Don’t Worry, Be Happy; Better: Worry, Work and Study, Be Happy

Timothy Geithner: "Well, I think ..."

Timothy Geithner made me money.  He was on the Charlie Rose show in March of 2009 and mentioned that he thought the government was going to support in some way the Auto Industry.  The market in March 2009 was hovering around 6500.  I thought that night that ‘this is it’, the bottom.  I guessed right.  But it was a guess.

So I bought Ford, GE, GM, GSX (this only 25 shares), and Citi.  A month ago Ford was up 5 times, GE up 2 times, GM gone bust, Citi basically no change (and I expect it to go back to its old yahoo days but they will need new management).  So I sold Ford, GSX and bought Sirius.  Then I bought more Citi and a few days later Ford dropped $2 and I bought it back.  I realize now that I was trading, not investing.  Gambling, not investing. 

I’m still up a fair amount, but very unsure.  This is the first time I’ve invested (really gambling) in stocks.  For the last twenty years all my money went into Kaffe Magnum Opus, and it is the only investment that has positive returns over the twenty year period.  Steady growth, profits after many years of management support and re-investment, and good prospects, although there are challenges in the coffee industry.

So what to do?  I’m reading Ben Stein, yes, that Ben Stein,  “Bulletproof Investing” and it is pretty good, pushing broad investments, not picking stocks, and diversity.  He believes that you will be well off is you get an 5 to 8% annual growth, basically a doubling over 8 to 10 years.  That would be really good for twenty years.  Invest $1 today and in 2030 you have $4 (1 becomes 2 in 10 years, and 2 then becomes 4 in the second 10 year period).  There is a lot more to his strategy, and it is appealing.  The only question: Will I live for 20 years?  I’d be 85.  Maybe. 

So what about real estate?  Commodities (I’m in the commodity business, roasting and selling coffee)?  IPO’s?  I don’t know.  And this is my dilemma.  And then there is Ricky.  Ricky worked with me for a few years while in High School.  After getting a degree in Engineering he now works as a trainer at Best Buy.  He is quite successful and I am happy for his success.  So what does this have to do with making money.  Yesterday he comes to my home to install a bit of electronics and he tells me he realizes that if he is to become a millionaire he must: Pick the Right Stocks and with luck, get rich; pick the right commodities (his friend has farm connections and made some big money); or own a business.  Ricky is about 23 or so.  Wise beyond his years.  Stocks and commodities are pure bets.  But owning your own business is a pretty sure bet if you work really hard, study, and look ahead.  Look around the corner you are approaching.  So …

What to do?  Sell the stocks.  Invest in my business.  It is my livelihood, and I influence directly the actions it takes.  Who knows what it will be worth when I’m 85.  It doesn’t matter too much because it makes me happy.  I worry, sure.  But it makes me happy.

I am a nail biter.  I worry, and even when I worry, I’m happy.  Sometimes a bit jumpy and sometimes a bit biting.  Overall, I’m happy.

If you don’t own a business, I’d suggest you start one.  Or be lucky.  Maybe you can pick the next Microsoft or Google, or for that matter, GM.  GM fifty years ago (1960) was a solid buy.  And my Uncle Mike Buckley made over a million in GM Stock before he died and left it all to charity.  In a funny way he was lucky he died before the management of GM became incompetent.  And let us remember the truth about long-term investing.  GM had a great run for many years, but in the long run?  GM went bust and is now worth nothing.  So much for the long run investor.  I wonder if this is a mortal sin?  Hey Ben, will I go to Hell in a Handbag?

Bob

AIG Bonuses

Mitch McConnell is full of baloney and much more.  Use your imagination.

Stop these bonuses now.  How?

1. Just don’t pay them, break the contracts that exist, and let the so-called good performers sue.  This will drag on for years with the 80% stockholder able to keep coming up with new ideas for lawsuits.
2. Call an emergency stockholders meeting and either clean out the board of directors and the management or make it clear they get no compensation if the bonuses are paid.  We, me and thee, are the stockholders.  Our government owns AIG.  Use the power.
3. Form a stockholder Committee to review loss Claims  to AIG from companies that received direct bail out money from you and I.   Was this loss claim included in the request for a bail out? 

Now come President Obama.  Your announcement today is well taken.  Pursue any and all legal means to stop the payments is a must. 

Why are we –  the only practical stockholder of AIG – not able to fire out the people who are both paying these bonuses and loss payments, or get darn good reasons to keep them?   Why not replace the board and the management. 

The people who get the payments of bonuses are going to quit because they know they don’t stand a chance of continued employment if they do take the payments.

Mitch McConnell must be on the payroll to say let the payments go through and look to stop it in the future.  Is he nuts?

An angry Bob Johnson

I Have The $420 Billion Answer: National Bank of America

The answer that everyone is looking for to solve the banking crisis is to not give money to failed banks, rather merge the bank into a new national bank, then  wait for the mortgage asset values (and other so-called toxic assets) to restore to true value and then give the value back to individual and small business taxpayers in the form of stock in the new solvent bank.

Here is how it works.

The Treasury forms a new bank; call it the National Bank of America.  If a bank is found insolvent then merge it into the new National Bank of America (NBOA).  The capital of the NBOA is the full faith and credit of the United States of America.  No money exchanges hands.  That is, there is no bailout.  The incoming insolvent bank has a negative net worth, but that is not relevant now as the US owns the former bank.

The problem assets will return to current market values and at that time the insolvent bank, now solvent, is given back to American Tax Payers in the form of common stock pro rata to the ratio of their income taxes paid while the bank was held by the NBOA to the total taxes paid by all individuals and small business taxpayers.  Citizens or small business that do not pay taxes during the holding period get no stock.

If the insolvent bank has operating losses, they are funded by the current budget of the US; and there is no write off the toxic assets.  The is no urgency to writing them off since the  onlly public body holding shares in the NBOA is the Federal Government. 

Currently there is no arms length transactions taking place in the housing market.  Owners are under duress, bank owners are under duress and so too is Fannie and Freddie.  Without arms length transactions the market collapses.  But if the Federal Govement owns the failed banks then there is no duress.   It holds the assests with asking prices at least equal to the mortgage amount granted when the house was purchased last.  So housing prices will restore to proper values.

Bob Johnson

Nationalize the Bad Banks – Here’s How

Nationalize the banks.  Oh my God, for so many years I thought this idea was blasphemous.  But not now.  The nature of the problem is so severe – or so we think – and the absence of lending is so dangerous, that action must be taken.

Leave the good banks alone.  They are doing ok, and there are advertisements from many local banks saying they have plenty of money to lend.  TD Bank purchased Commerce Bank, the bank Kaffe Magnum Opus, Inc. does business with, and they claim to have lots of money to lend.

No Bail Out – Merge the bad banks into a new National Bank of America

Nationalize the bad banks.  Here’s how.  Form a new National Bank of America  – NBOA – using the faith and credit of the United States as capital.  Then, as the bad banks implode merge them into the new national bank.  When the markets find a way to properly value the so called toxic assets now in the portfolio of the National Bank of America,  it must issue shares to every individual and small business taxpayer in American. 

The number of and value of the shares will be proportional to the amount of taxes paid in relation to the total tax paid by the group of individuals and small business taxpayers.  If people or small businesses have not paid taxes in the period beginning when the NBOA is formed and ending at the time it issues shares, then they get no shares.

Pretty Cool.  This targets the solutions directly at the banks that are needy.   Please write to CNN or Politico

As a founder of a successful business I’ve decided to express both business and other ideas that effect business in this blog.   Please listen President Obama

Bob Johnson

Mortgage Appraisals are UnderPriced by Fannie Mae and Freddie Mac

Appraisers approved by Freddie Mac and Fannie Mae are now providing appraisals that are way below the real value of the homes they appraise.   This is helping to slow the economy, defeat the low mortgage rates that are out there in order to drive the economy, and not permit consumers to transfer debt that is not deductable on tax returns to home interest which is deductible.  Low appraisals will permit banks and mortgage companies to collect fees and not provide the financing because the appraisal is too low to allow the refinance or worse too low to allow the purchase of a new home.

It is preposterous.  In this example the appraisal may defeat an investment in a new building for my coffee roasting company, Kaffe Magnum Opus, Inc.  Here is a first hand example.

My home mortgage is $287,000 on a home I purchased for $340,000 on December 31, 2003.  Since then I’ve spent more than  $125,000 improving my home and property.  Most of this went into creating 1700′ of new space including a gym, a very large music room for jams where we have had 30 muscians at one time and a space designed for a kitchen, but now used as a workshop.  All of this is heated, and finished very nicely. 

In June 2006 realtors told us to list the house for $600,000.  In February 2008 three realtors gave us list prices of $650,00-.  So the house would likely have sold around $599,000.

My home appriased yesterday for $420,000 by an appriaser hired by Wells Fargo Bank, who holds my mortgage.

I am refinancing my mortgage and locked in a rate of 5% to pay off my current %6 loan.  I paid 1/2 point for this lock-in.  The question is should I accept this lowball appriasal. 

No.

My plan was to increase my mortgage to 80% of whatever the appraised value would be, which I planned at well over $500,000 plus or minus, given the terrible market, but $420,000 never entered my mind.

The additional cash is going to be invested in Kaffe Magnum Opus, Inc.   Kaffe Magnum Opus would use this money to support expansion into a new building – a new building.  Do you see that Fannie, Freddie, Wells and Tom the appraiser, and Mr. President, who I support wholeheartily.

The appraisal is bunk, and I will not accept it.  And KMOCoffee will go forward with its project.

So the appraisal may stop an expansion; certainly it keeps the $100,000 mortgage proceeds and really more like $600K  (the lowball estimated cost of a new building) out of the economy. 

It is a good example of how a bank can avoid lending money without it showing up in the newspapers.

Our Great Country is in a bit of trouble and I’m willing to spend a lot of money for expansion that will help it, and Kaffe Magnum Opus, Inc. out.  So I hope the Administration will take a closer look at this practice and make the mortgage companies and the people who buy these mortgages enact appropriate practices.

Bob Johnson

Unemployment Benefits Extended Good or Bad for Business

  

We Have To Help the Unemployed

Banks and Investment Bankers caused the huge problems we have today. 

These are difficult times and it is right to provide longer benefits for the folks who have lost their jobs. 

 

There is a real downside to these extensions.  While Congress extends the benefits, it does not pay for them.  In New Jersey, where my business is located, the extension of benefits is paid by an increase in the payroll taxes my company pays.  Unemployment taxes are based on experience and on the total amount the state needs for payments.  The more people who leave our shop, for example, the higher the tax rate my company pays.  If fewer people leave, the tax rate decreases.  When benefits are extended the amount of benefits that are charged to my business increases by a like amount, and the more it pays over time.

 

So an extension of unemployment benefits is an increase in taxes on business, large and small, which tends to reduce employment.

 

I believe that the cost of the extension of benefits is more fairly carried by the entire tax base of the nation.  The only way this can happen is to argue persuasively with your Congressman or Congresswoman.

 

Do you agree with this proposed change in Federal Policy?

 

Bob Johnson