This article from HumanEvents.com is not for mental lightweights who know little about history and believe in re-writing history, and in re-writing the United States Constitution to suit their particular agenda in this day and age.

The following was sent to me by Sharon English, a client of mine. She is concerned about the proposed Healthcare Bill before Congress, and you should be too. Here's why.

The following article is by Ken Balsley, a close personal friend of mine, and the best pure reporter that I worked with during my 20 years in the newspaper industry. If you wanted readership for your print publication, you set Ken loose. Ken would go and find out what no one else even suspected was there, and then report what the rich, powerful and influential people in our society did not want known because it was seldom, if ever, favorable publicity for the person or group in question. Ken is a rare and vanishing breed in our time; he is a person who is more interested in the truth than in promoting a cause or a political party. Ken would never become a talking voice or a hack for some self-serving politician, or officious government bureaucrat.

The journalist in me was tempted to publish a pro and con series of articles on the Democrats' proposed National Healthcare Plan that is winding its way through our U. S. Congress. The impatient, practical side of me recognized how repugnant this whole issue has become. Both sides have reduced any real exposure and discussion of the proposed bill to a series of scare tactics, and low-level, useless name-calling that sheds no truthful light on the process. Get the full story.

When is it too soon to learn important financial lessons in life? Answer: Never. This story explains why.

This guest story from the Internet was sent out as an analogy to the recent stimulus package approved by the United States Congress.

This guest article from the Internet will cause some ultra left-wing liberals to launch a hate campaign, mostly because left-wing liberals are not much interested in facts or dialog about any opinion that they do not agree with, regardless of the subject. They deem any opinion other than their own to be worthless and irrelevant since they already have all of the answers to every issue worth mentioning. I personally love left-wing liberals because they remind me of how close I am to losing my freedom of speech if they have their way. Notice that I did not use the term Democrat in identifying ultra left-wing liberals. I feel about ultra left-wing liberals the same way I do about ultra right-wing conservatives—both groups know too much, talk too much, and do not listen to anyone but themselves.

The demise of major American newspapers in our ordinary life could be seen as sad and tragic for a grandparent, and as an excellent opportunity to capitalize on another's misfortune for a plugged in, technological savvy grandchild. The distance in generational gap between the two is not so much a preference as a giant chasm. Learn how and why it happened.

Stop this American nonsense of government bailouts with taxpayer money for businesses that cannot survive because of poor management. Let the poorly run businesses collapse and sink into bankruptcy, foreclosure or receivership, and be sold to businesses with better management that can take these distressed enterprises back to profitability. Learn why this is more important now than ever.

I spent some time contemplating an article on the recent rash of mass killings by some of our really sick fellow citizens. Then I read Ann Coulter's comments on the subject and realized that there is no way I could out write or out think her, so I am printing her view on the matter because it is excellent in my professional opinion as a fellow writer.

Any change in government policies, actions and laws that affects its citizens will generate some strong opinions. Here is one that I edited that has been floating around the Internet.

This letter to the editor was apparently sent to the Wall Street Journal on August 8, 2008 by Alisa Wilson of Beverly Hills, California. Wilson, a Doctor of Philosophy graduate, sent the letter in response to a Wall Street Journal article titled, "Where's The Outrage?" that appeared on July 31,2008. I post it here because I think of lot of United States citizens are outraged at the moment.

College ought to be a place where a student learns from a professor, however, at today's universities too often the professor is an extremely liberal social progressive who believes his or her idea of social engineering would cure most of our problems. There are times when the student attempts to teach the professor what he or she should have already experienced and known. This is one of them.

We write children's stories to entertain, illustrate and teach a lesson in life. Sometimes these same stories provide a vehicle to teach a lesson in life to adults. Here is one effort to do so. I have done some editing to increase the impact of this tale.

My prayer for you, President Barack Obama, is that you will be able to answer the call of solitude when it beckons. It has been such a tumultuous start to your presidency. You came with an open mind, a clear conscience and a good heart. It may well have been your intention to make every decision in your presidency with right thinking and right motives. You have now discovered that the very people you trust can make it otherwise.

From Maine to California, from Florida to Washington, and from North Dakota to Texas, all across the country, there are at least 20, if not 40, million Americans who have hatred for the 43rd President of the United States, a man dubbed "W". From print publications as well known as the New York Times to the Internet site of the Huffington Post, the purveyors of the hate "W" campaign have let their invective out for the world to see. Find out why.

A lot of stuff floats around the Internet. Some of it is worth reading, most of it is not. Here is a comment worth reading.

The following letter by Michael Graham was sent to the Boston Herald and appeared in its Oct. 28, 2008 edition, a week prior to Senator Barack Obama being elected President of the United States. It validates what I have been thinking and feeling for some time, namely, that there is very little real journalism left in America.

Clients, friends and family send me a lot of material that is floating around the Internet. Occasionally something comes via email that is worth another look and perhaps a thought or two. This is one is apparently by P. J. O'Rourke from 1991 and contains this postscript: A Lone Humorist Attempts to Explain the Entire U. S. Government.

Those of us who have suspected that the media coverage of the 2008 Presidential Race has not been fair now have a study to validate our suspicions. The Center for Media and Public Affairs spent the past two months monitoring comments by sources, voters, reporters and anchors that aired on evening newscasts at America's three main national networks (ABC, CBS and NBC) and documented what many of us already knew. Learn the full story.

This story is floating around the Internet. There is humor in this story but there is also an element of truth that is hard to ignore because there is enough evidence to convict the Congressman is his certitude. I post this here because we are nearing the end of the 2008 Presidential race. This story also illustrates the most salient advice I can give women about men, and that is: listen carefully to what a man has to say and then watch what he does, because what he does is who he is. If women could read, understand, retain and apply my advice they would avoid a lot of bad, unnecessary relationships.

Perhaps you have to be a little older to remember a guy named Lee Iacocca. He rescued Chrysler Corporation from extinction by asking for, and receiving, a first-ever business loan from the United States government. Under Iacocca's leadership, Chrysler Corporation repaid that loan and went on to great success with Iacocca at the helm. Iacocca, now 82 years young, has a new book out titled "Where Have All the Leaders Gone?" The following email is circulating on the web. I edited it, and print it here because I believe--as Iacocca does--that leaders are born and not made; they just need to step forward and take action.

The following article by John Dietz requires those of us who are interested enough to focus long enough to understand just how important our vote will be in this fall's Presidential election. Dietz is part of Trustmakers Financial Services, an asset protection firm in New York. I post it here because many of my readers are smart and have assets.

This article has been floating around the Internet. I believe the article has a message worth reading, so I have cleaned it up and posted it here so all can see and form their own opinion.

For at least once in recent years, the more rational members of the United States Supreme Court outnumbered the wannabe activist judges who revel in putting their own stamp of authority on the U. S. Constitution. In a too close 5-4 decision recently (6-26-08), the Supreme Court ruled that Americans have a right to own guns for self-defense in their homes.

Imagine my surprise when I went online recently and encountered this headline: "Karl Rove's Sly Deal With Fox". Think of a conservative, right-wing political hack with sleight-of-hand magic out to pull a fast one over on American voters. You get the picture. This incredible insight comes from Amanda Terkel and Matt Corley, who sound more like an ice-skating dance team—and now, Terkel and Corley with all of the suspense of Ravel's "Bolero"—than highly sought after investigative political commentators. Get the full story.

It is possible that Republican presidential candidate Rudy Giuliani has infuriated his Democratic rivals to the point of distraction. As a good Republican Giuliani should be pro life but he is pro choice.  Being in favor of abortion on demand makes Giuliani more dangerous politically to Democrats than actually wiping out another life so women can retain their right of choice at the expense of their potential progeny.  Only Democrats are supposed to be pro choice.  Giuliani is now under searing attack from every Democrat and flaming left-wing Democratic news organization worthy of the name.

When reading Krauthammer, I am reminded that Henry Ford said "the hardest thing to do in the world is to think, and that is why people do so little of it." This is especially true during Presidential elections which start about a year too early and end about a year too late.  It is often hard for me to decide which is wearier, the droppings of a contentious person, or a Presidential election.  We have 18 more excruciating months to go in this one and will probably be no better informed on the day we vote.

Being a politician in America today is one of the best paying jobs a person could have.  If you do not know that the vast majority of politicians lie, cheat and steal as necessary to get elected and stay elected, you do not understand much about politics in America today. It is real difficult to practice integrity when your pants are down.  The best job most national politicians actually do is helping themselves get rich legally at the expense of the electorate they are supposed to be representing.

There is probably nothing that disappoints me more than the current sad, sorry state of newspapers in America today. There is more personal journalism in newspapers than news. Name brand newspapers that once had proud heritages with outstanding reporters have become nothing more than pandering sluts who cannot get enough of their personal journalism and politics into the news side of the paper. Their chief contribution is to try and trick enough readers into paying for the newspaper, thereby elevating themselves to word prostitutes for hire to the political party nearest to their misguided beliefs.

There comes a time in a person's life when you have to start thinking for yourself rather than be a lemming to politics, a political party, politicians, pundits, predators and a phony press.  We are a nation divided when it comes to the "a" word.  We are all about rights, and little about responsibilities. Too many of us have become self-centered, self-absorbed rights takers rather than rights observers. Rights crushed responsibilities a long time ago, and now we remain content to kill our unborn.  It is really all about us, what does God have to do with it?

Presidential elections provide a lot of humor when you can recognize the joke. Every few days some new, outrageous flap kicks another outrageous flap off of the front page of our nation's daily newspapers. I do not care if political parties whine about the events of the day. What I do care about is the righteousness with which the Democrats and Republicans do whine and complain. Please spare me the soap opera.

Referendum 67 asks Washington State voters to approve or reject a law passed earlier in the year by the state legislature that authorizes filing suit against an insurer for unreasonably denying a claim for coverage or payment of benefits. The plaintiff in the suit could recover up to three times the amount of damages sustained, plus attorney fees and litigation costs. Here is how you could vote and why to do so

After reading my article on the current R67 political battle in Washington State, Steve immediately wrote me an email and posed an important question: Who can we trust? I answer that question in my reply.

Every now and then something crosses my desk that makes sense and deserves my thoughtful attention. The following address by Ron Paul, a Republican Presidential candidate, was delivered to the U. S. of House of Representatives. John Fitzgerald Kennedy, the 35th President of the United States, was a Democrat, was the youngest person to be elected to the presidency, and was the first Catholic president. Among the many quotable things Kennedy said was this: "Too often we enjoy the comfort of opinion without the discomfort of thought."

Trust me when I say calling you Annie is not a schoolyard taunt. Unthinking people accept perception as fact and as truth. You were accused of directly calling presidential candidate John Edwards a "faggot". Then you apparently told the New York Times in an email that "Come on, it was a joke. I would never ins ult gays by suggesting that they are like John Edwards. That would be mean." Nonetheless, it takes no talent to name call or even cleverly suggest name calling. It takes a lot of talent to say something so significant that thinking people actually consider changing their thought process and belief system.

Apparently Cindy Sheehan is done being the public face of the anti-war movement. It only took Cindy Sheehan about two years to figure how to deal with and apparently accept life's misfortunes. I often wonder about protesters like Cindy Sheehan, and thousands of others that have preceded her in various causes. Think about all of the people who are out to "change the world" into their idea of a better place, and never get anywhere. They want to change everyone else, but not change themselves. Cindy Sheehan may have learned one of life's great lessons: you can only control yourself.

Zach Carter Outlines His Choices for America's 10 Most Corrupt Capitalists - Hint: It's Not David Letterman's Top 10 List

So Just How Much Do These Media Moguls Make? The Answer: More Than Your Wildest Dreams - They Make Money Even When Their Businesses Don't

Why Do People Read Newspapers? And Why Are So Many People Now Reading the Internet? The Answer Will Surprise You

This analysis by Jack Fuller first appeared in the Nieman Reports newsletter, published by the Nieman Foundation for Journalism at Harvard University. Jack Fuller, who won a Pulitzer Prize for Editorial Writing, was editor and publisher of the Chicago Tribune and president of Tribune Publishing Company.

Robert Reich Says "Don't Listen to the Cheerleaders, the Main Street Economy Isn't Improving" - He Should Know

Federal Reserve Chair Does Not Need to Be a Toady in Defending the Interests of Big Banks - Say It Ain't So, Bennie

Bloomberg News Survey of CEO Pay - Leslie Moonves, Columbia Broadcasting System's Top Exec, Was Apparently Overpaid by $28 Million in 2009

The plight of newspapers that are diminishing in importance reaches across the pond from the United States to Ireland. Here is an insightful piece by Roy Greenslade that appeared in The Irish Times. Greenslade is a Professor of Journalism at City University London. I have changed the British spellings of words to our spellings here in the United States.

Staff and Owners of the media try to get it right, but oftentimes cannot resist pushing it just a little to promote their own point-of-view and hopefully influence unaware readers and viewers, most of whom can smell a pile of stink a mile away. Read Michael Calderone's take from politico.com.

One reason seekers of news are abandoning print newspapers for the Internet has nothing directly to do with technology. It's that newspaper articles are too long. On the Internet, news articles get to the point. Find out why by reading this article.

Mark Fitzgerald is the Editor-at-Large for Editor & Publisher magazine, the nation's most famous and well-respected magazine covering the newspaper industry in America. Fitzgerald assesses the state of the industry today, why it will survive, and where it is headed.

Everywhere there are con artists wanting to take the easy way out—they lie, cheat and steal for a living, rather than working for a living and paying taxes to support our free enterprise system. Corrupt census takers are no exception.

Michiael Sokolove is a contributing writer for the New York Times Magazine, where this article first appeared (apparently on 9-9-09). After a 20-year career in the newspaper business, I re-publish it here because newspapers are like children for those of us who have spent a good deal of our adult working life in the newspaper industry. For me, the death of a newspaper is almost like the death of a child, always taken too soon and never able to be replaced. For those who understand, read on. For those who do not understand, you have other fish to fry.

There was an 8-year period of my life when I owned and operated a community publishing company that published a weekly newspaper, and I made it my business to separate news facts from the opinion expressed in our editorials and by our columnists. Most major newspapers today make no distinction between news and opinion, and this is one reason why fewer people today care what major newspapers have to say.

With the collapse of our America economy and ongoing recession, hardly a day goes by without reading or hearing about an underperforming chief executive officer of a Fortune 500 company getting bounced out on his ear. Then the incompetent CEO that ruined the company and its stock value is walking away with a sweet going away gift of millions in compensation while the company is losing money and struggling to survive. Why is this happening in America?

Most people that know me and see me find me to be a very even-tempered guy in control of himself and the situation. But there are days, and this is one, where me Irish temper gets riled up. Let me make it very clear: Don't let me catch you today, or I will willfully kick your sorry ass. Why? Read my article if you want to know.

Sometimes it seems obvious that too many chief executive officers at America's biggest corporations make really stupid decisions that are driven by greed and avarice rather than sound business practices. Take for example the two mortgage giants Fannie Mae and Freddie Mac, one of about 90 banks that are in financial trouble—Wachovia—and a former automotive giant that is in serious financial trouble—General Motors. Find out why.

When you understand that the average CEO in America makes 400 times what the average worker makes, you could get upset. When you have an environment where chief executive officers of companies can rack up a pitiful financial performance and still continue to rake in millions of compensation for being essentially incompetent, it is even more upsetting. What are we to do?

Why aren't those postal lines moving faster? If you thought it was because the front counter people at your post office are slow and inefficient, think again. Usually in the battle between men and machines, it is the man that slows down the machine; in the case of the USPS front counter processing software, it is the machine that is slowing down the man, not to mention annoying customers and aggravating postal employees.

They took their merry time about it, but finally some Internet Service Providers have decided to do the right thing and get about the business of eliminating child porn on the Internet service they provide. That is the good news. The bad news is that it took a threat by a government official to file a legal suit with charges of fraud and deceptive business practices to eventually get the ISPs to agree. Is it not amazing that pigs do not know that pigs stink!

It seems that in its unbridled greed and with the avarice of its associate mortgage brokers, bankers have taken on a bunch of residential paper that amounts to bad loans. Apparently delinquencies are even rising among borrowers with good credit and conventional mortgages. My, my, my, sounds like someone has a real big problem. Excuse me while I go to sleep with a clear conscience. Let me explain why.

In the Future, There Will Be No Social Security Checks Mailed to Eligible Citizens - Seniors Get Screwed Again

Read and Heed This Advice - A Corporate Attorney Tells You How to Help Protect Your Personal and Financial Information

Money Matters: 12 Steps That Can Help You Become More Financially Secure in Today's Troubled Economy

Why Should Anyone Pay the U. S. Government $100 Million for an Estate Tax Debt?

Tim Berry has a Juris Doctor Degree and is affiliated with TrustMakers Financial Services in New York City. He can be reached at (888) 916-7070. If you have assets, as many of my readers do, what Berry has to say is worth reading.

Has the Meltdown of the American Economy Rendered Asset Protection Trusts Useless?

I am a huge fan of John Dietz, a qualified (CWPP and CAPP) Senior Advisor at Trustmakers Financial Services in New York—(888) 916-7070. Read this guest article on Asset Protection Trusts by Dietz and you will see why.

Cook Islands Launches Legislation for a More Asset-Protected LLC Structure

Ed's Note: This article is by Puai T. Wichman, Managing Director of Trustmakers Financial Services in New York. Trustmakers is an asset-protection consulting firm not licensed to practice law. They are the best at what they do, and can be reached at (888) 916-7070. I post this guest article on my blog because I am interested in asset protection concepts and have many readers who are as well.

Depositions - The Most Important Asset Protection Factor in the Discovery Process

Ed's Note: A lot of my blog readers are educated, literate and make excellent incomes. They are concerned about asset protection because they have something to lose. They would be interested in this article on giving depositions by Randall Edwards of Trustmakers Financial Services in New York, NY. Edwards can be reached at (888) 916-7070.

5 Lessons on Asset Protection & Estate Planning During the Current Recession

A lot of my blog readers are educated, literate and make excellent incomes. They are concerned about asset protection because they have something to lose. They would be interested in this article by John Dietz of Trustmakers Financial Services in New York, NY. Dietz can be reached at (888) 916-7070.

Editor's Note: I subscribe to Trustmakers' email newsletter which I received yesterday with the following article by Roccy M. DeFrancesco, Jr. Roccy has a lot of acronyms after his name, including JD, CWPP, CAPP and MMB to be exact. Financially savvy people know what these mean, but you do not need to be a financial whiz to understand the clarity of what he has to say about how to keep more of the money you earn. I have some readers with huge liquid assets who might be very interested in Roccy's article, and therefore am posting it here. For those readers who have assets and want to keep them, and those who would like to keep more of their assets when they acquire them, read on.

Federal spending in 2008 is estimated to top $2.7 trillion. Knowing that $1 trillion is really $1 billion 1,000 times, and that $2.7 trillion is really $1 billion 2,700 times, and $1 million 2,700,000 times, it is mind-boggling to wrap your mind around. No wonder we are called the richest nation in the world. We may also be the most foolhardy. Find out why.

George Clason's book "The Richest Man in Babylon" reveals the fastest way to become financially savvy. It works today because money is governed today by the same laws that controlled it when prosperous men thronged the streets of Babylon 6,000 years ago. Here is a synopsis of The Richest Man in Babylon and the important financial lessons it teaches. The moral to the story The Richest Man in Babylon teaches this lesson: Proper preparation is the key to our success. Part 1 of 2.

Clason's "The Richest Man in Babylon" Part 2 - The 7 Cures for a Lean Wallet and The 5 Laws of Money

George Clason's book "The Richest Man in Babylon" reveals the fastest way to become financially savvy. It works today because money is governed today by the same laws that controlled it when prosperous men thronged the streets of Babylon 6,000 years ago. Here is a synopsis of The Richest Man in Babylon and the important financial lessons it teaches. The moral to the story The Richest Man in Babylon teaches this lesson: Proper preparation is the key to our success. Part 2 of 2.

I have become so sick and tired of online gurus offering scam products and opportunities that I must reveal the truth about what I have discovered. It is simply this: In virtually every ad I have read and responded to online a sinister tactic has left me disappointed and dismayed. All of the solutions I had been promised left me unable to achieve any real success whatsoever. Learn the sinister tactic being used.

Learn how he did it by forming a new part-time business and using the legal tax deductions from his business to reduce his net taxable income.  By doing so he took the money he saved and wiped out all of his remaining personal debt to become debt free.

The next time you go borrowing, and your friendly banker smiles as you walk into his office, be aware that you may be snookered by someone not worthy of your trust. For the uninitiated, there are more real surprises at loan closings in America than when opening gifts on Christmas morning. One client of mine went to a loan closing and learned that $10,000 had been added to the loan closing costs without prior notice; he thankfully got up and left. Why you should be aware.

The next time you go borrowing, and your friendly banker smiles as you walk into his office, be aware that you may be snookered by someone not worthy of your trust. For the uninitiated, there are more real surprises at loan closings in America than when opening gifts on Christmas morning. One client of mine went to a loan closing and learned that $10,000 had been added to the loan closing costs without prior notice; he thankfully got up and left. Why you should be aware.

While there are predators all around us, we generally do not think of our financial providers as predators. When Ed Bagley receives a postcard in the mail advertising a $5,000 loan you can receive tomorrow with only your signature as collateral, he digs a little deeper, uncovering the source of the loan and the fine print terms of the loan. What he discovers is shocking, and fair game for exposure so that unwitting borrowers know the score.

A client of mine received a "Smart Watch Report" from her mortgage lender the other day, and asked me to evaluate it for her. The report was really an invitation to refinance her current mortgage loan and use her equity interest to either get cash now or sell her home and use the equity to buy a new home. It was a great deal for the mortgage lender and a terrible deal for my client. Find out why.

The recent legislation to help curb credit card provider abuse sounds better than it is. Yes, there are some restrictions, but there are many more important restrictions the bill does not cover. Find out why the bill is really a hollow bill without genuine substance, and why congressmen allowed it to happen.

Credit Card Security Tips to Prevent Identity Theft

The following security information comes from an attorney who had his identity stolen and credit cards misused in the process. My editorial comments in parenthesis follow the attorney's advice:

What is it with some big corporations in America today? Too many of them lull you to sleep and then rip you off while acting like this is business as usual and acceptable. The latest example comes from the three big credit reporting bureaus—TransUnion, Experian and Equifax. They are luring consumers to several web sites claiming to give away a free credit report but only do so if you agree to buy one of their lame services, such as credit monitoring. Learn the truth about what is happening.

A sharp rise in the delinquency of subprime mortgages has caused lenders to tighten up their standards and actually reject applications. Should you attempt to refinance your present mortgage or seek a new mortgage, your credit score has become more critical to your loan approval. Can it make a difference? Yes, it can make a significant difference in payment. Find out how and why.

The three top credit reporting agencies were too cheap to offer a toll-free line and better service on their own, and would not even continue to maintain the toll-free line system they were ordered to implement unless faced with prosecution by the Federal Trade Commission. Here are 6 things you can do to help protect yourself and your credit score.

For years young adults with no credit history, limited credit history or blemished credit history have worked around the problem by having someone with good credit—usually a parent, spouse or good friend—added as an authorized user to their credit card. All of this is about to end as Fair Isaac (the developer of the FICO credit score) will create a new scoring formula to eliminate the authorized user tactic. Learn what you can do to protect yourself.

Two seemingly unrelated stories caught my attention yesterday. One was about corporations stockpiling cash and the other was about consumer savings rates, which moved into negative territory for the first time according to the U. S. Commerce Department. American corporations are doing well at the moment while the consumers that feed them profits are saving zero dollars and paying high interest rates. Credit card companies have no legal limits on what they can charge for interest and fees.

Like a 4-year-old child at the checkout counter in a supermarket, American consumers want just one more impulse buy to make their buying day complete, and apparently the more expensive it is, the better.  Like a dog in heat, if we have it we tend to spend it in America.  All of this impulse buying is detailed in a recent USA Today article with this headline: "Spending is hotter than the 4th of July". And indeed it apparently is, but is this good cash management?

When I had some pains in my chest my internist decided I should have a stress test. It sounded like a good idea to me. I enjoy living and am not the least bit interested in the alternative. While I do not understand the technical terms involved, I was readily able to recognize the cost of the procedure. Try $2,485. All of this took about 4 hours and the physician was involved for all of probably 20 minutes.  I had insurance but still will end up paying $593. My insurance company will pay $813. It is not difficult for me to understand why people wonder if they have medical insurance or not.

Money Matters:

September 19, 2009

Guest Article:

Why Should Anyone Pay the U. S. Government $100 Million for an Estate Tax Debt?

(Ed's Note: Tim Berry has a Juris Doctor Degree and is affiliated with TrustMakers Financial Services in New York City. He can be reached at (888) 916-7070. If you have assets, as many of my readers do, what Berry has to say is worth reading.)

By Tim Berry

I read a case today that really got my blood boiling.

A married couple fled Uganda in 1972 with only a few items of personal property. It seems that when Idi Amin came to power, he forced all Ugandans of Asian descent to leave, and the government proceeded to seize all their assets.

The couple resettled in Belgium and lived there until the husband passed away in 2002. Evidently the couple did good for themselves, for when the husband passed away, he had acquired 250,000 shares ($11,790,000 worth) of Citigroup stock.

I gotta tell you, when I hear stories like this--people leave a country with nothing and go on to do good if not great things with their lives--I am inspired and feel pride. Think about it: People kicked out of their home country merely because they are the "wrong" race, who go on to accumulate millions in assets. Typically I think what a great American story; these people deserve a medal or some other form of special recognition.

However, I can't really do that in this case. You see, both members of the couple involved were not, and never were, United States citizens; in fact, they weren't even residents of the U.S. The entire reason I am writing this, and why my blood is boiling, is that our U.S. tax laws effectively expropriated their assets just as their former homeland had done.

How? The United State's estate tax code says the U.S. has the right to tax each and every nonresident not a citizen of the United States (cumbersome I know, but it is the phrase used by the code) who has property within the United States. Now logic would tell you that if someone owned the stock via a Belgian bank located in Hong Kong, the property wasn't within the U.S.

Never put logic in the same sentence as "the tax code".

Why? The U.S. estate tax code has a very interesting provision: "Shares of stock owned and held by a nonresident not a citizen of the United States shall be deemed property within the United States only if issued by a domestic corporation."

Remember the $11 million of Citigroup stock? That was stock issued by a domestic corporation. Since the stock was issued by a domestic corporation, our millionaire nonresidents who are not citizens have to pay taxes on the U.S. stock they have accumulated. Wow!

Basically the U.S. has the right to tax anyone in the world who owns shares of U.S. corporations. Think that one through; let it percolate down to your senses of justice and fair play. The U.S. says it has the right to tax non-U.S. citizens, non-U.S. residents, if those people were stupid enough to purchase U.S. securities. Nothing like biting the hands of the investors that feed us.

Before I start with some cold, hard numbers of this case, you might want to run and get a bucket.

Remember the value of the stock with our nonresident not a citizen of the United States died? He had 250,000 shares of Citigroup, valued at $11,000,000, when he died. This court decision was filed on Sept. 14, 2009. Citigroup closed at $4.52 a share on the 14th. It appears the estate paid an initial $2,070,000.01 and the court awarded the IRS an additional $2,070,000.01 (I'm not joking about the one cent), plus a late filing penalty of 25 percent. Those of you who are engineers, whip out your calculators. How much is that portfolio worth today? About a million dollars. Summing it up, the estate will have to pay over $4,000,000 and penalties for a stock portfolio worth only $1,000,000 today.

OK, enough of my righteous indignation. What can you, your relatives, or anyone you know do to alleviate the problem? Don't hold stock in your personal name.

The rules are pretty much the same for a "non-resident not a citizen of the United States" as they are for a U.S. citizen. Don't own your assets in your personal name; own them via an entity like a trust . Trusts don't die. If they don't die, they don't owe estate taxes. Just that one simple step would have saved this guy a few million dollars in estate taxes.

Let's go further with this simple concept. There is a very old quote/truism, "The power to tax is the power to destroy". Our government has the right to tax our wealth. In effect it has the power to destroy our wealth, our achievements, and our success as well.

Last year I sat down with an individual who had to pay the IRS more $100,000,000 to settle his father's estate tax debt. $100 million. Please give me some rational explanation of why someone should have to write a $100,000,000 check to the government?

Yes, I know all the philosophical arguments about this country had the infrastructure to help him build his company, and the military to protect his company etc., but at a cost of $100,000,000?

The power to tax is the power to destroy.

Consider this an impassioned plea to take control of your family's financial situation. Too many of us idly sit back and think, "I really need to do something" and yet 2 days later have been caught up in the vortex of life and don't take action. As this case shows, the tax code is very unforgiving if you don't engage in any planning, and yet at the same time, the tax code can be very lenient if you just take some simple steps. Think about it, and then take action.

July 22, 2009

News can and does sway public opinion. A real crisis can have a liberating affect as people tend to throw away old precepts in favor of new and improved ideologies. The financial crisis of the last 12 months has brought with it a mindset of "all is bad". In fact, I believe the only thing that was not called into question was—you guessed it—Twitter.

Getting to the Point—Asset Protection Trusts (ATPs)

Is the Asset Protection Trust still considered the workhorse of Asset Protection Planning, or did it meet an untimely demise in the financial crisis of 2008/09? I was prompted to consider this question when an advisor recently called me about a client who needed Asset Protection. As we were walking through planning ideas, the advisor said: "Based on all the problems of 2008, are you guys still using these APTs for Asset Protection?"

Bad times can and do change a thing or two, but the stalwart of Asset Protection is still the Asset Protection Trust. It may have more names than it did before—Asset Protection Trusts, Offshore Asset Protection Trust, Foreign Asset Protection Trust, International Asset Protection Trusts, and various other names including acronyms—however, each name can be put into the definition below. Here are the basics:

What Is an Asset Protection Trust?

An Asset Protection Trust is any trust utilized to insulate assets from creditor attack. An Asset Protection Trust is normally established in an offshore jurisdiction, although the assets will more often than not remain in the United States under the indirect control of the person establishing the trust (the "settlor").

These trusts are normally structured so that they are irrevocable for a term of years so that the settlor is not a current beneficiary. Even though they are "foreign trusts", they can be structured so they are treated as domestic grantor trusts for tax purposes. With a properly drafted and timely settled trust, the creditors of the settlor cannot reach the assets of the trust.

An Asset Protection Trust is also normally structured so that the undistributed assets of the trust are returned to the settlor upon termination of the trust provided there is no current risk of creditor attack, thus permitting the settlor to regain complete control over the formerly protected assets.

An Asset Protection Trust is:

• An effective tool to settle or discourage litigation.
• A means to keep the ownership of assets absolutely confidential.
• An alternative to traditional pre-nuptial agreements.
• A hedge against potential exchange controls.
• A device to protect otherwise unprotectable pension assets.
• A means to give an insolvent debtor a fresh start.
• A preferred technique to avoid forced heirship laws (common in Europe).
• A way to avoid probate.
• A way to internationalize investment and hedge against governmental instability.

The bad times may be better for Asset Protection. The reality is no longer dangling somewhere in the back of your mind, but playing out on the front page of the newspaper everyday!

How Asset Protection Works

There are literally hundreds of different techniques to protect different categories of assets. Some are appropriate for everyone and are based on common sense (e.g. not flashing your money around or never entering into a general partnership) and others are appropriate for wealthy or soon-to-be-wealthy people (e.g. foreign Asset Protection Trusts). Asset Protection techniques also vary depending on both the type and location of property.

All Asset Protection techniques have one thing in common: They each make it more difficult for a creditor to either find or take assets. By implementing a properly crafted Asset Protection Plan (which may include an Asset Protection Trust as well as other entity formations) an individual can legitimately put a significant portion of his assets out of the reach of judgment creditors and still retain control over these protected assets.

When thoughtful and careful planning is put in place, the results have been nothing short of astounding. Who knows how our future economy will look 5 years out, but I suspect that litigation will still be with us for quite some time, and therefore, the need for Asset Protection.

If you have questions about these types of trusts, please email info@trustmakers.com .

May 10, 2009

Cook Islands Launches Legislation for a More Asset-Protected LLC Structure

(Ed's Note: The following article is by Puai T. Wichman, Managing Director of Trustmakers Financial Services in New York. Trustmakers is an asset-protection consulting firm not licensed to practice law. They are the best at what they do, and can be reached at (888) 916-7070. I post this guest article on my blog because I am interested in asset protection concepts and have many readers who are as well.)

LLC legislation has recently been promulgated in the Cook Islands. The Cook Islands International Limited Liability Companies Act 2008 ("the Act") follows the model adopted in a number of U.S. States. It goes further, however, to give statutory certainty on several key issues of concern to U.S. attorneys using domestic U.S. LLC statutes. The Act also introduces several unique Asset Protection features, consistent with the importance of this industry in the Cook Islands.

The Act provides a broad foundation to structure an LLC according to its own rules, rather than have them directed by statute. The operating agreement may contain any provisions for the conduct of its business as long as they are lawful. Certain provisions (designed to protect the interests of its members) are mandatory.

Like most LLC jurisdictions, a creditor of a member is permitted to apply for a charging order against a membership interest. The Act goes a step further however, setting out the availability of other remedies, the nature and extent of that charging order, and the rights of the creditor against that membership interest.

S 45 of the Act is the starting point. A creditor is defined as any person whose judgment is recognised by the High Court of the Cook Islands, and includes any person who claims to have a general assignment of a member’s property whether arising from an intestacy, bankruptcy or otherwise.

S 45 (6) specifies that the sole remedy for a creditor against a membership interest in a LLC, is the right to apply for a charging order.

(6) The charging order remedy given by this section shall be the sole and exclusive remedy available to a Creditor in respect of a member's membership rights.

Similar provisions in other jurisdictions have been interpreted by courts (in the absence of a sufficient definition of the exact nature of a charging order), to include rights similar to those of a mortgagee in possession, of an assignee, and of a lienholder. These have created uncertainty as to the extent of protection offered by an LLC. Any uncertainty in the Cook Islands has been removed by clear provisions including subclauses (7) & (8) of section 45 providing as follows:

(7) For the avoidance of doubt and without limiting the generality of subsection (6):

(a) a charging order shall not be construed to constitute a lien on a member’s interest in a limited liability company;

(b) the Creditor in whose favour a charging order is issued pursuant to this section shall not thereby become an assignee of any membership interest or any part thereof, nor shall that Creditor hold or be entitled to exercise any membership rights in relation to that interest.

(c) any member holding any membership interest subject to a charging order shall continue to exercise all his membership rights, and obligations in relation to those rights, in all respects as if the charging order had not been issued.

(d) subsection (6) shall apply whether the limited liability company has a single member or multiple members.

(8) For the avoidance of doubt and without limiting the generality of subsection (6) and subsection (7), a person in whose favour a charging order has been issued shall have no right to:

(a) interfere in the manager’s management of the limited liability company including any sale of its assets.

(b) liquidate or seize the assets of the limited liability company;

(c) restrict the business of the limited liability company; or

(d) dissolve, or cause the dissolution of, the limited liability company"

Exemplary, pecuniary and aggravated damages are not recognised in the Cook Islands, and accordingly are not able to be recovered under a charging order.

For the purposes of assessing the sum which may be subject to, and recoverable pursuant to, a charging order the Court shall disregard and exclude any amount which constitutes an award of exemplary, vindictive, retributory or punitive damages (by whatever name), or is an amount of damages arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for loss or damage.

What the charging order does provide, is for the creditor to receive distributions of capital or income which would, but for the charging order, have been received in the hands of the member.

If the limited liability makes a call on members for capital in accordance with its rules, the company may use a distribution due to the member to meet that capital contribution notwithstanding the charging order. This is consistent with the charging order being seated at the member side of the equation rather than the company. The distribution never reaches the member so the creditor has no claim upon it.

An interim charging order may be applied for ex parte, but will only have a life of a maximum of 30 days. The applicant will need to ensure the defendant is served with the proceedings and must deal with the application expeditiously if a full charging order is to issue. Otherwise, a charging order, once granted, is good for five years.

Importance is given to the member and the LLC being separate legal persons in relation to interlocutory applications. An action against a member is not sufficient to support discovery orders or injunctions being issued against the LLC in which the member holds a membership interest.

Foreign judgments given in relation to the availability of a membership interest to satisfy a creditor, (unless consistent with Cook Islands law), cannot be recognised or enforced in a Cook Island court.

LLCs are not required to have their members benefit from this regime and these provisions apply subject to the operating agreement. This allows the formation of LLCs whose members are happy to put their interests at risk or to mortgage their interests. However, what they cannot do is to change their minds later. This is the one provision in an operating agreement which cannot be altered. This requirement is aimed to avoid any involuntary amendments to the terms of the operating agreement affecting the applicability of that section.

LLCs may transfer their domicile from the Cook Islands to another jurisdiction and LLCs from other jurisdictions may seek registration in the Cook Islands under the legislation. However, LLCs wanting to escape existing corporate debts would do well to avoid the jurisdiction.

The Act specifically provides that with redomicilation the LLC takes its prior debts with it and any action against the company, whether already filed or not, prior to redomiciliation, may be continued and any judgment entered shall be enforceable against that LLC in the Cook Islands.

The usual confidentiality provisions apply. Proceedings are heard in camera and information may be divulged in only limited circumstances.

The new legislation provides a comprehensive but not cumbersome framework for the operation of LLCs. It is believed LLCs will provide a useful addition to attorneys and financial advisers in conjunction with the establishment of trusts in the Cook Islands.

February 21, 2009

Guest Article

Depositions – The Most Important Asset Protection Factor in the Discovery Process

(Ed's Note: A lot of my readers are educated, literate and make excellent incomes. They are concerned about asset protection because they have something to lose. They would be interested in this article on giving depositions by Randall Edwards of Trustmakers Financial Services in New York, NY. Edwards can be reached at (888) 916-7070.)

By Randall K. Edwards

(There is one aspect of) Asset Protection that usually does not often get a lot of attention. This is because when one thinks of protecting one’s assets, it is usually framed in terms of avoiding a lawsuit altogether. I would like to address an issue that arises when the lawsuit has already been filed and discovery—the process by which each side is allowed to get information from the opposing party—has begun.

Some important discovery tools are written interrogatories, requests for production of documents and requests for admissions. In my book, however, there is nothing more important to your case than your deposition—your sworn oral testimony in response to questions from your opponent’s attorney. Proper preparation for this important step in your lawsuit is vital.

I have taken and defended hundreds of depositions of clients, witnesses, company representatives, experts and others. I cannot overemphasize their importance. Deposition testimony is crucial to any case, and always results in each side in a lawsuit re-assessing their case as a result. Cases are often won or lost on the strength or weakness of a single client or witness deposition.

A deposition is usually taken at an attorney’s office. Despite the fact that there is no judge present, you will be sworn to tell the truth as if you were testifying in court, because the deposition is a formal judicial proceeding. Your testimony will be recorded by a court reporter and transcribed into a written book, which can be used against you if your testimony changes.

Present at the deposition will be the opposing counsel, your lawyer and a court reporter. Parties to the lawsuit also have the right to attend all depositions, unless barred for some reason by a court order.

Your attorney has the right to make objections to questions that you are asked. These objections are generally made "for the record"—so that if your deposition is used in a later proceeding, the judge can rule on whether the question was proper and should be stricken from the record. Unless your attorney instructs you not to answer—usually because a question requests information protected by an evidentiary privilege, such as attorney-client communications—you will be required to answer the question, regardless of the objection.

Depositions are often high-stress and unpleasant ordeals. Having a hostile attorney ask you questions that you may suspect are more designed to trick you than to find the truth is sometimes like trying to balance on a high wire without a net. Nonetheless, depositions can be handled in such a way that your case is strengthened by your testimony.

Here are some tips for your deposition, based on my years of experience.

Dress Appropriately for Your Deposition

Dress in clothes that would be appropriate if you were testifying in court. Your testimony may be videotaped and played before a jury in the trial of your case. You want to look your best in such a case. Even if your testimony is not recorded by video camera, you want to use the same degree of care in your appearance as you would if you were testifying before a judge and jury. This will project you as a confident and capable witness who takes your responsibilities seriously.

You are under oath—the same oath as if you were sworn into the witness box in court. If you are shown to be anything less than truthful, you may be guilty of perjury. At the least, if you can be shown to be lying on any point, everything that comes out of your mouth will be suspect. It is far better to tell the truth, regardless of how painful, than to testify falsely.

It has been my experience that in most cases, the truth, in all its horror or glory, comes out in a lawsuit—sometimes in ways that you can never anticipate. When that happens, it is better that you have fully told the truth on your terms than to let someone hostile to you try to tell your story for you.

I once saw an entire case unravel at trial because a party had shaded the uncomfortable truth in their deposition, and had been confronted with the lie while on the witness stand. The opposing counsel made the best of it, arguing to the jury, "If he is willing to lie once under oath, he will be willing to lie again. In fact, you can never know when a liar is telling the truth about anything. You cannot trust a thing this guy says." The jury took the argument to heart and the punishment in the verdict was swift and sharp.

It has been my experience that the first person to lose his temper in a lawsuit also loses the case. If you speak out of anger, you are more likely to say something you will regret later, and you also show that you can be manipulated. Hard as it may be, you should always remain calm, even (especially) in the face of heated questions from an opposing lawyer whose goal appears to be to "get your goat".

In this regard, you should always treat the opposing lawyer with respect –even if you do not feel that respect is deserved. There is no advantage to you in mistreating opposing counsel. In fact, your dislike for an opposing counsel can so taint your view of the case that your ability to present your side will be severely compromised.

Do not answer a question you do not understand, and do not speculate as to what the opposing lawyer is asking. If you do not understand what you are being asked, tell the lawyer to rephrase the question. Do not guess at what the meaning of a question is.

Once you have answered the question, stop talking. There is no good to be gained, and much harm to be done, by giving more information than you are asked (to answer). While it is important to be completely truthful and to answer all questions honestly, it is not necessary to say anything more.

I had a client once volunteer information in a deposition about an embarrassing situation in their earlier life—something completely irrelevant to the case and not asked for by the other lawyer. It caused immense problems in the case and wasted a lot of attorney and client time before the case finally resolved. There is no need to give any information that you are not asked about.

In this regard, if you can answer a question with a simple "yes" or "no", do so. Think of every word that comes out of your mouth as a bullet the other side in the lawsuit can use to shoot you. The fewer bullets you hand over, the fewer wounds that can be inflicted on you. Do not give a long narrative answer. Do not be lulled into a relaxed conversation where you might let your guard down. There is nothing casual in the deposition process—ever.

There is no crime in not remembering something months or years after something occurred. It is far preferable to simply say "I do not remember" or "I do not know" if you cannot recall than to speculate on something that you feel you should remember. On the other hand, if you do remember something, do not try to hide the truth behind the ruse of "I do not remember" or "I do not know" answers. Being honest about a painful truth is always better than looking evasive when you do know the answer.

In connection with this, try to avoid saying "always" or "never." Since there are no exceptions to such characterizations, it is easy for an opposing counsel to search for an exception to your statement and make you out as being untruthful.

Also avoid saying "I am not lying to you" or "in complete honesty". Use of such phrases makes it appear as though you might lie on occasion or speak with less than complete honesty.

Do Not Be Afraid to Ask the Opposing Lawyer for a Document That Might Refresh Your Recollection

Depositions are not memory tests. If the opposing lawyer has a document in his possession that you do not have – or that you have not seen for some time—it is unfair for that lawyer to try to play "gotcha" with it.

If you are aware that a lawyer has a document that might refresh your recollection, do not be afraid to ask the lawyer to let you take a look at it. If he will not, it will reveal that the lawyer is playing games rather than trying to get at the truth.

Do not Interrupt the Question Before It Is Fully Asked

In everyday conversation, we often interrupt one another as soon as we understand the direction the talk is going. Depositions are not everyday conversation, however. They are important interrogations, the results of which will be on the record forever. Thus, it is important that you listen carefully to the complete question and pause to formulate your answer. This not only gives you a chance to calmly give the information that is asked for, but it also gives your lawyer the ability to interpose any appropriate objections to the question.

If you need to take a break for whatever reason, ask for one. A deposition is not an endurance contest. If you need a bathroom break or simply a chance to get up and stretch your legs, feel free to ask for a break. Breaks are a good time to converse with your lawyer and to assess your testimony so far.

For example, if the other lawyer says something like, "Would you agree with me that …" or "Now what you are saying is …," you need to think carefully about whether your testimony is being accurately summarized. If you disagree with a statement about your testimony, feel free to correct or clarify that statement. Remember, it is your deposition, not the opposing counsel’s deposition.

Depositions are rarely simple or easy. Nonetheless, great good for your case can come from your deposition testimony. It is truly Asset Protection in the trenches. With adequate preparation, you can be confident and collected in giving a deposition.

December 13, 2008

There is an old Chinese saying by Confucius:

Lately, hosts of people want to "learn" about asset protection. I think what the Chinese really meant was that the term master refers to a "readiness" and openness to obtain knowledge. Having fielded many of the questions of our subscribers at Trustmakers, it seems to me that there is a global impetus to learn about asset protection (and I don’t think that we have to explain to anyone "why").

Of course, asset protection means to safeguard one’s wealth against those who may take claim to it. That definition is correct, but it leaves behind the nuances to the "living" side of asset protection and estate planning and still another side, which is transfer upon death by a testament (transfer by will) or by some other means of transfer.

Within these "other means" category are a multitude of options, many of which offer tax mitigation. Many others offer asset protection. Some offer both tax mitigation and asset protection.

If it sounds complicated, that’s because it is. Trying to figure out why the IRS Code has to be so complicated or why the laws are constantly changing won’t do anything for you or your estate.

Months ago I wrote a newsletter about the global economy and stated that (like it or not) you are a part of it. This certainly has been the case as we have seen the turmoil on Wall Street, plunging hedge and pension funds and international banking trouble. They are all interconnected.

Due to the vast number of things out of your control, you should do what you can within your control. Even if the task feels too complicated, start by sorting out a few facts and definitions and taking it one-step at a time; get education first to create a foundation. Next week’s newsletter and special attachment will build on these definitions.

Trustmakers offers our subscribers a fantastic way to start your estate planning with foundational material from a guest author with an advisor who stands as an authority on the subject.

Here are some of the basics that you will need to understand to benefit from the upcoming newsletter on estate planning.

Asset protection cannot prevent lawsuits. It does not hide assets and it is not a way to avoid paying taxes. Asset protection must be within legal means. Asset protection protects assets from creditors: taking into consideration title of assets, ownership and benefits, future revenue and taxation. It concentrates on the "life" side of your finances.

Estate Plans are not "per se" protection from lawsuits or creditor attacks. Traditional estate plans arrange for the end of a person’s life, including alternative solutions in the event that a person may become disabled before they die. It concentrates on the "passing" of assets upon death and sometimes during life with techniques such as gifting.

Asset protection plans need to be reviewed frequently; family situations change, laws change, IRS Code changes and economic conditions change. All of this is a consideration of asset protection. Often asset protection plans change. They must be prepared for changing situations.

Estate plans have similar considerations. Changing laws, tax codes, and ownership conveyance may affect circumstances surrounding estate plans regarding transfer of possessions or assets.

Estate plans and trusts can be revocable or irrevocable.

Irrevocable – Unalterable, committed beyond recall. - Black’s Law

Revocable – Capable of being withdrawn or cancelled. - Black’s Law

Asset protection is not accomplished by starting a company. There are many ways for creditors to seize company assets. Many assets are seized due to faulty titling or the use of the wrong entity for protection. Asset protection plans are made to hold up when challenged by any outside entities.

Estate planning is not accomplished by having a will. A will can be challenged. If you do not have a will, your estate will be placed in probate where the courts decide the outcome, expenses and taxation of the estate. With a pourover will, the assets left outside the estate plan are placed into the trust upon the death of the owner. (There is also a pourover trust where assets outside a trust are placed into a trust upon death.)

The term used for describing the circumstances of conveyance during life (as opposed to death) is: Inter vivos – (Latin for "between the living") Of or related to property conveyed not by will or in contemplation of imminent death, but during the conveyor’s lifetime. – Black’s Law

Asset protection does not prepare for your medical care during disability. Asset protection keeps your assets out of harm’s way while you are still alive.

Estate plans have documents with preparation for disability and incapacitation, such as long-term medical care and Medicaid protection. Estate plans do this by using Power of Attorney, sometimes referred to as "advanced directives."

Advanced Directives, Medical Power of Attorney, Health Care Power of Attorney - an empowerment of an attorney-in-fact or proxy, to make health-care decisions for the grantor, including sustaining and terminating care. – Black’s Law

In almost every trust, a person gives up "legal ownership" of the asset or property to a "trustee," but retains "beneficial ownership" as beneficiary.

Ownership - The right to posses, use and convey.

Trustee – One who, having legal title to property or assets, holds it in benefit for the right of another and owes fiduciary responsibility to that beneficiary.

Beneficial Owner (Beneficiary) – One recognized with the right to equity and enjoyment because the title or deed maintains this right. – Black’s Law

This month we have decided to emphasize what is within your strength and power. Many of our questions lately have focused on what can be accomplished during recession and turbulent financial times. The answer? Many of the same things that can be accomplished in great economic times.

Estate planning and asset protection concentrate on you and your assets! You won’t want to miss next week. Our goal is to help you start the New Year with the right perspective.

• Is my money safe, my pension, my insurance etc.? Is the safety of your assets merely an illusion?
• What type of company will protect my assets and offer favorable taxation?
• What type of trust do I need? What types of trusts are there?
  Is the stock market safe?
• Is my home safe?
• Do I have adequate insurance?
• Are my assets deliverable in the manner I desire upon my death and to the people I intend to take possession?
• Can I reduce my taxes?
• Is going offshore for me?
• Am I covered in the event of disability?
• Should I review existing plans I have in place so I can update with the current changing law?

In addition, to end simply with one question, ask yourself, "Am I prepared?" Your thought, "for what?"…and that second thought is our job at Trustmakers, to prepare you!

May 29, 2008

Financial Lessons in Life

IRA Rescue Using Home Equity Management: How You Can Remove Your IRA Money Tax-Free

Copyright © 2008 Ed Bagley

(Editor's Note: I subscribe to Trustmakers' email newsletter which I received yesterday with the following article by Roccy M. DeFrancesco, Jr. Roccy has a lot of acronyms after his name, including JD, CWPP, CAPP and MMB to be exact. Financially savvy people know what these mean, but you do not need to be a financial whiz to understand the clarity of what he has to say about how to keep more of the money you earn. I have some readers with huge liquid assets who might be very interested in Roccy's article, and therefore am posting it here. For those readers who have assets and want to keep them, and those who would like to keep more of their assets when they acquire them, read on.)

By Roccy DeFrancesco

In my last newsletter, I discussed how you can solve the double tax trap (upwards of 85% for readers with an estate tax problem) of money in a qualified plan or IRA by using the very simple concept of liquidate and leverage (L&L). While a simple strategy, it’s one that can significantly increase the amount of after tax wealth you can pass to your heir at death.

For this newsletter, I thought I would give an alternative strategy to L&L that involves proper "home equity management".

Let me ask you a few questions:

1) If you die with an estate tax problem and money in an IRA, what will be the tax on the money in the IRA? Answer: 70-85% for most readers.

2) Do you or do you plan on having debt on your home when in retirement or at death? Answer: Most client readers with wealth will not have debt or not much debt on their home at death (especially if they use the simple Home Equity Acceleration Plan to aggressively pay down debt.

3) Do you plan on selling your 3-4-5 bedroom empty nester home (big home with no children left)? Many readers will sell their large home in retirement and downsize into a smaller home or a condo (having a big home when you are 70+ years old can be draining due to house upkeep and cleaning).

4) Do you plan on buying that vacation home/condo in another part of the country? Sure, many readers, once in retirement, will buy a condo in a nice vacation spot and split time between that condo and the primary place of residence.

While you might have thought the “L&L” concept was beneficial, you can improve the finances of the concept if you incorporate Home Equity Management.

This concept I’ll be discussing in this newsletter is very simple on its face (although fully understanding the math can get a bit complicated). IF you can create a deductible home mortgage payment, you can remove money from an IRA to pay for the mortgage without paying taxes on the money removed from the IRA.

Why? Because the taxable dollars removed from the IRA will be allocated to a deductible home mortgage interest expense (IF set up correctly).

The following example is very specific. It deals with a couple who wants to sell their home. If the clients simply want to re-finance the home, the interest might be deductible up to the first $100,000 of debt or not at all.

Example:
Let’s use our Dr. Smith again. Assume he is now retired and has a paid-off home worth $1,000,000 dollars and has $500,000 in his IRA. Let’s assume he would like to downsize the current house now that the children are all grown up and that he wants a vacation home in another part of the country.

Assume Dr. Smith buys a new, smaller home or condo locally (where he lives) for $400,000 and a new home or condo in a nice vacation spot for $400,000. Assume he puts down approximately $158,000 on each property and has a deductible mortgage expense on each property with the same $242,000 mortgage at 6.5%.*

With two interest-only mortgages at 6.5% with a total amount of deductible debt of $484,000, the interest expense on the mortgage payments will be approximately $31,500 a year.

*As you can see, I’m manipulating the numbers to fit a particular example. This is exactly what you will do in the real world when calculating how much money you want to draw out of the IRA every year. Some people will want to draw out X amount so that the IRA balance is zero at age 100, 90, or 85. Others will not want to draw down the IRA balance to zero for fear that they will need some of the money.

For this example, I’m assuming the money in the IRA grows annually at 6% and that Dr. Smith can take withdrawals of $31,500 from age 60 to 98½.

If Dr. Smith removes $31,500 per year from the IRA to pay the mortgage payments, there will be no taxes due on the withdrawn money because he can deduct the $31,500 of IRA income on his tax returns due to the fact he has a corresponding home acquisition debt payment for the same amount.

Repositioning the Money for Estate Planning

After Dr. Smith removes the money from his IRA tax free, he then needs to do something with the profit from the sale of his house (his available cash from the sale is $684,000 after putting down the two $158,000 payments on his two new houses or condos).

I’m going to assume that Dr. Smith would like to maximize the size of his after-tax estate that will be passed to his heirs. Just like the “L&L” solution, Dr. Smith will choose to gift money to an Irrevocable Life Insurance Trust (ILIT). In this example, I’m going to assume Dr. Smith will use $484,000 of his $684,000 profit from the sale of the home to gift to an ILIT.

Once the money is in the ILIT, a large death benefit life insurance policy will be purchased on his life, which will pass the maximum amount of wealth to the heirs, income-tax and estate-tax free.

One main issue Dr. Smith will have to deal with is the gift tax problem of repositioning the $484,000 into the ILIT. Dr. Smith and his spouse can gift $12,000 per spouse per child to the ILIT every year without gift taxes. They have two children and four grandchildren, and, therefore, they can gift up to $144,000 a year to the ILIT every year without incurring gift taxes.

In this example, at $144,000 a year, Dr. Smith can gift the money into the ILIT in just over three years.

How much death benefit can Dr. Smith purchase with a $484,000 premium? $3,000,000.

Therefore, if Dr. Smith dies tomorrow, next week, next year, or when he’s 85 or more years old, $3,000,000 will pass income-tax and estate-tax free to his heirs.

Remember the numbers from the earlier do-nothing scenario? If Dr. Smith did nothing, the $500,000 IRA balance would grow and be taxed at 80%. If Dr. Smith died at age 70, the heirs would receive $189,830 after taxes. Whenever Dr. Smith dies in this example, his heirs will receive $3,000,000 after taxes.

There is no doubt that readers who have “trapped” money in IRAs can use this type of solution to significantly increase the size of their after-tax estate for the heirs.

The goal with these types of newsletters is part educational and part motivational. Millions of Americans have money in their IRA or qualified plans and estate tax problems. If they “do nothing,” 70-85% of that money will go to the IRS at death.

By working with a team of advisors who are familiar with all the various ways to remove money from an IRA in a tax advantageous manner or in a manner so as to maximize your after-tax estate, you will do the best job possible to pass the maximum amount of wealth to your heirs and will certainly do much better then most client’s default position which is to “do nothing.”

(Editor's Note: You can reach Roccy and Trustmakers Financial Services at (888) 916-7070.)

May 26, 2008

Talk About Poor Examples

If USA Families Ran Finances Like Their Government, They Would Go Bankrupt

Copyright © 2008 Ed Bagley

It does not seem that long ago that federal spending in the United States of America was $627 billion in 1965, according to The Heritage Foundation, which keeps track of these and other numbers of interest. Federal revenue in 1965 was $620 billion, so our government was $7+ billion in the hole for 1965.

Even then, knowing that $1 billion is really $1 million 1,000 times and that $628 billion is really $1 million 628,000 times, it seemed like a lot of moolah.

Federal spending in 2008 is estimated to top $2.7 trillion. Knowing that $1 trillion is really $1 billion 1,000 times, and that $2.7 trillion is really $1 billion 2,700 times, and really $1 million 2,700,000 times, it is mind-boggling to wrap your mind around. No wonder we are called the richest nation in the world.

We may also be the most foolhardy nation in the world as our national debt has now topped $9.4 trillion against an estimated annual federal revenue of $2.5 trillion for 2008. It may be difficult, but think about servicing $9.4 trillion in debt with $2.5 trillion in revenue.

Perhaps the relationship between the two figures it is easier to think of this way: Your annual income is $100,000 and you have to service $376,000 in debt, or your annual income is $50,000 and you have to service $188,000 in debt. What if the $188,000 in debt was credit card debt? Would you ever get out from under?

There are a lot of families in America with annual income well in excess of $100,000 that are servicing more than $1 million in debt, but does all of the wonderful lifestyle make your feel any more secure?

Is our federal spending out of control in the United States? It is a fact that federal spending has grown 334% since 1965, that is 9 times FASTER than our median income, which rose just over 35% during the same period.

If you think that statistic is scary, try this one: Discretionary spending, the portion of the federal budget subject to annual review and debate, has risen 152% since 1965 while mandatory spending, consisting mostly of Social Security, Medicare and Medicaid which continue on automatic pilot, has risen 759% since 1965.

In other words, mandatory spending is rising 5 times FASTER than discretionary spending. Mandatory spending has grown from $169 billion in 1965 to $1.45 trillion in 2007, taking up more than 58% of the federal budget.

Our government has a real stupid plan when it cannot meet our taxpayer obligations—the government prints more money. When doing so, our government simultaneously increases inflation and reduces the value of our American dollar. This is the same plan that South American dictators use when pressed for cash to pay bills. Do it enough, and pretty soon it takes a wheelbarrow full of dollars for a citizen to buy a loaf of bread.

If you lost your job and your income was cut in half or two-thirds, you would use some good old-fashioned Yankee ingenuity (common sense) to cut back your expenses until you found another source of revenue. If we as citizens printed money to cover our expenses, our government would prosecute us and send us to jail.

The people who run our government are citizens like you and me, with one big difference: they can authorize the printing of money to cover their mistakes and we cannot. It also helps that none of them are forced to live in a dumpster behind a trash store. Trust me when I say that they are hardly living near poverty level.

In other words, there are so many millionaires running into each other in the nation's capital they can hardly get anything done that will actually help the people they are representing, which would be us. The plain truth is that politicians have done more to help themselves get on in life than help us, and they have done this because we put them in a position to do so.

Our elected officials in Washington have such a good self-image they refuse to be part of our Social Security System, which is plenty good enough for the taxpayers who elect and support their spending habits, but certainly not good enough for them. Their retirement system is not nearly as shabby and cheap as ours; their retirement system continues their salary for the rest of their life when they retire.

But enough carping about our elected politicians who basically could really care whether we drop dead or get on in the world. Do not believe all of the drivel coming out of their mouths this presidential election year.

Put simply, Barack Obama wants to be the first African American president, Hillary Clinton wants to be the first woman president, and John McCain wants to be the oldest president ever elected. All are U. S. Senators, and all are multi-millionaires or married to multi-millionaires. Their chief interest in being a politician is to line their pockets at our expense.

If nothing about our country being $9.4 trillion in debt bothers you, perhaps you should know that the $9.4 trillion is the actual debt at this very moment—the federal debt INCREASES $1.2 billion per day into the future.

And, just for the record, our actual federal obligations into the future are a whopping $55 trillion and counting. This figure includes "off balance sheet" items like Social Security, Medicare, etc. that we the taxpayers are obligated to pay by being taxed even more in the future.

Most of us who are less prosperous than the millionaire politicians who represent us would do well to work at becoming debt free so we can ultimately survive even if our government cannot.

Read my editorial comments on key issues and concerns, including "Facts About the Second Most Controversial Topic in America – The First Is Abortion", "So Why Should I Subsidize Any Banks Because of Their Greed and Incompetence?", "A Disturbing Trend in Our Society – The Lack of Trust in Our Institutions" and "Washington's Hottest Political Issue Pits PI Attorneys and the Insurance Industry". Find these articles and more in my Lessons in Life link.

February 22, 2007

Book Review:

Clason's "The Richest Man in Babylon" Reveals the Fastest Way to Become Financially Savvy – Part 1

Copyright © 2007 Ed Bagley

George Clason's book "The Richest Man in Babylon" reveals the fastest way to become financially savvy. It works today because money is governed today by the same laws that controlled it when prosperous men thronged the streets of Babylon 6,000 years ago.

Here is a synopsis of The Richest Man in Babylon and the important financial lessons it teaches:

A self-employed chariot builder becomes discouraged when, after years of hard work, he realizes that he will never become rich. He labors hard to build the finest chariots in the land, soft-heartedly hoping that some day the Gods will recognize his worthy deeds, and bestow upon him great prosperity.

He now realizes that the Gods could give a care about the work on his excellent chariots. He longs to be a man of means, and have the lifestyle of the richest man in Babylon, who was a childhood friend.

He confers with his best friend, a musician, who reminds him that it is not enough to have a fat wallet, as a man’s wealth is not in the wallet he carries, because a fat wallet quickly empties if there be no golden stream to refill it.

The chariot builder decides to confront the richest man in Babylon, who he knew in his youth, and learn how he became so rich.

The chariot builder shares his lament with the richest man in Babylon, knowing that both he and the richest man in Babylon were once equal, played the same games in childhood, studied under the same masters, had equal talent and ability, and worked just as hard; now he works just as hard but his childhood companion has become the richest man in Babylon, while he still struggles.

The rich man replies, “If you have not acquired more than a bare existence in the years since we were youths, it is because you either have failed to learn the laws that govern the building of wealth, or else you do not observe them.”

The richest man then explains that he had learned how to become rich from a moneylender, for whom he had provided a service in exchange for the moneylender’s secret to success.

The moneylender said, “I found the road to wealth when I decided that a part of all I earned was mine to keep, and so will you.”

The money lender tells the rich man, who was then a scribe in the hall of records, to set aside one-tenth of all he earns as his portion to keep.

A year later the young scribe comes back to the money lender, who asks him if he has kept a tenth of all he earned.

When the scribe replies yes, the moneylender asks him what he has done with it.

The scribe says he has given it to a bricklayer who was going to foreign lands to buy jewels, which he and the bricklayer would sell for profit when he returned. The scribe ends up with nothing, as the bricklayer is sold worthless glass rather than fine jewels.

“Every fool must learn”, says the money lender, “but why trust the knowledge of a bricklayer about jewels? Your savings are gone,” continues the moneylender, “you have jerked up your wealth-tree by the roots. But plant another. Try again. And, this time, if you would have advice about jewels, go to the jewel merchant.”

Another year passes, and again the scribe goes to the money lender, to tell him that he had saved one-tenth and given it to a shield maker to buy bronze, and each fourth month the shield maker pays him rental.

“That is good,” says the moneylender, “And what did you do with the rental?” “I had a great feast and bought a beautiful scarlet tunic,” replies the scribe.

“You squander your savings,” admonishes the moneylender. “How do you expect your savings to work for you, and generate more savings to work for you? Get yourself an army of golden slaves to work for you, then many a rich banquet you may enjoy without regret."

Two years later the scribe again goes to the money lender, to tell him that he still saves one-tenth, invests it more wisely and now continues to do so. “Each time I loaned money to the shield maker, I loaned back also the rental he had paid me. Therefore not only did my capital increase, but its earnings likewise increased.”

“You have learned your lessons well,” says the moneylender.

“You first learned to live upon less than you could earn. Next you learned to seek advice from those who were competent through their own experience to give it. And, lastly, you have learned how to put money to work for you.

"You have taught yourself how to acquire money, how to keep it, and how to use your money to prosper. You are now competent for a responsible position.”

The scribe goes on to become the richest man in Babylon.

It was apparent that no one could do for the scribe what the scribe had done for himself. Each man has to work out his own understanding of what needs to be done, and then prepare himself to take advantage of the opportunity to succeed in a big way.

The moral to the story The Richest Man in Babylon teaches this lesson: Proper preparation is the key to our success.

February 23, 2007

Book Review:

Clason's "The Richest Man in Babylon" Part 2 - The 7 Cures for a Lean Wallet and The 5 Laws of Money

Copyright © 2007 Ed Bagley

Part 1 of this 2 Part series ends the synopsis of George Clason's book "The Richest Man in Babylon," but Clason raises an important question: Why should so few men be able to acquire so much gold?

The answer is because they know how.

One may not condemn a man for succeeding because he knows how. Neither may one with justice take away from a man what he has fairly earned, to give to men of less ability.

And so it was that the good king of Babylon sought out the richest man in Babylon to teach to others in his kingdom the secrets of his success.

This is a synopsis of what the richest man taught to the people of Babylon:

The Seven Cures for a Lean Wallet

1) Start your wallet to fattening. Save one-tenth of all you earn. Remember that a part of all I earn is mine to keep. Do this faithfully. Do not let the simplicity of this escape you.

When I ceased to pay out more than nine-tenths of my earnings, I got along just as well. I was not shorter than before, and, money came to me more easily than before.

2) Control your expenses. How is it that all do not earn the same yet all have lean wallets? Here is the truth: That which each of us calls our “necessary expenses” will always grow to equal our incomes unless we protest to the contrary.

Confuse not necessary expenses with desires. We all have more desires than our earnings can gratify. Examine which of the accepted expenses of living can be reduced or eliminated. Let your motto be 100% of appreciated value demanded for every dollar spent.

Budget your expenses so that your actual necessities are met without spending more than nine-tenths of your earnings.

3) Make your money multiply. Protect your growing treasure by putting it to labor and increasing. Money in your wallet earns nothing. Money that we earn from our money is but a start; it is the earnings generating earnings that builds fortunes.

When the richest man in Babylon loaned money to the shield maker to buy bronze, he said this: "Each time I loaned money to the shield maker, I loaned back also the rental he had paid me. Therefore not only did my capital increase, but its earnings likewise increased."

4) Guard your money from loss. Everyone has an idea of how to make quick money; few, however, have the evidence of making money to justify their idea, scheme or offer of quick riches. The first sound principle of investment is security for your principal.

Before you loan your money to any man assure yourself of his ability to repay your loan, and of his reputation to do so. Make no one a present of your hard-earned treasure.

Consult the wisdom of those experienced in handling money for profit. Such advice is often freely given for the asking, and may possess more value than the amount you are about to invest.

5) Make your home a profitable investment. When you can set aside only nine-tenths of what you earn to live, and can use a part of that nine-tenths to improve the investment in your housing, do it; owning your own home is also an investment that grows with your wealth.

Your family deserves a home they can enjoy and call their own. It builds a sense of stability and well-being.

6) Ensure a future income. Build income-producing assets that do not require you to work forever. We will all grow old and die.

You should prepare a suitable income for the days to come when you are no longer younger and cannot work as hard, and to make preparations for your family should you no longer be with them to comfort and support them. Provide in advance for the needs of your growing age, and the protection of your family.

7) Increase your ability to earn. Desire precedes accomplishment, and the desire must be strong and definite. When you have backed your desire for saving $1,000 with the strength and purpose to secure it, you can then save $2,000.

Desires must be simple and definite. Desires defeat their own purpose when they are too many, too confusing, or too difficult to accomplish. Cultivate your own powers to study and become wiser, more skillful, and more productive.

Here is more sage advice from Clason's masterpiece on financial matters:

The 5 Laws of Money

If you had to choose, would you choose tons of money or wisdom? Most men would take the money, ignore the wisdom, and waste the money. Here is the wisdom:

1) Money comes gladly and in increasing quantities to any man who will put aside not less than one-tenth of his earnings to create an estate for his future and the future of his family.

2) Money labors diligently and contently for the wise owner who finds for it profitable employment, multiplying unto itself in infinity if kept working diligently. Money multiplies itself in surprising fashion.

3) Money clings to the protection of the cautious owner who invests it with the advice of men wise in its handling.

4) Money slips away from the man who invests it in businesses or purposes that he is not familiar with, or which are not approved by those skilled in its keep. The inexperienced handler of money who trusts his own judgment, and puts his money in investments which he is not familiar, always pays with his money for his experience.

5) Money flees the man who would force it to impossible earnings, or who follows the alluring advice of tricksters and schemers, or who trusts it to his own inexperience and romantic desires in investment.

Here is the hard lesson of the 5 Laws of Money: You cannot measure the value of wisdom in bags of money. Without wisdom, those who have it quickly lose money, but with wisdom, money can be secured by those who have it not.

This ends the condensation.

October 8, 2007

There Is No Other Way

The Only Way to Become Financially Free in America Today: Start Your Own Business

Copyright © 2007 Ed Bagley

I have become so sick and tired of online gurus offering scam products and opportunities that I must reveal the truth about what I have discovered. It is simply this:

In virtually every ad I have read and responded to online a sinister tactic has left me disappointed and dismayed. All of the solutions I had been promised left me unable to achieve any real success whatsoever.

And the sinister tactic being used? Let me simply call it the sin of omission in the solution being offered for my hard-earned money and time.

As strange as it might seem to a man, think about baking a cake that has 5 ingredients. What I have been getting from online gurus is generally 4 of the 5 ingredients, or 80% of the knowledge and application it takes to make the big bucks like the gurus.

Without the 5th and final ingredient the cake making process and the cake are a flop. Worse yet, the gurus know this and purposefully withhold the final ingredient, knowing that if you knew it, you would then join them in the success circle.

They nonetheless advertise and sell their information as if they are giving you all of the ingredients and the full story. In the process, I was being really cheated out of my investment in their products and opportunities.

They were literally lining their pockets at my expense while acting like successful online entrepreneurs willing to share their success information for a price.

The online business of selling information to unsuspecting prospects without giving the prospects all of the information and help they need to succeed has become a multi-million dollar industry.

These online gurus are worse than spin doctors in politics. They will literally steal you blind and act like they are doing you a real service; there is apparently no end to their righteousness and profits, not to mention their disingenuousness.

Enough is enough. I am sick and tired of all their lies and ad copy that drones on for 50-plus pages, spewing out their "exclusive" knowledge, how "easy" it is to succeed like they do, all the "evidence" of their newfound wealth, all the "testimonials" of the common folk and superstars who worship at their feet, all the "crap" you are going to get (minus the real information you need to succeed), how their information is "worth" thousands, how "you can buy it" for hundreds, and how you must "act immediately" to take advantage of their time-sensitive offer.

All of it crap. I have never had a single one of these gurus help me with sincerity at my point of need. They are only interested in selling me more of their personal and company products, books, tapes, seminar tickets, etc., all of which they make money at my expense.

Here is what I believe you need to know before you begin a journey toward becoming financially free:

1) Unless you are a famous rock star, professional athlete or chief executive officer of a major corporation, you have no chance of becoming financially free. You cannot be hired help as an average worker and become financially free in America.

You should have figured out by now that you are not going to get generous raises each year, get more time off, and get better medical, dental and associated benefits. You are an employee, not the owner of the company.

2) As long as you are hired help, you are going to pay too much of your earnings in taxes. Workers are taxed to death. You should know by now that even if your government taxed the rich three times as much, the combined middle class taxpayers still pay far more taxes.

Take the middle class out of paying taxes and the United States would collapse. There would not be enough money to pay all of bureaucrats who regulate our lives and our incomes.

3) Your government does not reward you for being financially responsible, your government punishes you. Your government taxes you on your savings. Your government restricts the amount of tax-free money you can contribute to your retirement accounts. Your government encourages you to go farther into debt by giving you a bigger mortgage interest deduction for a bigger house with a bigger mortgage payment.

4) Very few Americans can save enough for retirement because their incomes are too low, their taxes are too high, and by the time they pay their bills, too many live month-to-month, unable to save enough for retirement.

So what is the answer? Let me share with you not what I think, but what I know.

5) First, you need to go into business for yourself. Do not quit your job, simply start a part-time business on the side so you can begin to generate some income, and accumulate more legal tax deductions. The tax deductions will enable you to lower your taxable income. Then you can take the tax savings and invest in your retirement and/or expand your business.

6) Second, this is not rocket science. You do not need a college degree or special advice from your banker or financial expert, 95% of whom will lie, cheat and steal to take your money while trying to convince you that they are your best friend and helping you. If you doubt this, just start reading the real life articles I write in the Lessons in Life section of my Blog.

7) Understand that as hired help you have so few legal deductions you can count them on one hand. As a business owner, you have a minimum of 200 deductions and hundreds more if you are a major corporation. You simply cannot continue to pay the taxes you are paying as hired help and get ahead.

8) Do you know that as a business you can legally arrange your affairs so that virtually all of your business travel expenses are 100% deductible? This lowers your net taxable income, and reduces the net taxable income your business generates.

9) Do you know that if you have children ages 8 to 18 you can hire each of them to work in your business, and pay them approximately $5,000 a year? Do you know that this income for each of your children is tax free to them, and you can take the combined employment expense as a 100% business deduction?

10) Do you know you can start a legal business for a one-time investment of as little as $200, and maintain your business for as little as $20 a month? Yes you can. I do it, and I can show you how to do it.

Read the following article I wrote about my personal experience. You can actually do something to help yourself and your situation. I know. I did. You can too.

Click on the link below to read the article I wrote about my personal experience. You can actually do something to help yourself and your situation. I know. I did. You can too. Go here for more information:

http://www.edbagleyblog.com/BusinessOpportunities.html

May 19, 2007

Copyright © 2007 Ed Bagley

When I first thought about becoming an Internet Marketer, I thought about becoming debt free.  I did not like the idea of paying hundreds of dollars a month in interest on my obligations.

I was reading one day and came across this quote from a British author that seemed to capture my feeling exactly: "Money is like a sixth sense without which we cannot make a complete use of the other five."  Nothing before or since has made more sense to me.

I realized I could not reach my full potential without becoming debt free and financially independent once and for all.

But how?  I was led by the myEcon business opportunity to buy a copy of Rich Dad, Poor Dad, Robert Kiyosaki's book about financial intelligence.

I read the book, then read the book a second time and was impressed by Kiyosaki's personal financial advice, but I got stuck on two of his thoughts:

1) The first thought was "making more money will not solve your personal financial problems if cash flow management is the problem."

I then understood that either I needed to get in control of my personal finances, or spending, increasing debt, and paying interest on debt would be in control of me.

2) The second thought was "you really need to become debt free BEFORE you start investing." 

I then understood that if I was paying 18% to 21% on my credit card debt, for example, and not earning squat on my investments, I was going backwards about a 1,000 miles an hour.

Both of these thoughts were upsetting to me because I knew he was right as right can be.

If I did what everyone else did, I would have what everyone else has, and for most people, what they have is years of hard work, unfair taxes and a lifetime of debt.  And let me tell you, I had some debt.

It is not unusual today for a middle class family to have $100,000, $200,000 or $300,000 in personal debt, if for no other reason than many middle class families are making payments to the bank while owning their home.

I then understood that I needed to change my thought process about what I was doing financially, and why I was doing it. 

I realized that if I lacked the will for change, there was no one who could show me the way.

So I became determined to get in control of my cash flow, and eventually retired $269,000 in debt to become a free man.  

I became very thankful that I was led to Robert Kiyosaki's book by the leaders of myEcon, the very networking opportunity I had used to start my Internet Marketing business. 

Getting rid of the interest I was paying on $269,000 in debt was an incredible blessing.   

What is unusual about what happened to me is that the myEcon leaders were more focused on helping me improve my personal finances first, so I had a better opportunity to earn money. 

MyEcon was the first networking company I have ever been exposed to where the leaders actually cared more about me than lining their own pockets at my expense by selling me a bunch of crap that I did not need or want. 

I came to appreciate the myEcon leaders because of how I was treated by the company's management and its leadership example.

When presenting its "myEcon 5 Steps of Cashflow to Wealth" program, the company did not stress making money.  The company talked about how to minimize my expenses, how to minimize my taxes, how I could eliminate my debt (I took them seriously on this one), and how I could invest my money in assets rather than paying taxes and debts.

For those people who have a job, myEcon recommends that you not get a second job or work overtime to meet your obligations as this would only create more income and more taxes to pay.

MyEcon advises you to create a business and then spend your available, extra time building your part-time business to create legal tax deductions and lower your taxable income.

I have been in opportunities where I sunk money in and got nothing out.  No one, or no company, ever really cared enough to help ensure my financial future while they were lining their pockets at my expense. 

I simply got sick and tired of subsidizing other opportunities while I got all of the motivation and training in the world, but no strategy to actually succeed.

To find out more facts about the myEcon opporunity, go directly to my online home page for myEcon.  Just click on the "Opportunity" button at the top of the page, and view an audio/visual presentation.

When you are done, and ready to make a move, hit the "Enroll" button and you will be directed to myEcon's secure sign-up page where you can be sponsored by me (Ed Bagley) through my company, Northwest Marketing LLC.

You cannot join this company at my web site here, you must join on the web site the company has provided for me to sponsor you.

If you cannot figure out how to sign up, call me at (800) 965-6484.  Leave a message, give me your name, area code and phone number and I wil return your call ASAP.  I will give you the strategy I have been given.  Click on the link below to be taken to my home page for myEcon:

December 12, 2006

Financial Matters:

Why Lenders Are Not Your Friends - Part 1

Copyright © 2006 Ed Bagley

The next time you go borrowing, and your friendly banker smiles as you walk into his office, be aware that you may be snookered by someone not worthy of your trust. If your banker is an attractive woman, then you are even more susceptible.

I have grown over the years to appreciate a certain breed of bankers as one of the lower life forms that inhabit planet Earth. What I am about to share with you is even more true of certain mortgage brokers, secondary lenders and financial predators. They operate as sleazy parasites under the guise of helping the least creditworthy consumers who have virtually no savvy in financial matters.

Rather than pick on the worst of this collection of lenders who will help relieve you of your money without any conscience, I have targeted bankers. Before the banking industry was deregulated there were many people who considered bankers worthy of some trust and admiration. Those days are over.

Bankers still enjoy the best reputation (such as it is) among these lenders, but they have no problem patting you on the shoulder while picking your pocket and telling you how much they have helped you. I do not intend to indict the entire lending industry, just 95% of it. Here is an example:

My 24-year-old son wanted to refinance his first mortgage and was about to go to a leading lender in the market to look at its loan proposal. I decided to tag along because I know how lenders operate, especially when dealing with younger clients and senior citizens who have not handled the finances in their family.

His present loan had a principal balance of $123,773 with 7.458% interest at a 30-year fixed rate.
The proposed re-fi was for $134,999 with 9.9% interest (10.28% APR) at a 30-year fixed rate. The re-fi would cover the $123,773 principal balance due and provide a $10,409 home equity loan. The lender was actually smiling when he outlined what a good deal this was for my son.

I had coached my son to simply listen to the proposal, commit to nothing, take the paperwork with him, and tell the lender he would study the proposal and let the lender know if he wanted to proceed.

Once away from this flytrap I took my son to lunch, and we discussed the great deal he was given.

First, I had him look at the 3% discount fee on the Good Faith Estimate of the closing costs. (The discount fee is the amount you are paying for the privilege of getting the loan.) The discount fee was listed at $312.

What the lender was not telling him was that the 3% discount fee was figured on the $10,409 home equity loan and not on the $134,999 for the total loan which was $4,050, a slight difference of $3,748 in their favor.

If you called the lender on this discrepancy, he would probably say, "Oh, you're right, that's a mistake. That's the figure for the home equity loan. Jeez, I'm sorry."

When the day comes to close the loan, you see the bloated figure and object, and then the lender multiplies the $134,999 loan times 3% and viola, it comes up correct. You are dazed and confused, feel under pressure, want to get this over with and sign on the dotted line. This happens every working day in America when loans are closed.

Long after you are gone, the lender is quietly snickering, counting up the additional funds he will earn, and welcoming the next dumb bunny who comes through the door while you will be stuck with making payments for 360 months on a lousy loan.

For the uninitiated, there are more real surprises at loan closings in America than when opening gifts on Christmas morning. One client of mine went to a loan closing and learned that $10,000 had been added to the loan closing costs without prior notice; he thankfully got up and left.

Always remember that for every liability you have, you are someone else's asset. For every liability—such as a mortgage, credit card, car loan or school loan—you are an employee of the company lending the money.

If you take out a 30-year mortgage loan, you have become a 30-year employee of the company which lends you the money. This is a very sobering thought when you are paying attention, as you should be. I am not talking about anything important in this article, just your financial health.

Part 2 of this article will take the financial details of the loan apart and show how not taking the loan will save my son $157,495.

December 13, 2006

Financial Matters:

Why Lenders Are Not Your Friends – Part 2

Copyright © 2006 Ed Bagley

I told my son that normal closing costs for a re-fi of $148,638 at 6.5% for 30 years is $2,500. Total closing costs for his $134,999 proposed loan were $5,412, only $2,912 more. So I asked him "Could you be paying too much for closing costs?" Answer: Yes.

Then we looked at his original principal balance owing of $123,773 versus his new principal amount owing of $134,999 should he accept the loan. I pointed out that he is losing $11,226 before he even starts servicing the new loan. Yes, he is getting a home equity loan of $10,409, but what is he really gaining? Answer: Nothing. He is losing again.

Then we calculated the closing cost recovery rate of $5,412 using a financial planning program. He learned it would take 30 months of payments just to recover his closing costs. I pointed out that until you recover your closing costs you have not saved a cent in the transaction.

He had already made 12 payments on his existing $123,773 loan, reducing his principal amount owing to $122,623. He had earned $1,150 in equity by making 12 payments at $862 a month.

Then we looked at what his principal amount owing would be when he reached his 30th payment with the new loan. (Remember, it is going to take 30 payments to recover his closing costs.) Answer: $133,085 at a monthly payment of $1,233.

Then I asked him what his principal amount owing would be if he just kept paying another 30 months on his current loan plus the 12 months he had already paid. Answer: $119,342 at $898 a month.

The lights began to turn on in his mind. Now he recognized that he would be $13,743 ahead in principal owing if he just kept paying on the existing loan at the lower monthly payment ($335 less!).

This sudden revelation begged the question: How can this be? Answer: The interest on mortgage loans is front loaded. He learned that if he went for this nationally known lender's great loan deal that he would be making loan payments for 30 months (2.5 years) and still owe $13,743 more in principal balance than if he kept his present loan and paid $335 less in his monthly payment.

Finally we looked at what it would cost to service both loans. His current loan had 348 months remaining (29 years) at $898 monthly. Total cost? $312,504. The proposed loan had 360 months remaining (30 years) at $1,233 monthly. Total cost? $443,880. The difference? $131,376.

Just how badly did he need that home equity loan? Answer: Not at all.

And how much would he save in actual dollars by not accepting the proposed re-fi from the lender who was supposedly helping him out? Answer: $157,495.

Here are the savings:

1) $11,226, the difference in the original amounts of the loans.

2) $1,150, the equity he already had earned from making 12 payments on his present loan.

3) $13,743, the difference in principal owing if he continued paying his present loan.

4) $131,376, the difference in the cost to service the proposed loan.

Never forget that finance is a dirty business like finding a cockroach on a cow pie.

The banker, mortgage broker or financial predator you are dealing with is not your friend trying to help you. He (or she) is your enemy trying to hurt you so his company can profit at your expense while he gets his big commission check and looks good to his employer.

If you want an excellent example of how your banker educates you about your finances, try swallowing his line about your first home purchase being probably the greatest and most rewarding investment you will ever make.

Remember that he talked about how your new home would be such a great asset for you. Anything to get you thinking you could not possibly afford your new home without his help, and that it would be your greatest investment.

Your banking friend never told you that your fantastic new asset is not even an asset but a liability. A liability, you say? Of course, silly, the bank holds the paper on your home until you pay it off, and your loan is really an asset on the bank's balance sheet, not on yours.

By lending you the money to buy your home, your bank creates an asset on its balance sheet, and if it is an asset for the bank, it must, by straight accounting procedures and common sense, be a liability on your personal balance sheet.

Heck, if the banker told you this, you might think twice about becoming a 30-year employee of the bank while you are making your payments for the next 360 months.

Are all bankers and mortgage brokers bad people? Naw, only 95% of them. When you go to borrow money for your next mortgage, my best advice is Good Luck, and God Speed. I certainly hope you educate yourself enough to realize that dealing with the 5% will save you a ton of money and grief over the next 30 years.

October 28, 2006

Copyright © 2006 Ed Bagley

While there are predators all around us, we generally do not think of our financial providers as predators. Typical providers we might use include banks, financial centers (the fancy name some banks call themselves today), credit unions, mortgage brokers, and mortgage bankers to name a few.

With thousands of people going online and starting home-based Internet Marketing businesses daily, many quickly develop a need for more capital to build their new part-time, second-income enterprise. Some inexperienced newcomers fail to budget properly and soon find themselves in over their head.

Their next likely stop is to find a lender. I was stunned yesterday to get in my post office box one of those new, fancy, 6-by-9-inch oversized postcards with this screaming headline on the slicked up front side: Get $5,000 by tomorrow!

If I did not know better, I would have thought I was reading one of the exaggerated opportunities that pops up on my monitor every day, you know, the one that says "Join Us Now And Collect Your $2,000,000" from "one of the world's most rewarding financial associations." Yeah, right. I could use an extra $2 million, and if I read through the entire sales pitch, I would probably find out that I really had to do very little to get it.

Sometimes it is easier to relate to the $5,000 you can get tomorrow (yes, you read right, tomorrow). You see, the lender in this case does not want a lot of legal paperwork and collateral to hold you up. Heck, they just need your signature!

This presents a wonderful opportunity to play Donald Trump. There was a time when The Donald could borrow millions by just signing his name on a dotted line.  Sure, the $5,000 lender, called CashCall out of Fountain Valley, California, presumably does a credit check and, even if you rent or your credit is not perfect, the $5,000 will be in your bank account tomorrow (this delivery process is commonly known among the financial community and those who borrow such sums in such ways as a bank wire transfer). And, of course, your immediate money problems are solved! Viola! (as the French would say).

Turns out the source of the money received actually comes from First Bank & Trust of Milbank, South Dakota, a member of the FDIC, mind you (this important fact is used to apparently inspire confidence in the lender which is probably in good standing with your federal government as FDIC does stand for the Federal Deposit Insurance Corporation, an independent agency of your federal government).

Words cannot express how choked up I am with compassion over the fact that a bank would lend someone $5,000 on their signature only, and deliver the money into their account the next day. Some banks are just too wonderful for words.

A lot of folks would be overjoyed at the bank's generosity and understanding in their time of need. Then again, those same folks probably would be too excited about solving their "problems" to read the fine print in the same offer.

Did I just say fine print? Yes I did. That is the really small type on the bottom of the back of the life-saving postcard that has the catchy headline (get $5,000 by tomorrow!), and the prominent picture of ten $100 bills on the front, that says:

"Example of loan terms: The Annual Percentage Rate (APR) for a $5,075 loan is 59.90%, with 84 payments of $254.03." This is what I call a 7-year, fixed-rate loan that will bring the lender $21,338 in return. So, here is the deal: You get a $5,000 loan and the privilege of repaying the $5,000 you borrow plus another $16,338 in interest.

It caused me to wonder if they sell asbestos suits in Milbank, South Dakota, surmising that some folks may develop a need for them, depending, of course, on where they might be going.

The next time your lender is being so nice to you, remember the message of this postcard, and ask yourself, "Why is this lender (or banker) being so nice to me?" The answer, dear friend, is not that he or she has your best interest at heart.

Why should I even give this seemingly obscure offer even two cents of my time? Only to make this point: Since when is helping a financially desperate person made better by driving them deeper into debt, and then leaving them as ignorant as you found them?

H. L. Mencken (1880-1956), who became a U. S. journalist and literary and social critic, once said "You can never underestimate the stupidity of the American people."  Man, was he right.

August 14, 2007

Almost All Are Irresponsible

Mortgage Lenders Act Like Your Friend in Need, But Seek to Line Their Pockets at Your Expense

Copyright © 2007 Ed Bagley

A client of mine received a "Smart Watch Report" from her mortgage lender the other day, and asked me to evaluate it for her.

The report was really an invitation to refinance her current mortgage loan and use her equity interest to either get cash now or sell her home and use the equity to buy a new home.

She made her original 30-year fixed rate loan for $142,000 at 5.5% interest a little more than two years ago. Her principal and interest monthly payment is $806. She has her property taxes and home insurance rolled into the loan, making her actual monthly payment $1,014, or $208 more.

Her appraisal at the time of the loan was $200,000 and her mortgage lender set the estimated current value at $253,000, giving her an estimated equity of $114,000+. Her principal owing at the time was $139,000+.

This is what I quickly observed:

1) She needed to buy a new home like she needed another hole in her head, and I told her so. Since she has a fixed income, buying a newer, better home would simply increase her debt and make it more difficult to service the increased debt.

2) While she could refinance her 30-year fixed rate to a 15-year fixed rate loan and save $55,000 over the life of the loan, it would increase her monthly payment for principal and interest to $1,193, an increase of $387 over her current $806 monthly payment.

Rolling her property taxes and home insurance into the 15-year loan would bring her new actual payment to $1,401, again an increase of $387 over her current monthly payment of $1,014.

3) The first offer her mortgage lender made was to do a "cash out " refinance wherein she could get her hands on $89,000+ in cash to fritter away on a new car, vacations and whatever else she did not need. This would be an incredibly dumb move for her to make, and I said so.

To do this her mortgage lender suggested she enter into a new 30-year fixed rate loan at 6.750%, a full 1.25% greater than her current loan. Her APR (annual percentage rate) would be 6.980%, or almost 7%.

Her new payment for principal and interest would be $1,477, or an increase of $671 over her current $806 monthly payment for principal and interest.

Rolling her property taxes and home insurance into the new 30-year loan would bring her new payment to $1,685, again an increase of $671 over her current monthly payment of $1,014.

Should my client take the lure of getting her hot hands on an extra $89,000+ in cash she would pay dearly for a really stupid financial decision.

The mortgage lender that suggested this option in their "Smart Watch Report" could really care less whether my client went into more debt and may not be able to meet the new obligations should she take the "cash out" refinance.

The mortgage lender could not care less if my client dropped dead. The lender still holds the paper on the property (they own it until the current loan is paid off in full) and could easily sell the property to recover its original $142,000 investment while still making a huge profit in the process.

Is what the mortgage lender is offering my client a responsible thing to do? You decide. I fail to see how loaning my client more money at a higher interest rate and increasing her debt is helping her. It would in fact hurt her.

Borrowers do not understand that when they take out a 30-year fixed rate mortgage loan they become an employee of the company lending the money. Teasing the lender with a "cash out" offer that could easily drive them into bankruptcy is hardly a responsible act by any lender, much less a leader in the marketplace.

This is the point and purpose of writing this article and posting it on the Internet: Since when is helping a financially desperate person—or any borrower for that matter—made better by driving them deeper into debt, leaving them as ignorant as you found them, and lining your pockets at their expense?

Thought You Might Like to Know

May 24, 2009

Never Underestimate How Much Credit Card Reformers Will Accept for a Vote

Copyright © 2009 Ed Bagley

When I moved from the East Coast to the West Coast in 1973, credit card companies doing business in the State of Washington could not legally charge more than 12% interest on an account. That was because credit card interest rates were subject to the usury limits of the State of Washington; that was the law in every state.

In 1979, the U. S. Supreme Court justices that represented you and me ruled that the state of the lender, not of the borrower, had the sole power to legislate interest rate limits.

South Dakota then eliminated any usury limits, hoping to draw more businesses to its state. The credit card companies flocked to South Dakota and immediately began to increase their interest rates to what have now become unconscionable levels. Federal credit unions are currently limited to charging a maximum of 18% interest, but banks can charge whatever the market will bear.

Many banks currently charge 30% interest for certain accounts, and virtually all banks have default rates that soar to 30% when cardholders use their line of credit and then overcharge their limit, make a late payment, or miss their monthly payment. Credit card providers also have steep fines for any misstep a consumer may commit.

While no one is forcing consumers to apply for and use credit cards, credit card companies have routinely and willfully taken advantage of any consumer misfortune, such as losing their job or being hit with exorbitant hospital bills, to inflate interest rates.

The average credit card balance of many Americans is $13,000, either on one card or several cards. A 30% interest rate means the consumer has to pay more than $300 a month in interest alone without reducing the underlying $13,000 principal balance by a single cent.

The idea is to put consumers into a position where they have a legal obligation for the rest of their natural lives that they cannot possibly bring to a zero balance even if they stop using their credit card(s) and pay the interest only.

The recent legislation to help curb these abuses sounds better than it is. Yes, there are some restrictions but here is what the bill does not do:

It does not cap interest rates on credit cards, it just slows down the time when the rates can be implemented. Companies will still be able to charge interest rates of 30%, 40%, 50% or 100%, whatever the market will bear.

It does not explicitly cap credit card fees. Are your surprised? Don't be.

It does not take effect immediately, giving credit providers in many cases 9 months to raise rates and fees on current accounts. Do you really think they will not do so?

It does not limit interchange fees charged to businesses for credit card processing; these fees are passed on to the consumer.

In other words, the bill does not attempt to restrict the most important issues, such as capping the interest rates and fees.

It also does not prevent issuers from finding new fees to boost revenue. Use your card to withdraw money at another bank's ATM machine, and your credit card provider as well as the bank in question charges a fee. Look for these fees to rise dramatically. So how ridiculous can this get? How about cameras that record if you even look at an ATM machine but do not use it, then you are charged a fee for just thinking about using the machine.

While some regulation of credit card provider abuse is welcome, this current bill is more smoke and mirrors than substantive legislation. Why? Heck, I thought you would never ask.

Here's why: Credit card providers spread a lot of money around to get a majority of your congressmen to craft a bill that was more favorable to the credit card company than the consumer. Some people call this lobbying; others call it a convenient pay-for-vote system that continues to enrich congressmen and credit card companies at your expense.

July 3, 2008

Editor's Note: The following security information comes from an attorney who had his identity stolen and credit cards misused in the process. My editorial comments in parenthesis follow the attorney's advice:

1) Do not sign the back of your credit cards. Instead, put 'PHOTO ID REQUIRED'. (This presumably would not reveal your signature, but would require you to present your photo identification every time you used your card).

2) When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the 'For' line. Instead, just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels will not have access to it.

(While this is a worthy procedure, many credit card payers include the billing invoice from the credit card company, which does have your complete card number showing bigger than life. Anyone stealing the transaction would have not only your check but also your card statement with the number showing. The credit card company could probably figure out who you are and apply the payment correctly, but not giving them your full number may delay the posting of the payment, causing you to incur a late payment penalty.)

3) Put your work phone # on your checks instead of your home phone. If you have a PO Box use that instead of your home address. If you do not have a PO Box, use your work address. Never have your SS# printed on your checks. (DUH!). You can add it if it is necessary. But if you have it printed, anyone can get it. (I agree. I would not even put my work number on my checks.)

4) Place the contents of your wallet on a photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place. (This is excellent advice.)

I also carry a photocopy of my passport when I travel either here or abroad. We have all heard horror stories about fraud that is committed on us in stealing a name, address, social security number, credit cards.

Unfortunately I, an attorney, have first hand knowledge because my wallet was stolen last month. Within a week, the thieves ordered an expensive monthly cell phone package, applied for a VISA credit card, had a credit line approved to buy a Gateway computer, received a PIN number from DMV to change my driving record information online, and more.

But here is some critical information to limit the damage in case this happens to you or someone you know:

5) We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them. (Excellent advice.)

6) File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation, if there ever is one. (Excellent advice.)

But here is what is perhaps most important of all, and I never even thought to do this:

7) Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and also call the social security fraud line number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the Internet in my name. (Excellent advice.)

The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.

By the time I was advised to do this, almost two weeks after the theft, all the damage had been done. There are records of all the credit checks initiated by the thieves' purchases, none of which I knew about before placing the alert. Since then, no additional damage has been done, and the thieves threw my wallet away this weekend—someone turned it in. It seems to have stopped them dead in their tracks.

Now, here are the numbers you always need to contact about your wallet, if it has been stolen:

1) Equifax: 1-800-525-6285

2) Experian (formerly TRW): 1-888-397-3742

3) Trans Union : 1-800-680 7289

4) Social Security Administration (fraud line): 1-800-269-0271

Read my articles on Borrowing and Credit Card Companies, including:

"Your Credit Score – How It Can Cost You Thousands More on Your Mortgage – Part 1"

"Six Actions You Can Take to Improve Your Contract Terms – Part 2"

"FICO Plans to Eliminate Authorized Credit Card User Accounts – Part 3"

"Financial Predators: Vermin, Rodents and Other Insect Pests"

December 10, 2007

They Lie, Cheat and Steal

The Biggest Scam in the Credit Reporting Industry Screams Deception and Greed

Copyright © 2007 Ed Bagley

What is it with some big corporations in America today? Too many of them lull you to sleep and then rip you off while acting like this is business as usual and acceptable. The latest example comes from the three big credit reporting bureaus—TransUnion, Experian and Equifax.

These three credit reporting bureaus are involved in a fight to wrest the credit scoring business away from FICO (Fair Isaac), which for years has been the leader in the marketplace.

The industry changed dramatically in 2003 when the Fair and Accurate Credit Transactions Act required the three major credit reporting bureaus to supply each consumer with one free credit report annually.

For decades the major bureaus had denied consumers access to their credit histories, selling the data exclusively to lenders. Since then the bureaus have moved aggressively to tap the consumer market.

The result has been very profitable as domestic sales of credit data to consumers created $220 million in revenue in 2003, more than doubled to $448 million in 2006 and is projected to top $860 million by 2010, according to market researchers.

Basically, the credit reporting bureaus have generated this income by appearing to give away a free credit report when in fact they are doing no such thing. They are luring consumers to several web sites claiming to give away a free credit report but only do so if you agree to buy one of their lame services, such as credit monitoring.

Worse yet, the scores you get from two of the top three bureaus are not FICO scores at all, but rather scores concocted by two of the bureaus in question: TransUnion and Experian. These scores are generally higher than the actual FICO score, giving consumers a false idea of their true score when lenders use the actual FICO score to make lending decisions.

This amounts to not just deception on the part of the bureaus in question, but dishonesty as well, in other words, they lie, cheat and steal and get away with it under the guise of "creative marketing", which is better described as "creatively screwing the consumer out of his or her money by misrepresenting what they are actually getting for free".

In this process, the bureaus are not serving consumers honestly. There is not a shred of integrity in this process and the credit reporting bureaus know it; they do it because they can legally do it even though it does not represent how business should be conducted.

Rather than actually helping and serving consumers in a straightforward transaction, they choose to line their pockets at the consumer's expense.

America became the most prosperous nation on the face of the earth by major corporations actually serving consumers, being fair and honest in their dealings by giving consumers more value for their purchase, and actually building a reputation of being trustworthy.

Those days are long over. Too many major corporations today are raising lying, cheating and stealing to an art form and then launching their "creative marketing" plans in a fit of righteousness. They deserve my absolute contempt, and should deserve the absolute contempt of consumers in every corner of this country.

Consumers who are taken in by their corporate greed are being misused, and frankly too many of them do not realize what a lower life form they are doing business with.

Here are some facts that you should know:

1) The one and only place you can get your free credit report annually is at:
AnnualCreditReport.com

Even at AnnualCreditReport.com you will not get your FICO scores from all of the major credit reporting bureaus. You will typically get your credit reports from the three bureaus and only one of your credit scores. You will have to buy your credit scores from the other two, and even then you may not be getting your actual FICO score which virtually all lenders use in decision-making.

Dozens of these "dummy" sites affiliated with the bureaus falsely imply that they can also distribute the government-mandated free reports. This is an absolute lie and why they are lying to consumers.

The plain truth is that the word "free" in business advertising in America is used so freely that it really has no meaning in the context of these kind of disingenuous offers by credit bureaus.

2) Any other URL that says they offer a free credit report is really a scam to relieve you of your hard-earned money. Both TransUnion and Experian are lousy with these dummy web sites and are taking advantage of the opportunity to line their pockets at the consumers expense.

3) The truth is that the only place you can get your actual FICO score is at Fair Isaac's consumer web site (myFICO.com), or at Equifax (Exquifax.com), which is the only credit reporting bureau that sells (not gives away free) FICO scores to consumers.

It is a sad commentary that in our day and time too many major corporations in America are terrible role models for anything and will do nothing to stop lining their pockets at the consumer's expense.

I am ashamed of the greedy, dishonest, disingenuous leaders of these companies. They should have to face their mother and family and explain how they failed to learn and practice some basic human traits, including honesty, integrity, trustworthiness and kindness.

This, of course, will not happen because in many cases their parents have left this place for a better one. That does not excuse their behavior or greed. What else are these so-called leaders doing in the dark of the night that we cannot see?

Editor's Note: Read my articles on Borrowing and Credit Card Companies, including "Financial Predators: Vermin, Rodents and Other Insect Pests", and my 3-part series on "Your Credit Score – How It Can Cost You Thousands More on Your Mortgage – Part 1; Six Actions You Can Take to Improve Your Contract Terms – Part 2; and FICO Plans to Eliminate Authorized Credit Card User Accounts – Part 3".

July 25, 2007

The Bane of the Borrower

Your Credit Score: How It Can Cost You Thousands More on Your Mortgage – Part 1

Copyright © 2007 Ed Bagley

A sharp rise in the delinquency of subprime mortgages has caused lenders to tighten up their standards and actually reject applications.

Should you attempt to refinance your present mortgage or seek a new mortgage, your credit score has become more critical to your loan approval.

Can it make a difference? Yes, it can make a significant difference in payment.

Fair Isaac, an acronym for Fair Isaac Company which is the most recognized authority in determining your personal credit score, gives this example of how your credit score can affect your monthly payments based on a 30-year fixed-rate mortgage for a $300,000 home loan:

FICO Score        Interest Rate         Monthly Payment

760 to 850         6.298%                 $1,857

700 to 759         6.520%                 $1,900

660 to 699         6.804%                 $1,957

620 to 659         7.614%                 $2,121

580 to 619         8.932%                 $2,399

The difference between the best rating and the worst rating increases your monthly payment by $542, you pay $2,399 rather than $1,857.

A credit score is a mathematical model that analyzes information in your credit report. Lenders use credit scores to gauge the likelihood that you will repay your debts.

So what determines your credit score? Payment history is 35%, the amount you owe is 30%, the length of credit history is 15%, new credit is 10% and the types of credit you are using is 10%.

You can obtain all three of your credit reports from Equifax, Experian and TransUnion at:

http://www.annualcreditreport.com

You are entitled to a free copy of your credit reports annually but will not receive your credit scores for free. You will be pitched to pay for the right to receive your credit scores from the agencies.

Many of the sales pitches for free credit reports at other web sites are no more than high pressure attempts to get you to pay for the report by subscribing to any number of services that you neither need nor want.

Should you type in http://www.freecreditreport.com, for example, you will be taken to an Experian web site that will give you a free credit report for their service only IF you are willing to be subscribed to a service they offer for $14.95 a month.

Experian invites you to "Join Over 20 Million Customers who have already checked their FREE Experian CREDIT REPORT."

Multiply $14.95 per 20 million per month and it adds up to $299 million in monthly revenue if the cardholders continue the service. Multiply $299 million in monthly revenue times 12 months and it adds up to $1.588 trillion in annual revenue for Experian.

There are two things very wrong with Experian's offer. First, and foremost, the credit report IS NOT FREE unless you subscribe to a service I would neither need nor want.

Experian's marketing formula for writing a sales pitch is hardly unique. Almost any marketer can open his or her e-mail tomorrow and read the same formula repeated in 100 different sales pitches for another opportunity to provide a product, service, or attend a seminar. The pitch will be in English, the language will be in doublespeak.

Second, the large headline above the button to get your report says "GET YOUR FREE CREDIT SCORE AND A WHOLE LOT MORE!" The inducement is misleading. It does not say get your free credit report, it says get your free credit score. You get your report and your credit score and some other services only by agreeing to sign up for the $14.95 a month service.

Someone eager to get their free report will hit the button for their free credit report and unwittingly subscribe to a service they neither need nor want. You must read the fine print on the page to know the difference.

This kind of inducement by Experian is hardly clear, straightforward, honest, ethical or anything else good; it is bad and wrong. The fact that advertisers can even do this legally is disturbing and obviously not regulated.

Do not, I repeat DO NOT, respond to any other online pitches for your free credit report other than http://www.annualcreditreport.com (this is the government-mandated site) or you may be ripped off by an industry that is neither helpful nor trustworthy.

Credit card reporting agencies are always giving poor, difficult customer service, making shyster offers and responding poorly when removing incorrect information from your credit report.

They are paid by businesses to only find and record any negative information about you. They could care less whether you drop dead on their front steps as long as they relieve you or your money first.

(Note: This is Part 1 of a 3-Part Series.)

Note: Read my 2-Part Series on "Why Lenders Are Not Your Friends" and "Financial Predators: Vermin, Rodents and Other Insect Pests" and "Shopping Online – Caveat Emptor (Latin for Let the Buyer Beware)" and "How Online Surveys Prey On New and Unaware Marketers". Find these articles and more in my Blog Archive.

July 26, 2007

The Bane of the Borrower

Your Credit Score: 6 Actions You Can Take To Improve Your Contract Terms – Part 2

Copyright © 2007 Ed Bagley

If any of these three agencies (Equifax, Experian and TransUnion) could "legally" lie, cheat and steal they would do it every day of the week and twice on Sunday.

All three agencies were forced to give out a free credit report to consumers annually; they did not do it willingly and never would have done it without being mandated to do so by the Federal Trade Commission (FTC).

Another example is that the top three credit reporting bureaus agreed to $2.5 million in payments (penalties) as part of settlements negotiated by the Federal Trade Commission to resolve charges that they (each and every one) violated provisions of the Fair Credit Reporting Act (FCRA) by failing to maintain a toll-free telephone number at which personnel are accessible to consumers during normal business hours.

In other words, the three top credit reporting agencies mentioned were too cheap to offer the toll-free line and better service on their own, and would not even continue to maintain the toll-free line system they were ordered to implement unless faced with prosecution by the Federal Trade Commission.

Pigs in the barnyard are more ethical, trustworthy and honest than the top three credit reporting bureaus. If it looks like a pig, walks like a pig, acts like a pig and smells like a pig, it is a swine.

These are businesses that either through their sloppy, inattentive reporting or accurate, quality reporting help determine your credit score which determines how much you will pay or not pay to fulfill your monthly mortgage contract.

Be advised that your credit score from each agency will likely vary because, whether recorded correctly or not, some lenders do not report information about borrowers to all three credit bureaus.

Here are 6 things you can do to stay abreast with your credit reports and credit scores:

1) Secure copies of your credit reports and credit scores annually, even if you have to pay to get credit scores from two of the agencies too cheap to give them to you.

2) Dispute errors that you find in the reports. The credit reporting agencies would not care if an error caused you great harm, and they would not (singly or collectively) notify you if they found an error that they knew would hurt your score.

They get paid by businesses for your report. You are nothing to them other than the fact that there would be no credit reporting business without you.

3) Pay off credit card balances as it is one of the factors used to determine your FICO score, which is your total debt relative to your available credit line, called "credit utilization".

4) Do not close unused accounts as closing these accounts reduces the amount of credit you have available. Cut up the card and do not use it but keep the account open as it can help your credit score.

5) Do not open new accounts as it could hurt rather than help your credit score even though by doing so you will increase your credit utilization.

6) Pay your bills on time because 35% of your credit score is determined by your credit payment history.

(Note: This is Part 2 of a 3-Part Series.)

July 27, 2007

The Bane of the Borrower

 Your Credit Score: FICO Plans to Eliminate Authorized Credit Card User Accounts – Part 3

Copyright © 2007 Ed Bagley

Do you realize that in our country you are penalized for practicing good money management habits? Think about it.

If you paid for your own college education and refused to fall into the credit card trap that uses lenders to purposely suck the financial life out of naïve students, you might graduate debt free and have no credit history.

When you want to buy a vehicle on credit or a home with a mortgage, you could not get a loan without a credit repayment history and a decent FICO credit score.

For years young adults with no credit history, limited credit history or blemished credit history have worked around the problem by having someone with good credit—usually a parent, spouse or good friend—added as an authorized user to their credit card.

Once the authorized user is added, his or her credit card payment history is added to the account, giving the original card holder a higher credit score and access to loans and better loan terms.

All of this is about to end as Fair Isaac (the developer of the FICO credit score) will create a new scoring formula to eliminate the authorized user tactic.

Fair Isaac is taking the action because it estimates that 30% of the 165 million consumers with credit cards have authorized users on their accounts.

Once the new system is implemented in mid-2008, millions of authorized users will see their credit scores decline or go into free fall. Authorized users with no credit history of their own will see their credit scores disappear. Those hurt the most may be young adults and married women.

Here are some tactics these two population groups can use to fight back:

1) If married and listed on your spouse's account apply for a credit card in your own name.

2) Apply for a revolving credit card from a department store or other retailer as they are easier to get because they generally have lower credit limits and higher interest rates.

3) Apply for a secured credit card because you put money into an account in advance to cover your card transactions. If you default on your payment, the lender debits your account to cover the payment.

Sometimes secured credit cards become unsecured credit cards when you pay timely over a period of time. In some cases, you may even get back the initial deposit in the secured account plus interest.

4) Try to keep your balance below 30% of your available credit as this credit utilization will improve your credit score.

You can research fees and other features of credit cards at

http://www.bankrate.com

(Note: This is the last of a 3-Part Series.)

February 14, 2007

Cash Is King in America

If You Are Looking for Leeches, Skip the Pond, Go to Your Credit Card Company

Copyright © 2007 Ed Bagley

Two seemingly unrelated stories caught my attention yesterday. One was about corporations stockpiling cash and the other was about consumer savings rates.

Some American corporations really know how to sock it away.

ExxonMobil ended its 2006 first quarter with $36.5 billion (not million, but billion) cash in hand, according to USA Today, giving the world's No. 1 oil company more cash than any company in the USA.

Could you even imagine having $36.5 billion in your savings or retirement account? That is a lot of moolah, or serious money for people in the know.

Microsoft was close behind with $34.8 billion in cash. Microsoft's savings were even more significant when you remember that Microsoft paid a $32 billion one-time dividend in 2004 after starting an annual dividend program in 2003.

Johnson & Johnson was a distant third with $17.2 billion, but even $17.2 billion is a staggering figure.

Industrial companies in the Standard & Poor's 500 had stuffed their corporate piggy banks with $642.7 billion by June of 2006. Imagine just the interest a company generates on its retained earnings. ExxonMobil earned $946 million in 2005.

The savings rates of consumers are just the opposite.

In 2005 personal savings rates of consumers moved into negative territory for the first time according to the U. S. Commerce Department.

That means consumers not only spent all of their after-tax income but dipped into existing savings or borrowed money, often with credit cards (the scourge of modern American finance) to cover their spending.

This is a fact that I learned from QSR, which is a trade magazine that covers the restaurant and fast food industry. QRS follows consumer spendable income.

By law other monies evaporate from retirement savings accounts through forced distributions. Your government loves to keep consumers spending so the economy grows, and it could care less whether retirees actually need to withdraw their retirement funds early.

Your government cannot keep its nose out of your business, or its hand out of your pocket.

Credit card companies did very well during this period. CBS reported that in 2004 credit card companies collected $14 billion in penalty charges and other fees, accounting for nearly half of the industry's $33 billion in profits.

You remember credit card companies. They are the leeches who loan you money when you do not deserve it and then bleed you dry until you cannot stand up straight or pay your monthly bill on time.

Then comes the over limit fee, the late fee and the interest on the remaining balance, all of which is calculated to send you to the poor house faster than a merchant can swipe your credit card for a purchase.

I call credit card companies leeches not to be clever but to be accurate.

A leech is really a worm, many of which are bloodsucking parasites, especially of vertebrates, which include mammals, which include humans. And if you think credit card companies do not suck the lifeblood out of you financially, then you will be forever enshrined as their friend in need of being snookered.

You have no need to go looking for leeches at your local pond, most Americans are carrying eight credit cards around with them every day. The average American family has 8 credit cards according to a 2004 report by FRONTLINE (a PBS-funded web site) and the New York Times newspaper.

Here are a few facts you should know about credit cards:

1) Nearly 144 million Americans have a Visa, MasterCard, American Express or Discover credit card.

2) 38% of those credit card users pay their bill in full monthly.

3) 24% pay only the minimum payment monthly. Do you understand that only one credit card with an outstanding balance of $10,000 at 18% interest takes 40 years (yes, 40 years) to pay off if you make only the minimum payment of 2% per month? And that is even if you charged nothing else on the card for 40 years.

4) The average American family carries a credit card debt of roughly $8,000.

5) Did you know that a credit card issuer (generally banks) can raise your APR (annual percentage rate) automatically for any of the following reasons: You went over your credit limit on another card, you failed to make a payment to another creditor, or you applied for and received a loan, including a mortgage loan for a house, a car loan or a student loan. I am not making this up and some of you readers know this.

6) Did you know that there are no legal limits on the amount of interest and fees that banks can charge for a credit card because two U. S. Supreme Court decisions permit banks to charge what the market will bear.

This means a credit card issuer could charge you 100% interest, I,000% interest or 100,000% interest. Wipe that mocking smile off of your face and smarten up.

Your U. S. Supreme Court was not thinking of you when they allowed banks no legal limits on the amount of interest and fees they could charge. I suspect some of those highly educated justices own stock in credit card companies, and even if they do not, they should be ashamed to call themselves justices at any level.

That is why Citibank, the issuer of MasterCard and one of America's banking giants with its tentacles reaching into every financial area, moved to South Dakota which has no cap on interest rates.

Usually credit card issuers move to South Dakota or Delaware because they are states with weak or no "usury laws" which regulate interest rates.

So what does all of this have to do with the price of tea in China? Let us draw a picture for those who cannot connect the dots.

American corporations are doing well at the moment and stockpiling money while the consumers that feed them profits are saving zero dollars and paying high interest rates.

These high rates are charged not only by credit card issuers but by predatory lenders who prey on those most in need who have not done a good job of handling their finances.

To think that your U. S. Supreme Court allows these kinds of practices to continue is pathetic. It is neither just nor reasonable. It is downright cruel and unnecessary and should stop.

I know this article is not flashy and will probably get little attention from consumers who continue to act as if banks are their best friends.

H. L. Mencken figured it out a long time ago when he said "You can never underestimate the stupidity of the American people." He said it, not me, but I agree with him in regard to the 24% of credit card users who pay only the minimum monthly payment.

July 12, 2007

The Impulse Buying Phenomenon

American Consumers Are Short on Discipline When it Comes to Parting With Their Income

Copyright © 2007 Ed Bagley

Like a 4-year-old child at the checkout counter in a supermarket, American consumers want just one more impulse buy to make their buying day complete, and apparently the more expensive it is, the better.

Here is an example: A 68-year-old, semi-retired businessman shells out $600,000 for a recreational vehicle which costs about $550 to top off at the pump. He and his wife are tooling around the country in an effort to have fun while they can.

His comment on the decision is that "This isn't a dress rehearsal for life—this is it. We're curtailing nothing." Those big tears you see following his comment might well come from any children who see their inheritance fading away into the sunset with dad and mom.

Like a dog in heat, if we have it we tend to spend it in America.

All of this impulse buying is detailed in a recent USA Today article with this headline: "Spending is hotter than the 4th of July". And indeed it apparently is.

Although the median amount of credit-card debt carried by the typical American is about $6,600 (this is not a typo), 13% of respondents in a recent online poll reported balances higher than $25,000, according to CardTrack.com.

"Never have Americans, who have always liked their toys, been faced with a situation where their impulses are so hard to control," says Stuart Vyse, a professor of psychology and author of the upcoming book Going Broke: Why Americans Can't Hold on to Their Money.

The fact is that we as consumers can buy almost anything we want anytime we want on the easiest terms we want. Sellers and lenders have no compunctions about selling us what we do not need at a price we cannot afford and at a rate of payment that can eventually drive us into bankruptcy.

Sellers and lenders, especially credit card lenders, have raised this willingness to line their pockets at our expense to an art form. And yes, I understand and agree with the observation that we all need to be responsible for our actions.

What I do disagree with is this: How can doing the right thing with right thinking and right motives justify lending consumers money and credit when they do not deserve it, and then leaving them no smarter but broker and deeper in debt in the process?

All of this unmerited lending is creating and concentrating wealth among America's very rich, and the rich club in America is growing faster and farther away from America's poor and middle classes.

"For the first time in history, more than half of all earned income, specifically 50.4%, is going to 20% of the U. S. population, which amounts to $3.5 trillion in the hands of 23 million households," says Peter Francese, a demographic trends analyst for ad and marketing giant Ogilvy & Mather.

So more than half of the earned income in America is going to 20% of the population, leaving the other half to 80% of the working stiffs that are left to continue buying things they do not need at prices they cannot afford on credit.

A key component of this impulse spending happens because too many Americans think they can afford it when they cannot.

Families are less frugal today, in part because only 25% of households have married couples with children, a significant drop from 50% in 1960 and the lowest percentage in census history. We have a census procedure in this country to learn these kinds of sociological shifts.

There are more working couples without children who have more disposable income and keep spending rather than realizing their good fortune and saving. Leading the spending spree are the seniors mentioned at the beginning of this article.

Seniors have so much spendable income that a Luxury Marketing Council has been created to advise top brands on consumer trends for a growing group of seniors that have at least $1 million in liquid assets. They do not need to sell their home to buy a $125,000 Maserati, they simply write a check out of one of their accounts.

I personally would not encourage this kind of spending among any consumers, and especially on an automobile which is a decreasing asset. If you cannot control your impulse to buy, at least buy land or developed properties that might well appreciate over time.

The USA Today article carried information by Pitney Bowes MapInfo which identified the Top 20 Counties nationwide with the highest average expenditures annually per household. Here are the Top 7:

1) Marin, CA - $68,782

2) Fairfield, CT - $65,263

3) Fairfax, VA - $63,569

4) San Mateo, CA - $63,229

5) Morris, NJ - $62,995

6) Somerset, NJ - $62,345

7) Westchester, NY - $61,425

I identify these counties as "high rent districts" which are too expensive for most people to buy a home. One thing is for sure, if you do not make some major money, you are not going to be able to keep up with those earners who can.

Not all of us suffer from this apparent impulse to buy.

The answer to impulse control just might be in yoga. Yoga taught me "impulse control", the ability to feel an urge and delay acting on it. Yoga also taught me that when stability becomes a habit, maturity and clarity follow.

While earning money has a way of increasing financial intelligence quickly, I learned a long time ago that a fool and his money are some parted.

I will keep the $125,000 and you can have the Maserati. I will keep the $600,000 and you can have the recreational vehicle. Eventually, cash is king; the car and the recreational vehicle will eventually end up in the junkyard with a lot of other impulse purchases.

By Martha M. Hamilton

March 28, 2007

Exactly Who Is Profiting?

Imagine Getting Sick, Having Medical Insurance and Going Broke Anyway

Copyright © 2007 Ed Bagley

When I had some pains in my chest my internist decided I should have a stress test. It sounded like a good idea to me. I enjoy living and am not the least bit interested in the alternative.

This was more than an ordinary stress test like running on a treadmill. I was walking quickly on an elevated treadmill while undergoing some nuclear profusion imaging to reconstruct tomographic SPECT images.

Apparently the shots they gave me lit me up inside so the physician and nuclear technician could see how I was reacting to the stress.

While I am probably leaving something important out and do not understand the technical terms involved, I was readily able to recognize the cost of the procedure. Try $2,485. All of this took about 4 hours and the physician was involved for all of probably 20 minutes.

I had insurance but still will end up paying $593. My insurance company will pay $813. It is not difficult for me to understand why people wonder if they have medical insurance or not.

An article in USA Today on March 22 had this headline: Even the insured have trouble paying bills.

Well, duh. I would hardly be exaggerating if I suggested that medical insurance coverage in America is totally out of control.

We have millions of citizens working without any medical insurance, others are paying through the nose for coverage they do have, we have millions of children without any medical coverage whatsoever, and very few of us seem to be getting our medical obligations paid with our insurance in force.

Businesses and organizations keep reducing our medical coverage to lower their premiums, and the insurance providers keep reducing our benefits and raising our deductibles and co-pays for office visits and prescription drugs.

Workers and consumers are getting it from both sides while health care providers and insurance providers claim each is gouging the other. It makes you wonder who is really profiting.

A fleet of 400-dollar-an-hour attorneys with 17 months of legal investigation could not figure it out in their most sober effort, nor would they want to as the pay is too good.

To say no one is really profiting is nonsense as medical costs have routinely exceeded the increase in inflation during recent years.

In the USA Today article, a senior policy analyst says "Shifting more costs onto patients has significant health access and financial consequences."

Well duh. Trust me when I say it does not take a senior policy analyst to tell consumers they are getting the short end of the stick as well as paying more for less medical coverage and less medical service.

Someone far brighter than a senior policy analyst needs to figure out how health care coverage in American can be less expensive and more effective.

Things are so bad you cannot even get detail on your bill, and even if you did it is so poorly explained that you cannot understand the charges.

It is like insurance companies lying, cheating and stealing in their policies with consumers, getting caught, paying multi-million dollar fines for their indiscretions, and then acting like it is no big deal when these major corporations are actually common criminals that are never prosecuted.

Is it possible that a nation that has produced so many great thinkers cannot come up with one great thinker that can see through this health care maze and produce a positive plan that benefits the few moneymakers enough to benefit all of us who need more affordable coverage?

January 12, 2010

The Print Assault Continues

Irish Professor Claims Newspapers Are in Peril as Trends Change in the Age of New Media

(Ed's note: The plight of newspapers that are diminishing in importance reaches across the pond from the United States to Ireland. Here is an insightful piece by Roy Greenslade that appeared in The Irish Times. Greenslade is a Professor of Journalism at City University London. I have changed the British spellings of words to our spellings here in the United States.)

By Roy Greenslade

To imagine the media future, it is important to take you on a trip into the media past and remind you of the media present. I plan to guide you on a journey to 2020, to what I will call the post-media age, but I need to set the scene with history and context.

News traveled slowly for centuries, going only as fast as human messengers could travel, whether by foot, horse or ship. It also tended to be specific—from individual to individual—and controlled. The people received only the news the authorities, church or monarch, deemed fit to release.

That changed in various European countries from the mid-17th century with the foundation of newspapers. Though they had a long struggle to secure the freedom to publish, they did impart "unauthorized" knowledge.

Editors, however, were dependent for their material on relatively slow, if exotic, communication systems.

In the autumn of 1845, for instance, a young man called Paul Julius Reuter used carrier pigeons to convey the stock market news from Paris to Berlin because they were swifter than the available train.

Some six years later, with the development of telegraphy, the man now renowned for starting the Reuters news agency made the birds redundant. News was now on the move through electrical wires. Some 25 years afterwards, the first telephones were in use, though international networks took an age to develop.

By 1935 reporters were beginning to use telex machines and they enjoyed a long life. I recall that as recently as 1986, I was still receiving telexed copy from Sunday Times foreign correspondents.

Just before the dawn of the 20th century, wireless telegraphy (aka radio) arrived. Then, within 40 years, came television. In diverse ways, newspapers, TV and radio spawned all manner of innovations that increased the range and speed of news transmission.

At each stage of technological progress, not only did the quantity of news increase but also the style of presentation. Moving pictures, quite obviously, made a huge difference.

Then came the personal computer and, in 1991, the foundation of the global system of interconnected computer networks we know as the Internet. Hard on its heels came the mobile phone, a device that allowed people to talk and send messages from wherever and whenever they fancied.

The digital revolution was under way and within the last decade it has transformed the way people across the world communicate, especially with the spread of ever-faster broadband speeds. It has enabled millions to publish their words, pictures and films without needing to beg for permission from traditional mainstream media moguls or state bureaucrats.

The net has created a new media hierarchy headed by a range of brands—Microsoft, Apple, Google, Yahoo and Amazon—that have either generated profits on a scale the great giants of the industrial revolution could never have imagined or secured audiences that promise a golden future.

The names of social networking web sites, such as Facebook, MySpace, Bebo and Twitter, are known to millions of people on every continent. Young people use these sites as naturally as they walk and talk. They upload photographs to Flickr. They upload videos to YouTube. They seek information from Wikipedia. They strike bargains on eBay.

In Britain, people routinely watch television programs online by using the BBC’s iPlayer service.

RTÉ’s web site is offering a similar kind of "catch-up TV". In the United States, Hulu allows people to see major shows from TV networks to be screened online. Whatever is shown on a computer can also appear on increasingly sophisticated mobile phones too.

Nor should we forget the new, improved generation of e-readers either. Scores of books and copies of daily newspapers can be downloaded on to devices slimmer than a paperback. They are catching on fast.

The net has not eradicated old media but it has certainly hollowed out the profits of newspapers and commercial TV and radio outlets by attracting the advertisers who funded their content. Some companies have gone to the wall, though the wiser, and more financially stable, have sought to cuddle up to the new media, trying to find an accommodation that will allow them to continue in some form, to go on turning a profit.

Did I say wiser? Well, let us get that in perspective. I am referring in most cases to short-term commercial wisdom. Their chances of survival to 2020 look slim because the digital revolution has a good way to run yet. Even those who regard themselves as digital revolutionaries have no clear idea what is around the corner.

Could anyone in 2004 have forecast that by the following year a site set up merely to receive video clips from all and sundry would become one of the most accessed sites on the web? That is YouTube.

Even so, I have a dream of the future, a dream that I also realize could just as well turn into a nightmare. Let me share the sweet dream with you first.

There may not be as many newspapers, but there will be plenty of journalism. It will have assumed a new form in which, to use Jay Rosen’s unmatchable phrase, "the people formerly known as the audience" will play a key role in the gathering and transmission of news events.

They will surely do this on a local or, to use another fashionable buzzword, hyperlocal, basis. Their work will appear largely online, on sites that are unlikely to be connected to the major publishing chains that have ruled the news roost in the United States and Britain for so long.

A similar change will be wrought at the national level. There will be fewer print titles, though online audiences previously attracted by the strength of a brand name will ensure its survival. But there will be much fewer journalists in full-time employment.

It does not mean the elimination of professional journalism, by which I mean people paid to carry out daily journalistic work in order to hold power to account, which is the prime task of our trade. Simple economic reality will ensure that news outlets—whether they are publishing brands that exist today or small start-ups—will not host large staffs on the old newspaper model.

These professional news "hubs" will work in concert with, for want of a better term, amateur journalists. Call it participation or collaboration or, to borrow a term coined by Alan Rusbridger, the editor of the Guardian, mutualisation. It is how news-gathering is already developing and, in 10 years that will have become the norm.

Start-ups will be common. Many young would-be journalists, especially those streaming out of university courses in the coming years, will have set up their own sites because jobs in old "big media" will have vanished. Entrepreneurial journalism will flourish, servicing niche interests. These may be as unspecific as generalized "investigative journalism" or narrowly focused, on travel, say, or the transport system or health.

Did I hear someone, Rupert Murdoch perhaps, ask a pertinent question about funding? Who will be paying for this collaborative journalism in 2020? I predict that we will have a mixed economy—advertising, subscription, micro-payments, sponsorship, philanthropy, donation, charity and a range of payments for add-on services formed around news hubs.

People will not pay to place classified ads, but large-scale advertisers will be drawn to support sites that achieve either high volumes of traffic or attract niche audiences. State funding is unlikely, though I imagine that the BBC’s and RTÉ’s license fee arrangements will still exist on a roughly similar basis as today.

Then again, the further fragmentation of TV audiences by 2020 will reduce the advertising take for broadcasters—in favor of online—which will be a threat to RTÉ unless it can renegotiate higher license fee income.

Online journalism will secure funding because, despite the current cynicism about the big media corporations that tend to dominate in every market across the world, collaborative journalism will give it a new credibility. Indeed, smaller outlets will have a greater chance of gaining public trust.

So there is a dream. A new news paradigm. An unmediated media emerges with a public service remit. It will not mean the termination of human interest journalism, of course. There will be plenty of celebrity sites to satisfy the appetites of those who seek tittle-tattle.

But let me also concede that the idealistic dream of a smaller scale journalism unfettered by commerce could turn into a nightmare. One undoubted advantage of big media is that it has the size to mobilize populations when wrong is done, especially by the state. Newspapers and broadcasters strive to keep governments honest.

Now consider a world in which the state, freed from scrutiny by powerful watchdogs, seeks to control content. China has devoted untold resources to seal off its population from net freedom. Even the technologically challenged states of Burma and Iran managed to block the web. In Britain, anti-terrorism legislation has the power to curb online freedoms.

Down the centuries, people have fought for the right to know more. It would be truly ironic if that struggle were to be halted in the face of history’s most liberating communications technology.

January 11, 2010 - 2nd Article

Guest Article

Here Are the Top 10 Media Blunders During 2009 for Your Consideration

(Ed's Note: Staff and Owners of the media try to get it right, but oftentimes cannot resist pushing it just a little to promote their own point-of-view and hopefully influence unaware readers and viewers, most of whom can smell a pile of stink a mile away. Read Michael Calderone's take from politico.com.)

By Michael Calderone

Upheaval in the media world continued in 2009, with 15,000 newspaper jobs lost, some glossy magazines killed and Washington bureaus either cut back or shuttered completely. And yet, online outlets sprouted—a few beefing up the ranks in D.C.—while more journalists embraced Twitter, blogs and platforms that don't require ink on paper.

While a number of this year's more noticeable media blunders occurred through simple carelessness, some could be also considered growing pains in adjusting to changes in the media, such as reporters jumping the gun on Twitter, experimenting in video, cutting-and-pasting text from a blog or getting caught when homemade video surfaces on YouTube.

Here Are the Top 10 Media Blunders

1) CNN Mistakes Coast Guard Drill for Attack. On Sept. 11, of all days, CNN blasted the following via Twitter: "BREAKING NEWS: Suspicious boat in river near Obama in DC. Police scanner reports of shots fired. Circumstances unclear." As it turns out: very unclear.

What the CNN reporter actually heard over the scanner were conversation about a training exercise taking place on the Potomac. But the false alarm spread quickly over Twitter, and the network quickly corrected the report on-air shortly thereafter. Still, the White House wasn't amused. Press secretary Robert Gibbs slapped CNN on the wrist, saying that "before we report things like this, checking would be good."

2) The Washington Post's "Salongate". It's understandable that newspapers are seeking new revenue streams, but the Post took things to another level this summer. The newspaper sent a flier to lobbyists and potential corporate backers promising an off-the-record, non-confrontational sit-down with editors and reporters in the home of publisher Katharine Weymouth. The price per salon: $25,000.

Shortly after the news broke of what smelled like a pay-to-play operation, the paper canceled the series. But the Post's top brass continued dealing with questions on how the salons were organized and promoted for months to come.

3) Fox's Tea Party Trifecta. Fox News had a banner ratings year, and throughout 2009, it gave extensive coverage of Obama administration opponents, especially the so-called tea party movement's events on April 15 and Sept. 12. But coverage of that latter event led to a couple of apologies later on.

Video surfaced of a Fox News producer rallying protesters for a live shot, while Sean Hannity mistakenly used the 9/12 footage in describing a smaller rally on Capitol Hill later in the fall. (Hannity owned up to the error, apologizing to of all people, Jon Stewart!). Ironically, Fox News had actually criticized other networks in a full page newspaper ad claiming they "miss[ed] the story" of the 9/12 rally.

4) ABC Correspondent Tweets Obama's OTR "Jackass" Swipe. While a tweet is at most 140 characters, one blasted to more than a million followers can ping-pong around the Internet within seconds. That's what happened when ABC correspondent Terry Moran tweeted some preliminary, off-the-record chatter between President Barack Obama and CNBC's John Harwood.

He wrote: "Pres. Obama just called Kanye West a 'jackass.'" Moran's apology for publishing the off-the-record banter didn't end the matter, as audio, and later video,
of the exchange made its way online. Harwood thought that Moran erred in tweeting the comment, but took things in stride, calling the ABC reporter "a class act and a good journalist."

5) MSM Misses Van Jones, ACORN Stories. The resignation of an environmental adviser in the White House may not be Watergate, but the Van Jones controversy –propelled by conservative blogs and right-wing talkers like Glenn Beck—showed the potential for partisan media to move the news cycle even as most mainstream outlets ignored the story.

Similarly, Andrew Breitbart's BigGovernment.com conducted an undercover investigation of ACORN that prompted follow-up in the press and calls for investigations from public officials. The New York Times, for one, took notice, with top editor Bill Keller even assigning an editor afterward to start monitoring the budding controversies in the opinion media.

6) NY Post's Obama/Chimp Cartoon. The New York tabloid thrives off attention-grabbing tabloid covers and some of the best headlines on the planet. But the paper can also go too far when it comes to attracting eyeballs, such as publishing a cartoon showing two police officers shooting a monkey, with the text reading: "They'll have to find someone else to write the next stimulus bill."

The cartoon immediately struck some as a racially motivated slight against the president and resulted in apologies from the paper and, a few days later, from the man on top: Rupert Murdoch.

7) Milbank-Cillizza Web Show Gets Pulled. The first-ever White House beer summit - remember that?—prompted a lot of jokes in the media. And Washington Post writers Dana Milbank and Chris Cillizza mocked the summit on their "Mouthpiece Theater" Web show, by coming up with what beers political leaders would likely drink.

Their suggestion for Secretary of State Hillary Clinton—"Mad Bitch beer"—did not go down well with bloggers, drew a rebuke from women's media groups and resulted in a great YouTube parody. Both Milbank and Cillizza apologized; Post executive editor Marcus Brauchli went a step further—he killed the video show.

8) Dowd Borrows from TPM (by way of "friend"). New York Times columnist Maureen Dowd is a Pulitzer Prize-winning writer. So the fact that she had borrowed a passage nearly verbatim from Talking Points Memo inevitably drew attention, and the reason she gave—that a "friend" had sent it to her—failed to end the mini-controversy.

While the Times corrected the column, the paper wouldn't answer whether it's accepted policy to allow columnists to use passages from others without any attribution. The episode was also a bit ironic considering that Dowd was the one who reported on Joe Biden plagiarizing a British politician just over two decades earlier.

9) Olbermann, Maddow Misquote Murdoch and Limbaugh. It's not always easy to admit you're wrong—but it must sting a bit more when you have to apologize to ideological foes in the process. MSNBC's Keith Olbermann had to issue a correction over comments he attributed to Murdoch, a frequent target on "Countdown."

Olbermann had quoted Murdoch as saying that News Corp. has "never been a company that tolerates facts"—actually, he said "fat." Later in the year, Rachel Maddow acknowledged having falsely attributed a quote to Rush Limbaugh about wishing to honor Martin Luther King Jr.'s assassin—that's something the top radio host never said.

10) WaPo's Public Enemy Correction Goes Viral. Craig Silverman, of RegretTheError.com, called it the "the correction that launched a thousand tweets." And he's right. Last month, the Post noted that an "article in the District edition of Local Living incorrectly said a Public Enemy song declared 9/11 a joke. The song refers to 911, the emergency phone number."

It was a simple mistake that occurred in the editing process, but the correction somehow hit the sweet spot in media and pop culture and led to imitators on Twitter offering their own faux Post corrections in a chain that followed long after the correction was made.

Dishonorable mention: And My Bggest Blunder of 2009? Another example of how one line quickly posted on a blog can reverberate the wrong way. When Louisiana Gov. Bobby Jindal walked out to respond to Obama's speech before Congress in February, someone on MSNBC uttered "Oh God." I blogged that it was Olbermann, before listening again and writing a few minutes later that who said it was unclear (Indeed, it was actually Chris Matthews.). It landed me on Olbermann's "world's worst person" list the following night. After explaining the mistake in a subsequent blog post, there was redemption – I was on the next night's "best persons" list.

January 11, 2010

Guest Artricle

An Interesting Take on Why Some Readers Today Prefer the Internet Over Reading Newspapers

(Ed's Note: Michael Kinsley is a columnist for The Atlantic magazine, which first published this guest article.)

By Michael Kinsley

One reason seekers of news are abandoning print newspapers for the Internet has nothing directly to do with technology. It's that newspaper articles are too long. On the Internet, news articles get to the point.

Newspaper writing, by contrast, is encrusted with conventions that don't add to your understanding of the news. Newspaper writers are not to blame. These conventions are traditional, even mandatory.

Take, for example, the lead story in The New York Times on Sunday, November 8, 2009, headlined "Sweeping Health Care Plan Passes House." There is nothing special about this article. November 8 is just the day I happened to need an example for this column. And there it was. The 1,456-word report begins:

Handing President Obama a hard-fought victory, the House narrowly approved a sweeping overhaul of the nation's health care system on Saturday night, advancing legislation that Democrats said could stand as their defining social policy achievement.

Fewer than half the words in this opening sentence are devoted to saying what happened. If someone saw you reading the paper and asked, "So what's going on?" you would not likely begin by saying that President Obama had won a hard-fought victory.

You would say, "The House passed health-care reform last night." And maybe, "It was a close vote." And just possibly, "There was a kerfuffle about abortion." You would not likely refer to "a sweeping overhaul of the nation's health care system," as if your friend was unaware that health-care reform was going on. Nor would you feel the need to
inform your friend first thing that unnamed Democrats were bragging about what a big deal this is-an unsurprising development if ever there was one.

Once upon a time, this unnecessary stuff was considered an advance over dry news reporting: don't just tell the story; tell the reader what it means. But providing "context" as it was known, has become an invitation to hype.

In this case, it's the lowest form of hype—it's horse-race hype--which actually diminishes a story rather than enhancing it. Surely if this event is such a big, big deal—"sweeping" and "defining" its way into our awareness—then its effect on the next election is one of the less important things about it.

There's an old joke about the provincial newspaper that reports a nuclear attack on the nation's largest city under the headline "Local Man Dies in NY Nuclear Holocaust."

Something similar happens at the national level, where everything is filtered through politics. ("In what was widely seen as a setback for Democrats just a year before the midterm elections, nuclear bombs yesterday obliterated seven states, five of which voted for President Obama in the last election.")

It could be worse. Here is The Washington Post's lead on the same health-care story:

Hours after President Obama exhorted Democratic lawmakers to "answer the call of history," the House hit an unprecedented milestone on the path to health-care reform, approving a trillion-dollar package late Saturday that seeks to overhaul private insurance practices and guarantee comprehensive and affordable coverage to almost every American.

Give The Post points for at least attempting to say what the bill does, but take them away again for the bungled milestone metaphor (you don't "hit" a milestone if you hope to reach the next one), and for allowing Obama to fill the first 13 words of the piece with tired rhetoric.

The Times piece, by contrast, waits until the third paragraph to quote Representative George Miller, who said, "This is our moment to revolutionize health care in this country." That is undeniably true. If there was ever a moment to revolutionize health care, it would be the moment when legislation revolutionizing health care has just passed.

But is this news? Did anybody say to anybody else, "Wait'll you hear what George Miller just said"? The quote is 11 words, while identifying Miller takes 16. And there's more:

"Now is the chance to fix our health care system and improve the lives of millions of Americans," Representative Louise M. Slaughter, Democrat of New York and chairwoman of the Rules Committee, said as she opened the daylong proceedings.

(Quote: 18 words; identification: 21 words.)

Meanwhile, Republicans oppose the bill. Yes, they do. And if you haven't surmised this from the duly reported fact that all but one of them voted against it, perhaps you will find another quote informative.

"More taxes, more spending and more government is not the plan for reform the people support," said Representative Virginia Foxx, Republican of North Carolina and one of the conservatives who relentlessly criticized the Democrats' plan.

(Quote: 16 words; identification, 19 words.)

Quotes from outside experts or observers are also a rich source of unnecessary verbiage in newspaper articles. Another New York Times story from the November 8 front page provides a good example here.

It's about how the crackdown on some Wall Street bonuses may have backfired. Executives were forced to take stock instead of cash, but then the stock went up, damn it. This is an "enterprise" story—one the reporter or an editor came up with, not one dictated by events. And the reporter clearly views the information it contains as falling somewhere between ironic and appalling, which seems about right.

But it's not her job to have a view. In fact, it's her job to not have a view. Even though it's her story and her judgment, she must find someone else—an expert or an observer—to repeat and endorse her conclusion. These quotes then magically turn an opinionated story into an objective one. And so:

"People have to look at the sizable gains that have been made since stock and options were granted last year, and the fact is this was, in many ways, a windfall," said Jesse M. Brill, the chairman of CompensationStandards.com, a trade publication. "This had nothing to do with people's performance. These were granted at market lows."

Those are 56 words spent allowing Jesse M. Brill to restate the author's point. Yet I, for one, have never heard of Jesse M. Brill before. He may be a fine fellow. But I have no particular reason to trust him, and he has no particular reason to need my trust.

The New York Times, on the other hand, does need my trust, or it is out of business. So it has a strong incentive to earn my trust every day (which it does, with rare and historic exceptions). But instead of asking me to trust it and its reporter about the thesis of this piece, The New York Times asks me to trust this person I have never heard of, Jesse M. Brill.

Of course this attempt to pass the hot potato to a total stranger doesn't work, because before I can trust Jesse M. Brill about the thesis of the piece, I have to trust The New York Times that this Jesse M. Brill person is trustworthy, and the article under examination devotes many words to telling me who he is so that I will trust him. (By contrast, it tells me nothing about the reporter.)

Why not cut out the middleman? The reason to trust this story, if you choose to do so, is that it is in The New York Times. What Jesse M. Brill may think adds nothing. Yet he is only one of several experts quoted throughout, basically telling the story all over again.

In the current financial crisis, The New York Times and other papers seem to have given reporters more leeway than ever before to express their opinions directly. Editors may have realized that these issues are hard enough to explain without running into roadblocks at every turn labeled Warning: Opinion Territory Ahead. But the old wordy conventions survive.

Quotes from strangers restating the reporter's opinion are one. Another is adding protective qualifiers to statements about which there is no real doubt (as when I wrote above that the bonus restrictions "may have" backfired). A third-illustrated by the headline on that story, "Windfall Seen as Bonuses Are Paid in Stock"—is to attribute the article's conclusion to unnamed others. Somebody sees a windfall. We're just telling you about it.

The software industry has a concept known as "legacy code," meaning old stuff that is left in software programs, even after they are revised and updated, so that they will still work with older operating systems. The equivalent exists in newspaper stories, which are written to accommodate readers who have just emerged from a coma or a coal mine.

Who needs to be told that reforming health care (three words) involves "a sweeping overhaul of the nation's health care system" (nine words)? Who needs to be reminded that Hillary Clinton tried this in her husband's administration without success? Anybody who doesn't know these things already is unlikely to care. (Is, in fact, unlikely to be reading the article.)

Then there is "inverted-pyramid style"—an image I have never quite understood—which stands for the principle of putting the most-crucial information at the top of a story and leaving the details for below. Pyramid style is regarded as a bit old-fashioned these days, hence all those florid subordinate clauses at the top of both the Times and the Post versions of the health-care story.

The revolt against pyramid style is also why you get those you'll-never-guess-what-this-is-about, faux-mystery narrative leads about Martha Lewis, a 57-year-old retired nurse, who was sitting in her living room one day last month watching Oprah when the FedEx delivery man rang her doorbell with an innocent-looking envelope . . .and so on. (The popularity of this device is puzzling, since the headline—"Oprah Arrested in FedEx Anthrax Plot"—generally gives the story away.)

But ruthless adherence to classic inverted-pyramid style can also lead to repetition of the story again and again, with one or two more nuggets of information each time.

And then, finally, comes the end, or "tag." Few writers can resist the lure of closure—some form of summing-up or leave-taking. Often this is a quote that repeats the central point one last time, perhaps combining it with some rueful irony about the limits of human agency.

The Times health-care article does this. "'Our plan is not perfect, but it is a good start toward providing affordable health care to all Americans,' said Representative Peter A. DeFazio of Oregon." The same day's story in The Post does it too, with a quote too long to quote.

On the first day of my first real job in journalism—on the copy desk at the Royal Oak Daily Tribune in Royal Oak, Michigan—the chief copy editor said, "Remember, every word you cut saves the publisher money." At the time, saving the publisher money didn't strike me as the world's noblest ideal. These days, for anyone in journalism, it's more compelling.

October 29, 2009

Important News About Newspapers, What We Grew Up With and Still Want to Enjoy Reading

(Ed's Note: Mark Fitzgerald is the Editor-at-Large for Editor & Publisher magazine, the nation's most famous and well-respected magazine covering the newspaper industry in America. Fitzgerald assesses the state of the industry today, why it will survive, and where it is headed.)

By Mark Fitzgerald

Difficult as it may seem at the moment, newspapers will eventually work their way out of this worst-ever industry economic trough. But on the other side of the Great Recession, ironically, they are likely to ask themselves the same question they repeated at the depth of the crisis: Now what?

What should newspapers do with the increased resources they will have in a recovered economy? Where can they get the biggest return on investment inside the newspaper? Or does it make more sense not to plow any more money into the traditional departments of a newspaper business?

Newspapers in this bewildering industry crisis have become so used to cutting—and cutting in places that were once considered untouchable—that it's no sure bet they will return to bulking up any part of their businesses, from the newsroom to the carrier force.

In 2009's second quarter, many newspaper companies surprised Wall Street and each other by managing to eke out profits, despite declining advertising revenue—only because of deep cuts in manpower and material. On conference calls with analysts, several CEOs referred to those cuts as "permanent expense elimination"—suggesting that those lost jobs, standalone sections, larger page counts and bigger news holes were gone and never coming back.

That prospect alarms some increasingly vocal industry observers who fear newspapers are learning all the wrong lessons from their cost-cutting. A sizable contingent believes the absolute best place to bulk up is the segment of the newspaper herd thinned the most—the newsroom.

But other academics, economists and executives just as vocally disagree about where to devote newspaper resources, which surely will be more abundant in better days but will almost as surely be scarce compared with historical cash-flow and profit-margin levels.

Some say newspapers must begin marketing themselves like other businesses. With the recent increases in revenue contributions from circulation, that area deserves more investment than it has traditionally received, one argument goes.

Good work good for business? For others, however, there is no argument: Journalism—news content—is the principal business of newspapers, and without investment there, all is lost.

"Destroying the editorial value of an editorial product could be commended only in an asylum," noted British newspaper editor Harold Evans wrote recently in The New York Times Book Review, condemning "slash-and-burn strategies" that weaken the newsroom.

Indeed, there's a solid business argument for investing in journalism, a number of prominent American academics argue.

This summer, Esther Thorson, dean of graduate studies and research at the University of Missouri's School of Journalism, as well as Shrihari Sridhar and Murali Mantrala from Missouri's Trulaske College of Business, presented research taken from the extensive confidential financial data compiled in Inland Press Association's annual Cost and Revenue Study.

They probed the spending on newsrooms, circulation and advertising sales and developed an econometric model to see how much revenue would be affected if the mix of spending was altered.

"Could they have distributed those dollars differently to make more money with good journalism?" Thorson asks. "And the answer is virtually always yes, very consistently across hundreds of newspapers. They under-spend in newsrooms by a pretty significant amount, and they overspend in circulation—though not nearly as much as they overspend in advertising."

Specifically, their model suggests that "under-spending" in the newsroom isn't just missing an opportunity for greater revenue—it actually damages the business. Cutting back investment in the newsroom just 1% is 3 times worse than the same percentage cut in circulation or distribution, and 7 times worse than making that cut in ad salespeople. The deeper the newsroom cut, the worse the damage, this research contends.

Thorson's conclusions didn't surprise Stephen Lacy, a professor and associate dean for graduate studies at Michigan State University's School of Journalism. "Newspapers have to continue to invest in the product, because every single piece of academic research I've ever seen indicates newsroom investment is the thing you've got to do," he says.

"You can't shortchange the quality of the content and expect people to spend time with it—particularly if you're going to charge them for it."

It's simple economics, Lacy argues. Any monopoly or quasi-monopoly—a status that newspapers enjoyed until recently—that takes ever-bigger profits, as newspapers took ever-bigger margins, and does not invest in the product invites competitors. One oft-cited example is the American car industry in the late 1960s and 1970s, which let quality slip as it maximized profits, and found a big share of its market taken away by Japanese and other foreign automakers.

That's how it works in the world of newspapers, too, says Lacy. One of his studies looked at counties where the dominant paper was a daily owned by a publicly traded chain, which typically needs to produce bigger profit margins, even if that means cutting newsroom spending. They were contrasted with counties where the dominant paper was family-owned or otherwise privately held.

"The county with the publicly traded daily had an average of one more weekly in it than counties with the private daily," Lacy says. "The rules of economics don't just apply to cars—they apply to media, too."

Rick Edmonds, the former St. Petersburg Times managing editor and now a media business researcher and writer at the Poynter Institute, worries that newspapers "are flirting with the tipping point of seeming expendable to discerning readers" because of the cuts. He notes that a reader complaint arising more frequently on the Web sites of newspapers is that "there's nothing there" in the print product.

"It's just my overall sense that some of the papers are dangerously small," says Edmonds. "Maybe of necessity, since you have to live within your means. But I would hope there would be some reinvestment in the product, or at a minimum redoubled efforts to be sure what's in there is good and reflects the added-value that good reporters can bring to the conversation."

Tim McGuire, the former top editor at the Minneapolis Star Tribune, agrees the newsroom should be first in line for more investment—but the content it produces has to change. "If you look at newspaper Web sites and printed newspapers, you see story after story after story that you can find in a whole lot of other places. There's simply not enough work being done in producing value-added stories," says McGuire, now the Frank Russell Chair for the business of journalism at Arizona State University's Walter Cronkite School of Journalism and Mass Communications.

Newspapers will have to invest in both digital and print, with each a very separate product. "Obviously, anybody who doesn't see we're in an online world is an idiot," says McGuire. "But I see The Arizona Republic and the Star Tribune still selling to 300,000-plus customers every day, and that seems to my little peanut mind there's got to be a business there, and probably serious money again in a non-recessionary environment—especially if you give people something they want."

Careful spending on content is critical, agrees Missouri's Thorson: "If you put a bunch of money into the newsroom and everybody just takes a couple more trips, it doesn't do you much good."

Feeding the 'Black Holes'

As far as Earl Wilkinson is concerned, however, increasing newsroom resources amounts to sinking more money into a "black hole." The International Newsmedia Marketing Association (INMA) executive director says too many editorial dollars go to coverage the consumer no longer wants: "We've over-served them—but over-served them with stuff they don't want."

Wilkinson's not picking on editorial, he hastens to add, but on all the big cost centers of newspapers. The other "black holes," in his view: "Big printing monstrosities, preservation of departmental silos, payouts of enormous dividends, and the pursuit of large advertisers at the expense of the small."

What newspapers have to do instead, he insists, is spend more on marketing and research and development. Under-spending on marketing has been a newspaper problem for 30 years, he argues, with newspapers typically spending 1.5% of revenue, and only half of that on marketing to consumers.

"We spend just a small fraction of what we tell advertisers they should spend," says Wilkinson. "We've got an attention-deficit consumer culture. People need to be reminded of why they need to read newspapers every day."

Advertisers, too, he adds: "The game is not about building a bigger magnet anymore, and pulling advertisers in. We've got to go and get them." To do that, newspapers should devote 5% of revenue to marketing and another 2% to R&D, Wilkinson advises. He also thinks spending in the advertising department could be adjusted to pursue smaller advertisers and equip them with self-serve technology, rather than always chasing the big accounts.

Consider Reprioritizing

Mark G. Contreras plans for the newspaper business' post-recession future not from the perspective of an academic or industry advisor. He's E.W. Scripps' senior vice president/newspapers, responsible for the day-to-day operation and strategic direction of 28 dailies and community papers.

When Contreras is asked about where to devote resources—newsroom or advertising?—his answer recalls the old commercial for Certs breath mints: Stop, you're both right.

Scripps leaders, he says, came to that conclusion after spending a great deal of time in the past year thinking about how to organize the company in a changed media environment. One of the first steps was to bring in the restructuring firm FTI Consulting Inc. Out of that came a corporate reorganization of Scripps that was announced in August.

"We fancied ourselves pretty good at analyzing our business," Contreras says, "but their first question was, why are you guys organized the ways you are organized?" What FTI found was a company that basically replicated everything 13 times in every market. "We asked ourselves, what really is going to add enduring value, and the conclusion we came to was that it's content and advertising sales," he says.

There was another disconnect, he adds: "If you look across the company, you see 20% to 25% of our bodies are in either the news department or ad sales, and 75% are not. And that's because we're in a corporate model where the form and structure is more labor-intensive."

Over a period of time that proportion is going to reverse, Contreras says—but he cautions that the "overall pie is going to shrink." The absolute number of employees is likely to go down, especially as Scripps looks to trim expenses again in the third and fourth quarters of this year. But the percentage of the remaining workforce devoted to editorial or sales will grow, he projects.

Shrink the workforce outside of the newsroom if you must, Missouri dean Thorson says in a final word of advice—but stop shrinking the physical newspaper. And not just because loyal readers are beginning to complain.

"There's very clear evidence that advertisers, too, are very sensitive to what's in a newspaper, and what's missing," she says. "A big newspaper is like a big party—you want to be there."

After the recession, INMA's Wilkinson and Michigan professor Lacy agree, newspapers will find themselves continuing to face issues that should have been addressed long ago.

"Not to spend, not to invest would be a mistake," Lacy says. "But I wrote something to that effect 16 years ago. People didn't listen then, and I suspect they won't listen now."

September 25, 2009 – 2nd Article

Guest Article:

Be Cautious About Giving Information to Census Workers

(Ed's Note: Everywhere there are con artists wanting to take the easy way out—they lie, cheat and steal for a living, rather than working for a living and paying taxes to support our free enterprise system. Corrupt census takers are no exception.)

With the U.S. Census process beginning, the Better Business Bureau (BBB) advises people to be cooperative, but cautious, so as not to become a victim of fraud or identity theft.

The first phase of the 2010 U.S. Census is underway as workers have begun verifying the addresses of households across the country. Eventually, more than 140,000 U.S. Census workers will count every person in the United States, and will gather information about every person living at each address including name, age, gender, race, and other relevant data.

The big question is - how do you tell the difference between a U.S. Census worker and a con artist?

The BBB offers the following advice:

If a U.S. Census worker knocks on your door, they will have a badge, a handheld device, a Census Bureau canvas bag, and a confidentiality notice. Ask to see their identification and their badge before answering their questions.

However, you should never invite anyone into your home that you do not know personally.

Census workers are currently only knocking on doors to verify address information. Do not give your social security number, credit card or banking information to anyone, even if they claim they need it for the U.S. Census.

While Census Bureau representatives might ask for basic financial information, such as a salary range, it will not ask for your social security, bank account, or credit card numbers, nor will employees solicit donations.

Eventually, Census workers may contact you by telephone, mail, or in person at home. However, they will not contact you by e-mail under any circumstances, so be on the lookout for e-mail scams impersonating the Census.

Never click on a link or open any attachments in an e-mail that are supposedly from the U.S. Census Bureau.

September 20, 2009

Guest Article:

A Big City Newspaper Story That Only a Newspaperman Could Most Appreciate

On a recent trip into Philadelphia, after I exited the Interstate and coasted to a stop at the first traffic light, a man walked up to my car. He wore a black apron with a change pouch and held aloft a copy of The Philadelphia Daily News, the city’s tart, irreverent tabloid. It gave me a warm feeling.

Of course it did! I’m a newspaper guy. I worked as a reporter for The Daily News in the 1980s, and later for what we called "big sister," the sober, broadsheet Philadelphia Inquirer. Even in better times, I would have been happy to see the product being hawked, but these days any small sign of life in the newspaper industry, even just the sight of someone reading a paper, feels positively uplifting.

I handed over 75 cents for my Daily News, then drove on toward the center of the city — and U.S. Bankruptcy Court, where a hearing was soon to begin, part of an ongoing process that will determine the fate of the city’s newspapers.

Philadelphia is, of course, the city of Ben Franklin, a printer by trade who published The Pennsylvania Gazette, a newspaper, as well as Poor Richard’s Almanac. It is where the Founding Fathers drafted the nation’s most important documents — the Declaration of Independence and the Constitution.

Word of the Declaration went out to the people on July 6, 1776, when it was published in the pages of The Pennsylvania Evening Post. By the early 20th century, the raucous, elbows-out era of American newspapering, there were 10 daily papers in the city.

Now down to a besieged two, Philadelphia is a particularly good place to observe what appears to be big-city journalism’s last stand, when many of America’s metropolitan newspapers must quickly figure out how to become profitable again or face likely extinction.

The stakes extend in many directions. Newspapers remain the primary source of news-gathering in America. And unlike so many Internet "sites," they are firmly grounded in a geographical place. To read a newspaper is to know what town you’re in. As a young reporter, I covered the trial of a well-known Philadelphia mobster, Harry (the Hunchback) Riccobene, who had been tried, convicted and incarcerated numerous times previously.

I approached him during a break on the trial’s first day and asked if he was nervous. He wasn’t. "What’s the expression?" he said to me. "My record speaks for itself." I was pretty proud when that made it into print. I felt as if I’d shared a joke with a whole city, one that I knew appreciated that kind of wise guy humor.

No one would say that the history of journalism in America is one of unremitting excellence. Plenty of smaller communities, and some big cities, have never been blessed with anything better than lackluster newspapers.

Certainly The Inquirer and The Daily News, when owned by Walter Annenberg, Philadelphia’s postwar press baron, were undistinguished, in no small part because they were subject to Annenberg’s political and personal pique. (He was said to have a blacklist of names that could not appear in print, an eclectic group that included Ralph Nader, Imogene Coca and Zsa Zsa Gabor, as well as the city’s NBA franchise, when it went uncovered for a season because Annenberg had a beef with its owner.)

Annenberg’s sale of The Inquirer and The Daily News in 1969 to the Knight newspaper chain (which later became Knight Ridder) had the effect of elevating the journalism. The Inquirer established a formidable reputation by winning 17 Pulitzer Prizes between 1975 and 1990, a total second only to that of The New York Times in that period.

It is certainly less ambitious now than in its peak years, when it sent reporters to cover every big national story and maintained a half-dozen foreign bureaus, but it remains a force in its region and capable of the kind of "watchdog" journalism essential in cities like Philadelphia, which seem to breed corrupt politicians.

The Daily News, with a reduced staff that covers fewer stories, remains aggressive, and its distinctive voice is taken seriously in the city’s corridors of power.

But the journalistic worthiness of the two newspapers has not protected them. And what was seen as a possible salvation in 2006, the purchase of the newspapers by Philadelphians with deep roots in the city (the first local investors since Annenberg), has, to this point, produced only a ghastly hemorrhage of money.

The new owners put up $150 million of their own. Before filing for bankruptcy, they stopped payment on $400 million in debt. They have not, however, given up, and are locked in a standoff with lenders that Brian Tierney, the leader of the ownership group, has framed as a battle to preserve quality journalism in Philadelphia.

Tierney is the central figure in Philadelphia’s newspaper drama today — an imperfect, improbable savior who in his previous role as the city’s most prominent public-relations executive was hyper-aggressive, and often bullying, in his interactions with reporters. No one would compare him with Franklin, except perhaps in his self-confidence. But he has taken to newspapering with a convert’s devotion.

In one of our conversations, he had to stop talking for a moment as tears came rolling down his cheeks. He was telling me about a speech he gave to an adult-education group, a routine appearance until the moderator asked everyone to join hands and pray for The Inquirer and The Daily News.

"It was unbelievable they would say a prayer for us," Tierney said as he reached under his glasses to dry his eyes. "But they care. You know, it’s not like we’re some radio station thinking about switching from Top 40 to a salsa format. This is the people’s work, a public trust."

Bankruptcy proceedings in which the parties do not amicably come together on terms for restructuring debt are fluid and unpredictable. The Philadelphia newspaper case has been particularly rancorous.

A possibility exists, probably remote at this point, that the papers could just fold, making Philadelphia the winner of a dubious sweepstakes: first major American city to be left without a daily newspaper. Alberto Ibargüen, president of the Knight Foundation, which finances journalistic innovation, told me, "It’s going to happen somewhere."

What you notice first about Tierney is his stocky, strong-looking build and the restless physical energy he gives off, as if he’s always an instant away from rushing the line and tackling a quarterback. Now 52, he grew up in Philadelphia’s blue-collar suburbs but was educated at its elite schools, Episcopal Academy on the Main Line followed by the University of Pennsylvania.