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Wednesday, October 22, 2008

EDITORIAL: Why I Am Not Voting For Barack Obama

I am a rare and endangered species in America - I am Black, and I am not voting for Obama.

The racial undertones of this 2008 Presidential Election cannot be ignored…well, not by persons like myself. Although most Americans have done everything they can to stay away from the racial issues, the fact of the matter is that most Black people in America are voting for Obama simply because he is Black. As long as he doesn’t admit to worshipping the devil or being a serial killer, they will support his candidacy as the fulfillment of the dream that fostered the Civil Rights Movement and every struggle for justice that Black Americans have endured in this country. I get it; really, I do. I would hope that non-Black Americans are at least able to sympathize with that position, considering the circumstances. Such a unilateral and uncontested, even blind support of a candidate is charged almost purely by emotion, but in this case it is at least emotionally justifiable.

Nevertheless, I wouldn’t vote for Barack Obama if you paid me to, which ironically enough, is exactly what he is doing.

Barack Obama’s economic policies often offend me. He has re-branded all out socialism as “Change” and “Hope”, or as MadTV so eloquently put it, “Chope”.



Among Obama's flawed economic policies are a “Windfall Profits Tax”, a “tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate”, an indexed minimum wage increase that automatically rises with inflation, and a federal ban on the permanent replacement of striking workers. If you have a one-sided view of the economy, this sounds great; more money in your inelastic pocket. However, these kinds of anti-capitalist policies would actually contribute to the destruction of the balance that makes our economy strong in the best of times because it unfairly assures the underdog that he will never experience the worst of times. America cannot be the “Land of Opportunity” if those who take advantage of the opportunities are penalized as a result. Minimum-wage jobs are not designed to support families of 3 or more; that‘s what professional degrees, skilled trades, and even second jobs are for. Strikes are risky, and an employer has every right to fire employees who don’t show up for work, whether it makes him a cold-hearted miser or not. Unfair redistribution of wealth is socialism, pure and simple.

If you want to be a socialist, move to China.

On the other hand, while McCain is not as conservative as I would like, his economic policies are far more fair and balanced. For example, McCain's remedy for victims of the sub-prime mortgage lending bubble is to adjust their loans to reflect the current value of their homes as opposed to the former, inflated value. They still have to pay the debt they signed up for, but there is a compassionate act of good will on behalf of the government that demanded the banks begin lending to the sub-prime market in the first place. Instead of penalizing Americans who make over $250,000 a year (which is not rich, by the way), he wants to reduce prices on gas and food, which is fair to everyone. McCain also lists a number of economists who approve his economic plan on his website, which lends to it’s greater realistic soundness compared to Obama’s plan.

I enjoy my freedom too much to have my vote bought by someone who would rather see me live as a poor, minimum-wage earning worker for the rest of my life than help empower me to become a business owner who can afford to hire employees and make profits without being unfairly taxed. I can’t sell out to someone like that.

I don’t care if he’s Black or not.

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Thursday, October 16, 2008

EDITORIAL: Just Because College Is Expensive, It Doesn’t Mean That You Shouldn’t Have To Pay For It.

Editorial
Editorial
As I was listening to The Rush Limbaugh Show yesterday, I heard a sound byte of Senator Obama and a young college student who was a little disgruntled about the cost of her education. Obama agreed that what she was experiencing wasn’t fair, and of course, went on to give his typical encouragement blurb about change, hope, or what have you. Limbaugh came back to rant about how Obama doesn’t think that people should have to pay for higher education because he is a socialist. Thoughts of my own mountain of student loan debt soon drowned out the radio, and I found myself sincerely contemplating the issue.

Was Obama right? How much should I have to pay for higher education?

Just to be sure Rush’s argument wasn’t unfairly slanted, I checked Obama’s position on his website, www.barackobama.com. His official stance on higher education costs read as follows:

...Obama and Biden will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students. Recipients of the credit will be required to conduct 100 hours of community service...

Low to middle income families would surely welcome such policies, and for good reason. According to the U.S. Census bureau, the cost of postsecondary education has more than doubled since 1990. Faced with today’s gloomy economic climate and grim future, parents and students are crying for relief. Obama promises to educate high school graduates for 1/3 of the cost of tuition.

But is that his job?

While the tax credit sounds great to those who qualify for it, it should worry Americans who do not, because they will be the ones paying the bill. With Obama appeasing the American middle class by promising to increase the tax burdens only on Americans making more than $250,000 a year, this wealth redistribution system essentially boils down to the “rich” and the government taking care of the “poor”.

Is that really fair?

Others argue that the cost of a student’s college education should only be negotiated by two parties - the college and the student. This could be viewed as a free-market approach to education. While some insist that private institutions not backed by the government only serve the rich, the opposite is true. Harvard University has plans to increase student aid this year in a grand effort to subsidize tuition so that more deserving students can afford to attend. This is a good example of a private institution compromising with students to accommodate the changing economic climate.

Whether you like Obama’s plan or not, the truth is that the U.S. government already offers generous student loan programs that empower millions of Americans to pursue higher education while contributing to the American economy. While we hate to pay back the student loans that seem to multiply exponentially as soon as you sign on the dotted line, we enjoy the professional positions that we are able to pursue as a result of our advanced education. Furthermore, the interest goes to help fund the government that provided the initial loan. This allows students to pay their own way through college without having to offer collateral or pay out-of-pocket. Is that not more than fair?

Just because college is expensive, it doesn’t mean that you shouldn’t have to pay for it.

My parents knew that they would not be able to afford to pay all of our college tuition, so they told us to study hard and apply for as many scholarships as we could. They took out loans to cover some of the difference, and so did we. That’s life. Otherwise, we would have either had to put off going to college until we could acquire the necessary savings and credit or pursue other options. This approach to funding higher education wasn’t pleasant, but it was most certainly fair. It’s fair because the return on the investment has the potential to be exponentially higher than the investment itself. If I owe $100,000 in student loans but I make $150,000 per year, the investment pays off substantially. Unfortunately, since great jobs are not guaranteed, college education is a risky investment. That doesn’t mean, however, that if you come up short that it wasn’t fair because the cost of the education was too high. You might then be able to requisition the government to bail you out because you lost money pursuing gain that did not pan out for you.

Wow; that sounds eerily familiar…

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Tuesday, October 14, 2008

Is 5.00% APY On A 3-Year CD A Good Deal Right Now?

stock market crashWith all the chaos in the American banking system going on right now, consumers across the country are looking to for the safest place to store and grow their hard-earned dollars. The stock market crashed last week, with double-digit declines for each of the 3 major indexes. Though American equities regained some ground today, we are still dealing with a serious bear market. From the Prime Rate website:

"...Since closing with record highs on October 9, 2007, the DJIA has now lost 5,713.34 points (40.336%), while the S&P 500 Index has declined by 665.93 points (42.547%). The record high for the DJIA is 14,164.53; for the S&P 500 Index it's 1,565.15..."
Most of us don't trade individual stocks on a regular basis, but most of us are linked to stocks by our retirement savings, like 401(k) and 403(b) plans. The waning stock market is especially bad news for those near retirement, as most portfolios have lost a lot of value this year.

I Am Grateful for The Conservative Ways of Credit Unions

Back in 2003, when the Federal Reserve dropped the fed funds target rate to 1.00%, which in turn caused the U.S. Prime Rate to drop to 4.00%, I was very interested in a credit card on offer from my credit union. The APR was 6.99% fixed, and the typical credit line for this particular Visa® card was $5,000. I wanted this card bad, not just because of the interest rate, but also because it was from my credit union, and I knew that the term and conditions associated with this card would be more consumer-friendly than any card on offer from any traditional bank.

When I applied for the card, my application was met with fierce resistance. My credit score wasn't that bad, but I was, and still am, self-employed, so my credit profile must have caused one or more red flags go up. The loan offcredit cardicer who reviewed my application asked for 2 years of tax returns and proof that I was making the money that I claimed I was making on the application. I submitted all the documentation they wanted (took about a week to fax it all), but, in the end, my application was rejected. I did not received a canned "dear john" letter from the credit union. The loan officer called me at my home and explained that the credit union could not approve my credit card application because I did not have enough collateral with them, i.e. I did not have enough cash on deposit. I was told that I could reapply at any time. That rejection was painful, but I understood: the best credit cards on offer from the best financial institutions will only go to consumers who are very secure financially. If I had around $5k in my saving or checking account, I probably would have been approved.

Play it very safe; lend conservatively; don't lend unless the member has been thoroughly vetted. It's because my credit union stuck by these principles that it has managed to avoid the financial ravages caused by the excesses of Wall Street investment banks and the debt associated with lending hundreds of thousands of dollars to first and second homeowners who couldn't afford the monthly payments. Wall Street banks like Citigroup® chased the 11%-13% returns promised by super risky mortgage-backed securities, and, when the subprime fiasco was unfolding last year, ended up paying 11% on a loan from the sovereign wealth fund owned by oil-rich Abu Dhabi. Bottom line: Citi® was relegated to subprime borrower status because they got sloppy and too greedy. They were, in essence, issued an 11% APR subprime credit card by a foreign government that makes unbelievable sums of money for doing next to nothing. How's that for irony?

Is 5.00% APY On A 3-Year CD A Good Deal Right Now?

Right now, financial institutions are really into Certificates of Deposit (CD's),credit union CD rates as evidenced by the high yields being offered these days. A week ago, my credit union was offering -- and they were pushing this offer very hard -- a generous 5.00% APY on a 3-year CD (CD's are called Share Certificates at credit unions), which may seem kinda' weird, because, as you can see in the screen capture image I've posted to the right, the rates on offer for 42 and 60 months are lower. Should be: the longer you let them hold your money, the better the interest rate you get, right?

The target rate at which most healthy American banks and credit unions can borrow overnight funds from each other via the Federal Reserve -- the target fed funds rate -- was lowered to 1.50% last Wednesday, and is expected to be lowered again at the October 29 FOMC meeting. With all the turmoil in the credit markets, the Fed has allowed financial institutions to borrow vast sums at very low interest rates and for terms much longer than overnight[1][2][3]. But the prospect of locking in a rate of 5% for 3 years is very tempting for my credit union, because they know how rates are going to look about a year from now.

With all the money the Fed is dumping into the American and international banking systems, the price we'll all have to pay for the Fed delivering truckloads of cheap cash at the doorsteps of our bankssavings and nest egg is inflation. A lot of money is being dumped in an effort to loosen up frozen credit markets, and this will inevitably translate to high inflation down the road. The Fed will respond to runaway inflation by raising interest rates, no matter how anemic the economy is. Since all that money that'll be sloshing around in the economy is likely to cause inflation to accelerate at a fast clip, the fed funds target rate (FFTR) will likely be raised to a relatively high level. The median FFTR from 1990 to now is 4.5%; the average is 4.367%. Don't be surprised if the FFTR is 6.0% or higher 12 months from now.

So if my credit union can lock in 5% for 3 years, and the FFTR will go to 6.0% or higher within 12 months or so, then you can see that my credit union will have gained the advantage by the time the CD matures.

So, is investing in a 3-year CD @ 5.00% APY a good idea right now? Absolutely! But, if you can, go for a 12-month CD for now, or reserve as much cash as possible for next year. When the Fed ends the next cycle of raising the FFTR, I'm betting that you will be able to get even better returns with 3-5 Year CD's, so much better that I'm confident it'll be worth the wait.

Yes, I am grateful for my credit union. My Roth IRA has continued to grow despite all the nonsense going on in the banking system. And I'm confident that I have nothing to worry about.

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Saturday, October 11, 2008

A Gruesome Suicide Next Door

picture of apartment after fiery suicideI got home late last night, having spent the evening hanging out with friends. When I drove through the security gate of my apartment complex, I noticed some police activity at a building that's a good distance away from my building. I parked my car near my place, stepped into the house for a few minutes to rehydrate, then walked about a quarter mile to where I spotted the police cars. The police had just left, but Larry, a security guard I know, was still hanging around the building. I asked him what happened. At first, he didn't want to tell me because he was told by the cops to keep quiet about the details. But I was able to get him to talk with a little prodding and a bribe in the form of a can of Cherry Coke I had in the car.

Turns out there was a fire in a downstairs apartment. The blaze produced so much smoke that the building had to be evacuated. Larry told me that the fire started in the bathroom and spread throughout the apartment. A middle-aged woman had committed suicide. Apparently, she poured gasoline into the bathtub, jumped in then sparked up a cigarette lighter. Larry let me into the crime scene for a minute so that I could satisfy my curiosity. The electricity was out in the bathroom so I couldn't turn on any lights in there. I couldn't see anything in the bathroom, but I was able to see that the rest of the apartment was a complete mess. Larry told me that if I went into the bathroom with a flashlight, I would have been able to see burnt flesh everywhere.

So, obviously, my next question was why. I was almost certain that it had something to do with the stock market (it crashed last week) but I was wrong. Larry informed me that the suicide note made no mention of finances at all. The victim was distraught because her partner had recently ended their romantic relationship.

What a strange way to end one's life. Surely some pills or a handgun would have been far less painful. Why gasoline?

I don't believe in suicide, but I do believe that euthanasia is acceptable in some very extreme circumstances, like if an individual is in constant and overwhelming pain, and there is no other way to end the suffering. To force someone to life a full life in terrible pain is cruel and should not be permitted in any civilized nation.

Suicide because you were jilted by your partner? I can't go for that. Suicide because you lost all your money in the stock market? Give me a break. Suicide because some debt collectors won't stop calling? Please!

But it happens:



Know your rights! Debt collectors who call and harass consumers are breaking the law, and they know it. If you are being harassed, visit Nolo.com and download a Demand Collection Agency Cease Contact form. Cost is $4.99. Or use one of the many form letters available for free on the Internet.

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