The U.S. Debt Disease:

Filed under: Economy — admin January 4, 2012@ 4:35 pm

Read any introductory college economics book you wish, most will tell you that there is no way the amount of public debt can outstrip the productive capacity of a wealthy, developed nation like the United States. Just five year ago this claim may have been plausible but at present the US has realized a public debt of over $15 trillion–an amount roughly 100 percent of GDP!

 

So those same books will go on to tell you how bankruptcy is a trifling concept to the Federal Government, subheadings: Refinancing and Taxation. Our entire system endlessly fuels the fire of debt with more debt as individuals finance everything from a college education, to homes, and automobiles.

 

Following the example set by Uncle Sam, people are virtually enslaving themselves with the amount of debt they possess, the difference being that we, as individuals, have no one to tax or no one to unload our debt burden on. The banking system, on the other hand, has nearly unlimited access to the Federal Reserve, where the sign out front reads “Dump debt here.”

 

Looking at the student loan market the average debt upon graduation is roughly $24,000, with median pay leveling out at about $26,250, assuming individuals are able to get jobs right out of college. Forget Brave New World, we’re in dystopia now.

 

In a system where everything runs on enormous levels of debt, the very idea of saving has become a sophistry. If you can’t possibly save enough for a car or an education, you get a loan instead. In the same way that toxic loans to the housing market corrupted the industry and drove prices sky high, similar parallels are occurring in the student loan and higher education market. The enormously wealthy few are becoming richer with the financialization of our country, and the more people who wake up to this reality the better equipped we will be as a nation of sovereign individuals to stop the cycle and start generating wealth for ourselves, not others.

 

Debt is a huge burden on our society and most of the world does not realize that it is crippling to their financial well-being.  It will literally enslave you into a never ending cycle of poverty unless action is taken to solve the fundamental financial problems.  It is time to take action with your financial situation and education on debt, money and your own financial situation.  It’s more important than ever with the insurmountable financial issues facing our world today.

MORE JOBS COMING TO MEMPHIS:

Filed under: Economy,Memphis — admin @ 3:19 pm

The Memphis-Shelby County Economic Development Growth Engine (EDGE) board recently met on Wednesday, Dec. 21 to grant a 15-year tax freeze to Valero Energy Corp. provided that the company follows along with planned investments and upgrades to its Memphis facility totaling more than $298 million over the next five years. In a statement on the refinery’s importance to local operations, Valero spokeswoman Lisa Wheeler noted that it is a direct supplier of Memphis International Airport, as well as the only refinery in Tennessee. Aside from saving Valero nearly $26 million in local taxes, the company will also, during the payment-in- lieu-of-taxes period, generate about $54 million in revenue for the city and county while maintaining hundreds of local jobs. EDGE board member and SunTrust Bank Memphis

President and CEO Johnny Moore was particular about preserving middle-income jobs in his move forward with Valero’s application.

 

Another company, AB Mauri Fleishmann’s (ABMF), which has had a Memphis-based facility for over 20 years manufacturing and selling fresh, instant, and active dry years and other bakery ingredients, similarly applied for a PILOT at the Dec. 21 meeting, but their application was postponed until January. In regards to its facility at 2743 Riverport Road, ABMP hopes “to have its operating costs [lowered to] approximated those of its competitors.” Also on the drawing board for the company is a planned $16.5 million investment at its plant. The PILOT would save the company about $854,000 in taxes, and during the period would generate almost $3 million in revenue for the city and county. The company also projects both job creation and preservation upon a grant by EDGE.

 

This is great news for Memphis.  Jobs are coming from all over.   Valero, Electrolux and Mitsubishi are all bringing jobs to the Memphis market and are getting tax incentives to do so.  The government in Memphis seems to be pulling out all of the stops to bring more jobs to the market.  Great news for Memphis real estate investors!

Students college education overpriced and not showing a high return on investment.:

Filed under: Economy — admin December 20, 2011@ 2:54 pm

The student loan market relentlessly makes it way to and past the $1 trillion mark, having outstripped credit card debt, estimated at around $850 billion. According to the U.S. Department of Education, the national student loan cohort default rate increased from 7.0 percent in the fiscal year 2008 to 8.8 percent in 2009–the rate for for-profit institutions was up to 15 percent from 11.6 percent. Tuition costs as compared to other general, healthcare, and even housing indices have also been on a steady rise, up 23% since 2000, while real earnings for post-graduates–namely, the lucky few who are able to find jobs to remunerate the debt incurred while learning non-marketable skills in higher education institutions–have declined.

From dot.coms to mortgages, it would appear that student loans are the flavor of the week as for-profit schools have created a subprime education market by luring Americans into a system which provides little economic gain for students while aggrandizing and enriching the companies on Wall Street.  In fact, three of the top ten holders of FFELP loans are Citibank/Student Loan Corporation, Wells Fargo/Wachovia, and JPMorgan Chase Bank, the same players responsible for the toxic mortgage lending that received trillions in taxpayer dollars as bailouts. Education has become another discredited commodity, marketed as a necessity, and gambled upon by the government and Wall Street.

Private institutions are likewise responsible for strapping students with large amounts of debt. At the University of Southern California, total tuition and fees including room and board have increased by nearly 40% in the last ten years. College officials claim that increases in tuition are being offset by increases in financial aid offers though the average paid percentage of fees only went up from 67 to 68 percent. At any rate, it makes little sense to pay for or invest in anything that is not seeing a growing rate of return.  A recent article in the Huffington Post recounts that last spring, PayPal founder and investor Peter Thiel awarded $100,000 each to two young entrepreneurs to not attend college, supplementing his belief in a definite student loan bubble. The vast majority of young Americans will not be so lucky, however. Minimum wage paying jobs will await those who do graduate and default rates will continue to soar until this bubble, like all the rest before, eventually pops. We can more likely expect a slow deflate in this case, as a student education bubble poses much less of a threat to the overall economy than housing debt, but individual borrowers will doubtless face difficulties.  So it would seem, invariably, that Peter Thiel has the right of it.

 

The education system is flawed in itself as financial education is not taught in schools.  Many graduates come out of college brain washed, thinking they are entitled to a job just because they received their degree.  To their disbelief they are getting a rude awakening finding that the real world job market does not have a place for inexperienced graduates within cash strapped businesses in the current economy.  Companies would rather skip the initial investment of training a recent college grad versus finding someone that already has been trained for the same wage.  This is even more of a reason to start thinking like an Entrepreneur and start to take control of your own financial future.  There are over a million ways to make money being self-employed.  If you learn the skillset of how to make money on your own without a J.O.B. (Just Over Broke), you will forever be financially stable.

Income disparity, our polittical system and occupy wall street:

Filed under: Economy — admin @ 2:40 pm

As far as media and the typical American household are concerned, it would appear that dinner table conversations are limited to unemployment rates and mob mentality depictions of Occupy Wall Street demonstrations. Even self-dubbed business programs purposely omit any information pertaining to real wages and income. The perspective of the average working class American has been interred beneath every small pretension of recovery and equality. For instance, what does it actually take to qualify for the top one percent?

About 66 percent of tax returns show an adjusted gross income of $50,000 or less, with an additional 31 percent showing an adjusted gross income between $50,000 and $100,000. At 97 percent, we’re not quite there yet. Those asserting incomes of $100,000 to $500,000 do not even make the cut and the woes of investment bankers that individuals within this income range will, if regulated, lose claim to their life savings are simply ill-founded, if not meant to be entirely misleading. After all, Wall Street is doing a pretty great job of that already.  Now, to be in the top one percent, you will need an adjusted gross income of $1,000,000 or more.

Our political system is one in which lobbying is favored as a means of political progression by force and bribery. It is one in which big business-stock market speculators pay less on their taxes than regular households. Our financial system is geared towards short term profits rather than long term preservation and function, and it seems the public will continually be burdened with the misgivings of the super wealthy as they bribe their way back into financial stability at the expense of the American taxpayer. In this device for the banks and by the banks, the typical American worker is bringing in just $26,000 a year while the big banks get richer with damaging quick buck strategies.

The burden of student loan debt is now claimed as a deductible on tax returns by over 10,000,000 Americans, up by nearly 150 percent in a decade—certain proof big banks are making even more money off of the American public. On the side of taxes, nearly 75 percent of total income tax is paid by households making less than $500,000 a year. Much of this has to do with the vast majority of the population not being in the top 3% in the first place.  What this means is that the top 3% are paying 25% of the taxes so they are paying a higher share of taxes due to the amount of income they make.  They do pay less in tax relative to their total income but that is because they have educated themselves as to the tax breaks in the system.  The poor and middle class could very well pay less in tax relative to their incomes as well IF they would take the time to educate themselves about the tax breaks and set a tax and financial plan in place.   The occupy Wall Street protestors would have you believe that they are victims; however, it all comes down to proper education on the tax system and financial education.  Personally I do not believe that the occupy Wall Street protestors socialism tactics work and it will be the end of our economy as we know it.  Here is a simple analogy of what would happen:

“When the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer. 

The professor then said, “OK, we will have an experiment in this class on Obama’s plan.” All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (Substituting grades for dollars – something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little. 

The second test average was a D! No one was happy. 

When the 3rd test rolled around, the average was an F. 

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else. 

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

It could not be any simpler than that.

These are possibly the 5 best sentences you’ll ever read and all applicable to this experiment:

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.”

The middle class are doing worse in the current so called economic recovery than the actual recession:

Filed under: Economy,Retirement — admin November 22, 2011@ 6:23 pm

Newspaper headlines of late are quick to detail what little sign of national economic stability they can; some job growth here or a sign of stock market recovery there. And while it may be true that the S&P 500 is up 77 percent from the lows of March 2009–especially good for big-time stock market gamblers–median household incomes are falling at faster rates during this so-called “recovery period,” than they were during the actual recession years.  As you can see from the chart below since the beginning of 2009 the median income has dropped sharply while unemployment rises significantly.

 

 

In the meantime, the National Association of Realtors (NRA), in addition to providing evidence of continued decline in home sales, also reported a record-high affordability index, which when taken together simply do not add up. How are homes more affordable when the median income continues to decline?  Another example of how the media, along with agencies like the National Association of Realtors try to make things look better than they are.  Low consumer confidence and tight lending policies by the banks pose definite difficulties, however there is more to be gained than lost as the cyclical nature of the economy will not provide such optimal investment opportunities for long.  Now is the perfect time to start to invest in real estate as rates are low and you can make a great return on your money due to cash flow.  There are also great opportunities to purchase property with built in equity as the banks continue to liquidate their inventory.  Taking control of your future is more important now than it has ever been.  As median incomes continue to decline the middle class will be pushed into poverty IF they do not do something about it.  There are plenty of available resources and alternative investments the middle class can make right now but education is the key.  Unfortunately the media is controlled by stock market advertising dollars which control the education base of the American public.  Now is time to get educated about alternative investments instead of putting  money in the stock market where all one has is hope the values will continue to climb, which is highly unlikely in the current volatile economic times. Stop hoping and enact an investment strategy that works.  Stop investing for capital gains and invest in cash flow.  A cash flow investor can weather economic instability much more than capital gain investors.

 

Mathew Owens, CPA

 

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The American Saver is now the American poor:

Filed under: Economy — admin November 9, 2011@ 6:35 pm

In a recent effort to encourage spending by consumers, the Federal Reserve promised to hold short-term interest rates near zero at least through mid-2013. A plan to lower long-term rates followed suit in September. Unfortunately these lower rates make it harder for savers to hold onto their cash and still beat inflation. Even the typical money market account, having seen an 80 percent decline since 2006 is no longer a safe bet with inflation rates exceeding interest rates; the overall effect being diminished purchasing power.

Meanwhile, sitting pretty on trillions of dollars in bailouts–rather, welfare payments courtesy of the American public–the banks are simply not lending money due largely to the shrink in household incomes. Holding fast to the bailouts designed to fix their volatile balance sheets, the banks are earning a higher interest rate on these reserves than they are allowing their suffering customers. Furthermore, with said balance sheets so saturated with toxic loans in residential and commercial real estate, banks do not want to cut into this capital, indicating the primary incentive is to keep their own pockets full. Punishing both the saver and the spender, who can say without a doubt that the banking system is truly acting in the best economic interests of Americans?

Recovery on Wall Street does little to ameliorate the qualms of national unemployment, the median duration of which is the highest it has been since records began being kept in the 1960s. Players on Wall Street bank on the foreclosure of people’s homes while U.S. banks have near $231 trillion in derivatives, a sum almost four times the global gross domestic product. Engendering this sly theft of Americans in the aggregate, the financial system’s veritable altruistic objective should be to allocate capital to the areas with the greatest global economic growth.

Left with the choice of either contributing to the worldwide gambling problem or spending all of their money, consumers have almost no options that allow for return in regular savings accounts while their overall purchasing power dwindles more and more each day. As an elegy to those who flip-flopped houses during the real estate boom from 2000 to 2007 only to lose everything when the market crashed, those seeking to enter the high-frequency, fast paced game of speculate and trade–the stock market casino–will do well to learn from history.

Focusing instead on long-term commitments, low home prices coupled with low interest rates make this a great time to become an investor in real estate, allowing you to exercise control over and improve your financial security–something the Federal Reserve and the banking system are neither suited nor interested in doing.  Investors from across the globe have started to focus on investing in cash flow instead of capital gains and are now purchasing cash flowing investment properties that produce above inflationary returns.  Education is key when investing in real estate so many investors hand their money over to a mutual fund manager or similar instead of taking action and control over their own retirement and financial stability.  It is now easier than ever to invest in real estate as there are companies that specifically help investors invest in turn-key, fully renovated investment properties with property management and systems already in place.

Now is the time to take action.  Take responsibility for your own financial situation and start developing cash flow so the economic problems of the world do not affect your retirement and financial stability.

Mathew Owens, CPA

www.ocgproperties.com

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Visualization of the National Debt:

Filed under: Economy,Taxes — admin September 18, 2011@ 4:15 pm

These days the average American household has an average of $15,799 in debt, a number found by dividing the total revolving debt in the United Sates ($793.1 billion as of May 2011 as listed in the Federal Reserve’s July 2011 report on consumer credit) by the estimated number of households carrying credit card debt (50.2 million). Relatively, the average student after college has an estimated $24,000 in debt–based on the amount taken out in loans–according to the New York Times in the year 2009. In combination with the poor state of the economy and the high unemployment rate, these numbers are shocking to behold–enough so that the total United States federal debt of over 14 trillion dollars becomes a crippling figure by comparison. So how daunting exactly, is the U.S. debt?

 

Let’s see if we can’t put things into perspective for you.

 

• One hundred dollars is the most counterfeited money denomination in the world, but a single bill can fit in your wallet.
• Ten thousand dollars is enough for a great vacation or can buy you a used car.  It is the approximate amount made during one year of work by the average human on this earth.
• One million dollars will see you complete about 92 years of work.
• One hundred million dollars can fit comfortably on an ISO/Military standard sized pallet.
• One billion dollars is about ten pallets in size–about enough to fill a 15 by 8 foot room, wall-to-wall.
• One trillion dollars will span and fill an entire football field of double stacked pallets of $100 million dollars each, full of $100 dollar bills. If you spent $1 million dollars a day since Jesus was born, you would not have spent $1 trillion dollars by now. Unless the government fixes the budget, US national debt (think of it as their credit card bill) will topple $15 trillion by Christmas 2011. This amount passes 20% of the entire world’s combined Gross Domestic Product.
• Finally, $114.5 trillion dollars is the amount the U.S owes in unfunded liabilities, meaning the money they do not have to fully fund the Medicare, Medicare Prescription Drug Program, Social Security, Military, and civil servant pensions. Realistically, if you live in the USA this is also your personal credit card bill; you are responsible along with everyone else to pay this back.

Also, check out http://www.usdebtclock.org/, which constantly updates to show the current United States gross national debt, along with your own share of it.

 

Talk about a government for the People, by the People. We should come up with a new slogan for the U.S. Government, “The U.S. Government, devaluing the dollar one bail out at a time.”

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Memphis On List of Strong Housing Markets:

Filed under: Economy,Memphis,Real Estate — admin September 13, 2011@ 8:50 am

This month’s stock market declines, the battle over the federal debt ceiling and the European debt crisis have deepened American pessimism for the national economy and housing market at large.  Despite this gloomy outlook we can actually expect home prices to rebound within the next two years, with an expected turn around as early as next year. Looking at this in more detail, the Fiserv financial-data firm forecasts that home prices in 384 U.S. metro areas will rise by an average of  2.7% between the first quarter of 2012 and the first quarter of 2013, with 95% of those areas showing gains in that time period. Chief economist at the firm David Stiff, notes that home prices are far more affordable at this juncture now that the housing bubble has burst.  Additionally in most metropolitan areas, home prices–when compared to household incomes–are at pre-bubble levels.

Memphis, Tennessee, in particular is expected to see a 10% gain in home prices by spring of 2013 according to a report by Fiserv Inc. Overall, the inventory of unsold homes and the amount of foreclosure inventory hitting the market is going to slowly decline this year and start to be less of an impediment to price appreciation.  However, depending upon what happens in the economy we could see some volatility due to affordability levels, economic policy changes and a possible increase in supply of homes due to those factors.  This increase in supply is dependent upon how much economic turmoil we see ahead and further price corrections in specific volatile markets like California, Arizona, Nevada and Florida which have already seen massive hits in the property values.  We have seen much more stability in Memphis Tennessee over this economic storm and we feel its necessary to invest in the right market to cover your downside risk.

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THE STOCK MARKET IS THE BIGGEST PONZI SCHEME OF ALL!:

Filed under: Economy,Taxes — admin August 29, 2011@ 12:10 pm

With the stock market tumbling, many investors are looking to stable cash flow investments backed by a hard asset such as real estate.  Most investors realize that the ponzi scheme of the stock market keeps investors in high risk and highly volatile investments.  Simply put, its gambling!  The stock market only rises if you continue to pump more money into it, just like a ponzi scheme.  What do you think is going to happen when the baby boomers start to slowly take all of their money out of the stock market to live on because their investments do not cash flow well enough to retire off of?  The air will be let out of the balloon.

Most financial planners will tell you that you should put your money in mutual funds or various hybrid insurance products that literally suck the wealth right out of you.  On top of significantly reducing your returns due to the high fees the mutual fund companies charge, you are taking 100% of the risk.  They make money through fees weather you make money or not.  Ask yourself; is that the right business relationship I want to be in?  Most of the world population invests this way primarily because it’s been drilled into our heads by the large investment companies, politicians via the tax code that incentivize 401k and mutual fund investing, and the financial industry in itself.  They want you to invest for the long term so that they make money off of you for the long term.

The U.S. debt was just downgraded to AA+ by the S&P, signifying an increase in risk related to the government’s ability to pay its debt.  In my opinion, it was not done soon enough.  Not because I think that the U.S. debt is really in danger of default just this moment, but because of the politicians’ relationships to the banking system and their ability to steal money from the WORLD.  They are so closely intertwined that they are giving each other bail outs on the trillions of dollars of loans that they have already made trillions of dollars on, via the fractional reserve banking system.  People are so focused on the $14 Trillion in debt, just like the politicians want you to be, that they are not focusing on the hundreds of trillions of funny money loans already given out by the banks.  For every $1 that anyone deposits into the bank the bank gets to lend out AT LEAST $10 and make interest on that money.  It use to be $40 to $1.  That means that the more the banks lend, the more money they make, and the more funny money is pumped into the economy which increases the likelihood of hyperinflation.

If hyper inflation happens, real estate prices, commodities prices, gold, silver and any hard asset should sky rocket making it a perfect time to buy real estate.  It’s the perfect storm.  You can buy discounted real estate due to the massive amount of foreclosures, while using debt at low interest rates, and have the opportunity to buy at the bottom of the market.  What’s great about real estate is that instead of investing in something unstable like the stock market, where you have no collateral for the investment, you actually have a hard asset that can pay you above stock market returns just with the cash flow.  The long term average of the stock market is close to 8%.  Most of the real estate investments I personally invest in make 8% – 10% in cash flow from the rental income without financing and 15% – 25% with financing with a much lower risk.  The rental income from the investment will cover your note payment, your expenses and still give you positive monthly cash flow.  On top of that your risk is decreased because you are backed by a hard asset and under market value.  Most people believe that investing is risky, and it is if you do not know what you are doing.  Getting educated on how to invest is key.

The U.S. politicians need to get the debt situation in order, but if you plan on protecting yourself in case they don’t, investing in real estate should be your perfect hedge.  On top of that you will be able to retire off of cash flow instead of worrying about the market value of your stock portfolio and wondering if it will be enough for you to retire.

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HOW TO SPEND $9 TRILLION OVER 10 YEARS!:

Filed under: Economy — admin August 22, 2011@ 3:18 pm

In the year 2001, the national debt stood at $5.8 trillion. Today that figure has more than
doubled to $14.3 trillion. This $9 trillion increase over the past ten years can be attributed to
government expenses, particularly with the 2001 and 2003 tax cuts, additional interest costs, and
also the war in Iraq and Afghanistan. Why is it then that we constantly hear politicians and Wall
Street bankers going after Social Security payments as a key way to balance the the debt?
Compared to the aforementioned expenses, Social Security hardly factors into the $9 trillion in
question. Out of the top three contributors to the increase in debt, the only item being discussed,
albeit rather quietly, is taxes. The 2008 financial industry bailout added an additional $200
million, although the Federal Reserve partook in a shadow bailout of its own totaling over $2.8
trillion on their balance sheets.
The fact of the matter is that both political parties have set up a system where money is
filtered to the top one percent, while the middle class wilts on a vine. This new economic system
distributes wealth by political will, while backstage of this farcical theatre the working class is
being forced into debt serfdom, finding it virtually impossible to buy a home or even get an
education without racking up onerous amounts of debt in loans.
The velocity at which the national debt has grown in this country is stunning. When
comparing annual changes in GDP and government debt over the past 50 years, the rate at which
our debt is growing has far surpassed our growth in GDP. This is clearly not a good thing; as a
country you do not want to accumulate debt faster than your economy can develop and
compensate for this number. For the most part, during the 1980’s or the era of “deficits don’t
matter,” is when we really notice this change. This trend has continued through the years, with
little of the $9 trillion having trickled back down into the hands of the middle and working class.
The only group seeing solid income growth is at the top and much of their growth is secured by
government favoritism and welfare for the rich.
Not convinced? In this new kind of system we live in, hedge fund managers pay taxes at
a much lower rate than your typical construction worker. Additionally, one out of three
Americans have no savings to their name, so financially they have nothing to protect. A
majority of the population has bought into the notion that political parties are out to help them,
but the current distribution of wealth alone should be enough to shatter this idea.
Tax breaks are of little use, especially since they tend to benefit only the extremely
wealthy. Were this all free market based, it would be a different story. Bailed out companies
now invest overseas and create jobs in other countries with U.S. taxpayer dollars while our
economy suffers. Most Americans would rather have a healthy economy instead of seeing their
tax rates fall and having an economy that is producing low wage capitalism jobs. We have spent
so much in so many areas, all with no significant, positive impact on the middle class.
Do you think we have spent $9 trillion wisely over the last decade?

Even with all of this negativity in the political realm and the major implications it has on
our economy, there is light at the end of the tunnel. While we climb out of this giant debt bubble
and major financial changes occur, there is going to be more opportunity to gain wealth than
ever before. If you are able to keep your eyes open as things change, instead of putting your
head in the sand and hiding, you will be on the winning side of this financial storm.

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