I do not agree in full or in part with and I shall continue my diatribe here with Kwanzaa. I have mixed feelings with Kwanzaa because part of me believes that we have pulled away from the family communal atmosphere that once permeated our community. Yet on the other-hand I fully recognize & subscribe to the US being a Constitutional Republic with Capitalistic leanings. Where your are rewarded for your success, if you have the courage to press forward & believe in your dreams.

So with that said on this 4th day of Kwanzaa 2009 - Ujamaa (Corporative Economics) to build & maintain our own stores, shops & other businesses and to profit from them together. This sticks me in the gut. I believe that we should "build & maintain our own stores, shops, & other businesses." That's the Capitalist in me. Yet the next portion "to profit from them together" is the issue point. I fully believe that we as business owners should offer a fair product or service and expect a fair profit in return. Should you expect to share in the profits when I put up the Seed money, Vision, & Sweat equity? That is where the pendulum swings from Capitalism to Socialism. In other-words you have made too much profit so we must take from you & spread it around. It this were a Pyramid or Ponzi scheme you should expect it to eventually trickle down to the lowest level group before colapsing, but as I stated before we live in a Constitutional Republic with Capitalistic leanings & Homie Don't play that...

2009 will go down as a year of eyeopening change in the world of finance & two names have come to the top of the scandle chart Bernie Madoff the jailed architect of a $65 billion Ponzi Scheme & Allen Stanford the alleged architect of a $8 billion Ponzi Scheme. Now it is my thesis that this would never occur in the Black Community, because Bernie Madoff swindled a mostly Jewish investor group in some cases without ever meeting face to face. They almost begged for the opportunity to invest their money with him. Some of the largest names in the entertainment industry (whos names ended in Berg), largest private mostly Jewish universities, hedge funds, & non-profits. These deals came together through country club or golf club marketing where a broker in Florida with the relationship with Madoff would say “Hey Joe, who is handling your investments?” Joe may respond “XYZ firm.” The broker would then ask the gotcha question “If I could get you in the fund managed by the former chairman of the NASDAQ would you be interested?” If by chance Joe said no the next questions is just as critical “You know it has consistently returned above 12%?” (first of all that is unheard of on a consistent basis. & should have sparked an investigation.) But the individuals that were involved mostly answered in the affirmative.

Now it is my Theory that if this same conversation was to occur in the black community it would go Not Slightly, but insanely different. "Yo Donte' where you got your savings?" Donte' answers "In the bank, why you need to know, I don't owe you any money." Oshae answers laughing " Naw, D. Nothing like that, but If I could get you in the fund managed by the former chairman of the NASDAQ would you be interested?" Donte' responds beligerantly "Shae, What in the world are your talking about, you cash your checks at the check cashing place just like me. You don't know anything 'bout no N-A-C-Q. I ain't interested sounds like a pyramid to me."

I often tell the factual story that as a mutual funds broker I held a book a couple million dollars in assets under management and 90% of the total value of my book was held by 3 white women. 10% was held by black folk of all genders. I had to work 10 times harder for that 10% that I had to work for the 90%. The issue was trust. Blackfolk didn’t trust me, where as the white women took me based on my credentials & knowledge.

Every 3-5 years there are a plethora of get-rich-quick schemes that rape the black community of generations of time and wealth that are touted to bring “Passive Income” or whatever the buzzword of the day is to your kitchen table by allowing you to leverage the power of you network. Many times these schemes leave the person an outcast amonst friends & family because every few years they “have found it!”

It is my belief that Blackfolk truly will not know that they have arrived financially until they have a 96 Billion dollar scandle, but that will never happen until we Trust each other.

One Word.... "Duhhhh!!!!"

2009-03-17T11:58:00.000-07:00

I the words of that Urban Ghetto Poet Rakim Allah of Eric B. & Rakim Fame “Its been a long time, I shouldn’t have left you without a dope rhyme to step to…” Sorry for the distant time that has passed since the last post. Econ-For-The-African

GM CEO says bankruptcy would cause liquidation

http://finance.yahoo.com/news/GM-CEO-says-bankruptcy-would-apf-14666397.html

I refuse to purchase an American made Automobile. I know with everything going on this is not going to be a popular post. I first got my driver’s license in 1986, I couldn’t wait. I studied hard & my mother took me, and the era of freedom began.

· I got my 1^st car in 1986, a 1979 Ford Fairmont. It was given to me by my aunt. It ran 3 weeks and died one block from my mother’s home.

· I got my 2^nd car in 1986, a 1984 Dodge Omni. It was a great car, it took me places I was supposed to be and some places I wasn’t. It lasted till my junior sophomore year in college around 1991 when the transmission/clutch went out

· I got my 3^rd car in 1991, a 1986 Ford Ranger (this is why I hate “some” pickups). My dad purchased it from my uncle, it ran 2 months and died the Friday of Homecoming weekend when the alternator went out. I got that fixed and 8 months later it died again when the Transmission went out.

For those of you keeping score that is 3 cars in 7 years. I walked & bummed rides my senior year so that I could graduate and purchase my own car, new without any restrictions. When I graduated I purchased

· My 1^st car after graduating was a 1993 Honda Civic. I loved that car. I financed it but immediately got on a mission to pay it off in 3 years which I successfully completed in 1996. That car took me up and down the eastern seaboard from Maryland to Miami, and eventually out to Texas. Unlike the others, I finally retired it in October 2001 when it had 208,000 miles.

· My current car is a 2001 Lexus; it currently has 134,000 miles on it.

For those of you keeping score that is 2 cars in 16 years. Anyone want to guess what I attributed the difference to???

The American auto industry is made up of great companies for those of you with Traditionalist spirits. In my opinion their issues are

· Horribly managed Income Statements & Balance Sheets

· Lack of Innovation (The Arrogance of the CEO’s, Broke Folk Need Not Apply)

· Planned Redundancy

Horribly managed Income Statements & Balance Sheets

Common now, you have read my past blog post do I really need to go into the benefits of building a strong balance sheet? Do I?

Lack of Innovation (The Arrogance of the CEO’s, Broke Folk Need Not Apply)

I make no bones that the last American auto that I realistically looked at and said wow that’s different was the Ford Probe, that was back at a time when Ford’s motto was “Quality is job 1.” Unfornately, I never felt that Innovation was job 2, 3, or even 4. I have been to a few auto shows and people tend to walk and drool over the latest “X-something.“

First point that “X” badge denotes “Experimental”

Second point, it rarely if ever makes it to market.

I had to bust-a-gut laughing when the CEO’s of the Detroit auto makers got their hat handed to them when asking for money from the feds. Then they went home and returned 1.5 weeks later driving their latest hybrid electric vehicles. That was in December 2008. The issue that I have is while their dealerships are going out of business, they have to shut down production in late December to February of every year to retool, and the few factories that are staying open aren’t producing hybrid electric anythings. Finally the Volt by Chevy that the CEO’s drove to DC on their second visit is a 2010 at a cost of $30,000 plus (only with government subsidies, without the subsidies it will be above $40,000) that will not hit the dealerships till estimated end of 2010, however in the meantime you can purchase a lovely Hybrid Escalade ESV for 60,000 plus. Somewhere in Detroit there are some real smart MBA’s getting paid to come up with some dumb a$$ ideas.

Planned Redundancy

Planned Redundancy was practiced back in the day where the auto makers calculated that Americans would change autos at predetermined points in time, mostly 5-7 years. That is why it was difficult to get an auto loan beyond 3-4 years Pre 1980’s. Planned Redundancy also manifested itself in the manufacturing of the product, as you would purchase an auto and in 6-12 months the bumper would fall off. (Why do we think what we think?) Have you ever heard anyone say:

· I have to get me something new before this one starts to give me trouble.

· Oh, I just had to do this repair, you know what that means.

People still have the thought that every 5-7years they have to get a new car even though the cars are better built than they use to be.

Back in the 70’s every black family had that one bourgeois family member that purchased a Mercedes, Volvo, or BMW till they got hit with the $1000 oil change. When the first Hondas hit the US Market they were so good that years later you still saw 1977 Accord Hachbacks on the road well into the 1990’s.

In conclusion, The only American Auto I would purchase is a Pickup Truck (but I hate Pickups). The reason is most pickups are built to work truck standards and work trucks have to take a beating over their lifetime and it would not look good in the eyes of businesses if their work trucks continuously broke down. In other words, that is why Dodge is RAM tough, Built Ford Tough, & Chevy Silverado America’s Best Truck (per the commercials).

(EMERGENCY POST) The Emperor has No Clothes & The Inmates are Running The Asylum

2008-09-30T08:49:00.000-07:00

I sometimes listen to Bill O’Reily and Rush Limbaugh to see what the other side is thinking, Sometimes I agree… & sometimes I don’t. But sometimes they say something that Is so ludicrous that I just have to check it out… Last night Bill O'Reily cited the below article and more specifically the highlighted section from a Forbes.com article and what a US Treasury rep answered as to how they came up with $700,000,000,000. US Gov Due Diligence at its best...

http://www.forbes.com/home/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html

Below is a reprint from the link above…

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.
"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."
Wow. If it wants to see a bailout bill passed soon, the administration's going to have to come up with some hard answers to hard questions. Public support for it already seems to be waning. According to a Rasmussen Reports poll released Tuesday, 44% of those surveyed oppose the administration's plan, up from 37% Monday.

Doing my Damndest to work on this A-Political Thing… But getting tired of the Conspiracy Theories!!!

2008-09-25T13:06:00.000-07:00

This is not what I was originally going to post this week, as I have been watching our government make what I consider more and more boneheaded mistakes. Now that the news media has gotten everyone worked into a lather.

On morning of Wednesday September 24, 2008 I was in a Suburb of Chicago after my 5:30am workout I was watching CNN & preparing for work in my hotel room and while watching what were the financial plans congress had to decide to tackle for the US on this day. You know the ones (because you are informed):

$700,000,000,000 bailout of the Wall Street financial markets.

I also had the Steve Harvey Morning Show streaming through my computer (Gotta get my daily shock by the Strawberry Letter 23) but I was listening to Tommy’s Tips and as I believe “Behind every Joke there is some Truth.” So let me put it together like he did…

Today’s Title is “Can Bush go on and leave now, We got it from here… Onst again, Can Bush go on and leave now, We got it from here…” As they said on the show whats the worst that can happen... We go to War, We loose our Jobs, We loose our homes, Gas prices go up...

(btw... that is George W. Bush in the picture)

But then I get in the rental car and while listening to the XM satelite station XM169 The Power the Conspiracy Theories begin... "They are going to target Black people and turn them away from the polls." "You know they are devising schemes to keep you from voting." and my ultimate favorate "lets march to show them they can't steal this election like they stole the last one..."

First, let me address the email blast that we have began, after the 23rd time I got the email asking if the rules on the Polling places (No banners, no buttons, no hats) were true.

by the way...YES, IT'S TRUE!!!

My dad lived across the street from Brown Highschool in the WestEnd of Atlanta in the early 80's and that highschool happened to be the polling precenct for the WestEnd in Athanta. the morning of the election I remember getting a knock at the door and it was a polling official informing us we had to remove the political signs in the front yard.

Black people, It is great that they are reiterating this rule, however in every election rule book in every state of the union their have always been rules on:

How many ft/yrds campain paraphanelia can be from a polling venue
What is considered passive campaigning (ie t-shirts, hats, buttons in polling area)

Sorry, I guess this wasn't for me... it was for the uninformed... LOL (hanging head & stepping down from the soapbox)

Now that, that is clear can my Friends and Frat brothers stop sending me this email!!! (Honorable Mention to Perry & Jon)

I origionally thought that I would put out "What Black Folk should do now..." every 6 months. However, With everything going on I decided to put out a listing of items for all to consider. I decide to put out another "What Black Folk should do now!!!"

WHAT BLACK FOLK SHOULD DO NOW!!!

Early Vote to avoid Lines - Check with your respective county to see when it begins
The A-political person in me says If I don’t like the decisions that a person makes while in office at the next election I’ll vote them out and put someone else in. Many persons have alluded to the fact that this is an important election, therefore let me save you some time, headache, and frustration from the potential lines. Around the nation some jurisdictions have began early voting. To find out when your jurisdiction’s early voting process begins Google your county and/or state elections board (You can find it... My county in Texas starts October 20th at selected poll locations). Now, once you get the information "Go Early Vote!!!"

Manage Your Balance Sheet

Yea, I know I sound like a broken record, but I happen to like Old School. I believe that the Urban Ghetto Poet Charlie "Last Name" Wilson of the legendary Green Archer & Pine Band (The GAP Band for those of you who are uninformed) said it best “The Bigger the Headache, The Bigger the Pill…The Bigger the Doctor, The Bigger the Pill…” The government is handing the American taxpayer Bigger and more Bitter pills to swallow everyday. I want to address the current and future ramification of these actions. I also want to address “Personal Liquidity” and how you can build a Strong Balance sheet regardless of what the market is doing. First note: As I have said numerous times before a Strong Balance Sheet will help you avoid bankruptcy & retire in a respectable manner. If these companies had strong balance sheets they would not need a bailout.

ASSET Management (Grow Strong Assets)

Cash - ("Cross Town Money") Facts about cash... Nothing spends like cash. I know I own it. I don't have to pay interest, People will pay me interest in the right vehicles. (Assuming it is held in a checking or Savings account) (Don't get it twisted, Know the Truth... See the FDIC Rules below)

Money Market Accounts (Your Emergency Fund - 3-6 months of EXPENSES)
Some funds have “Broken the Buck” what that means is they have let their share value dip below the $1.00 mark. That does not mean that "All" Money markets are at risk. This still the one of the most liquid, most stable, & penalty free accounts that you can have. Money Markets invest in less risky more stable vehicles Treasury Securities, Municipal Securities ect.

Retirement accounts (ROTH's, IRA, SEP's, Simples, 401(k)
I have written in my post "Sometimes we do things & don't know why we do them..." sometimes we fail to realize that retirement takes planning. Planning is an active process it requires us to be fully engaged with the goal of knowing the lifestyle we plan to retire in.

Houses (Yea, I said it...)
Your house is an Asset, that will not change. I have a statastic that said that House Value (Equity) accounts for 60% of Middle Class wealth. I personally believe that it should account for No more than 45% if you build the Strong Assets listed above. Most people over the last 5 plus years purchased more house that they could not afford. This Over Zealous Exuberance and the Ill Founded Belief that realestate always goes up in value has put the US in the position it is currently in. The reason for my 45% versus 60% statement is that if at retirement you have $1 million in Assets (for most of us that amount is too low to retire in a comfortable manner given inflation) that tells me your home is $600,000 of your wealth, and in order to gain access to that $600,000 you have to either sell the home (where are you going to live?) or take out a loan (which is contrary to building a strong balance sheet!!!). My 45% calculation would give you a $450,000 home at $1 million in total assets, that means you have over half a million in cash and cash equivilents. You are more Liquid!! I would dare to say that at retirement you need $600,000 in cash you don't need a $600,000 minimally liquid house. If you disagree please write me...

LIABILITIES (Don’t Reduce… Get rid of them)

10 – 15 Year Fixed Rate Mortgage
Finally, they are going back to the old formula of granting mortgage debt. Simplisticly the formula was 20% down and your home should be no more than 3 times your income. (Oh my gosh, that takes us back to the stone ages, I will never be able to save that...) I agree, you will have a difficult time saving that if you are attempting to purchase more home that you can Afford (ie $525,000 home on a 55,000 total household income, thats $105,000 Down... that is also approx a $3,500 a month mortgage payment on a 15 year) A more realistic scenario is purchasing a home 3 times your income or less (ie 3 times $55,000 equals $165,000) putting 20% down or $33,000 and paying a mortgage of approx $1,113 or less on a 15 year.
Auto Loans
Finally, they are going back to the old formula of granting auto debt. The old formula is your total car debt should not be more that half you annual income (ie $55,000 times .5 equals $27,500)
Credit Cards, Student Loans, Heloc's & 2nd Mortgages
YOU SHOULD NOT HAVE THEM... YOU HAVE CASH IF YOU DID WHAT WAS STATED IN THE ASSET AREA.

NOTES:

PROTECTION (These are not Balance sheet Assets but they are items that protect your balance sheet assets)

Personal Protection
Life Insurance
Health Insurance
Government Protection
(FDIC) Federal Deposit Insurance Corporation

Today’s Title is “Can Bush go on and leave now, We got it from here… Onst again, Can Bush go on and leave now, We got it from here…” Bush misquoted this protection granted under the FDIC on last night in his bail out speach. Now people (I'm trying to stay A-Political on this...) if the President can't describe this protection correctly, whith all his advisors & speach writers, how is Joey six pack on the street going to understand it?

Per this rule your deposits at your respective bank is insured up to $100,000. Now that is not $100,000 per account (ie. You have 75,000 in your savings & 50,000 in your checking for a total of $125,000). That is $100,000 in total deposits at that bank.

When IndyMac bank in California failed and was taken over by regulators persons were standing out infront of the bank to get their money and some had $2-300,000 in one bank. But multiple accounts. They thought that they were protected, and they were not. For anything over the $100,000 insured amoung, you become a bank creditor and may get paid pennies on the dollar during liquidation.

Some of you will have to contend with estates from parrents & loved ones at sometime in your life. I offer this as information for persons who get inheiritances or insurance settlements it is not safe to have more than $100,000 in any one bank, At that level you need an investment advisor (you actually need one before that time).

For all of you conspiracy theorist out there:

Yes, I know Jesus loves me, and its not going to increase if is send this email to 20 other people. I can get closer if I spend time with him. I don't think he has email.

I don't need a $100,000 a year job selling items that I don't have to inventory or warehouse.

The only thing that is going to get rid of those love handles, and get me the six pack that I desire is time in the gym and good eating habits.

I don't need discount Herbal Viagra. (Men or Women's)

No, The African Diplomat living in exile in Spain does not need my help to transfer 10 million dollars out of the war torn congo.

I don't need a special program to wipe away my debt.

I don't need a special credit report to Maximize my buying power.

Fannie & Freddie needed their A$$’s Whipped… But the Government just gave them Time Out instead.

2008-09-10T11:04:00.000-07:00

This will be a Rant… On Personal Responsibility, Cause I don't know where they learned it... Wait a minute, Yeah I Do...

I have a Frat Bro that when we send emails that are out of order he tells us to "Get in the corner" I've got a feeling that I should start walking...

“Don’t whip your kids, ‘cause it teaches them how to hit. Pleeze…It don’t teach them how to Hit, It teaches them how to Sit Down…” Comedian Sinbad circa 1991

I Agree 110% with Sinbad…

When I was young if I did wrong my momma beat my butt. Period, Point Blank, End of Story! She taught me that there were consequences to my Bad (“Stupid” for you Non-PC people) decisions. Those temporary stints of “Intense Pain” and my deafening cry’s of “Momma, I ain’t gonna do it no mo!!!” solidified my character as it is today. Now, it amazes me that as a grown man I watch many of my black peers (many of whom got whippin’s) move to the side of the tracks that condones becoming your child’s “Friend.” My mother was Not my “Friend,” until I became grown, and the critical days of rearing a young black male to survive in this Constitutional Republic, Capitalistic Society that we call America were behind me. This same movement of thinking condones “Time Out.”

Time Out??? As a kid I played Red Rover, Red Light Green Light, Kick Ball, 4-square, Hide & Seek, & the my personal favorite Catch a Girl Kiss a Girl and I was well aware that when someone called “Time Out” that meant either someone got hurt & was crying, they momma called them, or for the times we played in the street, a car was coming. After all cases when the issue passed, the previous mode of play resumed. So In my opinion “Time Out” only means you got a pause from your previous activities, no matter how bad they may have been.

However, due to the respect & love that I have for my mother there are things that I may do or say in my own home that I will not do or say in hers, this is solely because of my mothers preferred method of using whippings versus time out. She overtly let me know that I didn’t own anything in that house & was allowed by her grace and that of the good Lord to occupy the space in which I stood. I now see kids that I consider out of control, ineligible to critically think & solve problems, and believe that things are supposed to be given to them… Could this be a result of Time Out???

I don’t have any kids, nor do I want any, but if I did (and this applies to my niece & nephew) I have & will continue to Whip their A$$. Period, Point Blank, End of Story! I ain’t changing that paradigm…

Sunday September 7, 2008 under what I deem the cover of darkness the federal government made the decision to bail out Fannie & Freddie Mac.

WHAT? DID I JUST TYPE THAT CORRECTLY??? YOU HAVE GOT TO BE KIDDING ME!!!

In my opinion this is the equivalent of putting the Mortgage industry in Time Out. It is a pause so that they can in the future continue the bad behavior that put them in this position to begin with.

A saying that I have used many times is that Black folk get “Half the Good, and Twice the Bad.” In most things that happen in America this is the case.

During this entire mortgage boom the status quo for black folk continued in the following manner:
Home Ownership & Borrowing Power

1. Fewer than 50% of African Americans own their own homes compared to more than 75% of white Americans. The truth is we spend & save at the same rates as white America…the only difference is, when they get in trouble they have a home that they can pull money out of if need be

2. African Americans are more that 3.5 times as likely as white Americans to receive a home purchase loan from a sub-prime lender & 4.1 times as likely as whites to receive a refinance loan from a sub-prime lender. Sub-prime is usually 1 to 6 points over the prime rate, and is reserved for lending to businesses that do not qualify for prime rates.

3. In neighborhoods’ where at least 80% of the population is African American, borrowers are 2.2 times as likely as borrowers in the nation as a whole to refinance with a sub-prime lender

4. Upper Income borrowers that live in predominately African American neighborhoods are twice as likely as low income white borrowers to have sub-prime loans.

5. Home Ownership is important however too often we are using our homes as a piggy bank. Removing equity and never achieving ownership, which makes us perpetual renters that happen to get a mortgage interest deduction. Therefore Nullifying any and all Net worth we achieve
(State of the Black Union, 2006)

These were the statistics during the height of the mortgage boom. It has been said that when America coughs Black Folk catch a cold. In this case America has the Flu, black Folk have Double Pneumonia, Hepatitis C, & the Gout.

Fannie & Freddie are not and have not been Government entities since the early 1980’s Congress made them public institutions, traded on the stock exchange. However the public continued to believe that they were backed by the government, their prevailing thought was that “what could be safer than the government & realestate.” I believe, that if a business fails it should go out of business, or at a minimum file reorginization bankruptcy (Chapter 11). Investors may loose, but that is the risk you take when you invest, that is why in finance is is labeled "Investment Risk." Most businesses when they take a balance sheet whipping go out of business. The article that I read said “They are too Large to Fail.” What in the world does that mean "...too large to fail" Black People, lets put this in perspective, I am 6’2” my momma is 5’4” I was not too large to take a whipping or fail. The redeeming quality in all of that is to learn from your mistakes. My fear is that the financial markets, the home buying public, & the government have not learned anything. They never have to learn how to build a strong balance sheet. The government is swooping in with a dollar sign on its chest like "Captain Save-a-…" (Well I can’t say it but you know what I mean…) This is the equivalent to the current trend in Pee Wee sports where “There are no winners or losers, everyone gets a trophy.” As a youth one of the things that helped me figure out that I had better have an A, B, & C plan is the fact that around 9 years old I was on a baseball team that went 0-13. We didn’t get a trophy, we were loosers and everyone knew it. I quickly learned that If baseball was my Plan A I was in trouble. Plan B was Basketball I have always had a great outside shot & great defensive skills, but my lack of endurance hindered my effectiveness. I quickly learned that If basketball was my Plan B I was in trouble. School quickly became my Plan C. I may not be able to beat you in a physical race but I can out think you!

Fannie & Freddie are not regulatory agencies, they are servicing corporations. HUD is a regulatory agency they set standards for the housing markets to operate. Home loans are backed by bonds. Fannie & Freddie package those loans, bundle them together with similar loans and resale them in the Secondary market to Investors, investment banks, Mutual funds, ect. That is why they are called "Mortgaged Backed Securities." Those Investors hold them for the associated payment stream. (i.e. you pay your mortgage the investor receives the principal & interest payments). The main issue that is being cited is that the good loans (15 or 30 year fixed) have been packaged with the bad loans (Interest only, ARM’s, Option Arms, Backend Balloon, ect), and the bad ones make up a greater percentage of the package than the good not only because of 1st mortgages, but Equity Refi’s, HEOLC’s, 120%, etc. Therefore, it is not as simple as stripping out the bad loans because that makes the entire loan package (the bond) worthless (Gee, Thanks Fannie & Freddie). Remember, in my previous post I discussed the importance of building a Strong Balance Sheet?

This is what Your Balance sheet looks like:

Asset – Your House (You want to keep your house)
Liability – Mortgage (You want to get rid of your mortgage)

Note: Hopefully, your mortgage owed is less than the value of your home... (loss of value of the underlying asset is another post)

This is what Fannie & Freddie’s balance sheet looks like:

Asset – The Bonds (Accounts Receivable) – (They want to keep you in a mortgage as long as they can.)
Liability – Your House (They don’t want your house)

The issue is that there are people that have given up and walked away from their houses pre or during foreclosure due to ARMS, HELOC, 120's, or Interest Only. That essentially gives Fannie & Freddie (via your bank) a bunch of houses. (Or in simple terms a bunch of Liabilities on their books.) If the market is slow & the buyers are scarce the bank is in trouble which means Fannie & Freddie are in trouble.

So with Fannie & Freddie holding these as the loans go into default, they can’t provide new funds (they don’t have the payment streams or the cash flow) at reasonable rates to the primary market (Wells Fargo, Citibank, Wachovia, BofA) which means they can’t lend to the home buying public.

I made the statement that they want to keep you in a Mortgage as long as they can… Here’s the facts:

Word Association Time

What do all these words have in common

Morbid
Mortician
Mortality
Mortified

They all mean in some way Death. Because they are all derived from the latin root “Mortuus” which means dead, deceased, passed away, gone West, departed.

What about these words
Engage
Baggage
This suffix in latin means to attach, to promise, to collateralize, assurance, surety.

Is this word in any way similar???

Mort-gage – It means A Promise (An Attachment) till Death

Knowing how the mortgage market works I don’t believe that Fannie & Freddie would have failed. I believe like any other Publically traded company they would have file reorganization bankruptcy (Chapter 11) had their bumps, bruises, and scars only to come out on the other end as a company able to make better choices. Now if this caused there to be stricter lending standards then so be it. The markets, individuals, banks & institutions would be better for having learned the lesson. This should be a true exercise in La Se Fair Capitalism… The market should work this out without government intervention.

I guess I need to remember that these companies are now run by people who got “Time Out” & Not “Whipping’s”…

Sometimes we do things & don’t know why we do them… Do you want to go on a Trip or a Vacation?

2008-09-05T10:33:00.000-07:00

A TRIP: Is 2-3 days, is decided in a day, usually involves going to see family, driving time is normally 5 hours or less, and you come back more tired than when you left.
A VACATION: Is a week or more, requires planning, someone else takes the initiative in getting you there, & you are pampered and relax.

When I was growing up my family would take a TRIP to my grandmother’s house. It generally lasted a weekend, we normally left on Friday evening or Saturday morning, and we returned on Sunday afternoon. These were wonderful TRIPS. We would see all my mother & father's brothers, sisters, aunts, uncles, cousins, etc. and generally would come back more tired than we were than when we left. We would take 3-4 of these TRIPS a year. I'm sure many if you have done the same thing...

When I got grown, gone, & on my own and began to work my first job, I was given VACATION days (initially 2 weeks a year). I quickly learned to continue the traditions that I was taught, on either the Friday before or the Monday after the weekend I would drive from Atlanta to North Carolina to visit friends, play golf, and come back more tired than I was than when I left. I would take a day here, or a couple of days there until I had exhausted my vacation days. My mentality had not changed...

I was 34 years old before I took my first True VACATION. My wife & I flew to Miami and spent 2 days in South Beach shopping and relaxing. Then we boarded a cruise ship for a 7 night cruise to Puerto Rico, St Thomas, Haiti, & the Bahamas before returning to Miami and spending another night in South Beach prior to returning home. We were gone 10 Days, Now that is a VACATION.

Do most black folk take trips or vacations?

I ask this question as I read a USA Today article entitled “401(k)’s (a) tapped to save homes.” Over my time in the insurance & financial services industry I have fielded my fare share of questions from individuals regarding their use of their 401(k)s to fund their short term desires. The questions range from borrowing from the 401(k) to purchase cars, homes, kids college, etc. People who engage in these self depredating acts normally attempt to justify it with misguided logic.

Normally, I had the hardest time hiding my disgust all the while attempting to convince these black folk to take a VACATION with their money instead of TRIPS. After I explained the benefits of a 401(k), ROTH, SEP or other retirement vehicle, I would receive a cross look from the potential client and the TRIP mentality question would come out, “When can I get my money?”

Preface: Ignorance is having never been taught. Stupidity is having been taught but refusing to implement what you have been taught. Therefore, from this point forward you cannot claim Ignorance… if you take a 401(k) loan you are Stupid.

I then would have to go through the descriptions of “These are the special cases where you are Allowed to Get Your Money…” But in the back of my mind I am screaming “DON’T TAKE A TRIP, TAKE A VACATION!!!” In reality I know they have friends, family, and that one person in the church that took some accounting classes telling them “you got bills, you need your money…” and follow that conversation up with the following Myth:

Myth: If I borrow from my 401(k) it is my money & I am paying myself back…

Fact: This is normally done to satisfy a short term (TRIP) issue or desire.

I have to pay the IRS… Borrow from the 401k. If you had an emergency fund this would not be an issue.
I need a down payment for a new car… Borrow from the 401k. Do you really need it? Do you need that level of Auto (why not used)? You knew your car was on its last leg, why didn’t you set money to the side for the future payment?
I am behind on my Mortgage or Credit Cards… Borrow from the 401k. Collections Agents are putting this misguided logic in people’s heads, and the Ignorant follow, like sheep being led to the slaughterhouse.
My child is going to college and I can’t afford the tuition… Borrow from the 401k.
How Dare You, Tell your child to get good grades, and they uphold their end of the bargain. But you chose not to put away the money necessary to uphold your end of the bargain… You Lied, now your retirement suffers or your child suffers… “Thanks Mom & Dad!!!”

(Maybe this is a stupid question… but, Why do I have to Borrow money from my 401k if it is mine??? Sorry, I digress.)
You are Not, paying yourself back. What you have done is halted any future growth on the principal amount that you have taken out. You have created a new bill. You are taking a TRIP,

Ex. You are salaried $50,000 employee. You borrow $5,000 from your plan on a 2 year (24 months) payback schedule. You invest 5% per month ($208.33) into your plan.
If the market grows by 10% over the next 2 years, you will lose approx $537.39 in growth

You have imposed a negative payment stream. In the loan case you are investing 5% per month ($208.33) and you want continue the same investment after you take the loan, you are actually have to increase your payback to $264.56 to truly pay yourself back. That is just to service the loan. You still have not added new investment to stay on track. Therefore, to truly pay yourself back after the loan you have to pay & invest 208.33 + 264.56 = $472.89 to stay even. § That does not take into account the additional loss if your employer matches. § The loan repayment is taken out post-tax not pre-tax

A VACATION requires Planning just as managing your long term investments require Planning. A person with a VACATION mentality knows that if they want to retire and “Not Have To go back to work one day” they have to plan their work & work their plan and let the money produce children & then let money’s children’s children work for them.
Learn What a VACATION is, True Retirement should be similar to a long term Vacation, with reduced stress, and not be a burden to family. I observed that there is a significant difference to how “The other half retires” versus how most Black folk retire.

Do you want Plan A, B, or C?

Plan A: I have personally observed many black folk that have done it right… and they retire to larger homes, better communities, & more money that they had when they were working. There retirement consist of moving to “Active Adult” communities like the following:
http://www.delwebb.com/Default.aspx
http://www.newretirementcommunities.com/?pid=7501

Plan B: In many cases Big Momma moves in with the Sister or Auntee that lives closest and they setup a hospital bed in the formal living room because Big Momma can’t climb the stairs. Is this how you want to retire? I ask this because you may say yes but your children may have another plan…

Plan C: You get to choose from Level A-D based on the amount of money you have…
Level A & B - are run by Hyatt, Hilton, Mariotts
Level C & D - the Social Security Plan… Wait a minute, You are on the Social Security plan (Welfare) “you have to be destitute to get this assistance…” Welcome to level D. Unless you have a family member to take you in which puts you back to Plan B.

What you should do…

Stop treating this account as “Cross-Town” money. “Cross-Town” money is your checking or savings account at your local bank… because it is going to last you as long as it takes you to get “Cross-Town” and see something that you want. This is for retirement, Period!!! If you never want to retire or plan to live off “Anti-Social Insecurity” take one of the above outlined paths.
Establish an emergency fund of 3-6 months worth of expenses… this will keep you from considering 401(k) loans as an option.
Many of us carry blackberry’s, palm-pilots (Treo’s), iPhone’s, etc. and set a reminder on your birthday and your birthday plus 6 months to reallocate your portfolios or at least look at it. In participant-directed plans (the most common option), the employee can select from a number of investment options, usually an assortment of mutual funds that emphasize stocks, bonds, money market investments, or some mix of the above. Many companies' 401(k) plans also offer the option to purchase the company's stock. The employee can generally re-allocate money among these investment choices at any time. In the less common trustee-directed 401(k) plans, the employer appoints trustees who decide how the plan's assets will be invested.
Invest as much as you can with a goal of 15% and As the market goes down continue to invest, it will come back & your diligence will payoff.
Never…Ever…Ever… take a 401(k) LOAN. Whether a hardship withdrawal or otherwise.

_______________________________________________________
Foot note:
(a) The 401(k) plan is a type of employer-sponsored defined contribution retirement plan under section 401(k) of the United States Internal Revenue Code (26 U.S.C. § 401(k)). A 401(k) plan allows a worker to save for retirement while deferring income taxes on the saved money and earnings until withdrawal. The employee elects to have a portion of his or her wage/salary paid directly, or "deferred", into his or her 401(k) account To maintain the tax advantage for income deferred into a 401(k), the law stipulates the restriction that unless an exception applies, money must be kept in the plan or an equivalent tax deferred plan until the employee reaches 59½ years of age.
There are 3 ways money can grow Taxable, Tax-Deferred, or Tax Free. A 401(k) offers Tax-Deferred growth. This means you put the money in pre-tax in many cases and at retirement you have to pay taxes on the growth.

Your Individual situation may vary, Please consult with your financial professional.

"I'm a Grown A$$ Man, Dawg..." Being Proud yet Trying to stay A-political…

2008-08-28T08:54:00.000-07:00

I normally am not an emotional person but on August 27, 2008 at approx 5:40pm cst I experienced something as I sat alone on a couch in a hotel room in a suburb of Chicago. I had many machinations of the word “Never” run through my mind. I had pictures of Gov. George Wallace and his famous quote “I say segregation now, segregation tomorrow, segregation forever” in my mind. My visions of the KKK being given a parade permit, and publically marching through the main streets of Charlotte, NC in the early 1980’s. The echo’s of my freshman year in college 1988 and the shouts of “Run Jesse, Run…” on the campus of NCA&TSU. The fear of white folk, my 1st year out of college when Susan Smith killed her kids by strapping them in their car seats and driving the car into a lake. Then telling authorities that a black man car jacked her, stole her car and kids which caused authorities to blindly roundup as many black men as they could arrest via an illegal dragnet search.

Being a post civil-rights child, I remember growing up and being asked “What do you want to be when you grow up?” My rehearsed answer when I was younger was “I’m going to be a doctor…” During my upbringing that was believable. Dr. King & Dr. Lowe were prominent black pediatricians in Charlotte, NC. There were times when my answer was “I am going to be an Architect”… that was also easily believable because my father and most of his associates were architects, also prominent community leaders & friends of the family included Harvey Gant who was an architect (former mayor of Charlotte) were in my circle of people I could reach out & touch.

However, on last night at approximately 5:40pm cst. In a hotel room in a Chicago suburbs, all that was erased, and I was catapulted from the adolescent black kid with rehearsed answers to the question of “What do you want to be when you grow up?” to a Grown Blackman with the full emotional realization of “Damn, It’s Possible…” I have to admit, being A-political (a silent independent, financial conservative & social moderate) my belief that “Change” especially the change Sen. Obama spoke of got the completely disengaged comment of “Yea, Right…” (used in the presence of White folk) or the "N-word Please.." (when with my boys) Now, I will say that I have always voted, but my belief in the truth to power behind that vote was incomprehensible in my A-political view of the world. I always cynically saw the two party system as “one group takes my vote for granted, and the other could care less…” which rode inline with my day one view of “On day one of them swearing in is my life going to change?” The answer always was a resounding “NO!!!” and sometimes “Hell NO!!!” With that said I wanted to keep this Blog A-political as well however, emotion and personal responsibility, will not allow me to stand idly by without declaring a stance, because yesterday I saw something different. I saw one party finally move away from the bygone days of Gov.George Wallace, Freedom Riders, Medgar Evers, Fannie Lou Hamer and the 1964 convention. To the cohesive party question of “What do you want to be when you grow up?” I believe the answer came back “United”

“I am supporting Barak Obama” Because I believe If you remove Belief/Hope from and individual they will fight to find somethinth they can believe in, something that they can call their own. In the same veign, If you restore Belief/Hope to that same individual they will not give you 100%, they will remain cautiously optimistic. So even through my tears, last night I realized that america took a huge step towards their promise that "All Men are Created Equal..."

Now, Emotion has not completely overtaken my financial sensibilities, in other words I have not completely drank the cool-aid although I did take a sip. I will still continue to be critical of his Economic Policy because I believe it overly impacts the burgeoning Black Middle Class & Small Business Owners. If you wonder why read his document “Keeping Americas Promise” http://www.barackobama.com/issues/economy/

Once you finish reading ask yourself just as Econ for the African has, “How will you pay for that?”

Not Dead... Just (Researching) a Change in Formats...

2008-08-19T14:04:00.000-07:00

Hello...Black People... Listen UP!!!

I felt that I needed to put out a quick word to everyone that has been following Econ for the African. The quick word is "Econ for the African is not Dead," I just purchased a Macbook Pro (thats right I'm Personally done with Microsoft) and am experimenting with changing the format from just a blog to a Podcast/Blog. I am consulting with the marketing guy for my other businesses who is more knowledgable (and younger than I) of the "How To's of Podcasting" than I am. I have been testing a Mac program called "Garage Band" to facilitate this. We are also discussing giving Econ for the African its own Identity, website, marketing, & feel.

Don't worry Black People it will still be "Free!!!" At least for the forseeable future.

I feel that because of my work schedule (Traveling 90%) writing the blog grows difficult versus dictating to my computer in a hotel room. My only burden will be lugging 2 computers, an Iphone, & a blackberry through numerous airports without looking too much like the biggest Black Nerd you have ever seen...LOL

I still have alot to say and have been getting some great Ideas for shows from many of you, so keep the subject ideas comming.

Econ For the African

Half the Year is Almost Over, How Are You Doing???

2008-06-10T08:19:00.000-07:00

I’m originally from the east coast but live I now live in Texas and I will not go into the utter disdain I have for the Historically African-American, Historically Trifling Holiday of Juneteenth. Somewhere there is 2.5 years of slavery back pay in arrears plus interest. (It’s a Joke people… Lighten up…) I will hopefully benefit all in the community by listing something you can implement in your life today & not 2 years from today…

Revisit your Goals – It is now time for a gut check. You said you were going to do it, so do it. Get back on track to loose the weight, get in shape, create a budget, start a business, Improve your Life…

Celebrate your Successes, you have had some its time to Celebrate…

For this Month, Turn off the television for 3 hours a week & Read a book – If you are already an avid reader read a book in a genre that you don’t normally read.

Try a type of food that you don’t normally eat.

Japanese
Thai
Indian
Middle Eastern

Teach your kids to try a type of food that they don’t normally eat.

Get to know someone from a different culture that you may eventually call Friend.

Schedule your next Doctor, Dentist, or Optometrist appointment.

Get a Cholesterol test
Prostate Exam
Mammogram
Total Blood Work

Put to rest a Myth

Learn to Swim
Save some Money
Increase your Vocabulary
Learn a new sport (Fencing, Lacrosse, Rugby, Golf, Cycling, Hockey)

Stop drinking Liquor, Coffee, Diet Coke/Pepsi, Smoking ect for 1 month and save the daily money you would otherwise spend

Pull your (Free in most states) Annual Credit Report – This is the ONLY Truly free website endorsed by the US Federal Trade Commission. ( https://www.annualcreditreport.com/cra/index.jsp) Most of the others are sponsored by the credit reporting agencies and attempt to get you to purchase services.

Get a Mentor – Someone who has established themselves in the area you see yourself going. Most Important Note: Someone That Will Tell You The Truth. If you are trying to loose weight, you don’t get a personal trainer that is more overweight that you. You go and get a personal trainer that is more in shape than you. You don’t ask a broke friend to be your financial coach.

If you have a Mentor, Talk to you mentor, I guarantee there is something that they have not told you.

Become a Mentor - Take a young person to lunch, dinner or another cultural event just to talk. Younger Brothers & Sisters cannot step up to the table if you don’t give them a place setting.

Listen to Non-Biased Creditable Talk Radio.

The Dave Ramsey Show - www.daveramsey.com

NPR Tell Me More (Michelle Martin) - http://www.npr.org/templates/rundowns/rundown.php?prgId=46

NPR News & Notes (Farai Chideya) - http://www.npr.org/templates/rundowns/rundown.php?prgId=11

A New Conversation with Men (Michael Taylor) - http://thenewmale.com/

Get a Hobby (other than shopping) – I can’t begin to tell you how it unnerves me when you see African-American women profiled in magazines and they list Shopping as their hobby. “White People have Wonderful Weekends; Black People just have a Couple of Days Off…” Steve Harvey

Take a class -(Ride a Motorcycle, Golf, Foreign Language)
Read
Write a Blog, Start a Podcast
Learn to Fish (Literally)
Photography

Volunteer - Invest some Time in others.

Plot your career path - most people have their careers dictated to them versus actively pursuing a position, level, or industry.

Save some Money, Invest some Money – They are not the same…Learn the difference!

Stop complaining, Stop Rationalizing, & Start taking PERSONAL RESPONSIBILITY.

Get a Passport (I know, I know Travel cost are rising.) however, you can’t leave the borders of the US & certain US Territories without a Passport. Expand your horizons by setting a goal to get it stamped.

Say Thankyou or Congratulations to a "Good Black Father."

PT 2. – Stop Looking for a Program…

2008-05-27T13:17:00.000-07:00

(Sorry, I couldn't decide on which picture to post)

One Monday in May 2008, I was driving from Dallas, TX to Austin, TX and had rented a car with XM satellite radio. I had tuned in to a show that was hosted by an alumnus of the same university that I attended. This talk show host as many do had someone on that was his shows resident mortgage guru. This young lady obviously made her income in the mortgage arena and was very impressive in her knowledge of credit programs and other measures to “get you in the home you deserve…” Now during this interview the interviewer & the interviewee made the statements:

The President needs to bring back the Sub-prime Mortgage market & revamp it because it allowed Black folk access to financing to purchase homes.
There are still programs that allow purchasers to put No-Money Dow that will allow persons to purchase a home by borrowing 103% Loan-to-Value (LTV)
I heard of a Vacation Program…

I listened the next 30 min while yelling at the radio the entire time. If you read Part 1 you will now see the culmination of my financial disdain for those few African-Americans in the financial services arena that spew incorrect information in order to pad their pockets while continuing to fleece our the community… Damn Leaches. I am not attempting to become the Armstrong Williams of the African-American financial community, but if I do then so be it… I will stand proudly in my Frat Brothers Company.

The President needs to bring back the Sub-prime Mortgage market & revamp it because it allowed Black folk access to financing to purchase homes.

Whilst listening to the financial interview I had to yell… “What housing market are they looking at?”

What is Sub-Prime?

In general, subprime lending (also known as B-paper, near-prime, or second chance lending) is lending at a higher rate than the prime rate. However, in US mortgage lending specifically, the term "subprime" simply refers to loans that do not meet Fannie Mae or Freddie Mac guidelines. While often defined or defended as lending to borrowers with compromised credit histories, the Wall Street Journal reported in 2006, 61% of all borrowers receiving subprime loans had credit scores high enough to qualify for prime conventional loans.

So with the term defined, I offer this mode of thought… if you have a “Compromised Credit History” You don’t need to buy a house you need to pay your bills and understand that the only thing that can improve your credit is “Time.” Stop Looking for a Program. Any Program that cleans valid negatives from your report is fraudulent and may leave you with a legal issue. Again the only thing that can improve your credit is “Paying your Bills & Time”

Please if you get the chance to rent or see the movie “Maxed Out”… in this movie there is a lady in the movie who is a learned Harvard Professor in the area of finance & economics. She describes a time she was asked to give a lecture to a group of bankers where she described a method they should pursue only lending to the best most credit worthy borrowers. At the conclusion of her lengthy lecture (by her own admission) the main leader stood up and asked her “If we do that how will we make money?” You see, bankers make the bulk of their money by lending to persons they know will have difficulty repaying what is borrowed. They make the majority of their money off of late fees & penalties. So if prime lending is for the best most credit worthy borrowers (reduced rates). Sub prime is for the marginal more risky borrowers (higher rates). It has nothing to do with making money available to minorities. It hast to do with making money on the available minorities.

When a person is on the radio or television touting that they have the secrete answer remember this… there is no secrete of the rich, most people got rich in public. Its just the public was not paying attention.

There are still Programs that allow purchasers to put No-Money Down that will allow persons to purchase a home by borrowing 103% Loan-to-Value (LTV)

On the last post I talked about the balance sheet and the basic formula:

Assets - Liabilities = Equity

This Program is Stupid… Let’s do the Math and put it back into the basic formula:

Asset $100,000 Home
Liability ($0.00 Down) $103,000 mortgage ($100,000 * 1.03%)
Equity NEGATIVE EQUITY OF $3,000

Not to mention the interest on the mortgage. Have you ever heard of the term Up-side-down. That is it, in other words you owe more that the property is worth.

I heard of a Vacation Program…

I heard of vacation programs (time shares) that ask for $1,500 down and $250 per month to have the ability to vacation anywhere in the world that they have properties. These are spectacular resorts. It is being marketed to African-Americans via well known individuals and commercials. Sounds like a Wonderful Program… Now I don’t fault these individuals for doing the job they are paid for which is selling these to the masses. I do ask why there is not a contrasting view presented? (Oh, I forgot… I’m not famous and getting paid for the truth…)

Let’s do the Math…

If I put $1,500 down and $250 a month in my Financial Calculator for 30 years (the program says 50 years b/c you can will it to your kids…) at 12% that is $927,665. I don’t know of a vacation that is worth $927,665, Do you? This vacation program has stripped the wealth from the family that participates in this. Oh, by the way if you take it out to 50 years and will it to you kids as they suggest, that family just gave up $10, 351,960. That’s a 10 million dollar mistake…

STOP LOOKING FOR A PROGRAM!!!!!!!!!

Next: PT 3 – Protect your Parents & Grand Parents

Pt. 1 - LET'S GET GOOD AT THE BASICS (The Balance Sheet)

2008-05-21T12:22:00.000-07:00

(I apologize upfront for this being long & probably boring... But if you grasp the concept you will gain wealth)

I have an accounting degree, but a lot of my practical knowledge was gained by working with a Chartered Accountant from the UK. He taught me a very interesting perspective, American Managers forget a simple accounting concept called “Going Concern” which is a Balance Sheet approach, and they are overly concerned with P&L (Income Statement / Budget) analysis. I observed this when I worked for a French company and in the quarterly finance meetings the French Managers would ask a balance sheet question which US managers would give a P&L answer and the French would rip them a new one, by asking a completely new litany of questions. The Balance Sheet (& Going Concern) ask "Can I keep the Doors Open," the P&L ask can I keep the Lights On... What good is it to keep the lights on if you don't have a building to keep them on in???

Many of you have taken business & accounting classes at some point in your career, and these classes tout the benefits of leadership and knowledge or how to effectively manager (ROI) Return On Investment & Expenses. This approach leads common folk to believe that no worthy correlation between this knowledge can be achieved. This could not be further from the truth. The analysis of a Balance Sheet / Income Statement is the same regardless of how many commas are involved. We can get good at the basics by understanding what information these two forms of financial data convey. I will keep my explanations insanely simple so that the masses may understand.

Balance Sheet

The balance sheet shows a long term view of your financial status at a point in time. It communicates the basic financial formula.

Assets = Liabilities + Equity

Thoughts are things & words have power… What is an Asset, Liability, and Equity?

An Asset is anything that puts money in your pocket (over the long term).
A Liability is anything that takes money out of your pocket (over the long term).
Equity is how much that goes in your pocket, stays in your pocket.

ASSETS – An Asset is anything that puts money in your pocket (over the long term).

Statistics show the inequality…Assets create opportunity, assets give you leverage power:

1% or less of us have 1mill net worth
Less than 25 % of us have $25,000 in assets
4.3 million of us versus 381 million of them have an IRA or KEOGH.
2.92 million of us versus 592 million of them Stocks and mutual funds.

I am sure that you have heard, “The key to wealth is to build assets…” I would like to add, “The key to building wealth is to build strong assets without incurring offsetting liabilities, thereby increasing your equity.” So, the obvious question is “What are Strong Assets?”

Simple listing of “Strong (Financial) Assets”

Houses – owned free & clear
Income Producing Stocks, Bonds, Mutual Funds
Income Producing Annuities, 401k,
Income Producing Businesses

Simple listing of “Strong (Non-Financial) Assets”

Education
Spirituality
Children

Utilized properly the listing of Strong Non-Financial Assets can yield financial success. Notice, I did not include in either listing:

Automobiles – Unless it is an antique this is a depreciating asset & typically are acquired in a manner that increase liabilities (auto loan) or leased and therefore do not increase equity. Sam Walton one of the richest men in the world drove an old pickup. Warren Buffet one of the richest men in the world drives a Lincoln town car... Jay-Z by his own admission in an interview doesn't drive at all.
Vacation Time Shares – This is equivalent to a long term lease. Most persons are told “Build Equity… Buy a home… Stop Making Your Landlord Rich, etc.” If home ownership is valued as the “American Dream” why is Leasing your Vacation monthly smart… answer: “It’s Not”
Stock Options – these are normally issued by corporations as a feel good tactic because they make employees feel as though they own a something. They are also issued when the “strike price” (the price where you will make money by exercising the option) is nowhere near the actual stock price. The transactions work like this (this can be one step or multiple steps):

The stock has to be trading higher than the “strike price”
e.g. Stock trading at $15 the strike price is $10
Individual “Exercises” the option (This is where ownership is achieved)
eg. Purchases the stock for $10
Individual sales the stock for $15 and pockets $5 (this is where ownership is lost)
Preface – I have heard of the millionaire janitor/secretary, as everyone else has, that became that way by taking options in the company as opposed to salary and bonus increases. The majority of persons hold options “Ever” (in other words… so long the “For” gets dropped)

Liabilities - A Liability is anything that takes money out of your pocket (over the long term).

Financial Liabilities are killing our communities. The common thought is to “Get It anyway you can…”

Wealth Killing Liabilities

Car Loan

Title Pawn
Rim Rental

Credit Cards
Mortgages
Student Loans
Payday Lenders
Furniture Financing

I know… I know… your mind immediately jumped to the question of “How do I get a car, home, education, or any of the things I want without a loan?” Here’s a novel idea…PUT MONEY TO THE SIDE & SAVE!!! How can you build wealth if you spend or owe every dollar you get your hands on to someone else? Answer… you can’t.

I owe… I owe so off to work I go is the mantra of the poor & liability burdened. Many a New York Times Bestseller have led us to believe that the lies are the truth and the gospel is a lie when it comes to money and finance. As Big Momma says… “The Devil is a Lie…” We need to be sober, conscience, & aware of the traps:

90 days is not the same as Cash, Cash is the Same as Cash.
(OPM) Other Peoples Money is not how the rich get rich
0% credit cards contain a back end Gotch in the fine print… That’s how the Bank makes money.

Equity – Equity is how much that goes in your pocket, stays in your pocket.

Equity is Ownership and We have little or no Real Equity in our community… outlined in the following statistics:

· 87% of the wealth is owned by Someone else

o When our babies are born into this world they will never gain more than 13% of the wealth

· Business Equity – Less that 10% of us have equity in businesses

o 3500% More of others have equity in businesses

§ 10.4 million of us vs. 789 million

The balance sheet tells us that if we have a loan against our assets we only own a proportional share in the asset. I am describing 100% ownership (Free & Clear). In the past I have sat with many clients (most look like me…) and they have Negative equity positions. Even though from the outside looking in they have the large house, flashy car, finest cloths, & kids in private school. Unfortunately, most of our people look like this or worse:

Asset		Liability
Cash (in Bank)	200.00	Mortgage	247,000.00
House	250,000.00	Auto Loan	30,000.00
Car	35,000.00	Furniture Loan	9,000.00
Furniture	8,000.00	Credit Card	8,500.00
Total Assets	293,200.00	Total Liabilities	294,500.00

		Equity	(1,300.00)

Total	293,200.00	Total	293,200.00

Lets get good at knowing & implementing the Balance Sheet Formula...
Assets = Liabilities + Equity

Pt. 2 – Stop Looking for a Program

Where has all of the Black Businesses Gone?

2008-05-07T07:58:00.000-07:00

What subject did Martin Luther King Jr. argue & fight for in his last days???

Economic empowerment/freedom… his last days were spent organizing the march for the black sanitation workers of Memphis, TN. To receive equal rights and equal pay.

Strangely enough this is something we had in a segregated system and lost in our educated integrated system. Now I am not diagramming our re-entrance into segregation. However, I will describe a conscience movement towards economic segregation, building black business loyalty (outside of the barber or beauty salon), spending your $$ with those that look like you. I will also describe the marketing strategy of increasing the belief in quality of goods & services delivered from black businesses. Finally, the movement away from the education systems that engrained the “Black Pride” in us to use facilities by us & for us.

ECONOMIC SEGREGATION

My last post had to do with the fact that when we pool our economic resources we present an insurmountable economic force. Black Wall Street showed that in the early 1900’s we worked together, we spent our money together, we worshiped together, our children were educated together. Our “Family Values” were molded and shaped from the cradle to the grave.

Each & every other community practices economic segregation however we seem to lag in this endeavor. On a normal payday:

· The Asian dollar circulates among Asian businesses 28 days a month before leaving the community

· The Jewish dollar circulates among Jewish businesses infinitely and then only a small percentage ever leaves the community.

· The Black dollar circulates only 15 minutes.

Now how is it that their dollars circulate within their community so many times more than ours? One word… “Pride” Jews believe that “the pursuit of business & wealth is Godly” (Thou Shall Prosper by Rabbi Daniel Lapin) and it benefits the entire community to do business with their own.

Our prevailing mode of thought is pay my bills… pay my credit card, pay my car note. Now I don’t know of a black owned credit card company, do you? That brings me to another quick point, name me a black bank in your city. There are 48 Black banks & Thrifts in the country. That isn’t even one per state. We will store our money & finances with a small credit union but will not patronize a black bank.

BLACK BUSINESS MARKETING

We have a 2 fold issue:

Issue #1 – The automatic default belief that black businesses deliver inferior goods & services.

It needs to be identified that the above noted circulation of dollars falls on deaf ears when discussing the purchase of goods and services, and more specifically who to purchase them from. One of the primary reasons for this lack of circulation is the growth of the mega-mall, mega-retailer, & a brand loyalty that has all but eluded the black business owner. On a smaller scale when we purchase from small businesses we tend to purchase our specialized goods & services from Asians. I tend to hear… “The Korean Lady does better embroidery/tailoring with a faster turnaround”

The largest wholesale clothing market in the United States is Magic held in Las Vegas twice a year. The buyers from most of the major retailers attend this market and miscellaneous markets held in cities around the country. In other words, the same distributors /wholesalers that the big name retailers purchase from is the same market that the black business purchase from. Therefore the belief that inferior goods are provided by black businesses is without merit.

I hold licenses in the financial services industry and was trained by a white gentleman who is very close friend of mine. It always irked me (for lack of a better term) that when I would sit down with potential clients that looked like me, they would question my education, suggestions, training, product offerings, etc. Until the time when my white friend would come in the door. When that would happen, the nature of the transaction completely changed and the deal closed. What changed??? I had more education than my counterpart, my product offering were exactly the same. The difference was skin color and the inherent belief by my own people that I was going to steal their money or get them in a risky investment. Self hate…

Issue #2 – The actual level of customer service delivered by black businesses comes with an attitude. I will agree, if I am spending my money I deserve a certain level of respect, not attitude. I find that we can be treated inferior in a large retailer and continue to spend money with them, but if the same bad service comes from someone that looks like us in a minority owned business boutique, “they should know better.”

Black businesses have to be consistently on a red level of alert forever cognoscente of the customer service that they offer, to their own people. This is because a black business patronized by a black customer only gets one chance, redemption is not an option.

In the words of Dr. Cornel West "You can't lead the people, if you don't love the people. You can't save the people, if you don't serve the people." Many Black businesses are around, exist, thrive & fail, by loving our people, but has our larger community returned the favor or adopted a suburban materialistic stance and fallen into the strategies of the big name store makes it better by default.

BLACK WALLSTREET - Black History Month

2008-02-20T09:35:00.000-08:00

[I did not write this, I pulled it from a website many years ago & don't remember the address. However, that does not make it any less important, informative, & relevant as it relates to Black Economics.]

"...and now I begin the incredibly difficult, the incredibly frustrating, & the incredibly involved search trying to bring together the history of a people" El Hajj Malik El Shabazz (Malcolm X)

Ron Wallace: co-author of Black Wallstreet: A Lost Dream Chronicles a little-known chapter of African-American History in Oklahoma as told to Ronald E. Childs.

If anyone truly believes that the last April attack on the federal building in Oklahoma City, Oklahoma, was the most tragic bombing ever to take place on United States soil, as the media has been widely reporting, they're wrong-plain and simple. That's because an even deadlier bomb occurred in that same state nearly 75 years ago.
Many people in high places would like to forget that it ever happened. Searching under the heading of "riots," "Oklahoma" and "Tulsa" in current editions of the World Book Encyclopedia, there is conspicuously no mention whatsoever of the Tulsa race riot of 1921, and this omission is by no means a surprise, or a rare case. The fact is, one would also be hard-pressed to find documentation of the incident, let alone an accurate accounting of it, in any other "scholarly" reference or American history book.
That's precisely the point that noted author, publisher and orator Ron Wallace, a Tulsa native, sought to make nearly five years ago when he began researching this riot, one of the worst incidents of violence ever visited upon people of African descent. Ultimately joined on the project by colleague Jay Jay Wilson of Los Angeles, the duo found and compiled indisputable evidence of what they now describe as "A Black Holocaust in America."
The date was June 1, 1921, when "Black Wallstreet," the name fittingly given to one of the most affluent all-black communities in America, was bombed from the air and burned to the ground by mobs of envious whites. In a period spanning fewer than 12 hours, a once thriving 36-black business district in northern Tulsa lay smoldering-A model community destroyed, and a major Africa-American economic movement resoundingly defused.
The night's carnage left some 3,000 African Americans dead, and over 600 successful businesses lost. Among these were 21 churches, 21 restaurants, 30 grocery stores and two movie theaters, plus a hospital, a bank, a post office, libraries, schools, law offices, a half-dozen private airplanes and even a bus system. As could be expected, the impetus behind it all was the infamous Ku Klux Klan, working in consort with ranking city officials, and many other sympathizers. In their self-published book, Black Wallstreet: A lost Dream, and its companion video documentary, Black Wallstreet: A Black Holocaust in America!, the authors have chronicled for the very first time in the words of area historians and elderly survivors what really happened there on that fateful summer day in 1921 and why it happened. Wallace similarly explained to Black Elegance why this bloody event from the turn of the century seems to have had a recurring effect that is being felt in predominately Black neighborhoods even to this day. The best description of Black Wallstreet, or Little Africa as it was also known, would be to liken it to a mini-Beverly Hills. It was the golden door of the Black community during the early 1900s, and it proved that African Americans had successful infrastructure. That's what Black Wallstreet was about.
The dollar circulated 36 to 1000 times, sometimes taking a year for currency to leave the community. Now in 1995, a dollar leaves the Black community in 15 minutes. As far as resources, there were Ph.D's residing in Little Africa, Black attorneys and doctors. One doctor was Dr. Berry who also owned the bus system. His average income was $500 a day, a hefty pocket of change in 1910. During that era, physicians owned medical schools. There were also pawn shops everywhere, brothels, jewelry stores, 21 churches, 21 restaurants and two movie theaters. It was a time when the entire state of Oklahoma had only two airports, yet six blacks owned their own planes. It was a very fascinating community. The area encompassed over 600 businesses and 36 square blocks with a population of 15,000 African Americans. And when the lower-economic Europeans looked over and saw what the Black community created, many of them were jealous. When the average student went to school on Black Wallstreet, he wore a suit and tie because of the morals and respect they were taught at a young age.
The mainstay of the community was to educate every child. Nepotism was the one word they believed in. And that's what we need to get back to in 1995. The main thoroughfare was Greenwood Avenue, and it was intersected by Archer and Pine Streets. From the first letters in each of those names, you get G.A.P., and that's where the renowned R&B music group The GAP Band got its name. They're from Tulsa. Black Wallstreet was a prime example of the typical Black community in America that did business, but it was in an unusual location. You see, at the time, Oklahoma was set aside to be a Black and Indian state. There were over 28 Black townships there. One third of the people who traveled in the terrifying "Trail of Tears" along side the Indians between 1830 to 1842 were Black people. The citizens of this proposed Indian and Black state chose a Black governor, a treasurer from Kansas named McDade. But the Ku Klux Klan said that if he assumed office that they would kill him within 48 hours. A lot of Blacks owned farmland, and many of them had gone into the oil business. The community was so tight and wealthy because they traded dollars hand-to-hand, and because they were dependent upon one another as a result of the Jim Crow laws.
It was not unusual that if a resident's home accidentally burned down, it could be rebuilt within a few weeks by neighbors. This was the type of scenario that was going on day-to-day on Black Wallstreet. When Blacks intermarried into the Indian culture, some of them received their promised '40 acres and a Mule,' and with that came whatever oil was later found on the properties.
Just to show you how wealthy a lot of Black people were, there was a banker in a neighboring town who had a wife named California Taylor. Her father owned the largest cotton gin west of the Mississippi [River]. When California shopped, she would take a cruise to Paris every three months to have her clothes made. There was also a man named Mason in nearby Wagner County who had the largest potato farm west of the Mississippi. When he harvested, he would fill 100 boxcars a day. Another brother not far away had the same thing with a spinach farm. The typical family then was five children or more, though the typical farm family would have 10 kids or more who made up the nucleus of the labor.
On Black Wallstreet, a lot of global business was conducted. The community flourished from the early 1900s until June 1, 1921. That's when the largest massacre of non-military Americans in the history of this country took place, and it was lead by the Ku Klux Klan. Imagine walking out of your front door and seeing 1,500 homes being burned. It must have been amazing.
Survivors we interviewed think that the whole thing was planned because during the time that all of this was going on, white families with their children stood around on the borders of the community and watched the massacre, the looting and everything---much in the same manner they would watch a lynching.
In my lectures I ask people if they understand where the word "picnic" comes from. It was typical to have a picnic on a Friday evening in Oklahoma. The word was short for "pick a nigger" to lynch. They would lynch a Black male and cut off body parts as souvenirs. This went on every weekend in this country. That's where the term really came from. The riots weren't caused by anything Black or white. It was caused by jealousy. A lot of white folks had come back from World War I and they were poor. When they looked over into the Black communities and realized that Black men who fought in the war had come home heroes that helped trigger the destruction. It cost the Black community everything, and not a single dime of restitution---no insurance claims-has been awarded to the victims to this day.
Nonetheless, they rebuilt. We estimate that 1,500 to 3,000 people were killed, and we know that a lot of them were buried in mass graves all around the city. Some were thrown in the river. As a matter of fact, at 21st Street and Yale Avenue, where there now stands a Sears parking lot, that corner used to be a coal mine. They threw a lot of the bodies into the shafts. Black Americans don't know about this story because we don't apply the word holocaust to our struggle. Jewish people use the word holocaust all the time. White people use the word holocaust. It's politically correct to use it. But when we Black folks use the word, people think we're being cry babies or that we're trying to bring up old issues. No one comes to our support. In 1910, our forefathers and mothers owned 13 million acres of land at the height of racism in this country, so the Black Wallstreet book and videotape prove to the naysayers and revisionists that we had our act together. Our mandate now is to begin to teach our children about our own, ongoing Black holocaust. They have to know when they look at our communities today that we don't come from this.

To order a copy of Black Wallstreet, contact:Duralon Entertainment, Inc.,P.O. Box 2702, Tulsa, Oklahoma 74149or call 1-800-682-7975Black Wallstreet: A lost Dream $21.95ISBN 1-882465-00-8Black Wallstreet: A Black Holocaust in America! video $29.95

What Black Folk Should Do Now - Black History Month

2008-02-19T12:30:00.000-08:00

I don’t want to Rant… I promise you that I don’t… I want to give concrete solutions that African-Americans (Black-folk) can implement in their lives. So, with that said, I will offer items that we can implement personally to move our community from a stance of economic dependency to independency…

1. Don’t Resolve to do something (New Year’s Resolution), Commit to your Goals – No one wants their Husband, Wife, Significant Other to resolve to Love them… They want a Commitment. I kickstart my goals around February 15 of each year because by that time the resolution people have left the gym, and I have had time to do some review of the previous years as well as some introspective thinking and drafting of my view of the short, mid, & long-term goals. It also allows me to draft, re-draft, & finalize #’s 2-7 below.

2. Set some Goals (Commitments) by Writing them down. I meet people every day and I ask “Do you have Goals?” They answer “Yes.” My next Question “Are They Written Down?” They answer “No, They are in my Head.” A Goal in your Head Is a Dream. Goals have the following characteristics, Clear, Time Bound, Written Down, Reviewed Daily, & Positively Stated.

3. Create A Monthly Family Budget – (What is a Budget?) Before the month begins you have written down how much you have allocated to predefined categories (The Budget). As you spend record (Write Down) how much you spend within the categories (The Actual). At the end of the month, subtract the Budget from the Actual to see how you perform on a monthly basis. Use this knowledge to prepare the next month’s budget. When you begin it is difficult the more you do it, it will get easier. Anything worth doing is worth doing badly at first. – Les Brown

4. If you are eligible start or contribute to a 401k. This is Tax Differed Growth

5. If you are eligible start or contribute to a ROTH IRA – You have until April 15 to fully fund a ROTH for 2007. You also can begin a monthly investment program (via most mutual fund families) to fund your 2008 ROTH. This is up to predetermined governmental limits. There are 3 ways money can grow, Taxable, Tax Differed, & Tax Free. ROTH’s Grow Tax Free. (Check with your CPA or Tax Professional & an Investment Professional)

6. Establish an Emergency Fund of 3-6 months of Monthly Expenses. Statistically, the college student entering the workforce will change jobs (via downsizing, off shoring, or personal decision) every 3-6 years. I personally got laid off 3 times before I turned 30 from large companies.

7. Pull your (Free in most states) Annual Credit Report – This is the only Truly free website endorsed by the US Federal Trade Commission. ( https://www.annualcreditreport.com/cra/index.jsp) Most of the others are sponsored by the credit reporting agencies and attempt to get you to purchase services.

8. Own Something 100% Free & Clear – Get out of Debt (Completely Never to Go Back!!!) (NKJ) Proverbs 22:7 - The rich ruleth over the poor, and the borrower is servant (slave) to the lender.

9. Stop Trying to Get Over & Go To Work on Your Goals & Dreams, You have a better chance of being struck by lightning (Odds of being struck by lightning: 576,000 to 1) than winning the Lottery (Odds of winning the California lottery: 13,000,000 to 1)

10. Save the Next Generation from Sallie Mae (GSL Government Student Loan) Mama & Daddy – Put some money away for your child’s college education ASAP!!! Remove the Excuse I got a loan so my kids can have one.

11. With that said if you have a Student Loan, Pay It off (Refer to #8), If you have a Student Loan, think about this… You Possess the Education but the lending institution (or Government) Owns it. I meet 40-50 year old people who are still paying on their student loans from their 20’s… Shameful. They have paid off cars but have not paid off their Student Loan.

12. Stop Counting on your Kids to make you Rich – There is a better chance of your child performing in an extraordinary manner in school, (Odds of finding out your child is a genius: 250 to 1) than becoming a pro athlete (Odds of becoming a pro athlete: 22,000 to 1). We all can give examples from our high school years that for whatever reason the Best Athletes Do Not Make It to the NBA or NFL.

13. Build a Strong Asset Base (Simple Definition – Asset: Something that puts money in your pocket). (NKJ) Proverbs 13:22 - A good man leaveth an inheritance to his children's children: and the wealth of the sinner is laid up for the just. A Strong Asset Base is owned Free & Clear (Refer to #8). The Wealthy purchase Appreciating Assets (Strong Assets) Free & Clear, The Poor purchase Depreciating Assets (Weak Assets) and further weaken them by purchasing them with Debt.

14. Read and Complete a Book this Month – If you are already an avid reader, then read a subject or genre that you don’t normally read.

15. Tell your Family that you love them.

16. Spend an hour a week in Quite time alone – Pray / Meditate. Most people are afraid to be by themselves.

17. Be on time for something (other than a party or church).

18. Help someone Not Related to You.

19. Celebrate Small Successes – (I hate Clichés… but here you go) Inch By Inch it’s a cinch. This will keep you from becoming discouraged on your journey to the larger goal. Celebrate paying off that $50 credit card (NOT By Charging More), by getting an ice cream cone. Celebrate loosing 5 lbs. by going to the movies.

20. Become a Dreamer again; Dream so Big It makes People Uncomfortable- No one ever got wealthy following the crowd. Never be afraid of trying something new. Remember a large group of professionals built the Titanic, and a lone individual built the Ark.

21. Become a Positive Person – Remove contractions from your vocabulary – Can’t, Don’t, Wouldn’t, Shouldn’t, Aren’t, etc. Most contractions are negative because it is a word paired with “NOT.”

22. Separate yourself from Negative People – you first must recognize the negative people in your life. (Refer to # 21)

23. Get a Mentor – Someone who has established themselves in the area you see yourself going. Most Important Note: Someone That Will Tell You The Truth. If you are trying to loose weight, you don’t get a personal trainer that is more overweight that you. You go and get a personal trainer that is more in shape than you. You don’t ask a broke friend to be your financial coach.

24. Become a Mentor - Take a young person to lunch, dinner or another cultural event just to talk. Younger Brothers & Sisters cannot step up to the table if you don’t give them a place setting.

25. Get our Health in Check – To be Rich & Sick is Stupid. Go To The Doctor (MEN)

Economic Stimulus or Government Sponsored Trip to the Mall

2008-02-13T17:45:00.000-08:00

I got a problem, My education & training will not let me play in the belief pool touting the fear tactic that we are entering an economic recession. The reason I have an issue with this mode of thought is because of the following:

In macroeconomics, a recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year.

Let me be one of the few people to say this “WE ARE NOT IN, NOR CURRENTLY MOVING TOWARDS A RECESSION” we are experiencing an economic slowdown. The Definition states (2 or more successive quarters) 6 months or more, of negative economic growth, we have not experience one full month of negative economic growth in 2008. Therefore I have to ask, why do we need an economic stimulus package? In the past, people had to suck it up, tighten our belts, & operate on a strict household budget. Our parents & grandparents did not look towards the government to give a handout. It was known that the government was not coming to the rescue. They got out and worked extra jobs or started a business. When did it change? Could it be that those generations coveted personal responsibility, versus government intercession in their day to day lives?

Who spends more money, the high income earners or the low wage earners? When I was in college I had an internship working for an income tax preparer during tax season. This was back in 1993 when the (RAL) Refund Anticipation Loan (also known as the Rapid Refund) was just coming to light. The majority of the clients I serviced for this “Loan” product were the poor & low income. Now, many will argue because of the cost of living the poor & low wage need their money. I argue that, the poor & low income need education to know that if they are receiving a tax “Refund” they gave the government too much money during the year. You cannot get a “Refund” unless you “Prefunded” your income tax account. Who handles your money better, you or the government? Isn’t it ironic that you fill out less that 1 full page (w-4) for the government to take taxes out of your check, but you have to fill out multiple pages (1040) to get your refund back from the government? (Disclaimer: File your taxes in proper & legal order. I do not encourage nor advocate not filing and paying taxes)

$600 - $1,200 will be received by most of you within the next 3-5 months as a part of the economic stimulus package. What are you going to do with it? Will you choose to have a Rich or a Poor mentality? The government is expecting the persons with the Poor mentality to rush to the mall and spend the money (to stimulate the economy). Some will say, I am going to put it in my savings account. That sounds noble, however most savings accounts are what I call “across town money,” because it is going to last most people long enough to get “across town” to buy those shoes, video games, or that handbag. What would the person with the Rich mentality do? (Hint: The poor save, the rich invest)

Money typically acts just like water… It flows from the path of least resistance to the path of most resistance. In other words, most people that operate without any type of formal written agreed upon family budget will spend the cash and it will end up in the hands of Mr. Macy, Mrs. Wal-Mart, Mr. Visa, & the Brothers of American Express. A budget is the dam for your money. But if you operate without a monthly budget it will flow to either a person or a corporation that does operate with a budget.

I find it ironic that the federal government that have never willingly given the people any direct monies, have passed out 2 monitary rebates during the last 8 years this one & the last at the end of the internet bubble. Things that make you go Hmmmm!!!