The New Robber Barons
By PETER ROST
The U.S. Department of Labor claims we have an unemployment rate of 4.9% According to "the Economist," however, the true unemployment rate in the U.S. is over 8%, or 12.6 million Americans. The difference is due to the fact that the U.S. Government doesn't count people as unemployed after six months without a job
I recently joined the ranks of our many unemployed citizens. The termination of my employment as a Vice President at Pfizer was subject to intense media interest, partly due to the fact that Pfizer notified the press before they informed me.
Contrary to press reports, however, I have received no severance payments and for the first time in my life I am eligible for unemployment benefits; $13,078. At this annual income level my family of four would actually fall below the federal poverty level,quite a difference from a year ago when my salary was over half a million.
I'm also uninsured for the first time in my life and I have to pay the full price for drugs, just like 67 million other uninsured Americans. Contrary to many others, however, I do have a choice. In accordance with federal COBRA law, I was offered the opportunity to continue my health care coverage for 18 months. There was only one hitch; I had to pay $15,269 per year to receive this benefit. I decided that with an income of $13,078 that didn't make sense.
Clearly the system we have today isn't just broke. The system is utterly and completely sick and our weakest citizens are paying the price, every day. And while I have belatedly been forced to share some of the experiences of our poor, uninsured, and unemployed, my situation doesn't even start to compare with people with no resources, no voice, nowhere to go and no one who listens to them. For those citizens we have something that's called the Government; a government that is supposed to look out for the people who can't look out for themselves, but instead focuses on "pay to play money."
Today's system is built on greed. Greed is defined as an excessive desire to acquire or possess more than someone needs or deserves. Greed is not a corporate executive who builds an organization such as Microsoft, creates a lot of jobs, and happens to get rich. Greed is to become CEO for a drug company such as Pfizer, be responsible for a stock price drop of 40% over his five year tenure, twice as much as the AMEX Pharmaceutical Index, secure a $80 million retirement package while firing 16,385 Pharmacia and Pfizer employees, and get a 72% pay increase to $16.6 million as his reward.
According to the New York Times average worker pay has remained flat since 1990 at around $27,000, after adjusting for inflation, while CEO compensation has quadrupled, from $2.82 million to $11.8 million. Our CEO's are in a position in which they can basically use public companies as personal piggy banks. And this is perfectly legal as long as they get someone else to sign their check. Meanwhile, the federal minimum wage has remained at $5.15 an hour since September 1, 1997. In fact, after adjusting for inflation, the value of the minimum wage is at its second lowest level since 1955.
At the same time, the pharmaceutical industry spends over $100 million on lobbying activities to stop lower drug prices, according to the Center for Public Integrity. There are 1,274 registered pharmaceutical lobbyists in Washington, D.C. and during the 2004 election cycle, the drug industry contributed $1 million to President Bush. For an industry that makes $500 billion on a global basis, spending one million on a president or $100 million on lobbying is pocket change.
This money was well spent. It stopped legalized import of cheaper drugs and instead we got a new Medicare drug program. This $720 billion law includes $139 billion in profits to drug manufactures and $46 billion in subsidies to HMOs and private insurance plans. The program has been such a disaster for our poor that at least twenty-four states have enacted emergency measures to ensure access to medications in the last couple of weeks . That's what a million dollars buys in Washington.
So how could this happen? The answer is simple. The American democracy has been stolen by our new class of Robber Barons--the CEO's of our big corporations. A political system dependent on charity from rich men in hand-tailored suits with $100 million retirement packages is no democracy. It is a kleptocracy. It is not what our founding fathers envisioned.
But we have the power to change this; to free our corporations from sticky-fingered CEO's, to free our elected representatives from "pay to play money" and to free our people from all these tyrants. We have the power to be free, at last.
Can we change this? Can we build a new future? I believe that we can. I believe this because we live in a country that could rid itself of slavery, a country that finally allowed women to vote; a country that has come a long way in the short time since the civil rights movement began. But early on, each of those incredible changes was fiercely opposed by those in power, and none took place without great sacrifice. To free our corporations from sticky-fingered CEOs, to free our elected representatives from "pay to play money," and to free our people from these tyrants is going to take sacrifice and time. Perhaps a long, long time. In short, it will require a second American revolution. And I believe that one day it will happen.
Thursday, March 30, 2006
Monday, March 27, 2006
The Mobs
The Mobs against the President
At the present time, President Bush has the lowest popularity rankings of its presidency, at the same time the last two events: the port deal and the immigration debate are taking another toll in the negative side.
I wonder if they will be only two events of this kind, public outrage with the UAE Port deal and the immigration reform (claims for action) are just examples of mob-brat behavior, in today’s globalized markets and WTO courts, there is a price for promoting special protectionism.
The UAE will not bring this to the WTO but the shareholders of BO that approved the deal might pull a recourse for compensation.
The president is getting criticized from all flanks. The fact of the matter is, in both cases the position of the President is correct, even if the brat-mobs decided the opposite.
In the port case: if it is not good for UAE to run ports in the same should reciprocal for US companies running foreign ports. For that matter, any other national foreign strategic interest businesses run by american corporations will be question in the near futere. Check Point software had to pull out of buying a software company this week, it seems that we are in a roll.
Many American corporations are engaged in running vital foreign government infrastructures, and it should not be surprising to see the same policy used by congress to those american corporations. The idea that it will not be used by other countries against American corporations running critical operations in those nations is just pollianish.
The port case will thread water because in the most likely scenario, the UAE will be offered to calm the waters with some other alternative to the direct investment in BO, including tax payers funded loans for infrastructure in Dubai City or other similar preferential action.
The mob posturing can be justified by sheer blindness in the face of free markets and global trade. This posturing falls in all merits of decent behavior.
Teh question is: are we for fair trade or we are protectionist at convenience.
USA claiming flag around the planet will have one more caveat: you can instill fear in others but eventually protectionism will be use in kind and fair trade dialogues.
The immigration situation falls within the same merit the fair trade doctrine. In this case, the solution is far simple and there is only one beneficiary that is the present tax payers.
Clearly there is racism involved in the debate, but if NAFTA has done something is to impoverish its members in all Latin American countries. The rpesent has a culprit and that is NAFTA and its proponents, that happen to be the same Congress we have today lynching inmigration.
The failure of leadership from the US and Mexico in lifting people's standards to deter mass iunmigration has failed. Poor standards of living has created a larger problem that was promised to be resolved with NAFTA. It turns out that the deal of NAFTA benefited again the same crowd of the super connected plutocrats.
By now, borders with Mexico and Canada need to be eliminated. Free flow of merchandise and people will deliver some of the promises of NAFTA and instead of racism and xenophobia and market protectionism.
Instead of introversion and bully attitudes, evolution is in the direction of integration and assimilation. Mob idiocy is not a recipe for success.
Friday, March 17, 2006
It's worse, way worse, than it sounds.
The trade deficit's deep bite
A $225 billion U.S. trade deficit means we're deeper in the red than 20 years ago and sinking fast. Among the impacts: A lower standard of living for all of us in the years ahead.
By Jim Jubak
It's worse, way worse, than it sounds.
Which is pretty frightening, since it certainly sounds really bad.
On Mar.14, the U.S. Bureau of Economic Analysis announced that the broadest measure of the U.S. trade deficit grew to $225 billion in the fourth quarter of 2005. That marked an increase of 21% from the $185 billion deficit in the third quarter of 2005. And the quarter's results drove the deficit for all of 2005 to $805 billion, a new record.
The current account deficit -- defined by economists as the combined balance on trade in goods and services plus income transfers between the U.S. and the rest of the world -- increased in the fourth quarter to 7% of U.S. gross domestic product (the most common measure of the U.S. national income). For all of 2005, the deficit was 6.4% of GDP.
In 1985, when the G7, then the club of the world's seven largest free-market economies, pushed through a major devaluation of the U.S. dollar in the Plaza Accord, the current account deficit was a mere 3.5% of U.S. gross domestic product. The good news is that the world is a lot more tolerant of a massive U.S. deficit with the rest of the globe than it was 20 years ago. The bad news is that we're running a lot deeper in the red than we were in 1985.
So how can I say that the news is actually worse than it sounds?
First, because if you look at the long trends driving the deficit numbers, they're still picking up steam. The momentum is running very strongly against the United States, and when you're talking about reversing the course of something as big as the U.S. or the global economy, momentum counts.
Second, because the deficit has become so large that there isn't any silver bullet that will let us get out of this hole painlessly and quickly.
And, third, the demographics of an aging world say that our creditors are going to need the money they've lent us not too far down the road in order to support their own retirements.
Depressed yet? Wait, I'm just getting warmed up.
Overseas investors buying U.S. assets
Let's take a look at the most ominous trend in the 2005 numbers.
Unlike the trade deficit, which just measures the difference between what we export in goods and services and what we import, the current account deficit also includes international flows of investment income. That's worked to the benefit of the United States over the decades since World War II because we've built up quite a big portfolio of overseas investments from real estate to ownership stakes in foreign companies to holdings of foreign bonds that pay income to the U.S. owners of those foreign investments. For all of 2005, that income flowing into the U.S. came to a whopping $466 billion, up 24% from 2004.
But for years, overseas investors have been buying our assets faster than U.S. investors buy foreign assets. In 2005, for example, U.S.-owned assets overseas increased by $492 billion, while foreign-owned assets in the U.S. increased by $1,293 billion. (Or $1.29 trillion, if you prefer.)
And as you'd expect, the faster growth in foreign ownership of U.S. assets has gradually increased the amount of income that overseas investors receive from the United States. In the fourth quarter, the income flow actually turned against the U.S. We sent $2.4 billion more in income overseas than we received. That was a shift from the $4.9 billion income surplus in favor of the United States in the third quarter of 2005, and only the second time EVER (or at least since there have been decent records) that income from investments has been in deficit for the United States. In 2004, the surplus from income was more than $30 billion. From 1980 to 1985, the annual average was above $30 billion, and from 1980 to 2004, the smallest annual surplus was $4.3 billion in 1998.
So the shift from surplus to deficit in the fourth quarter is a big deal. It quite probably marks the end of a long period when flows of income into the United States from U.S.-owned assets helped offset deficits in years when U.S. imports exceeded U.S. exports.
Trend is accelerating
A turning point like this is just the beginning of an accelerating trend. It's extremely likely that the income deficit will continue to grow for years to come, because foreign investors are increasing their ownership of U.S. assets -- an increase of $278 billion in the fourth quarter -- faster than U.S. investors are buying overseas assets -- an increase of $43 billion for the quarter.
And ownership of an asset today creates a stream of income for a lot of tomorrows.
A shift from an income surplus of $30 billion to the income deficit of the $10 billion or so some economists project for 2006 isn't much help if you're trying to balance an annual current account deficit north of $800 billion. But it becomes positively devastating if you add this trend to other trends now working to push the current account deficit higher in the years ahead.
Look at oil, for example. In 2005, the United States imported $176 billion in crude oil at an average cost per imported barrel of $46.78, according to the Census Bureau. Our trade deficit with OPEC (the Organization of the Petroleum Exporting Countries) came to $92 billion. That's less than half our huge deficit with China in 2005 of $202 billion, but it's still a significant part of the $805 billion record deficit in 2005.
And there's certainly a good chance that the price of that oil -- and hence the size of the U.S. trade and current account deficits -- will climb in the years ahead. On the same day that the fourth-quarter current account numbers hit the news, the president of OPEC said the organization's new price target was between the upper $50s and the lower $60s per barrel. That's a huge jump from the last announced price target of $22 to $28 a barrel.
There's an unfortunately long list of similar trends that are working to continue to push the U.S. current account deficit higher. The size of the U.S. surplus in agricultural products has been falling as U.S. consumers eat more specialty and out-of-season products from around the world. Higher U.S. interest rates will increase the income flowing to the overseas owners of U.S. financial assets. And so on…
But you get the idea.
No magic fix
It would be comforting to believe that this huge problem can be fixed by a single, simple act. That's why our politicians are so fond of "solutions" such as forcing China to revalue its currency, the yuan, so that Chinese goods become more expensive. Or of rhetorical solutions such as "The U.S. can grow its way out of this problem by making U.S. exports more competitive."
Well, when you're running an $800 billion current account deficit, "it don't work like that." In many categories, Chinese goods are so much cheaper than the alternatives and so embedded in the global supply chain that making the yuan more expensive would, for some painfully long period, just increase the profits of Chinese manufacturers and the size of the U.S. trade deficit with China.
And our chances of growing our way out of this mess? Since U.S. exports make up such a small percentage of the U.S. economy, exports would have to grow by 70%, Paul Ashworth of Capital Economics has estimated, to eliminate the deficit.
A slew of solutions
In truth, it's going to take the combination of a lot of different "solutions" to get us out of this fix.
Yes, we should work to increase U.S. productivity, because that will drive U.S. exports higher -- and because high U.S. productivity growth, relative to the rest of the developed world, will continue to attract the overseas investments that we'll need to finance our deficit while we dig ourselves out of this hole
Yes, we should put pressure on China to take down barriers in its markets that prevent U.S. companies in fields such as financial services from doing more business in China. And we should demand that the Chinese adopt adequate rules protecting intellectual property. Add that to some appreciation in the yuan, and the trade deficit with China will shrink. Gradually.
Yes, we should do everything we can to encourage economic growth in the rest of the world. The U.S. can't continue to pull the global economy -- even with strong assists from China and India.
Yes, U.S. consumers have to spend less and save more. The odds are that it will take a painful slowdown in the U.S. economy to produce the "spend less" result. Higher U.S. interest rates would go a long way toward creating that spend-less environment and encourage U.S. consumers to save more as well. Part of the U.S. savings "problem" is a result of the negative real interest rates that Alan Greenspan engineered to keep the economy from deflating after the popping of the tech stock bubble in 2000. But certainly, no rational economist expects people to save when banks pay 1% and inflation is 2%.
Yes, those of us who live in the U.S. are looking at a reduction in our standard of living. We've used borrowed money to live beyond our means, and the bill is coming due.
And most of all, we need to follow the first law of holes: When you find yourself in one, stop digging. We need to adopt policies on energy, government budget deficits, health care and education that won't put us even further in hock while we're trying to work our way out of this deficit.
We don't have an endless amount of time to take these steps. Japan, a major funding source for the U.S. current account deficit, is one of the most rapidly aging societies in the world. Japanese savers will need to keep more and more of their money at home to pay the costs of that aging. The Chinese, another society of savers, have only a relatively small window of opportunity for putting aside the money they'll need to pay for their own retirements and health care in a society virtually without pensions or health insurance.
All this may sound very abstract to you. Global problems do seem far away from the everyday tasks of getting the kids to school or paying the doctor.
So in my next column, I'll talk about how the U.S. trade deficit and the budget deficit in Washington have already put the squeeze on your future.
A $225 billion U.S. trade deficit means we're deeper in the red than 20 years ago and sinking fast. Among the impacts: A lower standard of living for all of us in the years ahead.
By Jim Jubak
It's worse, way worse, than it sounds.
Which is pretty frightening, since it certainly sounds really bad.
On Mar.14, the U.S. Bureau of Economic Analysis announced that the broadest measure of the U.S. trade deficit grew to $225 billion in the fourth quarter of 2005. That marked an increase of 21% from the $185 billion deficit in the third quarter of 2005. And the quarter's results drove the deficit for all of 2005 to $805 billion, a new record.
The current account deficit -- defined by economists as the combined balance on trade in goods and services plus income transfers between the U.S. and the rest of the world -- increased in the fourth quarter to 7% of U.S. gross domestic product (the most common measure of the U.S. national income). For all of 2005, the deficit was 6.4% of GDP.
In 1985, when the G7, then the club of the world's seven largest free-market economies, pushed through a major devaluation of the U.S. dollar in the Plaza Accord, the current account deficit was a mere 3.5% of U.S. gross domestic product. The good news is that the world is a lot more tolerant of a massive U.S. deficit with the rest of the globe than it was 20 years ago. The bad news is that we're running a lot deeper in the red than we were in 1985.
So how can I say that the news is actually worse than it sounds?
First, because if you look at the long trends driving the deficit numbers, they're still picking up steam. The momentum is running very strongly against the United States, and when you're talking about reversing the course of something as big as the U.S. or the global economy, momentum counts.
Second, because the deficit has become so large that there isn't any silver bullet that will let us get out of this hole painlessly and quickly.
And, third, the demographics of an aging world say that our creditors are going to need the money they've lent us not too far down the road in order to support their own retirements.
Depressed yet? Wait, I'm just getting warmed up.
Overseas investors buying U.S. assets
Let's take a look at the most ominous trend in the 2005 numbers.
Unlike the trade deficit, which just measures the difference between what we export in goods and services and what we import, the current account deficit also includes international flows of investment income. That's worked to the benefit of the United States over the decades since World War II because we've built up quite a big portfolio of overseas investments from real estate to ownership stakes in foreign companies to holdings of foreign bonds that pay income to the U.S. owners of those foreign investments. For all of 2005, that income flowing into the U.S. came to a whopping $466 billion, up 24% from 2004.
But for years, overseas investors have been buying our assets faster than U.S. investors buy foreign assets. In 2005, for example, U.S.-owned assets overseas increased by $492 billion, while foreign-owned assets in the U.S. increased by $1,293 billion. (Or $1.29 trillion, if you prefer.)
And as you'd expect, the faster growth in foreign ownership of U.S. assets has gradually increased the amount of income that overseas investors receive from the United States. In the fourth quarter, the income flow actually turned against the U.S. We sent $2.4 billion more in income overseas than we received. That was a shift from the $4.9 billion income surplus in favor of the United States in the third quarter of 2005, and only the second time EVER (or at least since there have been decent records) that income from investments has been in deficit for the United States. In 2004, the surplus from income was more than $30 billion. From 1980 to 1985, the annual average was above $30 billion, and from 1980 to 2004, the smallest annual surplus was $4.3 billion in 1998.
So the shift from surplus to deficit in the fourth quarter is a big deal. It quite probably marks the end of a long period when flows of income into the United States from U.S.-owned assets helped offset deficits in years when U.S. imports exceeded U.S. exports.
Trend is accelerating
A turning point like this is just the beginning of an accelerating trend. It's extremely likely that the income deficit will continue to grow for years to come, because foreign investors are increasing their ownership of U.S. assets -- an increase of $278 billion in the fourth quarter -- faster than U.S. investors are buying overseas assets -- an increase of $43 billion for the quarter.
And ownership of an asset today creates a stream of income for a lot of tomorrows.
A shift from an income surplus of $30 billion to the income deficit of the $10 billion or so some economists project for 2006 isn't much help if you're trying to balance an annual current account deficit north of $800 billion. But it becomes positively devastating if you add this trend to other trends now working to push the current account deficit higher in the years ahead.
Look at oil, for example. In 2005, the United States imported $176 billion in crude oil at an average cost per imported barrel of $46.78, according to the Census Bureau. Our trade deficit with OPEC (the Organization of the Petroleum Exporting Countries) came to $92 billion. That's less than half our huge deficit with China in 2005 of $202 billion, but it's still a significant part of the $805 billion record deficit in 2005.
And there's certainly a good chance that the price of that oil -- and hence the size of the U.S. trade and current account deficits -- will climb in the years ahead. On the same day that the fourth-quarter current account numbers hit the news, the president of OPEC said the organization's new price target was between the upper $50s and the lower $60s per barrel. That's a huge jump from the last announced price target of $22 to $28 a barrel.
There's an unfortunately long list of similar trends that are working to continue to push the U.S. current account deficit higher. The size of the U.S. surplus in agricultural products has been falling as U.S. consumers eat more specialty and out-of-season products from around the world. Higher U.S. interest rates will increase the income flowing to the overseas owners of U.S. financial assets. And so on…
But you get the idea.
No magic fix
It would be comforting to believe that this huge problem can be fixed by a single, simple act. That's why our politicians are so fond of "solutions" such as forcing China to revalue its currency, the yuan, so that Chinese goods become more expensive. Or of rhetorical solutions such as "The U.S. can grow its way out of this problem by making U.S. exports more competitive."
Well, when you're running an $800 billion current account deficit, "it don't work like that." In many categories, Chinese goods are so much cheaper than the alternatives and so embedded in the global supply chain that making the yuan more expensive would, for some painfully long period, just increase the profits of Chinese manufacturers and the size of the U.S. trade deficit with China.
And our chances of growing our way out of this mess? Since U.S. exports make up such a small percentage of the U.S. economy, exports would have to grow by 70%, Paul Ashworth of Capital Economics has estimated, to eliminate the deficit.
A slew of solutions
In truth, it's going to take the combination of a lot of different "solutions" to get us out of this fix.
Yes, we should work to increase U.S. productivity, because that will drive U.S. exports higher -- and because high U.S. productivity growth, relative to the rest of the developed world, will continue to attract the overseas investments that we'll need to finance our deficit while we dig ourselves out of this hole
Yes, we should put pressure on China to take down barriers in its markets that prevent U.S. companies in fields such as financial services from doing more business in China. And we should demand that the Chinese adopt adequate rules protecting intellectual property. Add that to some appreciation in the yuan, and the trade deficit with China will shrink. Gradually.
Yes, we should do everything we can to encourage economic growth in the rest of the world. The U.S. can't continue to pull the global economy -- even with strong assists from China and India.
Yes, U.S. consumers have to spend less and save more. The odds are that it will take a painful slowdown in the U.S. economy to produce the "spend less" result. Higher U.S. interest rates would go a long way toward creating that spend-less environment and encourage U.S. consumers to save more as well. Part of the U.S. savings "problem" is a result of the negative real interest rates that Alan Greenspan engineered to keep the economy from deflating after the popping of the tech stock bubble in 2000. But certainly, no rational economist expects people to save when banks pay 1% and inflation is 2%.
Yes, those of us who live in the U.S. are looking at a reduction in our standard of living. We've used borrowed money to live beyond our means, and the bill is coming due.
And most of all, we need to follow the first law of holes: When you find yourself in one, stop digging. We need to adopt policies on energy, government budget deficits, health care and education that won't put us even further in hock while we're trying to work our way out of this deficit.
We don't have an endless amount of time to take these steps. Japan, a major funding source for the U.S. current account deficit, is one of the most rapidly aging societies in the world. Japanese savers will need to keep more and more of their money at home to pay the costs of that aging. The Chinese, another society of savers, have only a relatively small window of opportunity for putting aside the money they'll need to pay for their own retirements and health care in a society virtually without pensions or health insurance.
All this may sound very abstract to you. Global problems do seem far away from the everyday tasks of getting the kids to school or paying the doctor.
So in my next column, I'll talk about how the U.S. trade deficit and the budget deficit in Washington have already put the squeeze on your future.
Sunday, March 12, 2006
The Kingdom of Idiocy
The latest award winning idiotic behavior comes from an irresistible out loud clamor opposing the deal, by a foreign company holding trust from the UAE, controlling the ports operations in three major US cities.
This hypocritical posturing is the most idiotic behavior posed by politicos, media and other irrational morons in a long while.
Let’s start by looking at the radical and biased news reporting that emanates from FoxNews. Coincidentally, Fox News parent company News Corp happens to have as majority share-owner a corporation named Kingdom Holding Company. This holding company is led by Prince Alwaleed Bin Tabal, an articulate and brilliant individual who runs the Saudi Royal family trust. At the same time Fox has become the number one media outlet of disinformation, dispersing lies, baseless commentary, ran by a radical right wing apologist, and with a corporate parent manager named Rupert Murdoch, who is an expert at democracy manipulation and election media intoxication.
Kingdom Holdings also is the largest shareowner in Citibank. By now we all know that Andrew Weil, was “asked to retire” as CEO because his runs with regulators and the large sums of fines accumulated by its operation and other penalties. Among the things that brought such fiasco to Citi where: allowing Citibank to launder dirty money of drug trafficking from Mexico’s Carlos Salinas de Gortari ,former president of Mexico, who is personal friend of Robert Rubin –Present Chairman of Citibank and secretary of the Treasury under Bill Clinton- and great friend of the Bush family as their are friends and "brothers" with the Royal family of Saudi Arabia.
Today Carlos Salinas de Gortari is exiled in Ireland and has a vacation home in Dubai. The list of irregularities at Citibank is so long that it took two truck loads to move the files with evidence of misbehavior. The latest nightmares for Citi are around the on going investigation of Pinochet, Argentinian president LaRua laundering charges of public money under "advice" of Citi or the Osama Bin-laden family bank accounts. If you worry who moves containers in which port, better start to worry about who allows the money to move around to finance the deals.
Other mundane things Kingdom Holding are involved include, luxury Hotels as the Four Seasons, hey, leave no bed unmade in your way to Washington, the Plaza Hotel in NYC, Samba Financial Group the largest financial group in SA or the grandiose Hotel George V in Paris.
So why the present attack to the UAE and not Saudi Arabia?
It is a convenient attack falling in the lap of the President. Moreover, it is an attack based on racism and islamophia, this is not far away from other phobic behavior and biases used to twist politics and the herd’s brains. The illegal Mexican border crossing, of latest headliners, events that for 200 years were accepted as common, got a reprieve thanks to the infatuation of the "media" with the gaffe of the UAE.
In the kingdoms of idiocy the herds move in sync.
You can blame it on the President and his crony plutocrats with absolutist behavior but do not forget to put most of the blame in the Congressional crowd on election day, who were the ones who started all this sell-off, from the fascists driven republicans to the reactionary right wing democrats.
Attacking the sale-off to foreign companies of key strategic operations is old news and misplaced after so many years of foreign ownership of key assets.
"Dud" all these things go against the Party of Davos.
It is difficult to resist all this enjoyment thanks to the Kingdom of Idiocy.
US focus on risk
US focus on risk 'poses threat to economy'
All Financial Times News
Michael Chertoff, the US homeland security secretary, has warned that emotional responses by Congress to security issues, such as the recent flare-up over ports, threaten to damage the nation's economy.
"We do not want a regime in which we are so focused on risk to the exclusion of all else that we lock everything down and we destroy our country," Mr Chertoff told the FT. In his first interview since congressional opposition forced Dubai Ports World to divest the five US terminals it obtained through its acquisition of Britain's P&O, Mr Chertoff said Congress underestimated the progress made by the Bush administration in promoting port security.
While conceding that more work was needed, he stressed that the administration had to focus on "intelligent security" in a way that "doesn't burn down the village in order to save it".
In the wake of the ports controversy, some lawmakers have argued that all cargo containers entering the US should be inspected. But Mr Chertoff said such a move would be "tantamount to shutting the ports down".
"Anybody who is thinking about that ought to go to their local port community and ask the longshoremen how they feel about losing their jobs, and Wal-Mart and Target about how they feel about losing goods coming in," said Mr Chertoff. "There would be a tremendous negative side-effect."
Mr Chertoff said he was surprised the US business community had not been more vocal on the ports dispute and other homeland security issues that could hurt their companies.
"The business community...doesn't really get as aggressive as I would imagine that they would be on issues that really strike at the heart of their interests," he said. "Every business has employees. If there is anything people care about...in politics, it's employment."
"If I were in the shipping industry, the maritime industry, the cargo industry. I would be concerned about measures that would strangle business and put workers out of work in this country."
Asked whether the administration should shoulder the blame for the congressional backlash over the ports deal, the security chief replied: "There are times when, if we were quicker in explaining what we do, we might avert a certain amount of heartburn." Sometimes the hard thing to anticipate was "when the reaction is not based on the facts necessarily but based upon some emotional reaction."
On whether the administration's constant warnings about terrorism were making the public overly sensitive to security risks, Mr Chertoff said: "We have to have alertness and care but not hysteria or anxiety?.?.?.?We don't want to build a system that smothers us as a society, whether it is civil liberties or our economy."
Mr Chertoff, who faced calls for his resignation following the administration's dismal response to Hurricane Katrina last year, declined to say whether he had considered stepping down. "For me to quit just because the going got rough was not what I think is my responsibility," he said.
All Financial Times News
Michael Chertoff, the US homeland security secretary, has warned that emotional responses by Congress to security issues, such as the recent flare-up over ports, threaten to damage the nation's economy.
"We do not want a regime in which we are so focused on risk to the exclusion of all else that we lock everything down and we destroy our country," Mr Chertoff told the FT. In his first interview since congressional opposition forced Dubai Ports World to divest the five US terminals it obtained through its acquisition of Britain's P&O, Mr Chertoff said Congress underestimated the progress made by the Bush administration in promoting port security.
While conceding that more work was needed, he stressed that the administration had to focus on "intelligent security" in a way that "doesn't burn down the village in order to save it".
In the wake of the ports controversy, some lawmakers have argued that all cargo containers entering the US should be inspected. But Mr Chertoff said such a move would be "tantamount to shutting the ports down".
"Anybody who is thinking about that ought to go to their local port community and ask the longshoremen how they feel about losing their jobs, and Wal-Mart and Target about how they feel about losing goods coming in," said Mr Chertoff. "There would be a tremendous negative side-effect."
Mr Chertoff said he was surprised the US business community had not been more vocal on the ports dispute and other homeland security issues that could hurt their companies.
"The business community...doesn't really get as aggressive as I would imagine that they would be on issues that really strike at the heart of their interests," he said. "Every business has employees. If there is anything people care about...in politics, it's employment."
"If I were in the shipping industry, the maritime industry, the cargo industry. I would be concerned about measures that would strangle business and put workers out of work in this country."
Asked whether the administration should shoulder the blame for the congressional backlash over the ports deal, the security chief replied: "There are times when, if we were quicker in explaining what we do, we might avert a certain amount of heartburn." Sometimes the hard thing to anticipate was "when the reaction is not based on the facts necessarily but based upon some emotional reaction."
On whether the administration's constant warnings about terrorism were making the public overly sensitive to security risks, Mr Chertoff said: "We have to have alertness and care but not hysteria or anxiety?.?.?.?We don't want to build a system that smothers us as a society, whether it is civil liberties or our economy."
Mr Chertoff, who faced calls for his resignation following the administration's dismal response to Hurricane Katrina last year, declined to say whether he had considered stepping down. "For me to quit just because the going got rough was not what I think is my responsibility," he said.
Tuesday, March 07, 2006
Why the Rich Get Richer
http://finance.yahoo.com/columnist/article/richricher/2844?p=1
by Robert Kiyosaki
Investing: Assets That Are Lifeboats in a Shaky Future
*Another great piece by Kiosaki. If you have not read his books and follow his columns at yahoo finance, I wil suggest you do, take a minute and buy his books and read them with time to grasp his message, the books and the subscription are worth every single penny many times over. His views are unbiased and well thought out with timing of good decissions on his side.
Investing: Assets That Are Lifeboats in a Shaky Future
by Robert Kiyosaki
Tuesday, March 7, 2006
As retirement nears, millions of Baby Boomers are scrambling for deck chairs on the Titanic. For about 30 years now I have been watching a major financial disaster developing. Its contributing factors include the shaky financial foundations of Social Security and Medicare, compounded by most Americans' lack of financial education and entitlement mentality.
As a result, my investment strategy is to get out of anything that's "paper with ink on it." I explain what this means and what investments I favor later in this article.
Speed and Agility Will Win the Day
But first, let me discuss the iceberg known as Financial Excess, which I believe lies before the SS U.S.A. In the last three decades, we as a nation have only increased our excesses, accelerated our mistakes, and mismanaged America's wealth. Turning the ship's wheel at this time -- hard left or hard right -- will do no good. It's too late.
So it's not a good time to be captain of SS U.S.A., or the skipper of SS Big Mutual Fund or SS Pension Plan. In the coming years, I believe big will not be better.
Instead, for many of us, it's better to be a small, disciplined investor. I believe speed, financial education, and maneuverability will prove to be better than size. It'll be far better to be in a well-stocked lifeboat than be treading water with millions of pensioners and laid-off workers, many with their party hats still on.
Why so pessimistic? Well, I would rather be known as a realist. Most of us are aware of the problems ahead. Some are:
1. A pervasive entitlement mentality.
It's not just the poor who are expecting a government hand out. Everyone from senators to farmers and retirees expect it, too. Unfortunately, this problem is not an issue for my generation, the Baby Boomers, but will fall squarely on the shoulders of the children and grandchildren of Baby Boomers.
2. Social Security is a small problem when compared to Medicare.
As of 2004, Social Security was a $10 trillion off-balance-sheet liability. Medicare is a $64 trillion liability. The Social Security fund will begin to run in the red around 2015. The Medicare fund is already operating in the red, a situation that started in 1992. The combined $74 trillion off-balance sheet IOU to Americans is more money than is available in all the stock and bond markets of the world. This means life or death will be determined by your wallet, not your doctor.
3. A lack of financial education.
Many people do not know such basic realities as:
A 401(k) is not a retirement plan (it's a savings plan).
Bonds aren't safe.
Saving money is risky.
Why mutual funds have such low returns.
What is inflation.
Why workers are taxed more than owners.
Why pensions are disappearing -- legally.
People know there's a problem, yet they continue to do the same things. Today millions of people have trillions of dollars riding in the stock market, their homes, savings plans, and bonds -- financial assets that worked in the past but probably won't work when the SS U.S.A. hits the iceberg.
Investing in Tangible ValueAs an investor, I'm investing against the U.S. dollar. Let me be clear: I'm not investing against the U.S. -- America is a rich, productive country. But our dollar is toast. Those who have followed my articles know that in 1971, our dollar stopped being money and became a currency, a piece of paper with ink on it (see "Why Savers Are Losers").
In my opinion, that means getting out of anything else that's "paper with ink on it" -- anything backed by the full faith and confidence of the SS U.S.A. That means I'm very suspicious of stocks, bonds, savings, and mutual funds, especially if they're U.S. dependent. Although I love real estate, I'm suspicious of any piece of property that doesn't generate cash flow today. I don't invest in future appreciation of real estate -- not today, at least.
Today, I invest in assets with tangible value, especially assets that go up in price as the dollar's purchasing power sinks. Today, I have large positions in gold, silver, and oil.
For the small investor, I believe buying silver coins is a safe bet. As the dollar drops, silver will hold its value or go up. I don't recommend buying coins for numismatic value (rarity). A friend has his son buy one silver dollar a week instead of saving money in the bank. As I write this, that's worth about $12 a week. He keeps the coins in a safe-deposit box. It's not big investing -- but it's a great habit.
In today's economic environment, it's better to save silver than to save paper with ink on it, and that includes cash, mutual funds, stocks, and bonds. If it seems unpatriotic to short the dollar and other forms of U.S. paper, then buy a few U.S. silver and gold coins. While I'm bullish on America, I've been very bearish on our dollar for years.
by Robert Kiyosaki
Investing: Assets That Are Lifeboats in a Shaky Future
*Another great piece by Kiosaki. If you have not read his books and follow his columns at yahoo finance, I wil suggest you do, take a minute and buy his books and read them with time to grasp his message, the books and the subscription are worth every single penny many times over. His views are unbiased and well thought out with timing of good decissions on his side.
Investing: Assets That Are Lifeboats in a Shaky Future
by Robert Kiyosaki
Tuesday, March 7, 2006
As retirement nears, millions of Baby Boomers are scrambling for deck chairs on the Titanic. For about 30 years now I have been watching a major financial disaster developing. Its contributing factors include the shaky financial foundations of Social Security and Medicare, compounded by most Americans' lack of financial education and entitlement mentality.
As a result, my investment strategy is to get out of anything that's "paper with ink on it." I explain what this means and what investments I favor later in this article.
Speed and Agility Will Win the Day
But first, let me discuss the iceberg known as Financial Excess, which I believe lies before the SS U.S.A. In the last three decades, we as a nation have only increased our excesses, accelerated our mistakes, and mismanaged America's wealth. Turning the ship's wheel at this time -- hard left or hard right -- will do no good. It's too late.
So it's not a good time to be captain of SS U.S.A., or the skipper of SS Big Mutual Fund or SS Pension Plan. In the coming years, I believe big will not be better.
Instead, for many of us, it's better to be a small, disciplined investor. I believe speed, financial education, and maneuverability will prove to be better than size. It'll be far better to be in a well-stocked lifeboat than be treading water with millions of pensioners and laid-off workers, many with their party hats still on.
Why so pessimistic? Well, I would rather be known as a realist. Most of us are aware of the problems ahead. Some are:
1. A pervasive entitlement mentality.
It's not just the poor who are expecting a government hand out. Everyone from senators to farmers and retirees expect it, too. Unfortunately, this problem is not an issue for my generation, the Baby Boomers, but will fall squarely on the shoulders of the children and grandchildren of Baby Boomers.
2. Social Security is a small problem when compared to Medicare.
As of 2004, Social Security was a $10 trillion off-balance-sheet liability. Medicare is a $64 trillion liability. The Social Security fund will begin to run in the red around 2015. The Medicare fund is already operating in the red, a situation that started in 1992. The combined $74 trillion off-balance sheet IOU to Americans is more money than is available in all the stock and bond markets of the world. This means life or death will be determined by your wallet, not your doctor.
3. A lack of financial education.
Many people do not know such basic realities as:
A 401(k) is not a retirement plan (it's a savings plan).
Bonds aren't safe.
Saving money is risky.
Why mutual funds have such low returns.
What is inflation.
Why workers are taxed more than owners.
Why pensions are disappearing -- legally.
People know there's a problem, yet they continue to do the same things. Today millions of people have trillions of dollars riding in the stock market, their homes, savings plans, and bonds -- financial assets that worked in the past but probably won't work when the SS U.S.A. hits the iceberg.
Investing in Tangible ValueAs an investor, I'm investing against the U.S. dollar. Let me be clear: I'm not investing against the U.S. -- America is a rich, productive country. But our dollar is toast. Those who have followed my articles know that in 1971, our dollar stopped being money and became a currency, a piece of paper with ink on it (see "Why Savers Are Losers").
In my opinion, that means getting out of anything else that's "paper with ink on it" -- anything backed by the full faith and confidence of the SS U.S.A. That means I'm very suspicious of stocks, bonds, savings, and mutual funds, especially if they're U.S. dependent. Although I love real estate, I'm suspicious of any piece of property that doesn't generate cash flow today. I don't invest in future appreciation of real estate -- not today, at least.
Today, I invest in assets with tangible value, especially assets that go up in price as the dollar's purchasing power sinks. Today, I have large positions in gold, silver, and oil.
For the small investor, I believe buying silver coins is a safe bet. As the dollar drops, silver will hold its value or go up. I don't recommend buying coins for numismatic value (rarity). A friend has his son buy one silver dollar a week instead of saving money in the bank. As I write this, that's worth about $12 a week. He keeps the coins in a safe-deposit box. It's not big investing -- but it's a great habit.
In today's economic environment, it's better to save silver than to save paper with ink on it, and that includes cash, mutual funds, stocks, and bonds. If it seems unpatriotic to short the dollar and other forms of U.S. paper, then buy a few U.S. silver and gold coins. While I'm bullish on America, I've been very bearish on our dollar for years.
Sunday, March 05, 2006
Ignoring The Obvious
The present prevalent intended behavior of ignoring the obvious is as much ideological, hypocritical, arrogant, abusive, ignorant as it is an exercise of self-denying reality.
Those who intend their behavior to ignore the obvious usually are driven by short term greed with corrupt moral guidance.
Those who acknowledge the obvious, they should bring their energy to the front at first, we all must try to educate deniers of the obvious to the reality of the obvious.
Second, if the effort is futile we must defy their ignorance by imposing the reality in front of them by using rational means.
This could mean participating in local dialogue with elected officials, writing letters to news papers or even taking the courageous step to run for any elected office.
The obvious today is the research results of weather change and its consequences.
When Warren Buffet starts to postulate weather change as a rational variable to increase liability insurance rates, then, we better start paying attention.
Warren Buffet’s action and insurers, in top of the thousand of researchers that are raising the flags on weather change warnings, it is something we must stop be indifferent, and take positive and serious actions to change our present path and act on the recommendations of experts, but we cannot stand still and continue this route if we want to have an livable planet as legacy for our future generations.
Anyone with kids should start to take the responsibility of leaving a better earth to the next generation. A better hearth than they encountered, but it seems that this is not going to happen if the apathy we are experiencing in the subject is not addressed.
The consequences of weather change and ignorance are starting to be too obvious to ignore as hurricane Katrina proved in the Mississippi and Alabama, or the heat wave in France that killed 12,000 two years ago, or the Monsoon patterns of past years that are killing thousands every year, or the long rain patterns in areas that are too populated to be safe to reside, and societies are not really to confront human disasters.
We might think the news of glaziers melting, might not have clear impact on us today, but they do. We might think that change on concentration of pollutants from the US, China and India are not changing heat air patterns and destroying defenses for sun heating pattern in the soil. Scientists are crying out loud saying these patterns changes are dangerously serious and very real.
I am not sure if all the negative and doom and gloom is as hard and bad as it is stated.
I know one thing, scientists are the ones who have made their lives to study this planet, and most of us only hold biased opinions and we are not the ones to be debating the science presented with overwhelming data. If erring in the side of prudence has made great leaders, our present leaders denying the obvious on weather change are plain cowards by walking away of their responsibilities and the future generations for not acting with prudence and pro-actively addressing the necessary changes to bring earth back to balance.
The numbers behind the lies
Economist John Williams says ‘real’ unemployment and inflation numbers -- figured the old-fashioned way -- may be two or three times what the government admits. Here’s why, and what it means for Social Security.
By Bill Fleckenstein
Fun with numbers.
Corporate America likes to play that game, the better to boost stock prices. Folks might be surprised to learn that "Governmental" America also plays the game in its compilation of macroeconomic data. Beneath the surface are undesirable, sobering consequences for us all.
Last weekend, the always-terrific Kate Welling published an interview with an economist named John Williams. It will be available on the free portion of her "pay" site via this link starting March 11. This article is the first one that I have seen in which all the flaws in the government data, pertaining to the Consumer Price Index, unemployment, Gross Domestic Product, etc., are disclosed in one piece by someone who's been following the data for a long time. Start investing with $100.
I have been aware of nearly all the statistical tricks used by the government since they were implemented. Nonetheless, seeing them collectively described in one article is incredibly sobering. Having said that, there is a bit more "black helicopter" insinuation and fewer data points than I would like to see in an article such as this. However, the main points are the math that most folks need to know, but likely do not.
Once you read it, think about it and understand it, you will see why so many thoughtful people -- like Jim Grant, Warren Buffett, Marc Faber, Bill Gross, Fred Hickey and Paul Volcker -- have grave concerns about the future of the dollar (due to the macro imbalances that exist today).
In fact, reading this article, you will conclude that there's no way out, short of running the printing presses. The problem with that end game: At some point, foreigners will revolt. One can only hope that, somehow, there will be a way out. But without an understanding of the issues, folks will have no way to react as events unfold, and adjust their assets as we get more clues as to how all this will play out.
Thus, I would encourage everyone to print out the article and read it as many times as necessary, in order to gain a full understanding of the issues. Since we don't know at what rate some of these problems will start to impact the markets, all we can do is be prepared -- by having our insurance policies (in the form of the metals and foreign currencies), and then being alert to signs that the beginning of a chain reaction may be under way. Meanwhile, to pique folks' interest in the article, I'm going to take the time to provide some "Cliffs Notes" here.
Jobs data don't count the down-and-out
Williams starts by discussing the headline economic data: "Real unemployment right now -- figured the way that the average person thinks of unemployment, meaning figured the way it was estimated back during the Great Depression -- is running about 12%. Real CPI right now is running at about 8%. And the real GDP probably is in contraction." (By "real," he means calculating the data the way they used to be calculated, not as inflation-adjusted.)
He then explains how the employment data are compiled, noting that 5 million chronically unemployed people are not included in the statistics. In fact, there are seven or eight different employment statistics. One called U-3 is the official one. The broadest one, U-6, currently shows unemployment as running around 8.4%. As he explains, the one that's the most historically consistent is running around 12%.
On the Potomac: Reverence for reverse-engineering
Williams differentiates between two data-manipulation practices. One is "systemic manipulations, where methodologies are changed." That's done in order to align the government's view of the world with the world, i.e., make things look better than they are. The second practice is out-and-out fudging of the data to produce whatever result is desired. Williams describes instances where various administrations have literally reverse-engineered the data to achieve that result (though politics is not the main purpose of the article).
For those not familiar with "substitution," he explains the practice's evolution in the CPI calculations. The concept of substitution was a concoction of Alan Greenspan and Michael Boskin, who basically argued that if one item were too expensive, consumers would substitute that with a cheaper one. Williams' response: "The problem is that if you allow substitutions, you aren't measuring a constant standard of living. You're measuring the cost of survival. You can keep substituting down and have people buy dog food instead of hamburger. It happens. But that's not the original concept behind the CPI."
That ticking sound? Social Security
Williams says that the government's motive in all of this, if there is a motive (of the government collectively; don't picture a group of men cooking up something in a back room), is its desire to put a favorable spin on all the data.
Another motive? Transfer payments like Social Security are indexed to the CPI, and they would be far higher if the CPI were accurate. In fact, says Williams, if the "same CPI were used today as was used when Jimmy Carter was president, Social Security checks would be 70% higher." That's seven-zero.
Though Williams doesn't get much into hedonics, he does talk about the inflation-understating impact of geometric weighting versus arithmetic weighting in the CPI statistics: "Geometric weighting ... has the 'benefit' that if something goes up in price, it automatically gets a lower weight, and if it goes down in price, it automatically gets a higher weight."
Then for the ticking time bomb: Social Security. The proceeds from withholding do not go into a lockbox or trust fund. They are spent, thereby reducing the size of the stated deficit. More importantly, he notes that the government's accounting for the deficit doesn't include any accruals for Social Security or Medicare liability.
In fact, if that were done and the government used GAAP accounting, the deficits for 2003, 2004, and 2005 would each have been around $3.5 trillion. That's a trillion, not billion. In 2004 alone, the deficit on an accrual basis would have been $11.1 trillion, due to a huge one-time spike for setting up the Medicare drug benefits. In essence, as he points out, we're piling up additional liabilities in an amount roughly equivalent to our total GDP every three years.
Lots of these imbalances have existed for some time, and they haven't mattered. Such macro problems only matter when they matter. Once that point in time is reached, events have a way of swiftly getting completely out of control -- which is why one has to understand the nuances and be alert for potential signs of chain reaction, as I mentioned earlier.
Charge that Maybach to my imputed income
Returning to the subject of GDP, Williams illuminates a wrinkle that I had not known about, called "imputations": They are "an outgrowth of the theoretical structure of the national income accounts. Any benefit a person receives has an imputed income component. If you're a homeowner, the government assumes that you pay yourself rent on your house, so that's rental income. ... Imputed interest income, for instance, accounted for 21% of all personal interest income in 2002, and was growing at an annual rate of over 8%. Meanwhile, fully 62% of total rental income that year was the imputed variety."
He goes on to point out that folks really aren't doing that well, which is why their incomes aren't growing, which is why they've borrowed money. And that's why understanding the housing ATM is so important -- because as that sputters to a halt, folks will be stuck in the same place they were before (which precipitated the borrowing, i.e., not enough income growth). Only now, they're going to be stuck with incremental debt of their own creation.
What festers underneath the data
Next, he strings together the stock-market and housing bubble, for a summation of where we are: "When that (stock) bubble burst (in 2000), without a foundation of strong income growth, or a financially sound consumer, it triggered a recession that was a lot longer and deeper than the government would have you believe.
"In fact, I contend that what we are in now is a protracted structural change that goes back to the beginning of that 2000 recession, which eventually may be recognized as a double-dip downturn. We did have some recovery in 2003, but in 2005, you started to see signs of a downturn in a variety of leading indicators that I use."
That's not so far off from what I believe. In other words, if you really looked at the data and understood them, you'd see that what appears in the headline numbers is nowhere near what the real supporting data show. Our financial condition is a ticking time bomb. What none of us knows is when it implodes.
Bill Fleckenstein is president of Fleckenstein Capital, which manages a hedge fund based in Seattle. He also writes a daily "Market Rap" column on his Fleckenstein Capital Web site. His investment positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy, sell or hold any security. The views and opinions expressed in Bill Fleckenstein's columns are his own and not necessarily those of CNBC or MSN Money.
By Bill Fleckenstein
Fun with numbers.
Corporate America likes to play that game, the better to boost stock prices. Folks might be surprised to learn that "Governmental" America also plays the game in its compilation of macroeconomic data. Beneath the surface are undesirable, sobering consequences for us all.
Last weekend, the always-terrific Kate Welling published an interview with an economist named John Williams. It will be available on the free portion of her "pay" site via this link starting March 11. This article is the first one that I have seen in which all the flaws in the government data, pertaining to the Consumer Price Index, unemployment, Gross Domestic Product, etc., are disclosed in one piece by someone who's been following the data for a long time. Start investing with $100.
I have been aware of nearly all the statistical tricks used by the government since they were implemented. Nonetheless, seeing them collectively described in one article is incredibly sobering. Having said that, there is a bit more "black helicopter" insinuation and fewer data points than I would like to see in an article such as this. However, the main points are the math that most folks need to know, but likely do not.
Once you read it, think about it and understand it, you will see why so many thoughtful people -- like Jim Grant, Warren Buffett, Marc Faber, Bill Gross, Fred Hickey and Paul Volcker -- have grave concerns about the future of the dollar (due to the macro imbalances that exist today).
In fact, reading this article, you will conclude that there's no way out, short of running the printing presses. The problem with that end game: At some point, foreigners will revolt. One can only hope that, somehow, there will be a way out. But without an understanding of the issues, folks will have no way to react as events unfold, and adjust their assets as we get more clues as to how all this will play out.
Thus, I would encourage everyone to print out the article and read it as many times as necessary, in order to gain a full understanding of the issues. Since we don't know at what rate some of these problems will start to impact the markets, all we can do is be prepared -- by having our insurance policies (in the form of the metals and foreign currencies), and then being alert to signs that the beginning of a chain reaction may be under way. Meanwhile, to pique folks' interest in the article, I'm going to take the time to provide some "Cliffs Notes" here.
Jobs data don't count the down-and-out
Williams starts by discussing the headline economic data: "Real unemployment right now -- figured the way that the average person thinks of unemployment, meaning figured the way it was estimated back during the Great Depression -- is running about 12%. Real CPI right now is running at about 8%. And the real GDP probably is in contraction." (By "real," he means calculating the data the way they used to be calculated, not as inflation-adjusted.)
He then explains how the employment data are compiled, noting that 5 million chronically unemployed people are not included in the statistics. In fact, there are seven or eight different employment statistics. One called U-3 is the official one. The broadest one, U-6, currently shows unemployment as running around 8.4%. As he explains, the one that's the most historically consistent is running around 12%.
On the Potomac: Reverence for reverse-engineering
Williams differentiates between two data-manipulation practices. One is "systemic manipulations, where methodologies are changed." That's done in order to align the government's view of the world with the world, i.e., make things look better than they are. The second practice is out-and-out fudging of the data to produce whatever result is desired. Williams describes instances where various administrations have literally reverse-engineered the data to achieve that result (though politics is not the main purpose of the article).
For those not familiar with "substitution," he explains the practice's evolution in the CPI calculations. The concept of substitution was a concoction of Alan Greenspan and Michael Boskin, who basically argued that if one item were too expensive, consumers would substitute that with a cheaper one. Williams' response: "The problem is that if you allow substitutions, you aren't measuring a constant standard of living. You're measuring the cost of survival. You can keep substituting down and have people buy dog food instead of hamburger. It happens. But that's not the original concept behind the CPI."
That ticking sound? Social Security
Williams says that the government's motive in all of this, if there is a motive (of the government collectively; don't picture a group of men cooking up something in a back room), is its desire to put a favorable spin on all the data.
Another motive? Transfer payments like Social Security are indexed to the CPI, and they would be far higher if the CPI were accurate. In fact, says Williams, if the "same CPI were used today as was used when Jimmy Carter was president, Social Security checks would be 70% higher." That's seven-zero.
Though Williams doesn't get much into hedonics, he does talk about the inflation-understating impact of geometric weighting versus arithmetic weighting in the CPI statistics: "Geometric weighting ... has the 'benefit' that if something goes up in price, it automatically gets a lower weight, and if it goes down in price, it automatically gets a higher weight."
Then for the ticking time bomb: Social Security. The proceeds from withholding do not go into a lockbox or trust fund. They are spent, thereby reducing the size of the stated deficit. More importantly, he notes that the government's accounting for the deficit doesn't include any accruals for Social Security or Medicare liability.
In fact, if that were done and the government used GAAP accounting, the deficits for 2003, 2004, and 2005 would each have been around $3.5 trillion. That's a trillion, not billion. In 2004 alone, the deficit on an accrual basis would have been $11.1 trillion, due to a huge one-time spike for setting up the Medicare drug benefits. In essence, as he points out, we're piling up additional liabilities in an amount roughly equivalent to our total GDP every three years.
Lots of these imbalances have existed for some time, and they haven't mattered. Such macro problems only matter when they matter. Once that point in time is reached, events have a way of swiftly getting completely out of control -- which is why one has to understand the nuances and be alert for potential signs of chain reaction, as I mentioned earlier.
Charge that Maybach to my imputed income
Returning to the subject of GDP, Williams illuminates a wrinkle that I had not known about, called "imputations": They are "an outgrowth of the theoretical structure of the national income accounts. Any benefit a person receives has an imputed income component. If you're a homeowner, the government assumes that you pay yourself rent on your house, so that's rental income. ... Imputed interest income, for instance, accounted for 21% of all personal interest income in 2002, and was growing at an annual rate of over 8%. Meanwhile, fully 62% of total rental income that year was the imputed variety."
He goes on to point out that folks really aren't doing that well, which is why their incomes aren't growing, which is why they've borrowed money. And that's why understanding the housing ATM is so important -- because as that sputters to a halt, folks will be stuck in the same place they were before (which precipitated the borrowing, i.e., not enough income growth). Only now, they're going to be stuck with incremental debt of their own creation.
What festers underneath the data
Next, he strings together the stock-market and housing bubble, for a summation of where we are: "When that (stock) bubble burst (in 2000), without a foundation of strong income growth, or a financially sound consumer, it triggered a recession that was a lot longer and deeper than the government would have you believe.
"In fact, I contend that what we are in now is a protracted structural change that goes back to the beginning of that 2000 recession, which eventually may be recognized as a double-dip downturn. We did have some recovery in 2003, but in 2005, you started to see signs of a downturn in a variety of leading indicators that I use."
That's not so far off from what I believe. In other words, if you really looked at the data and understood them, you'd see that what appears in the headline numbers is nowhere near what the real supporting data show. Our financial condition is a ticking time bomb. What none of us knows is when it implodes.
Bill Fleckenstein is president of Fleckenstein Capital, which manages a hedge fund based in Seattle. He also writes a daily "Market Rap" column on his Fleckenstein Capital Web site. His investment positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy, sell or hold any security. The views and opinions expressed in Bill Fleckenstein's columns are his own and not necessarily those of CNBC or MSN Money.
Tuesday, February 28, 2006
Did You Miss Something
Making substantial amounts of money is an “asymmetric advantage” derived for the understanding of its innate characteristic. Money today is fiat currency -meaning, there is nothing but “will” behind the currency- with no real value except the cost of the paper is printed.
Most of the wealth created in the past 25 years has been accumulated by a very small amount of people using “asymmetric knowledge” using a Noble Laureate term.
I am not Nobel Laureate, thus, in my words it s called ripping of the assets of citizens using corruption as main tool.
Today, leaders all over the word and I mean all over, no excluding America, after individuals gain power, in business, policing or policy, there is a sudden hidden act of lowering on their standards of decency.
Greed must be an Ok action when you act alone in a forest, but it is not such good behavior when you have to fund schools, paved the streets we must walk or tax others.
By now, there is a large sense that something is amiss in the way we are living. The most clear is the mental state of global fear. In some cases this fear is well found. In other cases fear is government induced, by direct actions or use of media. From the reporting words of African killer bees to the next assassin in the making.
One constant realization by individuals is, as each fear accumulates, the way to act freely is reduce proportionally as fears increase.
By now, it should be not secret that citizen participation and leaders behavior via institutions and representation is at the same level of Louis XV, King George, Franco or Mussolini. Comparing T. Blair primer of England to King George is not that difficult, nor it is to equate most other present leaders to some other abusive leader.
From an exuberant greedy investor point of view oppression of citizens is the best investment decision can be made, because it is very easy to corrupt leaders with money. Those Russian billionaires moving around the planet are part of the pudding, Chinese communist billionaires -if sounds weird- are growing, or CEOs billion dollar packages in capitalist efficient markets are examples of citizens idiotic approach to accountability and participation.
Idiocy is not an uncommon treat that benefits abusers. Today, losing citizens freedoms via democracy is nothing it has happen out of the blue. When US Today reports that America has lost democracy, (US Today 2/28/06 last page section A)it is not something to shrub off the shoulder calmly and keep it the prevalent social apathy.
It is known of social scientists that people react to fear and are willing to give up their rights in fear of losing something bigger. Scientists also know that after the lose of rights occurs, it is not likely for citizens to regain their freedom of fearless behavior and their rights continue to deteriorate over time in a manner it is not perceived as alarming. That is the real alarming turning point, and I think many we think we have turned the danger point.
From a speculator point of view the capacity to corrupt leaders with money is and advantageous situation, in front of the rest of people, with not access to capital. This is understood to apply all humans. There is a wonderful study done by three retired generals of the Israeli secret service in which they quantify the amount of money need it to bribe a politician depending the action demanded from the individual. After a few years negotiating labor contracts I learned that it take very little money to buy people.
Today, democracy has lost its freedom and eventually those who sold it to the highest bidders will regret their actions and its consequences.
Most of the wealth created in the past 25 years has been accumulated by a very small amount of people using “asymmetric knowledge” using a Noble Laureate term.
I am not Nobel Laureate, thus, in my words it s called ripping of the assets of citizens using corruption as main tool.
Today, leaders all over the word and I mean all over, no excluding America, after individuals gain power, in business, policing or policy, there is a sudden hidden act of lowering on their standards of decency.
Greed must be an Ok action when you act alone in a forest, but it is not such good behavior when you have to fund schools, paved the streets we must walk or tax others.
By now, there is a large sense that something is amiss in the way we are living. The most clear is the mental state of global fear. In some cases this fear is well found. In other cases fear is government induced, by direct actions or use of media. From the reporting words of African killer bees to the next assassin in the making.
One constant realization by individuals is, as each fear accumulates, the way to act freely is reduce proportionally as fears increase.
By now, it should be not secret that citizen participation and leaders behavior via institutions and representation is at the same level of Louis XV, King George, Franco or Mussolini. Comparing T. Blair primer of England to King George is not that difficult, nor it is to equate most other present leaders to some other abusive leader.
From an exuberant greedy investor point of view oppression of citizens is the best investment decision can be made, because it is very easy to corrupt leaders with money. Those Russian billionaires moving around the planet are part of the pudding, Chinese communist billionaires -if sounds weird- are growing, or CEOs billion dollar packages in capitalist efficient markets are examples of citizens idiotic approach to accountability and participation.
Idiocy is not an uncommon treat that benefits abusers. Today, losing citizens freedoms via democracy is nothing it has happen out of the blue. When US Today reports that America has lost democracy, (US Today 2/28/06 last page section A)it is not something to shrub off the shoulder calmly and keep it the prevalent social apathy.
It is known of social scientists that people react to fear and are willing to give up their rights in fear of losing something bigger. Scientists also know that after the lose of rights occurs, it is not likely for citizens to regain their freedom of fearless behavior and their rights continue to deteriorate over time in a manner it is not perceived as alarming. That is the real alarming turning point, and I think many we think we have turned the danger point.
From a speculator point of view the capacity to corrupt leaders with money is and advantageous situation, in front of the rest of people, with not access to capital. This is understood to apply all humans. There is a wonderful study done by three retired generals of the Israeli secret service in which they quantify the amount of money need it to bribe a politician depending the action demanded from the individual. After a few years negotiating labor contracts I learned that it take very little money to buy people.
Today, democracy has lost its freedom and eventually those who sold it to the highest bidders will regret their actions and its consequences.
Monday, February 27, 2006
Getting rich is simpler than you think
The Basics
Getting rich is simpler than you think
By Harry Domash
Blend three ingredients -- a paycheck, discipline and time -- and, you, too, can be a millionaire. It's not always easy, but it's simple. And you have no excuse not to do it.
Here is the single most important thing you will ever hear about investing: Getting rich is simple.
Not easy, but simple.
And here is the second most important thing you will ever hear about investing: You have no excuse not to do it.
Only three ingredients are needed: income, discipline and time. Chances are, you already have two of them, income and time. All you need to do is add the third, discipline. And armed with the following knowledge, that key third ingredient may be a lot easier to find.
Here's how it works: Say you start with nothing, invest $500 (of your income) a month (a healthy discipline), and let your money ride (over time) in diversified investments. Long term, the stock market returns at least 10% annually. Assuming a 10% return, you’d have $102,000 after 10 years, $380,000 after 20 years, and $1.1 million in 30 years.
Here's a similar scenario: If you start with a nut of $50,000 and add only $250 per month, you’d have $180,000, $516.000 and $1.4 million after 10, 20, and 30 years, respectively. All this happens through the power of regular investing and a simple-but-powerful concept called compounding.
Compounding
What is compounding?
Compounding is the reinvestment of the interest you receive from the money you set aside. For example, if you invest $1,000 and earn 10% interest on your principal at the end of each year, you'll get in $100 interest at the end of the first year. If you reinvest that interest, the second year you would start with $1,100, and thus would earn $110 interest. If you stay with it, you’d more than double your money every eight years.
“Compounding," Albert Einstein said, "is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealth.” Einstein was a smart man. But you hardly have to be a genius to make this concept work for you.
The real magic of investing comes when you combine the surprising power of compounding with continuous and regular investments -- in other words, discipline.
The best way to make these continuous investments happen is by setting up an account with a broker or mutual fund that automatically deducts a fixed amount from your bank account every month. “Automatic” is the operative word here. Trust me, if you don’t set it up that way, it won’t happen. Instead, you’ll end up pouring money in when the market is soaring and skipping payments when it’s heading down. Eventually you’ll get discouraged and give up.
Dollar-cost averaging
The process of continuously investing a fixed dollar amount is called dollar-cost averaging -- a term that sounds much more technical than it is. Through dollar-cost averaging, you'll end up buying more shares when a stock or fund is down, and fewer when it’s up. For instance, say you’re investing $500 monthly in a stock trading initially at $50 per share; so the first time, you buy 10 shares. If the next month the stock moves up to $62.50 your regular purchase will net you only eight shares. However, if the stock drops to $41.67, you'll get 12 shares (not including any transaction fees).Start investing with $100.
It's easy to set up regular-investment mechanisms, thus harnessing the power of dollar-cost averaging. Mutual funds are the traditional way. But there are other outlets, as well, that allow you to apply the strategy with individual stocks or exchange-traded funds, which are baskets of stocks that identically track standard market indexes, such as the Dow Jones Industrial Average ($INDU).
Risk
Sure, investing in the stock market has risk. There’s always the chance the market will go nowhere for the next 20 or 30 years and you’ll end up no better than where you started. But there’s risk in everything, even CDs.
With CDs, your original investment isn't in danger. Most CDs are insured, and the federal government will step in and make you whole, even if your bank goes belly up.
But a problem crops up when something more sinister surfaces: inflation. At this writing, inflation, running at around 2%, is considered relatively benign. But is it?
Let’s do some math. Your real return is the interest you receive less the inflation rate. If your CD is paying 3% and the inflation rate is 2%, you’re only making 1% in real terms. If inflation takes off, say to 5%, your CD will probably be paying around 4%. In inflation-adjusted terms, you’ve lost 1%.
But it can get worse. Inflation hit 14% in the early 1980s. In such times, CDs and similar fixed-income investments don’t even come close to the inflation rate, meaning you’re losing serious money, in real terms.
By contrast, assets such as real estate and stocks tend to move with prices, and, over time, the stock market has outpaced inflation. For instance, in the 20-year period ending Dec. 31, 2001, the cumulative return of the market, as measured by the S&P 500 Index ($INX), was 1,606%, compared to 88% cumulative inflation over the same period.
What’s the point? Yes, there’s risk in investing in the market, but the odds are that continuous, regular investing combined with the power of compounding will make you rich.
The odds
If you count yourself a member of the “I want it now” generation, the idea of waiting 20 or 30 years to get rich probably sounds like a dumb idea.
Sure, there are faster ways to get rich. You could win the lottery, or pick the next Intel (INTC, news, msgs) or Wal-Mart Stores (WMT, news, msgs). But don’t quit your day job just yet. Your chances of winning big in the lottery run around 15 million to 1, at best.
Meantime, naturally, you would be sitting pretty if you had had the foresight to plunk significant cash into Intel or Wal-Mart 20 years ago. But consider this: You would have lost money if you’d picked Advanced Micro Devices (AMD, news, msgs) instead of Intel, and you’d be broke if you’d picked Kmart (SHLD, news, msgs) (which completed its merger with Sears Roebuck on March 27) instead of Wal-Mart. In both instances, your retirement plans would be history.
Here's the bottom line, like it or not: The fate of your retirement, your comfort in older age, probably lies in your commitment to the concepts laid out in the paragraphs above. For the vast majority of us, wealth creation is a slow and steady -- and powerful -- process. The tortoise almost always beats the hare.
It's not easy. But it's very, very simple.
At the time of publication, Harry Domash did not own or control shares in any of the equities mentioned in this column.
Getting rich is simpler than you think
By Harry Domash
Blend three ingredients -- a paycheck, discipline and time -- and, you, too, can be a millionaire. It's not always easy, but it's simple. And you have no excuse not to do it.
Here is the single most important thing you will ever hear about investing: Getting rich is simple.
Not easy, but simple.
And here is the second most important thing you will ever hear about investing: You have no excuse not to do it.
Only three ingredients are needed: income, discipline and time. Chances are, you already have two of them, income and time. All you need to do is add the third, discipline. And armed with the following knowledge, that key third ingredient may be a lot easier to find.
Here's how it works: Say you start with nothing, invest $500 (of your income) a month (a healthy discipline), and let your money ride (over time) in diversified investments. Long term, the stock market returns at least 10% annually. Assuming a 10% return, you’d have $102,000 after 10 years, $380,000 after 20 years, and $1.1 million in 30 years.
Here's a similar scenario: If you start with a nut of $50,000 and add only $250 per month, you’d have $180,000, $516.000 and $1.4 million after 10, 20, and 30 years, respectively. All this happens through the power of regular investing and a simple-but-powerful concept called compounding.
Compounding
What is compounding?
Compounding is the reinvestment of the interest you receive from the money you set aside. For example, if you invest $1,000 and earn 10% interest on your principal at the end of each year, you'll get in $100 interest at the end of the first year. If you reinvest that interest, the second year you would start with $1,100, and thus would earn $110 interest. If you stay with it, you’d more than double your money every eight years.
“Compounding," Albert Einstein said, "is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealth.” Einstein was a smart man. But you hardly have to be a genius to make this concept work for you.
The real magic of investing comes when you combine the surprising power of compounding with continuous and regular investments -- in other words, discipline.
The best way to make these continuous investments happen is by setting up an account with a broker or mutual fund that automatically deducts a fixed amount from your bank account every month. “Automatic” is the operative word here. Trust me, if you don’t set it up that way, it won’t happen. Instead, you’ll end up pouring money in when the market is soaring and skipping payments when it’s heading down. Eventually you’ll get discouraged and give up.
Dollar-cost averaging
The process of continuously investing a fixed dollar amount is called dollar-cost averaging -- a term that sounds much more technical than it is. Through dollar-cost averaging, you'll end up buying more shares when a stock or fund is down, and fewer when it’s up. For instance, say you’re investing $500 monthly in a stock trading initially at $50 per share; so the first time, you buy 10 shares. If the next month the stock moves up to $62.50 your regular purchase will net you only eight shares. However, if the stock drops to $41.67, you'll get 12 shares (not including any transaction fees).Start investing with $100.
It's easy to set up regular-investment mechanisms, thus harnessing the power of dollar-cost averaging. Mutual funds are the traditional way. But there are other outlets, as well, that allow you to apply the strategy with individual stocks or exchange-traded funds, which are baskets of stocks that identically track standard market indexes, such as the Dow Jones Industrial Average ($INDU).
Risk
Sure, investing in the stock market has risk. There’s always the chance the market will go nowhere for the next 20 or 30 years and you’ll end up no better than where you started. But there’s risk in everything, even CDs.
With CDs, your original investment isn't in danger. Most CDs are insured, and the federal government will step in and make you whole, even if your bank goes belly up.
But a problem crops up when something more sinister surfaces: inflation. At this writing, inflation, running at around 2%, is considered relatively benign. But is it?
Let’s do some math. Your real return is the interest you receive less the inflation rate. If your CD is paying 3% and the inflation rate is 2%, you’re only making 1% in real terms. If inflation takes off, say to 5%, your CD will probably be paying around 4%. In inflation-adjusted terms, you’ve lost 1%.
But it can get worse. Inflation hit 14% in the early 1980s. In such times, CDs and similar fixed-income investments don’t even come close to the inflation rate, meaning you’re losing serious money, in real terms.
By contrast, assets such as real estate and stocks tend to move with prices, and, over time, the stock market has outpaced inflation. For instance, in the 20-year period ending Dec. 31, 2001, the cumulative return of the market, as measured by the S&P 500 Index ($INX), was 1,606%, compared to 88% cumulative inflation over the same period.
What’s the point? Yes, there’s risk in investing in the market, but the odds are that continuous, regular investing combined with the power of compounding will make you rich.
The odds
If you count yourself a member of the “I want it now” generation, the idea of waiting 20 or 30 years to get rich probably sounds like a dumb idea.
Sure, there are faster ways to get rich. You could win the lottery, or pick the next Intel (INTC, news, msgs) or Wal-Mart Stores (WMT, news, msgs). But don’t quit your day job just yet. Your chances of winning big in the lottery run around 15 million to 1, at best.
Meantime, naturally, you would be sitting pretty if you had had the foresight to plunk significant cash into Intel or Wal-Mart 20 years ago. But consider this: You would have lost money if you’d picked Advanced Micro Devices (AMD, news, msgs) instead of Intel, and you’d be broke if you’d picked Kmart (SHLD, news, msgs) (which completed its merger with Sears Roebuck on March 27) instead of Wal-Mart. In both instances, your retirement plans would be history.
Here's the bottom line, like it or not: The fate of your retirement, your comfort in older age, probably lies in your commitment to the concepts laid out in the paragraphs above. For the vast majority of us, wealth creation is a slow and steady -- and powerful -- process. The tortoise almost always beats the hare.
It's not easy. But it's very, very simple.
At the time of publication, Harry Domash did not own or control shares in any of the equities mentioned in this column.
Tuesday, February 21, 2006
Give us the daily Money
I cannot and I do not want to provide financial advice to anyone. This is a dog eat dog environment in relation to money and investing. In addition who cares more than you about your hard earn greenback.
All, I will tell you here. I have done it, I am doing it or I will be doing it; today, tomorrow, in the future or never.
A few of my personal rules, some times I follow these strictly, sometimes I do not follow them at all, it depends how I feel that time of the year about rules. In either situation, I have discipline we cannot beat the market averages without discipline. You need to be bold, you need to be patient and you need to be ready to move from point A to point Z of your asset allocation.
Truth: all 229,000 money managers, recommending investing in open market stocks, never beat the major market averages for a period over 10 years.
Truth: money managers or investors investing in business beat the market averages 70% of time.
Truth: 90% of speculators -all stock holders are de facto speculators- lose money over the long haul -inflation adjusted- and average returns are below the commonly accepted average returns of 7%.
Truth: unmanaged indexes outperform 97% of all money and fund managers 100% of the time over a period of ten years in any given cycle. Thus, stop paying fees and look at a pondered basket of ETFs that are quantitatively managed as "powershares" in the Russell 2000, the SP 500, small cap, med cap and large cap stocks. I just keep adding $$ to the basket and my average is above 20% year over year. This allocation is never more than my taste for risk, and I can allow myself to take. Any one trying this should be willing to ride declines of 50% for some periods in the equity markets.
My allocation in this area changes over different economic times, sometimes I have less than 10% of my total allocation in non-dividend paying stocks.
Truth: dividend paying stocks over time beat eth market averages. I like them on my tax defer accounts, they are wonderful investments. I sell the asset if the indications are of NAV continued decline. I run a screen with focus on high dividend stocks and apply a calculation of value over a normal retirement investment target period with all dividends re-invested I will get a nice surprise.
I use www.bloomberg.com calculators and news.
As a build my 2007 target investments, I will post the information in www.marketocracy.com using fund symbols, which I will post here. Although, my returns continue to be gracious, by ranking myself against the top ROI kings -mutual funds and published money managers, I find myself in money bliss. I cannot guarantee that I will continue to outperform anything, nor anyone will be successful trying to replicate what I do. You might try it if you want, but be aware of the risks involved.
This is serious stuff. I am just one person doing one person thing for two persons.
Why the Rich Get Richer
http://finance.yahoo.com/columnist/article/richricher/2652?p=1
by Robert Kiyosaki
Finance Home > Why the Rich Get Richer > Why Many Aren't Securing Their Financial Future
Why Many Aren't Securing Their Financial Future
by By Robert Kiyosaki
Tuesday, February 21, 2006
Most people know they should invest, just as most people know they should watch their diet and exercise. Nonetheless, millions of people -- I estimate that 80 percent to 85 percent of Americans -- don't invest at all. What I mean by this is that these people aren't active investors.
An active investor is someone is someone who actually lives off their investments as opposed to wages from a job. My investments deliver a stream of cash flow every month, and I, like other professional investors, don't need a job.
It's similar to the difference between amateur and professional golfers: Amateurs may be very good players, but can they live off their golf game? A professional can withstand the heat of competition and has the mental toughness and the physical skills to create a stream of income.
At age 65, many amateur investors "turn pro" -- whether they like it or not. And that's a frightening thought.
In this article, I take a humorous as well as a more serious look at why people don't invest. A thank you to John S. Baen, Professor of Real Estate at the University of North Texas, for creating this list of why people don't invest -- even though they know they should.
Why People Don't Invest: 12 Humorous Reasons
1)They're already paying into Social Security.
2)Their budget includes $20 per week for lottery tickets, which is bound to pay off soon.
3)They believe that inflation means their money will grow.
4)Old people don't eat much anyway.
5)They sit at home waiting for the Publishers Clearing House van to pull up in their driveway and deliver their check.
6)Their money is safely buried in the backyard.
7)Their rich Aunt Melba will die soon.
8)Little Matilda is sure to make it big in Hollywood.
9)They can cash in their Dallas Cowboy collector glasses when it's time to retire.
10)Their dot-com stocks will come back to life.
11)They'll write a book and live off the royalties.
12)They plan on marrying a young wife/husband when they're 60 and depend on their financial support.
Sometimes we need a break from the seriousness of why we invest and take a moment to laugh a little...or maybe cry. Unfortunately, even though funny, this list contains many truths.
Investing for Cash Flow
The sad thing is: Many people think they're investors when they're not. Lots of people think their 401(k)s and IRAs, which have stock, bond, or mutual fund holdings, are investments, but I consider them savings plans. People with such retirement plans are what I call passive investors. They're simply "saving" for retirement.
Similarly, if you own your home and live in it, I don't consider it an investment. Without cash inflow monthly (and with money going out each month for mortgage payments, utilities, property taxes, insurance, and maintenance), your house is a liability, not an asset. It might become as asset -- if you rent it out for income each month that exceeds your expenses on it, or when you sell it and realize a capital gain.
Most professional investors invest for cash flow first and capital gains second, and, ideally, you want both (see "Investments That Pay Today -- and Tomorrow"). Rich dad told me many times: Investing for capital gains is gambling, not investing.
And remember: You don't need money to make money. Many of those people who don't invest cite that reason -- "I don't have the money to invest."
But there's OPM (Other People's Money) everywhere -- if you've trained yourself to see opportunities around you. How do you do that? Invest in your financial education. Learn how to spot good opportunities and how to turn a seller's problems into your profits.
Perhaps the best example of OPM is a bank as your real estate investment partner. They will loan you the lion's share of the money and allow you to take 100% of the tax advantages, depreciation, and capital gains.
Apart from a light-hearted look at why people don't invest, there are serious reasons for their inaction:
1. They have an entitlement mentality.
When the word entitlement is used, many people point an accusing finger to the poor and those on welfare. Yet, the sad truth is many people have an entitlement mentality. Starting with the President of the United States and working down, millions of people expect the government (or a business) to take care of them once their working days are over. This despite the shaky financial footing of Social Security and Medicare.
My rich dad believed we should all learn to take care of ourselves. I agree and believe it's about time our schools teach people to take care of themselves, rather than believe they're entitled to government support.
2. They lack vision.
Millions of people cannot see past tomorrow. It was Tolstoy who said: "The most unexpected thing that happens to people is old age." This year, the first Baby Boomers turn 60.
As an older Boomer, I hear many peers say, "I don't have to worry. I'll just keep working." They don't see that the day will come when their body cannot work anymore -- if they're lucky to live that long.
The cost of long-term care exceeds what most people earn today. For example, a friend pays over $6,000 a month to keep his mom in a modest facility -- that's more than most families earn monthly. What's going to happen when 75 million Baby Boomers start needing long-term care?
Today, I also hear young people blithely saying, "I'm still young." Whenever I have the opportunity, I remind young people that the Baby Boom problem is really theirs to finance.
3. Our school system doesn't teach us much about money.
"Go to school to get a job" is common advice. But that idea echoes the entitlement mentality, the idea that once you have a job, the company and the government will take care of you. It also reflects a lack of long-range vision. Today, we need to be educated about money beyond just "getting a job." We need to be educated for life after a job, after our working days are over.
The entitlement mentality and myopic vision stem from one place -- our schools and the lack of financial education in our educational system. It's time for our educational system to enter the 21st century and prepare people for the real world.
Author's note: Send me your top three reasons why people don't invest for inclusion in a future Yahoo! Finance column. Send them to: kiyosakionyahoofinance@richdad.com. Please use "Three Reasons" in your subject line and include your name, city/state/country and e-mail address.
by Robert Kiyosaki
Finance Home > Why the Rich Get Richer > Why Many Aren't Securing Their Financial Future
Why Many Aren't Securing Their Financial Future
by By Robert Kiyosaki
Tuesday, February 21, 2006
Most people know they should invest, just as most people know they should watch their diet and exercise. Nonetheless, millions of people -- I estimate that 80 percent to 85 percent of Americans -- don't invest at all. What I mean by this is that these people aren't active investors.
An active investor is someone is someone who actually lives off their investments as opposed to wages from a job. My investments deliver a stream of cash flow every month, and I, like other professional investors, don't need a job.
It's similar to the difference between amateur and professional golfers: Amateurs may be very good players, but can they live off their golf game? A professional can withstand the heat of competition and has the mental toughness and the physical skills to create a stream of income.
At age 65, many amateur investors "turn pro" -- whether they like it or not. And that's a frightening thought.
In this article, I take a humorous as well as a more serious look at why people don't invest. A thank you to John S. Baen, Professor of Real Estate at the University of North Texas, for creating this list of why people don't invest -- even though they know they should.
Why People Don't Invest: 12 Humorous Reasons
1)They're already paying into Social Security.
2)Their budget includes $20 per week for lottery tickets, which is bound to pay off soon.
3)They believe that inflation means their money will grow.
4)Old people don't eat much anyway.
5)They sit at home waiting for the Publishers Clearing House van to pull up in their driveway and deliver their check.
6)Their money is safely buried in the backyard.
7)Their rich Aunt Melba will die soon.
8)Little Matilda is sure to make it big in Hollywood.
9)They can cash in their Dallas Cowboy collector glasses when it's time to retire.
10)Their dot-com stocks will come back to life.
11)They'll write a book and live off the royalties.
12)They plan on marrying a young wife/husband when they're 60 and depend on their financial support.
Sometimes we need a break from the seriousness of why we invest and take a moment to laugh a little...or maybe cry. Unfortunately, even though funny, this list contains many truths.
Investing for Cash Flow
The sad thing is: Many people think they're investors when they're not. Lots of people think their 401(k)s and IRAs, which have stock, bond, or mutual fund holdings, are investments, but I consider them savings plans. People with such retirement plans are what I call passive investors. They're simply "saving" for retirement.
Similarly, if you own your home and live in it, I don't consider it an investment. Without cash inflow monthly (and with money going out each month for mortgage payments, utilities, property taxes, insurance, and maintenance), your house is a liability, not an asset. It might become as asset -- if you rent it out for income each month that exceeds your expenses on it, or when you sell it and realize a capital gain.
Most professional investors invest for cash flow first and capital gains second, and, ideally, you want both (see "Investments That Pay Today -- and Tomorrow"). Rich dad told me many times: Investing for capital gains is gambling, not investing.
And remember: You don't need money to make money. Many of those people who don't invest cite that reason -- "I don't have the money to invest."
But there's OPM (Other People's Money) everywhere -- if you've trained yourself to see opportunities around you. How do you do that? Invest in your financial education. Learn how to spot good opportunities and how to turn a seller's problems into your profits.
Perhaps the best example of OPM is a bank as your real estate investment partner. They will loan you the lion's share of the money and allow you to take 100% of the tax advantages, depreciation, and capital gains.
Apart from a light-hearted look at why people don't invest, there are serious reasons for their inaction:
1. They have an entitlement mentality.
When the word entitlement is used, many people point an accusing finger to the poor and those on welfare. Yet, the sad truth is many people have an entitlement mentality. Starting with the President of the United States and working down, millions of people expect the government (or a business) to take care of them once their working days are over. This despite the shaky financial footing of Social Security and Medicare.
My rich dad believed we should all learn to take care of ourselves. I agree and believe it's about time our schools teach people to take care of themselves, rather than believe they're entitled to government support.
2. They lack vision.
Millions of people cannot see past tomorrow. It was Tolstoy who said: "The most unexpected thing that happens to people is old age." This year, the first Baby Boomers turn 60.
As an older Boomer, I hear many peers say, "I don't have to worry. I'll just keep working." They don't see that the day will come when their body cannot work anymore -- if they're lucky to live that long.
The cost of long-term care exceeds what most people earn today. For example, a friend pays over $6,000 a month to keep his mom in a modest facility -- that's more than most families earn monthly. What's going to happen when 75 million Baby Boomers start needing long-term care?
Today, I also hear young people blithely saying, "I'm still young." Whenever I have the opportunity, I remind young people that the Baby Boom problem is really theirs to finance.
3. Our school system doesn't teach us much about money.
"Go to school to get a job" is common advice. But that idea echoes the entitlement mentality, the idea that once you have a job, the company and the government will take care of you. It also reflects a lack of long-range vision. Today, we need to be educated about money beyond just "getting a job." We need to be educated for life after a job, after our working days are over.
The entitlement mentality and myopic vision stem from one place -- our schools and the lack of financial education in our educational system. It's time for our educational system to enter the 21st century and prepare people for the real world.
Author's note: Send me your top three reasons why people don't invest for inclusion in a future Yahoo! Finance column. Send them to: kiyosakionyahoofinance@richdad.com. Please use "Three Reasons" in your subject line and include your name, city/state/country and e-mail address.
Monday, February 20, 2006
When the Media Fails
http://www.washingtonpost.com/wp-dyn/content/article/2006/02/20/AR2006022000746.html
Investing a new energies is going to be the next internet boom and bust.....Do not read my lips read the Washington Post article headline and content.
As the article touts the new miracles in new energies. The middle of the report inserts a quote: "there is a deficit of $25 mil in investment and 36 scientist will be fire" go figure, it is all hyping all over again.
I will no ponder the reasoning of the process or the qualifications of the reporters, I take just the fact about the hypocritical approach titling the article and the reporting.
The new federal budget was approved with record expenditures, but 90% of all scientific research in the US got sliced or freezed, except war research, nuclear and NASA -project to go to Mars.
It is not new news that research and education for research is underfunded in America. The proof is on patents assigned. Worse, going forward is the decline in doctoral/reserach program applicants.
Today, 60% of all PHd's working the US are born in a foreign country.
The present state of nationalistic arrogance and blindness, is not the best position to claim a bright future.
If the Ayatollahs stiffle education, Christian zelots are doing the same, time to get a new enlightement.
Friday, February 17, 2006
The Blame Game
It is easy to blame some else for your problems, that does no remove the problem from being your own big problem.
That is what is happening with the US economy.
Yesterday, the new appointed Chairman of the Federal Reserve, Mr. Bernanke was grilled with questions about the upcoming reckoning day for the US economy.
As it was Mr. Bernanke fault that Congress controlled by industrialists, that includes all republicans and 90% of democrats, are running the biggest deficit in history and the most hypocritical behavior since Louis XVII France.
The US deficit is alarming to say the least, to compare, with half of the present deficit in percentage points to the economy, the present US deficit, the IMF and WB cut funds to Argentina and created the Argentina crisis. So imagine, we had the balls to go to Argentina to create the biggest economic disaster in Latin America that has created the biggest trend of animosity against the US and here we are today running twice the amount of deficits and external debt and calling it solid. Go figure who is going to trusts the US next.
Today, the IMF and the WB of the US are China and in far away second India. Our total ppool of lenders 2.3 billion people.
The trade deficits with China and the fact that China has become the controlling interest of US holdings, at the present pace China is creating as much power over US policy as the IMF and the WB has over the rest of poor countries.
If you think this is far fetched, read the transcripts of the congressional hearings on the economy and trade, some members of Congress Republican and Democrats are crying foul for the upcoming reckoning.
The decline of the US currency is the firsts signal, the dollar had to be devaluated because the buyers of dollars agree that it was not worth 50% of what it was selling. Do you think America is worth 50% less of what it was worth four years ago? Or your work should have 40% less value? For that matter anything in your live that you transact with dollars is worth 40% less today than 5 years ago. Not a material reality to forget. Check the value of the always mocked Canadian dollar, from where we buy our oil or the value of the English Pound from where we clear all our insurance money.
Sooner or later, and in terms of concrete dates runs between 10 to 25 years, the US will become a third tier economy, based on the fed own research, this reality is approaching. Are you ready for this reality?
If you decide to blame, you have no much room accomplish anything substantial.
The action driven blame game can start by getting rid of incumbents in Congress, usually dramatic change creates wealth. Find a challenger to any elected incumbent and volunteer or fund the individual even if you think philosophical is opposite to your views. Some times changes has very interesting outcomes.
That is what is happening with the US economy.
Yesterday, the new appointed Chairman of the Federal Reserve, Mr. Bernanke was grilled with questions about the upcoming reckoning day for the US economy.
As it was Mr. Bernanke fault that Congress controlled by industrialists, that includes all republicans and 90% of democrats, are running the biggest deficit in history and the most hypocritical behavior since Louis XVII France.
The US deficit is alarming to say the least, to compare, with half of the present deficit in percentage points to the economy, the present US deficit, the IMF and WB cut funds to Argentina and created the Argentina crisis. So imagine, we had the balls to go to Argentina to create the biggest economic disaster in Latin America that has created the biggest trend of animosity against the US and here we are today running twice the amount of deficits and external debt and calling it solid. Go figure who is going to trusts the US next.
Today, the IMF and the WB of the US are China and in far away second India. Our total ppool of lenders 2.3 billion people.
The trade deficits with China and the fact that China has become the controlling interest of US holdings, at the present pace China is creating as much power over US policy as the IMF and the WB has over the rest of poor countries.
If you think this is far fetched, read the transcripts of the congressional hearings on the economy and trade, some members of Congress Republican and Democrats are crying foul for the upcoming reckoning.
The decline of the US currency is the firsts signal, the dollar had to be devaluated because the buyers of dollars agree that it was not worth 50% of what it was selling. Do you think America is worth 50% less of what it was worth four years ago? Or your work should have 40% less value? For that matter anything in your live that you transact with dollars is worth 40% less today than 5 years ago. Not a material reality to forget. Check the value of the always mocked Canadian dollar, from where we buy our oil or the value of the English Pound from where we clear all our insurance money.
Sooner or later, and in terms of concrete dates runs between 10 to 25 years, the US will become a third tier economy, based on the fed own research, this reality is approaching. Are you ready for this reality?
If you decide to blame, you have no much room accomplish anything substantial.
The action driven blame game can start by getting rid of incumbents in Congress, usually dramatic change creates wealth. Find a challenger to any elected incumbent and volunteer or fund the individual even if you think philosophical is opposite to your views. Some times changes has very interesting outcomes.
Monday, February 06, 2006
New Federal Budget New Debt Record
The good news is that all the new federal debt records is all been done by self nominated fiscal conservatives. Can you imagine if they were not fiscal conservatives !!!! And the present budget does not include any of the major events that need immediate funding: War in Iraq and rebuilding the south Afganistan, Tajikistan, Sudan, etc. The actual debt will actually double the amount serve each American another $19,ooo or $280 more billion in new debt. In plain terms 3/4's of a trillion dollars, this way it looks smaller. I challenge you to write the number in a piece of paper and divided by the US population. Include illegals they pay taxes in most cases.
We need to thank those folks that save money and are willing to subsidize our mortgages, our leased cars, all our manufacturing, copiers, bananas, cereal, broccoli, gasoline/oil, plastic, basically every thing that you need to survive is been subsidized by: 1) The Saudis 2) China 3) Japan 4) Most western retirement plans 5) Africa natural resource explotation all exempted from supporting development where we exploit it.
Many are starting to get chills and worry asking themselves: will the Saudis bail out or the Japanese etc. No one is going to bail out of the Ponzi scheme.
Their leaders's debt to corruption is so large that they need every single apartment build in Manhattan to hide their country pilfered assets and they need US debt to robe their own country man to cover up their own con job.
We must get up every morning and send a few thanks in the way of the Saudis, whom with their magnanimous benevolence provide us with 15% of our present debt service. Consequently our above average standard of living.
We must thank the Chinese becuae their labor camps and exploited workers provide us with cheap everything except a few other thing no yet figure out, like housing. In the process the Chinese send us the savings of their citizens who in fact they save every month around 40% of their income so they can retire securely.
If they knew what we do with their pension money......
We need tot thank the Japanese who with a strong sense of dignitiy and dictatorial behavior buy our debt at rates unheard of in history of issuing debt. Which will be the equivalent of esxporting 70% of their savings to the great US go-go live style.
Hey, we must thank capitalism for the power to detroy their assets. As it did when the Japanese economy and US asset values where at sky high and the Japanese pensions bought the top US buildings and thanks to the magic of the federal reserve all those assets become a bargain basement and a buy back for US insures waiting for the next resale. The Japanese invested at inflated values, and lost and average of 65% in every single dealsince the 80's, all that pays for our party time.
So.....when you get up each moning, say a couple of thanks to our beloved debt buyers for such wonderful partnership. They work hard we party hard. Now, as action items of thanks:
Light a candle for Shinto and do a couple of claps. Fast one day in the name of Allah, so your tommy knows how some kids feel. Do five minutes of Tai Chi and let's hope that the Chianese continue to use labor camps for cheap labor as the nazi did. Finally, the Ruskies need to get back to the herd and buy back all those dollars they just sold, and for that, I suggest drink a double Spice Russian Vodka Martini.
I hope you plan some indulgent luxuries to celebrate all of them in unison after you are done with the single thank yous.
!!Viva la Deuda!!
Thursday, January 05, 2006
Taketh or Giveth
My take on a couple of fervent religious things.
There is not question that many individuals with the name of Iosephus and variations of the present translation of the name Jesus lived in the area were the stories attributed to him in the Bible. We know that the present interpretation of the life of such individual has not much relation to historic documentation. We also know the Bible as we know it today was lastly compiled in ten principal and different formats. The earliest Catholic codification of texts was done by the Roman codification of popular texts of 325 which basically was a coordinated political project.
Its purpose was to control the Near East and undermine the control of the Judaic elites. Four more codifications and text alterations occurred when the Koran appeared. By 780 was understood and rightly perceived by the Christian elites in the Middle East, the Koran was as a serious threat to their control. The Koran competed with the capacity to incite blind passion, as the Christians were, and challenge the power of the elites ruling from Constantinople. Thus, initiating the next emergent need for a new codification of biblical texts -first time referred as such in 750 ad- to “create military enforcement of expansion and defense of power.”
The corruption in the western-Christian church organization was rampant it was in the verge of self-destruction.
It wasn't until new threats mainly from Martin Luther, the church’s own corruption, it basically questioned the Church of Rome own dogma. It forced the council Trent to be called with the emperor sending delegates to represent the crown rights and avoid a war of power.
The justification of the many deviant behaviors exercised under the bible scripts were stripped, all changes to counter attack the powers emanating from new threats, internal corruption and land ownership- and external from the Turks under the flag of Islam.
In the air was the full question of how to use the bible. In a rough translation from the Enciclopaedia Catolica reads "It was determined that the Bible should be interpreted according to the unanimous testimony of the Fathers and never misused for superstitious or deviant purposes. Nothing was decided in regard to the translation of the Bible in the vernaculars."
It should be obvious that all religious books and interpretations are human in purpose and destiny.
It makes the Bible another human crafted document for control of social behavior. Most religious dogmas if implemented in honesty create a leveled equalitarian societies of respect referred as Christian societies. It has nothing to do with present pervert interpretation of the biblical texts.
It wasn't until 1562 that most of the present behavioral doctrines were adopted. It is agree among philosophers of power, that religion is a useful social tool of control, as is control over dogma, education, health, policing, taxation and armed power supporting the elites to control and wage wars of expansion with the purpose of exploiting the conquered.
Tuesday, December 27, 2005
Why the Rich Get Richer Continues
Educate Yourself into Riches
by Robert Kiyosaki
Tuesday, December 27, 2005
Many of Wall Street's elite firms were being required to pay tens of millions of dollars in fines to investors, according to media reports. The penalties are for alleged bad investment advice, courtesy of New York State Attorney General Eliot Spitzer.
This brings me to one of my favorite quotes from famed investor Warren Buffett goes: "Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway."
I have been highly critical of the standard financial planning advice -- "work hard, save money, get out of debt, invest for the long term, and diversify" -- for a long time. Such guidance is often more a financial advisor's (subway rider's) sales pitch than a solid investment guide.
But while I think it's courageous that Spitzer slaps millions in fines on a few Wall Street firms for their bad investment guidance, I believe the investors who accepted that unsound advice have some responsibility, too. Isn't knowing the difference between good and bad advice part of knowing what you're doing?
The Difference Between Investing and Shopping
The problem is, most investors don't know how bad the standard investment advice is. This mantra of "work hard, save money, get out of debt, invest for the long term, and diversify" is followed by millions of investors -- who lost $7 trillion to $9 trillion between 2000 and 2004. Many are still following this bad advice today.
Not only did millions of investors lose trillions of dollars, many also missed the boom in real estate, oil, gas, and previous metals. Furthermore, despite investors' huge losses, Wall Street paid out some of its biggest bonuses in history.
However, investors should realize it's "buyer beware." Investing is different from shopping. If I go to Sears and don't like the tool or shirt I purchased, I can generally get my money back. When we go shopping, we expect value for our money. But when we invest, we do so in the hopes of making more money -- and knowing that we risk making losses. What would happen to the financial industry if brokers were sued every time a client lost money? The wheels of world commerce would grind to a halt.
My point is: The world is filled with honest people handing out bad advice. An example of honest bad investment advice is the standard one of "work hard, save money, get out of debt, invest for the long term, and diversify".
The world is also filled with biased advice, which is why people say, "Never ask an insurance broker if you need insurance, or a mutual-fund sales person if they recommend mutual funds." Furthermore, there are many crooks and con artists as well, who intentionally promote dishonest ventures.
Spotting the Difference
So while it's imperative that we have the Securities and Exchange Commission and a brave Attorney General such as Spitzer to enforce the rules, we, as individual investors, still need to be vigilant and personally responsible for the advice we receive and what we do with our money.
In my opinion, that means each of us needs to be responsible for our own financial education so we can tell the difference between good advice, biased advice, and crooked advice. If you can educate yourself to know the differences between those three types of advice, getting rich is easy.
Or, if you take investing advice from a subway rider, don't be surprised if you wind up on the subway.
by Robert Kiyosaki
Tuesday, December 27, 2005
Many of Wall Street's elite firms were being required to pay tens of millions of dollars in fines to investors, according to media reports. The penalties are for alleged bad investment advice, courtesy of New York State Attorney General Eliot Spitzer.
This brings me to one of my favorite quotes from famed investor Warren Buffett goes: "Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway."
I have been highly critical of the standard financial planning advice -- "work hard, save money, get out of debt, invest for the long term, and diversify" -- for a long time. Such guidance is often more a financial advisor's (subway rider's) sales pitch than a solid investment guide.
But while I think it's courageous that Spitzer slaps millions in fines on a few Wall Street firms for their bad investment guidance, I believe the investors who accepted that unsound advice have some responsibility, too. Isn't knowing the difference between good and bad advice part of knowing what you're doing?
The Difference Between Investing and Shopping
The problem is, most investors don't know how bad the standard investment advice is. This mantra of "work hard, save money, get out of debt, invest for the long term, and diversify" is followed by millions of investors -- who lost $7 trillion to $9 trillion between 2000 and 2004. Many are still following this bad advice today.
Not only did millions of investors lose trillions of dollars, many also missed the boom in real estate, oil, gas, and previous metals. Furthermore, despite investors' huge losses, Wall Street paid out some of its biggest bonuses in history.
However, investors should realize it's "buyer beware." Investing is different from shopping. If I go to Sears and don't like the tool or shirt I purchased, I can generally get my money back. When we go shopping, we expect value for our money. But when we invest, we do so in the hopes of making more money -- and knowing that we risk making losses. What would happen to the financial industry if brokers were sued every time a client lost money? The wheels of world commerce would grind to a halt.
My point is: The world is filled with honest people handing out bad advice. An example of honest bad investment advice is the standard one of "work hard, save money, get out of debt, invest for the long term, and diversify".
The world is also filled with biased advice, which is why people say, "Never ask an insurance broker if you need insurance, or a mutual-fund sales person if they recommend mutual funds." Furthermore, there are many crooks and con artists as well, who intentionally promote dishonest ventures.
Spotting the Difference
So while it's imperative that we have the Securities and Exchange Commission and a brave Attorney General such as Spitzer to enforce the rules, we, as individual investors, still need to be vigilant and personally responsible for the advice we receive and what we do with our money.
In my opinion, that means each of us needs to be responsible for our own financial education so we can tell the difference between good advice, biased advice, and crooked advice. If you can educate yourself to know the differences between those three types of advice, getting rich is easy.
Or, if you take investing advice from a subway rider, don't be surprised if you wind up on the subway.
Sunday, December 25, 2005
“All Politics is Local”
“All Politics is Local” Tip O’Neill
All questions you ask a candidate must have local affections without forgetting that one day the same person might be your national official or will be a member of your local party structure thus having access to your federal elected official.
Questions presented to a candidate for endorsement for a local office must include a series of question, that are part of the “all” even if they are out of he present scope or situations that the candidate will confront but affect all of us in all subjects from local to national level.
All interview processes must imagine your town library council member running for Congress in the not long future or have a voice at the local party level politics, that might influence the federal elected official.
What you ask today might be useful in the future.
For example the most forgotten questions are budget questions, when the issue most affecting us in our everyday day lives is the federal and local budgets.
This kind of question line gets asked when the situation is so bad that it makes them irrelevant.
At the point if which the average candidate gets asked relevant commitments and questions usually it is too late.
If the tendency is to ask a candidate if they support this war of that war, it will be more apropos to ask if the candidate will be an unbiased supporter of increase on military personnel salaries by 50% or more and introduce legislation linked to pentagon budget cuts. As counter intuitive as it might seem, it indicates one single purpose, if the civilians plan to send a military person to war they must pay fair salaries, specially the support for above average salaries of highest paid private mercenaries.
In parallel include support for legislation that, if the reserves are going to be called to an arm conflict the amount of pay must be fully replaced and a 50% increase salary for active duty while in armed conflict participation.
Although, this is not an anti-war position it is a position that reduces the easy of action to send soldiers to war and demand negotiations for peace due to reduced budgets.
For example most housing subsidies are driven to simple pay for housing via rental agreements, but not towards ownership via subsidies, candidate positioning and questions in the direction of subsidized ownership while demanding for better accommodations for the people in need. In housing is more apropos to demand ownership than to demanding for support dilapidated rental units.
A candidate will have to answer support for budget question in which there is not increase of taxes but an increase on educations and health coverage which is more progressive than tax increases. The Guns and Butter choices, when too extreme at local level go in favor of butter, call it local tax cuts.
The importance of this dialogue is to increase the level of questioning before throwing the towel in one direction based on partisan views. Needs of people are no partisan.
Most people are independent and most people need education in the subjects of need.
We all constantly need to find a common ground on our own personal needs, our town, our national needs and our international needs.
Most of the ignorance on subjects of need are driven by jingle style phrases with empty value, and driven to support idiocy and disrupt understanding and dialogue of issues.
SEC Ready to Loosen Rules on Corporations
Buried in page C14 of the New York Times was the story of the SEC newest effort to erode individual shareholders rights.
The change is pushed by corporate crooks in the making and some Congress members. The SEC vote took place under the new strategy of Chairman Cox on December 13, 2005. This will not be a date to remember for individual investors who care about their freedom to know and invest securely.
Among other supporters of this private investor erosion of rights is our own Congresswoman Sue Kelly. Congress woman Kelly, whom, she has advocated to deregulate “small business“. The problem with the term “small’ is that on these folks views “small” means anything less than $700 million. No your majority and normal town business. Also, not to forget are the elected Congress members Lowey and Engel. None of these two have raise their voice to oppose such damaging changes to investors, that increases risk to assume reporting is not manipulated and cooked by corporate crooks as we have learned in the past few years.
We have such large pool of crooks in corporate America that decimating Sarbanex-Oxley legislation will be the wrong message for the wrong reasons.
Although, Sarbox is nothing to cheer as a protection for individual investors, it is better than standing naked at 20 below zero, which will be the equivalent of this regulation change.
The politicians continued abuse of Orwellian language and non-stop redefinition of meanings, is very dangerous to any society.
The SEC latest proposals and measures affects all citizen investments, these investments are being put at a higher unnecessary risk.
The vote at the SEC went 18-1. The dissenter was the president of the Center for Financial and Market Integrity. You might wonder why the person advocating for markets integrity loses the battle, overturning 404 Sarbox (as is commonly referred). This is part of the radical right corporatist ideology, to shift risk from this new monarchy to the people.
The way it works is not too complicated. By making the alternatives to savings and returns to be placed in higher risk investments, then the laws supporting ownership of holdings get devaluated, by stripping of shareholders rights, thus eliminating accountability from the perpetrators of malfeasance, leaving the investors holding worthless paper and retirees wondering where is the next job at half minimum wage at 65 years of age. This vote an the present political position is a devastating event for individual investors.
The danger here for all of us is the lack of accountability of our elected officials, and we are the ones allowing them to walk away unquestioned.
The continued positioning of regulations deterring shareholders rights, has reach levels in which all equities and share-ownership is the equivalent of a sophisticated Ponzi scheme. This is supported by the government and fall on the backs of Americans. It is not me saying this it is, the last five Nobel prizes of economics are saying this in many ways.
It an era in which most of our savings are induced by government legislation to be placed in the riskiest of investments as in the stock market, the lack of solid pensions must has directed to strenghent private investor rights,, not to decrease them. A large amount of blame falls in the hands of mutual funds. Who by supporting crooked accounting on corporate America, have not made and statement and divest from companies that blatantly silence the truth of their accounting methods. Most of equity invest today is in untrustworthy assets, most equities have underlining worthless claims.
This is a system that it is in a path of accelerated booms and bust (as the recent stock market internet crash) moving wealth from the savers to the rulers, most of the benefits go to the very few who control the Ponzi scheme.
The pressure exercised today by Congress members and the Bush administration to annul the Sarbanes Oxley Legislation, when they should protect investors from crooked accounting and internal systems that allowed CEOs to commit fraud, it is in the opposite direction of citizens needs.
These measures are in the direction of allowing crooks to thrive again and the rest of us survive in these murky waters, and the prospective of loosening against our hard earned savings to the lack of accountability.
As Alan Greenspan said last week “if we lose trust we lose capitalism“, we have lost trust and we cannot trust reporting.
Wednesday, December 21, 2005
From Mercenaries to Peacemakers?
Scandals Confront Military Security Industry
by David Phinney, Special to CorpWatch
November 29th, 2005
Wherever Tim Spicer turns up, he carries the kind of baggage that gives the private military business a bad name. An internet video showing private contractors shooting at civilian cars in Iraq, loosely linked to his company, has ignited a firestorm about unregulated gun-wielding security convoys, escorting reconstruction or government advisors, roaming the country. [See Box]
This latest scandal comes at a time when the military security industry is reaping huge profits from the gun-carrying business in conflict zones around the world once dominated by rogue soldiers of fortune. As thousands of armed guards, working largely under U.S. contracts, travel the roads of Iraq, the industry is seeking respectability though a Washington trade group -- the International Peace Operations Association (IPOA).
The group calls itself “the most ethical and effective voice of the Peace and Stability Industry,” pledged to ensure that “their capabilities are not misused or abused.” Its members include industry heavy hitters like ArmorGroup, Blackwater, Hart, MPRI, the Olive Group and Triple Canopy.
Shooting Gallery
The grainy video (click to download) shows the view of an Iraqi street from the back of a moving vehicle. The long barrel of a gun, held by someone inside the vehicle, swings across the frame and viewers see the effect of bullets, apparently fired from the vehicle, spraying civilian cars coming up behind. Bloggers claim that the man with the gun is Danny Heydenreycher, a South African employee of Aegis at Camp Victory.
In one of the four separate incidents, after shots are fired, viewers see a Mercedes car crash into a taxi; passengers flee from the taxi, but no movement is seen in the Mercedes, suggesting that the passengers were injured or killed.
According to Robert Young Pelton, author of an upcoming book, “Licensed to Kill: The Privatization of the War on Terror,” the people driving the vehicle are part of a convoy of private military contractors. The video was originally posted on an unofficial Web site run by a disgruntled contractor working for Aegis Defence Services. (The website claims to be a voice for to "the men on the ground who are the heart and soul of the company.” The video has been deleted from the site but has taken on a life of its own in the blogosphere.)
Aegis holds several sweeping Pentagon contracts in Iraq worth over $430 million. In published news reports, Tim Spicer, the head of Aegis, insists that an internal investigation of the matter is ongoing and notes that there is no evidence that the video involved Aegis. Authorities in Baghdad are also apparently looking into the video, which has torched a firestorm of criticism as bloggers ponder if the United States uses private contractors who shoot unarmed Iraqis.
Pelton, who spent a month with armed convoys running the road from the Green Zone headquarters in Iraq of the U.S. military and government to the Baghdad International Airport, said he understands the public concerns over the conduct of armed private security companies working in Iraq. Private security companies are known to regularly fire guns in the streets as a warning to clear traffic and to caution vehicles coming up from behind.
“The US military considers all of Iraq a war zone,” said Pelton. “Contractors are the frequent target of car bombs, but there are rules and professional standards. Two of the four incidents are trigger happy contractors. It’s a good bet that all of the victims of the incidents will generate some type of retribution against the security industry. Even in a war zone, there is a clear line between professional security providers and amateurs. This video shows how not to conduct vehicle security.”
Another source who is familiar with private security operators in Iraq says that it is nearly impossible to tell the difference between a hostile vehicle carrying a bomb and innocent Iraqi civilians driving toward you. Under rules issued by the Pentagon, any private security team member is expected to wave off a possible threat, fire warning shots and then shoot at the vehicle’s engine to stop it. Team members are also allowed to shoot to kill as the last resort in a situation of pressing circumstances.
“Some team members are scared all the time and shoot a lot, some are scared once and a while and shoot once and a while, some are never scared and never shoot,” the source said. “You can never tell when you are about to get blown up, that’s why some contractors get blown up or they would have shot the driver.”
But at the same time as the industry is evolving -- becoming more corporate, more visible, and more concerned with projecting a responsible image -- private military contractors are facing scandal like the new video in circulation and unprecedented scrutiny from the news media. Some executives recognize that if the companies don’t regulate themselves, someone else might. The public, and many policymakers, sees contractors through an image shaped by accusations of war crimes, rogue operations, and photos of private contractors engaged in torture at Abu Ghraib.
To some, Tim Spicer, a Falklands Islands war veteran with weathered good looks, embodies the industry’s old rogue image. During the past 10 years, the 53-year-old former Scots Guard lieutenant colonel racked up a gun-for-hire resume littered with questionable deals and testaments to poor judgment.
Highlights of his globe-trotting career include sparking international scandals in Southeast Asia and flaunting international bans on arms trafficking in West Africa. A contract held by his now defunct company, Sandline, precipitated the toppling of the very government that hired it: Papua New Guinea. When Sandline mounted a $10 million armed operation in Sierra Leone, initially bankrolled behind-the-scenes by a shady fugitive wanted for embezzlement, Spicer was accused of legal and financial shenanigans.
And now, to the chagrin of many IPOA members, Spicer wants to join the organization. His membership bid comes just as the IPOA is trying to reposition the industry as for-profit providers of armed men as peace keepers.
In a vote several months ago, IPOA rejected Spicer’s company Aegis Defence Services. A second bid to join the only trade organization for security contractors is causing a private little war inside the IPOA sandbox.
“This is an issue about making a stand. The organization shouldn’t back away even if blood is spilled on the carpet,” said an executive in a major security company who cited commercial reasons for insisting on anonymity. “If the IPOA doesn’t get it right, it will come back to haunt it.”
Spicer was “surprised” by IPOA’s initial rejection “especially since we were invited to apply,” he said in a recent telephone interview. He flatly denies rumors that he threatened legal action against the group.
Complicating matters is the fact that London-based Aegis holds the Pentagon’s largest private security contract in Iraq. Established in September 2002, by Spicer, who owns 40 percent of the company and is its chair and chief executive, the fledgling company made headlines in June 2004 when it landed the $293-million three year contract in Iraq despite having no experience in the Middle East. The contract has since been expanded for another year, making it now worth $430 million.
Under the three-year agreement, Aegis wields considerable power and influence over the safety and effectiveness of the other security companies including many IPOA members. Spicer’s company provides daily analysis on counter-insurgency and personal protection to government officials. It also holds sweeping responsibility for electronically coordinating employees of other security convoys traveling around Iraq, working for companies with reconstruction or government contracts. The scores of contractors under Aegis’s control constitute a workforce the size to a military division; and may rank as the largest corporate military ever assembled.
Saving Africa
Doug Brooks, IPOA’s president, a passionate defender of private military contractors, had no comment about the internal spat over Spicer and declined to reveal who re-invited Aegis or why its first application was rejected. In the industry’s rough and tumble past, Brooks had defended Spicer’s former company, Sandline, telling CorpWatch more than a year ago that the company had helped save thousands of lives in Sierra Leone.
"Sandline was remarkably effective," Brooks said. "Their goal of restoring the democratically elected government was achieved. They maintained a low profile but played a critical role in the success."
The lanky 43-year-old head of IPOA is more circumspect these days. “This is an internal matter,” Brooks said. “But I do think we should try to be inclusive.”
Brooks, a son of a professor of African studies with an unfinished doctorate in international security, says his long-time interest in Africa inspired him to start IPOA in April 2001. At the South African Institute of International Affairs, and during years of teaching and traveling in Africa, he says he saw impoverished nations with ill-equipped armies struggle against violent insurrections as developed nations stood by, unwilling commit their own forces.
The hands-off policy allowed butchers to storm across the continent while United Nations peacekeepers frequently fell short of the task, he said. For example, in 2000, Sierra Leonan rebels routed 17,000 poorly-trained and equipped UN security troops, and then rampaged through the countryside dismembering unarmed citizens and creating hundreds of thousands of refugees.
"We still don’t know how many died," Brooks said. "But I spoke to hundreds of Sierra Leonans about the failure of the UN peacekeeping force. They are all very vocal and pissed off.
It was the private companies such as Pacific Architects & Engineers (PAE) and International Charter Incorporated (ICI) of Oregon (now IPOA members) that "stayed put," providing airplanes and logistics support for the local military and, according to Brooks, gained the trust of the people.
Spicer defends his work in Sierra Leone and Papua New Guinea as “defending democratically elected government that were removed in violent coups.”
Robert Young Pelton, author of an upcoming book, “Licensed to Kill: The Privatization of the War on Terror,” offers a different take, noting that Sandline's predecessor, Executive Outcomes, had intervened in Sierra Leone in 1995 and saved lives.
"But the Sandline "Arms to Africa" debacle in 1997 did little to save lives. It's a common confusion that Spicer allows," he says. "In PNG Spicer's involvement actually ended up deposing a democratically elected government. Both jobs resulted in resource concessions being granted to Sandline owners or backers."
Whatever the industry’s past faults, Brooks believes in its future. It was the willingness of private military companies to do the work that developed nations refuse, he said, that led him to found IPOA and seek the support of policy makers.
"I think the industry is a huge resource that should be tapped,” explained Brooks, who represents the industry at defense contracting conferences and meetings with the State Department. "There are times when government won’t send their own troops, but they are willing to write a check."
Business Booms in Iraq
Check writing is exactly what has been happening in Iraq, where billions of dollars in new Pentagon contracts have supercharged the growth of private security companies and spawned multimillion-dollar companies overnight. Private security accounts for at least one quarter of the $24 billion earmarked for rebuilding, according to a recent report by the U.S. Special Inspector General for Iraq Reconstruction (SIGIR). Much of this money goes to the estimated 25,000 to 30,000 armed contractors who were swiftly sucked up from a global pool of ex-military and law enforcement personnel.
The sharp demand for personnel has led to varied (some say lower) standards of training and military experience in workers from dozens of countries including the Britain, Colombia, Chile, El Salvador, Fiji, Nepal, Peru, Serbia, South Africa, and the United States.
Tim Spicer
Controversy follows Tim Spicer as surely as contractors follow armies into war. His former private military company, Sandline International, which was involved in several international scandals in the late 1990s, continues to be a classic case study of what can go wrong when private military companies wage war.
The government of Papua, New Guinea hired Sandline in 1997 to quell a nine-year rebellion on the island of Bougainville and to secure one of the world’s largest copper mines. The plan backfired after local military leaders learned of the deal and staged a coup. (Spicer’s contract for $36 million dollars -- more than the country’s annual budget -- included providing two Soviet-made attack helicopters, several assault helicopters, six rocket launchers and grenade launchers, according to research by Brookings Institute military expert Peter Singer.)
Riots broke out, Prime Minister Julian Chan stepped down, and the government imploded. Soldiers apprehended Spicer at gunpoint, jailed him on a weapons charge, and then booted him out of the country amidst a fog of allegations that public officials had been bribed.
Despite botching the operation, Sandline demanded and collected an outstanding $18 million balance from new government in Papua New Guinea.
Sandline next appeared in Sierra Leone in 1998 as part of an effort to restore the government of ousted President Ahmad Tejan Kabbah. Spicer was accused of violating a United Nations and United Kingdom embargo on arms smuggling – punishable by up to seven years in prison. Prior to receiving the $10 million contract, Spicer is reported to have accepted $70,000 businessman Rakesh Saxena to bankroll a Sandline expedition to recapture Saxena’s Siera Leonan diamond and bauxite mining interests. At the time, the Indian-born Thai national was awaiting extradition to Thailand to face charges of embezzlement from a bank in Thailand and traveling on the passport of a dead Serb.
Sandline’s shipment of 30 tons of arms to Sierra Leone ignited a news storm in Britain after Spicer disclosed that British and U.S. officials had secretly encouraged him. The “Arms-to-Africa Affair,” as it came to be known, rocked Tony Blair’s government, triggered a high-profile British House of Commons investigation, forced the resignation of former British high commissioner in Sierra Leone, Peter Penfold, and elicited unsuccessful calls for Foreign Secretary Robin Cook to step down.
“Our attempts to uncover the structure, ownership, and business connections of Sandline were met with extraordinarily evasive answers by Mr Spicer,” states a government report. “A follow-up memorandum from Mr. Spicer was thin and opaque—and failed to provide a number of promised answers. Nevertheless, Mr. Spicer's business is not unlawful, and he is a British citizen with a record of service in the armed forces.”
In April 2004, around the time that Aegis received its mammoth security contract in Iraq, Sandline officially shut down. A notice on its website explained that the company was going out of business because of waning government support for peacekeeping missions. “Without such support, the ability of Sandline to make a positive difference in countries where there is widespread brutality and genocidal behavior is materially diminished.”
Both the Iraqi and U.S. governments have complained about the training and behavior of private contractors in Iraq. In an April performance review, SIGIR faulted Aegis’s compliance in five areas of its contract, including inadequate employee background checks and slack verification of qualifications and training. After sampling records of 20 of Aegis’s 125 Iraqi employees, the review concluded that the company conducted no police checks on 18 and failed to interview six; there were no records at all for two of the men.
"There is no assurance that Aegis is providing the best possible safety and security for government and reconstruction contractor personnel and facilities," concluded the audit, which recommended stricter enforcement of the contract.
The Iraqi Ministry of Interior has repeatedly complained about reckless gunplay by the private security convoys that barrel through densely populated cities with weapons waving out the windows to clear the streets.
Even U.S. military officials have chaffed that the increasing reports of indiscriminate shootings and other war crimes endangers their own troops. However, under an order issued by the Coalition Provisional Authority before the U.S. government officially departed Iraq in June 2004, all private military contractors are immune from prosecution in Iraq.
“They shoot people, and someone else has to deal with the aftermath. It happens all over the place,” Marine Brigadier General Karl R. Horst told The Washington Post in a September 10th story. “These guys run loose in this country and do stupid stuff. There's no authority over them, so you can't come down on them hard when they escalate force.”
Horst, deputy commander of the 3rd Infantry Division, which is responsible for security in and around Baghdad, said that between May and July, he tracked at least a dozen shootings of civilians by contractors.
Some private contractors argue that the dangers of a war zone necessitate shooting at, and possibly killing, people who turn out to be civilians. Since the violent resistance in Iraq makes little distinction between them and enlisted personnel, they say, contractors must act aggressively for their own protection.
The military itself has given mixed signal to private contractors in Iraq. In a major incident in May 2005, 19 security contractors working for Zapata Engineering were detained for allegedly shooting recklessly in the streets of Fallujah and nearly hitting U.S. forces. Later Marines searched, roughed up members of the convoy, and jailed them for three days without charges.
The Zapata contractors were released, but complained that the U.S. military had blacklisted and banished from working in the security business in Iraq -- although none ever was charged with a crime.
Another U.S. Army investigation last spring was based on an anonymous four-page letter detailing allegations of wrongdoing by the contractor USIS, according to a recent story in The Los Angeles Times. The letter writer accused USIS of deliberately reducing the number of trainers to increase its profit margin and detailed two incidents in which USIS contractors allegedly had witnessed or participated in the killing of Iraqis during the assault on Fallujah a year ago. (Private security contractors are not allowed to conduct offensive operations.)
The letter also claims that a USIS employee saw Iraqi police trainees kill two innocent Iraqi civilians, then covered it up. A USIS manager "did not want it reported because he thought it would put his contract at risk," according to the letter.
The head of the probe, Army Colonel Ted Westhusing, reported the allegations to his superiors, but told them that he believed USIS was complying with the terms of its contract. U.S. officials investigated and found "no contractual violations," and “these allegations to be unfounded, according to The Los Angeles Times. (Westhusing subsequently committed suicide, distraught over his experiences in Iraq)
Marriage Rules Without Divorce or Alimony
Brooks and his IPOA members know full well how such incidents and grievances feed into the image of private security workers as macho mercenaries unbound by laws of war or decency and loyal only to cash. IPOA has crafted a code of conduct -- now in its 10th revision -- that Brooks believes establishes self-regulation among IPOA members and "a deep sense of responsibility."
The rules call for "effective legal accountability," transparency, and dedication to the “greatest benefit of humanity.” IPOA members pledge to observe international human rights laws; cooperate with investigations of contract violations; and work only for legitimate, recognized governments, international organizations, non-governmental organizations, and lawful private companies. (Pelton says the rules resemble the "vows of marriage and without the divorce or alimony" noting that it is a self-adminstered code with no enforcement.)
IPOA now boasts of 18 member companies. All are in the business of war or post-conflict stabilization. Most are active in Iraq, specialize in providing armed security forces or training, and are staffed by former military personnel. Others provide expertise a wide variety of tasks traditionally handled by the military: de-mining, building, transportation, and equipment maintenance.
The conflicting views and the code’s legitimacy are now being tested behind closed doors as IPOA considers membership for Aegis. Given the track record of many private military contractors around the world, it may be that IPOA’s rejection of Spicer’s application has more to do with old-fashioned competition than with new-found principles. Indeed Spicer believes that criticism of him and the rejection of his membership bid "may be commercially and politically motivated.”
Mark Whyte, an executive with the British security company, Pilgrims, whose company protects business and media clients in Iraq, tends to agree with that conclusion.
“While I'm no personal fan of Spicer, this is little more than professional jealousy in my view,” Whyte said.
Pilgrims does not belong to IPOA and Whyte takes issue with some of the organization’s more politically-charged goals of nation building, but adds: “If you look at the values espoused by IPOA, I would say that Aegis is one of the few companies that actually try to live up to them in Baghdad.”
Whether that assessment is accurate or not, Aegis is certainly aiming to position itself as a respectable member of a legitimate industry. In addition to its bid to join IPOA, it has hired former U.S. and British government figures including Robert McFarlane, former national security adviser to President Ronald Reagan, Lord Peter Anthony Inge, former British chief of defense staff, and Nicholas Soames, former British armed forces minister. All hold advisory or non-executive positions.
"This is only just becoming an industry,” Mark Bullough, Aegis managing director, told the Financial Times on November 4, referring to the new appointments. “There has been a question mark over how respectable it is. Certainly the reassurance of the non-executive names offers an endorsement of our company and points of reference for people not used to dealing with the sector.”
David Phinney is a journalist and broadcaster based in Washington, DC, whose work has appeared in The Los Angeles Times, New York Times and on ABC and PBS. He can be contacted at: phinneydavid@yahoo.com.
by David Phinney, Special to CorpWatch
November 29th, 2005
Wherever Tim Spicer turns up, he carries the kind of baggage that gives the private military business a bad name. An internet video showing private contractors shooting at civilian cars in Iraq, loosely linked to his company, has ignited a firestorm about unregulated gun-wielding security convoys, escorting reconstruction or government advisors, roaming the country. [See Box]
This latest scandal comes at a time when the military security industry is reaping huge profits from the gun-carrying business in conflict zones around the world once dominated by rogue soldiers of fortune. As thousands of armed guards, working largely under U.S. contracts, travel the roads of Iraq, the industry is seeking respectability though a Washington trade group -- the International Peace Operations Association (IPOA).
The group calls itself “the most ethical and effective voice of the Peace and Stability Industry,” pledged to ensure that “their capabilities are not misused or abused.” Its members include industry heavy hitters like ArmorGroup, Blackwater, Hart, MPRI, the Olive Group and Triple Canopy.
Shooting Gallery
The grainy video (click to download) shows the view of an Iraqi street from the back of a moving vehicle. The long barrel of a gun, held by someone inside the vehicle, swings across the frame and viewers see the effect of bullets, apparently fired from the vehicle, spraying civilian cars coming up behind. Bloggers claim that the man with the gun is Danny Heydenreycher, a South African employee of Aegis at Camp Victory.
In one of the four separate incidents, after shots are fired, viewers see a Mercedes car crash into a taxi; passengers flee from the taxi, but no movement is seen in the Mercedes, suggesting that the passengers were injured or killed.
According to Robert Young Pelton, author of an upcoming book, “Licensed to Kill: The Privatization of the War on Terror,” the people driving the vehicle are part of a convoy of private military contractors. The video was originally posted on an unofficial Web site run by a disgruntled contractor working for Aegis Defence Services. (The website claims to be a voice for to "the men on the ground who are the heart and soul of the company.” The video has been deleted from the site but has taken on a life of its own in the blogosphere.)
Aegis holds several sweeping Pentagon contracts in Iraq worth over $430 million. In published news reports, Tim Spicer, the head of Aegis, insists that an internal investigation of the matter is ongoing and notes that there is no evidence that the video involved Aegis. Authorities in Baghdad are also apparently looking into the video, which has torched a firestorm of criticism as bloggers ponder if the United States uses private contractors who shoot unarmed Iraqis.
Pelton, who spent a month with armed convoys running the road from the Green Zone headquarters in Iraq of the U.S. military and government to the Baghdad International Airport, said he understands the public concerns over the conduct of armed private security companies working in Iraq. Private security companies are known to regularly fire guns in the streets as a warning to clear traffic and to caution vehicles coming up from behind.
“The US military considers all of Iraq a war zone,” said Pelton. “Contractors are the frequent target of car bombs, but there are rules and professional standards. Two of the four incidents are trigger happy contractors. It’s a good bet that all of the victims of the incidents will generate some type of retribution against the security industry. Even in a war zone, there is a clear line between professional security providers and amateurs. This video shows how not to conduct vehicle security.”
Another source who is familiar with private security operators in Iraq says that it is nearly impossible to tell the difference between a hostile vehicle carrying a bomb and innocent Iraqi civilians driving toward you. Under rules issued by the Pentagon, any private security team member is expected to wave off a possible threat, fire warning shots and then shoot at the vehicle’s engine to stop it. Team members are also allowed to shoot to kill as the last resort in a situation of pressing circumstances.
“Some team members are scared all the time and shoot a lot, some are scared once and a while and shoot once and a while, some are never scared and never shoot,” the source said. “You can never tell when you are about to get blown up, that’s why some contractors get blown up or they would have shot the driver.”
But at the same time as the industry is evolving -- becoming more corporate, more visible, and more concerned with projecting a responsible image -- private military contractors are facing scandal like the new video in circulation and unprecedented scrutiny from the news media. Some executives recognize that if the companies don’t regulate themselves, someone else might. The public, and many policymakers, sees contractors through an image shaped by accusations of war crimes, rogue operations, and photos of private contractors engaged in torture at Abu Ghraib.
To some, Tim Spicer, a Falklands Islands war veteran with weathered good looks, embodies the industry’s old rogue image. During the past 10 years, the 53-year-old former Scots Guard lieutenant colonel racked up a gun-for-hire resume littered with questionable deals and testaments to poor judgment.
Highlights of his globe-trotting career include sparking international scandals in Southeast Asia and flaunting international bans on arms trafficking in West Africa. A contract held by his now defunct company, Sandline, precipitated the toppling of the very government that hired it: Papua New Guinea. When Sandline mounted a $10 million armed operation in Sierra Leone, initially bankrolled behind-the-scenes by a shady fugitive wanted for embezzlement, Spicer was accused of legal and financial shenanigans.
And now, to the chagrin of many IPOA members, Spicer wants to join the organization. His membership bid comes just as the IPOA is trying to reposition the industry as for-profit providers of armed men as peace keepers.
In a vote several months ago, IPOA rejected Spicer’s company Aegis Defence Services. A second bid to join the only trade organization for security contractors is causing a private little war inside the IPOA sandbox.
“This is an issue about making a stand. The organization shouldn’t back away even if blood is spilled on the carpet,” said an executive in a major security company who cited commercial reasons for insisting on anonymity. “If the IPOA doesn’t get it right, it will come back to haunt it.”
Spicer was “surprised” by IPOA’s initial rejection “especially since we were invited to apply,” he said in a recent telephone interview. He flatly denies rumors that he threatened legal action against the group.
Complicating matters is the fact that London-based Aegis holds the Pentagon’s largest private security contract in Iraq. Established in September 2002, by Spicer, who owns 40 percent of the company and is its chair and chief executive, the fledgling company made headlines in June 2004 when it landed the $293-million three year contract in Iraq despite having no experience in the Middle East. The contract has since been expanded for another year, making it now worth $430 million.
Under the three-year agreement, Aegis wields considerable power and influence over the safety and effectiveness of the other security companies including many IPOA members. Spicer’s company provides daily analysis on counter-insurgency and personal protection to government officials. It also holds sweeping responsibility for electronically coordinating employees of other security convoys traveling around Iraq, working for companies with reconstruction or government contracts. The scores of contractors under Aegis’s control constitute a workforce the size to a military division; and may rank as the largest corporate military ever assembled.
Saving Africa
Doug Brooks, IPOA’s president, a passionate defender of private military contractors, had no comment about the internal spat over Spicer and declined to reveal who re-invited Aegis or why its first application was rejected. In the industry’s rough and tumble past, Brooks had defended Spicer’s former company, Sandline, telling CorpWatch more than a year ago that the company had helped save thousands of lives in Sierra Leone.
"Sandline was remarkably effective," Brooks said. "Their goal of restoring the democratically elected government was achieved. They maintained a low profile but played a critical role in the success."
The lanky 43-year-old head of IPOA is more circumspect these days. “This is an internal matter,” Brooks said. “But I do think we should try to be inclusive.”
Brooks, a son of a professor of African studies with an unfinished doctorate in international security, says his long-time interest in Africa inspired him to start IPOA in April 2001. At the South African Institute of International Affairs, and during years of teaching and traveling in Africa, he says he saw impoverished nations with ill-equipped armies struggle against violent insurrections as developed nations stood by, unwilling commit their own forces.
The hands-off policy allowed butchers to storm across the continent while United Nations peacekeepers frequently fell short of the task, he said. For example, in 2000, Sierra Leonan rebels routed 17,000 poorly-trained and equipped UN security troops, and then rampaged through the countryside dismembering unarmed citizens and creating hundreds of thousands of refugees.
"We still don’t know how many died," Brooks said. "But I spoke to hundreds of Sierra Leonans about the failure of the UN peacekeeping force. They are all very vocal and pissed off.
It was the private companies such as Pacific Architects & Engineers (PAE) and International Charter Incorporated (ICI) of Oregon (now IPOA members) that "stayed put," providing airplanes and logistics support for the local military and, according to Brooks, gained the trust of the people.
Spicer defends his work in Sierra Leone and Papua New Guinea as “defending democratically elected government that were removed in violent coups.”
Robert Young Pelton, author of an upcoming book, “Licensed to Kill: The Privatization of the War on Terror,” offers a different take, noting that Sandline's predecessor, Executive Outcomes, had intervened in Sierra Leone in 1995 and saved lives.
"But the Sandline "Arms to Africa" debacle in 1997 did little to save lives. It's a common confusion that Spicer allows," he says. "In PNG Spicer's involvement actually ended up deposing a democratically elected government. Both jobs resulted in resource concessions being granted to Sandline owners or backers."
Whatever the industry’s past faults, Brooks believes in its future. It was the willingness of private military companies to do the work that developed nations refuse, he said, that led him to found IPOA and seek the support of policy makers.
"I think the industry is a huge resource that should be tapped,” explained Brooks, who represents the industry at defense contracting conferences and meetings with the State Department. "There are times when government won’t send their own troops, but they are willing to write a check."
Business Booms in Iraq
Check writing is exactly what has been happening in Iraq, where billions of dollars in new Pentagon contracts have supercharged the growth of private security companies and spawned multimillion-dollar companies overnight. Private security accounts for at least one quarter of the $24 billion earmarked for rebuilding, according to a recent report by the U.S. Special Inspector General for Iraq Reconstruction (SIGIR). Much of this money goes to the estimated 25,000 to 30,000 armed contractors who were swiftly sucked up from a global pool of ex-military and law enforcement personnel.
The sharp demand for personnel has led to varied (some say lower) standards of training and military experience in workers from dozens of countries including the Britain, Colombia, Chile, El Salvador, Fiji, Nepal, Peru, Serbia, South Africa, and the United States.
Tim Spicer
Controversy follows Tim Spicer as surely as contractors follow armies into war. His former private military company, Sandline International, which was involved in several international scandals in the late 1990s, continues to be a classic case study of what can go wrong when private military companies wage war.
The government of Papua, New Guinea hired Sandline in 1997 to quell a nine-year rebellion on the island of Bougainville and to secure one of the world’s largest copper mines. The plan backfired after local military leaders learned of the deal and staged a coup. (Spicer’s contract for $36 million dollars -- more than the country’s annual budget -- included providing two Soviet-made attack helicopters, several assault helicopters, six rocket launchers and grenade launchers, according to research by Brookings Institute military expert Peter Singer.)
Riots broke out, Prime Minister Julian Chan stepped down, and the government imploded. Soldiers apprehended Spicer at gunpoint, jailed him on a weapons charge, and then booted him out of the country amidst a fog of allegations that public officials had been bribed.
Despite botching the operation, Sandline demanded and collected an outstanding $18 million balance from new government in Papua New Guinea.
Sandline next appeared in Sierra Leone in 1998 as part of an effort to restore the government of ousted President Ahmad Tejan Kabbah. Spicer was accused of violating a United Nations and United Kingdom embargo on arms smuggling – punishable by up to seven years in prison. Prior to receiving the $10 million contract, Spicer is reported to have accepted $70,000 businessman Rakesh Saxena to bankroll a Sandline expedition to recapture Saxena’s Siera Leonan diamond and bauxite mining interests. At the time, the Indian-born Thai national was awaiting extradition to Thailand to face charges of embezzlement from a bank in Thailand and traveling on the passport of a dead Serb.
Sandline’s shipment of 30 tons of arms to Sierra Leone ignited a news storm in Britain after Spicer disclosed that British and U.S. officials had secretly encouraged him. The “Arms-to-Africa Affair,” as it came to be known, rocked Tony Blair’s government, triggered a high-profile British House of Commons investigation, forced the resignation of former British high commissioner in Sierra Leone, Peter Penfold, and elicited unsuccessful calls for Foreign Secretary Robin Cook to step down.
“Our attempts to uncover the structure, ownership, and business connections of Sandline were met with extraordinarily evasive answers by Mr Spicer,” states a government report. “A follow-up memorandum from Mr. Spicer was thin and opaque—and failed to provide a number of promised answers. Nevertheless, Mr. Spicer's business is not unlawful, and he is a British citizen with a record of service in the armed forces.”
In April 2004, around the time that Aegis received its mammoth security contract in Iraq, Sandline officially shut down. A notice on its website explained that the company was going out of business because of waning government support for peacekeeping missions. “Without such support, the ability of Sandline to make a positive difference in countries where there is widespread brutality and genocidal behavior is materially diminished.”
Both the Iraqi and U.S. governments have complained about the training and behavior of private contractors in Iraq. In an April performance review, SIGIR faulted Aegis’s compliance in five areas of its contract, including inadequate employee background checks and slack verification of qualifications and training. After sampling records of 20 of Aegis’s 125 Iraqi employees, the review concluded that the company conducted no police checks on 18 and failed to interview six; there were no records at all for two of the men.
"There is no assurance that Aegis is providing the best possible safety and security for government and reconstruction contractor personnel and facilities," concluded the audit, which recommended stricter enforcement of the contract.
The Iraqi Ministry of Interior has repeatedly complained about reckless gunplay by the private security convoys that barrel through densely populated cities with weapons waving out the windows to clear the streets.
Even U.S. military officials have chaffed that the increasing reports of indiscriminate shootings and other war crimes endangers their own troops. However, under an order issued by the Coalition Provisional Authority before the U.S. government officially departed Iraq in June 2004, all private military contractors are immune from prosecution in Iraq.
“They shoot people, and someone else has to deal with the aftermath. It happens all over the place,” Marine Brigadier General Karl R. Horst told The Washington Post in a September 10th story. “These guys run loose in this country and do stupid stuff. There's no authority over them, so you can't come down on them hard when they escalate force.”
Horst, deputy commander of the 3rd Infantry Division, which is responsible for security in and around Baghdad, said that between May and July, he tracked at least a dozen shootings of civilians by contractors.
Some private contractors argue that the dangers of a war zone necessitate shooting at, and possibly killing, people who turn out to be civilians. Since the violent resistance in Iraq makes little distinction between them and enlisted personnel, they say, contractors must act aggressively for their own protection.
The military itself has given mixed signal to private contractors in Iraq. In a major incident in May 2005, 19 security contractors working for Zapata Engineering were detained for allegedly shooting recklessly in the streets of Fallujah and nearly hitting U.S. forces. Later Marines searched, roughed up members of the convoy, and jailed them for three days without charges.
The Zapata contractors were released, but complained that the U.S. military had blacklisted and banished from working in the security business in Iraq -- although none ever was charged with a crime.
Another U.S. Army investigation last spring was based on an anonymous four-page letter detailing allegations of wrongdoing by the contractor USIS, according to a recent story in The Los Angeles Times. The letter writer accused USIS of deliberately reducing the number of trainers to increase its profit margin and detailed two incidents in which USIS contractors allegedly had witnessed or participated in the killing of Iraqis during the assault on Fallujah a year ago. (Private security contractors are not allowed to conduct offensive operations.)
The letter also claims that a USIS employee saw Iraqi police trainees kill two innocent Iraqi civilians, then covered it up. A USIS manager "did not want it reported because he thought it would put his contract at risk," according to the letter.
The head of the probe, Army Colonel Ted Westhusing, reported the allegations to his superiors, but told them that he believed USIS was complying with the terms of its contract. U.S. officials investigated and found "no contractual violations," and “these allegations to be unfounded, according to The Los Angeles Times. (Westhusing subsequently committed suicide, distraught over his experiences in Iraq)
Marriage Rules Without Divorce or Alimony
Brooks and his IPOA members know full well how such incidents and grievances feed into the image of private security workers as macho mercenaries unbound by laws of war or decency and loyal only to cash. IPOA has crafted a code of conduct -- now in its 10th revision -- that Brooks believes establishes self-regulation among IPOA members and "a deep sense of responsibility."
The rules call for "effective legal accountability," transparency, and dedication to the “greatest benefit of humanity.” IPOA members pledge to observe international human rights laws; cooperate with investigations of contract violations; and work only for legitimate, recognized governments, international organizations, non-governmental organizations, and lawful private companies. (Pelton says the rules resemble the "vows of marriage and without the divorce or alimony" noting that it is a self-adminstered code with no enforcement.)
IPOA now boasts of 18 member companies. All are in the business of war or post-conflict stabilization. Most are active in Iraq, specialize in providing armed security forces or training, and are staffed by former military personnel. Others provide expertise a wide variety of tasks traditionally handled by the military: de-mining, building, transportation, and equipment maintenance.
The conflicting views and the code’s legitimacy are now being tested behind closed doors as IPOA considers membership for Aegis. Given the track record of many private military contractors around the world, it may be that IPOA’s rejection of Spicer’s application has more to do with old-fashioned competition than with new-found principles. Indeed Spicer believes that criticism of him and the rejection of his membership bid "may be commercially and politically motivated.”
Mark Whyte, an executive with the British security company, Pilgrims, whose company protects business and media clients in Iraq, tends to agree with that conclusion.
“While I'm no personal fan of Spicer, this is little more than professional jealousy in my view,” Whyte said.
Pilgrims does not belong to IPOA and Whyte takes issue with some of the organization’s more politically-charged goals of nation building, but adds: “If you look at the values espoused by IPOA, I would say that Aegis is one of the few companies that actually try to live up to them in Baghdad.”
Whether that assessment is accurate or not, Aegis is certainly aiming to position itself as a respectable member of a legitimate industry. In addition to its bid to join IPOA, it has hired former U.S. and British government figures including Robert McFarlane, former national security adviser to President Ronald Reagan, Lord Peter Anthony Inge, former British chief of defense staff, and Nicholas Soames, former British armed forces minister. All hold advisory or non-executive positions.
"This is only just becoming an industry,” Mark Bullough, Aegis managing director, told the Financial Times on November 4, referring to the new appointments. “There has been a question mark over how respectable it is. Certainly the reassurance of the non-executive names offers an endorsement of our company and points of reference for people not used to dealing with the sector.”
David Phinney is a journalist and broadcaster based in Washington, DC, whose work has appeared in The Los Angeles Times, New York Times and on ABC and PBS. He can be contacted at: phinneydavid@yahoo.com.
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