HOW TO SELL TOOTHBRUSHES

(Thanks Sue Foley for Sharing)

The kids filed back into class Monday morning. They were very excited. Their weekend assignment was to sell something, then give a talk on productive salesmanship.

Little Sally led off: "I sold Girl Scout cookies and I made $30," she said proudly, "My sales approach was to appeal to the customer's civic spirit and I credit that approach for my obvious success."

"Very good," said the teacher.

Little Jenny was next:

"I sold magazines," she said, "I made $45 and I explained to everyone that magazines would keep them up on current events."

"Very good, Jenny," said the teacher..

Eventually, it was Little Johnny's turn.

The teacher held her breath ...

Little Johnny walked to the front of the classroom and dumped a box full of cash on the teacher's desk. "$2,467," he said.

"$2,467!" cried the teacher, "What in the world were you selling?"

"Toothbrushes," said Little Johnny.

"Toothbrushes!" echoed the teacher, "How could you possibly sell enough tooth brushes to make that much money?"

"I found the busiest corner in town," said Little Johnny. "I set up a Chip & Dip stand and gave everybody who walked by a free sample. They all said the same thing, 'Hey, this tastes like dog shit!' Then I would say, 'It is dog shit. Wanna buy a toothbrush?' I used the governmental approach of giving people something for free, and then making them pay to get the shitty taste out of their mouth."

Pay for Performance? Not at Fannie Mae

With all the outrage by the Obama administration relative to executive compensation at banks, why is the pay czar not concerned about the excessive pay at Fannie Mae?


If you look at the executive compensation table below you can see that Michael Williams was paid $6.68 million last year at a time when Fannie posted a ($71) billion dollar loss. That was after a ($58.7) billion dollar loss in 2008 when Mr. Williams was paid just under $7.1 million. So much for “pay for performance.”

Let’s make this even simpler. In 2008 Fannie lost ($8,270) for every dollar Mr. Williams received in total compensation. In 2009 the story got even worse. Fannie lost even more money in 2009, but Mr. Williams only saw a 5% reduction in his compensation, while losses at the company increased 22.9%. As a result, for every dollar that Mr. Williams received in compensation in 2009, Fannie lost ($10,722)!!

Let’s not demonize some about executive compensation and give others a free pass. Through the end of 2009, the government poured some $125 billion of capital into Fannie and Freddie and they still want more. They have received more federal aid than any other financial in this crisis and yet they are exempt from all the financial reform, including executive compensation.

Most of the banks have already repaid their TARP money and turned a profit for the government. With all the hand wringing about TARP, at the end of the day, if you take out all the non-financials, like GM, Chrysler, AIG, etc. you will find that the government actually made money with the TARP program. While the program has been demonized in the press as a taxpayer, I would do it all again, except I would keep it to banks and not car companies and insurance companies. Name me another government program that actually returns more money to the Treasury than it initially took.

It is hard to fight facts, so let’s keep the dialogue to the facts and quit using rhetoric, scare tactics and populist language to talk about these government programs.

The Facts about Health Care Reform Part 1

I expect this to be one of many posts I do relative to the new health care law the President Obama signed. Most Americans, and I would venture to say, most politicians who voted on this, have no clue what was actually signed into law. I hope to shed some light on some of what is actually in this bill.

Here is my first installment after getting through the first 44 pages, of which the first 17 were the table of contents.

Talk about a blank check. Below is the actual wording on page 40 of the new Health Care Law. $30 million in initial funding to carry out tracking of consumer problems, assisting with customer complaints, education on consumer rights and responsibilities related to group health plans, assisting with enrollment in a group plan and problem resolution related to premium tax credits. The kicker is that this legislation authorized unlimited funds in subsequent years.

(1) INITIAL FUNDING.—There is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, $30,000,000 for the first fiscal year for which this section applies to carry out this section. Such amount shall remain available without fiscal year limitation.

(2) AUTHORIZATION FOR SUBSEQUENT YEARS.—There is authorized to be appropriated to the Secretary for each fiscal year following the fiscal year described in paragraph (1), such sums as may be necessary to carry out this section.’’.

What makes this amusing is the very next section of the law (Sec. 2794) is titled “Ensuring that consumers get value for their dollars.” Unfortunately, they are not referring to the $30 million above or the $938 billion in the whole bill. They are legislating the unreasonable increase in premiums for health insurance coverage. For that they are appropriating another $250 million. And by the way, if they don’t spend all $250 million by 2014, they won’t give it back to us the taxpayer, they get to keep the unused funds and use it for grants to the states.

I have an idea, how about if we design legislation that encourages the government to spend less, not more. There is absolutely no incentive here to save the taxpayer money. The provisions in this law always ensure that the money is spent, no matter how inefficiently. I would welcome incentives that provide good quality programs, but at a reasonable cost.

With the government I think it is safe to say: You can buy better, but you can’t pay more.

We need fiscally responsible legislation that encourages the most efficient use of limited resources. All too often politicians believe they have an unlimited source of funds. We, the taxpayers, provide that funding and it is limited and should be allocated where it can be put to the most productive use.

Enough rambling for now. I will continue to plow through the new law and report back what I find.

Fannie and Freddie - "The Money Pit"

Now let’s deal with what is probably the most costly bailout from the financial crisis. It is not a bank, it is Fannie and Freddie, which surprise surprise are run by the government. Fannie has received $60.9 billion of direct government support while Freddie has received another $51.7 billion. That is over $111 billion, way more than any bank has received. This $111 billion represents 4 times what is left to be paid in TARP money by the banks.


On top of the enormous aid provided, both Fannie and Freddie have had enormous losses. Fannie reported a fourth-quarter loss of $16.3 billion, including $1.2 billion in dividend payments to the Treasury Department which was down from the $25.2 billion they lost a year earlier and the $19.8 billion they lost in the third quarter. For 2009, Fannie's losses totaled $74.4 billion, compared with $59.8 billion in 2008.

The news at the much smaller Freddy Mac is not much better. Freddie reported a fourth-quarter loss of $7.8 billion, compared to a loss of $23.9 billion a year earlier. They lost $21.6 billion for all of 2009 which was an improvement over the $50.1 billion they lost in 2008.

So in essence, we the taxpayers, had to fund another $100 billion for Fannie and Freddie to cover their losses. Oh did anyone mention that the top brass at Fannie and Freddie got cash compensation in excess of $6 million. If this were a CEO at a bank you can be sure it would have been page 1 news.

To use Mr. Obama’s own words, We Want Our Money Back!! What is the plan to get the $100 billion back from Fannie and Freddie? What about the $174 billion still outstanding to all the non-banks?

“We want our Money Back”

How many times have you heard President Obama utter these words? For me, it has been 200 times too many. What irritates me is that he says this and he either doesn’t know the facts or refuses to accept them. Consider the excerpt from the most recent Treasury report on the TARP Capital Purchase Program.


To date, the disposition of warrants has succeeded in significantly increasing taxpayer returns on the TARP preferred investments that have been repaid by Banks. As of December 31, 2009, Treasury has received $4 billion in gross proceeds on the disposition of warrants in 34 banks, consisting of (i) $2.9 billion from repurchases by the issuers at agreed upon fair market values and (ii) $1.1 billion from auctions.1 For those 34 institutions, Treasury received an absolute return of 3.1% from dividends and an added 5.7% return from the sale of the warrants for a total absolute return of 8.8%.

Did anyone you know earn 8.8% on any investment last year? Do you know of any other government program that actually makes money for the taxpayer?

Did President Obama not read the report that Treasury created? Is he not aware of what is happening in his own administration? Or does he just like to bully the banks?

Now let’s look at who received TARP funds:

As you can see from the chart below TARP funds were given to not only banks, but also to AIG, GM, GMAC, Discover and oddly enough the suppliers to GM. As you can see almost half of the TARP funds were given to non-banks (47%). Of the $191 billion given to the banks, $149 billion has already been repaid. In other words 78% of the money given to banks under the TARP program has already been repaid. In contrast, none of the money has been paid back from AIG or any of the auto companies.

I think it is right for President Obama to ask for his money back, he just needs to ask the right people. Let’s not be beating on the banks to return the TARP money until we see at least 75% of the funds returned from these non-bank entities that should have never received TARP funds in the first place.

Make Savings Automatic

Many American Families Don’t Have Savings Accounts

 

The latest Federal Reserve Board Survey of Consumer Finances data, revealed that most low and moderate income households don’t have savings accounts:

• 68% of low-income households (incomes below $18,900) – don’t have a savings or money market account.
• 52% of moderate-income households (incomes $18,900 -$33,899) – don’t have a savings or money market account.
•  42% of middle-income households (incomes $33,899 - $53,599) don’t have a savings or money market account. 
• Only 20% of upper-income households income of $89,300+ don’t have an account.

 Kind of hard to be a saver if you don't have a savings.  If you don't have a savings account, now would be the perfect time to set one up and if you are getting a tax refund, have the refund directly deposited into your new savings to give you a nice jump start.  

 

A nationwide survey this month showed that a large majority of Americans (83%) believe that the most effective way to build up personal savings balances is to automatically transfer funds from a paycheck or from checking to savings. 

  

While many consumers believe in this systematic approach to savings, most don't actually have these systematic transfers set up for themselves.  Setting up a systematic savings transfers is really easy.  You can have money directly deposited to your savings account right from your paycheck or with most online banking programs you can just set up a transfer yourself.  With online banking you decide the amount and frequency of these transfers and can easily adjustment instantly.  The key is to make sure they happen automatically.  If you don't see it you won't spend it.

   

Next week is America Saves Week, and the message you will be hearing from many Banks and consumer groups is “Make Savings Automatic”.   Why not make it a point to set up a automatic deposit from your payroll or a transfer from your checking into a savings account ever pay period.  You will be amazed at how quickly the dollars will add up.  You owe it to yourself to "Pay Yourself First" and "Make Savings Automatic.".

 

 

 America Saves Week

 

 

A Billion, it's Nothing . . . Or Is It?

How many zeros in a billion?  We have become desensitized to these large numbers and I thought it would help to put them in perspective.  We are only talking about billions, yet our government is throwing around trillions of dollars, so just imagine how much more horrifying this would be if we looked at trillions instead of billions.

The next time you hear a politician use the word 'billion' in a casual manner, think about whether you want the 'politicians' spending YOUR tax money. A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into some perspective in one of its releases…  

• A billion seconds ago it was 1959
• A billion minutes ago Jesus was alive
• A billion hours ago our ancestors were living in the Stone Age
• A billion days ago no one walked on the earth on two feet

A billion dollars ago was only 8 hours and 20 minutes, at the rate our government is spending it.

  

While this thought is still fresh in our brain, let's take a look at real life example.  After hurrican Katrina, Louisiana Senator Mary Landrieu (D) requested Congress for 250 BILLION DOLLARS to rebuild New Orleans.  Interesting number....what does it mean?  Let's examine it by doing some simple division:

• Well... if you are one of the 484,674 residents of New Orleans (every man, woman, and child) you would get $516,528.
• Or... if you have one of the 188,251 homes in New Orleans, your household would get $1,329,787.
• Or... if you are a family of four... your family would get $2,066,012.

Are you serious?  Washington, D.C., HELLO! Are all your calculators broken??  Wouldn't we have been much better off just offering $250,000 to each household and have them repair/rebuild their homes by employing workers in the local market?  Think of the multiplier effect of doing that!!

We need sanity back in government, and the realization that "We the People" , not the government, are the solution to our problems.