FLASHBACK: Change

This was originally a posted in August of 2008. Looking back, so much has uh, changed. But so much more hasn't...

* * *

I think the Dems' urgent message of "Change" needs to be called out.

"down" is a change from "up"

"loss" is a change from "profit"

"jobless" is a change from "employed"

As a business owner, the only "Change" I see with a President Obama is bad, bad, bad for the guys who make this country great and who create, like, 80% of the jobs in America: small business owners.

We're getting creamed by the federal minimum wage increases -- the big one's coming next year... For those who don't know, it's a 40% increase over three years.

We're getting creamed by increased requirements to provide health insurance, and the crazy-stupid cost of it.

We're getting creamed by the weak dollar, high energy prices, and high commodity prices (special thx to the ethanol canard).

We're getting way-creamed by credit-card processing fees.

If you're wondering why everything from milk and meat to gas and movie tix have skyrocketed, see above.

If you're wondering why unemployment is going up, see above.

If you're wondering what's the deal with inflation, see above.

So many people seem to think that the everyday business owner (the Quiznos store owner, the Shell gas station owner, the neighborhood 7/11 guy) can reach into some magical unending pot of money to cover these rising costs. Obama certainly seems to think so.

Let me set the record straight: we can't. We're bruised and hurting - but not down-and-out. We get up each morning to make a go of it - to make the best of it. We love what we do and we love the people we work with. But in order to stay in business and pay our leases, our mortgages, our SBA loans, etc, and feed our families, we're having to not hire that extra shift worker. It's not because we don't want to. It's because we literally can't afford the up-front costs/overhead that worker represents. We also have to raise prices. Again, we don't really want to - we have to (see above).

From what I can see so far, the policies Obama has outlined will make things way worse.

Yes, things have not been perfect, but with all candor, we're due for a dip in the economy. How deep of a dip we will have goes directly to how much government tries to "redistribute" us out of this.

The best-case scenario for right now, I think, is unleashing our best minds and producers to solve our domestic energy deficit. LOTS of other things fall into place once we do that.

FLASHBACK: Careful What You Wish For

Originally posted Oct 8, 2008

 

There was a story I read once called "Lathe of Heaven." It its about a man who's dreams alter reality. In short, his dreams come true.

But in that peculiar way that minds work, his dream come true in ways that are unexpectedly... direct. It turns out his ability is like that of a genie: sure, you get what you want, but in the end, do you want what you get?

* * *

During the Carter Administration, there was an idea that it would be a good thing to make homeownership a right. After all, shouldn't everyone own a home?? As a means to that end, the Community Reinvestment Act (CRA) was created and signed into law. It basically made it a little easier for those people "on the bubble" to afford to buy a home.

In 1995, President Clinton signed into law a major expansion of the CRA that strong-armed banks into lending to uncreditworthy people. And it worked - people were able to buy a home with "no money down."

But what this action by the Democrats did was to effectively guarantee that home prices would rise. Everybody's homes became instantly more valuable because that pesky 20% down payment was no longer required.

Nobody really noticed until the tech bubble popped.

When 1999 changed to 2000 and a Yahoo stock dropped from $300 to $30, a lot of the money that wasn't lost found it's way into the real estate market. Why wouldn't it? A lot of very smart people realized that there was a ton of money on the table. They were right.

As the real estate sector rallied, competition for those mortgage dollars increased, the guidelines were loosened. More and more and more people could qualify for no-doc loans.

It was a win-win: Banks were investing in the value of the property, not the borrower. As annual appreciation rates broke through the double-digit barrier, the banks were happy. So what if a borrower failed? They'd just sell the property for 15-20% more than they paid for it last year. The bank's debt is cured, and the borrower can take that money, buy another home, and try again.

Even though President Bush sounded the alarm in 2000, and McCain sounded the alarm again in 2003-4, Democrats consistently shouted them down. They said, in effect, "Move along, move along... there's nothing to see here..."

In the fall of 2005, the first whiff of trouble rippled through the real estate market. By 2006, the slowdown was palpable. In 2007, real estate professionals knew the jig was up. The ones who didn't sell in '06, sold their homes, rented, and waited.

Now, in 2008, we are in full-frontal crash mode. We could have done something to stop this crash, but the Democrats blocked every attempt. Their zeal to give away homes to a minority of people who couldn't pay trumped their oath to serve and protect all their constituents.

So, wish number one was "gee, I wish it was easier to buy a home" Granted! But now home prices have risen to crazy-high levels because money's so cheap.

Wish number two was "man, home prices are so high; I wish they would come down!" Granted! The real estate bubble has burst, and home prices have fallen as much as 60% in some areas.

* * *

Meanwhile, people said, "boy, I wish the minimum wage was higher... that would be sweet."

At the same time, people thought that one of the things contributing to the American trade deficit was an expensive dollar. I wished the dollar would come down in price so that American goods would be more competitve in the world market. We'd sell more and better products to the world market and that would be a good thing.

Granted! But the combination of many things, including falling dollar and higher labor costs contributed to higher oil prices (oil is priced in dollars), an overall CPI increase of, like, 6% in one year, and an unemployment rate of 6.1% (up from 4.8% last year). Ask a small business owner why this matters.

* * *

Then people thought, "You know, these gas prices are crazy - I wish they would come down. There's no way oil should be at $130 a barrel; it should be at, like, $80. $40 would be better!"

Granted! The price of oil started to fall... a lot! Yesterday, it traded in the $80-90-per-barrel range. Oops, the price of oil dropped so drastically because of (well-founded) fears of worldwide recession.

* * *

So here we are, 20-something days from the 2008 elections. I hear a lot of people saying, "Gosh, I wish things would change. I want change so much. Change, change, change, change, change..."

Well, here are the choices: one guy who has done a lot over a long time versus another guy who has done very, very little over a very small amount of time. Both guys talk about 'change.'

Considering the realities of this election, there will certainly be change.

What we need to consider, however, that we choose the right change.

Be Careful What You Wish For...

There was a story I read once called "Lathe of Heaven." It its about a man who's dreams alter reality. In short, his dreams come true.

But in that peculiar way that minds work, his dream come true in ways that are unexpectedly... direct. It turns out his ability is like that of a genie: sure, you get what you want, but in the end, do you want what you get?

* * *

During the Carter Administration, there was an idea that it would be a good thing to make homeownership a right. After all, shouldn't everyone own a home?? As a means to that end, the Community Reinvestment Act (CRA) was created and signed into law. It basically made it a little easier for those people "on the bubble" to afford to buy a home.

In 1995, President Clinton signed into law a major expansion of the CRA that strong-armed banks into lending to uncreditworthy people. And it worked - people were able to buy a home with "no money down."

But what this action by the Democrats did was to effectively guarantee that home prices would rise. Everybody's homes became instantly more valuable because that pesky 20% down payment was no longer required.

Nobody really noticed until the tech bubble popped.

When 1999 changed to 2000 and a Yahoo stock dropped from $300 to $30, a lot of the money that wasn't lost found it's way into the real estate market. Why wouldn't it? A lot of very smart people realized that there was a ton of money on the table. They were right.

As the real estate sector rallied, competition for those mortgage dollars increased, the guidelines were loosened. More and more and more people could qualify for no-doc loans.

It was a win-win: Banks were investing in the value of the property, not the borrower. As annual appreciation rates broke through the double-digit barrier, the banks were happy. So what if a borrower failed? They'd just sell the property for 15-20% more than they paid for it last year. The bank's debt is cured, and the borrower can take that money, buy another home, and try again.

Even though President Bush sounded the alarm in 2000, and McCain sounded the alarm again in 2003-4, Democrats consistently shouted them down. They said, in effect, "Move along, move along... there's nothing to see here..."

In the fall of 2005, the first whiff of trouble rippled through the real estate market. By 2006, the slowdown was palpable. In 2007, real estate professionals knew the jig was up. The ones who didn't sell in '06, sold their homes, rented, and waited.

Now, in 2008, we are in full-frontal crash mode. We could have done something to stop this crash, but the Democrats blocked every attempt. Their zeal to give away homes to a minority of people who couldn't pay trumped their oath to serve and protect all their constituents.

So, wish number one was "gee, I wish it was easier to buy a home" Granted! But now home prices have risen to crazy-high levels because money's so cheap.

Wish number two was "man, home prices are so high; I wish they would come down!" Granted! The real estate bubble has burst, and home prices have fallen as much as 60% in some areas.

* * *

Meanwhile, people said, "boy, I wish the minimum wage was higher... that would be sweet."

At the same time, people thought that one of the things contributing to the American trade deficit was an expensive dollar. I wished the dollar would come down in price so that American goods would be more competitve in the world market. We'd sell more and better products to the world market and that would be a good thing.

Granted! But the combination of many things, including falling dollar and higher labor costs contributed to higher oil prices (oil is priced in dollars), an overall CPI increase of, like, 6% in one year, and an unemployment rate of 6.1% (up from 4.8% last year). Ask a small business owner why this matters.

* * *

Then people thought, "You know, these gas prices are crazy - I wish they would come down. There's no way oil should be at $130 a barrel; it should be at, like, $80"

Granted! The price of oil started to fall... a lot! Yesterday, it traded in the $80-90-per-barrel range. Oops, the price of oil dropped so drastically because of (well-founded) fears of worldwide recession.

* * *

So here we are, 20-something days from the 2008 elections. I hear a lot of people saying, "Gosh, I wish things would change. I want change so much. Change, change, change, change, change..."

Well, here are the choices: one guy who has done a lot over a long time versus another guy who has done very, very little over a very small amount of time. Both guys talk about 'change.'

Considering the realities of this election, there will certainly be change.

What we need to consider, however, that we choose the right change.