Lazy Man and Money

More Bailouts… Are You Still Angry?

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I’m reading about the big three car maker bailouts and I’m not sure whether I want to laugh or cry. I think I’m leaning towards crying. I understand that car makers circulate significant money through the US economy. My question is: aren’t there a lot of businesses doing the same thing?

Are we going to see T.G.I. Fridays asking for a bailout next? Aren’t they hit hard by the falling stock prices and the economy? It’s pretty clear to me that people are going out to eat less. Why else would every restaurant want to save me money? If T.G.I. Fridays goes under, cooks and waiters will be out of business. Companies that supply Fridays with food will lose business. Surely Friday’s is deserving of some money, right?

Let’s take it to another level of absurdity. One of the first things that companies cut in the rough times is advertising. This blog is supported entirely by advertising. If there’s no advertising, I make no money. If I have no money, I don’t spend it on restaurants and other things. So, due to the poor economy should I get some bailout money? Wait a second, that’s what the economic stimulus packages amount too, isn’t it?

Maybe I’m just not very smart, but it seems like this just moves money around the United States. It doesn’t seem to bring in new outside money. The Red Sox had general manager named Lou Gorman once. Whenever he couldn’t make a trade to bring in a great player, he’d say, “You can’t rob Peter to pay Paul.” By this he meant that you always had to trade something of value to get something of value. So with these bail outs, aren’t we simply robbing a nation of tax-paying Peters to pay a few car-making Pauls? Perhaps we should focus on tourism so that we bring in dollars from external sources.

I (and I’m not the only one) have a problem with people getting a break when they make irresponsible decisions. I think it sets a bad example for one. However, I also feel that I should be able to get the similar breaks if I need them – especially if I can show that I’m making smart decisions.

So how do you feel about these bailouts? Is there an end in sight? Where does the line get drawn?

Six Reasons to Love This Economy (Really. I’m Serious!)

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Everything seems for sale nowadays
Everything seems for sale nowadays

“Larry Bird is not walking through that door, fans. Kevin McHale is not walking through that door, and Robert Parish is not walking through that door… all the negativity that’s in this town sucks… And it stinks.” – Rick Pitino

Any Celtics fan, and many NBA fans, remember this famous rant from Rick Pitino. He took over the Boston Celtics and failed to bring them to the glory of the mid 80’s. The fans of Boston weren’t happy. I turned on CNBC a few times over the last week and every analyst sounds like Rick Pitino. They speak of how the credit markets stink and this economy sucks. They stick and they suck… and Alan Greenspan isn’t walking through that door. (Though much of this mess was on his watch, so maybe we don’t want him to).

With all the negativity out there, I feel I need to provide a little perspective. Let’s focus on some very good things about this economy. Believe it or not, opportunities abound for those who were responsible in the past and know where to look.

  1. Buy Some Cheap Stocks – While everyone is afraid of the stock market, these are some of the lowest prices we’ve seen in some time. Not to bring you back to school, but history and math has proven time and time again, buy low and sell high.
  2. Save Money on Cars – It’s a bad time for car manufacturers now. Headline after headline in the news state how bad it’s been for them. If you’ve got good credit (or can pay cash), you should be able to walk into a dealer and get a great deal. The consumer is in the best position I can recall in the last ten years. (For more tips, see save money on cars :-)
  3. Big Savings on Dining – I covered some of the deals at restaurants earlier this week. I missed some places like Applebee’s Pick ‘n Pair Lunch Combos for $6. (For more tips, see save money at restaurants)
  4. Buy Cheap Oil – I looked up today and noticed that oil is currently under $70 a barrel. I remember when people were complaining about gas prices when oil was at $140… and we were afraid it would go to $200! I look at this as not only a great time to refuel my car, but I can’t help but believe that PowerShares DB Oil Fund is a greater opportunity here to make money over the next 5-10 years.
  5. Capitalize on the Expected Poor Holiday Sales – Notice a trend by now? Retail sales want your money. Stores are going to battle hard for your dollars this holiday season. This puts you in perfect position for you to say, “What are you going to do to make me happy?” Just try not to be too obnoxious with it.
  6. Learn To Manage Your Money Better – This is going to sound counter-productive to the previous advice of spending money, but hear read me out. Necessity is the mother of invention. In this economy, many people will need to manage their money better. I hope some see this as an opportunity to invent new ways to optimize their money management. When times become good again, they will be stronger for it.

Do you have other reasons to love this economy? Let me know in the comments!

Photo Credit: Mike Licht

Is There a Cure for the Economy? The Spending and Saving Catch-22

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If you read personal finance blogs or magazines you’ll find a lot of advice to save money, get out of debt, and build an emergency fund. This is all solid advice and things that I fully endorse on Lazy Man and Money. It makes too much sense to stretch your dollar further and to be prepared in the case of some kind of emergency or job-loss. Plus, as of 2002, Americans had $750.9 billion of debt spread across 84 million households.

If you watch CNBC or read the Wall Street Journal, you’ll get a different view of things. They’ll discuss consumer spending as being a sign of a healthy economy. It goes a little something like this. If you decide to not go to restaurants or make your coffee at home instead of going to Starbucks, these businesses will close. It’s not just these business, but if you cut back on travel hotels lose money… entertainment movie theaters and Netflix lose money… you can go on and on. If businesses lose money, jobs will be lost. When people lose jobs, it’s never a good sign for the economy. This is why the government is giving us money, to stimulate spending.

So if people spend money and live on credit, the value of a dollar falls. If they don’t spend money, people lose their jobs and the economy suffers. Doesn’t this seem like a game of lose-lose. It seems you are quite literally damned if you do and damned if you don’t.

I wish I had a solution for this problem. Maybe I should have studied macro-economics in school. I’m trying to think of how America can win this Catch-22. Maybe I’m crazy, but it seems like as long as the money shifts between business and consumers the economy isn’t going to improve overall. If consumers have more money they have safety and security, but businesses suffer. If businesses have more money, consumers are likely overspending and have too much debt. I’m probably being a little simplistic in thinking that money might be a zero-sum game.

The best idea I can come up with is to sell goods and services to other countries and bring in outside money. If money within the US is truly a zero-sum game, the solution is to add more money to the game. That outside money can pay off our consumer debt and keep businesses running. I wonder if we can export goods and services cheaply enough for foreign countries to buy them. Questions, questions, questions, I wish I had answers.

Maybe you have some questions as well? Perhaps you even have answers? Let me know in the comments below.

Does America Need to Wake Up Financially?

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I might not have mentioned it, but I’m in Los Angeles this week, staying at a swanky hotel called The Omni. (I’ll tell you more about it after my stay, but it’s essentially free.) They dropped off a copy of USA Today yesterday and for the first in months, I read a physical newspaper. It’s a general interest newspaper, but the front page seem dominated by financial concerns. There is a “Nation’s gas gauge” in the top left showing how much the price of gas has changed in the last day and the price a year ago. (It’s 37% more expensive for the regular stuff in case you were wondering.) The cover story was, As food costs soar, it’s back to basics for meal planners. At least they didn’t have an article on adjustable rate mortgages rising and people foreclosuring on homes. Maybe the editor didn’t want to depress everyone on the same day.

That’s what America is faced with today. Food prices through the roof. Gas prices through the roof. Home prices through the roof. It’s going to cost you more money to commute to your job. The money you make there is going to less quantity or quality of food. Then you come home and worry about how you are going to pay the mortgage. At least basic clothing is relatively cheap, right?

As Ben Stein says, this isn’t so much of a problem for the highly skilled/educated lawyers, doctors, investment bankers, etc. When you bring in six figures or more, you can usually a few hundred dollars a month. However, if you are on the lower pay scale you likely have bigger problems. The rise of gas and food is huge. When you might have been scraping by before you might be in even bigger trouble now. In the aforementioned article, Ben Stein is quick to point out that “Since [1974], real wages both hourly and weekly for all non-government workers, on average, have fallen by about 5 percent, very roughly.”

I’d like to revisit that USA Today article on food costs. It is filled with anecdotal evidence of people reacting to food costs:

  • Retirees Sally and Robert Jones reverted back to some of the menus that got them through graduate school, living on beans, stews, and soups.
  • Nancy Sierra eats peanut butter and jelly sandwiches for lunch.
  • Tiffany Nicosia whips up new recipes with whatever is left in her refrigerator.
  • Rebecca Woods and her family of five saw their grocery bills double from $800 to $1,600 a month.

However, the part that I want to focus on is the Rebecca Woods quote:

“We were eating whatever we wanted “” yogurt, bagels, name-brand cereals. I wasn’t looking at the price of anything. I was at the point where I bought the same thing every week. I ran into the grocery, I bought what I needed and ran out.” Later she says, “I realized we were sinking financially and couldn’t go on that way.”

Are you like Rebecca was – spending money without looking at the prices? Do you know someone who is? Do them a favor and use the little e-mail icon at the end of this story to send them this article.

State of the Economy

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Most days, I try to avoid watching CNBC. I’m weird in that I often find it entertaining. I avoid it because I often get the feeling that I’ll be able to time the stock market. Yesterday, I couldn’t resist temptation and I flipped on CNBC for a few minutes.

The Price of Oil

The price of a barrel of oil jumped over $140. It seems like yesterday that people were wonder if oil would top $100. It came close for a while and would dance between $90 and $95. I expected $140 to happen at some point. Like most people, I just figured it would take a good 3 or 4 years.

As much as I wish we didn’t have to more than $4.00 for a gallon of gas, I’m extremely happy that this is spurring people to buy cars that get more miles to the gallon. Maybe I live in an idealistic world, but perhaps people will realize that it’s not so bad and make other cuts in their spending.

The Price of General Motors (NYSE:GM)

If you missed the news yesterday General Motors hit a 53-year low. For those unfamiliar with what that means, CNBC anchor Mark Haines put it best, “If you bought a share of General Motors 53 years ago, in 1955, you would not have made any money. In fact you would have lost a lot due to inflation.”

Think about that for a second. I realize that car companies have been put through the ringer for quite some time. However, I can’t imagine a company that my parents have grown up with to not grow shareholder value their entire lifetime. I picture what it might be like to crawl though an attic. There you find an old dusty box. Inside some long-lost shares stock certificates. You’re in luck! The company still exists. You’re not in as much luck as you thought though as it’s not likely worth a lot.

I thought these two points together add to something really interesting. The price of oil is rising so much, while the value of the car companies drop. Is this like 2000 when Internet companies were skyrocketing and energy stocks are low. I don’t think so, but crazy things happen in 8 years.