Economic Crisis - Desperate Measures

In my last post "Lessons From A Recession", I said be careful of who you trust. In less than 24 hours I received this chain email from a credible, trustworthy person that I have known very well for over 40 years. I am not sure why he sent this to me, but I figured he thought he would give it a try...what does he have to lose? Creditability? Respect?
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Subject: PLEASE READ! IT WAS ON GOODMORNINGAMERICA TODAYSHOW , JUST DO IT!! !!

This was sent to me by my accountant... if you think this is ridiculous
I have no problem giving you his contact information...

Read carefully...
THIS TOOK TWO PAGES OF THE TUESDAY USATODAY - IT IS FOR REAL

To all of my friends, I do not usually forward messages,
But this is from my friend Pearlas Sandborn and she really is
an attorney. If she says that this will work - It will work. After all, what have
you got to lose?

SORRY EVERYBODY.. JUST HAD TO TAKE THE CHANCE!!! I'm an
attorney, And I know the law. This thing is for real. Rest assured AOL and Intel will follow through with their promises for fear of facing a multimillion-dollar class action suit similar to the one filed by PepsiCo against General Electric not too long ago.

Dear Friends:

Please do not take this for a junk letter. Bill Gates sharing his fortune. If you ignore this, you will repent later.

Microsoft and AOL are now the largest Internet companies
and in an effort to make sure that Internet Explorer remains the
most widely used program, Microsoft and AOL are running an e-mail
beta test.

When you forward this e-mail to friends, Microsoft can and will
track it (If you are a Microsoft Windows user) for a two week
time period.

For every person that you forward this e-mail to, Microsoft will pay
you $245.00 For every person that you sent it to that forwards it on,
Microsoft will pay you $243.00 and for every third person that receives
it, You will be paid $241.00. With in two weeks, Microsoft will contact
you for your address and then send you a check.

Regards. Charles S Bailey General Manager Field Operations

1-800-842-2332 Ext. 1085 or 904-1085 or RNX 292-1085

Thought this was a scam myself, But two weeks after receiving this
e-mail and forwarding it on. Microsoft contacted me for my address and
within days, I received a check for $24, 800.00. You need to respond
before the beta testing is over. If anyone can afford this, Bill gates
is the man.

It's all marketing expense to him. Please forward this to as many
people as possible. You are bound to get at least $10, 000.00.

We're not going to help them out with their e-mail beta test without
getting a little something for our time. My brother's girlfriend got in
on this a few months ago. When I went to visit him for the Baylor/UT
game, she showed me her check. It was for the sum of $4,324.44 and
was stamped 'Paid In Full'.
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Take a look at this...does the letter look familiar?

http://www.snopes.com/inboxer/nothing/microsoft-aol.asp

http://www.snopes.com/inboxer/nothing/billgate.asp

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Unfortunately, as long as there is fear and greed, this kind of stuff will never go away. Things are likely to be worse in the future. The economy has created a desperate environment that have people searching for some once in a lifetime chance to save their financial situation. This is a play on those fears. It illustrates that fear can prompt good honest people into trying desperate measures.

I know this appears innocent, but chain emails can spread viruses or some other nasty thing that will destroy your data. They can spread programs that collect personal information. And what about the next scam? What will it contain? If it sounds too good to be true, it is. Don't let desperation cloud your judgment. Panic, fear, and greed can break the best of us. Learn to be disciplined and never stop learning. And by all means, be careful who you trust.

Lessons From A Recession

As we come to a close on what has been a treacherous and punishing economic cycle, it is important that we all learn something from this economic cycle.

A recession is a cleansing process, and a painful one. But from the ugly, opportunities to prosper will be abundant again.

But first, in order to prosper, we must take a few lessons forward with us to prevent a repeat of history. The lessons are the same for business and individual success.

Lesson number one - Keep your balance sheet clean. Have little to no debt and keep an ample amount of cash for emergencies. Cash gives you the flexibility to ride things out and invest timely when things start to recover.

Lesson number two - Keep your credit clean. Part of this can be accomplished by having enough cash to ride out the economic downturns, but the other part is discipline (don't be too greedy). Keep debt manageable and borrow conservatively. Debt is burdensome and will strangle a company or individual quickly. Planning for debt repayment should be a plan based on worse case scenario. The 2008 global recession is a worse case scenario. Always plan for the worse.

When greed takes center stage it reminds us all to be careful who you listen to. From the Madoff debacle to the demise of companies like Lehman Brothers, trust is at a premium. So what is the third valuable lesson? Do your homework. Gain as much knowledge as possible and don't get into things you don't understand. Concentrate on what you know best. Blind faith is a bad strategy.

Finally, things can always be worse. Be prepared for the worst. Strive to be in the best financial position possible at all times. When times get good, take calculated risks, but realize the economy can change for the worst in hurry. An "all in" attitude is a gamble and often a move of desperation or greed. Avoid the urge to get greedy.

Here's hoping that you see the recent events as a learning experience and an opportunity to recover. Best of luck.

BIG OIL...the root of all evil, right?

Well we have to blame someone for the high price of oil, don't we? Let's crack down on those oil speculators and oil companies for driving up the price of oil and all will be right with the world again, right? WRONG!

The price of oil or any other commodity is driven by supply and demand. Yes, speculators may drive up the price, but the higher prices will only hold if demand equals or exceeds the supply. If not, the speculators who got in late will run for cover and sell their positions driving the price down. Eventually the price will settle at the appropriate market level. This is basic economics, yet I hear people whine that the government should get involved to crack down on speculators. Even Obama is touting this in his ads to bring the price of oil down. Yeah, that's what we need, government involved in controlling those that invest in oil and those big oil companies like they are the root of all evil. The people who vote on these principals are absolutely clueless. If you trade or sell anything, aren't you trying to get the best price? Maybe the government should crack down on you for driving prices up on whatever you are selling because I want your product for a cheaper price! See how ridiculous this is?

Those people that speculate take on a great amount of financial risk. For example, attempting to ride piggyback on anything that is rising or falling in price at a dramatic rate to make money is a dangerous path if you don't know what you are doing. It is high stakes gambling. But, if they are willing to accept these huge risks they also deserve to reap the potential huge rewards. In the end prices will always settle at an equilibrium. The extreme prices are only temporary. Speculators are needed in the market (especially in the commodity markets) and trying to eliminate this group of investors will cause many undesirable issues. The high price of oil will be the least of our problems.

If you are really serious about lower oil prices or lower prices for anything, then reduce your demand for that product. There are always alternatives. Having the government controlling a free market and the price of anything is a recipe for disaster.

The US Economy - March 10, 2008

You have to love the political rhetoric of the promises to fix the economy. The economy, like all things in life, is a cyclical process. The ebbs and flows are similar to the change of seasons. While policies and events help shape the direction, it is businesses and the consumer that ultimately moves the needle. Humans are greedy by nature and a recession is merely a cleansing of that greed. Government and the Federal Reserve react to put more money in the economy and eventually the pendulum will swing again.

In May, Americans will receive tax rebate checks to help stimulate the economy. And it will do just that. But, this is not a fix to the current conditions. It will provide a temporary spark but it won't be sustainable unless Americans find more discretionary income in their pockets to spend. And it needs to be noted that if the government knows this is a way to stimulate the economy, why are corporations and consumers taxed to death? Higher taxes will always lead to a depressed economy (eventually) because consumers and businesses drive economic growth and nothing is more powerful than the discretionary dollar that can be spent.

To key weapons to control the US economy are taxes and interest rates. Lower one or both and the economy will prosper. Raise both and the economy will suffer. It really is that simple and complex. It is complex because inflation works in the opposite direction most of the time.

So if Americans want to influence the economy, they will need to understand what impacts it first. Take universal health care for example. Where will the money come from to pay for this? Higher taxes? If so, this means less jobs and tougher economic conditions. We all need to ask these questions before voting for "change".

Time will heal the wounds of the current economic cycle like it has done in the past. Understand what impacts the economy and why and you will make more informed and prosperous decisions in the future.

NFL Network Wins

Obviously this didn't turn out to be a week 2 exhibition game and now both teams face off in the Super Bowl. The NFL Network got some much needed exposure and fans were treated to a great game. Now, fans will have to decide if it is worth switching providers.