The credit crunch continues. One in seven homeowners with a mortgage are behind on their payments. Foreclosure rates are still at historic highs and government programs to help alleviate the problem aren’t working.
There are some common sense approaches to the credit problem though, that don’t require government involvement or taxpayer dollars. Many lenders, regulators and politicians are just making the issue more complicated than it needs to be.
Lenders want to protect their investments. They have no vested interest in seeing people tossed out of their homes just for the sake of tossing them out of their homes. What if they could protect their interests and equity without an eviction?
If someone is several payments behind on their mortgage, they are likely going to lose any claim to the house. Since they had borrowed against the value of the home, they really aren’t losing anything as far as assets go. They never really owned it. The heartbreak and upheaval comes from having to pack up and move, and having to do so while one’s access to credit is non existent. What if the lender agreed to finance the arrears over a period of years while allowing the customer to rent the home at current market rates? The customer would give up any claim to the home, pay back the arrears over time and must make timely rent payments. The bank doesn’t have to go through the expense of foreclosure, maintains a revenue stream from the property and retains all its equity in the property.
What if lenders could make it easier to avoid getting behind in the first place? My very first loan was for an old VW Bug I bought when I joined the Army. My credit union had a policy of offering a “skip a payment” option each December to help customers free up some cash for Christmas. It’s not as generous as it may sound. The lender just extends the life of the loan by a month and actually ends up making more money than they would have if you didn’t skip a payment. The customer gets to have a Christmas budget without ever having “saved up”. This doesn’t have to be a Christmas thing. What if borrowers could earn a “skip a payment” option every twelve months (use it or lose it, you can’t skip two payments in any given 12 month period)? This would help mortgage holders when things get really tight. It just might give them the breathing room they need to get through a tough time. Again, the lender is just deferring the payment and getting some extra interest in the process. If it prevents a foreclosure, they come out way ahead.
Why aren’t more of these types of solutions employed? Well, because lawmakers and executives who spend too much time in meetings tend to think the worst of the “average American”. Thus, policy is developed based on the what the very worst among us might do. To be fair, HOA’s and other civillian oversight organizations display the same tendencies. The fact is, most people are good people. A bit less paranoia in the marketplace could serve us all very well.
Of course, not all bad cash flow situations can be salvaged. Sometimes you just have to take your licks. However, with a bit of creative thinking and cooperation rather than panic, lenders and borrowers can work together to serve their own interests without relying on legislation and mandates. Finding ways to minimize trauma while protecting your interests can be good for business in the short, medium and long term. How long do you think a customer will remember that you could have forced them out of their home, but chose not to?
Wednesday, July 21, 2010
Saturday, July 17, 2010
Thursday, June 3, 2010
Who decides what businesses are desirable?
There is a heated debate going on in the City of Fountain, Colorado right now over whether or not to allow medical marijuana dispensaries to operate within the city limits and under what conditions. Several groups have been informally polling and speaking with business people and the general public, to get an idea where they stand on the issue.
As a local business owner, I was asked if I thought having a medical marijuana dispensaries open nearby would help, or hurt my business. I found the question not only leading, but very disturbing. It illustrates an attitude and modis operandi that’s all too typical among people who see more and more government control as a virtuous goal.
The problem I have with the question is that it assumes that I, as a local, existing business, can work with the government to ban undesirable businesses from opening nearby. That’s a very convenient way to keep out indirect competitors. Should a local phone store like Cricket or Verizon and their neighbors have a say in whether or not an electronics store can open near them? Could shopping center owners influence what businesses can open nearby. What if you’re trying to open near a large shopping center, but not renting from that center? Do you think the landlord my have some influence over his or her tennents?
But doesn’t a neighborhood or community have the right to decide what kind of businesses should operate in their area. The do and they exercise it every day. It’s called commerce. Businesses can’t survive, never mind thrive, without customers. You cast your vote every time you make, or don’t make a purchase. A factory, nationwide Internet business or businesses where the customer base doesn’t reside nearby is a different animal, but that’s not what was being discussed here. A business that relies mainly on a local customer base must have their support, as expressed by their purchases.
Taking market forces out of the equation, by making it subject to a political vote or government policy, is the kind of “business/government/community based” approach to commerce that leads to the multi-billion dollar lobbying industry. Businesses don’t compete in the marketplace, they compete in the legislature. They don’t pour resources into research, development, cost cutting and generally adding value, they pour resources into political action committees, community focus groups, polling companies and marketing material and campaigns aimed at influencing a political outcome. As it turns out, when you get large enough in terms of cash flow, it’s more cost efficient to eliminate potential rivals through legislation than to actually compete with them.
An incredible number of medical marijuana dispensaries have opened throughout the state in recent months. I fully expect the marketplace to dispense with most of them. There are a few more expenses involved in owning and operating a commercial, retail store in a highly competitive atmosphere than there are in selling dope out of your basement. Suddenly you have rent, utilities, signage, taxes, employees and there are six other guys in a two mile radius, openly enticing your customers to buy from them. Sure was nice when you were the only guy they knew that sold pot.
But if you have the know-how and the discipline to pull it off, you have a consistent local customer base, and you’re operating a legal business, who am I to say you shouldn’t exist? The legitimate issue for government is to determine whether or not there is a direct public safety issue and if so, make that case to the public. Whether or not a local retailer has the support of the public will be determined when/if they open for business.
As a local business owner, I was asked if I thought having a medical marijuana dispensaries open nearby would help, or hurt my business. I found the question not only leading, but very disturbing. It illustrates an attitude and modis operandi that’s all too typical among people who see more and more government control as a virtuous goal.
The problem I have with the question is that it assumes that I, as a local, existing business, can work with the government to ban undesirable businesses from opening nearby. That’s a very convenient way to keep out indirect competitors. Should a local phone store like Cricket or Verizon and their neighbors have a say in whether or not an electronics store can open near them? Could shopping center owners influence what businesses can open nearby. What if you’re trying to open near a large shopping center, but not renting from that center? Do you think the landlord my have some influence over his or her tennents?
But doesn’t a neighborhood or community have the right to decide what kind of businesses should operate in their area. The do and they exercise it every day. It’s called commerce. Businesses can’t survive, never mind thrive, without customers. You cast your vote every time you make, or don’t make a purchase. A factory, nationwide Internet business or businesses where the customer base doesn’t reside nearby is a different animal, but that’s not what was being discussed here. A business that relies mainly on a local customer base must have their support, as expressed by their purchases.
Taking market forces out of the equation, by making it subject to a political vote or government policy, is the kind of “business/government/community based” approach to commerce that leads to the multi-billion dollar lobbying industry. Businesses don’t compete in the marketplace, they compete in the legislature. They don’t pour resources into research, development, cost cutting and generally adding value, they pour resources into political action committees, community focus groups, polling companies and marketing material and campaigns aimed at influencing a political outcome. As it turns out, when you get large enough in terms of cash flow, it’s more cost efficient to eliminate potential rivals through legislation than to actually compete with them.
An incredible number of medical marijuana dispensaries have opened throughout the state in recent months. I fully expect the marketplace to dispense with most of them. There are a few more expenses involved in owning and operating a commercial, retail store in a highly competitive atmosphere than there are in selling dope out of your basement. Suddenly you have rent, utilities, signage, taxes, employees and there are six other guys in a two mile radius, openly enticing your customers to buy from them. Sure was nice when you were the only guy they knew that sold pot.
But if you have the know-how and the discipline to pull it off, you have a consistent local customer base, and you’re operating a legal business, who am I to say you shouldn’t exist? The legitimate issue for government is to determine whether or not there is a direct public safety issue and if so, make that case to the public. Whether or not a local retailer has the support of the public will be determined when/if they open for business.
Tuesday, May 18, 2010
Open letter to Republican Incumbents
You may have noticed that there is a wave of angry voters out there. If you are in danger of losing your job, you may believe it's unfair; that your voting record demonstrates you are not part of the problem. I believe many of you still don't understand what all the fuss is about. Let me try to clarify.
The frustrated masses are not just Tea Party members. There are also frustrated individuals who prefer not to march under anyone's banner (myself included). We believe that this country is facing not only fiscal and economic disaster, but social disaster. Every time the government passes a new regulation, mandate, fee, or takes on some new role with respect to individuals, companies or organizations, we lose a little more individual freedom. We don't want you to take care of us. We just want to be able to interact with one another in the absence of force. We don't want you to make change painless. We want you to do the right thing.
Perhaps your voting record is immaculate. Maybe you've said and written all the right things during the course of your career. What were the results? We don't have time for another group of well intentioned politicians to do their very best and come up short...again. We're not interested in politicians that want to appease those who want less government while also appeasing those who want more government. It's not enough to be opposed to toxic policies. Stop them. When two sides advocate diametrically opposed philosophies of the role of government, you can't ride the fence. Pick a side and play to win. I don't know what you can do between now and your next election to convince the voters that you will reduce the size, scope and cost of government, but that's what we demand. As the great philosopher, Yoda, said "Do or do not. There is no try."
The Tea Party is not your enemy. Reality is.
The frustrated masses are not just Tea Party members. There are also frustrated individuals who prefer not to march under anyone's banner (myself included). We believe that this country is facing not only fiscal and economic disaster, but social disaster. Every time the government passes a new regulation, mandate, fee, or takes on some new role with respect to individuals, companies or organizations, we lose a little more individual freedom. We don't want you to take care of us. We just want to be able to interact with one another in the absence of force. We don't want you to make change painless. We want you to do the right thing.
Perhaps your voting record is immaculate. Maybe you've said and written all the right things during the course of your career. What were the results? We don't have time for another group of well intentioned politicians to do their very best and come up short...again. We're not interested in politicians that want to appease those who want less government while also appeasing those who want more government. It's not enough to be opposed to toxic policies. Stop them. When two sides advocate diametrically opposed philosophies of the role of government, you can't ride the fence. Pick a side and play to win. I don't know what you can do between now and your next election to convince the voters that you will reduce the size, scope and cost of government, but that's what we demand. As the great philosopher, Yoda, said "Do or do not. There is no try."
The Tea Party is not your enemy. Reality is.
Wednesday, May 12, 2010
Is sovereign currency about to go out of style?
Gold has been doing very well lately. As people lose confidence in global currencies, they hedge their bets by buying gold. Gold isn’t patented to any one country and so isn’t dependent on the competence of any government. The drawback is that it isn’t widely accepted as currency. That may be about to change.
in 2009, Thomas Geissler, the chief executive of TG-Gold-Super-Markt in Germany, rolled out a vending machine that dispenses small gold bars and coins. He’s since upgraded it to be able to update the price of gold every two minutes and has installed one in the prestigious Emirates Palace hotel in Abu Dhabi on a day when gold reached another all-time high.
The trouble with world currencies is that the only difference between a dollar bill and a Treasury bill is that one has an expiration date, and you get an interest premium to compensate for it. So when a government issues new debt (which they’ve all been doing a lot of lately) they are essentially creating new money. They’re adding new supply while demand is waning.
Central banks have been able to keep currencies relatively stable with respect to each other by buying and selling one another’s currency to achieve specific target ranges. They have not been able to hold their own against gold. While production does increase supply, demand is strong and growing. It may hit a tipping point if and when some major company or organization starts accepting, then demanding gold as payment.
A convenient way to acquire gold currency, such as Mr. Geissler’s “Gold to Go” machines, might just be a catalyst to creating a new global currency, which would be terrible news for existing global currencies.
in 2009, Thomas Geissler, the chief executive of TG-Gold-Super-Markt in Germany, rolled out a vending machine that dispenses small gold bars and coins. He’s since upgraded it to be able to update the price of gold every two minutes and has installed one in the prestigious Emirates Palace hotel in Abu Dhabi on a day when gold reached another all-time high.
The trouble with world currencies is that the only difference between a dollar bill and a Treasury bill is that one has an expiration date, and you get an interest premium to compensate for it. So when a government issues new debt (which they’ve all been doing a lot of lately) they are essentially creating new money. They’re adding new supply while demand is waning.
Central banks have been able to keep currencies relatively stable with respect to each other by buying and selling one another’s currency to achieve specific target ranges. They have not been able to hold their own against gold. While production does increase supply, demand is strong and growing. It may hit a tipping point if and when some major company or organization starts accepting, then demanding gold as payment.
A convenient way to acquire gold currency, such as Mr. Geissler’s “Gold to Go” machines, might just be a catalyst to creating a new global currency, which would be terrible news for existing global currencies.
Monday, May 10, 2010
Defending the Euro
I just sent this as an email FoxBusiness.com. I thought it would make a good post as well.
Wouldn't it have been better in terms of the value of the Euro as a currency if they had let Greece default (or restructure)? A country's currency is only as valuable as the world perceives it to be. A lot of that has to do with supply control.
I would be more impressed if the Euro-zone had told Greece "No, you can't have more Euro's, find another way." Even had Greece been forced to restructure its debt, that would demonstrate a failed business model, not a failed currency. In fact, the currency was too valuable to just give away.
I would think that would have increased the value of the Euro in the longer term. They haven't propped up the currency. They're trying to prop up a nanny state. I assume because they just don't want to believe it doesn't work.
Wouldn't it have been better in terms of the value of the Euro as a currency if they had let Greece default (or restructure)? A country's currency is only as valuable as the world perceives it to be. A lot of that has to do with supply control.
I would be more impressed if the Euro-zone had told Greece "No, you can't have more Euro's, find another way." Even had Greece been forced to restructure its debt, that would demonstrate a failed business model, not a failed currency. In fact, the currency was too valuable to just give away.
I would think that would have increased the value of the Euro in the longer term. They haven't propped up the currency. They're trying to prop up a nanny state. I assume because they just don't want to believe it doesn't work.
Thursday, April 29, 2010
The Cape Wind debacle
Cape Wind demonstrates that wind and solar are not the answer to our energy Jones.
The Obama administration recently approved America’s first off-shore wind farm, dubbed Cape Wind, off the coast of Cape Cod. This comes after 10 years of mandatory study, review and battling opposition groups. But opponents vow to continue to fight on grounds ranging from historic and cultural preservation to aesthetics, to safety. Similar arguments have held up solar and wind projects across the country.
It’s not just a matter of time. These delays, court battles, mandatory studies and public relations battles cost tens of millions of dollars which must be recovered somehow. If and when a project actually gets done, the cost will have to be built in to utility bills.
Wind and solar farms take up a lot of square miles. It appears there simply is not enough non-contested area on land or sea to even put a dent in our energy needs. Even individuals installing solar panels on their homes, must do battle with neighbors who want to plant or keep their trees.
The Cape Wind project would be 130 giant wind turbines, each 400 feet tall, and would hopefully provide 75% of the power requirements for Cape Cod. Now imagine what it would take to provide even 10% of the power requirements for Manhattan. Solar isn’t any more practical. If you wanted to use solar farms to supply the power needs for New York City, you’d have to cover most of upstate NY with solar panels. It’s just not going to happen.
Everyone likes the warm, fuzzy feeling they get when they talk about “clean” energy, but few want the means of production located anywhere near them. That being the case, perhaps we should stop throwing money down these black holes and look for solutions that have a snowballs chance of seeing the light of day. There are other options. Perhaps the most promising is algae to fuel. Algae farms can be located anywhere that has access to sunlight and carbon dioxide. You don’t even need clean water. Yet for some reason, approaches that are doomed to fail seem to garner all the taxpayer “investment” dollars. This is not an energy policy. It’s a bureaucrat and attorney jobs program.
The Obama administration recently approved America’s first off-shore wind farm, dubbed Cape Wind, off the coast of Cape Cod. This comes after 10 years of mandatory study, review and battling opposition groups. But opponents vow to continue to fight on grounds ranging from historic and cultural preservation to aesthetics, to safety. Similar arguments have held up solar and wind projects across the country.
It’s not just a matter of time. These delays, court battles, mandatory studies and public relations battles cost tens of millions of dollars which must be recovered somehow. If and when a project actually gets done, the cost will have to be built in to utility bills.
Wind and solar farms take up a lot of square miles. It appears there simply is not enough non-contested area on land or sea to even put a dent in our energy needs. Even individuals installing solar panels on their homes, must do battle with neighbors who want to plant or keep their trees.
The Cape Wind project would be 130 giant wind turbines, each 400 feet tall, and would hopefully provide 75% of the power requirements for Cape Cod. Now imagine what it would take to provide even 10% of the power requirements for Manhattan. Solar isn’t any more practical. If you wanted to use solar farms to supply the power needs for New York City, you’d have to cover most of upstate NY with solar panels. It’s just not going to happen.
Everyone likes the warm, fuzzy feeling they get when they talk about “clean” energy, but few want the means of production located anywhere near them. That being the case, perhaps we should stop throwing money down these black holes and look for solutions that have a snowballs chance of seeing the light of day. There are other options. Perhaps the most promising is algae to fuel. Algae farms can be located anywhere that has access to sunlight and carbon dioxide. You don’t even need clean water. Yet for some reason, approaches that are doomed to fail seem to garner all the taxpayer “investment” dollars. This is not an energy policy. It’s a bureaucrat and attorney jobs program.
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