Archive for April, 2008

The customer is the one in front of you

So I am sitting outside at a small white plastic picnic table.  T is inside delivering a banana box of strawberries and bananas to the store owners.  Sunshine turns my legs warm and the cool of the umbrella shade sets the tone.  I am reading the sport’s page, lakers in four!, and waiting while T barters us smoothies for breakfast.  Cars pull into parking lot in front, the click clack of someone walking down the sidewalk from the hair salon next store, the murmur of conversations, hello echoes, and then I realize that I have finished my paper, 25 minutes have passed and no breakfast smoothie of mango and ahsighee sits in front of me.

Without thinking very much, I find myself dropping the paper onto the table and striding off through the parking lot towards my favorite bagel shop across the street.  Later, as T and I walk back up the hill towards our place, I find myself trying to explain what I felt about what had happened.

The customer is the one in front of you.  The one who placed an order and is waiting while you . . . well, while they apparently did everything else but finish your order.  One of them got interrupted by family phone call.  The other decided to finish making the tuna salad for the lunch crowd while she talked to you and the other customers who wandered in and actually ended up getting their orders filled first.  ‘Cause when the cashier got off the phone, he began taking their orders and assumed that his partner was taking care of you.”

“They’ll never make it big,” says T.  She says it although since she started advising them on their business three months ago, the business has quadrupled its sales.  This month they have already reached their contracted limit for credit card sales ($5,000) with a week to go before the end of the month and they’re happy to pay the small penalty.

Mom and pop versus McDonalds, that is the nut of it.  Small businesses don’t have the benefit of a book of procedures that tell you exactly how to upsell the customer.  At any MacD, the cashier takes your order, your money, and by the time that’s done, almost, the finished product is waiting at the pickup point. Everyone on the staff has an assigned set of tasks designed to get you in, get your money, and get you out.  As a society, we have gone in my life time from drive ins to drive throughs.  Grocery stores rush up extra cashiers when the line is more than three.”

T gives me that look she saves for when I’ve gotten up on my soap box and she wishes I could just hear myself.   So I don’t have to say any more, she knows my drill.  We have owned small businesses like that one together for several years.  She also knows that most of the time I am totally anti-fast food from plastic flavored foods to upsizing the drinks.  (Have you noticed the new ads for “extra chicken” that they are trying to slip through under the guise of going “green”?)  So she is probably secretly amused at my upsettedness.  But hey, I am a breakfast person and waiting 25 minutes well that just doesn’t wash.

The thing is that I really do support the idea of thinking global while buying local.  T and I, we live the talk.  We walk to the grocery, we barter with our local merchants, we both ride bicycles, we stack our vehicle trips and use the library for the majority of our reading materials and studies.  Taking time to take the time is our motto but still we don’t live outside of our culture we live in it.  Even in an uncrowded store, when you get to the purchase point, you can feel the breath of the next customer on your neck.  And so we aren’t immune to the constant pressure unless we develop habits for dealing with it.  Relearn the ideas of breathing deeply, and enjoying the warmth of the sun on our backs.  And as Frankie used to sing,


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Weekly Tags

So here we are again, adding things up, reliving the week’s research and hoping that doing so will unearth even more blogosphere gold.

I spent quite a bit of time this week looking at the financial industry.  But I came across this site when I visited a blogger who had been brought to my attention by’s new “automatically generated related tags”. I seem to remember there was some lamenting at the state of financial literacy in school age children.  This project called, Banking on our Future, has several strong memes:  Urban education, political correctedness, and the real effects of a true financial education on our children.  The Board of Directors smacks of money, and the articles on the blog lead one to believe that in money matters god may be on your side.  Hope floats.  Ah well, who knows maybe the $836,000,000 they’ve spent of educating 228,000 kids will change the world.

I guess you can tell, dealing with the money men and women this week has left me cranky.  This next tag came about because there appears to be a species of search engine which crawls the sphere looking to link you up with an ad for their business.  This one came in looking to lead me to his business blog about MLMs.  His comment was easily recognizable as a car salesman’s hello.  But then I shouldn’t complain, right?  Traffic is traffic.  Plus, you might actually be interested in finding someone to invest in your home business so why not at least take a look.  Just remember to cross reference your Google search so you see all sides.

As you might have noticed, I do have some thoughts about the coming election and the effect the new president might have on the economy.  I could spend time commenting on this type of news report but something about Obama’s reaching out to new voters, and thinking voters at that, makes me less concerned about this foolishness than I used to be.

 Which leads me to this last little link.  Marc Prensky’s name came up in a discussion about media, learning, and writing at Nicola Griffith’s blog.  I had never heard of him but as a veteran of the education system and the ongoing battle to make it computer literate I could feel myself certainly responding to his message.  Why are kids still carrying 30 lbs of textbooks when the money spent on them could be used to deal with the ongoing economic crisis in our classrooms.  Fear of the machine and the loss of power it would bring about in the corporate atmosphere of America’s staid and true education system are real issues and I am glad someone’s addressing them because the 50% drop out rate doesn’t mean necessarily that students are failing, it may mean schools and their resistence to change may be failing the students.

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Bonds, Mr. Bond?

Shaken not stirred, isn’t that the way you like them, James?  Ah well, then I suppose you’d best start here.  I know, all that financial terminology and who can really trust Wikipedia?  But what are we to do, trust the trading firm who wants us to buy into the bond market with them?  No, you are right, James, we need to prepare ourselves for this adventure into the vast world of credit.

A bond is a so-called debt security.  The issuer gaurantees that you will be repaid your principal plus interest at maturity.  Unless, of course, the issuer goes bankrupt in which case you get in line like all the other lenders.

There is no guarantee of how much money will remain to repay bondholders. As an example, after an accounting scandal and a Chapter 11 bankruptcy at the giant telecommunications company Worldcom, in 2004 its bondholders ended up being paid 35.7 cents on the dollar. In a bankruptcy involving reorganization or recapitalization, as opposed to liquidation, bondholders may end up having the value of their bonds reduced, often through an exchange for a smaller number of newly issued bonds.

Oh, I realize, James, that you have no fear that you will get your money.  After all, you do have your ways.  Meanwhile, with interest rates at the Fed hovering at zero and the stock market fluttering and fluctuating minute by minute, bonds do seem the way to go.  Still . . .

At, reporter Katie Brenner gives us this estimate:

(Fortune Magazine) — You count on bonds to be the quiet part of your portfolio, providing steady returns and offsetting the volatility of your stock holdings. Many retired investors count on bonds for regular income. Lately, though, the bond market has been anything but calm. The subprime-mortgage meltdown has roiled the credit markets and slowed the economy. In response, the Federal Reserve has cut short-term interest rates, helping to push yields to near-historic lows.

And James, please don’t forget about the inflation factor.  With the Fed rate going low and prices on the rise, you may need to pull out your trusty submarine to survive the tide.

‘Til tomorrow, then.


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Real Estate, Interest Rate . . .

So first things first.  I think we might have to give a thumb up to the Fed.  Yesterday’s news that the sub-prime reset rates for mortgages at risk did not jump as high as was expected.  In other words, people expecting their mortgage payments to leap out of payment reach were pleasantly surprised at a little they had changed because the Fed had lowered prime.  Breathing room is what they call it.

Strangely enough, on the very same day that I read that news, my Citibank credit card sent me a letter explaining that they were forthwith increasing my variable rate for purchases to U.S. Prime plus 14.9% but with a minimum set at 19.99%.  At, I found this note:

When the prime rate decreased during the period February 2001 until June 2004, most credit card interest rates did not decrease accordingly.  In fact, most credit card issuers raised their interest rates steadily during that period.  How did they do that?  When the prime lending rate fell, they simply raised their margin rates to compensate for the decreasing prime rate so they would not have to lower the interest rate on customers’ credit cards.  You can find out how ethical your credit card company is by getting out your old monthly statements and seeing if your interest rate dropped as the prime rate fell steadily during the period February 2001 to June 2004. (Of course, to do this your credit card interest rate must be tied to the prime lending rate.)   If you have a variable rate card, notice how quickly your credit card company raised your interest rate when the prime rate increased.  Did they lower your interest rate when the prime rate fell?

I think just about everyone would agree that the credit card industry lacks in transparency.  Even as congress struggles to regulate it, it is also clear that the question about what reasons apply to explain the lenders margin rates are still missing.  As I expected, information about this problem is scarce and indicates the slant of privacy is definitely towards the credit card companies. 

Meanwhile, the world turns.  Have a nice Sunday.

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AARP is . . .

the sound that Garp made when tossed into the air.  Not.  It was the sound that Garp’s father made because he couldn’t talk.  Or AARP is the funny sounding title for the American Association of Retired Persons organization.  It might also be known to you as that group that starts sending you mail around your fiftieth birthday and doesn’t let up until you die.  Yes, they are relentless but in a good way.  I know when you first get the mailer it can be a shock.  Retired, old, me – Nooooo!  But then you get over it when you see almost immediately how being a member of such a large organization brings you benefits.  Hotel costs go down, lower auto insurance, health insurance, free financial advice, and after you start claiming Social Security benefits, medicare/AARP works to keep those medical and drug costs down.  They wield a fair amount of political clout, too.

I am thinking about this this morning because yesterday while strolling through my local Border’s Book Store I came across another benefit from AARP.   The little kiosk stood right there next to the main information desk.  It was one of those kind that you can turn so that you can stand in one place and see all the items on it.  This one had a variety of AARP pamphlets on it that covered the specific information a person might need to understand about topics as diverse as Health Insurance, Home Improvement, Consumer Protection, Social Security, Baby sitting as grandparents, and Money Matters.

As you might guess, it was this last one that caught my eye.  But before I go ahead with a review let me plugin this caveat.  The advice is for financial planning first, seniors second, and anyone who needs the information no matter what their age last. 

Money Matters Your Guide to Financial Security, the AARP version:

The Nutshell

  •  Start with a plan:  It can be a plan for the week, the month, or forever, just so it’s a plan.
  • Set goals:  What do you want and when do you want it, and how much do you think it will cost in time and money and in life energy to get it
  • Evaluate your cash flow:  What is coming in now, what will be coming in later, and how much of it do you spend
  • Calculate your net worth:  Add up the assets (things that you own that make you money) and subtract the liabilities (things that you have that cost you money) and remember debts are not assets until the cash flow from them is positive
  • Make assumptions about the future:  What will happen in the economy, in politics, in your employment or retirement, with your health, and with those within your immediate family
  • And as a last step, adopt a financial strategy:  Decide what is most important, decide how to use your information to get that done

The rest of the pamphlet is filled with reference material and contact info to help you realize your plan and, as I said above, whether you’re ten or ten times ten this collection of materials should be a great starting place to get you thinking about your money matters.

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Fear in the marketplace

I started reading a new author yesterday, Nicola Griffith’s, Always, a tale told in classic noir style, the hero viewing the world for my eyes.  At one point, she has a need to quote Andrea Dworkin:

“We are taught systematically to be afraid.  We are taught to be afraid so that we will not be able to act, so that we will be passive, so that we will be women…”

Don’t worry men you are taught the same thing and for the same purpose.

“the information we get, every day, from TV and newspapers and online, is all about the rapes that are completed, the lives lost, the pain suffered — preferably with blood and body parts and panicky eyewitness accounts.  Why? Because that’s what get an audience, and the bigger the audience, the more media can charge for their commercials.  More than eighty percent of us spend our lives afraid because that helps soap makers and computer manufacturers sell product.”

One of the most popularized strategies of the 80’s “War on Drugs” is the scared straight method.  Take a group of potential users to a hospital or a jail to see the end result of drug usage, and, so the story goes, they see what there is to be afraid of and thus change their evil ways.  Last year, over 870,000 people were sent to jail in America for drug related crimes.  Adding their lives to the 70% of the prison population that were already there for the same type of crime.  But I bet a lot of commercial time accompanied the TV showing of this strategy.  Today, you can see its progeny in the spate of Cops, Jail, Coroner, and Law and Order shows that clog the cable system networks. 

These days, though, the fear and purchasing power of these show may be on the wane.  Too much of a good thing?  Maybe.  But I think fear of something else may be pushing its way to the surface.  Right now what is selling TV and newspapers, and even here online, is the fear of a Recession or even worse a long term economic Depression.

The imagination is a powerful thing.  Feeding it with the news that sells is the purpose of our advertising.  But, and this is a big But, being scared straight into supporting an increasing and ongoing trillion dollar debt-laced budget, that’s just foolish.  We need to take a deep breath and remind ourselves to use our fears to Think Straight about what the true nature of our economy and our part in it is.

Here are some questions that might help frame our answers:

  • Where do we live and how close are we to the work we do?
  • How often do we use alternative forms of transportation?
  • What active part do we play in deciding what is happening in our own neighborhood?
  • What is happening in our neighborhood that contributes to a sustainable life?
  • How often do we participate in local government?
  • What are the political forces at work in our local economy?
  • What are the long range plans for our local economy?
  • What are the real problems that face our local economy:  job loss, business failures, not enough affordable housing, air pollution, increased utility costs, education system breakdowns ?

If we think straight about the answers to these questions, I believe we will see that there is much we can do and much to be worried about, but if being afraid is the result, it is the wrong one.


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Hedging the funds

I have just spent my first hour of writing time this morning researching Hedge Funds.  Why?  I have to ask myself.  Will I be able to invest in these non-regulated entities?  No chance, unless I win the lotto or some relative I never knew I had suddenly dies and leaves me millions.  Or maybe I’ll get in a car crash and sue for $$$,000,000.  Yeah, like I said, no chance.  On the other hand, maybe life is a sort of hedge fund, the way you live it that is. 

At Wikipedia we find this definition for hedge funds:

A hedge fund is a private investment fund that charges a performance fee and is typically open to only a limited range of qualified investors.

Highly qualified, I’d say since usually your initial investment is $250,000 or more.  And each fund can only have up to 100 investors, though there are some exceptions, I think.

As their name implies, hedge funds often seek to offset potential losses in the principal markets they invest in by hedging their investments using a variety of methods, most notably short selling. However, the term “hedge fund” has come in modern parlance to be applied to many funds that do not actually hedge their investments, and in particular to funds using short selling and other “hedging” methods to increase risk, and therefore return, rather than reduce it.

Here, you need to think of the recent surges in price for commodities, think of how large amounts of money invested in a specific future (okay I wouldn’t do the pork belly thing but it is one future) say rice.  Think about how much power a shrewd manager might have in moving these markets.

Hedge funds have acquired a reputation for secrecy.

Thanks to Bear Stearns and others, the pressure to pierce the vail of the funds has grown immensely. 

While there is no legal definition of “hedge fund” under U.S. securities laws and regulations, typically they include any investment fund that, because of an exemption from the types of regulation that otherwise apply to mutual funds, brokerage firms or investment advisors, can invest in more complex and riskier investments than a public fund might.

But how can you pierce what doesn’t exist.  Oh the funds exist, held in Barbados, the Cayman’s, and other off shore havens but that is all they are funds. 

 The assets under management of a hedge fund can run into many billions of dollars, and this will usually be multiplied by leverage. Their sway over markets, whether they succeed or fail, is therefore potentially substantial and there is a continuing debate over whether they should be more thoroughly regulated.

The managers usually form an LLC in order to direct the operation and handle the investments.  For this the standard income is something called 2 and 20.  2% for managing the fund and a 20% performance fee based on what the fund earns.  As you might guess, these fees may vary anywhere from 0 and 50 and inbetween.

I think the thing to understand about these hedge funds and their managers is that they are in it for the money for the most part and will seek to set up a fund for just about any purpose.  And though, I am sure there are “green”  hedges too, for the most part the fund comes first and the world second.  Which explains why this comment was made on dealbook:


A flattening of the yield curve, if it sticks should be bad for value stocks (who typically grow via debt) and growth stocks. Is this a harbinger? Does this hedge fund know something the rest of us can’t see? Hard to believe it, especially with all the pressure on the $US. But on the other hand, all the [bad] news on the dollar has been…. well, bad. So the other question is: “Are we at a $US inflection point?” Again, it’s hard to believe, with [pro forma] M3 growing at a close to all time high annual rate of 20% (kinda explains why they don’t report it anymore, huh?). From a supply and demand perspective, supply is flooding the world (we’re awash in dollars), so any relief has to come from increasing demand. I’m not an economist, but typically fear and greed will trigger demand for dollars — a big scary event, like a new terror wave, or some kind of economic renaissance in the US which will want to make capital come here. Why would anyone place a bet on those 2 items? Conceivably, a recession would be good for the dollar, but it would have to be pretty steep. Yes, that’s it. This hedge fund is betting on a recession, one steeper than the conventional wisdom. That would stem the flood of dollars leaking out into the world economy. For bond players, time to go long if you believe it.


— Posted by david russell

Any questions?

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