With all of the frustrating economic events going on in the world today, starting a home based business could possibly be the only way to solidify your financial future. If legitimate home business opportunities were straightforward and simple to deal with, everyone would succeed. I have to be honest – many new businesses fail. It’s going to take a lot of hard work and long hours to get your new venture off the ground. If you are willing to do the work and learn a few things, you can truly excel at it.

Lots of people have started working for themselves simply because they didn’t have a choice. The traditional methods of making a living have all but disappeared in today’s fragile economy. While I’m sure this has caused a lot of anxiety, many people have found working for themselves very liberating. You set your own hours, you set the limits on how much (or how little) you make, and most people have found that for the first time in their lives, they are enjoying the day- to-day routine. They have found that they are now doing something they want to do….not something they have to do.

Once you get all the preliminaries out of the way (determining what it is exactly you want to do, legally developing your company, creating a website), you just might find that you were made for entrepreneurship. Hey, it’s not easy and takes a lot of work. And remember, have a plan. No matter how large or small a company is – a business plan to a must. It’s your map to success and a requirement.

There are plenty of resources that you can tap in to help you through the beginning year of your new venture. The U.S. Small Business Administration is a must. Visit an SBA office or just go to their website. There is so much information available online to help guide you through many of the questions you will probably have in the beginning.

Make sure you spend some time networking with other entrepreneurs in your local community. There are always other people out there who have gone through the very same things you’re trying to accomplish. These individuals will offer you valuable information that will no doubt save you time and money. Pick their brains and get all the information you can before going one step further.

Networking can be accomplished online through various social media sites, going to physical training classes, or finding local business gatherings. Sales are frequently developed through these personal sessions by creating personal relationships with others. You must make this a priority. If you don’t feel comfortable socializing, it’s time to try and develop your skills in interpersonal communications. Effectively talking to people can make or break the effectiveness of your new business. Sales is about touching people’s needs and desires at a very personal level so it’s important to develop your sales skills to a point where you are comfortable interacting with potential customers.

You’ll probably find that you’ll be putting on more than the 40 hours you’re used to, at least at first. But I think you’ll also find that you will be enjoying the time spent. This new business belongs to you and you’ll be surprised at how fast you’ll catch the entrepreneurial “fever.”

Start using your personal and professional skills to your benefit…who knows, you might enjoy it.

There are numerous methods of determining the best methods of handling our money that didn’t exist a decade ago.  Most of us have personal computers at home that can be used to assist your financial development.  There are many software programs that can help guide you by showing where your money is currently going.  These programs can help you determine the best methods of using your cash to enhance your investments.  Determine how much is coming in, how much is going out and establish where the money is going.  It’s really that easy.  Once you know those facts, you can make your adjustments.

One question that you really should ask yourself is whether the investment methods you use are actually working for you to build financial wealth.  If there have been problems, changes in the market trends, an alteration in your personal lifestyle (a new baby, a recent move, a new job, you’ve just married, just divorced) then make the necessary changes to make sure your money is working to fit your life’s changes and goals.  Interest rates are down today and it may be time to consider refinancing your home but only you know whether that’s something you should do or not.  Plus, make sure you build at least three to six months worth of living expenses, if you don’t already have that amount put away safely. 

Other areas of interest to your personal financial life include your insurance coverage.  If your agent hasn’t called you recently, pick up the phone and dial your agent’s office and request that you take an inventory of your coverage (home, life, auto) and adjust where needed.  For goodness sake, examine your credit report at least once a year.  It might be a good idea to actually contact the credit agencies twice a year, especially if you are about to make a major purchase.  

Just as you need to develop and then redevelop your short and long term goals throughout the year, so it goes with the state of your financial well-being.  This should not be an unpleasant chore but rather something enjoyable.  Remember, by conducting these occasional checkups, you are insuring that positive financial results are more likely to be attained. 

Anything can happen throughout the year (as this year has shown), which can force you off your fiscal course.  Events that can make a difference in your life occur at a moment’s notice.  Just make sure that when unforeseen events occur, you make the needed corrections that will rebalance your financial life.  Plan to make a quick check every three months or so.  This is all part of goal setting that I believe is so important to leading a balanced and prosperous life.  Stay focused and make sure you perform your personal checkups on a regular basis. 

One of the most profitable times in my life was during my dedicated real estate career; I say that because, at the time, that is all I did.  That period also taught me about diversification and the importance of good money management, but that is another story.  Anyway, during this time (the late 90’s) I began to invest in real estate.  The market was a good buyers market so there were lots of opportunities, however interest rates were a little higher and I had pretty bad credit.  As I was growing up through high school and after my graduation, I didn’t maintain my credit as I should have.  Contrary to what people believe, think or say, you can fix your credit. I did but it took many years.  I was able to eliminate all the bad and replace it with all good. Yet again, that’s another story but you can do that to.

As far as this story goes, I identified a great place to make money in the real estate market place, most specifically rentals, and investor rehabs.  The problem was I didn’t have any extra cash and poor credit. So, I set out to accomplish my goal. I had to use private money; in fact I was paying interest as high as 18%, one year notes and five points.  Yikes, you say.  Me too!

The difference was this; if you aren’t putting any money down or little money down then your return is infinite regardless of what you are paying for the use of the money.  I always get the terms of the money first then I look for a deal that fits within those parameters.  That way I can still make money paying whatever the terms are.  That’s what I did.

I bought literally hundreds of properties and then started buying multi-family properties.  As I have written before, you need to move the ball along.  I was able to eventually find better pricing that was still high but not as high.  The point of all this is to show you that credit and using private money is a possibility that you can consider and today’s financial landscape offers a great opportunity to go out and find deals.

Let’s talk about no money down deals and better yet getting money back. First, there are lots of them out there. Maybe not as many no money down deals as in the past but certainly little to no money down deals are still available.  When I first started out I was able to do a lot of deals that actually paid me when I closed.  The key is to find someone that will deal with you.  Do your homework and keep moving the ball forward. 

Today our “American Dream” is at risk in every neighborhood from coast-to-coast.  It’s not just a newspaper headline anymore, it’s actually happening to us.  I have seen many communities lose their sense of identity as families watch other families they have known for years suffer foreclosure on their homes.  Vacant homes are not what we ever imagined the “American Dream” to be; it’s not how we thought this story would end.  We, as Americans, have always worked hard to obtain this “dream” but now the unemployment rate has hit 9.4 percent and so many qualified and dedicated individuals are out of work.  The “dream” seems to be slipping away from us and there’s not a thing we can do about it. 

We, the people of a “former” America used to graduate from school, go to work for a company for 40 years, retire and live the rest of their days on a corporate pension in a paid off house.  That just isn’t the case anymore.  The one thing that many elderly American’s will be bringing with them into retirement is their mortgage.  This will place a real burden on their fixed income. 

But wait just a minute….it just came to mind that the American Dream was never about greed, fortune or lofty positions.  It was always about a promise that tomorrow could be better; a thought that we could leave an even better life for our children and our grandchildren.  That’s the problem.  Hey, we need to remember that we can lose our homes and just get another one.  That’s not even an issue.  The one thing we can’t lose is our values and our sense of family and community.  That cannot happen or the dream is dead.  We are Americans; we can always turn the situation around. 

We just celebrated the 65th anniversary of D-Day.  Those were tough times.  Following a decade of depression, we were suddenly forced into a World War that took millions of our precious lives.  Those left behind willingly took jobs in aircraft manufacturing plants, grew their own gardens in the backyard in order to eat, and dealt with a rationing system that forced them to do without more than not.  Maybe it’s time for all of us, as an American population, to get tough.  You have to admit, we’ve gotten soft.  I’d rather my family not experience hard times for one moment but these are challenging times and we all need to get strong.  All I’m saying is we need to start to adapt, improvise and overcome.  That’s what I learned as a young recruit in the U.S. Marine Corps and now these attributes are making it around full circle into my personal life. 

No matter who is in control of the U.S. government, our population is in a constant state of complaint.  So, I think it’s time to shift the focus from the government to our personal lives.  Let’s all start to take more responsibility for what is happening in our lives.  If you look closely, I think you’ll find more good things happening than bad things.  Try it.  Write down three good things that happened to you today.  Stop the constant complaining and consider what is going right in life.  It will be better for you, your family, your neighborhood and your country.  We can all do this – allow history to repeat itself and allow the “tried and true” American spirit to bring us to new heights from this day forward.

The list of recessionary periods erupted for a variety of reasons; weak economic base, greed, war, governmental regulation, and a lack of confidence due to a variety of issues.  This is by no means a comprehensive listing of the weak/recessionary economic periods that have been faced by our nation but let’s take a look at a few.  I think you’ll find this interesting.

Panic of 1797 –

The effects of deflation of the Bank of England crossed the Atlantic to the new United States and upset commercial and Real Estate markets as far south as the Caribbean.  Britain was affected greatly because they war fighting a war with France. 

Depression of 1807 –

The Embargo Act of 1807 was passed by the U.S. Congress during the term of President Thomas Jefferson.  It devastated the shipping industry.  But as a result, the Federalists fought back at the embargo and began smuggling into New England triggering an economic depression. 

Panic of 1819 –

This is the first major financial crisis in the U.S. and featured widespread foreclosures, bank failures, unemployment, and a slump in manufacturing and farming.  It also marked the conclusion of economic expansion following the War of 1812. 

Panic of 1837 –

A sharp downturn in the U.S. economy was caused by bank failures and a lack of confidence in paper currency.  Speculative markets were affected when U.S. banks stopped payment of specie (gold and silver coins). 

And It Continues

Between 1837 and the turn of the century; there were a number of economic maladies that included the Panic of 1857, Panic of 1873 and the Long Depression (yes, I said depression) between the years of 1873 to 1896.  By the way, the Long Depression was caused when the Vienna Stock Exchange collapsing which caused an economic depression that spread around the world.  It occurred during a time when the world’s industrial output had expanded fourfold. 

There was a Panic of 1907 that happened because of the failure of Reading Railroad and withdrawal of European investments led to a stock market and banking collapse.  The Post-World War I recession from 1918 to 1921; the Great Depression of 1929; Recession of 1953 and 1957; 1973 Oil Crisis, a recession in the early 1980’s, 1990’s, and 2000’s which brings us to today. 

This Too Shall Pass

As you can see, the effects of a negative economy on Americans (and the world) have happened many times before.  I counted 19 separate weak economic periods that we have endured since the inception of this nation and there’s probably a few I missed. The point is this is nothing new.  

The world’s economy is actually rather fragile and can be upset by the most innocent of motives.  No matter what the reason, one thing is certain – we have always recovered from these devastating periods over and over again to experience positive economic growth on the other side.  While there’s no time frame that can be guaranteed as to when we will exit from this current economic state of affairs, one thing is for sure, at some point, things will start to improve.  In the meantime, keep a positive attitude and work toward a positive and useful future.  What choice do you have?  It’s time to make lemonade out of these lemons. 

All of sudden, everything I read in this new economic stimulus plan is about helping to create or SAVE 3.5 million jobs, when, in fact, this new federal stimulus plan was supposed to actually CREATE up to 4 million jobs.  This is a wakeup call and it is time for you, the American public, to get informed, stand up and speak your mind. Use the Internet to send emails to your senators and congressman.  With today’s speed of transparency, there is no reason that we, the American people, can’t find out exactly what is going on in our government in a moment’s notice.   

Hopefully some of the new initiatives that are being set in place will assist the American family’s homeownership problems. At lunch today, I was talking with someone who is no different than any of us, in that, his family is way upside down in their home.  They owe about $220,000, they paid $260,000 and the house appreciated to about $280,000 but is now worth, on a good day, about $175,000. 

I told him some great news, “Since you are paying your mortgage on time, you don’t qualify for the HOPE Now program, but you will qualify for the new $1,000 credit per year (max three years) for paying your mortgage on time.”

Okay, let’s work this one out.  Let’s say I pay $2,000 a month on the example above on a six percent mortgage.  I get a $1,000 tax credit per year for three years.  Let’s focus on this year.  That means, in reality, I would only pay about $1910.00 per month.  Sounds like a great plan, I save a little money each month and I have no chance to refinance my home ever because I am so upside down, due to no fault of my own.  And maybe 15 years from now the home values in my neighborhood will finally come back.

Now as I discussed in my previous writings, if I quit paying my mortgage for 60 days my bank will start working with me.  On this example, they will cut my mortgage to $160,000, give me a mortgage at four percent for 30 years and my payment goes to $1200.00 per month.  So I can save almost $10,000 per year every year, not counting the astronomical amount of interest I save each year.  Or I can keep paying and be 100k upside down and qualify for $1,000 per year for three years credit.  WHAT!! Are you kidding me?!  Who thought up this plan?  In comparison, let’s examine a project that IS included in the stimulus package. 

Congress included $38 million for wetlands restoration that the Obama administration intends to spend in the San Francisco Bay area to protect, among other things, the endangered salt marsh harvest mouse!

Now, I am not pointing fingers at any one person but House Speaker Nancy Pelosi and her $30 million mice may not be a smart investment for our country. Let’s see – save a mouse that has probably been around for a few thousand years or save a few hundred home owners, teachers, or jobs.  I just don’t get it.   Now don’t start calling me – I am “green,” but I’m not detached from reality.

Saving jobs is a priority but at what expense?  I say let the auto industry file bankruptcy. If the government is so worried about the jobs, then they can guarantee the reorganization, but you have to solve the problem.  The union mentality doesn’t work today and needs to change. I found it very funny when the CEO of General Motors was thanking the union presidents for their support in drafting their new solvency plan to Congress.  Why not thank the union for helping the company go down the drain?  Hey, here is some good news, we won’t have to change the logo for G-M; we can just change the name to Government Motors (GM).

Bottom line; fix the housing problem, get the money to the bottom and eliminate the trickle down affect.  Until then, little – if anything – changes. 

So, he tries to call a mortgage broker, but this proves to be difficult as he can’t find a mortgage broker still in business.  The president then decides to call his bank – the bank of China.  He tells them that he needs to refinance his mortgage. 

The bank says, “No problem Mr. President, your account is in good standing with us.” 

The bank then orders an appraisal and comes to find out that the president’s primary residence, the White House, is now not worth what it was, in fact the White House has dropped in value by more than 30%, making the president’s current mortgage more than the value of the home. Join the crowd, I say.

The president then has to decide what to do and to make things worse he just realized that he had an adjustable rate mortgage with a pay option ARM and the mortgage is set to adjust in the next few months.  No way will he be able to afford the new payment.  So, he calls the bank again and asks for help. 

The bank says, “Sorry Mr. President, there’s nothing we can do for you.  I would suggest that you call and apply for the HOPE NOW program.”

But WAIT, the representative at the bank says, “I’m sorry Mr. President but you don’t qualify, you are current on your mortgage.” 

The president then says, “Yes I know, I also have perfect credit.”

The bank representative replies, “Well, I am sorry there is nothing I can do for you, if you are 60 days late then we can give you a four percent fixed rate for 30 years, as well as lower your mortgage amount to 85% of the current value.  But right now you are current on your mortgage.  When will you be making your next payment?”

The president, now frustrated as every other American that owns a home today is, says, “You have to be kidding me, the only way to get help is to stop paying my mortgage so that I can qualify for help.  That doesn’t make any sense!  If I am going to be late then you can have this old White House, I don’t want it anymore…it’s just not worth it.  I can do a deed in lieu of foreclosure and walk away. The Bank of China can foreclose and sell it to someone for 30 cents on the dollar while I am going to go buy the new White House next door for 30 cents on the dollar and start over.  So, what if I have a ding on my credit, it’s a onetime issue and I can be done with it!”

This is only a parable, but in reality the majority of American home owners are facing this exact same situation.  Why should I be a financially responsible home owner and pay my mortgage on time only so that my neighbor can stop paying on his/her home, live in it for the next year or so rent free and then walk away from it, only to have the bank take it back and sell it for 30 cents on the dollar?  Or my neighbor just stops paying for 2 months and then applies for the HOPE NOW program, only to get a new re-forecasted mortgage for 85% of the current value, fixed for 30 years at four percent? This makes absolutely no sense. You can forget about any stimulus plans because if you don’t solve this problem quickly then the majority of home owners are going to just walk away from their home loans. This must be solved first. You solve this problem and you instantly put money in the pockets of American consumers. The consumer sentiment goes up and the economy gets real stimulus.

To examine this plan in greater detail, I invite you to read my blog at www.jamesdicksblog.com entitled I Need a Job – Not Stimulus. I have laid out a comprehensive plan on how we can get money flowing to consumers, as well as from consumers to business.  All we have to do is do it.  Like I always say, “If you always do what you have always done then you always get what you have always gotten.”

Happy Investing -

James Dicks

The stimulus package the U.S. Congress is working on would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

The $9.7 trillion in pledges would be enough to send a $1,430 check to every man, woman and child alive in the world. And according to Congressional Budget Office data, this is 13 times what the U.S. has spent so far on the wars in Iraq and Afghanistan.  Whatever….

Next, you would expect me to pull out the charts and graphs, but that’s not going to happen. I am not an economist, I am your next door neighbor, and you know the one.  I am the one that has seen my property value drop like everyone else in America, the one that has a vacant house next to them, the one that sees foreclosures in the neighborhood, the one that knows people losing their jobs, the one that is unfortunately laying people off, the one that can’t get business loans, the one that is suffering many of the same economic issues you are facing.

Listen, I can’t give you the magic formula to a successful economy, but what I can do is tell you what I think would make a difference and that’s what I am going to do.  I will let the smart people figure how we can do it.  I hear ideas everyday and some are good, well thought out and some aren’t.  Maybe my idea is one you feel is not well thought out, but that’s okay, at least I will get it off my chest and feel better about it.  I just hope and pray that someone along the way gets a small idea from what I’ve written and that idea will make it into the system somewhere…somehow.

As I write this, Fed Chairman Bernanke is speaking on TV.  I just heard him say something about what we are doing in certain areas is working.  One of the senators just cracked a smile to a fellow colleague, rightfully so. I don’t know of anything they are doing to help me, my customers, friends or family.  The problem is it is a trickle down effect from the top down and what we need is a flood up effect from the bottom up.

You want to make things take off quickly do something that helps the masses now, and thanks but no thanks, a $600.00 stimulus check won’t help anyone but Wal-Mart. So in an organized thought here is my basis for an economic plan form the bottom up.

First anyone in America that has a mortgage, let’s start with a primary residence, the federal government will take some of the bail out money and use it to help reforecast these mortgages. Yes, some will benefit and some will be penalized but in the end we all will be better off.  As mentioned above, we have enough money to pay off nearly all mortgages.  We don’t need all of the funds, so that’s good.  Let’s reset all mortgages to 85% of the current tax assessed value, not appraised value but tax assessment.  This does numerous things; one is that it gets consumers in a much more positive mind set.  Do this and then let the University of Michigan do their poll on consumer confidence and I bet it goes up.  Most people in America that own a home fall into a few categories; they stopped paying their mortgage and are awaiting foreclosure, they are paying but paying late, they’re paying on time but wish they weren’t, because all of these people most likely have  the same circumstance, which is their home is valued less than what they owe.

By re-forecasting the mortgages to 85% of the current tax assessment, the banks will get a new loan, one that actually has real value.  The home owner gets a mortgage with hope, one that they can now afford and one that has room to appreciate in value.  The re-forecasted loan will be 30 years fixed at 5%, and assumable.  The bank now has an opportunity to package the performing assets with real value and sell them to the secondary investment community.  The federal government can provide some assistance, as already outlined, by assisting investors with low interest loans and guarantees.  This cleans up the banks so that they can start making new loans. 

The banks will not be bogged down with home loans and chasing down their assets through foreclosure, what they will be able to do is focus on getting money to small business, thus starting from the bottom.  Allowing the money to flow to these small businesses will increase the opportunity for job growth.  As to the re-forecasted loans, banks will give forbearance as to the difference of the original loan amount and the new re-forecasted mortgage.  The government will waive any mortgage forgiveness rules and the banks in exchange will get an agreement that allows for the opportunity to recoup their initial investment or pass that opportunity along to the inventors that end up buying these newly re-forecasted mortgages. 

So, if you have a home that was worth $300,000 and your loan was $280,000, with a current tax assessment of $220,000 the new re-forecasted mortgage would be $187,000.  If in the future you ever sell your home you would owe the current lien holder of your mortgage the original amount of your current loan. That means sometime in the future the bank would have the possibility of collecting $93,000….no interest, and basically this would go to the government since they are backing the loans.

You may add a formula that includes an appraisal to go along with the tax assessment so that you could re-forecast the loan based on appraised value or tax assessment, whichever is lower.  That way you get an entire industry back off the ground; this would open the door to tens of thousands of appraisals immediately.

Mortgages and Home Equity Lines of Credit (Helocs), would be wiped out under my plan, but only up to 85% of the tax assessed value.  So, if you are under 85% of the tax assessment you wouldn’t get any help other than the fact that the homes around you go from vacant to occupied, foreclosures are stopped in their tracks, and home values start to appreciate again.  Furthermore, the economy gets better, which should be enough help for anyone.  The institutions forgiving their 2nd mortgages and Heloc’s get a tax credit for the forgiven amount to use toward their tax liabilities.  The mortgage forgiveness rules would be waived for these as well.

Next are the people that don’t own a home and feel they are getting the short end of the stick.  No problem I got something for you too.  The government will offer a 100% LTTA, not LTV, this is Loan to tax assessment not Loan to value.  It can be 100% of tax assessment or appraisal whichever is lower.  The rate is at 5% fixed for 30 years and assumable.  You have to show that you can pay the mortgage.  This is not a low or no document loan it is a full doc loan.

This gets the housing industry off and running, as well as the new home market and quickly eliminates bank owned properties from their inventories.  Lots of benefits to the industry here, title companies, real estate agents, builders, laborers, banks, local and state income increases through taxes and closing cost.  Wow, this would really stimulate the economy quickly and starts from the bottom up, it helps all of us. Even the Fortune 500 companies and the big “fat cats” sitting behind the helm of these companies will benefit. 

As a spillover from all of this, local and state governments can start to get back on their feet by having a new tax base, new homes sales coming out of the banks foreclosure departments and increasing the taxes collected by these governments. Better yet, because the homes are all backed by loans based on 85% of the current tax assessment, there is plenty of room to start seeing appreciation, literally in the next tax year, thus helping out these local and state governments by allowing them to increase their tax base.

Let’s talk credit; all the way around, this is a thorn in my side and one I see lots of questions from people on this topic every day.  We don’t need a band aid for our economic problems, we need a long term solution that will ultimately make us better off as the great country that we are.  I don’t want to be like Japan and be talking about the lost decade.  Basically the 90’s were lost in Japan because they waited too long.  We are moving in the right direction but let’s finish this now. 

The federal government will come out with a new credit scoring system. YIKES, I hear it already from the lobbyist, and from the worthless blood sucking credit reporting agencies out there.  I say keep your mouth shut and leave the elected officials alone.  The credit scoring system is a scam, it doesn’t work and it is time to fix it.  The FICO score is one of the reasons we got to the point we are today.  The government can create its own scoring system even if our tax supported government competes with the credit reporting agency – I say great!  You want to play you have to pay.  You want money or help from the government then you will have to use the new government credit scoring system.

Anyone that has had a foreclosure on their credit report during the last 24 months will have it removed, purged from their credit file. No longer does bad credit stay on your credit report for 7 years, we change the 7 years to 4 years.  Of course, the entire credit reporting system needs to be overhauled.  If the credit reporting companies can charge you to keep your credit clean let’s have a federal credit reporting agency and pay them.  The money can go to help reduce the national deficit.  The credit reporting agency can’t complain about it, competition is good for everyone.  This restores even more confidence in the American public.  Some people will take advantage of this and some people that should not be borrowing will but in the end it makes consumer confidence sky rocket.

That brings me to jobs; consumer confidence goes up, credit extension is restored, people’s homes are now sitting with appreciation.  What do you think will happen? People will go out and spend money, when they do, business will need to carry more inventory, they will need to hire more people, manufacturing will have to go up to keep up with supply, and you get jobs, lots of jobs. Businesses are making money again, and when they make money they pay their employees more, everyone is happy, and our economy is thriving.

To make sure that we don’t end up where we were and are, we have to put checks and balances in the system; eliminate low doc loans, eliminate no doc loans, and eliminate creative adjustable rate mortgages.  You buy what you can afford.  You need to refinance…no problem you must have equity in your home. The forgiven debt on the re-forecasted mortgages, seconds and Helocs, can be negotiated on the refinance.  But in the end the home must stay below the 85% loan to tax assessment, you can’t borrow more than 85% of tax assessment.

The rest is hard and easy, meaning you can’t have a budget and maintain spending if you don’t have money coming in.  Let’s start with the states that are going out of business.  Have the government step in and give the states zero percent loans, a giant debt consolidation loan, BUT the only way that the states can do this is to present a balanced budget within 90 days, much like congress required the car manufacturers to do.  They gave the car manufacturers a bridge loan, told them to come back in 90 days (which they are about to do) and when they show them a balanced budget and a feasibility of success for their business model the government they will loan them more money.  We should do the same thing for the states.  Of course, once you do this you get jobs flowing again on the state level.  The money that is ear marked for infrastructure will now get the states to focus on the job at hand instead of playing a shell game with cash flow.

And speaking of infrastructure, I don’t know all the numbers but I read somewhere that we are planning on spending about $38 billion on infrastructure in the U.S. in the coming years.  Thirty Eight billion, are you kidding me?  I am talking about pure infrastructure projects.  We should double or triple that amount!  It can’t hurt, it creates jobs, some states will get more some will get less but let Congress fight it out.  The only caveat is the money, if for pure infrastructure, no pork.  I saw China was spending $40 billion just on telecommunication infrastructure growth.  One special area of infrastructure and they are spending more than we are.  We are spending less than China on our entire infrastructure growth!

More on a balanced budget, as we start to cut those much needed projects and hard to make decisions on programs, we have to remember just like in business, if you wait too long to cut it’s too late.  Cut now so that you can be around to build later.  You will be able to add these programs back as you make more money but for now you have to get to a balanced budget.  You will also have an easier time to plan for your budgets on a local and state level as everyone is living in a home that is 85% of the tax assessment. The appreciation will kick in quickly allowing for more revenue, all the real estate closings that will be taking place will help the tax income go up for the local and state governments. 

Now for some not so exciting tax increases.  Overall we cut taxes, maybe even consider a flat tax.  They can argue this one in Congress too, but what we want to do is get everyone paying their fair share and increase taxes on things like cigarettes.  Cigarettes kill you and kill everyone around you.  So, if you want to smoke them, then you can pay more per cigarette. Use the extra tax money for the governments on a state level, as the tax collected would be higher in areas of where more smokers live thus creating more of a burden on a particular state’s health care systems.  Some of the taxes can be used to help people break the habit, lowering the tax collected in the long run, but exponentially lowering health care cost.

Increase tax on alcohol; all the same reasons for smoking apply to alcohol.  It kills people; people who drink it and people who don’t drink it.  You want to roll the dice then you have to pay to play; I don’t mean a small tax I mean an increase of, 20-30 percent.  Yeah, I hear it too.  The lobbyists are screaming at the top of their lungs… too bad.  Smoke a cigarette and drink a beer, great but we have to raise money.  A “use” tax is better than a general tax, everyone pays their fair share of taxes, but use taxes are for the people that specifically use a certain product.  I am not opposed to increasing sales taxes across the board.  We need to promote savings not wasteful spending. 

The wasteful spending and carefree borrowing mentality of the last 25 years is why we got here.  We need to be a nation of savers.  Yes, this contradicts some of what I said about increasing consumer confidence to get people spending money but that is natural, and people will spend when they feel better.  What we need to do is to get people to think before they buy.  Do you really need a new refrigerator, or are you better off saving for your children’s education.  I can guarantee you that if you do the above, people will go out and spend money to stimulate the economy and they will be able to find a job.

The best of both worlds – a job and stimulus.  Government, wake up! This is your wake-up call; we need stimulus from the bottom up not this high level garbage I am listening to on TV.   I listen to it every day and I have no idea what they are saying.  Just give me a job!

Happy Investing!

All my best

James Dicks

www.whoisjamesdicks.com