Rescue Without Being Saved

The U.S. government is like a bad father handing out money to his children so they don't misbehave. Why is it the that the U.S. Treasury feels its best policy it can offer is to hand out billions of dollars to everyone and everything, in a desperate attempt to save the economy. It's broken because the system does not work, and not because there is no credit. Those politically elite up on Capitol Hill cannot possibly think that because Americans can't put themselves into more debt, is the main reason why Americans climb out of a recession.

Let me introduce to those politicians in Washington a little thing called FICO. FICO known as the Fair Isaac Corporation is a company that stores credit scores, supplying formulas to retailers that can be used to see whether or not you are a risk to credit. It's a system that basically keeps you locked out of the credit system if you fall below what the market deems a low credit score. In a tighter economy, the acceptable credit score can be raised, and vice versa in better economic times. Credit scores are only measured based on your length of relationship with a debtor, and how often you failed to pay debts on time. It is not based at all on employment history or income.

So here's a formula. People are evidently spending more then they can afford. Their real estate assets are worth less than the amount owed. 62% of people in America rent, not as a choice but because of financial circumstances. Outside of the exceptionally wealthy Americans, everyone else cannot ever afford a home. Now with rising unemployment, getting out of debt, or even the prospect of owning a home is a far reach. Now, add to that formula, the U.S. government pouring more money into debt, and enabling banks to offer up more credit to an economy that simply is battered by not just an overwhelming amount of debt, but also penalties for not being in the black, and what you have is a cyclical promotion of consumers being locked into debt, and the destruction of anything monetary, and eliminating an economy that is fluid, offering consumers the ability to pay for something without incurring debt.

Currently, consumers are weighed down by the heaving pressures of bad credit. Each and every American is now stored in several databases somewhere in the world with a number assigned to them, stating what and how much credit they deserve. This number is the end-all-be-all of an individual's ability to get a loan, in order to purchase something that is way beyond his or her cash-on-hand spending capacity. A low credit score can be brought upon by almost anything these days, and most likely not just by not paying back on what you owe. Often times the media talks about and advises on how to manage money better, but what they fail to discuss is the reality of the situation, and that is how far down the road most consumers have traveled in spending credit, that the ability of managing money is null and void because they owe so much that their money doesn't actually exist. It's all being poured right back into debt. So the logical person would convince them self that the cost of living is priority, and can be paid for with cash-on-hand assets, and their debt can wait.

Technology that drives economy, as that used to monitor the consumer base is destroying the U.S. economy. It creates an ever-present watch-dog system on every consumer's spending history, and over time puts a large part of the population into a financial category of the unwanted. If a majority of the consumer base cannot spend then it leads one to think that there would be no prosperous economy. Who is really being saved here?

Why There's No Value

I had an interesting conversation with my mutual fund adviser this morning, on the matter of why the current economy is in such a funk. In a time when most baby boomer retirees are looking to collect on their hefty funds, they stare dividend declines in the face, and there's not a damn thing we can do. Yet, there is a large contingency, including myself, that has been brought up by these baby boomers, who taught us to save, save, save, and I do, among many others that I know who are trying to commit as much of our paycheck to our retirement plan as possible, among the overwhelming amount of other outrageous expenses we all have nowadays.

When I asked my adviser if he thinks that the lack of efficiency in out financial system is the root cause of why the markets are crumbling, he said "Yeah that's a very large factor!" There was a certain confidence in his voice, that made me absolutely believe him. He went on to mention that when the "big boys" want to invest, they can do it, without delay, and that their money is immediately passed into the investments without processing, and stocks and the market can both be monitored and traded in almost real-time. Unlike, us, retail investors, who are forced to operate through corporate brokers, in order to invest, and often times these investments spend days if not weeks being processed, and there is no way for the average investor to analyze or monitor the market, and compete at all with said "big boys".

Confidence in investing means that the avenue that an investor uses to access investment must be a level playing field. Consider for example the old school marketplace. Trades were handled face-to-face, in person, and in real-time, thus allowing any buyer to see, feel, and have 100% confidence in that the investment would be put into action right at that moment. Now, in today's markets there are so many different market approaches, and 9 times out of 10 those markets are unseen, because they are operated by middle men (large corporate financial investment firms), and the markets are only available to them, and not the actual investor. Now because an individual is forced to use this system, he has to await processing of his money, in order for the firm to implement his investment. Processing takes time, and as they say time is money. If an investor knows about a good stock today, by tomorrow that stock may be a completely different story. And, that is where the confidence in the markets fails the economy.

Why is the individual investor's money processed? Why isn't the investment firm's assets placed in check like that of the individual? There is no confidence in the economy because the economic institutions don't have confidence in the buyers or the face-to-face consumers. Everything is kept in check, as if even hard assets are considered credit, until it is processed by a higher entity in the financial system. Not a single person wants to have confidence in something they cannot buy or sell on site. If it is not available at that time of value, what will its value be a few days later? Should he preserve their confidence in that product if they don't yet own it? Of course not.

In conclusion, it should be noted that in this day and age where our credit can be monitored faster then our ability to own stock, why can't the process of investments be improved. There is no excuse for our technologies to enhance this system, and make it safer, easier, and more substantial of a market for consumers and investors to invest in.

Confidence is Nothing Without Value

Headlines everywhere today, are discussing how investors need to hold out and keep a positive outlook on where the markets are going. For seven days straight, the markets have been in negative territory, and yet the general public is being asked to stay positive, instead of dealing with the reality of the situation. How can people possibly hold their heads above water, when governments are tossing money at financial institutions that are failing, not because they are losing money, but because the average investor can't remain confident in an institution that has been absorbing money faster than the investors can put back into it.

Blame Wall Street, and blame the government for not owning up to being responsible with money. It is nearly impossible to look at an investment portfolio these days, and confidently get a solid understanding of what it's doing. For example, today I accessed my 401K plan online, and looked over my portfolio. Talk about scant information! I had one table showing all my funds, bonds, stocks, etc., along with prices of the stock at purchase, and quantity of stock I owned. Fair enough. Then it shows way at the bottom, my total earnings on these investments. No current stock price, no market values, and no break down of gains or losses. The company that runs this online software is CitiSmithBarney, which when I opened the 401K, was just SmithBarney, and also not to mention, that when I log in, I get a disclaimer saying that ING has just completed its acquisition of CitiStreet, which is an affiliate of CitiGroup. My eyes began to cross after the acknowledgment of CitiSmithBarney.

Wait, there's more! Now I see my list of investments, and then decide I'm going to look the stocks up on Google's finance site, and I could only find four out of the ten items in there. For instance, I was looking to do more research on the value of one of the items, Western Asst Mgmt US Gov. What the hell is that? There was no corresponding stock symbol. Why is it abbreviated. It doesn't come up in a search on Google, and Western Asset's web site, does even list it as a product, unless it's been named something else. I couldn't find any contact information on the site, so that I could call someone, and ask my unfulfilled questions. What kind of operation is this?

It is very frustrating to see that a Wall Street company, that is responsible for millions of people's hard earned money, and makes millions in profits a day, can offer up such a lousy excuse for an investment portfolio. It's almost as if they don't want you to understand it, because then it would be a lot easier to manipulate your money to grant them more profit.

The lesson for Wall Street to learn today is to respect your customers, and show a little more consideration for those who keep your hefty paychecks rolling in. If there is no confidence in the market, then it's because people just don't know. We are given half rate information, and expecting our advisers to do their job, and make sure we are headed toward a more secure future. So much for that. Would you invest in something you were unsure of, or something you nothing about, and if you did invest, would you be sure that things were going well, considering you nothing about what was going on?

Even our government is not providing the confidence we need in the markets. Today, George W. Bush gave a speech in the Rose Garden, explaining to us, all the facets of a failing economy. He simply restated everything we already know, and is not providing Americans with a sound and consistent plan. It's been 2 weeks already since the plan has been put into place, and the market is just getting worse. What is the plan? Why isn't it working? Why are we being told to not worry about the economy, yet every morning we wake up to a market that is diving? More rules need to be in place holding the Treasury accountable for all purchases and bail outs. All transactions should be openly available online for the taxpayer to see, so that they know what their return will be if and when the market climbs out f the depths. Also, all Wall Street firms need to be handed regulation making robust information readily available to public investors. Information just as well structured, and easy to understand as that of Google's or Yahoo's financing sites.

Information is a powerful tool. It can be used to take advantage of certain situations by limiting the amount that is granted forthwith. It can also benefit those who want to be informed, in order to make better decisions, because if those who are limiting information are harnessing that power, then the less informed will fail to effectively support the systems to which they contribute.