This American Lifestyle: Why Are We in This Mess

Why are You in Debt?

Peter Schiff comes on to CNBC and they all have a good laugh at him. Of course Peter Schiff has a 1 minute 30 second spot to deliver his message of doom and gloom, competing with the idiot host who wants to give you the “THE RECESSION IS OVER, THE RECESSION IS OVER,” mantra they always spew.

Let me explain why we are in this situation, since I [and you] have all the time in the world.

Preparing You for a Life of Debt

Let’s start with you and I’ll get to your parents in a second and tie it all in. Your first taste of true economic freedom is clamped down and you’re straddled with debt immediately. How? College! You take out massive loans, not secured by anything other than your I.O.U. You are then strapped with this debt fresh out of college. You must secure a job immediately to start paying it back.

But, wait! These college loans afford you a lifestyle change unlike, what you would have had, had you paid for college yourself. I’m not talking rich people. I’m talking average middle-class America, paying for college with their own money. “Well, no one would go to college,” you might say. Not true, and this is where Peter Schiff, Ron Paul and the Austrian Economic School of thought come into play. If everyone in America stopped taking college loans, or begging for government grants, college tuition would plummet and we all could afford it. Colleges would have to compete with each other, to offer an affordable price to gain student dollars. Colleges right now are not run like businesses, the are run like governments, wasteful. Colleges rely on the fact that the government is going to continually bailout the students. They no more reign in spending than the city or state or federal government does. If they have waste, they just raise tuition to pay for it. What do they care?

Conditioning You for Debt

The point is, you are now conditioned to accept massive debt, to afford you a certain lifestyle. This is where your parents come in. Instead of them saving, I’m talking on a massive scale, and paying for college out of their pocket, they do stuff like take out home equity loans. It has become to common place,that banks now advertise for it. “Take out a home equity loan for your kid’s college tuition.” 80 years ago, that would have been unthinkable. People would have called you mad. So, immediately, your parents first financial lesson to you is, go in debt to afford you a certain lifestyle. Nice lesson dad.

This lesson is repeated over and over. People were relying on the equity in their home, with the notion that housing prices would continually climb, so they could borrow on it. Now, Barrack Obama and Ben Bernanke, is trying to continue this farce by propping up housing prices. They are fighting the recession with every ounce of strength they have. And, believe me, they have an entire treasury to do it. They have the sheep, that is the American public to give away their money, and no one asks a question.

“More than three-quarters (77 percent) of Americans with pre-college age kids, however, have saved less than $20,000 for their children’s college expenses; 62 percent have saved less than $10,000, and 43 percent have saved less than $5,000. Twelve percent have saved nothing at all.”

Your house is not worth $125,000.00. I’m sorry to be the one to tell you this. Go back and see what your house would be worth in 1970, and maybe then you’ll have an accurate picture.

What people are failing to understand is, housing prices are predicated upon the scarcity of housing. Unfortunately, there was a housing boom in construction. There is an over abundance of housing. So your house is worth far less now, than when you first bought it. There are parts of the country with entire huge condo buildings sitting empty. I don’t have the numbers, but I guarantee there are at least 10% of empty real estate in every city. That means your housing price, should be lowered.

So this notion of borrow on equity… You have no equity. You have nothing. You were being propped up by the government the entire time. Why do you think you can deduct the depreciation of the value of your house annually? The government knew the real story.

So we have a failing economy, lowered housing prices, what’s next? Unsecured debt! Besides all the lending done on real estate, people still took up debt that was unsecured, like college. The lenders knowingly were doing this, but we were still borrowing. No one forced us to sign on the dotted line.

We just had the FBI raid TBW based on fraud. Stories like that should show you. I guarantee the FBI could probably raid every bank in the land for nefarious lending practices.

No one wants to swallow the pill. I bet you’re sitting here muttering, “I don’t want to lose my equity”, “I don’t want the value of my house to go down.” Or, you might be a banker saying, “I don’t want my clients defaulting on their loans.” So everyone is hoping Obama will bail them out, prop up this farce of an economy and keep it, business as usual.

No One Wants to Swallow the Bitter Medicine

This is what Peter Schiff, Ron Paul, and the Austrian Economic School of thought is talking about. Everyone is sitting quivering in their living room, hoping they won’t have to be the ones to pay for all this excess. And, when I say excess, I mean all the loans.

Imagine for an instance, that you had no debt, at all. Imagine the only expenses you had were your power bill. *GASP* I bet for some of you, that is nearly impossible to imagine. This is what the recession needs to cure. This is where this recession needs to go. Not, bailing everyone out. Not, propping up housing prices.

If we could go back in time, I would be for Obama saying,

“Today I’m wiping out all the toxic real estate assets. I am wiping out all current housing loans. I am declaring a banking holiday.”

Housing prices would have plummeted, but no one would care, would they? If your house was paid for, but only worth $10,000 would you care? However, no toxic assets were removed from the system, not a single one. And, you are still in debt.

Shakaama Has a New Blog: Shakaama Live

Shakaama Live

I finally take time to address you the reader personally and thank you.

Hey everyone.  I’d like to first say thank you all for reading my blog.  I check my stats constantly to see who’s reading.  While I do have lots of readers, I don’t seem to get a lot of genuine comments.  I say genuine, because I receive a lot of spam.  In fact 99.999% of all comments I receive are spam.  I even receive hand written spam comments.  Now, I don’t understand what’s the point of trying to post spam comments.  Do you see any spam comments on my blog?  No! Why?  Because I delete them all before they are even posted.  I welcome each and everyone to comment.  Even if you disagree with me.  I love a good conversation as well as a heated debate.  I think I even let someone comment that called me racist.  Which is sort of strange, seeing as nearly all of my idols, if he took the time to read my blog, are nearly all white: Peter Schiff, Ron Paul, Bob Barr, Ludwig Mises, Jim Rogers, etc…

Anywho…

I’d like to announce my new blog @ Shakaama Live .  I’ve made this step to allow me the opportunities, wordpress doesn’t allow, afford, think of.  On that blog you can find all sorts of great posts like: self improvement; financial opinion; stock market opinion; public policy opinion.

I also have a blog on my website Las Vegas DUI Lawyer and the blog is the latest and greatest DUI Blog.  That blog isn’t quite up and running but, always keep a look out.

But, back to shakaama live, I just wanted to personally invite you to come read my blogs there and also invite your comments on there.  The comments are, of course, based on approval, so nothing crazy will ever get through, nor will spam.

We have had one hell of two weeks here with all the famous deaths: Michael Jackson – a personal favorite of mine; Farah Fawcett – who didn’t age so well; Ed McMahon – ahhh when America could be real adults and watch Johnny Carson [who i also was sad when he passed].  I don’t know if I’m a storm crow, coming in after such sad news with my glad news.  Or, maybe I’m a morning glory, bringing cheerful tidings after the storm.  I have high hopes for all my blogs and websites.

Oh I almost forgot.  If you really want to get in shape, gain muscle lose fat, hop over to my website Gain Muscle Lose Fat.  It’s for both people who want to finally lose fat and stay completely fit and for those that want to gain muscle and get the body they have dreamed of.  I tell myself, if I ever got the body of my dreams, I would immediately move to hollywood and be an action actor.  So I’m following it too.  It’s all good stuff.  I concentrate on both outter body and inner body: healthy heart; healthy organs; cholesterol; excellent diet for life.

I’d be glad if you checked out all my projects really.  But, I never address you, my readers, directly, so I thought I’d do it for a change, give a personal touch and let you know i’m human.  I pray for each and every U.S. born, tax paying, citizen of America.  We have it hard and I think we’re being swindled.  I hope everyone can hear my voice so we all can be uplifted together.

Peace.

Kevin Cardinale of Boundless Enterprise

Please Visit My Website: Las Vegas DUI Lawyer

Watch Me on Youtube: Shakaama Live

Shakaama On Obama: The First 90 Days

Obamessiah ... this is getting out of hand.
Obamessiah ... this is getting out of hand.

I’m not defending Obama today.  However, I’m not so naive that I can’t see what is going on.  Today I will review the first 90 days.

It amazes me that people are so shocked that Obama gets into office and all of a sudden it’s politics as usual.  I am neither saddened by his actions so far, nor am i angered by his policies so far.

I have a political science degree.  So I am very aware of everything that is going on.  And, lets discuss this.

The bailouts

Everyone is so upset by the bailouts.  But, for every 2 people upset about the bailouts there is 1 person that is thankful for them.  You have to understand that the millions of Americans that are talking about “let them fail” do not think about the 30,000, 100,000 or million of employees of these companies that would be out of work.  So when these giant companies come to Washington, this is what Obama is looking at.  It is very easy to sit back and armchair quarterback this mess, but it’s a totally different story when a union 2 million strong comes through the door with the company president and they both beg for help.  It would take a nearly omniscient being to wade through this, and not have millions of people hurt.

He is the one
He is the one

Is that bad to think about those people?  No.  However, I’m pointing out the difficulties involved in this.  We give away millions upon millions of dollars every year to foreign countries.  JUST GIVE IT AWAY! as “aide”.  People complain about that under their breath, but no one speaks up.  All the American lobbyist who go to Washington for those countries, waddle right up to capitol hill for their clients.  Now the shoe is on the other foot.  However, no one is speaking for the people directly.
What are my hopes?

I would hope that Obama would be so charismatic that He didn’t have to be beholden to all these screaming memes around him.  Can you imagine if he had given 10 trillion dollars directly to us?  That would have boosted the economy.  Inflation would have skyrocketed overnight, but at least it would save our economy.  As it stands now, we don’t see the benefit and we still get the inflation.  Sadly.

President Obama Signs bill Alone
President Obama Signs bill Alone

Is Obama doing a good or bad job?  He’s the president.  He’s the wizard behind the curtain.  What can he do?
Ok understand this is politics. It’s not as simple as black and white.

He has to answer to people
He has to gain / call / demand political favors
He has moochers
He has blackmailers [no pun intended]

all of these factors go into every single word he speaks, and every single agreement / document he signs.

Talk about a walking target. This guy, unlike GHW and GW, is a newcomer and has to climb the ladder before throwing his weight.

Note i’m not defending Obama or anyone. Just want everyone to realize this is politics.  Yes we Americans want something, but capitol hill is a rat race unlike any other on the planet.   It’s sad, but true. Listen to Peter Schiff and rely on yourselves.  I’m proud of Obama as a black man. I’m sad about and for Obama as a Political scientist. But as a political scientist I understand the wizard behind the curtain.

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What Planet is Warren Buffet On?

The Oracle of Omana Warren Buffet
The Oracle of Omana Warren Buffet

Recently Warren Buffet has been appearing on the national scene, moreso than before.  He is now the darling of both the press and Washington.

He figured prominently during the bailout talks when he invested $5 billion in Goldman Sachs.  There was a proverbial gasp heard

The Warren Buffet Way
The Warren Buffet Way Click Here

round the investing nation at the time because everyone knew the financials were in trouble, in general, banking in specific.  But, let’s look at his deal.  At the time the stock seemed like a steal.  In fact, many thought he was taking advantage of the venerable bank.  For Berkshire Hathaway, it bought a US$5 billion equity stake in the dominant player  of the industry, and for its money receives a guaranteed dividend of 10 per cent a year on its perpetual preferred shares.  On top of that Goldman’s gave Berkshire 5 year warrants which give Berkshire the right to buy 43.5 million common shares of Goldman Sachs at a strike price of US$115 at any time before 2013.  However, banking stocks tanked, the crisis deepened, Goldman shares hit a low of US$47.41 on November 21st. After writing an op-ed piece for the New York Times on why he buys America, Mr. Buffet came in for criticism.

However, we are talking about Warren Buffet.  I’m often reminded of the movie “Wall Street” when i think of him.  Anything he purchases will sooner or later gather stragglers, who mistrust their own investment skills.  Goldman shares have doubled since November, closing at $111.93 last Monday.

“The Investment bank has had to change its business model, and reduce the amount of leverage it carries on its balance sheet, but some business areas are positively on fire with flow or client driven trading benefiting from wide spreads being charged and really bringing in the moolah.” [what a shocker, that actually works]

Benjamin Graham Click Here
Benjamin Graham Click Here

For every silver lining however there is a cloud.  The GE deal Berkshire got, with those same warrants, don’t look so delicious.  The warrants were for an aggregate cost of $3 billion @ $22.25 per share.  Ge closed at $10.43.  Yeah, not so much.

Warren Buffet Click Here
Warren Buffet Click Here

Which brings me to the next point.  Disciples of the value strategy, like Berkshire Hathaway’s Warren Buffett, focus on the long-term intrinsic value of a company, hoping to buy shares in good companies at reasonable prices.  For financial stocks—some of which haven’t or won’t survive the crisis—it’s nearly impossible to identify the long-term value, whether through profits, cash flow, or other measures.

But what are companies worth these days?  What is the value of a company that accepts TARP money?  Hard isn’t the proper word for what investors are up against when trying to figure this out, impossible is more like it.  And these atrocious bailouts and stimulus packages flowing out of Washington and the Federal Reserve [secretly, psssst hey AIG, come here in the alley i got some more money for ya] are only hurting the situation.  In the mean time Buffet is seen publicly on T.V. talking about he praises Obama for his efforts and he’s optimistic for the long term.  Was that on a Hallmark card Warren?  “Get Well Soon America” from your buddy Warren.

Bull Moves by Peter Schiff Click Here
Bull Moves by Peter Schiff Click Here

He’s lost it.  In fact if you go back and look at Berkshire Hathaway’s performance versus the dow over the past 20 years, it has underperformed. GASP!!! Not the sage of Omaha!!!  Oh brother.  Yes he’s lost it.  Hell, he got lucky in the first place.  He never “had” it.  A study was done once, some university economists [this is no joke, this is serious research here] wallpapered their class with the Wall Street Journal [yay free plug WSJ] blind folded several students, gave them darts and had them throw them.  They picked the stocks they landed on and invested.  [don’t try this at home kids, these guys have PhDs]  Every single student’s stocks out performed the DOW.  GASP!!! [and i would have gotten away with it if it weren’t for you meddling kids]  Apparently they did this study for years.  They concluded that the big performer investors are simply lucky and actually have no “magical skills” to predict good stocks.  [ha what do those snotty nosed professors of economics know]

So Warren [we’re on a first name basis] says he’s optimistic for the economy and Obama’s the bee’s knees.  Wellllllllll Peter Schiff, Ron Paul, Lou

Crash Proof by Peter Schiff Click Here
Crash Proof by Peter Schiff Click Here

Rockwell, Judge Napolitano, Glen Beck [I had to mention him so people who Google his name read this blog teehee], all say the exact opposite.  And, I agree with them [but who listens to me *sigh* I need a hug].  Can vultures pick up the pieces Warren Buffet leaves behind?  Sure, mull over the carcasses of the straggler investors who follow him blindly.  But, be wary and trust your own learning.  Read Adam Smith.  Be an “Austrian” school of economics disciple.  These Keynesian economist are the darlings of Washington right now, since they chant spend, spend, spend.

Jim Rogers
Jim Rogers

For the rest of us, invest in gold.  Buy dividend paying stocks OVERSEAS.  Stay away from cash and the dollar.  When this hyper-inflation hits, [oooooh boy don’t you dare argue with me there] and it will hit, all of your cash is going to go up in smoke.

How many billionaires…. were removed off the Forbes Billionaire list.

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Watch Me on Youtube: Shakaama Live