Economic Freedom in America

New web sites

I've been working on adding new websites with SiteBuildit.

In addition to Investing in Rental Properties I have built two new sites


I'm already earning more profit from these web sites then the cash flow from 5 houses without the risk or investment

Stopping Junk Mail and Annoying phone calls

One of the best ideas I ever came across on the Internet was the location of web sites to stop junk mail, get on the No Call List and Opt out of Credit card offers. This has literally saved me hundreds of hours per year that I can focus on making money or just relaxing. Taking action is really simple and takes no more then a few minutes for each registry, but great in reducing wasted time. Most highly recommended.

Want to have a web based business?

I mentioned in an earlier post that I was looking into SiteBuildit as a potential source of income. Two years ago when I decided to invest in rental property I used a web business called InvesterPro to build a web site for me. It cost me nearly $600 for them to develop a site for me and about $50 per month to maintain it. During the two years that I had the site live I had very little traffic and only a few contacts. None resulted in a real estate transaction.

After purchasing SiteBuildit for $299 my eyes have been opened as to why the previous web site did not attract many visitors. The InvestorPro web site was just a cookie cutter site (every subscriber had the same site except for the name of their business. Search Engines like Google tend to ignore these type of sites.

The main concept behind SiteBuildit is what they call the C-T-P-M process. Intuitively this makes a lot of sense to me. The extensive instructions tell you how to find niche key words that can attract traffic without a lot of competition. Lots of advice on building content and monetizing your site. After working with the software for a couple of weeks I created a web site called Investing-in-rental-property.com. (It's not completed yet but I'm starting to put into writing some of what I know.) I've been really impressed by how easy it is to build web pages. Once I have the time, I'll be able to improve the look and feel. Lots of information in the forums as well.

Overall - a very impressive service for building a web based business.

the latest bubble bursting and what's next?

Oil ran up to $135 a barrel increasing in price nearly daily. This despite drastic drops in US driving over the past year. Oil may be ready to crash as prices have dropped by $10 a barrel in the past week. Whether this week or next year, prices will crash eventually.

This is the third time in the last 15 years that we have seen this scenario. It seems to me that there is a tremendous supply of dollars chasing the next big thing. In the 90's the stock market marched to new highs due to "irrational exuberance", companies like Enron and WorldComm created new accounting to rack up "profits". When the curtain was pulled back and everyone realized the people pulling the strings didn't have the fundamentals, the bottom fell out.

In the early part of this decade the same scenario played out in real estate. The Wall Street gurus found new hedge founds to sell sub-prime loans and run up housing prices to irrational levels. The greater fool theory kept people buying until some started defaulting. Suddenly the curtain was pulled back again and look at the mess the real estate market is in.

I have no doubt that something similar is afoot in the commodities market. Oil prices are in the irrational range based on my years of working in oil research. Will we find new "funny" structures that traders have created? Possibly. Then Congress will hold some hearings and the money men will move on to some other way to find a way to invest all these excess dollars.

What that will be, I have no idea, but I'd bet money that it will happen. The world is awash with dollars.

Update: An interesting article I found several days later predicting $50-$70 per barrel oil in our near future. Also comparisons with housing bubble.

1970's Again?

In some ways the economic environment today is eerily similar to the 1970's. We have rising gas, food and precious metal prices. There were incessant fears about the coming climate crisis (a new Ice Age). The government was screwing things up with price controls then, now they are mandating CFL's, and ethanol and preventing oil drilling (there's talk about price controls for mortgage rates). We have claims (again) of peak oil and predictions of depression (much less a recession that hasn't even started).

So should you be afraid? That's what the media wants. That way you'll buy more of what they are selling. But the facts don't support the non-sense.

The stock market has barely dropped 10% from its peak which is usually called a market correction. Take a look at some statistics from 1996 when Clinton ran on the greatest economy ever:

Key Labor Market Statistics in 1996 and 2008
	March 1996	March 2008
1. U.S. Unemployment Rate	5.5%	5.1%
2. Number of Long-Term Unemployed	1.33 million	1.28 million
3. Average Weeks Unemployed	17.3 weeks	16.2 weeks
4. Median Weeks Unemployed	8.3 weeks	8.1 weeks
5. Not in Labor Force because discouraged over job prospects	451,000	401,000

Of course, if the Democratic candidates that are preaching anti free trade get elected and create another Smoot-Hartley Act, all bets are off. My employer (a large international chemical company) is booming with earnings rising faster then they have since the 60's. Most of that is due to the drop in the dollar and expanding oversees markets.

I expect that we will have slow positive growth this year. However, since this is an election year and the press is trying to discredit the incumbent party, we are going to hear recession, depression and everything else that's negative about the economy.

By years end the press will be moving on to something else to create fear. In the words of Emily Litella "Never mind...."

Update: More perspective Economic Hysteria

The great mortgage bailout

Our politicians seem hellbent on making the country one great nanny state. The Presidents proposal to bail people out is just the latest example. Here in NY they want to keep us from smoking, eating trans-fats and taking any responsibility for our lives. Fools and speculators have driven up the prices of homes in major markets and now someone has to pay the piper. It's always the politicians solution to make all of the prudent people pay for the crooks, fools and speculators irrational behaviour. People have been speculating since the great tulip bubble in Holland hundreds of years ago and someone gets burnt. Hell, I bought into the stock market in late 1999 and lost a lot of money. I didn't sue anyone or call my Congressman to get my money back. Instead, I kicked myself for my stupidity and learned a lesson. If people lose their houses because they took out liar loans, why should I pay (and I will, as will you)?

I wish politicians would let the free market take care of itself.

Most Powerful Period of Global Economic Growth in History

This article states that the period from 2003 to 2008 is greatest economy of all times.

"Moreover, if we and the consensus are correct, then the period 2003-2008 will have been one of the most powerful periods of economic growth globally since accurate data has been collectable for much of the world."

As I have posted in the Greatest Economy Ever and Roaring 20's are Back, this is not a short term phenomena but a long term trend. Paul Zane Pilzer should get a Nobel Prize for his Economic Theory.

So, if you are having a rough time now - don't blame the economy or Bush. As Larry Winget would say "Get off your Butt".

Success in one area does not mean success everywhere

I read this article about Bill Gates remarks to Harvard graduates and was stunned by the mans ignorance of economics. But, I really shouldn't be. Just because people are successful in one area of their lives does not mean they know anything about other aspects of life.

I work with PhD's all day long and at first I gave their opinions high weight because of their expertise in one field. But after a few years I came to learn that though they may be brilliant Chemists or Physicists, that doesn't mean they know anything in unrelated fields. In fact, I am convinced that the more specialized a person is in one field of knowledge, often the less they seem to know in other fields. Bill Gates may have been brilliant in building a business, but only recently learned that he better get his company involved in politics and lobby's if they are going to be successful. His ideas to save the world sound great to a Marxist, but someone has to make the money first - you just can't print the stuff.

People can become millionaires but have trouble their whole lives controlling their weight (Oprah and Rush Limbaugh). Many of us can keep our weight under control but screw up our finances. Very successful athletes routinely blow millions that they earn and many die poor. How many CEO's do you hear about that can't stay married?

Most of the population gives too much credence to people with no credibility in the field they are speaking of just because they are successful in other fields. Movie stars routinely get accorded great respect for their views on global warming, yet most are barely intelligent in matters of science (ditto to Al Gore).

So, the lesson to learn is that you should not feel like a failure if you are not successful in every aspect of your life. And second, don't give too much credence to the opinions of people if they have no direct experience in the field they are proselytising on.

Update: After I wrote this post I read a post by Steve Pavlina How Your Mind Really Works. I was struck by what he said about how to become dumber. This fits my view exactly that people that specialize seem to be stupid in so many other areas. The routine of being focused on one area seems to decrease intelligence. A very insightful post by Steve.

Common Sense Capitalism

John Stossel is one of the few in the media that I like to read or listen to. He seems to have common sense that few reporters are able to access. Here's an article called the Double Thankyou which speaks to the truth of what Adam Smith talked about 3 century's ago. It puzzles me so that the left clings to the Marxist ideas of government controlled health care.

Working together in business - part 2

In another post I talking about the challenges of working with your spouse. I mentioned that we were unable to resolve an issue around QuickBooks. My wife has an accounting background but really is computer challenged. In China she did all her accounting manually - even using an abacus when she first started in the 90's (this was not unusual for Communist countries - when I went to Russia in 1997 there were no computers and the Court Reporter sowed our documents together because there were no staplers).

I made several veiled threats to hire an accountant if she would not enter the data - that really made her mad and it had become a big source of conflict in our marriage. Finally this weekend I just decided to do it myself, even though I am clueless about accounting. Fortunately, my wife could not bear to see me screwing up the accounts and she decided to sit in front of the computer and start entering the data. Even though she had taken a QuickBooks course, she struggled trying to understand the software. I was able to help her in this respect and over the course of the weekend we were able to make substantial progress. She gained some confidence in her ability to use the software which was really the hangup in not entering the data.

Sometimes when working with a spouse it is not immediately obvious why the other is not doing something or doing it differently than you desire. The solution might not be obvious but fortunately, if you are committed to each other and the business, you can find a way to resolve the issue.

High gas prices headed higher - thanks to greens

Today's New York Times has an article discussing Ethanol and its implications on gas prices and global warming. The Greens like to promote this type of solution because its "renewable" and force it by fiat (like low flush toilets) onto the the consumer. In the end the consumer ends up paying a higher price for the product and the environment is in worse shape.

As a Chemical Engineer, I think forcing ethanol on the market is one dumb idea (this despite the fact that the company that employs me is pushing this and cellulosic ethanol). One of the key causes of high gas prices is the fact that environmentalists have restricted drilling for oil here and prevented oil companies from building new refineries for the past 20+ years. Last year industry executives were going to spend money to expand refinery capacity but the turn to build ethanol capacity makes that a poor business decision, so we will get little or no investment now and a continuation of high gas prices. Politicians don't belong in the market. Nixon's' price freezes in the 70's did tremendous harm to supply and price.

The federal ethanol mandate adds substantially to gasoline prices. Ethanol costs more per gallon than gasoline; it contains less energy per volume so a blend of 90 percent gas and 10 percent ethanol delivers 3 percent fewer miles per gallon; and ethanol has a higher vapor pressure which makes it even more expensive for refiners to meet EPA summertime vapor pressure maximums. The ethanol mandate also adds to costs for blending gasoline because companies now have to manage different two fuel supply chains.

America's Chicken Little Media

Many grew up hearing the story of Chicken Little proclaiming "the sky is falling". A column by noted historian Victor Davis Hansen asks "Is the sky falling on America?" All of my life the mantra of the media has been "if it bleeds, it leads", so it is no surprise that the media is promoting the end of mankind due to global warming, disaster in Iraq, China's economy dooming ours, cultural deprivation ruining our youth, we will all die of bird flu, etc., etc. As they said in a classic Seinfeld episode...yada, yada, yada. I often wonder why the American public just doesn't commit mass suicide...life is bad and going to get worse (:



I shut down the nightly news broadcasts 20 years ago and rarely look at a newspaper except for the sports section. I lived through the eighties when Japan was going to dominate the world and buy the country up. China is a much weaker country than Japan in my opinion and I don't foresee them surpassing us (except as the worlds leading polluter). I still believe that our economy is going to continue to lead the world for many decades to come due to our underlying entrepreneurial culture. The students in China may study harder but they can't seem to think outside the box like Americans and after graduating from school Americans work harder and longer (my wife is shocked by how hard I work compared to her experiences in China and I think I am a slacker). We are living in the Greatest Economy Ever and though we may have ups and downs, I expect this will continue.

As far as I can see, our environment is cleaner now than it ever has been in my lifetime and getting better, our cars are safer, houses bigger and filled with nicer products. We can watch 100's of TV channels, blog on computers more powerful than the one that went to the moon, we live longer and healthier lives (my parents were never in shape to go mountain biking at my age). We travel freely and even though the price of gas is high, we drive Hummers and won't be scaling back our travel this Memorial Day weekend.


No - the sky is not falling, just getting bluer

No such thing as obscene profits

I've often received nasty comments from people critical of my posts on oil companies. As I mentioned in my post on random thoughts, people will scream about the profits of big companies but don't say much about the wealth of the Kennedy's, movie stars or athletes. Today I read a great article called No Such Thing as Obscene Profits.

As far as I am concerned profits are what motivates me to work long hours after my regular job. Will my profits be big? I sure hope so, but I have taken lots of personal and financial risk to achieve any profits and I risk all of that if I lose money. Big companies do the same thing. It can cost a billion dollars to build an oil refinery. Drilling for oil is not a sure thing. There is lots of risk involved, so companies deserve to be rewarded when they take a chance and win.

Big loses also happen to companies. There was an article in the WSJ today that talked about all the layoffs and salary cuts that employees have had to take due to excessive losses by the industry. Daimler had to pay to have someone take over Chrysler this week. In a capitalist society there is no guarantee that you will make a profit. Those who scream about obscene profits are, in my opinion, either naive Marxists or too damn lazy to work. Jealousy is one of the seven deadly sins and the critics have it in spades.

Carnival of Entrepreuners

The Carnival of Entrepreneurs has been published with my post on Spouses in Business Together.

Exxon and Carbon Based Fuels

There's an interesting article at CNNMoney on ExxonMobil. I was offered a job by Exxon when I got my BS but decided to go to grad school instead. I was quite impressed with the company but as the article indicates "it is not a fun place to work". Exxon is the epitome of capitalism in my mind - the most profitable company in the world. Some call their attitude ruthless or arrogant, but it is just no-nonsense business. I would trust their assessment of the future far more than anything I read from outside "experts".

• Exxon doesn't think we are running out of carbon based fuels. They expect that even by 2100 carbon based fuels will account for 80% of our energy consumption. I think this is right on. Since 1973 the scarcity crowd had been warning we were running out of oil or that "peak oil" was occurring, yet each year new discoveries are made and new technology allows us to utilize more carbon based fuels.
• Exxon doesn't invest in the "popular" alternatives because they are not cost effective. This is one that the environmentalist just don't get. Further, the hypocrisy of not supporting nuclear power plants (the only viable alternative to carbon fuels and cleanest) forestalls a switch away from carbon based fuels. And even though my company is putting its future into bio-based fuels these will remain non-competitive with carbon based fuels and inflate food prices.
• Exxon sees the bigger risk that the price of a barrel of oil will drop, not that the price will go high and make alternative fuels competitive. The price of oil right now has nothing to do with the amount in the ground. It's all based on the political situation in the Middle East and the environmentalists ability to restrict domestic supply sources. The NIMBY attitude towards building refineries also contributes to the high cost of gasoline.

I had one commenter state that I was a "shill" for big oil. I have always been impressed by people or companies that create wealth for society. Even though I don't like to shop at Walmart, I am impressed by what they have done to create billions in wealth for our society and make route to market more efficient. Improved productivity helps us all lead better lives. Likewise, Exxon is so efficient that they keep the price of gas at lowest levels possible given the political situation. I have never been impressed by the critics that spend their time yapping about successful people and companies and failing to create wealth for society.

Spouses in Business Together

There's been a lot written about the pro's and con's of starting a business together with your spouse. Sometimes the articles seem written by "professionals" with theory's, sometimes by actual participants in such a venture. Here's a few of my thoughts and experiences:

• Who makes the decisions? This is probably the most important decision of all when starting a business with a spouse. Often you read something like "we talk about it then decide together". Well, of course, for many decisions this is true, but in real life it doesn't always work out so easily. Sometimes you just cannot agree on something. This may be due to a different point of view, different belief systems, or one spouse may have an appreciation for certain business aspects. For example, I handle the money and worry about making a profit, while my spouse is more concerned about the appeal of the house to potential buyers. My spouse also has a belief that if you are going to do a job "do it right" while I want to do it cheaply. So this often creates stress and one of us has to give in to the other. One thing I have learned is that she gets upset if I make a decision without consulting her.
• How does work get split? This can create lots of stress if one spouse perceives that the other is not carrying their share of the load. We split our work based on who is more interested and skilled in the nature of the work. Sometimes it is not straight forward. My wife was an accountant in China and I thought she would do the accounting. I bought QuickBooks in December, but she has yet to enter our data. I don't have a clue when it comes to accounting and she does not want to pay to hire an accountant. Nagging doesn't work, so now I just have to wait to see how this plays out.
• How do you deal with your relationship? If all you do is work together is that sufficient to ensure a good marriage? I don't think so, but time is a big problem (especially when one spouse is still working full time). Last night my wife wanted to take a long walk, but I felt so pressured to get more done that I stopped short and she felt upset that I was making her a low priority.
• How do you deal with the stress and pressure of time and money? Sometimes I feel myself being very impatient about a particular task or with my wife. It may seem unrelated but inevitably boils down to a fear of loss - losing money or time to spend doing other things (for example, my kids spend only every other weekend with me and I end up spending all my time on the business and not with my kids). I find myself losing my temper more frequently than before we started the business (normally I am very mild mannered). We have been pouring out cash for 4 months now and have yet to see a cent of profit. I often find myself waking up at 4 am and being overwhelmed with anxiety about our finances and unable to sleep.

Starting a business is itself a very stressful undertaking. Starting a business with a spouse can add substantially to that. However, for many people, it is not an option due to the financial aspects of having to hire someone to replace your spouse. In the beginning my wife was thrilled to be working alongside me, I'm not so sure that thrill is still there. Is it worth it? Some say that the if you weather the storms together you will have a stronger marriage, some say you will end up divorced. For now, the final chapters have yet to be written

Challenges of a Business startup

The DigeratiLife has a great list of challenges to work through when starting up a new business. I can attest to every one of these items she talks about. We live on a Spartan budget and I have worked extremely hard to have adequate cash reserves to fund unexpected expenses and start up costs. I've also worked on lots of methods to get hold of OPM. Even though I have a full time job we also live with lots of uncertainty. Real estate is not very liquid and the time line between purchase, renovation and re-sale is very unpredictable. So far we have bought 3 houses and haven't sold any.

One area that she did not discuss was how to balance work and family. I have 4 teenagers actively involved in after school sports. I am working 14+ hours per day between my job and business. I used to be able to exercise or do yoga but have dropped all of that. I try to spend a little time attending my kids sports events but that is difficult. The most time I get to spend with my kids is when I can get them to work for me while we are rehabbing. Having my spouse working beside me while we are rehabbing allows me to spend time with her, but I find that is not really the same as going out on a "date".

At some point I hope we can achieve more balance, but until there is adequate cash flow, I see no way to avoid an unbalanced life.

Prosper.com funding

I got a loan funded through Prosper.com yesterday. It was my third attempt and I think I have gained a little insight into the Prosper market.

• The first loan I attempted was for $20k. I had read that you will be more likely to succeed if you join a group. So I joined a real estate group. Unfortunately, the group leader wanted a 1% commission, so the interest rate that I felt I could afford was reduced. I put in a max rate of 9.5%. The group leader did not really supply much support and only bid $50, so I don't think that this was really worth much. The loan did not get funded.
• The second attempt was for $25k. I did not join a group but got dozens of emails from group leaders explaining why I needed to join their group. I also had a lively discussion in the forums section with other members on why my loan would not get funded. I had bumped up the loan interest rate to 10.5% thinking that this would be more likely to get funded than the 9.5% I had previously requested, but in the end got even fewer bidders.
• My third and successful attempt was for a loan of $6500. I wasn't sure if this would get funded either, but the bidding was similar to that on EBay - nearly all at the end. Over 240 people ended up bidding on the loan and although I started at 10% interest rate, I ended up at 8.5% as the lenders bid the rate down.

My credit rating is AA, so I don't think in the end that joining a group had anything to do with the funding of the loan. Some observations and opinions I have about Prosper:

• the lenders seem much more comfortable bidding on loans under $10k
• this is an emotional market place and it seems that most lenders will bid more based on emotions than rational data. I saw plenty of comments from bidders talking about how low credit grade people "deserved" the loan - this is not based on rational thinking. Also, the furious bidding as the loan listing came to the end also screamed of emotion.
• It didn't seem to matter the purpose of the loan as to whether it would get funded. People who had screwed up their finances were just as likely to get a loan as people looking to use a loan for business.
• this is pure anecdotal, but it seemed to me, having a picture of your wife and kids helped get funding.
• I'm not sure why people will fund loans for poor credit borrowers. Is it pure greed or "bleeding hearts"? See MyMoneyBlog's analysis of default rates. The default rates for the risky loans make them extremely poor investments from a lender perspective, yet I did not see a pattern where these loans were ignored - it seems to me a $20k loan from an AA borrower was a better bet than a $5k loan from a low credit borrower, but this is not true to prosper lenders.

It is an interesting concept and I am pleased with the results of the loan I got, but I don't think that I would ever bid on a loan as an investment.

The Inconvenience of Starting a Business

I just read a great post at IWillTeachYouToBeRich - an interview with a person who quit her job to start a wine business. There were 2 take-aways from the interview that really struck me. Her statement that starting your own business is "inconvenient". I've talked often about diversifying beyond your job or stock market portfolio. The sad truth is that starting your own business is too inconvenient for most people to bother with.

The other idea I picked up from the interview was putting a sticky note on your computer of the ONE critical thing that you should focus on that day to make your business a success. As the interviewee notes, there's a million little things that need to be done every day when you are starting a business and there is no structure. If you are a disorganized person, this is a prescription for disaster. I use Evernote to make a "To Do" list every day, but have not prioritized the "ONE thing" that I need to make my business a success. It's an interesting idea that I think I will try.