Sunday, October 25, 2009

The Lone Refinancer

Andy is refinancing his house. Yes, it is still possible. But, as Andy points out, rarely done.

"I've lived in the same house in Catonsville (a southwest suburb of Baltimore) for 25 years. My wife and I refinanced once before, back in 2002," says Andy. "I'm going to give a lot of business to local construction and remodeling companies. But I'm in the minority. The days of rampant refinancing are behind us."

The real estate bust made getting a home equity line of credit or second mortgage almost impossible. Gone are the days when Americans could go to their local bank and simply pull the equity out of their homes.

That's where the government comes in. What the banks have taken away, the government has given back ... to the tune of a $787 billion stimulus-spending package.

But the math doesn't add up. Economist magazine recently reported that 1.25 trillion in credit lines have already been cut. And another $1.5 trillion will vanish by the end of 2010.

I've got a bad feeling about this. The little growth we have is from the stimulus spending. Take it away and we're right back in the throes of a bad recession fed by falling demand.

I predict the government will be throwing us another stimulus-spending "lifeline." In the short run, it'll keep demand from falling off a cliff. But our $11 trillion-plus debt hole is getting deeper and deeper.

It's too early to declare the death of the dollar. But it's not too early to buy gold. (I've been recommending gold for years now.) Our economic policies stink. I hate bad government and bad policies. But gold loves this stuff ... and it's going up.

If you have trouble falling asleep and staying asleep, the problem may be related to additives in your food. Substances like aspartame, MSG, artificial coloring, nitrates, and even soy contain "excitotoxins," chemicals that can alter your brain chemistry.

Hormone levels can drop significantly as you age or as a result of lifestyle factors. And when they do, your sex drive plummets, you start putting on extra weight, and you tire out faster.
Hormone deficiencies can also cause serious health problems. In men, for example, low testosterone levels can cause metabolic syndrome. This leads to high cholesterol, high blood pressure, and insulin resistance. And in women past menopause, low levels of DHEA can cause musculoskeletal pain.  

It's not just the levels of your sex hormones that you need to be aware of. Chronic stress increases the hormone cortisol in your blood. And too much cortisol can cause inflammation, high blood glucose and insulin levels, low thyroid function, and even impaired immunity.

I talk regularly about the restaurant business because:

* I used to be in the business.
* I know half a dozen people who are restaurateurs.
* I am aware that opening a restaurant is the number one fantasy of people looking for a retirement "job."

My advice has always been the same: Don't do it -- unless you have money to burn or are willing to start small and work your ass off for less than a hundred grand a year.

These days, I'd say don't do. Period. Here's why.

A recent survey by a restaurant trade organization asked its members how their restaurants performed during the first six months of 2009 compared to the first six months of 2008.

Of the 628 respondents, only 25 percent reported an increase in 2009 sales.

That's not good. But most of those who are in trouble are working hard to survive. Some of the things they say they are doing:

* Reducing staff and cross-training to improve productivity
* Training dishwashers to be pantry cooks on slow nights
* Renegotiating credit card processing fees
* Shopping insurance policies and waste removal services
* Cutting out low-margin specials
* Tracking their numbers much more closely
* Eliminating non-essential employees
* Tying management compensation to food, labor costs, and profitability
* Reducing ads in newspapers and the Yellow Pages
* Tracking the usage of their top 10 inventory products
* Reducing inventory levels to reduce waste
* Putting more focus on portion control
* Getting rid of unprofitable services (mostly breakfast M-F)
* Converting to new sources for electricity and phone service
* Replacing high-priced managers
* Getting lease concessions
* Closing on slow nights
* Eliminating menu items that don't sell

It occurs to me that all or most of these actions make sense for any business that's in trouble.

Cutting expenses is always a good strategy -- if, that is, doing so does not denigrate your product or service. Before you make a proposed cut, consider how it will impact your customers. Any change that could diminish their experience with your product or their perception of your company is probably NOT worth the potential savings.

In the long run, you'll be better off focusing on building your customer base, no matter what the economy is doing.

Two recent news items caught my attention:

* In Charleston, West Virginia, the tap water is toxic. Bathwater burns sensitive skin. Drinking water takes enamel off teeth. Tests show that the local water has concentrations of arsenic, barium, lead, manganese, and other chemicals that cause cancer, damage kidneys, and wreck the nervous system. The cause? Local coalmines that were pumping illegal amounts of these pollutants into the ground. And what did state regulators do about it? Nada.

* On Wall Street, unemployment is at 7 percent. That is three percentage points lower than the national average. Executives at Goldman Sachs and other bailed-out brokerages are getting million-dollar bonuses. (The average bonus, including those for middle-level executives, is $700,000!) Meanwhile, the regulations meant to cut down on all the cheating and stealing have not been implemented. For brokers and bankers, it's business as usual -- but with taxpayers' dollars.

Government is supposed to protect its citizens -- not only from bodily harm but from this kind of thievery. Trillions are spent fighting wars against people who never attacked us. Yet little or nothing is spent to put a stop to the financial damage being done to us. That is a shame. Oh, well.

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