The ECONtrepreneur.

POTUS #StateoftheUnion '12

2012-01-24T22:15:00.002-06:00

The annual State of the Union address. A major political event, economic increment and trending topic.

@RogueEconomista

Every year Americans await the President's take on the economy and where we're headed in the new year. Campaign years are especially important because voters can signal whether or not they are happy with the administration at the ballot box in November.

Previously, we've discussed the difference between positive and normative economic statements. This is never so tantamount as to when you are deciding which candidate, which party even, to vote for. Politicians have to pander to voters' preferences to get or stay in office. Their political promises, however, often lack the economic prudence to maintain our strong global standing with high production or low unemployment. Below, some highlights from President Obama's 2012 address that could have gotten lost in translation:

The Iraq War is over and thus commenced the President's speech. By ending the way America lowered her military expenditures and extended the lifespans of troops no longer challenged by Bin Laden's al-Qaeda. President Obama philosophically challenges us to imagine a world where we achieve economic growth without the aggressive use of national (preemptive) defense. It's a tough picture to paint: Americans have been at war constantly for the last 9 years and our economy has not emerged unscathed. This should be a major selling point for what follows...

"Everyone gets their fair share...everyone plays by the same set of rules..." President Obama calls this idea an American value, not one of only Republicans or Democrats. The idea of instituting equity or fairness into economics is a slippery slope: our experiences, lifestyles and beliefs shape our idea of what is right or wrong, fair or shady. This is a political promise, not an economic one. The markets don't promise fairness, only efficiency. There will be losers. And who determines what is fair? If there is in fact a "who" then we're not in Capitalist Kansas anymore. Welcome to the new State-Sponsored Capitalism.

Where's the nose??

Domestic manufacturing is definitely a major bulletpoint of this year's speech. Surprisingly (to me) the President blatantly promoted protectionist strategies to promote domestic business at the expense of importing or producing goods and services cheaper elsewhere. I believe this to be problematic because by promoting America and putting down the rest of the world we are effectively cutting off our own nose to spite our lovely face. International trade helps us to grow beyond the resources we have. If we couldn't trade financial capital or democracy for oil then we'd have to change our way of life immediately. Also, producing goods and services at the lowest cost is a hallmark of competition and provides incentive for businesses to expand and evolve. This is more President political pandering: Obama is obligated to throw his support behind American manufacturing and production because he needs to be reelected this fall. In the long-run trade barriers such as "buying American" or subsidizing American producers hurts competition. Suppose we protect our industries as the President suggest and prices are better elsewhere in the world? then cash flows will leave our country for more favorable markets; it's a self-fulfilling prophecy. Trade restriction are a highly controversial area especially during a time when domestic jobs are so scarce! But economically, what's better for America's future?

Aaah yes, and taxes. If anything the Buffet Rule is major political prose. The likelihood that we reform our complicated tax system anytime soon is slim to none. The likelihood that we reform taxes so they are more efficient, less obnoxious and well..fair? You do the math.

*sigh* And no word this year on moving closer towards faster, efficient public transportation like we see in technologically-advanced Europe and Asia. With rising gas prices and American protectionism we can likely conclude that these constraints will constrict the economy and have an adverse effect on the job situation. People without income cannot pay high gasoline prices at the pump. They need high speed/long-distance trains, new buses, routes and stops, and metropolitan-wide light-rail systems to get them to where the jobs are. Oh, and more jobs will become available as we improve upon our nation's aged transit system to compete with other markets across the globe.

Love to hear your thoughts on this year State of the Union address!

Dr. King's Dream Today

2012-01-16T06:59:00.002-06:00

"Beyond Vietnam" is a speech by Dr. Martin Luther King, Jr., that you probably have not heard of if you are an 80's baby like myself. It was the speech he received the most vitriol for. Delivered exactly one year to the day before his assassination in Memphis, TN, King vilified America for her negligence of the poor in lieu of an unpopular war. What economic value can we use today from King's vision in 1967? Is his message in this unpopular speech relevant?

Most notably from that speech, King quoted an important statistic: "We spend $500,000 to kill each enemy soldier while we spend only $53 for each person classifed as poor; and much of that $53 goes to people who are not poor. So I was increasingly compelled to see the war as an enemy of the poor..."

Per Google, the costs of killing an enemy combatant in the Iraq or Afghan wars range from $50 million to $150 million depending on when you compiled the data. However, our soldiers of all colors can sit in the same classroom and live on the same block in peace. But the income inequality is the issue that remains an issue.

I believe that Dr. King would support the #Occupy movements worldwide. In "Beyond Vietnam," King speaks against the war to break down the wall between not only black and white, Jew and Gentile, but also between capitalist and communist and every variation in between. Market structure is a non-factor in King's utopia. Capitalism may very well be an engine of income inequality; but inequality anywhere is injustice everywhere. So with the growing income inequality we have experienced here, the conclusion is that the American capitalist structure must be reformed.

King explicitly addresses the "giant triplets of racism, militarism and economic exploitation..." and says that true compassion will force us to examine our values, or our normative statements. Should we spend our money on national defense or moral uplift? Today, on January 16, 2012 , we ask ourselves this question. The war in Iraq is over as the war in Afghanistan rages on. In contrast, income security, i.e., welfare spending is roughly 12% of the national budget, or $5,777.64 per poor person.

"There will be no meaningful solution until some attempt is made to know these [poor] people, and hear their broken cries."

- Dr. Martin Luther King, Jr., April 4, 1967

prosperity,

@RogueEconomista

BP Must Pay

2012-01-11T01:00:00.000-06:00

This week an Op-Ed piece ran in the NY Times which audaciously claimed that BP is the poster child for economic justice in industrial accidents. In response to the accident of 2010, a $20 billion fund to compensate victims of the BP Deepwater Horizon Oil Spill was established and Kenneth Feinberg was appointed by the President to oversee compensation to the masses of households and businesses adversely affected. The NYT author takes pains to note that BP has "performed quite admirably" in the aftermath.

Oil & Water don't mix; BP Deepwater Horizon rig explosion response team

The Players
Last year, The Delasol Group established a working relationship with Fiduciary Management Group (FMG) to facilitate monetary distribution for Loss of Subsistence Use of Natural Resources; verbiage meaning that due to the oil pollution, there are people who can no longer eat food from the water, use the water in any functional capacity or go back to work if their vocation dealt with the water. This is a claim that affects households and small businesspeople in the region.

And that $20 billion to rebuild the Gulf Coast economy? As of Monday the following statistics (1) are predictably true:

The Numbers

29.45% of the Fund has been paid out since inception in August 2010.
61% of all compensation has gone to businesses.
There's a 64% chance an individual will receive $5,000 or less (grossly understating the value of loss).
Claiming Loss of Subsistence Use of Natural Resources comprises two-hundredths of one percent or .02% of all claims paid.

The Rub

Specifically, The Delasol Group and FMG are working alongside tribal leaders of the Biloxi-Chitimacha Confederation of Muskogees in Southern Louisiana. This is a population that falls short of the education and political clout to make easy work of the onerous documentation. The Delasol Group is a business which serves the disenfranchised. This is a population of skilled shrimpers, homemakers, oystermen, deck hands, administrative assistants boat operators and many others who deserve more than a cursory article; more than a federal oversight; more than an obliterated culture. Visit FMG's secondary website dedicated entirely to the cause to learn more about the firm's efforts and the BCCM website to read about the tribes' history, goals and concerns moving into the future.

The Mission

Should the Gulf Coast Claims Facility amend their erroneous processes to file and receive compensation for Subsistence Use claims of Natural Resources damaged by the BP Oil Spill, FMG will invest and allocate reward monies for current and future generations of the tribes. The Delasol Group will draft, publish and present and make permanently available economic literacy curricula sensitive to the tribe's socioeconomic needs to nurture and develop their assets.

In addition to muddied shores and tarred inlets, these citizens face off against both their own government and Big Business in a mutual quest of life, liberty and the pursuit of happiness in an all too familiar standoff. To achieve tribal-level justice the American Indians are pitted against businesses and victims in competition for a bigger piece of GCCF pie. No litigation necessary; it's not their day in court these people strive for. They, like so many other disenfranchised Americans seek a day when their land, language and lifestyle are respected as any other.

I'd like to see the NY Times write a piece on the income inequality rampant among those who have received GCCF payment and those who have not. Or an Op-Ed on the deleterious conditions marring a credible and accountable GCCF claim approval process. No, a follow-up on how the people in this video clip have improved economically with help from BP since this was filmed last March should do the trick.

BP has made amends for nothing until it has made amends for everything. The GCCF is as yet unsuccessful if it neglects even the least of victims. In the spirit of activist and theologian Dr. Martin Luther King, Jr., "Injustice anywhere is a threat to justice everywhere (2)."

(1) Report obtained from the Gulf Coast Claims Facility website
(2) From King's Letter from Birmingham Jail, 16APR1963

@RogueEconomista

Optimistic Economics!

2012-01-09T19:41:00.004-06:00

This year, our 4th year in operation The Delasol Group focuses on improving efficiency in our mission to distribute personal, practical economic information to the People. We've been quietly building a foundation providing resumes and cover letters to job seekers, drafting new economic literacy workshops and partnering with other visionaries to get appropriate information to specific demographics. Efforts to market our mission and our brand have expanded beyond The Econtrepreneur - the official blog - and is now accompanied by a Facebook page and Twitter account profiling Delasol in the community and informal discussion on issues of economic significance. A primary means of marketing has been in the form of commercials, all of which are featured on The Delasol Group's YouTube page. 2012 A.D. has arrived plentiful with new opportunities and even wilder dreams for this small economic education and consulting firm with big ideas. Personal, practical economics. For everyone!

"Like" The Delasol Group on Facebook!

"Follow" The Delasol Group on Twitter!

"Subscribe" to this blog!

"Browse" the Delasol Group's videos on the official Youtube Channel!

"Visit" our website for more information on produts and services

cheers,

suneye rae
founder / economist

Investment Education for the People (1)

2011-08-12T23:58:00.002-05:00

Prosperity, ECONtrepreneurs! By popular demand I'm privileged to present The Delasol Group's Investment Education for people who talk themselves out of investing. "That's only for the rich." "One day I will..." "I'm too busy paying bills." "I don't know anything about investing." My hope is that you will be briefed with high quality information to enlighten even the casual investor. No investing experience necessary.

**You will, however need access to either Google Finance or Yahoo! Finance. It's free and you dont' even need to sign up! This is personal, practical economics, so you know it's hands-on. Throughout the Investment series we'll reference these applications (also available for your smartphone) for you to get used to using them for yourself.

A proper introduction to investing demands an understanding of risk. Straight up, risk is the possibility that you will lose; in this case, your personal investment of the Almighty dollar. Which brings us to our first rule of investing:

Don't invest more money than you can stand to lose.

There's no such thing as a free lunch, and investing should not be viewed as the pathway to getting rich quick. Substantial returns are available to smart investors who take substantial risks. And what makes a smart investor? One who is armed with both common sense...

If it seems too good to be true, it probably is. Suckers and their money are easily separated. Bernie Madoff's hedge fund promised double digit returns a year with grossly insufficient information as to how the money was invested. It was all just smoke and mirrors.

B. Money & his role model, Ponzi.

...and information (enter Delasol). Take a closer look at risk: there's Perceived Risk and Actual Risk; and their definitions are literal.

The risk we perceived last week when Congress was fighting over the debt ceiling was based on what we were feeling: uncertainty, anger, regret, ambiguity, confusion.
Actual risk works opposite it's counterpart (...usually..) and is measurable. Although the Dow Jones Industrial Index displayed all of our perceived risk (the market has been extremely volatile), the actual risk was much less severe.

What measure(s) you choose to determine how much risk you can stomach is up to the individual. To help, I present some valuation variables that budding ECONtrepreneurs may adopt to kickstart their research. For this part let's keep it simple and focus only on one stock, say McDonald's. Risk should be assessed for all types of investments, however, not just stocks.

Profits: Also called Gross Profits, also called Earnings. It's the benefit of a business making more money than it needs to run itself. After accounting for expenses (overhead costs, taxes, et cetera) what's left over is the good stuff that Wall Street and Fox News go nuts about every quarter. Here's an exercise. Let's research profit for McDonald's. Using Google or Yahoo! Finance, enter in the ticker for McDonald's stock. The ticker symbol is MCD. Both services offer you the option to look at additional Key Statistics. Follow this to Mickey D's profits. What is the amount?*

Price per Earnings Ratio: Aka Price Multiple, aka Earnings Multiple. If a company issues stock, the P/E ratio can be another useful resource Calculating it is unnecessary, as it's normally given as a stock's Key Statistic. Generally speaking, the higher the P/E ratio, the better. Warning: comparing P/E across industries is not wise...so compare MCD's P/E ratio to say, Wendy's (WEN) and not Toyota (TM).
The 52-week High/Low: The highest and lowest point at which a stock has closed (at the end of the trading day which is from (9:30A - 4:00P Monday thru Friday). A good perspective when making a decision on what you feel the intrinsic value of a stock is. Google and Yahoo! also give the daily high and low as a show of the stocks volatility.
Beta: The standard measure of a stock's volatility. A beta of 1 indicates a stock's price is in tandem with the overall market of stocks (the Dow or the S&P, for example). A beta of less than 1 means a stock will be less volatile than the market; and a value greater than 1 means, you guessed it, more volatility and fluctuation. Shop around with this one: Yahoo! says MCD has a calm beta of .36. Google says it's more rowdy and gives a value of .48. You be the judge.
Earnings per Share (EPS): Another lovely measure of profitability that is misleading if not examined closely. Company A and Company B have identical EPS. But Company A achieves this by taking on debt. Company B uses it's profits more efficiently and takes on more (if smaller) investment without the debt. Knowing this can help you make a more informed decision on whether to invest in Company A and B.

Try this over the next week: think of companies you like and search within Google or Yahoo! Finance and see if they have a ticket symbol. Then, think of a competitor. Compare and contrast the two companies on the basis of profitability, volatility, and type of business (what they make, if they're any good at selling it). Consider the value you'd place on the stock (in dollars) and see if it's comparable to the market price. You may (not) be surprised!

After you've had a chance to digest this, our series will continue focusing on Types of Investment Securities available besides stocks.

Have comments? Please post them!
Have questions? Check out www.investopedia.com or send me an email!

prosperity,

dls

*McDonald's profit as of 13August2011 is $9.64 billion.

Notes on a Scandal: Oil Spill Monsters

2011-08-09T19:15:00.000-05:00

Rumor has it that the Global North - rich in human resources and ingenuity - has systematically exploited the Global South - rich in natural resources - for personal gain. This is not entirely true.

"Global South" and "Global North" are alternative designations for developing countries and developed nations, respectively. It's a nod to the United Nation's Human Development Index; a low score (<0.5) indicates there's room for economic and social improvement. The geographic location of said countries, however, is approximate: e.g., Nigeria (0.4) is technically in the Northern Hemisphere, as New Zealand (0.9) and Australia (0.9) are in the Southern.

The truth is that nations of the Global North have natural resources as do their Southern counterparts. However, an economic principle called Comparative Advantage allows some countries (in the Global North) to exploit the benefits of world trade (globalization), albeit often at the expense of each other (read: the Global South). So Florida becomes a major producer of oranges, although the citrus treat is indigenous to Asia. New agricultural methods, technology and lower costs can remarkably make "Florida oranges" a household name.

Oil doesn't make one think of the United Kingdom, but believe it or not, it's rich in it! Because of comparative advantage, it's cheaper for a country rich in applying the human resource to technology to import it from say, the Persian Gulf or the Niger delta. Since the early 1900s, the UK has had a presence in the global oil industry. Through a series of mergers & acquisitions over the years, we have present-day energy conglomerates BP and Shell. The two UK energy firms have had their share of ups and down in the global markets, including anathema to Big Oil: a spill. Or worse yet, an environmental catastrophe. Volatile stocks, environmental damages and consumer confidence have left both firms humbled. Or has it?

BP:

Most recently claimed culpability in the Deepwater Horizon oil rig disaster last April. The Consequence: BP has to cough up $20 billion to compensate residents and businesses for the damaged coastline. The Rub: The claims & distribution process for victims is slow and unjust. Only 25% of the BP compensation fund has been paid out in the last year! Delasol filmed on location this Spring alongside a Native American community in Louisiana.
Profits: Up 21% from the previous quarter. Consider that rising commodity (gas) prices is a boon for BP; though this is only part of the story.
Production is down 11% from the same time last year. The company said the damage to its reputation as a result of the Gulf Oil Spill could hurt global business prospects now and in the future. Nonetheless, a new joint venture in India in is the works.
Share Price (BP) as of August 8th closed nineteen cents above $38 on the New York Stock Exchange (NYSE), hovering closest to it's 52-week low of $34.82 last August. Not a good indicator of investor confidence.

this ad does not reflect the position of the delasol group, but it was both effective and apt.

Shell:

After considerable pressure from the United Nations and a lawsuit on behalf of a Nigerian king, the Royal Dutch Shell company has accepted liability for two oil spills that devastated a community's freshwater supply in 2008. At least 7,000 oil spills have occurred in the area since Shell first discovered the Niger delta oil in 1956.
Profits (for the second quarter) are up 97% from a year ago, again highlighting the industry's heavy dependence on retail oil prices.
Production is down year-on-year, but relative to its competitors, prospects are looking up for Shell. Although many oil-producing nations restrict the movement of Big Oil, there is hope in the profitability of the $20B Pearl project in the Persian Gulf state of Qatar.
Share price (RDSA) is doing relatively (to itself and other oil stocks) well and trading within an acceptable range for the stock on both the NYSE and the FTSE 100 index in the UK.

So are oil spills a cause for shame or the impetus to fame? Shell has fared well while BP has struggled, but what's the end game for these firms? More production leads to higher profits and a greater number of environmental incidents. If handled ethically (and what is that?) Big Oil can bring the change we want to see. It seems to be a good start for Shell to own up to the land and it's people before its own bottom line.

your comments are welcomed!
dls

Pass the Peas, Please or Welcome to the Hotel California

2011-07-28T18:24:00.001-05:00

To reduce debt or raise debt? That is the question...

Debt and Congress go back like babies and pacifiers. Or rather, more like babies and pacifiers laced with cayenne pepper. The two simply do not mix. When fiscal year spending is being determined in Congress, it's outside the sphere of influence the Treasury has over it's awe-inspiring $14.3 trillion debt limit. Thus, the last six months has been a slow brewing maelstrom of media soundbites and political face-offs over how to position the band aid and what shade of neon it should be.

First quarter GDP grew by an annualized 1.8%. Historically, we're more a 2.5% growth nation. With unemployment way up and structural unemployment running rampant, the tax base is not growing. In my humble opinion, Republicans are correct in being against a tax increase. Where will the money come from? The rich have it, but not like that anymore. America's imperative to "Eat it's peas" (see the President's video clip below) means that the fun is over and it's time to get down to deleveraging. There's no light at the end this tunnel without coming face-to-face with dealing with our drunken obsession with debt.

Deleveraging is debt reduction and debt reduction is obviously our only option. Nevertheless, it's a tough choice, but the big debate in Washington is whether it's the only choice we have. Some lemons have been given to us to make lemonade (albeit without the benefit of sugar), such as high petrol prices that increased by almost a dollar in the first half of this year. Or consider inflation, which is eating away at consumer purchasing power, meaning we leave from the stores with fewer bags, if any. But the only things we are buying these days are veggies: long gone are the months-long binges on life's indulgences. Wallets are flattened, belts are tightened, as we come to know first-hand what eating, praying and living healthy feels like. Supply and demand gave us the lemons. Sheer chance presented us with the obligation to be economic stewards of all this wealth we have amassed - come what may - and be accountable for gorging ourselves on dessert first.

As the Treasury's "D-Day" of August 2nd quickly approaches, the looming question is if the U.S. of A. will be able to pay her bills. If not, it's default city. Since inflation is up and demand never sleeps, the American infatuation with credit presents an alternative to debt reduction. Just increase the debt limit. Otherwise, soldiers, pensioners, China, somebody isn't going to get paid. And just like me and you, if there's more going out than what's coming in, Uncle Sam will have to issue a few I.O.U.s, prioritize creditors, and pay on a "get it while it's hot" basis.

The Great Debate between Obama and the Republicans centers on who's the best at bluffing. Do we dare let the greatest country in the world's sovereign debt plummet to sub-AAA status and become as *gasp* Greece?? Or will even more debt fix our deleterious debt dilemma?

Neither, pardon my facetiousness. This is not an economic problem, but a political one. Greece is bad, but not as bad as the U.S. which can't lower unemployment, raise production or export goods to save our credibility in the global markets and is quite possibly staring a double-dip recession in the face. If August 2nd puts us into a tailspin it's only because we were graciously saved the embarrassment of it not happening in the previous 24 months since the Great Recession ended. Plenty of time - especially since the debt talks began in earnest in January '11 - to think of practical ways to deleverage. Like putting both public and private spending in check. Like shredding all access to easy credit. Like stepping back from the table. If you're up to your eyeballs in debt and you call Visa to issue more, they'd ask how the sanatorium got their number.

Get smart: America boasts a AAA rating alongside other countries such as Germany, France and the UK, all of which have lower debt levels. If ol' Uncle Sam was Samuel Jackson, his debt to income ratio would have him paying cash and showing 3 forms of ID to buy gum. A credit downgrade is inevitable and has been for a while since spending levels are off the meat rack. Deleveraging is our best bet to return to the long-term economic growth rates we've become accustomed to. Our vegetables, while unpopular and unpleasant, make us healthier, wealthier and wiser over time.

However, the media likes to push financial Armageddon, "the end is nigh" and blah blah, so I'll leave you on this "note" (double pun intended) regarding our raging lust for debt bound for default:

"You can check out anytime you like, but you can never leave!"
- the eagles

Prosperity and practicality,

dls

Labor Pains

2011-07-22T01:14:00.002-05:00

Despite months (what's felt like years) of the stalemate between players and owners in the National Football League, the end is surely in sight.

Collective bargaining - or labor negotiations - is as American as apple pie. It gives workers (football players) a voice to sound off to the employers (league owners) if they are unsatisfied with the pay-for-play structure. The current quagmire thrusts workmen's compensation and two lawsuits into the lockout limelight, the most pronounced since 1987. If the last four months of athletic uncertainty have left you frustrated and anticipating soundbites from Roger Goodell and DeMaurice Smith, let's apply some economic theory to the situation for peace of mind.

There are 32 owners in the NFL. 24 (75%) are needed to agree on a league-wide labor contract. Constrast this with 1900 players which require a 50.1% unanimous vote (951 men at least).Collective bargaining usually covers issues like hours, wages, benefits, working conditions and the like, so one can understand the player's hesitation to accept a longer regular season. Statistically, more games played increases the liklihood of more injuries. In the world's most protective (in terms of gear) sport, safety is the number one issue! The bid to add two more games was on the table at the owner's meeting, as was an effort to dissuade players from gaining from California's notoriously biased support of employee Workmen's Compensation claims. Economic game theory (pun intended) reveals that owners have it in their best interests to emphasize the number of extra minutes played rather than extra dollars made per season.
There's also $9.3 billion in annual revenue at the forefront of negotiations. Owners were able to agree on a supplemental revenue-sharing agreement to take a share of the money back from the players. Under the new CB agreement, players get roughly 46-48% of revenues, down from a 54-59% range in the early 2000s. Oddly enough, the NFL Player's Association had little to say against this measure. But no NFL franchise appears to be unprofitable - a MAJOR incentive to end the insanity - and the new agreement says that while rookies will make less (harder salary caps), retirees will see an increase in benefits (longer pensions), while current players will hardly take notice (Pareto efficient save for the new guys). Any complaints?

Without the profit struggles that the NBA faces - Commissioner David Stern says that 22 of the leagues 30 teams lost money last season!! - the NFL can have a win-win season for players and owners alike if they can simply focus on the game to get along. With the birth of the 2011-2012 pigskin season as early as next Wednesday if the egos can get over themselves, the labor pains never hurt so good.

Cheers,

dls

ESPN.com, the NFL Lockout Facebook page, and the Journal of Sports Economics were the primary sources for this blog.

Addressing Welfare: To Whom it May Concern

2011-06-13T12:38:00.000-05:00

~~Dear Poor People:~~
~~Dear Drug Users:~~
~~Dear Poor, Drug Users:~~

Last week on Facebook, a friend posted a controversial headline that sparked a lively cipher of opinions & facts about the state of America's welfare class. Specifically, friends chimed in on whether or not people on welfare should be drug-tested in order to apply for and receive benefits. Florida Governor Rick Scott trailblazed a new law that will commence the program beginning July 1; the first of its type in our country!

DLS founder S. Holmes studies America's indigenous welfare class.

I contend that this is "controversial" because ideas about economics can be either Positive or Normative. Positive economic statements are factual in nature; that is, they can be tested (E.g., "Randomly testing welfare recipients in Florida will result in a majority of positive outcomes"). Normative economic statements are opinions, and while popular, are in essence reflective of a person or group's values (E.g., "People on welfare deserve to be drug tested more often than people who are not on welfare").

One of Scott's campaign promises was to unburden the Florida taxpaying class by reducing the benefits extended to TANF (not Federal food stamp) recipients. TANF is a Federal welfare program - that by design - limits the amount of time people can receive benefits (the T stands for 'temporary'). The 50 states are allowed to allocate TANF funds how they see fit. In Florida, the Department of Children & Families (DCF) decides who's eligible. Without argument, rampant drug addition (and otherwise riotous living) among persons receiving cash transfers from working citizens should be checked and corrected. Just last year, the Los Angeles Times reported that $69 million was squandered from the state's coffers on gambling trips to Vegas, Hawaiian vacations and pilgrimmages to the Disneyland Resort.

Scott's seminal law in Florida will require recipients to complete a 3-step process:

Pay for the drug test out of pocket.
Pass the drug test to qualify for benefits.
Test negative periodically to continue receiving benefits.

If a person tests positive, they are denied benefits for one year after the first infraction and banned three years after the second.

The goal here (presumably) is to lock out people who would be most likely to spend cash on drugs. That way they can focus on getting clean and holding a job. Thus the tax burden is lessened, Florida's unemployment rate falls, and people have more cash and less dope to contend with.

Delasol presents a few fallacies that accompany a purely Normative view, just for discussion's sake. Not that Scott is wrong to implement such a program, but is it really addressing "the welfare problem?"

Yes, you read correctly, people desiring welfare and work must pay for the drug tests out of pocket. Not exactly an incentive to go..and without jobs, where does this money come from?
Assuming a positive approach to Governor Scott's view that people on welfare are disproportionate drug users, we can test this. No need, actually, since the state of Florida ran a pilot testing program in 2001. The results? If you use drugs in Florida you are just as likely to be on welfare as you are to be employed*.
A 2011 report on cost effectiveness** of such a program revealed that taxpayers end up paying more to execute drug testing on this level (without suspicion) than less humiliating methods that spare the dignity of people who choose to "just say no."

Is there a more direct way for Floridians to address the welfare problem? Or does the focus seem to be more on identifying the drug problem by class??

You can watch a clip of Gov. Scott's CNN interview with correspondent T.J. Holmes here.

Personal, practical economics. For everyone.

dls

*"No significant difference" was found among drug users by class or employment status.

**Conducted by the Center for Legal and Social Policy (CLASP)

A Native Inquiry: Seeking Economic Justice in the Bayou

2011-04-20T22:32:00.011-05:00

Towards the end of 2010, a financial management firm run by a former colleague of Delasol founder, Suneye Rae Holmes, approached us with a unique project: providing economic education to victims of the BP Deepwater Horizon oil spill who are of Native American descent. We were of course intrigued, as The Delasol Group was organized to galvanize people of color towards economic parity. Since that initial meeting, the Fiduciary Management Group (FMG)** has made an apprentice, and a believer out of Delasol. We've been hands on at ground zero: greeting potential claimants, answering questions, explaining terminology, exchanging life stories, parsing through documents and educating the masses. People have told us the dogged truth on how their lives have forever changed since this catastrophe. The need for reparation is great, but the story is not to end there. On this, the one-year anniversary of the BP Oil Spill, we invite you to view our vlog documentary on our work that is ongoing in the Gulf of Mexico; the first of its kind on the ECONtrepreneur. The Delasol Group is committed to partnering with FMG and the U.S. Government to see that this community gets the compensation and education it rightfully deserves.

Personal, practical economics. For everyone.

Prosperity,

delasol

**The link above is the correct web address for Fiduciary Management Group; on the documentary film credits, the web address is incorrect. Apologies for the confusion. dls.

Africa's Heart of Darkness

2011-01-26T14:26:00.062-06:00

Consider this post the Rosetta Stone on the turmoil in Egypt.

Millenia ago Egypt thrived as a global economy because of natural and geographic considerations: Africa's diverse resources could trade with ease from Egypt's location on the northeast corner of the continent; and the drying of the Sahara forced migration to more lush region, such as the Nile River Valley. From the start the economy was planned, meaning a central figure made the economic decisions for everybody. In Egypt's case, the pharaoh appointed a bunch of bureaucrats to oversee all of the industry: Mining, fishing, farming, slavery, warfare, energy, commerce, et cetera.

Unlike Cuba, the government didn't tell people what they could and could not produce. In Ancient Egypt, this was likely a decision made by the innate capabilities of the farmers and of the land itself. Not unlike Cuba,
Egyptian bureaucrats remeasured and reassigned the land to farmers after every rainy season based on past crop yields, assessed the expected crops for the next harvest, collected part of the produce as taxes, and stored and redistributed it to those on the state's payroll.

If your family was successful, you didn't live hand-to-mouth, and could store surpluses for future use. If you were really wealthy the men in your family may have access to the trading route to use extra goods to barter for others on the market. A market is anywhere buyers and sellers meet, and seeing as how Egypt had both command and market economy characteristics, it's what's known as a mixed economy.

To be fair, the percentage of produce and even manufactured goods which reached markets was probably small. Most people living over 8,000 years ago found personal financial gain of marginal importance to the tests of survival of the day. But we already know that international trade provided part of the economic base for the developing Egyptian high culture (e.g., wholesale merchants acting for the crown) that has influenced every civilization since. The extent to which private individuals were involved in trading goods and services cannot be estimated. Major changes to the early barter system began to with the influx of foreigners to Africa's shores, and the introduction of coined money in the Late Period. As expected, market forces (natural Supply and Demand) seem to have played a role above all during the periods when the Government was in upheaval.

Well, the government is certainly in upheaval now. Amid an ongoing promenade of marches, rallies, civil disobedience and riots people of all faiths colors, and backgrounds have gathered to protest a plethora of economic ills; namely the rising unemployment rate, creeping steadily back to 10%; the high cost of food because banks are now closed due to the local instability and the demand for groceries is outstripping the supply to the shelves; low wages have sparked flames of public outrage since 2004, but are gathering oxygen for the long slow burn today; and steadily falling Gross Domestic Product growth when they need it most.

The focal point of all of this righteous angst is President Mohamed Hosni Mubarak, the "Pharaohonic" figurehead in power for the last 30 years. Sounds like Zimbabwe (and President Robert Mugabe) all over again.

What is the eternal unrest that darkens Africa's heart? Despite birthing the
race of mankind, the governments of the Motherland quarrel against the very

people they were formed to serve, making a mockery of the notions of independence, sovereignty and civil and human rights. For years, Zimbabwe was Africa's "Golden Child" excelling far beyond its expectations as a former British colony. Has a history littered with slavery and marginalization based on color and culture poisoned the population of potential leaders of the people? Or are the vices and bad economic decisions of government officials an individual flaw (repeatedly observed) that rests in the heart of the person and not of the people? Is ECONtrepreneurship the responsibility of the person, the government, or the colonizer? We'd love to hear your thoughts.

Our hopes for a brighter Egypt, and thus, a more prosperous Africa.

dls

* Thanks to this summary of Ancient Egyptian Economics for research, Bloomberg BusinessWeek

The State of the Union 2011

2011-01-25T21:26:00.000-06:00

We revisit the President's annual address on what's going on in the U.S. and provide a briefing for busy ECONtrepreneurs.

After the opening preliminaries to thank us, shoutout the audience and squash partisan politics, he delved into some heavy positive (verifiable) and normative (opinion) economic information on Innovation that was broad in scope but riddled with detail.

President Obama rightly noted that technological advances have forever changed how we live, (look for) work, and play. While it's false that America is the largest and most productive economy (as based on Gross Domestic Product data, which is generally accepted in this country), it is true that the economy has escaped the snares of the recession and we are in the upswing of a recovery phase. This is the area of the business cycle that follows a downturn in economic activity. America is now progressing towards a new peak, led by corporate profits, net exports and (hopefully) employment. In the graphic below, "Real Output" is another name for the Gross Domestic Product.

Next, he considered our technological capacity to the education initiatives of boom economies such as India and Japan. While advances in gadgets and digital medium has largely contributed to U.S. economic growth over the last thirty years, India and China invested in their children, resulting in a smarter, more effective labor force. Consider the implications if America were to follow suit, coupled with our technology. Obama called for a reinvention of our energy policy to spearhead U.S. economic growth into the future. His vision is to develop the most able researchers and the most green policies on the planet. Think solar- or water-powered automobiles in the next decade. Not just more jobs, but more high-paying jobs. By 2035, he challenges the country to get 85% of its energy from renewable sources such as those just mentioned.

And speaking of education: it is positive information that investing in education is a predictor of the economic performance of a nation; we are more productive, live longer and engage in less crime. Race to the Top is an Executive-level initiative that provides monetary rewards for ideas to improve student achievement and teacher quality at the state level. Thrifty ECONtrepreneurs will dually be on the lookout for the now-permanent Tuition Tax Credits. A tax credit is an amount you are allowed to subtract from what you owe in taxes. So if you spend money on a student's expenses, you may qualify for the American Opportunity or the Lifetime Learning Tax Credit; incentives to consider the long-term implications of what higher education can do for you.

The President then went in on the ongoing debate on illegal immigration and demanded that we suffer the uncomfortable dialogue on national etiquette and policies to protect America's labor force and best economic interests, the nation of origin of the employee nonwithstanding. He normatively opined that kicking out the undocumented young intellegensia could result in vacant university seats or a decline in small business formation.

Infrastructure in the 2011 address now refers to both physical and digital innovations: American needs to improve both its interstates and information highways. Obama repeated a plea to push forward with plans to build a high-speed transportation system to compliment the high-speed internet which now transverses our country's citified and rural terrain. Public transportation investments can go a long way towards extending job mobility and business growth on the homefront.

The last point was a tricky one: to lower the corporate tax rate without adding to the deficit. How? Doubling exports by 2014, parterning with India, China and South Korea to add to the domestic workforce, enforcing our trade agreements (especially in the Asia-Pacific region), continuing to amend legislation as necessary to protect the American people (think health care and credit cards among others) and encouraging that "key word": Innovation. American exports are notoriously low compared to our imports, one big reason why our GDP (and therefore our productivity, as Obama pointed out) lacks behind that of the European Union.

Obama then began to speak in detail on how these ambitions could be reached, most notably a 3-year freeze in annual Federal spending, so as not to increase the deficit any more. The estimated savings, he warned, while good, will not be enough, so we much move to cut excessive spending wherever it is found, not just in the domestic arena. A powerful motivator for fledging ECONtrepreneurs who are seeking to maximize their futures, and not capitalize on the offerings of the present alone. While Medicare and Medicaid will likely take cuts, he wants to focus on continuing or increasing benefits for those Americans who require assistance to sustain themselves: retirees, the indigent and the impoverished. Other ambitions such as simplifying the tax code, keeping government progressive and of course, not allowing bipartisan politics to hinder our overall growth.

What can the State of the Union 2011 do for you?

cheers,

dls

Goudou Goudou

2011-01-12T09:41:00.000-06:00

As we welcome in the new year we can reference the Andinkrah symbol, Sankofa:

Literally translated from the language of the Akan people (W. Africa) as "it is not taboo to go back and fetch what you forgot;" we need to know where we came from to know where we are going! With that, the Delasol Group begins 2011 looking at the progress and setbacks experienced by the Haitian macroeconomy since the devasting earthquake one year ago.

Haiti is a country steeped in stories of triumph and scandal. Located on the eastern side of the island of Hispanola, the French exploited hundreds of thousands of African citizens to develop sugar and coffee plantations; the most profitable of all the French colonies at the time. In 1791, when slaves outnumbered colonists 10 to 1, a violent uprising resulted in the country becoming the only nation to gain independence following a successful slave revolt. For the African Diaspora, Haiti represents hope against all odds and freedom by any means. The new flag was France's, turned on its side and devoid of the white stripe, for obvious reasons.

Prior to January 12, 2010, Haiti was the worst off economy in the Western Hemisphere. Over half the population lived in abject poverty. The majority of production is agricultural, so the Carribbean nation is subject to frequent natural disasters that completely disrupt commerce. In 2008 alone, four hurricanes ripped through the island (Fay, Gustav, Hannah and Ike) in less than a month's time, causing billions of dollars worth of damage. The lack of technologically-efficient industries and domestic investment means that aid and financial captial to rebuild must be obtained from external sources.

One year ago today, the country was brought to its knees by the most devastating earthquake in two centuries. Close to 300,000 human beings lost their lives and the total cost of the disaster was estimated between $8-14 billion by the Inter-American Development Bank*. So what, if any, is the upside for Haiti?

A strong dose of resilience for starters. The term 'goudou goudou' (pronounced "goo DOO goo DOO"), the title of this post, is Creole slang for the disastrous earthquake. Saying it quickly over and over mimics the sound of buildings unrelentlessly shaking free of their foundations. A lighthearted attempt to bounce back from the darkest hour in recent history.

Another bright spot is legal measures that improve trade. The HOPE Act manifests an appropriate acronym: the Haitian Hemispheric Opportunity though Partnership Encouragement Act; specific legislation aimed to increase exports of Haitian goods and services (namely, apparel) to wealthier customers in the U.S. A very BIG deal, because exports are a boon to a country's production capacity, or GDP. While great in theory, HOPE I (passed in 2006) needed some tweaking, which necessitated the need for HOPE II (2008); legislation that broadened the scope of what types of goods are traded. Early evidence supports a positive response to HOPE II initiatives.

A third area is external aid. To date, world governments have committed more than $9 billion, including over $1 billion from the United States. But perhaps the best way to help a person or a country in need, is to help them help themselves. We here at the Delasol Group are staunch advocates of learning from experience and education: rather than depend on others to solve our economic problems, what common sense tactics and bold steps can we take to secure our own future wealth? Will Haiti summon the Sankofa principle to create a better tomorrow for its children? The selection of an incorruptible, solvent government by the people would be a step in this direction. Unfortuantely, there's still much work to be done.

Peace and Prosperity to Haiti!

delasol

*Established in 1959 to support development efforts in the Caribbean and Latim America to reduce poverty and income inequality. Visit their site here.

More info on the HOPE ACTs (PDF file)

Cannabis & Capitalism - What's Done in the Dark Series Part 2

2010-12-16T01:20:00.005-06:00

In this second installment of the What's Done in the Dark Series, we continue to explore the trade of illicit goods in the United States, namely, the fledgling industry for legalized marijuana sales.

The ad below debuted in Times Square, New York City, March 2010:

In Times Square no less! And earlier this month, a major television network debuted a 1-hour special on the Marijuana Industry in the United States. This macro level view is causing a lot of micro level conversations between regular people in their homes, at their colleges and on their jobs. For decades, the use of this Level 1 drug has been banned in one of the world's most economically progressive countries, while in others, it is accepted and profitable for both the state and the people. The occurrence of the television special itself - much less the content - is evident of changing normative opinions here on the home front.

A bit of history for the buffs: Marijuana is a close relative to industrial hemp; both strains are of the Cannabis genus which is believed to have originated in central Asia. For millenia, mankind has harvested this plant for medicinal, recreational, practical, and ritualistic use. Tribesmen in Africa employ herb to commemorate life's seminal events. Inhalation and ingestion results in a more holistic and vivid appreciation of the natural world and a change in one's level of consciousness. Yet no one person has ever overdosed or died from its use**. Past Presidents George Washington and Thomas Jefferson cultivated and profited from hemp during the dawn of our great country's birth. While marijuana for recreational use is regulated but permissible in countries such as Holland, Portugal and Spain, it was first decriminalized by Oregon (for non-medicinal use) in 1973, right here in the good ol' U. S. of A.!

The 1937 Marihuana Act imposed a nominal $1 tax on all shipments of the plant and a lot of bearucratic red tape on all market participants*. This era also witnessed the effect of the media on societal attitudes. Mogul William Randolph Hearst used his holdings in the publishing industry to further his personal opposition to the "Killer Drug," alongside Federal Bureau of Narcotics agent Harry Anslinger. The movie poster above is from the 1936 film of the same name. From 1937 until 1970, marijuana was technically legal, (though taxed) but America outlawed the "burning weed" at last, forty years ago. Data from the shadow economy reveals that consumption of the distinct leaf has proliferated during this time, to no wonder. Prohibition has a funny way of increasing the propensity to acquire the banned good.

The MSNBC documentary follows restaurateurs and chefs who specialize in edible pot recipes; a necessity for those who seek the herb's medicinal properties but can't or won't inhale. The myriad practical uses for the ubiquitous plant has placed it squarely on the radar of economists worldwide.

We first encountered Harvard economist Jeffery Miron on this blog last year. Since then, Dr. Miron has become a foremost voice on the practical, economic benefits of legalization. He often looks to the success of regulation in other nation's as well as the tumultuous history here that led to it's current banishment. He rationalizes - using economic theory and quantitative forecasting - that the savings the nation would retain from reducing law enforcement come out to about $7.7 billion annually. Similarly, he adds that proper taxation would add amounts of up to $6.2 billion to the budget coffers. You can read more on Miron's research here.

ECONtreprenuers nationwide have been and continue to capitalize off of cannabis. Much like the Gold Rush of the 1840s or the Internet Boom of the 1990s, independent dealers and businesspeople are making a dash to claim their stake in this wildfire (pun intended) market. While official sources of the size, composition and smoking habits of the American consumer base are scarce, a noteworthy reference is PriceofWeed.com. Let us step back and stress that The Delasol Group does not endorse the manufacture or sell of illegal drugs. But we do admire efficient economic ideals, and this website is just that.

Anonymous users can submit their location and the most recent price paid/weight received for (presumably) recreational quantities of the drug. An accompanying blog goes into some detail on the statistical adjustments to the data to cull out pranksters and others who would put in false values. Nonetheless, it gives the casual browser (another pun!) a chance to compare costs from city to city across the U.S.

We here at delasol would be interested in more social metrics from the hardworking people at priceofweed.com. What about a (anon.) user survey on usage, experiences (positive/negative), budget, networking, customer service and general etiquette on navigating the perilous corners of the shadow economy?? We specialize in survey design and implementation, as well as market research, so an economic partnership may be in the makings!

cheers,

delasol

* Obtained from this site.
**courtesy of the Centers for Disease Control This is a .pdf and the CDC data is on the last page.

The Nutcracker, What's Done in the Dark Series Part 1

2010-12-11T01:30:00.003-06:00

Happy Holidays from The Delasol Group!

In this first installment of the What's Done in the Dark Series, we explore the prohibited sale of alcohol in our communities. Our harmless post title belies the true nature of the nutcracker, and we don't mean the soldier in red.

In modern day Harlem, USA, a nutcracker is a horse of an entirely different color. Nutcrackers are potent mixed liquor drinks advertised on colorful flyers and sold in doorways and on corners throughout the borough.

Delasol founder Suneye Holmes first encounted the concoction at the annual African-American day parade in 2008. She remembers receiving flyers and business cards in broad daylight at the family affair, "as though selling liquor without a license is even legal!!"

The watered-down marketing techniques only serve to make the beverages appear more accessible and less suspicious to potential buyers.

$5 is the going price for a sealed plastic bottle of a Styrofoam cup of the drink. Vendors are composed of women, blue-collar workers, the underemployed and the requisite hustler-type. Buyers are usually underaged, underemployed or both, though young professionals and family-types are not uncommon. Obviously there is a need to regulate for the protection of the community: youths should not be inebriation and we need to know what's in those cups!! This area of the shadow economy highlights the need for accountability, order and consumer protection laws.

A typical investment is $250 for alcohol and fruit chasers. A typical return is $700, or $2.80 received for every dollar spent on ingredients.

The manufacture and sell of homemade mixed drinks is the stuff stories are made of in Manhattan. 80 years ago, people were just as enthralled with passing the time with an illicit elixir. But just like then, law authorities today are determined to quash the occurence. Equating the unauthorized sale to that of endangering a minor or child abuse, they are pouring out suspicious contents and passing out summons on the street. Recessions have a funny of increasing ECONtrepreneurship...and the fuzz.

Thanks to the NyTimes.com site and Harlem World, USA for much of the research for this blog.

cheers,

delasol

What's Done in the Dark (Series Preface)

2010-12-05T12:25:00.003-06:00

By definition, entrepreneurs are risk-takers. They take on the risks of gathering, organizing and profiting from economic resources: the natural land, financial, investment and human capital, and their own blood, sweat and tears.

Entrepreneurs, at some point in time, created businesses to market and distribute all of the products that we buy today, whether it's a physical good (like a volleyball) or a service (like going to get your taxes done). Businesses choose prices to sell their products for that are competitive with other firms. People choose which products to buy based on price and quality, among other factors.

In every country, the sale of illegal products is present to some degree. In the United States, it is estimated that outside of our booming $14.8 billion legal economy*, a $1-2 billion "Shadow" economy exists, though the numbers will vary from source to source. Government agencies, such as the Bureau of Economic Analysis (BEA), gather economic data from the paper trail left by people and businesses spending their incomes. But when the transactions are cash-based and neither the seller nor the buyer reports it, the government misses it. The Shadow Economy gets its name from this phenomenon; since we can only estimate it's size, there is much data than can be brought into the light.

This underground economy takes several forms and (on this blog) it is composed of any economic activity that takes place "off the books" or "under the table." Here are some common examples:

Transportation Services - When in New York City, you as the Yanks do: hop a ride in either a licensed Medallion (usually yellow) Taxicab, or in a mysterious black town car known only as a "gypsy cab." While both offer the same service, Medallion taxis actually have a medallion fixture on the vehicle; gypsy cabs lack this identifier, however, there is more room to barter with the gypsies (in our experience) and they are ubiquitous in the neighborhoods of the City, often preferred when yellow cabs are deemed overpriced or inaccessible. Medallions and their cabs are strictly regulated by the NYC Taxi & Limousine Commission.

Prostitution Services - The world's oldest vocation probably because of perpetually high demand and incomes. Usually shunned because it's obnoxiously labor-intensive. Arguably a low-skills position - pun intended - but the physical and mental stress, as well as the uneven distribution of said income negates most gains. Prostitution is illegal in the United States, but things are definitely done (and paid for) in the dark. The Netherlands legalized this one in 2000 and regulates it to date.

Weapons - The shadow economy provides the means for obtaining guns and ammunition that a government bans, perhaps via smuggling from another country or pilfering from domestic manufacturers. Often, it is the case of someone having a weapon they are ineligible to posses, because of an existing criminal record or maybe a documented mental illness. Rogue governments acquire guns illegally too, and some use them to start covert wars.

Alcohol & Tobacco - Prohibition of alcohol ended in the U.S. because Americans were still drinking and (because?) the economy was in dire straits. From 1919 to 1933 it was illegal to buy, sell, make or deliver alcohol in this nation. The amount of liquor consumed fell, but the number of illegal speakeasys and criminal activity in general rose during this period. The Twenty-First Amendment repealed the Noble Experiment. The U.S. Archives estimates that in New York City alone, in 1925, there were at most, 100,000 speakeasy clubs, offered the gamut of vice goods! Today, New York authorities are struggling with the manufacture and sale of homemade mixed drinks on the street called Nutcrackers.

Copyrighted Media - Think: bootleg. Your friendly local convenience store hookup; outside the store, that it. Whether you make a hand-to-hand transaction or search for that new movie or song online at little to no cost, it's all under the table and out of the light. The artists would argue that a higher fee is owed them for their work.

There are other markets that could be listed here, but delasol wants to emphasize that this list is not to suggest that the shadow economy is composed entirely of illegal activities. We define the shadow economy as including economic activities that are cash-based in nature, the result of bartering, or just outright illegal. Many cash-based businesses are perfectly legal, such as gambling in some American cities. And bartering, of course, is a matter of an agreement between the seller of a good or service and a buyer.

We will begin a new series on this blog on the economic implications of a dynamic underground economy. The first installation will be about the changing illegal drug trade in the U.S. as marijuana appears to transition from a high societal cost to a potential cash cow.

cheers,

delasol

*3rd quarter 2010 data (.pdf) from the Bureau of Economic Analysis

Pre-Paid Debit vs Checking and Credit

2010-12-03T21:55:00.001-06:00

An emerging financial market in recent years is the Pre-Paid Debit industry. Marketing as been particularly successful in the aftermath of the 'Great Recession' of 2008, caused primarily by credit on crack.

That one's for Wall Street.

Pre-Paid issuers, such as Young Money records, Wal-Mart, Russell Simmons and even the Kardashians have enjoyed relative profits as many consumers appear to prefer cash/debit transactions over more debt.

After a conversation earlier this week with a fledging ECONtreprenuer in Atlanta who is a musician/aesthetician/ESL instructor, we decided to devote some blog space to the Pro and Con of the Pre-Paid Debit Card - Fees! - to help inform persons considering their usage.

User be informed - Fees ahead!

In the October 22nd posting on record label Young Money's venture into the prepaid market, we featured a chart of fees from the RushCard website. With cash that you save and stuff inside a mattress, there are no fees to pay! As an economic tradeoff, however, there is also no interest to earn.

In a checking or savings account, it will vary from bank to bank (or credit union) if you have fees to pay. Ask questions if you are unsure if you will have to pay a fee to keep you money in the bank of your choice.

A Pre-paid debit card - such as the wildly successful RushCard - is NOT a debt instrument, so your credit stays intact! You only spend what you deposit into a pre-established account. Fees abound, however, for Initial Activation, Monthly Maintenance, International/Domestic transfers, Adding Money to you account and more. Understand that the amount that you deposit may not be the final balance after the necessary fees are deducted.

For example: The most popular reloadable prepaid debit card in America, the WalMart MoneyCard, charges $3 as a monthly maintenance fee, $3 to reload the card with more cash, $2 to withdraw cash at an ATM or a bank teller, and $1 to find out your balance at an ATM.
As prepaid cards go, that’s a good deal. Other cards charge a lot more, according to a September report by Consumers Union, the nonprofit publisher of Consumer Reports. One striking example is the Kardashian Kard, which has a $9.95 activation fee and charges $7.95 per month, with a $1.50 fee to call customer support and a $6.00 fee to shut down the card.**

Spend Wisely!

delasol

**Courtesy of the Christian Science Monitor

Liquid Assets

2010-12-01T15:07:00.004-06:00

Liv-ex is a UK-based company that brokers investments in wine.

Yes, wine. That most liquid of assets for oenophiles worldwide. Indeed, Delasol Group Founder Suneye Holmes has in recent years partnered with longtime friend Erica E. to promote informed wine tasting and choosing, at an economical rate, of course.

Liv-ex is an index of 100 wines that are very old and very delicious. Most of them hail from France - Bordeaux, primarily - but also from other countries as well. Wine is a "vice indicator," that is, a guiltly obsession that usually fares well whether the economy is making a lot or a little money for households and businesses. As of November 30th, wine as an investment is doing remarkably well compared to last month and the last year:

Presumably, "vice indexing" can help investors win at the expense of the weakness' of households. During economic downturns - such as the 18-month 'Great Recession' just survived - vice assets such as alcohol, tobacco and wine tend to increase sharply. Even moreso than during the peaks & recoveries.

Investing is as quantitative as decision as it is qualitative. That is, earning profits is as important as putting your money where your mouth (beliefs) is. At the pursuit of profit, entire civilations have been obliterated and cultures lost forever. When your economic decisions reflect the values and principles you want your future children to know, the return is far greater than gold.

While DLS has no holdings in wine, we are partial to grapes from Israel, South Africa, California and Argentina.

Happy Investing,

delasol

Cash Money

2010-11-30T15:17:00.000-06:00

Recently Delasol learned of the parent company to music label Young Money (see 10/22 posting), Cash Money, trailblazing new revenue streams in the book publishing industry. Co-Founder Bryan "Birdman" Williams speaks to an NBC journalist on the new directions the label is taking:

ECONtrepreneurship at it's very best! Taking his own resources and ability, Birdman has used pure grit (and lots of money capital) to create a niche in the (neighbor)'hood fiction and non-fiction literature markets. Per Birdman, the goal is to produce and distribute 5 or 6 books a year. Way to improve your bottom line while creating more entertainment, opportunities and motivation for others, Cash Money!

Birdman and brother Ronald "Slim" Williams intend to sell books at concert venues, thus bringing the two forms of revenue (music and books) under one convenient roof for consumers.From HipHopWired.com:

The first book is scheduled to be launched in February entitled "Raw Law: An Urban Guide to Criminal Justice," written by Muhammad Ibn Bashir. In March, they will release Wahida Clark's "Justify My Thug," a paperback original novel. Cash Money also was able to secure the rights to the memoir "Pimp" by the late Iceberg Slim.

Cheers,

DLS

Holiday Shopping Season 2010

2010-11-29T19:59:00.003-06:00

The Delasol Group sincerely hopes you had a restful and replenishing Thanksgiving.

Now that we've eaten, we can loosen our belts (so to speak)! The two business days following turkey day are the shining stars of the yearly shopping cycle.

Black Friday (or African-American Friday, as Whoopi Goldberg put it) and Cyber Monday, while relatively new, are now permanent parts of the American lexicon. Wherever would we be without those irresistable sales??

This year, consumers left the credit at home and went in with cash and plastic of the debit kind. Delasol Group Founder Suneye Holmes was one of that number in the pre-dawn hours on Friday, November 25th:

It was incredibly efficient in Weatherford, Texas. I arrived at the local Best Buy at 3:30 a.m. Best Buy representatives circulated through the line with flyers for specific Black Friday items: tvs, Wiis, PCs, washers/dryers, et cetera. Each flyer beared a number that guaranteed the bearer a unit of the item, which was (presumably) in limited supply. At 6 a.m. the doors opened and shoppers with and without flyers were escorted through the doors to a barricaded walkway with "exits" at each major section of the store: computers, music, audio/visual, etc. At each post abbreviated queues formed where employees exchanged products for flyers and shoppers could check out immediately, withough traveling to the front of the store! I purchased a laptop and computer software and security for myself for less than $700 in less than 10 minutes. The laptop was just what I needed: high-end processing speed with a lightweight body and a webcam. I feel that I maximized both my time and my dollar!

This year, shoppers chose to use cash, check or debit over credit cards. 30% less than last year and the lowert percentage in the last twenty years!* The Delasol Group would like to congratulate and encourage the general public for executing sound economic transactions on the most important shopping day of the year! Borrow less and save more for life's events!

Cyber Monday is the next business day after Thanksgiving that encompasses online retail sales by consumers nationwide. Online sales on Monday, November 29th topped $1 billion, the highest ever!! JCPenney's was a big winner this year. Black Friday sales, in comparison, were just under $650 billion, so selling your goods via the Internet in this day and age could prove most profitable. The economic outlook is to look into expanding your new or current product sales onto the World Wide Web!

Smart Shopping,

DLS

*Reuters Online

Young Money

2010-10-22T02:57:00.007-05:00

A special highlight today spotlighting the productive efforts of Young Money.

The youthful and creative bunch are well-known as efficient producers of hip-hop music: lots of it at a low cost. Young Money's founder, star artist Lil Wayne is ubiquitous in the mixtape industry, known for arguably the largest volume of published rap available in digital (or physical) form. Considering that YouTube can make you a rapper, that's a most impressive credential. Perhaps even more impressive is Wayne's contribution to the American English lexicon: bling-bling. It is heavily debated that while Wayne did not invent the word or the definition, he did help push its usage into the mainstram following his performance on the hook of B.G.'s 1999 single of the same name.

Not to be outdone, the Young Money crew continues to seek profits in other industries as well, namely cigars and debit cards (this link is not an application form for the card). Random? Perhaps, but not if you associate with Young Money's target demographic or familiarize yourself with their lofty lyrics. There's a market for any and everything perhaps (see 3/24/09 posting) The somewhat offbeat investments could shape up to be well-informed steps towards transforming Young Money into Mature Wealth.

The Young Money prepaid debit card only allows the user to spend - at most - what is in their account. So no "ballin' outta control" if you don't got it. A debit card, versus a credit card, urges more fundamental and practical money management; espeically for young hip hop fans. The Delasol Group credits artists that sing with the bling and support responsible economic growth in marginalized communities and beyond.

Another company that cater to fostering sound market transations with communities of color in (neighbor)'hood near you is Russell Simmons' Rush Card. Savvy ECONtrepreneurs would be wise to read the small print (it's your right!) and compare card fees. The chart below was obtained from Rush's site:

And for good measure:

Careful Spending.

DLS

We see you, Uncle Sam

2010-10-02T11:54:00.005-05:00

Don't get it twisted, Uncle Sam. The People of the United States are watching You!

We check back in a few months after a previous blog post on the Credit Accountability, Responsibility & Disclosure Act of 2009. Is Uncle Same keeping his promise of protecting credit card holders? We survey news items obtained from Google on what's current in the personal credit card markets.

1. Early in June, credit card issuers were already cutting up, finding ways to circumvent the new legislation. Violators have been charging new customers processing fees of up to $95 before the card is even used. Fail. Others increased interest rates before the Act took hold and offer a partial rebate (in the future of course) at the lender's discretion. The net result is the same as rasing rates. Epic Fail.

2. July told much of the same story. An associate economist the the Federal Reserve Bank of Chicago is quoted in the Wall Street Journal saying "Card companies are figuring out how to replace old fees with new ones....It's a race between regulators writing ever-more-complex laws and credit-card companies setting up ever-more-complex fees." While the fee increases are legal, they were starting to get out of control. A coalition of consumer rights groups sent a letter on July 7 to the Office of the Comptroller of the Currency name-dropped several offenders. Banks can't charge interest or fees on days payments can't be processed - Sundays and holidays - but stand firm that they still "accept"payments on these days. Doublespeak.

How to fight back amid the minefield of self-interest card companies? First, if you use credit at all, pay your bills on time. Makes raising sand when and if your card company unlawfully raises your interest rate or shortens your billing cycle much more palatable.

Second, continue to education yourself on credit card legislation. You can read the 33-page Credit card Act here (PDF). Get a credit report and always, read the small print. It's in plain language and right in front of your face...by law!

We like this chart, obtained from the WSJ online, with data obtained from the Pew Charitable Trusts, the National Consumer Law Center and the Center for Responsible Lending. It summarizes some of the less scrupulous practices currently being reported:

The Credit Education Series, Part 4 of 4

2010-08-08T12:58:00.001-05:00

In this, the culminating segment in the 4-part Personal Credit Education Series, we explore legislation on credit cards passed by Congress in early 2009.

On May 22, 2009, President Barack Obama signed into law the Credit Card Accountability, Responsibility and Disclosure Act. The Act was created to strengthen consumer protection in the credit card market.

Economic commentary can be either positive or normative in nature. Positive economics is "testable" meaning some data exists, we can make hypotheses and we can run social experiments. Normative economics is a personal opinion of how an individual "feels" things "should" be.

Let's put it into practice! The White House issued a press release last Spring that listed several Principles for Long-Term Credit Card Reform. Among them:

1. There must be strong, reliable protections for consumers. We can test (Positive) the reliability (Normative...who determines what is reliable? In this case, the Government does.) & the severity (Normative) of penalty enforcement when card issuers overstep the legal boundaries. How? What data do we have as proof that this measure is Positive economics? Specifically, the Act calls for a ban on unfair rate increases and folks under the age of 21 must have proof of verifiable income or a co-signer...who is older than 21. Going forward we should see a lower (of not zero!) incidence of reports of unfair rate increases and predatory lending if this proves successful.

2. All correspondence sent to cardholders must be in plain language and plain sight. We can check this and compare changes in statements before the Act and after its inception (Positive). Gone are the days of hunting and squinting for the terms of your agreement. Card issuers are required to make it plain and keep it moving, and Congress tells us what "plain" is defined as (Normative) in their policy.

3. Ensure that consumers can shop for a credit card without fear of being taken advantage of. Debatable; this has Normative origins. People shouldn't have to feel as though they are being played. The Act continues on to explain that issuers are required to show consumers the consequences to consumers of their credit decisions; this testable and therefore, Positive.

4. The Act will ensure Accountability from both card issuers and regulators. Again, what is deemed "accountable" varies from person to person (Normative), but for purposes of implementing national policy (a Positive), the Act specifies that issuers must post credit card contracts Publicly (e.g., on the Internet) and among others, requires that issuers must request public input (Positive) on trends in the credit card market and potential protection issues.

Earlier this year the NY Times online posted a Positive blog with Normative comments about the Act. Check it out here.

Given the size of the U.S. economy - the Gross Domestic Product is over $14 trillion! - we will periodically check in with the progress of the Credit Accountability Act. It will take time for these regulations to trickle down to ECONtrepreneurs like you.

Go forth and borrow wisely and better informed than yesterday.

Rational Expectations for the World Cup

2010-07-12T13:02:00.004-05:00

The 2010 FIFA World Cup has come and gone, wowing audiences worldwide with the sport's best and most promising teams and athletes competing for the number 1 spot. And for the very first time, the Cup was hosted on African soil. Congratulations to Spain, the winners!

From June 11th - July 11th, money and people flowed into South Africa, a proud country with a history no more complex and convoluted than any other, but did the African citizens benefit from such a seminal responsibility? In other words, was the decision to host the 2010 World Cup one that worked in the country's favor, or against it?

Economists believe that people (and nations) make decisions when they benefit more than they have to pay out; that is, when the benefits outweigh the costs. When we do this consciously with some desired outcome in mind - such as earning a lot of local revenue as a result of hosting the 2010 World Cup - economists say that people are "rational." We analyze a situation and weigh the pros and cons and act based on our expectations on how things will pan out. In this situation, it's safe to assume that the South African government and industry leaders (at the very least) thought that hosting the games would be a good idea for the country since they opted to host.

First, some historical context: South African was hostage to the institution of Apartheid from the 1930s when the term first appeared (an Afrikaans' word meaning "apartness"), through and beyond the 1940s when it was systematized into law. Think Jim Crow: nonwhite residents and business owners were restricted to certain areas, land ownership to nonwhites was duly restrictive, the lawful segregation of public facilities, prohibited social contact between the races, curbed nonwhite participation in government and economic policy, ad nauseum. Mounting international anti-apartheid pressure led to the state dismantling the system in the early 1990s. In it's wake was a worsening problem of income inequality between white South Africans and Black South Africans, and also between rich Black citizens and poor Black citizens.

According to the New York Times on July 12th, FIFA raken in approximately $3.3 billion in revenues from this year's World Cup, primarily from television rights, marketing and partnerships with various sponsors such as Coca-Cola.

South Africa's government spent just over $4 billion to host, most of which went to construction and improving infrastructure requirements. An estimated 130,000 temporary jobs were created by the soccer frenzy, in a country of 48 million (with 25 percent unemployment). President Joseph Zuma informed the media at a news conference "We are sure that the investment we have made will contribute to increased tourism, trade and investment. This will ultimately create new opportunities and bring in the revenue for us to address social challenges."

Well S.A. paid $4 billion and FIFA took in $3 billion. Well what else did South Africans get??

1. FIFA helped to establish the 1GOAL Campaign an initiative that serves the over 72 million children worldwide who are denied the chance to go to school. It was decided that the 2010 World Cup was the best place to launch the campaign, because the eyes of the world were watching. No data on the quantity or quality of education among South African children as a result of the initiative.

2. Ticket sales revenue would have significantly benefited the local economy if more tickets had been sold in advance. Reports state that initially, tickets were only sold online, a slight to Black South African fans, many of which do not hold bank accounts or have access to the Internet. Later, tickets were sold in-person exclusively to South Africans, but not before lots of revenues were missed. FIFA also had it's hand in these money flows as well, however.

Cynics (like the Delasol Group) contend that a not for profit organization like FIFA surely seems to be laughing all the way to the bank at the expense of the host country. Financially, the World Cup was a great deal for FIFA, but the grass wasn't as green on the South African side.

Thoughts? Always welcomed.

The Credit Education Series, Part 3 of 4

2010-03-24T19:24:00.009-05:00

Welcome back to the long awaited Credit Education Series, brought to you by The Delasol Group, an Economic Education & Consulting Firm.

In part 3 of our series, we explore a new issue making better, more-informed economic choices for yoursel and your families. That is the issue of Security. Insurance is one form of security in our society, just like alarm systems or credit report monitoring. We need to protect our loved ones, our assets and our personal information.

Compared to thirty or even ten years ago, job hunting has increasing moved from face-to-face interaction, to print media to the Web. Today, Monster.com, USAjobs.gov and Craigslist.org are popular choices for the unemployed. At a time in our nation's history when jobs are hard to find and money is scarce, Internet scams are on the rise and innocent people become more susceptible to the increased temptation!

Here are some common online scams, two of which the writer was involved in (though thankfully not scammed!) in the last three months!! This list is courtesy of the Internet Crime Complaint Center (the IC3) website.

Someone tries to give you a bad check, forged money order or some other kind of false monetary instrument to deposit. Usually, they tell you to cash it and take some off the top. (IMPORTANT: The bank will hold you financially responsible for what you took when the fraud is discovered!)

Someone tells you about a business opportunity where it takes money to join and the best way to make money is to sign up more people.

Someone offers to buy, sell or rent something

Someone tried to cheat you at gambling

Someone offers you an employment opportunity that turned out to be fradulent or illegal.

The IC3 serves receives and refers criminal complaints about cyber crime to local, state and federal law enforcement authorities. I submitted a report after I was sent a bogus cashier's check and instructions to cash it, take a fee (for SAT tutoring) and Western Union the rest. All parties were invisible, meaning that I only knew them through the Internet. This is a BIG NO-NO. While they got my address, they didn't get any bank information, and I was wise enough to keep all the evidence for any follow-up with the IC3.

Be smart. Protect your investments: your money, your family, your privacy! We will continue to treat Security has a high priority issue on this blog.

Cheers!

Healthcare Law Challenges Wealth Inequality in the U.S.

2010-03-23T11:59:00.005-05:00

Take a good look at this cartoon (courtesy of the SF Sentinel online) and understand what it means. When the President of the United States, Barack Obama, signed into law the Health Bill today, he took America in the opposite direction we have been moving in (with respect to government policy and taxes) for the past 30 years.

Since the late 1970s, the top (read: wealthy) marginal individual income tax rates have declined. There has also been a simultaneous increase in payroll taxes that finance Social Security and Medicare. From this brief, publicly available information, we can assume that our federal tax system isn't particularly progressive; on the contrary, it appears to reward the wealthy and the expense of those in poverty.

Nearly every tenet of the Healthcare Law pushes in the opposite direction. It makes healthcare accessible to every citizen. If people have healthcare, overall they will be healthier to work and play and be productive members of our economy. This assumption is just the icing on the cake, however. The bottom line is that everyone needs healthcare. The Delasol Group believes that all costs aside, healthcare is a basic necessity that no one would want to be without in any capacity. We salute the Administration on their tireless efforts to work across partisan lines to provide for Americans' well-being.

In large measure, the Healthcare initiatives will be financed by taxes on the wealthy. Households that earn more than $250,000 a year will see payroll taxes increase. Most of the beneficiaries of the new law are making less than four times the poverty level, or about $88,000. (The poverty level is set at $22,056 a year for a family of four, according to the Department of Health and Human Services' poverty guidelines (2009 guidelines are in effect until March 31, 2010) - which differs from the Census Bureau's official poverty threshold. If you are in this group and don't have insurance, subsidies will be made available to cover the costs.

Here's a list of other major changes we can expect now and in the new few years with the landmark passage of the $940 billion Health Bill:

The good news (and contrary to some) is that Medicare and the Children's Health Insurance Program (CHIP) will not cut back on eligibility. They can only expand it.

We like this one!! Within 60 days, the Secretary of the U.S. Department of Health & Human Services (HHS), Kathleen Sebelius, must develop a standardized format to be used to present insurance information to the people of the United States in an "understandable way."

By 2014, state-run insurance exchanges will will up and running. Persons choosing not to sign up with their employeer-provided insurance can opt to choose a carrier from a state-run exchange. More options mean that we can hold the insurance carriers accountable for better service for everyone.

Monetary penalties on citizens who choose not to carry individually mandated insurance will begin in 2014.

Plans will no longer be able to charge for pre-existing conditions.

More provisions for the final Healthcare Bill can be found in this interactive feature from the New York Times. We encourage you to continue to learn more about how this historic legislation affects you and your family.

In all economies worldwide, the demand for healthcare exceeds the available supply, mostly due to rising costs for medical equipment and services, but also because of accessibility. The people in Haiti have faced both of these issues head-on since the earthquake in January. The problem is obviously acute in low-income communities, at home and abroad. We have an obligation to provide for what's best for the public's welfare and healthcare is what's best for everyone.

The 2010 State of the Union Address & You

2010-01-28T11:40:00.016-06:00

How President Obama's 2010 economic agenda affects your life.

Happy New Year ECONtrepreneurs! How are Americans faring economically in 2010 and what can they realistically expect over the next twelve months? This blog applaudes President Obama's call for all Americans having the education and means to make informed choices for their lives during his speech last night.
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"How long should we wait? How long should America put its future on hold?"
"Make sure consumers and families have the information they need to make financial decisions."
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From this we know the President wholly supports the mission of The Delasol Group. In today's blog we highlight 5 areas from Obama's Executive Economic Summary for your learning pleasure.

Jobs. Last May (see 5/18/09 post, "Economic Indicators") we wrote about the National Employment Situation, a key piece of information about the health of a country's economy. Last night, President Obama stated that "1 in 10 are out of work;" a 10% unemployment rate, as of December 2009 (This is current as of January 8, 2010). When we posted that blog entry last Spring, the jobless rate was 8.5% and 8.9% in March and April, respectively. The unemployment rate has worsened over the last 10 months, but you don't need Delasol to tell you that. In many households people are looking for first or second, or even third jobs to make ends meet. Obama says that employment is our number one concern and last night proposed a new Jobs Bill to add 1.5 million jobs by the end of this year.

Works in Progress. On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act to combat the chaos in the economic markets. The Act focused heavily on help for small businesses, building American infrastructure , developing clean energy industry and practices, loosening credit and building national confidence. In the State of the Union address last night, President Obama refered to these areas several times as high priority. The ECONtrepreneur blog will continue to report on how these developments affect you.

What we got. The President said that in that last year, people had more disposable income (True), COBRA health insurance became 65% cheaper (True), and his Administration pioneered 21 different tax cuts (Possibly; we're still researching this one). With the benefit of hindsight, do you think this was a good sign of greater economic growth to come?

What we can hope for. Hope was a major theme of the Obama campaign. Last night he said the American economy will move towards full employment, long-term growth, suspending discretionary spending, universal healthcare, and improving the U.S. Trade Gap. These are additional topics we will explore on this blog in months to come.

What groups are definitely getting benefits? Students (loan forgiveness), retirees (stable markets and personal retirement accounts), the unemployed (new Jobs Bill), small business employers (tax credits and loose credit channels), homeowners (flexibility to move to a more affordable mortgage), women (equal pay for equal work), and military (veteran investment and support for families). The only group not benefitting - if that's possible - are the rich, who will not be seeing any tax breaks in the forseeable future.

That still leaves to debate how all of this progress will be paid for.

This year the ECONtrepreneur blog will closely follow progress in President Obama's economic agenda. Can't wait? Follow the Administration's progress at http://www.recovery.gov/.

Cheers!

Average Weekly Earnings - May 2009

2009-06-17T13:53:00.004-05:00

The U.S. Bureau of Labor Statistics (BLS) reported today that the average weekly earnings of private Americans fell by 0.3% from April to May. What does this mean for ECONtrepreneurs who monitor changes in the broader economy and its effects on their personal economies? Let's explore this in light of other recent economic news.

To begin, Average Weekly Earnings is an Economic Indicator (see May 8th post). From this we speculate on take-home pay trends for average workers. Average Weekly Earnings are reported monthly along with the Employment Situation Summary, also published by the BLS.

The Consumer Price Index (CPI), also from the BLS, was released today as well. For simplicity, the CPI is synonymous with inflation. The CPI is a gauge to determine if Americans are paying more or less for the same goods/services as they were last month or last year. Consumer prices in May increased 0.3%.

So earnings are shrinking and prices are rising. If this trend continues, your consumer spending could be threatened! You may not be able to buy the same quantity (and quality) of goods and services you previously could, although your paycheck is the same amount. In layman's terms, situations where there is too much money chasing too few goods, causing the price level to increase are called inflationary. Conversely, situations where there are too many goods and not much money, causing downward pressure on prices are called deflationary.

Thankfully, we are not experiencing neither inflation nor deflationary effects yet. But the threat of both linger. The Federal Reserve, America's central bank headed by Ben Bernanke, is responsible for monitoring inflation levels. If prices continue to rise unchecked, inflation is well on its way to a reality near you.

Let's dig a little deeper into the CPI figure. Total CPI rose 0.3% from April, but core CPI rose only 0.1%. Core CPI does not include food and energy prices. Why? These products are considered volatile and susceptible to wild fluctuations. If the supply of oil or corn is restricted, the prices of these commodities changes immediately and drastically. Taking these components out leaves us with a more stable rate: the core inflation number. Keeping food and energy prices in the CPI number is called headline inflation, because it does just that: makes news headlines!

According to Federal Governor Kevin Warsh, the risks aren't as prevalent as many would have us to believe:

The recent data on inflation shows that the risks of deflation, which entered the minds of many central banks around the world over the last 18 months...seem to be significantly attenuated. [Inflation dynamics are] "closer to a zone of price stability....

Warsh is undoubtedly looking at the bigger picture. While headline inflation is up, core inflation not so much so. And, looking at CPI figures from the same time last year, inflation levels are lower in 2009. Core inflation is steady, but headline inflation is a little trickier. Energy prices - specifically gasoline prices - increased in May but not like we're used to seeing this time of year (Memorial Day usually kicks off the summer driving season; when people need or demand more gas, the price of gas will rise). Here at The Delasol Group we anticipate June gasoline prices to be higher, thus contributing to a higher headline CPI number next month. However, American productivity is lagging and more modest GDP numbers will likely keep core inflation in check as well.

U.S. Trade Gap - April 2009

2009-06-10T13:31:00.011-05:00

Today the U.S. Department of Commerce reported that the national monthly deficit in international trade of goods and services increased to -$27.2 billion in the hole. That's a long way to climb out.

The International Trade Gap is also known as the Balance of Trade. It is one way to determine how healthy an economy is. The Balance of Trade is a summary of the monetary value of a country's exports and imports. Exports are goods and services a country sells. Imports are goods and services a country buys. When a country exports (buys) more than it imports (sells), the balance of trade is positive and is called a trade surplus. If a country imports (sells) more than it exports (buys), the balance of trade is negative and is called a trade deficit. The United States has been facing a trade deficit (buying more than we sell) since 1976. Interestingly, if you look at goods and services separately, the balance of trade for services has always been positive.

International trade is a necessary evil. It allows a business or country to expand; like most expansions, smaller, less competitive agents are usually hurt or allowed to fail for the benefit of the majority (In a future post, we will look at the effects of globalization on the Jamaican economy and the rise of Wal-Mart). Although the United States has many natural resources, for example, it cannot provide it's citizens with everything they want or need. For this reason the U.S. engages in international trade with other countries. The U.S. Trade Gap is the balance of trade between America and the rest of the world.

During the month of April, the deficit worsened by about a billion dollars from March. Deficits, per se, aren't necessarily a bad thing. It's really about when they occur and what effects other economic events have on them. In a recession, highly developed countries like the U.S. may want to export more, thus selling more goods to foreigners than they purchase from them. In theory, this would create jobs (to manufacture, distribute, market and transport the good) and demand for said good. This would help an economy fight the effects of a recession. In prosperous times, a country may be in a position to build capital or invest in machinery for future growth and will choose to import (buy) more goods and services.

Well, right now the United States is in the middle of recession and we're on the wrong side of the import/export fence. The widening deficit means that at a time when money is already tight from individuals all the way up to our national government, we are still outspending what little bit of revenue we're making. What are we spending our money on? Wait for it....Oil.

American oil imports are up and instead of gassing up our cars, in reality we are fueling the deficit! America has the most powerful economy in the world, measured by a Gross Domestic Product (GDP, another measure of economic health) figure of $48,000 per person, for roughly 300 million people. Wow! Additionally, U.S. firms have more flexibility and independence in their business decisions than their Western European and Japanese counterparts. But oil is the proverbial monkey on our back. Higher gasoline prices a year ago ate into our pockets and inevitably, into our trade budget. Imported oil accounts for about two-thirds of all U.S. consumption so it's a big part of national GDP (Remember, GDP is the economic determinant of how big and bad a country we are). According to the CIA World Factbook, America produces 9 millions barrels of oil and consumes 21 million barrels each day. We import 14 million barrels and and export 2 million. Something has got to give.

Oil is a natural source of energy, but not the only source. President Obama has issued a call for Americans to find other ways of getting the energy they demand - without going into debt or depending on someone else to negotiate the supply. On June 1st of this year, U.S. Department of Energy Steven Chu announced a $256 million investment from the President's American Recovery and Reinvestment Act. The initiative will support energy efficient improvement in industry. The funding is set to reduce energy consumption - especially in manufacturing and IT sectors - create jobs, and help grow the economy. We'll have to hold our government accountable for weening us off of our addiction and developing environmentally-friendly, long-term solutions.

Here's an interesting and ironic video clip of a Barack Obama painting done entirely in motor oil. The artist is David Macaluso.

A Healthier You

2009-05-29T12:46:00.007-05:00

The U.S. health care system is overweight with ill-gotten profits and has arteries screaming for reform.

While America is great - even the greatest! - at many things, we've fumbled with our health care system for long enough. An astonishing 15 percent of all Americans do not have health insurance. That's the equivalent to every Hispanic American not having insurance. It is unacceptable for one of the world's most developed nations to disregard the health and lives of so many of its citizens.

In short, our health care system is a quagmire of regulations and directives not easily translated into English! American workers pay increasingly higher premiums, deductibles and co-payments, in a system that dictates which doctors you can and cannot visit. Health care spending is about 15 percent of Gross Domestic Product (GDP) in the United States. To see how we match up against other countries, examine the graph below:

As you look at the graph, you see that Life Expectancy increases as you move higher up the vertical axis. Health care spending in "international dollars" (a fancy method of equalizing country currencies in order to compare them...on an 'apples to apples' basis) is along the horizontal access as you move from left to right. In an ideal scenario, you want to be a country that is higher than the others (your citizens live longer because they are presumably healthier) and towards the left (your citizens get healthier at a lower cost than others). Looking at the graph, Cuba and Japan are two great candidates for having the world's best health care systems. In essence, Cubans and Japanese pay less for good health care that helps them to live longer. The United States has comparable life expectancies, but pays much more money to live longer. Sierra Leone is our polar opposite, as its citizens can't afford enough quality health care so the average life expectancies are lower.

There are many reasons why some countries can provide better health care for its people. Some places are ideally located, so access to clean water, an abundance of fruits and vegetables produced and favorable climate are naturally occurring resources that encourage healthier living in places like Costa Rica and South Africa. Poverty, however, is the primary discriminator between who is healthy and who is not, no matter where you live. This is the case especially in America where we have high economic inequalities by income, education, race, et cetera. Here, high quality health care is available only to those who can afford it.

Enter U.S. President Barack Obama. In recent stops across the nation, he has revealed that his version of health care reform will cover the approximately 45 million Americans that are uninsured and will cost about $1 trillion dollars over the next ten years. If it sounds like a lot of money, it is! To this, the President says:

Failing to reform our health care system in a way that genuinely reduces cost growth will cost us trillions of dollars more in lost economic growth and lower wages.

The bigger issue, of course, is how is he going to pay for it. In his June 13th weekly address he proposed major cuts to Medicare and Medicaid, he has also said that taxes will go up and [unnecessary] health care spending will fall.

There is a wealth of information - and opinion - on America's Health Care Reform plans. Educate yourself here first, then come back to our blog to continue the discussion!

All Aboard!

2009-05-22T09:10:00.001-05:00

Not since the early 20th century have so many Americans had train on the brain.

In 1922, General Motors President Alfred P. Sloan took the initiative to get more Americans into passenger cars by enlisting the help of Standard Oil (now Exxon), Phillips Petroleum, glass and rubber manufacturers and politicians to build a convincing argument against mass transit. America's love affair with the automobile has blossomed ever since...although the love affair with GM recently soured....

Economics has a special love for transportation issues too. There is lots of opportunity for creating more efficient, more economical modes of transportation. And, during economic downturns, more people tend to choose public transportation over incurring private transportation costs such as gas and maintenance. For an example as to how well public transportation can work, look at Spain.

Case Study: Spain by Train

After the success of Japan's Shinkansen Trains and France's TGV, Spain opened its first Alta Velocidad Espanola (AVE, for "high-speed Spanish train") in 1992. It ran between Madrid and Seville. Since then, the network has grown to include more stations in the south and eastern regions. In terms of efficiency and economy, the route handles about 89 percent of railway and air traffic. The number of tourists to smaller town has increased, demand for business conventions is up and less competitive-areas now have the option to attract companies to their local economies. Here's an interesting video on the efficiency and overall satisfaction with the AVE.

Trains have numerous economic benefits as a preferred mode of regional transportation. The International Union of Railways (IUR) says a high-speed train (which, by definition travels 90 m.p.h. or faster) can carry eight times as many passengers as an airplane over a given distance, using the same amount of energy and emitting a quarter of the carbon dioxide for each passenger. The AVE reaches up to 300 m.p.h. during the morning rush hours between Barcelona and Madrid.

With clogged highways and overburdened airports here in the States, economic growth is suffering. President Barack Obama has set aside $13 billion for high-speed rail infrastructure in his landmark 2009 Stimulus Package. That's an initial $8 billion, then $1 billion annually for five years. The Transportation Department is to begin awarding monies by the end of summer. As of today, only one high-speed rail line is operative in America; it's the Washington D.C. - Boston line in the Northeast Corridor. The Federal Government has identified 10 corridors nationwide with great promise for high-speed development.

President Obama has this to say on high-speed rail systems in the U.S.:

"What we need, then, is a smart transportation system equal to the needs of the 21st century. A system that reduces travel times and increases mobility, a system that reduces congestion and boosts productivitym a system that reduces destructive emissions and creates jobs."

So now that we understand the benefits, what are the costs? The director of high-speed rail at the IUR says that high-velocity trains are not profitable. Despite hugh time and environmental savings system-wide, budget airlines still offer the cheapest prices between Barcelona and Madrid and the IUR director goes on to say that the systems in Japan and France are likely the only two to have broken even in terms of profit. There are major concerns in terms of safety, and reliabilty which can be very costly to maintain. CATO Institute economist Randal O'Toole found that aside from businesspeople and tourist, average Europeans still prefer driving to rail transit. In an article that appeared in USA Today on May 20th, he confirmed that taxes would rise for all Americans and that ticket fares would cover only some of the operating costs and none of the capital costs. O'Toole calculates that the cost of implementing a high-speed rail system in the U.S. would cost an eye-popping $500 billion, in stark contrast to the $13 billion the President has set aside through 2015. American highway infrastructure paid for itself in a matter of years from fuel taxation. What besides rail subsidies would sustain a nationwide system?

One idea is property taxes. Spanish real estate portal Kyero reported in June 2008 that property prices in towns and cities served by AVE stations outperform their provincial averages. As more stations are planned, it will be interesting to see how the introduction of high-speed rail impacts house price. This could in turn become a primary source of payment for train systems worldwide.

What are your thoughts on high-speed rail in the U.S.?

The Credit Education Series, Part 2 of 4

2009-05-15T13:25:00.003-05:00

In part two of the Delasol Group's Credit Education Series, we will open dialogue about the all important credit report.

What does my credit score say about me?

Your credit score is a three digit number that helps to determine the amount of credit (in dollars) you can borrow and the interest (as a percentage) you will owe. In general, the higher your score is, the more money you can borrow and the less you will pay for the loan. The more credit you can responsibly manage and pay back on time, the more creditworthy you are on paper to prospective lenders.

As a side note, interest is the cost of borrowing. If you borrow $5000 from your bank, they expect you to pay back the $5000, plus interest. Interest is the dollar amount you pay for having the luxury to access cash that is not yours; it's the cost of borrowing! Before the 1980s, American banks used to charge everyone the same flat interest of about 20%. After credit scores became readily available to individuals in the late '80s, banks began offering credit with a variety of interest rates, thus tying the cost of borrowing (interest rate) to a person's degree of credit risk. Credit risk is the polar opposite of credit worth.

How is my credit score determined?

Here's the breakdown on your credit score*:

35% is determined by your payment history; that is, do you regularly pay your debts on time? Note that unpaid library fines, medical bills and parking tickets are included in your payment history.30% is based on the amounts you owe each creditor and how that compares with the total credit available to you. If you are maxing out your credit lines, your score will suffer.15% is based on the length of your credit history. The goal here is to have a few accounts (you only need 1 or 2 to establish healthy credit habits) and old accounts, which show that you are a good steward of credit over long periods of time.10% depends on how many accounts you have opened "recently", or how many "recent" inquiries exist on your report; Recent is relative, but know that your score can drop if it looks as if you're seeking several new sources of credit - a sign you may be in financial trouble, and therefore not very creditworthy.The last 10% is determined by the types of credit you have chosen to use. Installment debt is paid in a fixed amount each month, like a mortgage. Revolving debt doesn't have a fixed payment (like with credit cards) so the amount you owe depends on how large the outstanding debt balance is and your prevailing interest rate.
What is a FICO score?
Now when people say "credit score" they usually mean the FICO score. FICO stands for the Fair Issac Corporation, the good folks who invented credit risk scoring. Keep in mind that FICO isn't the only credit score out there (one estimate says that there are over 1,000!) but it is the primary score used by lenders. FICO takes into account the data collected by 2 of the 3 largest credit-reporting agencies, and gives credit scores for Equifax and Transunion*. The FICO score can range from 300 to 850.

Do I need to pay for a credit report?
No! You can get a FREE copy of your credit report from each of the three major credit agencies once a year. How? Visit AnnualCreditReport.com, the only authorized online site under Federal law. Review it carefully and address any errors in a letter sent to the appropriate agency, with any supporting documentation.

How do I get my credit score?
Now this tidbit you are charged for. As stated above, FICO is the most widely used score, and this can be obtained from myFICO.com. Here, you can also get a score from Equifax or Transunion. Remember, some scores are proprietary by the company you choose; as fotenoted below, Experian, while a major credit bureau, no longer partner with FICO to provide credit scores, and instead offers its own model.

What do I do after I get my credit report and score?
Whether or not you need to monitor your credit is debatable. If you are trying to establish healthy credit habits it is in your favor to check your credit yearly or even quarterly to get used to searching for errors and evaluating the outcome of your credit decisions. Or, if you plan on using credit for a major purchase in the next 6-12 months, it would benefit you to check your credit and address any errors beforehand. Not only will you be aware of how creditworthy you are, but you also take the steps to change your economic behavior to become more wealthy and wise about your financial future.

Part III of the Credit Education Series coming soon!!

* This breakdown obtained from the New York Times Online article "Credit Scores: What You Need to Know", 01.06.2009.
* Experian no longer has a partnership with FICO to provide credit scores as of 02.2009

Economic Indicators

2009-05-08T09:36:00.007-05:00

A primary goal of this blog - and of the economic education services The Delasol Group provides - is to get people to relate how things in the larger economy affect their daily lives. Looking at national or regional economic data and news is an area of study called Macroeconomics. In contrast, Microeconomics focuses on a smaller ("micro") portion of society - individuals and businesses. While much of the information on this blog deals with your personal economy and other Microeconomic issues, it's important to keep up with Macro news too.

Case in point: the National Employment Situation.

Now this is the type of information that moves markets; literally. In fact, this data is so important that it's essentially locked up until the very minute it's released to the media and the public. National statistics that allow us to gauge how healthy the economy is and predicts future performance are called economic indicators. Here's a few of them here. The National Employment Situation is one too.

Today, the U.S. Department of Labor reported that the jobless rate rose from 8.5% in March to 8.9% in April and that roughly half a million people lost their job last month. Even with this dour information, it's optimistic that April's decrease was the smallest in the last six months. This could mean that the recession may be reaching a bottom - a turnaround point. If you visit the BLS website and search for the Employment Situation report, you can get even more details such as the unemployment rate by race, gender and industry. So how does this economic indicator affect you?

Let's imagine you were unhappy at your current job. You may be weighing your options: Should I go back to school for more education? Should I start my own business? Should I transfer to a new city? Awareness of what's going in the in Macroeconomy can help us make routine Microeconomic decisions. Knowing that businesses are still laying off workers may persuade you to keep your current position. However the fact that less folks were laid off in April compared to the previous six months may encourage you to explore your options and watch how the situation changes in the coming months.

We will continue to explore how changes in the Macroeconomy affect us as individuals. What other economic news have you heard about that you feel directly affects you?

Fear & Loathing in the U.S.

2009-05-07T13:27:00.006-05:00

Gun sales are up in the United States of America.

And if sales of guns is up, you can logically expect that ammunition sales and background checks are up too. The Federal Bureau of Investigation's website confirms that more people are trying to buy guns this year than in 2008*.

What's driving this trend is primarily disgruntled voter speculation (see definition below) and...wait for it...CONFIDENCE; or more appropriately, a lack thereof.

The day after President Barack Obama was elected on November 4, 2008, many gun stores, like the one pictured above, earned record revenues as gun enthusiasts and amateurs alike filed in and stocked up on their Second Amendment Right. Aside from isolated theories that the Obama Administration will usher in a new era of anarchy and chaos, it seems as though the increase in demand for guns and the like are due to one of three factors:

Some are anticipating new gun-control laws;
Others are concerned about their public safety as the recession searches for a bottom;
But most are eying guns as a "safe" and practical investment when the volatility in the stock market leaves most of us too queasy to take advantage of low-cost stocks and commodities.

Wait, investing in guns??

First two definitions:

An investment is a choice by a person to place money into a security - such as a stock, commodity or bond - after careful research. The investor's research assures him or her that a little risk will probably generate a lot of (monetary) benefit in the future.

Speculation however, is the same scenario without careful research.

Guns are investments like any other. Say your great-great-grandfather owned a weapon at the turn of the 20th century and now you have it. Like comic books and currency, old guns are worth money. Since America became its own country, the right to bear arms has been integral to our national identity. About 50% of all American households own a gun and many more are gun advocates.

But are guns "good" investments? That depends on the current state of the market for guns. Last September, Soviet-era AK-47 rifles (one of the first assault rifles, it was designed by Mikhail Kalashnikov and debuted in 1947) sold for about $350. By the end of 2008 the price had more than doubled! This was clearly a good investment in September, as in just a few months you would have watched with glee as the value of your investment rose. If you decided to sell - or "flip" - the gun, you would have made a profit! Today, European-made AK-47s sell for just under $2000.

Whoa.

Scarcity - or the premonition of it - drives up demand for a product. For this reason, it's no surprise that many gun dealers support the hypothesis that President Obama is going to restrict gun rights, despite signs that reinstating the Federal assault-weapons ban (which lasted from 1994-2004) is unlikely. In reality, the ban has very limited support in Congress. But if people lack confidence in the executive and legislative branches of our government concerning gun laws, you'd better believe they're going to want to get theirs now! The increased customer demand for guns and bullets make the cost of these products increase as well. This explains why AK-47s are appreciating in value faster than before.

Knowing the recent history of gun prices is a good place to start researching them as an investment. Are you buying when prices are historically high or low? The goal of investing is to "buy low, sell high" in order to generate a profit, rather than a loss. Another research area is to determine if there is any reason to invest now rather than later. If you think prices are going to go up, you should buy now! If you think prices will fall, or gun inventories will be overstocked, you may want to wait it out or search for a more promising investment. A third research area before deciding to invest is additional costs. Buying a gun would mean buying ammunition, insurance, a safe and a license. Taking a little time to explore your options could be the difference between the costs of your investment outweighing the benefits! Bottom line: Your investment should improve your financial health, not hurt it.

*The F.B.I. is the clearinghouse for all Federal criminal background checks for potential gun-buyers.

The Credit Education Series: Part 1 of 4

2009-05-06T14:19:00.008-05:00

By popular demand and by order of necessity, The Delasol Group brings to you an exclusive four-part series on Credit. In this mini-course, we are going to focus on ECONtreprenurial credit & debt management; that is to say, how to use your credit wisely and not allow it to use you! We eagerly welcome comments and suggestions to appropriately educate the masses on this hot topic.

First things first: Why is it important to establish credit?

The primary reason is because credit allows us to purchase things we do not have the cash for. Now don't be alarmed, there are many smart purchases that you may not have the money for, such as a home or an education. For these things - and other big money purchases - you need credit. It's not mandatory, but it's not common that you can shell out $25,000 in cash for a car or $300,000 for a house.

Another reason we establish credit is because borrowing money and paying it back responsibly allows us to borrow more money. If you are a small business owner, you will need to show some proof of paying regularly on your debts before a bank will give you a loan to expand. If you are a parent, you will need evidence of consistent debt payments to secure a student loan for your child's college education. Just like the saying, "It takes money to make money" it is also true that "it takes credit to get credit!"

Finally, the best deals go to people with good credit. You can expect lower interest rates on homes, cars and credit cards than someone who has a more troubled credit history.

Okay, so how can I build credit or turn my bad credit into something good?

Excellent question! There are two ways to establish or turnaround your credit:

1. Get your free Credit Report.
2. Check out Pay Rent Build Credit.
3. Purchase something on credit and pay it back on time and in full. Repeat.

Every 12 months you are eligible to get a free credit report. Every time you go to borrow money, rent an apartment or purchase a car, someone looks at your credit report to see if you are creditworthy or not. In recent years, it is common for potential employers to pull your credit report too, to ensure that as an employee you won't be more of a Liability than an Asset. Knowing what's on your credit report will save you from disappointment or embarrassment, and will let you know exactly where you need to start repairing your credit. There's only one place where you can get your free credit report. Click here to get yours!

Pay Rent Build Credit is a service that provides people with no or poor credit to build their credit without going deeper into debt. PRBC is a credit repository*, just like Equifax, Transunion and Experian. What makes PRBC different is that it is the first credit bureau to allow people to enroll themselves and lets them demonstrate their creditworthiness from non-debt bill payments. Things like Rent Cable, Daycare, Insurance, Cell Phone, Electric and Natural Gas payments. The "Big Three" repositories don't give you that option. The company gives you two options. If you have been paying on your bills regularly and on time, you can order a verification and key in payments you have made. If you would like PRBC to begin to track your timely bill payments, you should sign up to pay your bills online through one of PRBC's partners. PRBC then uses your timely bill payment history to create a credit report for you with both debt and non-debt payments. Pretty nifty idea! The Delasol Group fully supports this effort and invites you to view the website and watch the brief clip below on PRBC:

Now the third method of building credit - by actually using it - is usually either a complete bust or a bang! The Delasol Group would like to walk you through monitoring credit with your credit report in part 2 of our Credit Education Series. Stay Tuned!

* A Credit Repository is an organization that collects, updates, stores and reports financial information for people who make payments on stuff.

The Delasol Group's Online Guide to Saving & Interest Rates

2009-05-05T14:09:00.021-05:00

When you save money, you are paying yourself. You are putting your money away until you use it sometime in the future. Here's the catch: the longer you wait to use your savings, the more you have! In the midst of the most recent and vicious recession that any American has experienced, saving is like the new black, or the new 20, so to speak. It's en vogue. So for those of you who are new to this or are simply out of practice, here's The Delasol Group's Online Guide to Saving.

Choose Wisely. It's important that you know now that small decisions can have a big impact. ECONtrepreneurs have an uncanny ability to quickly surmise smart economic decisions from not-so-smart ones. Should you save $100, charge $100 a month, or do both (Your answer depends on your cash flow)?The regular savings you start now will accumulate quickly over time. The regular debt you incur now will do the same. Choose wisely.

Interest is interesting! If you don't understand interest rates and how they can work for and against you, you should not apply for any type of credit. Excessive interest charges are what keep most people in debt long after they paid off the original amount they borrowed! Why does this happen? For most, the answer is simple: read the small print. But, in the likely event that you won't, here's The Delasol Group's quick and dirty Primer on Interest Rates, at no additional cost!

Interest rates as they relate to saving money are good: the more you save, the more interest gets paid to you. But why do banks pay us interest? The answer is because people are essentially loaning their money to the bank when they open accounts. Your savings don't sit untouched until you make a withdrawal. Your bank uses your money to lend to other people, and when you need a loan, the bank uses someone else's money to lend to you. Confidence (there's that word again) is what allows people to trust that their bank will have their money when they need it. Paying interest is how your bank rewards your trust. If you are looking for somewhere to save money, you should always compare the interest rates on different accounts and consider the bank that has the highest rate of return.

Interest rates as they relate to credit hurt, rather than help you. You are charged interest for taking out a loan or mortgage or opening a line of credit (like a credit card or a charge/store card). It's required that a lender tell you how much interest you are responsible for. Often, you will see your interest obligation rise if you are late on or miss a payment. And, lenders determine the interest you pay based on your credit history. If you have struggled with making debt payments in the past, you will likely receive a higher interest rate. Think of it like this: your interest payments are how you reward the lender for giving you money to buy things you don't have the cash for, such as a home, an education or a spending spree (not advised until your cash flows are well -insulated from random economic shocks) Interest payments in this sense are the cost of borrowing money.

Prioritize Wants versus Needs. This one is simple in theory and difficult in practice. Hold on to your receipts for a week or two and then go back and see what you spend your money on and where you can cut back. Small purchases can be subsidized by ECONtrepreneurship in Action. Eating out too much? Make a better grocery list! Ballin' at Starbucks? Brew your own blend at home! Shop-a-holic? Mix, match and re-accessorize existing clothing to create new ensembles and buy clothing out of season! Take control of your lifestyle instead of allowing your lifestyle to control you.

What ways have you started saving in 2009? Tell us!

Personal Credit 101

2009-04-17T19:22:00.011-05:00

WAKE UP! Class is in session. Personal Credit 101.

Credit is without a doubt the hot topic across the country. On the macro level (nationwide) we can't hear enough about the 'Credit Crisis.' On the micro level (you and I) it's interest rates that keep our tongues wagging and pocketbooks asphyxiating.

Some basics all ECONtrepreneurs and users of personal credit should know:

Know your status. Before you start using credit of any type, get a credit report. The Fair credit Reporting Act guarantees you a free credit report from each of the three reporting agencies - Equifax, Transunion and Experian - every 12 months. Read more about it here. The only authorized source to get your free report under law is AnnualCreditReport.com. Delasol advises getting the reports separately from each agency; that way you can monitor your credit more frequently throughout the year. You will need your name (a no brainer), date of birth, address (current and previous) and Social Security number.
Know why it's a big deal for you. The information in your credit report is used to evaluate your applications for credit cards, loans, insurance quotes, employment and renting or buying a home.
Protect yourself against identity theft and loss of purchasing power.Once you have your credit report in hand, search for accounts you don't recognize and inaccurate information. If you find any, dispute the errors by writing a letter to the reporting agency detailing the inaccurate information; include copies of documents that support your position. If you suspect identity theft, visit the Federal Trade Commission's identity theft website.Monitoring your credit will without a doubt increase your ability to buy the things you want in the future; that's what your purchasing power is. If you are in the dark about your credit history and potential, you're limiting how far your dollars can work for you. ECONtrepreneurs exploit strategies where their money does the work for them. Good credit health is wealth in itself.
Stay on top of the issues.News reports have picked up on the major credit card issuers' (Bank of America and Chase to name a couple) initiatives to changed the terms for tens of thousands of customers. People who have low card rates but carry a balance month-to-month are being penalized. Issuers are hiking up rates and demanding higher minimum payments from people with great credit and those with poor credit. While in many cases you may contest a rate increase, it is usually granted with the caveat to restrain from using the card further, and is based upon your credit history. If you use credit, use it wisely and don't spend more than you can afford to pay back in 28 days.
Tell a friend. Word gets around. Helping others become savvy about their finances has positive effects on the whole community. Each one, teach one.

Stay tuned for an upcoming 4-part feature Personal Credit Education series on building and improving your credit history and worthiness, brought to you by the Delasol Group.

Becoming the Change You Want to See

2009-04-15T10:06:00.005-05:00

Shoutout to Ben Bernanke.

Yesterday the chairman of America's central bank addressed the nation from none other than Morehouse College in Atlanta, Georgia. Morehouse is a distinguished Historically Black College (HBCU), unique in that it is the only HBCU just for men. Bernanke made a strong statement by choosing the college for his remarks, as degree-seeking students are suffering disproportionately in the current recession.

Relative to their majority counterparts, minority-serving institutions on average have smaller endowments and higher percentages of students from less wealthy families, which means more Federal financial aid dollars per student. For these reasons - amid myriad shared threats to the viability of colleges and universities nationwide - HBCUs are petitioning alumni and outside donors to help struggling students stay in school. The reality for many HBCU students is that higher education is a luxury, not the standard.

Which brings us back to Mr. Bernanke, whose visit to Morehouse was unprecedented by our nation's most prominent economist. He is also trailblazing new ideas to make the Federal Reserve less mysterious, less sphinx-like to the American Public. Whereas in the past, the Fed was notorious for keeping taxpayers in the dark, a new day has arrived. In an online article in the Wall Street Journal it is revealed that the American Fed is considering holding regular news conferences to debrief the public on the Bank's strategies and concerns. The European Central Bank already provides this invaluable service to its citizens.

To back his statement, Bernanke said he is "fundamentally optimistic" about the U.S. economy. Saying,

"Recently we have seen tentative signs that the sharp decline in economic activity may be slowing....A leveling out of economic activity is the first step toward recovery."

Delasol is a business built on education and information. For this reason we strongly advocate Bernanke's proposed role as the nation's "Professor-in-Chief" (the WSJ's term, not ours). Information and preparation are the keys to success. Educate us on the issues, Ben.

How do you feel about a more open central bank?

A Crisis of Confidence

2009-04-08T11:17:00.010-05:00

There's is a common belief that if people are confident in their government, businesses and neighbors, the economy will perform well. That is to say, that if people are more happy than mad, more confident than anxious about the financial markets and banks, things will run smoothly for everyone. However, now that we are in a recession caused by overconfident home buyers, investment bankers and speculators, we're just looking for the light of day.

America has at its helm a leader in President Barack Hussein Obama. According to myriad opinion polls, most of the country thinks he's doing a commendable job, considering the quagmire he's [been] elected to commandeer. What makes these arbitrary polls so important? Why do we poll people on the state of the economy, the progress and popularity of the President and the like? What is it that these polls reveal to us?

The answer is confidence.

In addition to managing the world's second largest economy*, President Obama must also become a cheerleader of sorts. If the President is pessimistic about the economy, how can we, his constituents, have hope in his actions to revive it? Inspiring confidence is central not only to the success of the President's economic agenda, but as we saw during the campaign, it's a key ingredient that is central to Obama's success as a person. The audacity to hope, the willingness to accept change and hard work are values that helped him gain the trust - and ultimately the votes - of the American public.

But when is it too much? The President's critics are already clamoring that he's just another tax-and-spend stuffed suit, looking to say and do whatever is necessary to retain his position as the world's latest and greatest political poster child. Others simply opine that he's pulling the wool over our eyes to dupe us into supporting his massive $787 billion stimulus package announced in February. All speculations aside, we believe it's a most prudent move to encourage and rally the masses who are feeling the direct effects of this recession. While many feel that spending is not the way out of the Recession, President Obama has taken great pains to explain his legislative and budgetary actions, most recently in front of a group of Georgetown University students and faculty on yesterday (read the transcript of his remarks here). Sports teams get pep talks before winning games and motivational speakers make a ton of money. While there is no harm in inspiring confidence, it is dually prudent for Americans not to be gullible, vulnerable as we are. It is our responsibility to educate ourselves on the issues and hold our administration accountable for its actions. After all, that's what any reasonable ECONtrepreneur would do.

How has Obama's first 12 weeks in office affected your confidence in the government's (mis)handling the economic crisis?

*The decline of the dollar has resulted in the European Union becoming the world's dominant economy, in terms of Gross Domestic Product.

ECONtrepreneur of the Moment

2009-04-08T09:35:00.007-05:00

ECONtrepreneurs are economists and entrepreneurs. Because they must be about the business of securing their economic health - by keeping costs down and building assets - they often have to be opportunists. Now that's not a pejorative term, but an honest one. When a great deal comes along you may have to make a split second decision, no matter how much preening and primping you've done to prepare for that magical money moment.

In a recession, people tend to look inward for inspiration. It is true that one tends to explore their "inner entrepreneur" when money gets tight, often posing the question, "How can I make what I have work for me?" This is a telltale sign of a promising ECONtrepreneur.

Take Mr. Ethan Nicholas for example. I stumbled across his success story in the New York Times earlier this week. Back in August he worked as a computer programmer for Sun Microsystems until he learned he wasn't getting a bonus. Having heard about another guy who earned $250,000 for creating an iPhone application, he gave it a shot. He had to teach himself Objective-C (the coding language of the iPhone) and worked "morning, noon and night" for six weeks. After he finished, Apple approved the application in mid-October. The first day his appliation (iShoot) was made available to consumers, he made $1,000. When it was all said and done, he made $800,000 in five months.

Whoa.

Well, the featured ECONtrepreneur of today is The Delasol Group, founded by Suneye Rae Holmes. Yes, this is shameless self-promotion. However, it is also ECONtrepreneurship in action. Armed with two degrees in economics and a natural gift of gab, I longed to teach but couldn't get hired. So I created my own curriculum to teach my community to become economically literate. This means understanding how big economic news affect you as an individual, defining net worth and its importance and becoming more confident in managing your personal finance skills. I've been helped by the recession as well, because with everyone broke there's a demand for economic and financial literacy. To that end, once everyone is rich again, there will be a demand to know how not to go broke! However while I can't guarantee riches, I can offer you a common sense and reasonable approach to understanding the relationship between your money and the broader economy.

I've been privileged to work with a group called Teen Mothers in Washington D.C. I've designed lessons, board games and simulations to encourage them to open up about their strengths and weaknesses regarding money. Then we build from there. This is the second series of an Economic Literacy workshop I've done for this group and we're moving into the final days of the class. In the coming weeks I am planning to get the students out and into the community, communicating their economic needs and goals to working professionals in a real-life setting. For many of my students, they wish to get their own apartments or purchase a car. I am designing a real-life scavenger hunt to get them some practical experience in securing these things. Not only is this good practice for when they are ready to get said apartment or car, but it's also great networking, providing a point-of-reference when they have questions in the future. In the meanwhile, I am building my company's brand by blogging, designing a website (for myself and others...another ECONtrepreneurial pursuit) and looking to network with other ECONtrepreneurs. Be on the lookout for Delasol and I hope you enjoy watching my small start-up company grow over time.

Do you know an ECONtrepreneur who deserves recognition or at least a little promotion? Shoot us an email about them and we will feature them here! sunrae@delasol.biz

Cheers!

He put us in CZECH

2009-03-25T12:49:00.004-05:00

The Czech Republic's Prime Minister had some choice words for the U.S. economic stimulus package today. PM Mirek Topolanek stood before the European Parliament and said the Obama Administration's fiscal package and financial bailout "will undermine the stability of the global financial market" and ultimately is "the way to hell."

Whoa.

You may be asking yourself, just who is Mirek Topolanek? Outside of his role as the PM, he is the current head of state for the European Union (don't get excited, they get a new one every six months) and an opinionated Czech who likes to put others in check. I can't blame him for being suspicious of our government- (taxpayer) sponsored bailout, seeing as how the Czech Republic is a relatively stable economy in an unstable time, has a plethora of homegrown financial wizardry (a good thing?) and abhors its Communist past. Given these facts we can understand Topolanek's anti-interventionist soapbox rant.

BUT, what the world needs now is solutions, not more finger-pointing. We're all in this one together, PM.

The Chinese hate our economic policy too, but primarily because they can't control the value of the dollar. You see, when the U.S. economy collapsed last year, the Chinese - and most of the rest of the world - were holding "emergency money" in the form of, you guessed it!, U.S. dollars. It is common for countries to hold "emergency money" or reserves just in case of...say, and economic collapse. So when the dollar is bad, it's bad for everyone and in this case, the U.S.- Chinese economic yin yang was damaged.

As a result, of this financial dependence on the U.S., China has proposed a global currency to replace the dollar as the currency of "last resort". In this sense, countries who hold reserves won't have a heart attack every time the dollar takes a dip and can have more control over their own monetary policy.

Not a bad idea considering what we've witnessed over the last year in the U.S. Delasol thinks it wonderful that countries are eager to put their own financial houses in order and make smart decisions for themselves. But confidence is the integral ingredient here. Without a strong central government feeding morale to its citizens and reassurance that the darkest days are (hopefully) behind us, people would hoard cash, gold and ammunition in their homes. Trust me, this is not ideal. As expected, President Obama wasn't having it, flatly saying "I don't believe there is a need for a global currency." But if China doesn't want to fund our stimulus package anymore, can we blame them?

Delasol would love to hear your comments on the Obama Administration's economic stimulus package.

Cheers!

The Economics of the "Drug Game"

2009-03-24T14:21:00.007-05:00

ECONtrepreneurs watch the news. They understand that national and even international-level policies ultimately have some effect on them. They can't be about the business of managing healthy, wealthy lives if they are in the dark about current events.

Anyone who has been watching the news over the past couple of years has noticed a spike in the number of stories chronicling the breadth of Mexico's drug cartels. It's real, people, and not just in Mexico. The war for firepower, territory and control of the drug supply to one of the most drug-dependent countries in the world has been both ineffective and unprofitable for some time now.

You see, in 1969 former President Richard Nixon introduced the nation to the War on Drugs to "...to curb supply and diminish demand for specific psychoactive substances deemed immoral, harmful, dangerous, or undesirable.(1)" This initiative created laws that were to enforce the new campaign.

Well, enforcing gets...expensive. To reduce the supply of drugs a country must hire and salary cops, DEA agents and the like. To reduce the demand of drugs you have to pay for drug treatment, prevention and education. In fiscal year 2008, the U.S. government devoted approximately $13.7 billion to these efforts.

The shrewd ECONtrepreneur would then ask if what we are paying is worth the cost. Well, to this economist the answer is a resounding "NO!" Don't believe, me? Ask a guy from Harvard. Please meet Mr. Jeffrey Miron.

Miron says our economy would in fact save $7.7 billion a year if drugs were legalized. Hmmm...spend $13 billion or save $7.7 billion? A no brainer. Not to mention that the violence that surrounds illegal drugs would gradually diminish and the government could tax the stuffing out of suppliers.

Delasol does not advocate junkies running a muck in the streets of America. We do however agree with the economic argument that is it more profitable, sustainable, logical and justifiable to treat drugs as a health issue and not as a crime issue.

(1) From the omniscient Wikipedia.

Flying the (not so) Friendly Skies

2009-03-19T14:36:00.005-05:00

An article in today's online edition of the New York Times explores the pros and cons of low-cost air travel. How can the average ECONtrepreneur take advantage of this information?

The global economic slowdown has scared (and rightfully so) many into saving more and spending less. Airline travel - a relative luxury - is one of the hardest-hit industries. As people have opted to stay home for holidays and vacations, airlines have struggled to maintain profits and maintain overhead costs without letting workers go.

For ECONtrepreneurs, you can visit any online travel site (Travelocity is Delasol's personal favorite; great prices, easy to customize packages, variety of destinations and a San Antonian company to boot!) and find round-trip fares from Los Angeles to Tokyo for less than a grand, NYC to London's Heathrow Airport for less than $600 or Reagan National to DFW for about $200. Get while the gettin' is good!

Airlines, on the other hand, are imposing new 'a la carte' fares for just about...well..anything! Already passengers have had to fork over cash for in-flight snacks, entertainment and pillows, but the article reveals that similar fees for beverages, Wi-Fi and those roomy exit row seats are in the works, thus making the full cost of flying more difficult for customers to determine. A word to wise ECONtrepreneurs: Don't purchase anything you don't know the cost of!! Many sites (like Travelocity) provide the extra amenities and their costs, so it's always worth it to shop around.

Happy Trails to You!

The Bailout for Busy Folk

2009-02-23T20:52:00.026-06:00

Wanda Sykes gives a comedic and coherent view of the United States financial industry bailout!

So over the last year, we have watched with confusion and dismay the fall of the critically acclaimed American economy. But just what the heck happened? The Delasol Group offers its humble version of events below for the learning and reading pleasure of busy folks everywhere.

1. Credit is (was) the lifeblood of our economy. You and I use credit to buy cars, houses and education, and governments and businesses use it to finance new projects, maintain payrolls and expand. Without credit, we'd be forced to buy a car when we had the $20,000 saved up to do so. The cost of the privilege to use credit is the interest rate.

2. In the late '90s and early '00s, jobs were abundant and people had money to spend, invest and save. Credit was easy to get then, and one result was that more people were able to purchase homes. More people purchasing (demanding) new homes drives the price of a new home higher and higher.

3. Businesses benefited from easy credit too. They could invest in equipment and new projects and could afford to hire and train employees. Investment banks on Wall Street were getting paid too, because they trade the loans that people and businesses take out to finance their demands. Over the past decade, credit was increasingly "securitized." As an example: an investment bank may purchase a bunch of mortgage loans and sell them to an investor who wants to get in on the action within the American real estate market. The key is that the loans are only as good as the payments you and I make on our mortgages. Trading these mortgage-backed securities makes immediate cash for the bank. At the end of the first quarter of 2006, the mortgage-backed securities (MBS) market was valued at approximately $6.1 trillion. Whoa. These securities were good for a lot of people's wallets, even if they weren't well thought out investments.

4. It soon became obvious that houses were overvalued and too expensive for less-sophisticated borrowers to maintain. People began to default on their mortgages and in turn, mortgage-backed securities lost a ton of value. Investment banks that got rich quick off of MBS products went broke even faster. If people aren't making payments, the loans are worthless, and banks are stuck with bad debt. Bear Stearns was the first to go under in March 2008. Powerhouses Merrill Lynch and Lehman Brothers followed a few months later. The largest insurance company in the world, AIG, was forced to accept corporate welfare in the form of a multimillion dollar bailout from the government.

5. Everybody is broke; no one has the money to cover their debts and no one wants to lend money out because no one believes anyone has money (duh)! This is the essence of the credit crisis. Without credit, everything stops. Businesses and governments cannot expand, hire new people, or support the people they already have, so they lay people off.

6. So that brings us up to speed, Busy People. On February 17, 2009 President Obama signed into law the American Recovery and Reinvestment Act of 2009 to combat the chaos in the economic markets. In short, he's jump starting a new trend in spending since no one else is willing to. The goal of this is to get people engaged in economic activity again so we can move ourselves out of this mire and start doing business as usual. In a future post we will indulge ourselves on the details of the President's plan to save the world (literally) and explore if it's a boom or a bust idea.

What are your thoughts and questions on the Credit Crisis?

ECONtrepreneurship in Action

2009-02-05T20:59:00.004-06:00

Economics is about choices. What kind of choices will you make for your economic prosperity today? Take charge of your personal economy: your cash flow, your work life, your ambitions. Just like we live within the borders of the Nation's economy, you decide the direction of your own economy everyday. Optimize your choices by managing your personal economy like a small business owner: become an ECONtrepreneur! Economic literacy and community investment are tools that go a long way towards a peaceful and prosperous society. Informed citizens can individually and collectively improve markets and become agents of change. Learn to make smart decisions for good economic health. This blog will focus on practical economic education and information. Helping people value their worth and build net worth. ECONtrepreneurship means understanding how larger economic events affect you as an individual. It means being about the business of securing your family's economic future. Learn to let go and dream with confidence. Take a fun and challenging approach to building personal wealth in an uncertain world.

Blog posts will help you decipher and discover the economic activity around you and encourages reader interaction as experience is the best teacher. We are all working to live comfortably and can learn from the pains and gains of others. Communities communicate and congratulate. ECONtrepreneurs know how to hold on tight in a roller coaster economy, and they educate others on how to be safe and smart.

Economics doesn't have to be abstract. Personal, practical economics. Visit often!