Saving Money Making Money

There is still a market for starting and possibly even IPOing companies if they can save others money and have a revenue stream. Forbes has an article that focuses on Silver Spring and mentions a few other similar companies that are doing OK in the current climate. And in this climate doing OK, is great!

Silver Spring's products will save electric power companies money in multiple ways and allow their customers to save power as well. The power meter gives up-to the minute data to the power company on power usage at a residence. The customers can then view up to the minute usage on the web and change their habits to save money because of the instant feed back. Everyone wins, except for the meter readers who are out of a job.

The customers win because they get the feed back needed to cut their power usage. The power company doesn't have to pay meter readers to drive around and collect meter readings. And if enough customers cut peak power usage then power companies don't have to fund the cost of building new power plants just to satisfy peak demand a few days a year. These savings to the power company also equate to helping the environment and cutting carbon emissions. Which in my book makes this green technology even though that isn't mentioned in the main article.

Security Analysis

A few weeks ago I was shocked to find out that Amazon had a download of the audio book Security Analysis for 99 cents. It is abridged, very abridged at just over an hour long. (I believe it is just the book's introduction and first chapter.) However for the price you can't go wrong.

The first 30 minutes are basically an intro. That introduction itself is worth the price because of its view of the crash of 1929 from as soon after as 1934. That will put the current financial turmoil in proper perspective. Listening to that might conjure up the phrase "This has all happened before, and it will all happen again."

I recommend getting it if you have an mp3 player and use it to decide if you want to buy the book, or even getting the limited leatherbound edition with foreword by Warren Buffet. If you consider yourself a serious investor, or even a serious speculator, you should read this book or at least listen to the 99 cent introduction.

New Hovervilles

Listened to Marketplace Money podcast this morning and learned about the what might be the 21st century's Hoverville. The story segment was talking about a plan to help the homeless in California. Some inovative folks have come up with the EDAR. Which stands for Everyone Deserves A Roof.

May the demand for these decrease instead of increase with time.

Problem with Derivatives

Last night a friend called and told me that I should listen to Fresh Air on NPR. I did turn it on in time to catch part of the interview with former Wall Street trader Frank Partnoy. I was able to catch part of it and plan to get the podcast and listen to all of it.

Partnoy wrote a book back in the 1990's about derivatives trading on Wall Street, called Fiasco:. What follows after that on the title seems to have changed with reprints and is now "The Inside Story of a Wall Street Trader". The first title was F.I.A.S.C.O. Blood in the Water on Wall Street. He also has a new book coming out called The Match King.

In between these books he also wrote Infectious Greed: How Deceit and Risk Corrupted the Financial Markets.

From what I heard, the interview is definitely worth hearing, and the books are probably worth reading. Check them out from your library, buy from Amazon, or swing buy your local bookstore.

What to do with your old 401K

This blog has a good post about what to do with your 401K once you leave an employer. And that is a question facing more and more people these days.

You can take it and spend it. The WORST possible option. Really you should only consider cashing out if you are over 59.5; to pay for medical treatment against some life threatening problems; Tony Soprano is after you. And if Tony is just going to break your legs, you might want to think about going that route.

Implications of Medium to Long Term Resession

In looking for the silver lining of a very ugly economic cloud, I have been thinking about the upside of a long recession/depression. Once possible out come is a flight to quality. Not in the investing sense, although I'm sure that will happen as well. I'm talking about consumers buying quality over quantity.

This article, in USA Today on Americans buying smaller, smarter homes is an example of what I am talking about.

For more than a decade, she has urged people to build better, not bigger. Now, as the U.S. economy struggles to climb out of a tailspin and environmental concerns rise, her message has gone mainstream.
...
She says new gadgets, such as the iPhone, have helped consumers see that bigger is not always better. Now, she says, "we want more out of less."
...
"We could have gotten a bigger home" but chose instead better flooring, lighting, countertops and cabinetry, says Jennifer Kovatch, 24, an accounting manager. Next month in Corona, Calif., she and her fiancé are buying their first home. It has three bedrooms, not four. "We traded an extra bedroom for upgrades."

It is going to be a year or two when it pays to shop smarter. Sometimes buying the cheaper product saves money, other times it costs you money!

I leave with this quote from marketwatch:
It's enough to give a Buffett follower pause and consider another Twain nugget: "There are two times in a man's life when he should not speculate: when he can't afford it and when he can." Perhaps I should read more Twain.

Charlie Rose Buffet Gates

Came across this recently even though its almost 3 years old.

Optimism in Clinton County

From NPR, here is the story of two young men that are putting skills they learned from the Peace Corps to use in their hometown. You can read or listen to the story on NPR's website. In starting ENERGIZE Clinton County they are trying to put a Peace Corps philosophy to work at home; helping communities help themselves. Following an old proverb: “Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime.”

"We think of development as building homes and putting people to work. But if the home doesn't stand up throughout the years and if the job doesn't stay, then the development wasn't really development because it wasn't sustainable," Stuckert says. "And that was something the Peace Corps really taught, and that it's not about going in and doing these huge projects."

It's more about teaching people, through smaller projects, how to take charge of their own economic fate, and not to be dependent on a single employer.

Executive Pay

Under one of the most inflammatory titles I've seen recently on an article, Forbes has a story "Yes--You Deserve a Fat Bonus". If you didn't get a 6 or 7 figure bonus for 2008, it might take you a while to calm down from reading that title. But once you have calmed down the article is worth reading. Buried in it are some good ideas for compensation plans to help move people from short-term thinking to long-term planning. Speaking about UBS the article explains:

For the brass, however, the Swiss bank is an early reformer and has overhauled its executive comp plan in a way that could become an example for the industry. UBS' executives are now subject to a "cash balance plan," an account in which bonuses are deposited annually but from which only a third can be withdrawn each year. If there's a downturn for either the company or a business unit in the following year, UBS will withdraw money from the account. In a bad year executives can lose everything. Morgan Stanley, Swiss Re, and Zurich Financial are working up similar plans.

A side bar to this article contains a arguement from Carl Icahn that laws need to allow shareholders more control over the board and executive compensation.

What is bad about paying down debt?

I have continually heard or read things like the following in recent months:

Rosenberg is one of a chorus of economists who fret that tax cuts in any stimulus bill will prompt most Americans to stash the money away or pay down their debts--$2.6 trillion on autos and credit cards, $10.5 trillion on home mortgages--rather than spend their way out of the recession.

That was from Forbes.

Economists act like paying down debt is the worst possible thing to do right now. However what does paying down debt do? It gives money back to the banks so they have more cash on hand. And giving money to the banks is something we are doing at rates unseen before. Looked at that way, a tax cut could bail out both the banks and the Tax Payers at the same time. Consumers repay their credit card debt, HELOCs, etc. and banks will have more money to make new loans. Banks could then make loans to companies trying to bridge financing of profitable projects, to home buyers looking to take advantage of fallen housing prices, etc. It seems like a better solution than giving money to banks so they can sit on it and not lend it out anyway.

As a Tax payer I'd be happy to take what is left of AIG and give it to Warren Buffet's Berkshire Hathaway. That is if he would take it. Perhaps even if we could pay him to take it.

US House Hold Debt vs. GDP

One of the scariest graphs I have seen recently is this one from Credit Suisse and David Beim. It shows that the last time US house hold dept was 100% of GDP was 1929. I got this from an NPR podcast from Feb. 27th.

This tends to make one think that the down turn will be longer than any that most of us remember. It also brings back to me that I need to crack open the book Warren Buffet attributes most of his success to, The Intelligent Investor. Though first published in 1949, this book was written by Warren's mentor, Benjamin Graham, who was 35 years old and a professor of economics at the time of the 1929 stock market crash.

This is also part of the reason when I see investing pundits piling on the claims that Warren has finally lost his mind, I think they are discrediting the one person most likely to know what to do in these times. Buffet grew up during the depression and learned to invest from Benjamin Graham.

Once I finish The Interpretation of Financial Statements, also by Graham and published in 1937, I will begin The Intelligent Investor.

The same NPR show went on to cover another crisis story about a one page paper written by Joseph LaVorgna, chief U.S. economist for Deutsche Bank. You can read or listen to it at the Planet Money blog on NPR.

"Ultimately, the taxpayer will be on the hook one way or another, either through greatly diminished job prospects and/or significantly higher taxes down the line," the document says. ...
"This is a robbery note!" Johnson says. "It's saying, 'Guys, either you'll have 20 percent unemployment or national debt will go up to these dangerous levels, unless you buy toxic assets — not for what they're worth, not for what the market price is, as much as you can pay.'"