Monthly Archives: June 2009

Is this the end of the credit markets again?

The world as we know it is over, unless something drastic happens in the next 24 hours or so.  For the entire history of our nation business has been the engine that has spurned our growth.  And the engine of big business has been the ability to raise and borrow money.  This has been done by selling bonds, basically chunks of debt.

This is how corporations work.  A corporation is a business owned by the stockholders.  Most companies sell stock to raise money to start out with, this is called an IPO.  But after a while if you keep selling stock you dilute the amount that each person owns.  It is basically like taking on more and more partners in your company, meaning you own less, and you control less, and these partners share in the profits.  So most companies find it much cheaper to borrow money by selling bonds.  These stakeholders do not share in the profits or any upside in the company, but they also are the last to be hurt by and failure in the business.  As the business operates they also accumulate other debts, to vendors and to employees.  If a company fails it is just like a small business that fails.  The owner equity is wiped out first, the assets are sold and the bond holders get paid first and in full, and then if there is any money left over the other debts are paid.  Only after all of this is paid does the owner get anything.

In the history of large American business many companies have gone bankrupt, and it has always worked this way.  Almost every time the stock is wiped out.  Some companies survive by getting bought out, others simply restructure and are able to get out with little pain.  But here is the big change.  In recent times the government has gotten involved in being the largest bond holder of many companies, but the government does not look our for the best interest of US the tax payers, they don’t mind taking a loss.

Supreme Court ChryslerSee a few weeks ago Chrysler declared bankruptcy, and their stock was wiped out.  The company basically had three large creditors; The Government, the Union for future pension and health insurance payment, and the bond holders.  Lucky for Chrysler they found a buyer in Fiat for 35% of their restructured company, the problem is that this buyer is only willing to pay much less than what the company actually owes.  The Government is not really looking to get their money back so they are willing to take a major loss, the problem is that the Government used TARP money to invest in Chrysler and that was illegal, but that is a mute point now, they are just rolling over.  But the problem is that the Government and Obama have decided that the BULK of the money should go to the Union, heck Unions are the ones that put democrats in office.  So the Government decided to write the plan in such a way to pay only 29% of debt owed on the 42.5 million of debt of the bond holders, the people who should be first in line.  While the unions are getting 55% ownership in the new company, and the federal government is getting 10%.  A group of the bond holders spoke up and rightly said that they were not being treated right, that they should be first in line, not last.  The one Justice of the Supreme Court of the US saw it this way also and decided to stop the sale to Fiat under this current plan.   A huge amount of pressure came from the White House to allow the Fiat sale to go on, and the Court caved today and let it go on.

Now what this does is it creates a terrible precedent in US law that bond holders are no longer first.  This means that the people who invest get in bonds get none of the upside and much more of the downside risk, all for very little return.  This move will freeze the bond markets even more, in a time that we need them very much.  This also sets up the precedent for when GM finally gets done with their restructure.  The correct thing to do would be to wipe out the Unions.  These unions are the root cause for the failure of these companies.  Line workers start at more than $70 per hour in pay and benefits, many with tenure make well over $100 per hour.  And then they retire with a huge pension and a huge health care bill.   With such a high labor cost the average vehicle made by GM had over $7,000 in labor cost.  Newer, non-union plants owned by Nissan, Toyota and such have average labor costs per vehicle under $1,500.   So if GM wanted to make a vehicle for a cost of $20k (Sales price much higher), they would have much less money to work with to buy materials and make profits, in fact they have not made profits for many years, and now pay thousands per vehicle to cover their debt.  So if you spend only half that as your competition on the parts going into your product then your product can not be as good for the same price.  So during the 80’s and 90’s they just built a lower quality car, and recently they started building a much higher quality car, but at a much higher price.  In both situations it caused a steady march of customers away from these companies, and a vast loss in market share, making it even harder to do business.  The unions were like a boa constrictor, killing the company by squeezing tighter and tighter, but the Obama plan for GM is to give the unions over 90% of what they were promised, and they have taken no real concessions, not even a payout.  While the Government is willing to take only 60% of what GM owes the tax payers, and what about the bond holders.  Well they are going to get somewhere between 19% and 29% of what they are owed.  This is crazy really.  But this is payback to the unions for supporting the democrats, and a step into the much more socialist America that we find ourselves in.
If secured creditors keep loosing their rights then our capital markets will simply fall apart.  I was getting hopeful about our economy recently but this will really put a crimp on things.  It also does that help that the federal government needs to issue over $100 billion in bonds each month just to stay afloat with all the spending that is going on.  How much longer will people keep trusting in these bonds, when you see interest rates start to go up you will know that the trust is fading, and when that happens there will be even more trouble for us.

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MLM Math. The numbers behind the eFusjon comp plan.

When you are looking to join a MLM you may find that some are VERY VERY complex while others are very simple.  Well I love math, and I always lean towards the very simple ones.  Complex MLM’s tend to not do as well as others, and also you never really know if it is all correct.  Some MLM’s are so complex that you are never quite sure what you are going to be getting paid.  I love math and I like to take a company comp plan and test it by pushing it to the max.  With most comp plans it is easier to do that by flipping it over, seeing how much the company has committed to pay out for any one sale.  Next I look at the MLM from a break even point.

So on to the math.  The MLM is called eFusjon.  My first thought was that they could not spell, I even had to Google how to spell it just to write this blog.  First off this business model is unique to anything that I have seen, it is very interesting and it is PURE math.  And I love math.  The way it works is very simple, you get paid $5.27 for each active person that is in your downline.  It is a 3 wide system, you have a left, center and right person.  But this is where it gets interesting, you share your left and right spot with other people who are to the left and right of your sponsor, the first one who fills the spot gets it.  If they put someone in under you then you are paid $1.20 per month on those people.  To be able to earn money you need to have three active people who you personally sponsored, and if they go inactive for 60 days their spot is erased.  The payment goes for 15 levels deep.  So when the whole system is full that means that 15 people are making $5.27 on your order, and as long as you are not in the center that other people get paid $1.20 off of your orders.  From my count this can be a VERY huge number, well if the company had millions of people in it and no one dropped out meaning that you had 15 levels full of people above you there would be (1+2+3+4+5+6+7+8+9+10+11+12+13+14+15) 120 people who get the $1.20 override.  People.

So this means that on a $120 order that the company must pay out as much as $199.05 in commissions.  This is probably why they stopped paying $10 (Personal) and $5 (Sides) like when the company first started, because at that rate they would actually loose money on each order even with only 30,000 people in the company.  Of course a full system is over 100,000 people and only then would they start to pay out such huge numbers, but it will still be only half that get generate that much commissions for their upline.  I figure they need about 500,000 or so members for the system to stop working, and thus for them to be forced to change the system, I predict they will choose to change it once there is about 200k or so people in the company.  That may be some time from now, as there is only 30k at this time.  Also if people drop out that will also make holes in the chart which will also save the company money.  Of course they also need to produce the product for the $120 amount, and pay all of their bills.  One other thing that may save them is the fact that someone must recruit 3 before they get paid, and many never will do that.

The product is an energy drink, and it is healthy, and if I would buy it in the stores I would probably be willing to pay up to $1.50 or even $2.00 for a can, but I am really cheap.  Others would pay $3 with ease for a quality product that does what this does.  So lets say that it is worth $2 a can.  Well their price, with shipping and other fees is $166, for 48 cans.  So in my book you are getting $96 in product and paying $70 to participate in the MLM.  Now with a payback of about $5 for each person on your team you need 14 people to break even.  But it is much easier, because your upline can only put three people under each person so they must put people under you, and you get the full $5 for people in your direct upline, and $1.20 for people from the sides.  So if you find an active team you can quickly be in positive range.  If you find a superstar who can bring in 100 people in a short time then you would be making $500 a month.

So after looking at all of this, and crunching the numbers it all comes down to the team you are joining, and how many people you think you can bring in yourself.  So I looked at that.  The team that was showing me this has been in the company for less than 45 days, and they already have over 850 people.  They 2.8% of the entire company, and they are a group of builders that should have no problem putting in a 100’s per month.  Next the my good friend Fred was going to be directly above me, and he put in over 80 people in his last MLM in only 3 months, and that MLM was much harder to put people into.  Next I looked at the people I know, and how it would be easy to put at least a dozen of them in, and then they will put people in also, building a large group.  I know I need 14 people to make it even in my mind.  And with all of this I figured that 14 would be easy to get, I can probably even do it this month.  I need 32 to make this business totally free, and I think I can do that in the second month.  So I made the leap and I joined.  Most MLMs are built on math but most people who join them never look at the math.  I have looked at over 20 MLMs in the last 2 years and I have only joined 3 of them, simply because the math did not work on the others.  On those other ones there was no component of your upline building your team so on those I did not make money.   If you want to join in on my team will also receive the benefit of all of this, CLICK HERE to sign up, we will help you build into profitability ASAP.

I try to keep my personal brand to be that of Emerald Computers, the company that feeds me and pays my bills.  Most of the time that is all that I mention to people.   When I was looking at the math for efusjon I also took Emerald Computers into consideration, and that I may be able to sell computers, services, or websites to many of these people because of the fact that this company is very heavy into online marketing.  This made it a very easy decision, just from the few people there I already made two new clients who I should see this week.

One more final thought, another interesting part of this companies comp plan is the fact that you can sign up again and again under yourself.  So you can go a few levels, then you see a superstar, so you join again, and now you are double dipping, getting paid twice on their team.  It costs you $150 each month for each position so if you can create locations that pay more than that per month it is to your benefit to do so.  Plus you get more product to use.

I hope this helps, and I welcome any and all comments.

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