Far West Capital August 2011 Newsletter

The U.S. government debt ceiling, the never-ending European crisis, large drop in the July ISM manufacturing survey are just some of the things in the financial market that have caused us fear. But, guess what?! Our country is not as doomed economically as the media says we are. James Paulsen, Ph.D., Wells Capital Management’s chief investment strategist, assures us in this piece called “Reflections of a Soft Patch,” economic recoveries ebb and flow and our current recovery is as normal as the previous two. He includes informative graphs that will help us all chill.

Congratulations, Eric G., for winning the autographed football contest in our July Newsletter! The person described in the scout’s notes was Tom Brady, current quarterback for the New England Patriots who went from a not very impressive draft potential to winning three Super Bowl games and two Super Bowl MVP awards. Do you know how to identify and develop great talent when you see it?

Last year, you helped my Beretta USA No Worries Classic team raise a record-breaking $66,351 for Wonders & Worries. This year at the 4th Annual Beretta USA No Worries Classic, we hope to double that amount. Wonders & Worries is a Central Texas nonprofit that helps countless families and people, like Matt Mathias (this year’s Event Chair and my teammate last year), by helping children cope when their parent has a serious illness, like cancer.

Your Donation Makes a Difference:

  • More than 3,600 individuals and 900 families have participated in a Wonders & Worries program
  • Nearly 700 people in over 225 families are currently being served by Wonders & Worries
  • Wonders & Worries programs can help children with their mental health, family functioning, school performance, friendships, growth and development, and overall adjustment
  • All Wonders & Worries services are offered free of charge to people of any age, gender, socio-economic status and ethnicity

Please join me in supporting this wonderful organization by pledging and donating and spreading the word!

Back to economic fears, despite what we hear, the U.S. currently has the strongest profits fundamentals, highest percentage of positive earnings and highest revenue surprises in the world. Richard Bernstein, an American journalist, columnist and author, shows a different perspective in this piece about the state of the economy that proves that we should all just chill.

Looking for a new living space? The cottages used as the house of “The Dude” from the movie “The Big Lebowski” are on the market. But you won’t be living like the Dude or paying rent like the Dude — these cottages are in walking distances from the beach in Venice, California and are surrounded by beautiful views. Since serving as the Dude’s lair, they have gone through major reconstruction with a new roofing as well as new sewer line. The modest well-located cottages are one bedroom with heating provided by a furnace and are selling for the not-so-modest price of $2.295 million.

According to the article Bulldoze: The New Way to Foreclose, banks are now turning to demolishing homes instead of working with realtors, which allows banks to easily rid themselves of their least valuable repossessed homes. There are nearly 1.7 million homes in the U.S. in the state of foreclosure, and banks already own a portion of these and will be repossessing many more in the near future.

A number of banks are foreclosing hundreds of homes in cities whose land will be donated to local government authorities. Banks love these deals because once the properties are donated, they no longer have to pay for upkeep. According to tax experts, the banks may also be able to get a write-off for the donations. Local governments are also proponents of the deal because they receive free land to develop and use.

To some, this deal is viewed as economically beneficial in terms of lowering the over-supply of houses on the market and lowering their prices. But the benefits and repercussions of the banks’ demolition of housing are unclear. The fact that knocking down houses is the preferred option to resale demonstrates the unhealthy state of the nation’s housing market, but the effort to take an alternative way to fix the situation gives innovative hope for the future.

“In all realms of life, it takes courage to stretch your limits, express your power, and fulfill your potential… It’s no different in the financial realm.” -Suze Orman

It’s easy to think negatively when it comes to personal finances, but improving your attitude and changing your perception of personal finances is possible and can improve your overall stress level and everyday life. Suze Orman exemplifies the beneficial effects of having a positive and knowledgeable approach about personal finances. Orman’s humor and positive energy on a serious subject has helped her educate previously unaware people about the financial repercussions of their actions. She’s written multiple successful finance books, writes for several magazines, and is the host of the Suze Orman show. Before becoming one of the world’s most recognized experts on personal finance, Orman was a waitress earning $400 a month.

NFL training camp is one place where the sun’s force can prove to be dangerous in the record high temperatures experienced this summer. With heat being the number one weather-related killer, NFL players must be in excellent shape to endure conditioning drills during the hottest time of the year. Obviously, location determines who suffers the most from the heat, but as a result of overcoming this challenge, certain teams may be in better condition for the upcoming season.

Using the National Weather Service’s average August temperatures and number of 90-degree days, The Weather Channel has compiled a list of The Top 10 Hottest NFL Training Camps:

  1. Houston Texans (Houston, Texas)
  2. New Orleans Saints (Metairie, La.)
  3. Tampa Bay Buccaneers (Tampa, Fla.)
  4. Miami Dolphins (Davie, Fla.)
  5. Jacksonville Jaguars (Jacksonville, FLa.)
  6. St. Louis Rams (Earth City, Mo.)
  7. Tennessee Titans (Nashville, Tenn.)
  8. Carolina Panthers (Spartanburg, S.C.)
  9. Kansas City Chiefs (St. Joseph, Mo.)
  10. Atlanta Falcons (Atlanta, Ga.)

What do drug traffickers, health-care providers (such as doctors or hospital administrators), and elder-law attorneys have in common? They have all been connected to entitlement fraud, more specifically fraud with Medicare and Medicaid, which is probably a lot worse than you realize. Take a look at these facts from this article titled Entitlement Bandits.

  • A study of ten states uncovered $27 million in Medicare payments to dead patients
  • Judging by official estimates, Medicare and Medicaid lose at least $87 billion per year to fraudulent and otherwise improper payments
  • 10.5 percent of Medicare spending and 8.4 percent of Medicaid spending was improper in 2009, though fraud experts say the official numbers are too low
  • Every year since 1990, the U.S. Government Accountability Office has released a list of federal programs it considers at a high risk for fraud. Medicare appeared on the very first list and has remained there for 22 straight years.
  • Each year, Medicare pays 1.2 billion claims to 1.2 million health-care providers on behalf of 47 million enrollees.

Want to cut spending by $1 trillion in ten years? Find a way to eliminate the fraud.

Here’s another unique football player name for the books: Yourhighness Morgan, linebacker at Florida Atlantic University. What do you think is the most unique athlete name? Comment on our Facebook page! We’ll post the results in our next newsletter.

Where are home prices headed? Skeptics worry that banks’ ballooning inventory of foreclosures will keep a lid on home prices for years. But don’t get hung up on banks’ inventories; inventory isn’t the only thing that sets home prices. Tom Brown explains in this article: “Things won’t get back to normal until all those properties have worked their way through the system. But if you only look at banks’ housing inventory, shadow and otherwise, to figure out where prices are headed, and ignore other big shifts going on in the market, you’re apt to come up with too gloomy a conclusion. Rather, look at all the factors that are driving supply and demand. Housing starts and the rate of household formation are hugely important. Recent trends for both go a long way to offset the huge inventory of homes held by the banks.”

Milton Friedman, a well-known economist and public intellectual who has won a Nobel Memorial Prize in Economic Sciences, is also famous for being an advocate of freedom and personal liberty and his major contributions to macro and micro economics, economic history, and statistics. In his book “Capitalism and Freedom” (1962), he advocates the necessity of minimizing the role of government in a free market to create political and social freedom. In this old but timeless interview with Friedman discusses, or more like schools Phil Donahue, an American media personality, on greed, capitalism, self-interest, and politicians. Watch and enjoy this brief yet powerful video of Friedman effortlessly shutting down the argument that capitalism is based on greed.

If you’re a criminal, watch what you post on social media; the NYPD is watching you. The NYPD recently formed a new unit to monitor troublemakers on Twitter, MySpace and Facebook when they announce plans, brag about their crimes or solicit underage victims. Tracking online conversations and posts have already helped in a number of cases this year, including catching two unrelated people who bragged about their murders on Facebook, which is shocking on so many levels. This tracking method was also used in London recently to find rioters.

We all know that the U.S. unemployment number is well publicized. But we read a couple of different stats this week that we thought were worth noting. One, the labor force participation rate just fell to 63.9% – the lowest since early 1983 -when the unemployment rate was over 10%. Second, the percentage of the population employed fell to a 28 – year low of 58.1%.  Third, Gallup reports that the Underemployment Rate (which includes those who are seeking full – time work) is 18%. A few more – 45% of all high school graduates cannot find a full time job and 25% of all college grads.

Our team at Far West Capital is cheering on our Vice President, Jason Lippman, and his 10-member running team, Team Rogue Ultra, as they run the Leadville Trail 100 (yes, a 100 mile course!) in Colorado this coming weekend, August 20-21. This is Jason’s third time participating and he hopes to break the 25-hour mark! To learn more about their journey, check out this blog post. Go, Team Rouge Ultra, Go!

Did you ignore our advice about taking a vacation? Well, you’re in luck. Three Australians traveled 38,000 miles during a 44 day trip by 18 flights to 11 countries with 2 cameras and created 3 stunning short films called “Eat,” “Move,” and “Learn.”  It’s almost like a virtual vacation! Almost.

Do you want to grow your business? Do you want to grow personally and professionally too? Accelerator, an Entrepreneur Organization program, can help you do it! To learn more about Accelerator, check out our blog post.

We have seen the guys in this video speak in person. They’re very passionate economists, great bank analysts and can explain what the heck is going on with interest rates and Fed, given all of the turmoil from last week. Check out this video.

Is morality the most necessary condition for a market economy to operate? Game theory, economics, biology, and history all support that thought, but as this essay discussing the topic on Le Québécois Libre suggests, maybe we should consider the fact that free markets might not even exist without morality.

Hey, if Ted Nugent likes him…!

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