Monthly Archives: September 2008

New Nigerian Scam method.

I thought I have seen or heard of all the nigerian scams.  To protect myself I always use PayPal or else I deal in person with the customer.  Basically PayPal is a good company for running transactions because they are really focused on security, it is fairly hard to scam someone on paypal.  But today I posted something on craigslist, I specifically stated that I will only ship my item to people who pay with PayPal.  Craigslist is a huge target for bad people and almost all checks are fraud.

So a few minutes after I posted the item I got emails from two people who were interested.  They were both from free accounts.  (Red Flag)   Both were eager to buy at the full price with out asking for anything (Bigger Red Flag)  Next they wanted it shipped to Africa (100% Fraud massive red flag).   But I wanted to see how they would scam paypal.  Paypal is very secure.  So I told them to send me the money.  This is how stupid they are, they just spoffed some emails from paypal.  They took the normal one and made it seem that it came from paypal but when I logged in there was no money in my account.   The email really came from but they made the name say the real address paypal sends from.   They did a decent job of spoofing the email, it looked just like a real one if you did not look at the header.    But then to try to ease any subspisions they sent a second email saying this.

This e-mail is sent to you as a confirmation of payment made to your PayPal account.We have rigorously examined the payment for Your Laptop by PayPal Member(monica0002) and the amount to be credited to your account by  PayPal is $800.00 USD 
       This transaction is in order and legal.This fund will be credited to your paypal account once the shipment tracking number is sent to our verifying team
      We encourage you to ship the item immediately (due to Paypal's policy) as your payment has been confirmed by us.Security is of critical importance to us at PayPal.
      We use proprietary technology and constantly innovate to help ensure your transactions are safe. In addition,  PayPal has over 20,000 staffs worldwide dedicated to keeping  PayPal accounts safe, and stopping online criminals. And we work with Internet Service Providers (ISPs) worldwide to shut off fraudulent websites as soon as possible.

PayPal‘s Fraud Investigation Team is highly experienced in fraud prevention. Several members of the team were former law enforcement officials with extensive experience in fighting online fraud. PayPal‘s fraud investigation team focuses on: Identifying and preventing fraud before it occurs, Detecting fraud in process Mitigating loss, if fraud does occur, Delivering information to law enforcement around the world to help stop those committing online fraud.

I sent a message saying that I had not received the money when I checked my account. Of course cause it is totally fake.  Four minutes later they sent another that was almost the same, but this time it said that my account would only be credited once they confirmed the tracking number with UPS (A total lie, PayPal never does this.) After 10 minutes I receive 5 more emails from the buyer who really wanted me to contact them ASAP (I guess their time at the Nigerian Cyber Cafe was almost up.)

I also receive another fake paypal message that is much more desperate

Dear  Jason Dragon (,
                        This is to notify you regarding Payment made by "Monica0002" to your  account. The payment has been successfully made but on escrow due to security reasons we have to receive the shipment tracking number before your account will be credited.
                        This a new measure we are taking in order to protect both  sellers and buyers against fraudulent activities. Immediately the Item has been ship, send the shipment tracking number to PayPal Customer Service Department:" target="_blank" rel="nofollow">and immediately the shipment tracking number is CONFIRMED. Your account will be credited immeditely.

PayPal, and Craigslist company Copyright 1999-2008 PayPal. All rights reserved.
PayPal (Europe)  is authorised and regulated by the Financial Services Authority in the United state as an electronic money institution.

PayPal FSA Register Number: 226056

I simply sent an email back saying I don’t ship to scammers.  I wonder if that FSA number means anything?  I also noted how they misspelled, and why would a PayPal message mention Craigslist?   All odd.

Of course the reason that they do this is because it DOES WORK on some people who are too naive.  I am sure they have received tons of free stuff.  I bet at least one person who reads this blog has shipped an item out.  If this is you, or if you even were sent this scam I would love to see a comment from you.

How to get office or retail space on the cheap

In the last decade I have chosen office or retail space for quite a lot of businesses. Much of this is about Arizona but it should mostly ring true for most of the nation.

Of course, if you have the credit the BEST space is one you can buy.  If you have enough cash and credit to buy a building 3-6 times larger than you need and then rent out the rest you are very lucky and this should be done whenever you can.   I know many businesses that decided to buy and they rent out the rest of the building for more than their entire mortgage.  Remember, the same is true in commercial as in residential, when you rent your cost will always go up but when you own you lock in your mortgage payment at the start, and you are paying it back later and at the same monthly rate for the term of the loan. (Usually)  I also know a few business that, after 10 years or so, hit a bump in the road and were able to take out some of the equity in their building to keep their business going.  Lack of access to credit is a quick way for a growing business to fail, or for an entire economy to falter.

Now if you must rent you still have many options.  You are the one picking the building so you get to pick your neighbors.  Spend a day talking to them before you lease, ask them how the foot traffic is, ask them about the amount and types of customers they have.  See if they sell products that will attract customers that may buy your products.  Back in 2001 I located a computer store next door to a cad software and training company, during the first few years we received many of our customers from them simply because they needed a computer to run their cad things.  In 2006 that company moved away.

You also get to pick your landlord.  I have found time and again that you really want a local landlord, the smaller the landlord the more they need you and also the more willing they will be to break the rules when and if you need it.  Also they are much more likely to be helpful if you get behind because they need you.  If you are dealing with a property management company with distant owners they don’t care if you live or die really, the property management gets paid both ways.

You also get to set the terms of the agreement.  Many landlords like to hide tons of little details in their contracts.  One even tried to tell me what hours I needed to have a store open.  Another told me where we could park.  Before you sign the contract you can negotiate on anything you like, and most of these clauses are easily removed.  But one thing that has saved me tons of money is agreeing to take units as is in exchange for many months of free rent.  Many landlords will pay people to fix up the space but if you are willing to take it as is you will get exactly what you want and you can save thousands of dollars.  In one example we got into a location in 2004 and received 4 months of free rent in exchange for taking the unit as is.  All we needed to do was paint, put in new carpet and run our networking cables, which would we have had to have done no matter what.  We got the carpet 24 months no interest, we had some of our employees paint the unit and our total immediate out of pocket cost was less than 1 month of rent.  We now had 3 months for free, leaving us money to get some nice furniture and such.  Another term we always have looked at is about competition.  We don’t want someone to open up who is going to take away our customers so we make a long list of things we do and put in the contract that no one else who does these things can move in. Another clause that we put in that is helpful is the first right of refusal.  Basically this states that if the units adjacent to yours are empty and someone is looking at renting it that the landlord must call you and tell you that someone new is getting ready to move in, you then have 48 hours to decide if you want it or not.  This is very important if you ever plan to expand without moving.  If you foot traffic mostly comes from an anchor store you should also put in a clause saying that if the anchor store goes out of business you will receive rent at half price, and after three months you have the option to dissolve your lease at any time in case you want to move out.  We used this clause once in 2006, and it saved us a ton of money when the albersons wanted to leave, we got out of the lease 2 years early.

Getting a buyers agent is a great idea, the landlord is going to pay for one no matter what so don’t just call his agent, get one of your own who will work for you and have them talk to the landlord.  They will fight harder and you will end up with a much better deal in the end.

Once you have the unit there are a ton more ways to save money, more on that in another blog.

Trade shows, a great source of leads, without even paying.

Trade shows, Fairs, Home Shows and such are common all over the nation.  For a small amount of money you can have your small business seen by the masses that come by your little booth.  They can talk to you, and hopefully buy your stuff.

But what if the product you sell is something that mostly businesses buy?  This makes a problem for you, if you get a booth at the show almost everyone who comes by will not own a business that you can sell to, you will spend a lot of time and money with little return.

I looked at this as a bootstrapping entrepreneur and thought this way.  There are 100’s of businesses at this show, most of them have the owner or decistion maker stuck in their booth and on a slow day they have very little to do.  So I figure out which day will likely be the slowest then I go there, I take my business cards and some flyers and start talking to business owners.

Today I went to a home show, I saw a few existing customer but I spent most of my time looking for companies that I could talk to about my products and services.  Of course I sell computers and web design.  Over 20% of the companies I talked to had an imediate need for one of my products or services.  I got their cards, wrote notes on the back and left the event a few hours later with 15 companies that I can call and do business with.  Where else can you make so many quality leads in such a short time, for free while having fun?

I have been doing this with great success for a few years.  A few times I have even had people write me checks on the spot.

So if you are lacking for leads for your business consider this as a great bootstap way to make some instant customers.

Bootstrap your business.

Every day people start businesses.  Today I am going to talk about the real businesses, not the home based small business that you do part time, but a business where you hire people, you work at it, you create systems and build something that has long term value. This will be the first in a series of blogs about this subject.  HOW TO BUILD A BUSINESS ON A SHOESTRING.  AKA Bootstrapping.

When I see people doing this I see two VERY different type of people.  I see the first type, the people who have worked in the corporate world for a long time who decided they can do it better.  Then I see the people who just have an idea that they think will make a lot of money, and they have the drive and will to make it happen even if they don’t have much money.  The biggest difference between these two is the amount of money they will spend and blow through.

The Corporate Guy

Lets assume that both guys want to start a web design company. (The following is a true story, I know the guy well, the numbers are correct.)   The corporate guy sits down and start to think about what he will need to run his business, he thinks about all the tools he had at his last company and starts to write a list.  He needs a conference room, he need a high end server with redundancy and $10,000 of software to make it all work.  He need high end printers to show samples to customers he need an impressive office so that he can hire the best talent.  He spends $80,000 on furniture and making his office suite look great, he then hires 3 techs to sit down and create logo generation software, scripts to automate the entire interview process with the customer.  All things he was used to.  His techs also generate templates, then he goes out and advertises his services in many different mediums, he started with $150,000 and that is long gone, he has borrowed $100,000 more and has monthly expenses of over $25,000.   He gets some calls and some business but even with $10,000 coming in each month he quickly runs out of money, gets rid of his staff to reduce expenses but it is too late, he can’t pay the bills and after only 10 months he is our of business, he lost his $150,000 the $100,000 of his investor and he has bills to his landlord and other people who gave him things on credit for another $80,000.  And about 300 customer who paid for sites were left with nothing.  (I know all of this is true, he STILL owes me over $15,000)

The bootstrapper.

Next is the story of another guy that I know, he is a bootstraper, a real entrepreneur.  He also decided to build a web design question, he asked himself, “What is the minimum that I need to really function?”  The answer is a nice desk, nice chair with a nice computer loaded with the proper software.  He does not need to host the server locally, he can host it at one of the many hosting companies for about $200 per year or less.  Every time he sells 25 web sites he needs to pay $200 again but that is ok, he will be making money then.   He does not need an office, he can meet the customers at their office, or just over the phone.  He needs very little to get started.  He does not make an automated system for customer interaction, he just talks to them and finds out what they need.  He finds free advertising, and starts getting word of mouth.  His costs are lower so he charges less than the other guys but not too little to kill his business.  He saves most of his money so that his business can grow.

After a few months he has enough money for a small office, he finds a few people who are young and eager to learn, maybe not top talent, but people he can train from scratch and pay less than going rates  People who have a good attitude and are sharp.  He hires some sales people paying them 100% on commission so that he only pays out when he makes money.   9 months into his business he has a few hundred customers a small staff and a nice office.  He brings in 50 new customers a month at an average of $600, making 30k per month, with expenses under 10k per month he is quickly building his networth, and building his company.  He also has a business that can run without him, he can start to take time off, and if he got a bit bigger and put all the systems in writing and have everyone follow it he could even sell the business for huge money.


I would always invest in a bootstrapper well before I invested in a corporate guy, the problem is that the bootstrappers almost always don’t ask for money but when they do you should listen.  One company that was a bootstrap company, that did everything in house and did it on the cheap was Google.  1000’s of other companies started up in Silicon Valley with tons of different ideas but most were run by people who could simply not be frugal, they needed the fancy cars, and parties and cool offices.  Most of these companies failed.

When you are looking for a company to invest in look to see if they are a bootstrapper.  Don’t be impressed with the fancy office or cars, be scared.  If you are running your own business or looking to start one think about what is really need to make your business money, don’t spend money that you have not made yet unless it is 100% needed.

Over the next few weeks I will write blogs about bootstrapping, simply click on the bootstrap Category to see the other entries.

The Mortgage Crisis in Plain English

Hello, my name is Jason Dragon.  You may be a long time reader of my blog, or like many people you may have found this simply by doing a search, if that is the case then welcome.  I plan for this blog entry to be one of the largest in scope of any entry that I have every done.  We are going to talk about the current Mortgage Crisis.  I will talk about it in 4 areas.

  1. The Boom
  2. The Bust
  3. The Current Situation
  4. The Way Forward

If you are wondering, I do have a degree in Business and I spent a lot of time studying economics. For a short time I even sold mortgages.  I will try to keep the text as simple as I can, I want you to not get bored and to read the entire things. Some of this will be my educated opinion, but most is simply fact.

The Boom

At the start of 2000 there was a bust in the stock market, millions of people pulled out a total of billions of dollars.  When 9/11 came they did so even more.  All of these people needed a place to put the money and the new trend was to put it into Real Estate, housing prices started to rise.  By 2003 and 2004 many real estate gurus arrived on the scene, showing common people how to make money in real estate.  It was a great time.  Prices were going up each month.

To add to this information, for the first time, was easy to get and compile.  It was easy to find a good deal on a house online, you could even find out the estimated value of your house or any other by going to sites like Zillow.  It was also easy to get a loan.  Because home values were expected to keep going up you could get a house for $150,000 and get 100% funding because by the time you get close to closing it was already worth $175,000.

The housing market was a great investment, it is one of the only investments that you can get almost total leverage in. Figure this, you buy a house for $150,000.  You only put $10,000 as your down payment, you get a tenant in the house and they pay for all the expenses giving you a zero cash flow but no expenses.  Now you sit, wait a year in this market and the price of the house goes up by 10%, BUT your return was not 10%, because the price goes up on the whole value of the home, not just your down payment.  You now have $25,000 equity in the house, a return of 150%.  This is the reason that investors flocked to houses, huge returns.

For many people, the more passive kind who usually invest in bonds and such this was way too risky for them, so they decided they would simply buy mortgage backed securities.  100’s of billions of dollars flew into these.  What these were was baskets of mortgages, and you could buy shares in this basket just like a stock, they had sold and predictable returns.  If you were used to getting 2% on your money in a CD or government bond, now you could get 5% on your money by buying one of these.  It was great for pension funds and foreign banks to sock away money because it had a higher yield and was still considered very safe.

The reason it was considered so safe was because of the very low default rate in mortgages caused by a booming housing market. Most people would simply sell their house for a nice profit before they went into foreclosure.  The investment banks reduced the risk even more by bunching 1000’s of mortgages together.  They would then break them up into different levels.  If there were any defaults the investors at the lowest level would be wiped out first, and the investors at the highest levels would still receive their full returns even if 20% of the mortgages defaulted.  It was a great system.  The investment banks bought up over a 100’s of billions of dollars worth of mortgages using this process, and they charges a hefty fee for all of it, making them some of the most profitable companies in the world.

For almost 70 years there was been a set of two companies, founded by the US government to facilitate the flow and resell of mortgages, these are Freddie Mac and Fanny Mae.  Basically these were huge companies that would buy mortgages from banks.  If a bank could not resell the mortgages they would need to get deposits to cover all the mortgages that they wrote and that would be nearly imposable.  About 92% of all mortgages are resold.  Freddie and Fanny purchased over half of them.  They would buy them from the bank, the price was set by the value of the house, Credit of the home owner, zip code of the house and a few other factors.

This created a great system for the banks.  They would sit there and advertise that they can get you a great deal on a mortgage, they would help you with all the paperwork, they would send your information to underwriting, where they would basically see what was needed to make your loan sell for the highest price to Freddie/Fanny.  They had some rules such as the first mortgage could only be 80% of the value of the house, or else the homeowner would need to buy PMI (Private Mortgage Insurance).  The bank would then take your entire mortgage packet and find out how much they could get.  On a $200,000 loan at 6% there is someone making $12,000 in interest every year.   The buyer of the mortgage would pay a premium for the loan, but they wanted to make sure they would get their money back.  So what the banks did was to get the home owner to sign a pre-payment penalty clause.  Basically this was a clause saying that the bank would get 2 years worth of interest from the customer, that the customer would still have to pay 2 years of interest even if they sold or refinance the house before 2 years was up.  So on that $200,000 mortgage at 6% interest the holder of the mortgage was guaranteed $24,000 in interest payments.  Because this $200,000 mortgage was really worth $224,000 for the first 2 years they would offer to buy it for $215,000 from the bank.  The bank where you got your mortgage made $15,000, paying some of that out as a commission to your mortgage broker.  They also usually would agree to service the loan, meaning they would send out statements and collect the money on behalf of those who owned the mortgage.  If a loan had a longer pre-payment penalty the bank would get more money, if they sold it for a higher interest rate they would also get more money.  The more income they could show for the client the more they would sell the loan for.  The interest of the bank and mortgage broker was to get as much from the client as they could so that the resell value would be as high as possible.  A few banks even started to lie about some of the details to drive up the price.

Mortgages were sold almost instantly.  This allowed banks to generate mortgages as fast as they could.  It was a great deal, get someone to come in and fill out some paperwork, show that paperwork to the mortgage buyer, get the buyer to agree to fund the deal and then you close on the whole deal and walk away with huge profits.  Do this a few times a day and a little office with a handful of people can make millions per year.  And that is exactly what happened. The banks had every incentive to get you into a mortgage, and they would do whatever was needed to do so.  It was easy to get a loan, even if you had no money to put into the deal, they simply would do a 20% second mortgages, or even if you really had no income, you could just do a stated income loan.  People were buying houses who could not pay for them.  Their main plan to pay as little as they could each month, and refinance when that 2 years was up and they would have a ton of money due to the value of the house going up.  It was a great system that worked for millions of people.

All of this easy money was causing housing prices to sky rocket.   I live in Phoenix Arizona and between 2003 and 2006 prices for most of the city doubled, people were bidding against each other in attempts to get houses, simply because the house was a good investment.

Where was this money coming from?  Well as I said much of it came from people who got out of the stock market, and needed a new place to keep their money, a large chunk came from foreign companies.  Remember we are buying at least 700 billion dollars more of stuff each year than we export.  So many nations, China, India, Saudi Arabia have billions of dollars that they need to invest somewhere.  They want us to keep buying to they make it easy for Americans to buy things on credit, then we buy more and they sell more.  It is a great spiral that put America in huge debt while at the same time sending millions of jobs all over the world.  The is the greatest transfer of wealth in the history of the world, but more on this in another blog.

The Bust

In mid to late 2006 the prices started to get very high, and there were signs of problems.  Some of these no money down investors who bought on stated income loans started to not pay their mortgages and the prices were not going up fast enough to still leave the buyer of the loan with a profit.  The buyers of these loans started to change their guidelines on who they would give money to, they started to make it harder.  This was a sign to many investors to start to sell, and the number of houses for sale started to go up.

Some of the hottest housing markets were Southern Ca, Phoenix Az, Vegas Nv , Atlanta Ga, and Miami, Fl.  These markets saw some of the largest gains, they were all nice warm places to live and people have been moving here for decades.  But they also had something else in common, they were all major places where Illegal immigrants would flock.  In late 2006 and early 2007 there was a huge national debate about Illegal Immigration,  and many of those here illegally owned houses but decided to simply leave, they dumped their houses, many others just borrowed as much as they could and walked away.  And the prices in these markets started to fall.

Once prices started to fall it changed all the numbers for the banks and the buyers of the mortgages.  If you get that same loan for $200,000 the buyers have more risk now, they don’t have a security of the house itself because the value will likely be less than $200,000 if the customer defaults.  So they said that they would only take the best and most qualified borrowers.  No more stated income loans, no more loans to people with sub-prime credit.  Suddenly most Americans could not qualify to buy a house.   All of these people were pushed out of the market, demand for houses plummeted, and when demand goes down price is soon to follow.

To make matters worse some of the Sub-Prime loans started to default.  Many were from investors who were upside down on the loan, they borrowed in a corporate name so there was no ill effects to them to simply walk away and give the house to the bank.  So thousands of them did just that, it was smart for them to do so.  The people who used the system the most were mostly the smartest and best at it, and when things started to go down they were the first to get out.

Most of these banks only put a 1-3% budget in for losses and some are getting much higher losses than that.  These foreclosed houses had to be sold so the banks simply dumped them on the market.  But banks are not in the business of selling houses, and they do a very poor job of selling houses.  They are risk adverse so they only want buyers who they feel will actually close the deal.  For the most part they sell the house as-is.  They do nothing to make the house look good and nothing to try to sell it.  For most buyers, buying a REO (Real Estate Owned)(Bank Owned) house is not appealing.  People with good credit who can buy a nice house want that house to be ready, and come with a warranty.  So these houses sat on the market for a while and the only choice for the banks was to keep slashing prices.  This was the main cause for housing prices to plummet.  This caused even more people to realize that they are upside down on their house and more of them simply walked away.  From the middle of 2007 until now this process has been happening, and it keeps getting worse.

These banks then saw their stock start to melt down.  Imagine a company that has 250 billion in mortgages but they owe 200 billion in debt on those mortgages, lets call them Mega Bank.  It was great for them in the boom time, they borrow money at 3% and loan it out at 7%, making 4% on 200 billion dollars, or 8 billion per year.  They had every inventive to do this as much as they could.  This company would have a value of 50 billion dollars or so in book value, the stock market almost always prices your stock well above book value so the Market Cap (The total value of all stock of the company) may be 100 billion or so.  With earnings of 10 billion or so it would be at a Price to Earnings ratio of 10, something that wall street loves to buy.   This company would be a star.  Now what happens if there is a ton of risk in the mortgages that the company owns, the company figures out that 5% of their loans are defaulting, but for one loan that is a total loss it wipes out the profits from 10 other loans.  So their accountants do figure out on average how much are all of the loans that they company owns worth.  If that number is lower than what they currently value the loans at they restate the value of these loans and do a write down of these impaired assets.  If you have 250 billion of loans on the books your accountants may feel that they are only worth 200 billion.  50 billions dollars, on paper, just disappeared.  Some companies bought insurance for such a thing to happen, the largest company that sold such insurance was AIG, they have as much as 300 billion dollars of insurance losses out there that may be paid.   So if you are Mega Bank the value of your company just went down by 50 billion dollars, but in reality all the rest of your assets you owe so your stock crashes, your market cap is no longer 100 billion but maybe more like 10 billion, or even 1 billion.  Investors on the stock market don’t know what to do, all they know is that they can’t value your stock.

The Current Situation

At the start of 2008 there were 5 major investment banks in the US, and three banks acting as mortgage clearing houses.  These were the banks that were selling mortgages to investors.  The investment banks took most of their profits by keeping some of the most high risk and high profit mortgages for themselves.   4 of the 5 investment banks saw huge losses, and all three mortgage clearing houses saw major losses.  1 of them went out of business, Indy Mac, they simply took so many losses that they could not pay depositors any longer.  Freddie Mac and Fanny Mae lost almost all of their stock value and had to be propped up by the government to stay alive.

Of the 5 investment banks Bear Sterns was the first to fall, they went from a 100 billion dollar company one week to being bought out by JP Morgan Chase for only 1.1billion the next.  The next to fall was Lehman Brothers.  They lost billions in sub-prime mortgages.  Their book value was negative.  They has a lot of really good assets though and tried to sell to a bank in Korea, but it did not work and in September of 2008 their stock went almost to zero.  They declared bankruptcy On Sept 13th, and are being sold in pieces to different companies, stock holders will probably get nothing.  On the same day the third Investment, Merrill Lynch was purchased by Bank of America for $50 billion.  Bank of America stock fell 15% that day because investors thought that they had over paid.   That only left two Investment banks,  Goldman Sachs and Morgan Stanley.  On September 22nd 2008 these two bank, under new government requirements converted to traditional banks.

None of this was helped by the hedge funds, these are basically large pools of money that often bet that something will fail.  These hedge funds helped drive the price down of many of the companies I wrote about today.  But many hedge funds also lost money on the mess.

The government has decided that for the most part they are going to bail out many of these companies, they are also considering a new govenment agency that will, for a short while, buy up this bad debt for pennies of the dollar, allowing the banks to write off these losses and move on.

During this whole time it has gotten harder and harder to get a loan, basically unless you put 30% down, have perfect credit and tons of income you are not getting a loan.  The government put in a program to help some home buyers which helped out a bit.

Even with all of this going on our economy is still fairly sound.  Employment levels have only gone down a bit, and many other parts of our economy are still stable.

The Way Forward

I have always been a free market guy, I think that the system works best when there is freedom to be successful and freedom to fail.  The government is really taking the failure and greed of these companies and helping them out.  They are doing this to save the normal people and the economy as a whole and to fix our broken mortgage system.  The government, and our President have seen how large this problem is and that they only way to fix it is a huge government bail out, and I AGREE with them.  The bail out will put stability into the system, it will prop up all the banks, and it will resolve the credit crisis allowing money to start flowing again.  They are looking at up to 1.5 TRILLION dollars in loans, and buy outs.

I think that we need to do this, if we don’t our economy is sunk, but this is NOT a progam that I think will cost the taxpayer any money, in fact I think it will make our government the highest profits that we have ever made.  Think of it this way, they are not just giving money away, they are going to be buying mortgages at the low of the market, the current talk is to buy them for 50-60 cents on the dollar.  If they do that they will set a low in the market, these mortgages are still backed by the actual real estate and the economy will turn around.  So one of three things will happen to each of these mortgages.  They will either get forclosed on and the government will sell off the house, most houses are still valued at over 60% of the value of the mortgage so they will still make a bit of money.  Option two is that later on they may sell back the mortgage for a profit, maybe 70-80 cents on the dollar.  The last thing that will happen to some of these loans is that the home owner may sell or refinance the house, and the government will get 100% of the value of the house, basically doubling their money.  I think that if the government does this that they will make at least a 20% profit on the money.  They are talking about buying 700 billion in mortgages, making them about $150 billion.

For AIG they are giving them a 2 year loan for $75 billion.  In the termns of the loan the government gets a 11.25% return each year AND they get stock options where they can buy 80% of the company at a very low price.  The company was worth over $200 billion last year.  If it goes back up to even 100 billion the government will make almost 80 billion from their stock options, and still make about $17 billion from the interest on the loan.  This bail out could make the government almost 100 billion dollars.  The owners of AIG see how much they will loose if the Government loans them the money so they are still looking for other lenders to help them out.

Almost everything that they are doing is set up in such a way, this whole bail out system as a whole, will probably cost out government nothing and make us at least half a TRILLION dollars in the next 2-3 years.  This could wipe out our deficit and radically change our government balance sheet.   It is not enought to totally wipe out our deficit but it will reduce it a lot.  If the economy really picks up so will taxes and the government has a good chance of being in the positive.  Of course this positive change will not happen until 2009 and if a democrat wins as president will probably say that it was them that made this change and that they are the reason that the government is suddenly so profitable, but we know the truth.

On a side note the President does very little to effect the economy.  Most of what is done is done by congress or the treasury department.  Also anything that the president does do takes 2-3 years before it really goes into effect.  Such as the losses in 2000 were not caused by Bush, he just took office.  All I know is that I would never vote for someone who thinks that raising taxes in a time like this is a good idea.

Thanks for reading, if you liked this blog entry, please leave a comment, I read all of them, and also please subscribe, you will then get all the nice future entries that I make.  Thanks.

Fortune subscription coupon.

For over 10 years now I have read Fortune Magazine.  It great to think about what is successful, and what the big companies are doing.  They also publish their famous fortune 500.  The list I like much better is the one they make about the whole world, the Global 500.

They also feature something in each edition from a made up guy named Stanley Bing, the stuff he says is so great.  One great thing about fortune is that they finds important issues and write in depth 20-30 page stories about them.  One time they had a 90 page story, it was great.  Recently they had a 50 page photo album of the most powerful people in the world, it was great. I highly suggest that you subscribe.  You get so much.

Anyway the other day my subscription expired, because I have been with them for years they sent me a special Corporate Savings Offer.  Just call them at 1-800-621-8000 and tell them you have code “fob80h5”.  You will get 3 years for only $20, that is a killer deal, and it will be well worth it.

I have received nothing for writing this blog, I just simply really like this magazine.

Obama doing something that hurts us badly.

I usually don’t talk politics on this blog because this is a business blog,  but Obama did something that for me is unexcuseable.  The main stream media is not talking about it because if people on the left knew about this there would be outrage from manyand they want Obama to win.  But the media in the middle east is talking about it .  I also found it in the NY Post and I first heard about it on Fox News

I think that every American should hear about this.  It is on the verge of treason.  Basically here is the gist of the story.  Obama went to Iraq on his tour there.  During a meeting with the Iraqi Foreign Minister Hoshyar Zebari he basically presented himself as sure to be the next president.  He then went further to tell the Iraqi leader to NOT make a deal with the Bush adminisration and to wait until the election is over.  The reason he did this is clear, the Iraq war is almost over and if it ended or if there was a major event that was the sign of the end many people would not Vote for Obama.  Getting us out of the war is one of his main positions and if the war was over they may not support him.  

I think that this may be the first time in US history that a presidential candidate under minded the state departments policies by going to a foreign nation and counterdicting the current government.

If you read about it anywhere, you will find that the source of the story is the Iraqi Minister himself.  This delay would add at least 6 months to the war. At the current rate that would cost us about 70 billion dollars and about 70 American lives, all this for one man to be elected.  What ego.

Please click on the links to the news story above,  or do a search for “delay iraq obama” and make up you own mind.

Web design is still a growing part of computer industry.

Believe it or not, most business STILL do not have a real web page.  The market really fell out for the computer hardware business but we still are seeing a large demand for web design. The good thing about web design is that it has become easier and much cheaper to do but the perceived value has not gone down.  There are many companies out there selling sites for $5,000 or so that outsource it and pay less than $200 to get the site made, pocketing the rest.  I figure I can find a way to make a better site and charge much less.

When it has come to web design our company has usually passed it off.  It was not our core business, it was something that no one at our company knew how to do.  A few times we hired people to help us do web design for clients but every time it has failed, the designer was not as good as they thought they were and the client demand more than they originally wanted.

So now that our core business is down I decided that I would personally learn more about it.  Yea I know HTML, I know tables and forms, and I have built many pages over the years but to do the really good ones you need much more.  You need to know CSS to make it look good and have the same format.  You need to know PHP so that it is easy to change, dynamic and more functional.  So I set out last week to learn these two things.  CSS was easy, it is a simple concept that took only a few hours to learn.  PHP was much more complex because it is much more powerful, but after a few long days I feel I am good at PHP also.

The next step was to test out my ideas by making a simple website for one of my customers, I just happened to have one who needed a web page, so I built one for them.  You can check it out here. During the process of building this site I also have found a ton of really good resources

If you have been a reader for a long time you will know that I am all about delegating things.  My general rule is that if you can find someone who can do what you are doing for less, and is at least 80% as good you should have them do it.  The problem is that for me I have not found this, everyone wants to charge way too much and I have not found anyone who can even do the whole job at 80% the level that I now can.  I have found people who can do parts better or worse.  This is why I am not delegating.  If I start getting larger I may start to delegate more.  But in reality if you are building up a libary of tools it makes it much faster and easier.

The secret to getting the BEST deal on your next computer.

This is part of my Computer series of blog entries, click here for the others.

Ok almost everyone, and every business needs a computer to do their day to day business. For most people a computer is a large purchase.  For some businesses that buy hundreds of computers it can be a major part of their budget.  So getting a good price on this major purchase is very important.

What I am about to tell you is a secret that the people in the computer industry do not want you to know, in fact when I was running my retail store I have fired people for telling customer this.  The secret is this, computers are very easy to build, and you can buy the parts directly and shave off 30-50% of your purchase price.  It has always been cheaper to build your own but recently it has become very easy.  The parts are designed to work together, and you can mix/match them almost any way you like.

If you think that this is an off the wall idea then you would be very wrong.  The large computer companies are called Tier 1 Companies in the industry.  The rest of the companies that sell over 100,000 computers a year are called Tier 2 Companies.  The rest are simply called White Box, the industry word for Generic.  For the last 5 years the white box makers have been gaining market share, according to intel they sold over 57% of their CPUs in the white box channel.  During this same time the number of computer stores has fallen dramaticlly.  So how can this be, the answer is because millions of people and business are building their own computers.  The number one largest user of computers in the world, Google, has never purchased a server or workstation, they have built them all.  Microsoft is the same way, so is many of the fortune 500 companies, and millions of smaller businesses.  Many shop online, or they go to stores that sell parts.  Fry’s Electronics has built an empire on this with mega computer stores selling parts, but Frys is over priced, has very little help and it is hard to return things to them so I would never suggest you buy from them.  The best bet is your local computer company, if you are in Arizona call on us to provide your hardware, if you are outside of AZ you can still call us for advise, we can even tell you where to get the best deals online.  It is now said that as many as 1/3rd of all new computers are built by the end user, so why are you not doing it.  Let me tell you how.

So here is how you do it. First you need to buy the parts.  Only buy new products from a good company and you will be good.  Pick out the CPU you like, I usually suggest AMD because they are good, but in reality it matters little, as for most people any $80 cpu will do.  Now you get a motherboard that supports the CPU, just look for any new one that has the same socket.  I like MSI the best for motherboards, they are high quality and well priced. Basically every new computer uses DDR2 memory, so buy that, I would get at least 2GB if you plan to use vista.  Next you need a hard drive, again for most people just get the size you need then find the best price.  For most businesses the 160GB is the best to shoot for.  I like WD for the brand but others will also do, just make sure it is SATA.  Now you need a optical drive, I suggest a DVD burner, they do everything and only cost a bit more.  I usually suggest people get a card reader for all that digital memory.  Last you need a case to put the whole thing into.  The case will come with the powersupply and most will be good for basic systems, for really advanced systems with lots of extras a good powersupply is a good investment. That is it, you have everything you need to get started.  Guess what, you can do all this for well under $250.

Now lets talk about ad ons.  For most business systems you really don’t need a video card, just get a motherboard that has one on board.  You only need a video card if you want to run two monitors or if you play 3D video games.  If you play games then there is much more to consider, I will talk about that at a later time, but mostly this is a business blog.  You may also want a new keyboard, mouse, speakers or monitor with your new computer.

When you get all the parts simply open the case and start putting everything in.  I suggest putting the drives in first, then the motherboard, then the CPU, RAM and connect all the wires.  Don’t force things but use firm pressure where needed.  The hardest part is connecting the case wires to the motherboard, but there is a chart in the motherboard book if you get lost.  Next you boot on your OS disk, install the OS, then install the drivers.

Doing all of this may take 3-4 hours the first time but you should save at least 300-500 by doing this, and for most people they don’t get paid $300 for 4 hours of work.  For a business that is buying 20 computers they probably just saved over $8,000 and even if they don’t want to build the computers they can hire someone to be an IT person for a month for way less than that much.

By building the computer you also will get some added benifits, first the parts are much higher quality then most name brand computers.  Next if anything goes wrong with the computers you have common parts that are easy to replace, unlike the pripority computer parts most large companies sell.  Lastly you get a clean OS installed, without all of that added on spam and advertising that the large companies put on all their computers.

So next time you need a computer buy the parts and build it, you get a much better deal that way, even if you need to hire an expert to help you.

I am a total political junkie.

Wow I have found myself watching a huge amount of political stuff in the last two weeks.  These conventions were very interesting.  The tone of the whole race has really changed, people are now back to saying whatever they can to attack the person they don’t like.

I find it quite sad that people would disrupt an event that they have no place being at just to get some air time.  I find it sad that people attack other people for something unimportant just because they oppose them on a totally unrelated issue.  There are a few people who are not doing this but for the most part they are doing everything they can to bash the opposite party.  At least the candidates themselves seem, for the most part, to only been bashing on the issues.

It is OK to say you don’t agree with someone, and lay out point by point why you don’t agree with them.  You can argue with them as much as you can.  But what is not OK is bringing up non related issues, and bashing them on that.

Because of this I have had much less time for blogging recently.   I have not spent a lot of time blogging about politics, for three main reasons.  First this is a business blog, I do think that politics has a lot to do with business but the things I have been focusing on don’t.  Second, and most important, there are MANY people blogging about this, and most of them spend more time and energy on this issue than I would like to.  I like to collect info more than just give opinions.  Third, I hate it when people are so biased that they attack me for saying what I would say, it is OK to attack my views, but on other blogs when I post a comment that makes sense, they just write things that are simply evil because I don’t support their views.