Radio appearance November 14

On November 14 I will be on the Jessie Bowen blogtalk Internet radio show discussing my Wealth On Any Income book. Please tune in. Here is how to get the information:
Click Here for show time and call in information.

Fiancial Meltdown

It has been over three months since my last post and I have come to the realization that I would rather read media publications than write. But, I am a published author, and I do have opinions that matter to others, so I have made myself sit down and post another blog article.

I was inspired by the newest financial collapse: Lehman Brothers investment bank.It was known for months in many financial circles that Lehman was struggling. Lehman's stock had plunged 95 percent from its 52-week high to $3.65 on Friday, September 12, 2008. This wiped out nearly $35 billion in shareholder wealth in just 10 months. That is $35,000,000,000 that evaporated in 10 months from one brokerage firm’s value. This was despite Lehman’s CEO, Richard Fuld’s reassurances of Lehman’s strength.

Bear Stearns came as a surprise, but Lehman was expected. The latest is that Barclays Bank has backed out of it's offer to save Lehman, but Bank of America might still be a player to buy up the pieces, just like they did for Countrywide, the mortgage lender.

It is likely there will be more fallout in the financial services industry before this mortgage crisis is complete. From Daniel Alpert, Managing Director of Westwood Capital, LLC, it is estimated that banks and lenders have recognized about $550 billion of the $1.25 trillion in losses that he expects to be attributed to the mortgage meltdown.

The problem is the financial landscape is changing so often it is hard to keep up with the bad news. On this Sunday at 11 a.m. I wrote about the possible purchase of Lehman by either Bank of America or Barclays Bank. By 5 p.m., Barclays had already backed out.

I have been working on updating my best selling "Wealth On Any Income" book for several months now, and I just cannot keep up with the awful financial landscape. My new book will have the title "Thriving from the Economic Meltdown" so that readers can see what they need to do in these difficult times.

Regardless of how bad it gets for the banks, brokerage firms, and mortgage industry, there are still basic concepts that will keep the average person financial solvent. Ten "galley proof" copies of "Thriving from the Economic Meltdown" have been printed up, and it should be ready for release in another month or so. I will keep you posted.
Rennie

Vote for Proposition 98 on June 3, 2008

It is odd how our attention can miss the obvious. I have not written a new post recently, and I have been complaining to my wife of the deceptive ads that support Proposition 99 against Proposition 98. What I missed is that I should be writing about this in my blog.

What do I mean by deceptive? It is clear from a Los Angeles Times article on Tuesday, May 27, 2008, Section B, page 4, that AARP is promoting a lie about Prop 98. IT WILL NOT ELIMINATE RENT CONTROL. It will phase it out by allowing apartments to rise to market level AFTER a tenant under rent control moves out, is evicted for non-payment of rent, or dies. That could be years. For some tenants, they would benefit from rent control for the rest of their lives if Prop 98 were to pass.

It DOES have more stringent eminent domain restrictions than Prop 99, because it protects the property of more individuals and businesses and makes it harder for the government to seize property for redevelopment by private business. This is why Governor Schwarzenegger is supporting Prop 99; it makes is easier for the government to seize property.

Prop 98 is the ballot measure that should be passed, not Prop 99. Whether you are a property owner or a renter, I recommend the passage of Prop 98. As a property owner or a renter, you are protected under Prop 98. Please do not believe the deceptive ads by AARP and vote for Prop 98.

You can read the full text of the Initiative submitted to the Attorney General at
http://ag.ca.gov/cms_attachments/initiatives/pdfs/i684_2007-05-03_07-0015_Initiative.pdf

But here is the section directly from the Initiative dealing with rent control:
SECTION 6. EFFECTIVE DATE
The provisions of this Act shall become effective on the day following the election ("effective date"); except that any statute, charter provision, ordinance, or regulation by a public agency enacted prior to January 1,2007, that limits the price a rental property owner may charge a tenant to occupy a residential rental unit ("unit") or mobile home space ("space") may remain in effect as to such unit or space after the effective date for so long as, but only so long as, at least one of the tenants of such unit or space as of the effective date ("qualified tenant") continues to live in such unit or space as his or her principal place of residence. At such time as a unit or space no longer is used by any qualified tenant as his or her principal place of residence because, as to such unit or space, he or she has: (a) voluntarily vacated; (b) assigned, sublet, sold or transferred his or her tenancy rights either voluntarily or by court order; (c) abandoned; (d) died; or he or she has (e) been evicted pursuant to paragraph (2), (3), (4) or (5) of Section 1161 of the Code of Civil Procedure or Section 798.56 of the Civil Code as in effect on January 1,2007; then, and in such event, the provisions of this Act $hall be effective immediately as to such unit or space.

Again, the ad running on the TV from AARP is completely deceptive. Please vote for Prop. 98

Rennie

Consumerism is going to backfire

Consumerism is going to backfire

I just saw a 20-minute video on “Stuff.” The point is to educate all of us on what it takes to not only bring a product to market, but what the costs are that we do not see; the cost to our children, our planet, and ourselves. This goes way beyond why it is nice to recycle, but how we must fundamentally change our attitudes about buying stuff. This is a fit in how to create personal wealth. There is so much stuff we buy out of guilt, planned obsolescence, advertising pressure and so on, that this video will help you understand why we do NOT need to buy so much stuff.

Please see it at
http://www.storyofstuff.com/
Rennie

Frugal Holiday Gift Ideas

December 9, 2007

The following ideas were sent out to a forum of which most of the authors and co-authors from my publishing company use to stay connected. Many of the ideas came from several of the Ask Amy columns that are published in the Los Angeles Times, so I take no credit for originality, nor do I want to be accused of plagiarism.

When I was young, many, many, many years ago, I would go crazy trying to find the "right" gift for family and friends. As an adult I have changed dramatically. As an adult I recognize people have different ideas about gifts. I hate, as in "HATE" object gifts, like a tie, sweater, souvenir, plate, vase, knick-knack, watch you name it. I only allow my family to give me a gift I can consume: Candy, soda, movie tickets, video rental coupons, restaurant gift card, etc.

If I can't consume it, I don't even accept it. I realize that is pretty bold, and can even be considered obnoxious, but my family and friends know what kind of gifts I would prefer. And, isn’t a gift about giving what the individual truly needs or wants. Some folks want diamonds; I want a gift certificate to the Cheesecake Factory. This year my children did well. My daughter created a scrapbook of pictures from her childhood to having her own children. My son gave me a calendar he made from the photos stored on Snapfish and the Kodak Gallery with his son. And one of the photos has all three of my grandsons together. That’s what I really wanted.

One time my partner found a unique antique toy truck, very similar to the real antique truck that I own. I have a 1945 Dodge pick up and it is not a “thing” in my life. It is a working truck I use to haul lumber, stoves, refrigerators, and etcetera for my apartment buildings. I looked at his “potential gift” and said how cute it was. And he could see by the look in my eye that I did not want to have it in my life. I have enough “things” in my life, regardless of how cute they are.

Now to the point of this rant; how to cut down on both the amount of gifts you have to buy, the expense involved, and providing people with what they really need or want. Here are some ideas to make the holiday season easier and profitable on everyone, except perhaps retailers. I and/or my family have done many of the items on the following list.

1. (From Debbie Moore, Denver, CO) - This is what Gordy and I do for each other. We each have an envelop with our names on the envelop. Throughout the year as we see things that we would like we tear them out of the catalog or write them down on a piece of paper and put them in the envelop. Then when holidays or birthdays come we go to each other’s envelope and choose the gifts from among the ideas in the others envelop. It works really great! We are always surprised with the gifts we receive and they are always something that we want because we put them in our envelope. Only one rule to this little game; once you have put something in your envelope you can never look through your envelope. This was you are always surprised at holiday and birthday time. It really is a lot of fun and we always get gifts that we want!

2. Charity White Elephant - Large group activity: Each person brings a small wrapped inexpensive or white elephant gift to a potluck get-together. The gifts remain unopened, they are auctioned off starting at $1 and one or more charities receive the money raised. 15-20 people could raise $500 or more. Usually the more beautifully wrapped gifts fetch the most money, but could have the tackiest items.

3. Musical Gifts: Each adult buys a set number of gifts from 1-5 that cost no more than $5 each. At the get-together the adults play a game of "musical gifts." We person holds a present and the music plays. When the music stops you open the gift that is in your hands. This is a fun way to buy presents and avoid the stress of getting the "right" thing for the "right" person.
4. School Project Donations: DonorsChoose.org is a website that allows you to donate any amount of money to fund a specific classroom project, either part or the entire project. An athlete can donate to a sports uniform, a book lover can donate to a classroom set of Shakespeare, a traveler can donate to fund a group of students trip to a new city or state. If you fund the whole project you get thank you notes and photographs from the recipients.

5. Charity Check Up: You can find out the quality ranking of charities, foundations and non-profits based on their use of funds at CharityNavigator.org

6. Set a limit, like $10, and go to the 99 Cents store and get items you think your recipient would enjoy. This works best between couples or children. A child’s limit could be $3-$5. Suggest this for other family members, grown brothers and sisters, cousins, aunts and uncles.
7. Forget about gifts altogether: Recognize the holidays are really about families getting together, especially when they are scattered around the country, or world. Recognize ahead of time that the purpose is to simply enjoy each other’s company.
8. Spend your time help those less fortunate: Donate your time, not just your money, to a homeless shelter, food bank, or bring groceries to a battered women’s or children’s shelter or orphanage. Combine # 3 with this, bring the whole family, and have it become a tradition.
9. Gift exchange: Again, pick a dollar limit, write down the names of all the people you expect and draw names a few weeks prior to the event and get one gift for the person who’s name you picked.
10. White elephant gift exchange: We have all received things we do not want. Now is the time to have fun with them. In this game people draw numbers from a hat, based on the number of people at the event. The more people the more fun. If there are 20 people, then there are 20 slips of paper in the hat numbered from 1 – 20. Each person comes to the event with one gift, and places it on a table. It is best when no one knows who brought what. Number 1 goes first and picks a gift from the table.
Number 2 can either pick a gift from the table, or if they like what # 1 has, they can “steal ” that gift. Number 1 now picks another gift from the table. Number 3 can take a gift from the table or from # 1 or # 2, and so on. Place a limit on the number of times a gift can be stolen. Sometimes it is something desirable, like a board game. Other times it is dreadful, like an ugly monkey coin dish. We have done this for about 10 years now, and it just so much fun to see who can get the ugliest or funniest gift.One year an auto mechanic friend of ours beautifully gift-wrapped a used motor piston. The last part of the game after all the gifts have been selected is to guess who brought the gift. A final option is to have 2-3 extra gifts. First let anyone plead their case as to the worst gift and why. Then take a vote and allow a winner or two or three to pick one of the extra gifts from the table.

11. Make charitable contributions to the organizations that your recipient favors in their name.

12. Donate books to your local library or school. Pay for a textbook for a struggling or underprivileged college student.

13. Give the gift of time by doing a difficult chore for family, elders or neighbors. Examples: Put up storm windows, rake leaves, clear snow or rain gutters, paint trim…

14. 10. Finally, check out www.alternativegifts.org for worthy projects that benefit children, women and families in other parts of the world with food, medicine, water, etc.

Active versus Passive Investing

Active versus Passive Investing – Thanksgiving Day 11-22-07

The other day I was reading a pre-publication interview with a financial planner in Denver based on some questions from a reporter with the Denver Post. The planner had such an unusual name: Steve Smith. There is probably only one person in the country with a name like that. ( ;-) – smirk) Anyway, I used to be a financial planner, or rather do that work for a living, and can recall how my own thinking was prejudiced by the industry in which I was working.

I gave very little thought to the difference between an active and a passive investor back then, but Steve’s comments reminded me of how I look at investing now. Passive investors do things like dollar-cost-average into a mutual fund; they contribute to their 401(k) plan or IRA and get the help of a stockbroker, friend or financial planner to help them choose the investments. They might choose stocks, bonds, mutual funds, or even REITs. The point is passive investors give their money to someone else and hope they have a decent return, like 8-12% per year. I am not saying there is anything wrong with this, and it is probably appropriate for 80-90% of the population. I am suggesting this is not the only way to invest, but it seems to be the only method offered to the public that seeks investment advice.

Since I have been both a passive and active investor, a Chartered Life Underwriter and a Certified Financial Planner, I have both the education and experience to speak about both approaches to investing. I have done very well with real estate investments. I have done okay with stock investments earning 1% while others were losing 30-40% of their portfolios.

My views that are not necessarily in conflict with what Steve, or any other financial planner or stockbroker, might have to say but rather I want to add another dimension to the typical comments about real estate versus stocks.

1. Invest nationally or globally instead of just local:
Local markets can be excellent. As an example I have made millions of dollars by staying in the Los Angeles area. Unfortunately, it may not be fair to compare a local market like Denver Colorado to Los Angeles County. In the Los Angeles metro-plex area we have 14 million people, which is greater than the population of 46 states in the United States. There are only 4 states with a population greater then my metropolitan area. However, it is still "local" for me. New York was "local" for Donald Trump for a long time, and he did okay.

2. Invest in REITs to get real estate diversification:
REITS are Real Estate Investment Trusts. They group real estate properties, like apartment buildings, office buildings, shopping malls, industrial parks, etcetera, into a big pool, and sell shares like a mutual fund. It is easier for most individuals to come up with the money to own a part of an office building than to buy the whole building. Also, most people have no experience in managing an office building. And, while REITs give people diversity they also give the investor no control, just like a mutual fund or stock. Diversity is great for mediocre returns. If you want great returns you need to own the office building, mini-storage facility or apartment building and be an active investor.

3. Beware of sweat investment as a part of capital investment:
Yes, it is difficult to determine my investment return from capital versus sweat. When buying apartment buildings I was willing to work to produce great results. I am not a passive investor: My partner and I select the properties, improve them though remodeling or repairs. After that I manage the properties: Collect the rents; issue 3-day-pay or quit notices; choose the tenants; cleaning crew, painters, and plumbers. But I have been handsomely rewarded for it, far beyond the 5% fee that is customary for a management company.

I understand that most people do not have the willingness or experience to be active investors, but if they do, the rewards are far greater than historical returns for the stock market or real estate in general. When you combine the returns on commercial real estate from New York to Los Angeles you get numbers like a 7% return on capital. This provides no guidance for decision-making regarding investing in real estate in general, or in a local market specifically.

What the heck does a 7% return mean to me in Los Angeles when my partner and I are investing in apartment buildings that have been mismanaged and have deferred maintenance? Nothing, that's what. When we can take a building and double the rental income in 6 months through remodeling and effective management those national numbers about the returns on commercial real estate are meaningless.

Again, I am talking about active investing, not passive, and that type of investing most often is ignored in those interviews with financial planners, stock brokers and the like.

Have a wonderful Thanksgiving holiday and say a prayer for our troops.
Rennie

Doing versus Teaching

My last post was back in May, four months ago. Most people know the expression; "Those who can, do. Those who cannot, teach."

Well I do not like that expression, but I have been busy remodeling a 15 unit apartment building purchased in May. I have been too busy doing to be posting to my blog.

But, I believe teaching is important. Why? Because that is how I learned to do what I do. I also feel that those who know what they are doing should be contributing back to the community by teaching.

Therefore, I will be teaching a class at ULCA on Saturday, October 13, based on my book, Wealth On Any Income.

For those who did not learn how to handle money effectively, set financial goals that can be achieved, and ultimately create wealth, please sign up for the class. Or, send someone else to the class that you feel would get value from this information.

You can sign up at
MGMNT 833.61
Moving from Debt to Wealth on Any Income
Sincerely,
Rennie