Monday, June 30, 2008

Teetering On The Brink 

If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem.
--J. Paul Getty
It's odd, but I haven't heard much about this upcoming problem. It is very closely related to the current sub-prime loan fiasco.

Construction lending.

In good times, construction lending is risky. Most contractors are scum (sorry if any of you are out there, but you know I'm right). I used to have a customer that was kind of like Mike "Holmes On Homes" Holmes - he would go in after the fact and fix the crappy work of other contractors. This guy was rich! He had more business than he could handle.

Anyways, you have to keep your eye on these guys at all times. We used to hire Construction Control companies to tell us (non-contractors) when the various stages of the project had been completed - and completed correctly. We'd then fund the next portion of the loan.

If these guys could figure out a way to screw you, they'd do it. Nine times out of ten, they were taking money from your project to pay for work on another.... that had run out of money. It's ugly.

There is an incredibly unique and, in my eyes, incredibly stupid, feature with most construction loans. It's called, 'Interest reserve'.

It is essentially the bank lending itself money.

Let's say the borrower needs $1,000,000 for his project. The interest rate is 10%. The expected interest income to the bank on this loan would be $50,000.

Huh? Why not $100,000?

The borrower only pays on the loan for money that's actually been lent. So, assuming equal loan disbursements over the year, the average loan balance will only be $500,000. Ten percent on that amount would be the $50k.

Here's where it gets a little hinkey. Instead of drawing up loan documents for $1 million, the loan amount is $1,050,000. The bank holds this $50k in reserve and pays itself from this pool for the appropriate amount of interest based upon outstanding loan balances.

Let's say on day one, the contractor borrows $100,000 to get the project off the ground. At the end of the first month, he will owe an interest payment calculated as $100,000 x 10% divided by 12 months, or $833. The bank will pay itself from the reserve account.

The next month, the contractor borrows another $75k. The interest is now calculated on $100k + $75k + $833 (last month's interest payment) x 10% divided by 12 months, or $1,465. Once again, this payment will come out of the interest reserve, and be added to the outstanding loan balance.

This goes on until the loan is fully funded. Sounds like a great deal for both parties, right? The contractor doesn't need to come up with any money out of pocket, and the bank knows it will be paid, at least the $50k.

What if something goes wrong?

The bank has collateral, right? Well, kinda.

In most parts of the country, when you buy a home, usually 70% of the value is in the structure, and 30% is in the land. It varies, but that's probably a decent average.

Our contractor goes to the bank and tells them he owns a piece of property - free and clear - that he will put up as collateral for a construction loan. He wants to borrow the million bucks, but when the project is done, it will be worth two million. When the project is complete, he'll do a "take out" loan - permanent financing - that pays off the construction loan with a lower-rate home loan.

He asks for an "as completed" loan equal to a 50% LTV (loan to value).

The bank looks over his plans, and they seem reasonable. The home he wants to build and the neighborhood where he wants to build it, will clearly be worth $2 million. They draw up loan documents, perfect a lien on the property, and lick their chops at the great loan they've just made.

Things are going wonderfully. The project is being built on schedule. You're 6 months into the project and the plans are approved, permits pulled, grading is done, foundation is in, walls have been framed, rough roofing is completed, rough plumbing and electrical are done. He'd drawn $500k of the million dollar loan.

Then the SHTF.

It seems that our hero has been diverting some funds to other projects, and has cut corners on your project. It hasn't passed the electrical or plumbing inspections, and the city won't let him proceed until it's completed. Of course, he has no money left to make the project right.

He comes to you and says that he needs another $200k to get the project back up to snuff. If you don't agree, he'll walk from the project.

You consider your options: Give the scumbag another $200k which may or may not be used to get the project back on track, or foreclose on him and cut your losses.

The problem is, the collateral you hold - the land - won't pay off your loan. At best, it would be worth $600k (30% of $2 million) and would pay you off. But that's when the project is completed. As Unimproved land, it might be worth $200k-$300k, tops. Of course, anyone that would buy it would discount the price because you would either need to fix up the current project to bring it up to code, or tear it down, and start all over.

Rock, meet the Hard Place.

In the current real estate market, you now also have the problem of a declining real estate market. The home that would once bring $2 million, might now only bring half of that.

A personal aside: I can tell you from personal experience, that a 50% decline is not unheard of. I'm living it right now. My house is now worth less than half of what is was worth in 2005. Luckily, I bought my home in 2002, so I'm not YET under water. Still, I expect my home to be worth less than I paid for it before this sub-prime mess is over.

So.... our hero sees that he's not going to make a dime for working on this home for a full year. What do you think he's going to do? He's gonna bail.

The bank is screwed. And the FDIC is worried...
This month, the Federal Deposit Insurance Corp. alerted its bank supervisors to be on the lookout for banks that haven't come clean about potentially problem loans. "You don't want to have a false sense of security because the interest reserve is paying the loan," Steve Fritts, the FDIC's associate director for risk management and exam oversight, said in an interview. "You need to look to the credit fundamentals of the project."
Analysts (whoever they are) are estimating 150 small banks are at risk of failure. No Damned Way. It's much higher.

As I've discussed in the past, small banks have lost one of their primary "golden egg" loan sources, Commercial Real Estate. The big boys have figured out how to make a buck by bundling a bunch of small loans and selling them to the secondary market.

Small banks are getting desperate to find places to lend, and many, MANY have recently gotten into construction lending. They don't understand the risks, and are going to get their asses munched. As the WSJ article notes,
There are indications that potential interest-reserve problems aren't limited to a few banks. Matthew Anderson, a partner at research firm Foresight Analytics, said he has seen a surge in the number of banks that have a possible sign of trouble: They are hit with a sharp increase in loans that are expected to go bad after going for months without showing a high level of delinquencies.
Banks, small ones in particular, are getting very worried. They're taking risks they wouldn't normally take. But when the choice is between slowly dying on the vine, or at least taking a shot at saving their bank, they will disregard their usual underwriting standards and make loans they normally wouldn't make.

Some will win. More will lose.

I had a mortgage broker friend of mine give me a call and ask if my bank would be interested in doing a $5 million construction loan in Palm Springs (he didn't know I had been laid off). I brought him up to speed, then told him that because of a number of ownership reasons, my former bank would not have been interested in doing that type of loan. I told him I'd call some of my buddies at other banks and see if they had any interest.

The deal was for a small development. The builder owned the land free and clear. He was going to build it in phases. When each phase was completed, it would be sold, the loan paid off, then he would borrow for the next phase. This is a normal cycle.

I called a couple of buddies, and their stories were all the same: Not interested. The only deals they were NOW considering were ones where the builder put in the land and 25% of the construction cost... and his money had to be spent first. They also required that the bank be paid back first from any sales proceeds from each phase. Such a deal: the banks were now saying they were last in, first out.

Every one of them had been burned on their last few construction loans, and all still had some "problem children" on their books. Two of them noted potential issues with meeting capital requirements.

Mark my words: It's gonna get uglier before it gets prettier...



Friday, June 27, 2008

THAT'S What I'm Talkin' About 

United we stand. Divided we fall.

I have bitched loud and long about guns rights groups. They seem to suffer from Spinus Invisiblius - No Spine. I just don't think they've done enough to actually fight for our gun rights.

They seem too interested in not rocking the boat and getting the media against them. What they don't seem to understand is that most Americans - the overwhelming majority - want our rights restored. We'd support them en masse if they just showed some spine.

I have stated a number of times that if one of these groups gets aggressive, I'll join. My check will be in the mail. Hell, I even wrote the NRA and said I'd sign up for a lifetime membership if they just filed a lawsuit (didn't have to win) or started an Proposition drive to make CA a 'Shall Issue' state. I didn't hear a peep.

Well, it appears as though Gun Owners Of America will be getting my check. Make that checks.

It looks like they are taking a page from The Brady Bunch's play book and offering the outstretched hand - palm up - after a win. It's about damned time! They'll be getting a new member and a donation to DOG.

This is being organized by their non-profit Gun Owners Foundation. That means the donation is tax-deductible. You've got no excuse, if you care about getting some of our rights back.

To work the guilt-trip angle, remember, this is coming from an unemployed guy!
To that end, we at Gun Owners Foundation have established a special Defend Our Guns (DOG) fund to allow our committed and courageous legal team to lay the groundwork for the next battles in the Second Amendment war between those of us who love liberty and those who would allow the government to disarm us as the first step to our own enslavement.

If you believe that we must compromise to gain favor with those in government, and be pragmatic, you should not support the DOG fund.

If you believe that we have already lost, and the best we can do is trim our sails so as to avoid a total ban, you will not agree with what we are doing.

If you are fearful of telling the government that the main reason the Second Amendment was written was to control THEM, you will need to find a pro-compromise group you can join. That will be easy to find.

But if you believe that the Second Amendment recognizes a pre-existing God-given right, you need to stand with us.
I really like that attitude.

I saw a news report that the NRA is filing some sort of lawsuit here in California. If there is actually some steak to the sizzle, the CRPA (their CA chapter) might get a new member as well.

Things are looking up!

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Thursday, June 26, 2008

A Steaming Pile of Crap 

Any man can make mistakes, but only an idiot persists in his error.
--Marcus Tullius Cicero

You may have heard about the recent testimony before Congress on the National Intelligence Assessment on Climate Change (NIACC). Its intent was to wake Americans up to the coming pain the world is going to endure as a result of climate change, and what we need to do as a result of this change. I think that's a great thing. That's what government should do.

Not surprising one little bit, the eco-freaks and MSM have taken this report and spun it so badly as to make it indistinguishable from the actual report.

It's all about the agenda.

Before I get into the meat of this specific report, I want to share with you an actual example of how the eco-freaks and their cohorts in the media twist and color facts.

I was trying to get some background information on the NIACC and found a site called ScienceDaily.com. They had an article from a few days back titled, Expect More Droughts, Heavy Downpours, Excessive Heat, And Intense Hurricanes Due To Global Warming, NOAA.

It seemed to meld very nicely into this subject, so I gave it a read. They were talking about the content of a report by some government agency. I came across the following sentence in the article:
Global warming of the past 50 years is due primarily to human-induced increases in heat-trapping gases, according to the report.
Sounds pretty damning.

The only problem the authors of the article had, was they left a link to the actual government agency report.

Very stupid. Some asshole like me might actually read it.

Here's a link to the whole report by the US Climate Change Science Program (I believe this is a part of NOAA). The juicy part is in Chapter 3: Causes of Observed Changes in Extremes and Projections of Future Changes.
Changes in some weather and climate extremes are attributable to human-induced emissions of greenhouse gases.
That's a pretty powerful statement. They then go on to list their substantiation for this damning pronouncement:
• Human-induced warming has likely caused much of the average temperature increase in North America over the past 50 years. This affects changes in temperature extremes.
• Heavy precipitation events averaged over North America have increased over the past 50 years, consistent with the observed increases in atmospheric water vapor, which have been associated with human-induced increases in greenhouse gases.
• It is very likely that the human-induced increase in greenhouse gases has contributed to the increase in sea surface temperatures in the hurricane formation regions. Over the past 50 years there has been a strong statistical connection between tropical Atlantic sea surface temperatures and Atlantic hurricane activity as measured by the Power Dissipation Index (which combines storm intensity,
duration, and frequency). This evidence suggests a human contribution to recent hurricane activity. However, a confident assessment of human influence on hurricanes will require further studies using models and observations, with emphasis on distinguishing natural from human-induced changes in hurricane activity through their influence on factors such as historical sea surface temperatures, wind shear, and atmospheric vertical stability.
WTF? How did the authors of the report and the article come to the very clear conclusion that man is the cause of all evil? The entire report is loaded with, "it's likely", "very likely" and "we're pretty damned sure" (OK, I made that one up). Not a single citation of causation FACT.

In fact, the report said quite the opposite:
In these cases, it is difficult to quantify the magnitude and significance of the effect of the external influences on the phenomenon of interest. Therefore, attribution assessments become difficult, and estimates of the size of the anthropogenic [that means 'man-made' to you and me -Ed.] contribution to an observed change cannot be readily derived. This problem often occurs in climate-change impacts studies and has sometimes been termed “joint attribution”.
It all comes down to this: Make the conclusion fit the agenda, not the facts.

Alright, back to our story.

The Chairman of the National Intelligence Council, Dr. Thomas Fingar, gives his take on the confidential National Intelligence Assessment On Climate Change. Because of the classified nature of national security, the actual report is not available - he was just talking about generalities with his testimony.

Here's what the Wall Street Journal said about the testimony:
One of the biggest conundrums facing lawmakers is that solutions to global warming often hurt another of their top priorities: ensuring the availability of affordable energy, for example.

But on Wednesday, as the U.S. intelligence agencies weighed in, they heard about the cost of doing nothing: It may incubate terrorism and civil conflict.

Concluding that climate change will have wide-ranging impacts on U.S. security in the coming decades, a classified report complicates an already tangled debate by providing urgent new reasons to address the problem of global warming at a time when American voters are anxious about $4-a-gallon gas.
Message: Do nothing about global warming and you support terrorism. Unspoken: We all know what causes global warming, right?

The media has successfully 'branded' global warming/climate change as man-made. Even though not a single global warming report that has ever been produced (and I think I've read them all!) has proven a link between man and climate change, the conclusions of their reports unanimously proclaim this as the gospel.

I searched through the NIACC testimony to see if Dr. Fingar ever said man was the culprit.

Not once. In fact, once again, it was exactly the opposite. From the footnote on page 7:
While the NIA is based predominately upon a midrange scenario, some of the analysis cited in this section refers to IPCC reports with multiple scenarios. However, scientists indicate that even if humans stopped releasing CO2 tomorrow, climate changes projected for 2030 would still occur. Scenario trajectories— including those emphasizing concerted emissions reductions—do not vary significantly over the next 20-25 years.
Not just cutting back, but stopping the release of all CO2? Hell, if we change our ways and it doesn't make a difference, then why do the eco-freaks think we were the cause in the first place?!

So, Dr. Fingar, overall, how will this affect the US? After all, that's what we really care about, right?
The IPCC estimates annual costs from severe weather in damage to property and
loss of economic productivity for the United States to be in the tens of billions of dollars. Nonetheless, most models predict that the United States on balance will benefit slightly from climate change over the next few decades, largely due to increased agricultural yields.
Hmm. I don't seem to remember reading in any of the newspapers that the expected impact of climate change would be a net-positive for the US. MSNBC, CNN, ABC, CBS - all of them - neglected to report on this.

Funny how they missed that, no?

Watch what happens. The eco-freaks, Democrats and both presidential candidates will point to this report as justification to impose a carbon tax, halt additional oil drilling, turn more edible corn into ethanol and generally bow to the alter of their deity, Al Gore.

Why can't our government have a conversation like this?
Let's see, we know that the weather is changing. We don't yet know the cause, be it sun spots, gamma rays, volcanic activity, greenhouse gases created by man, or it's part of a natural cycle of earth. We just don't know.

We do know that this climate change is having some negative effects. Drought in certain parts of the world, flooding in others. It's causing food shortages. And it's only going to get worse.

People are rioting and overturning governments. Water will be the new gold. We've seen food shortages here in the US as well. The law of supply and demand has push prices through the roof. These food shortages have resulted in price spikes in "down stream" food sources, such as beef, chicken and pork, as they all eat the same grains that we eat.

Why don't we stop this foolishness of turning food-producing land into ethanol producing land? Who the hell came up with that one?! Someone jot that idea down, and write a law to fix that error.

A bunch of countries - some friendly, some not - will not fare as well as the US. Some of our neighbors, the Carrabean Islands in particular, will be hard hit. That could result in boatloads (literally) of new refugees. Let's make a plan for that.

The Middle East and Africa are also going to be hit pretty hard. Why don't we think of some way to teach them how to adapt to the upcoming changes. Ways to store and use water more efficiently. Ways to desalinate water more efficiently. Stuff like that. Maybe have a contingency plan for some food assistance, but only if they've adopted some of our recommended changes in how they do business. We'll need a plan for this as well.

OK, let's break for lunch. After that we'll talk about how we make our country energy independent. Some guy at a blog called No Nanny State wrote down some ideas about this, way back in 2006 (The Speech We'll Never Hear). We'll use that as a template.

Alright, people, who's buying lunch today?

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Wednesday, June 25, 2008

Change is Coming 

When you're finished changing, you're finished.
--Benjamin Franklin

Hopefully, that change is not pronounced, 'Oh-bah-muh'....

So sorry for the lack of posting. I've been up to my ass in alligators getting my new biz going. E&O insurance, website, articles of incorporation, email newsletter management system, logo design. That was all just today. I know, boo hoo!

I spent all of yesterday looking for various tax loop-holes, and found a number of them. Shockingly, a couple were actually from the State of California. I damned near passed out from disbelief.

I did see that SCOTUS will be announcing their decision on the Heller case tomorrow. So much rides on this... I'm not even going to offer a guess which way it will go. Only a prayer.


I've been reading a number of articles on the both the impact of a worst-case scenario for the environment if CO2 levels keep rising, as well as the impact on our national security if climate change continues.

In case you haven't been paying attention, I have seen no evidence presented anywhere that proves greenhouse gases are causing the recent climate turbulence. No one has provided evidence, only conjecture. I'm going to try and reconcile, then disassemble, these reports that try and tie these two together. It's all hype, IMO.

BTW, the impact and potential threat of climate change to our national security is VERY real.

Identify. Assess. Plan. Act.

It seems like the eco-freaks are in the Ready-Shoot-Aim camp. Act before you've assessed the situation.

Picking our bunched panties out of our asses trying to stop the production of a group of gases that may or may not be doing anything is insane. We need to be planning and acting on the impact of these changes.

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Monday, June 23, 2008

Hodge Podge 

I knew one thing: as soon as anyone said you didn't need a gun, you'd better take one along that worked.
--Raymond Chandler

Nice of Blogger to finally come back online....

Remember: We're not in a recession. Inflation is painfully low. All is well. Repeat mantra as necessary.

Maybe someone should tell,

United Airlines. For some unknown reason, they're laying off nearly 1,000 pilots. Business must be booming! Fly those friendly skies!

Or General Motors. Those knuckle heads are slashing prices (a sign that sales are skyrocketing, right?!) and extending a summer shut down at a bunch of plants. I'm sure they're doing it so their employees can enjoy their summer vacation with their kids.

Then there's Citigroup. They plan on laying off up to 6,500 workers. I just don't know why. They've only lost $15 billion in the last two quarters. My guess is it's because they want what's best for their workers. They're 'givers'.

Sorry, I just puked a little in my mouth...

Have you seen the recent PR push by corn growers? On Sunday, there was an actual big-time race called, Iowa Corn Indy 250 (I'm not making that up). It seemed as though every commercial was by some Iowa Cornholer Corn Farmer saying how proud he was to take food corn out of production and replace it with ethanol corn.

More puke in my mouth.

Then, there are all of these stories coming out about how good corn sweetener is for you.

Am I the only person in America without a lobbyist?

George Carlin bit the big one. He was one of my all-time favorites.


I've been pretty hard - I believe justifiably so - on most "gun rights" organizations. I've been particularly pissed off at the California Rifle and Pistol Association (the NRA state chapter). I can almost give the NRA and Gun Owners of America a pass because California is so far gone. But the CRPA is a California-only organization. If they're not going to fight, then what is their purpose?

Fair is fair. They've come out with a number of recent emails letting us know about three upcoming bills (click here, here and here) that are going before various committees of the state Senate.

The email called for action, gave time frames, and the names and contact information on the members of the various committees. This is the kind of stuff they need to be doing all of the time.

If they keep this up, they may get some membership money out of me...

I took my two sons and a friend of my oldest son (and a No Nanny State regular reader!) to the range yesterday. First time for handguns for my youngest son, and the first time for any kind of firearm for the friend.

They had a great time. Three hand guns and one rifle. We got there with only an hour and 15 minutes left of time before the place closed down. Somehow, we managed to go through 250 rounds of .38 special, 200 rounds of 9mm, and 50 rounds of .357 magnum. My oldest son also brought his Ruger 10/22 and they burned off 150 rounds or so.

A lot of lead in the air!

It was funny as hell when each of them took their turn firing .357 magnums. I have a S&W 686P. It's a very good, solid gun. Still, the recoil and the blast from the shells got their attention!

They all have their range cards now, so they can shoot for a discount in the future. They all said they want to go again. And again. And again.....

I'll get Californians loving handguns if I have to do it one shooter at a time! I need to start keeping track of this. I've now introduced 6 people to handguns by taking them to the range for their first time. There are now six more handgun-competent individuals in this state.

It's a start.

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Saturday, June 21, 2008

Accumulating Wealth 

Freedom is the greatest fruit of self-sufficiency.

I just don't get the mindset of our government. Shocking, I know.

I'm going through the learning process for fringe benefits and retirement plans for small businesses. It is astounding the flexibility given to small companies - and C-corporations in particular - in regards to what the business can "pay" for retirement and other fringe benefits.

As long as the benefits are made equally available to all employees, there is, for all intents and purposes, no cap on what can be provided. You just need to pick the right kind of plan. With a small, closely-held company that won't have any employees (perhaps other than family members), this is a gold mine.

Why is this leeway only made available to businesses? Why doesn't the government make tax deductions available to anyone that wants to put money away for retirement? Right now, if you're an employee at a company that has some sort of retirement plan, you are restricted or even prohibited from making additional contributions to your retirement nest egg.

It would seem to be in Nanny's best interest to allow anyone to put money away, in any amount, for their retirement. Keep the same withdrawal restrictions on the money - you must be at least 59 1/2 or meet certain other emergency requirements. This would help to increase the national savings rate, and could take pressure off of Social Security should a Means Test ever be imposed (as is sure to happen in the future).

It's almost like Nanny is intentionally trying to keep people dependent upon the system...

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Friday, June 20, 2008

One More Cut 

The seed of revolution is repression.
--Woodrow Wilson

You've heard the phrase, "Death By a Thousand Cuts", right? It means a slow, deliberate process that eventually results in an unpleasant end.

It's actually a quite effective tool for social change. Look at what the gun grabbers do: They pass seemingly innocuous gun laws, one at a time. Each one on its own doesn't seem harmful, but over time, when all of the teeny tiny laws are taken in the aggregate, you suddenly realize you've been stripped of most of your Second Amendment rights.

Yesterday, according to news reports, the Fourth Amendment got another cut.
Democratic and Republican congressional leaders agreed to the most sweeping rewrite of U.S. domestic-spying powers in three decades, ensuring that much of the controversial surveillance operation created by President Bush in secret will outlast his administration.
In a nutshell, Nanny will be able to search you - your email, your phone conversations, etc. - without having to first get a warrant.

In case some of you are not clear on the concept, here's the Fourth Amendment for your reading pleasure:
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
Summary: Nanny can't look at or take your shit without probable cause and a search warrant.

You'll note that there's no qualifying statement. It doesn't give Nanny a break if we're in peace time or at war. It is an absolute.

Yet, this "deal" will become the new law of the land.
The deal, if adopted in Congress, would bring the activities of a National Security Agency surveillance program permanently under the law. It would permit the federal government, in certain circumstances, to listen to communications of U.S. citizens without a specific warrant. It would also expand government powers to monitor communications on topics other than terrorism. Before the Sept. 11, 2001, attacks, the government needed a warrant if it wanted to listen to any conversation involving a U.S. citizen.
This is a perfect example of the Death By A Thousand Cuts. Notice that national security or terrorism are no longer the sole reasons to strip us of this right. Some cop or other government official will simply have to feel the need -any need - to monitor your communications, and he is within the law.

This law will also give the telecommunications companies that broke existing law, a pass.
Critical to sealing a deal was a compromise granting conditional immunity to telecom companies like AT&T Inc. and Verizon Communications Inc. for help they allegedly provided after 9/11 until January 2007. The deal says if they can show a federal court "substantial evidence" they received a written request from the attorney general or head of an intelligence agency stating that the president had authorized the surveillance and determined it to be lawful, suits against the companies will be dismissed.
Isn't the rule, "Ignorance of the law is no defense"? Don't these companies have a butt-load of lawyers, some of whom understand the Constitution? This is bullshit of the highest order.

I'm sure EPIC or EFF will file lawsuits, but they will lose. Some sort of "administrative privilege" or some other such crap will be used to justify this usurpation of our rights.

Nanny wins another round.

If you're one of those people that think we should give up our rights in exchange for safety, please, don't leave a comment. I believe you to be a coward, and will say so in the comments.

We cannot give up our rights in the name of protecting them.

Ask yourself, WWJD - What Would Jefferson Do? I think we all know the answer to that question, as his actions matched his words.

The latest issue of Backwoods Home Magazine arrived yesterday, and I was reading the My View editorial last night. In it, the author discussed some of the reasons for the French Revolution.
The French Revolution? Sure! That was the last great revolutionary moment in world history that was sparked by food shortages. The French had been complaining for years about their oppressive government, but it took a food shortage that prompted mothers to march for bread in Paris in the summer of 1789 to really get the revolution going. It lead to the beheading of Louis XVI, the most powerful monarch in the world, brought on Robespierre's Reign of Terror in which 20,000 fat cat aristocrats were guillotined in one year alone, and eventually led to world wars that ended monarchic rule across Europe.
Hmmm. Repressive government. Upset citizens. The start of food shortages.

This may turn out OK after all.

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Thursday, June 19, 2008

Comrade Nation 

The goal of socialism is communism.
--Vladimir Lenin

Jennerson did a post on nationalizing the oil companies. This comes as no surprise to me. I'm surprised that this kind of discussion didn't happen years ago when we started hearing about the huge profits the oil companies were reporting.

Whenever the government's policies end up screwing over the country, Nanny simply makes more laws to "repair the damage", which fuck things up even further. Repeat as necessary.

In this case, our fearless leaders have virtually eliminated the ability of the oil companies to find new oil. Nanny is either a tree-hugger or a big business hater, both of which mean bad news for American oil companies. Somehow, in their twisted little minds, punishing the refiners of oil will make things better.

I want you to stop and think for a second about what industries in this country are in the most trouble right now. Easily, the top two are banking and health care.

Banks are currently reeling from losses incurred because of the sub-prime crap, and our health care system is on the brink of collapse.

Both of these industries have already been quasi-Nationalized.

Banks have this cute little law called the Community Reinvestment Act (CRA). You must give money away to charities in the counties in which you do business. If you don't, you can be fined or have sanctions placed your operations that make it more difficult to conduct business.

When you hear about XYZ Bank making massive grants, or below-market interest rate loans to "the disadvantaged", they're not doing it out of some sense of obligation. They're doing it because Nanny says they must.

Want to open a new branch? Sorry, sport. You didn't give away enough money last year. Request denied! Can you think of another service business that needs permission to expand its business (other than city zoning laws)? We're not talking about opening a pesticide manufacturing plant in downtown Mayberry. We're talking about a bank.

It's nothing less than additional taxation and extortion.

Hospitals are under similar government control. If you want health care, by law, a "private" hospital cannot turn you away. What other business is required to accept non-paying customers?

Imagine someone walking into a bookstore, appliance mart or car lot and getting a book, refrigerator or new truck simply because they're unemployed and want the thing. It makes just as much sense.

Look how well this government operation - as opposed to regulation - has turned out. Both of these industries are reeling because of the additional burden placed upon them by Nanny.

All companies go into business to make as much money as possible. That's the reason you are willing to risk your investment capital. When burdensome laws are passed which unfairly increase your operating costs, weak people will make poor decisions. Instead of throttling the offenders, all companies in a given industry are punished.

The result is banks start making loans which defy all prudent underwriting standards. Hospitals begin cutting corners in the care they provide. The pressure to keep up with your competitors - or to just keep your doors open - increases.

On top of that, in both cases, fees for service (interest rates for banks and care charges for hospitals) are inflated and charged to those that are able to pay.

You end up with the messes we've got now. Somehow, our elected officials think that this business model would work well with oil.

I've never understood this regulation on banking and health care. I've looked quite closely, and nowhere in the Constitution is there an Article affirming our right to banking or health care. The same goes with oil.

Our Constitution guarantees you equal access to all of those things. But if you want them, you have to work to obtain them. It's supposed to be, "Want More? Work More!"

Well, you're supposed to have to work for them. Nanny has removed the incentive to provide for yourself, or to voluntarily help out others through charity. We now have WIC, food stamps, Section 8 housing, Medicare, CRA loans and grants to the "disadvantaged"... this list is endless. It is all forced charity through taxation.

If Nanny takes over some or all of the refineries, what will be the result? Gas cards for the po' folks? Free oil and lube when your government-provided car needs service? If they get really efficient [insert chortle here] maybe they can give away a free block of government cheese with every fill-up.

Industry doesn't need more regulation, it needs less. The free market will correct errors if it is allowed to operate. The problem is, we're moving away - at an alarming pace - from free markets towards a centrally planned and managed economy. History has shown us time and again how well that works, but those history books don't seem to be in vogue nowadays.

Welcome to The Socialist States of America, comrade.

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Wednesday, June 18, 2008

Proud Papa 

Pride in what you do is a personal commitment. It is an attitude which separates excellence from mediocrity.

Busy day, sorry for no post. The financial markets have given me a bunch of fodder for a post tomorrow.

Until then, I'm busting my buttons. My oldest son got accepted to his first choice of Paramedic School. It's one of the toughest to get into, and they bust your ass for 2 years. It's much more difficult that the others he was considering, but it carries a lot more weight on the resume when you're looking for a job.

He just got promoted to Field Training Officer with the EMT company where he works, and he's not yet 21 years old. He works hard at school and his job, and it's paying off.

I couldn't be more proud!

Back to the doom and gloom of the world tomorrow!

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Tuesday, June 17, 2008

Passing The Buck 

Freedom is the will to be responsible to ourselves.
--Friedrich Nietzsche

I remember as a kid hearing about a guy who went to a bar and got drunk. He got in an accident and killed or maimed someone. It was horrible.

What made the impression on me was that the bar was held responsible for the death. The thinking was, if they had stopped pouring drinks for the guy, the accident would not have happened.

It struck me, even as a little kid, as being incredibly stupid. The grown man had made the decision to get drunk. HE killed the person, not the bartender.

It seemed like more and more stories like that kept pooping up. The robber who was hurt breaking into a home being able to sue the homeowner because they got hurt.... while breaking the law.

The old lady that spilled the hot coffee in her lap and successfully sued McDonald's for her injuries.

Buy a house well beyond your means, and when you can't pay for it, looking to the government to bail you out.

The suits against gun manufacturers for people getting killed when a mad man shot up an office building in San Francisco.

The twisted logic hurts my head.

And it continues. I read a story today about an 18 year old girl that was in Hawaii on some cheerleading trip. She got drunk, fell off her balcony and killed herself.

A jury just awarded her family $700,000 that will come from one of the chaperone's on the trip.

Let that sink in: An adult makes the decision to get drunk and dies as a result of that decision, but someone else must pay the price.

What did the jury expect of this chaperon? Did they expect her to be with the cheerleader every second of the trip? Perhaps they thought it prudent to lock the girls together with leg chains so that none of them could wander off and get into trouble. Maybe lock every door from the outside and post guards in the halls?

This all comes back to Nanny. Our society has become so used to others telling us how to live that it is now part of the fabric of our society to not hold any individual responsible for their own actions.

Write a law for every aspect of daily living. Moderate behavior through legislation, even when that particular behavior is legal. If you somehow figure out a way to stray outside of the lines, that means someone else screwed up, not you. You're just a poor, stupid sod that doesn't know any better.

Without consequences, you never learn. The mistake will be repeated because there will always be a soft landing. Hell, you might actually profit from your mistake. We're encouraging poor decisions because there is no down-side.

This mindset has made it into the business world as well. Many will remember when Chrysler was bailed out by the feds in the late 1970's. That has now morphed into the looming massive bailout of many banks that made idiotic loans to people that couldn't afford them.

It takes a village.

There's no 'I' in Team.

The individual is dead. Long live the hive.

Marx and Engels must be dancing in their graves. There is no concept of, "The Buck Stops Here".

Where's Harry Truman when you need him?

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Monday, June 16, 2008

Prospect Theory 

People often say that motivation doesn't last. Well, neither does bathing - that's why we recommend it daily.
--Zig Ziglar

I think the universe is trying to tell me something.

This weekend, I was reading an article, and it mentioned something called Prospect Theory. It's a way of approaching people to which you want to sell something. I didn't think anything about it.

Not ten minutes later, I was reading a computer security newsletter, and the author was discussing Prospect Theory and how to use it to sell network security services. My consulting business will essentially be selling security practices for the entire enterprise, not just the computer systems, but it got my attention.

Later last night, I was watching some Discovery Channel show where the guy uses math to figure out odds. Real-life situations, like the likelihood of some computer nerds to get lucky at a bar. He discussed Prospect Theory.

I went from never hearing about this idea to being inundated with it! I figured I better pay attention.

The article on How To Sell Security had a great example of this theory:
Here's an experiment that illustrates Prospect Theory. Take a roomful of subjects and divide them into two groups. Ask one group to choose between these two alternatives: a sure gain of $500 and 50 percent chance of gaining $1,000. Ask the other group to choose between these two alternatives: a sure loss of $500 and a 50 percent chance of losing $1,000.
If you're like the vast majority of people, in the first example, you would take the sure gain of $500. In the second example, you would take the 50% chance of losing $1,000.

We are programmed to take the sure thing when it applies to a gain, but are willing to take a risk when it applies to a sure loss.

My new business deals with loss, or the potential of loss. It's a tough nut to crack to get CEOs to spend money to avoid a loss. They're willing to "roll the dice" and bet their company won't get hit by a hacker or have customer information exposed, or worse.

Just before I was laid off, I talked about this:
Even though I'm an executive with my bank, my job does not directly produce income right now. What I do helps us miss land mines, to protect what we've got, or to point us in the direction of more fertile fields in the future. I'm part of that nebulous, "administration" costs you see on an income statement. This is not a good place to be when margins are being squeezed right now.
People are very reluctant to purchase security, especially for things where they have little knowledge or experience. Computers are a great example. How many of you reading this have up-to-the-minutes virus software loaded on your personal PC's? Be honest.

I just rescued the laptop of a very smart friend of mine - she has a doctorate - who had used her computer on the Internet for 4 years without virus scan software. She got nailed. We lost a lot of information because of some of the "field medicine" I had to apply.

How many of you have ever backed-up your PC or laptop? What would you do if it were stolen, got a horrible virus or you simply spilled a cup of coffee on it and fried its circuits? Think about all of the family photos, Word documents, art project, recipes - whatever - that would be lost forever. Companies have their entire businesses on walk-away PC's, yet never back up the information. That's just insane, but not unexpected.

As the Prospect Theory demonstrated, people are willing to risk the sure loss (the expense of the back-up hardware and software) against the potential loss of their information or business.

So, it seems as though I'm screwed. No one will buy what I'm selling.

Guess again!

There is one tactic that can motivate people to act. Fear.
One solution is to stoke fear. Fear is a primal emotion, far older than our ability to calculate trade-offs. And when people are truly scared, they're willing to do almost anything to make that feeling go away; lots of other psychological research supports that. Any burglar alarm salesman will tell you that people buy only after they've been robbed, or after one of their neighbors has been robbed.
There's a fine line between tapping into primal emotions and exploiting a situation. I won't do the latter. I will provide them with facts and figures of actual banks that have been fined, sanctioned or outright shut down in recent years because of failure have adequate risk management practices.

Couple the enhanced desire to reduce risk, with the ability to do this at a low cost (at least when compared to having an in-house person manage this process), I think I have a decent enough chance of making a go of this.

Just as in fishing, my goal is to subtly offer a tempting morsel for consumption. Presentation in a natural, non-threatening manner that is too good to pass up, makes for a successful engagement! (Deep, huh?!)

Understanding what makes people tick is the key....

Do not get yourself into a situation where you lose all of the data on your PC. It is too easy and too inexpensive (how does FREE grab you?) to not do this.

I use a product called DriveImage XML. It's free, and it does a great job backing up data. Did I mention it's free? It is virtually identical in its capabilities to software I used at the bank to back up our servers. And that software cost many thousands of dollars.


Not to get too techie on you, but it can create an image of your entire PC. You can then restore or recover your entire disk, a directory or a single file.

And it's fast. I am able to back up my entire laptop hard drive (87GB stored) in about 2 1/2 hours.

I do the back up on a very inexpensive external hard drive. These cost about $120 and can store 500GB of data. They connect to your laptop via a standard USB port connection and take virtually no set up. They are truly plug and play.

I do my back ups once per week, then unplug the external drive and put it in a $30 fireproof storage box you can get at any office supply store, Walmart or the like. In this way, if my house burns down, I can easily rebuild my files (and my new business!).

If you don't want to do the entire back up, use the Copy and Paste capabilities of Windows and burn a CD or DVD of just the data you want to save.

Do this!

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Sunday, June 15, 2008

A Different Kind of Preps 

Expect the best, plan for the worst, and prepare to be surprised.
--Denis Waitley
After my recent, "change in employment status", I promised myself I'd take a month off, just to think and rest and reflect. I did pretty well, and that month wrapped up with my fly fishing trip to Oregon. It was a perfect ending to my break. It really helped to clear my head and bring my goals into focus.

This past week has been working to get back into "work mode" - keeping regular hours and "working" from 9 to 5. I've laid out the basics of a business plan, started detailing a project and deliverables plan and have squared up the pluses and minus' of the various legal forms of business (LLC vs. C-Corp vs. S-Corp). My schedule is to have all of the ground work finished by the first week of July, and have the marketing plan kick into gear.

For my primary income stream, in brief, I'm going to be starting a bank consulting business targeting small, independent banks on one of their primary regulatory requirements - complying with the Gramm-Leach-Bliley Act (GLBA). I'm not going to glaze your brains over by going into the details, but it is the primary law for banks regarding Enterprise Risk Management, Information Security and Business Continuity.

Even though this law has been around since 1999, banks still regularly get "dings" on their federal exams, because most CEOs are sales-driven, not compliance-driven. Nothing in this law will make you a dime, in fact it will cost you a great deal of money. To make matters even worse, much of GLBA focus' on technology. Most CEOs simply turn off their brains whenever any "computer stuff" comes up.

That is my opportunity.

There are firms that provide similar services (but of course, not as great as what I will provide!), but it is almost a sideline to them. This will be my focus.

I had lunch with my former CEO this past Friday. I should first mention that the split with the bank was very amicable. I've mention before that I got a great package that gives me a good deal of breathing room.

After the obligatory "chatting up" session, we discussed small-banks in general, my former bank in particular and my plans in detail.

Other than timing, we were in exact agreement about the future for small, independent banks. I think that, in general, small banks will not be around in 7-10 years. The little nooks-and-crannies where we used to be able to make a buck are being gobbled up by increasingly hungry big and mid-sized banks. Wall Street has gotten a taste of the great returns and low risk of small loans, and they just won't leave it alone in the future.

My former boss figures that date is in the 10-15 year range. Close enough.

He's got a number of merger and purchase negotiations in play. Two of these have been started in the month since I've been gone. He (finally!?) realizes that the only way to survive will be with size and gravitas. The small mom-and-pop institution is about to go the way of the diner with the endless cup of coffee. You can find them now and again, but they're off the beaten path.

We got into some of the details of my plan and he seemed genuinely impressed and excited about my idea and approach. He has offered to act as an informal sounding board and referral source to get me off and running. It was a good day.

For those of you paying attention, you'll have noted that I'm targeting banks that I think will be non-existent in 7-10 years. There is a method to my madness!

My intent is for the majority of my income to come from the consulting, with a smaller portion coming from 2 other sources. One of them will be helping Nanny with her apparent goal of finding ways to spend our tax dollars. I'm going to do my part to relieve her of the burden.

I'm planning on a 90/10 split between consulting/Nanny in the first year. 80/20 the second year, and so on. If that split can be accelerated, so much the better. I've always planned on retiring when I was 60 (in 11 years). If things work as expected, I should be able to meet that goal.

I'm sure that along this journey, there will be more road blocks and challenges. I'm a firm believer in planning and adapting to change. It's part of what makes life exciting! One thing I'm sure of, though, is that without a plan, you'll go nowhere. That ain't gonna happen.

Part of this process is re-doing my home office. I've got a spare bedroom that has been my office that I'd use on weekends or when I used to work from home. In the past year, with our wireless internet, I use my laptop mostly from our family room while watching TV, so the office has become a bit of a dumping ground. See for yourself.

Yeah, there really is a desk, chair, printer, fax, phone, filing cabinets, folders and reference materials mixed in that mess. I just need to find them! Another addition to the project plan.....



Friday, June 13, 2008

Pure Fantasy 

I like nonsense, it wakes up the brain cells. Fantasy is a necessary ingredient in living.
--Dr. Seuss

If the Dr. Seuss quote above is correct, we have Nanny to thank for waking up our brain cells. Have you seen the latest CPI data?
On a seasonally adjusted basis, overall inflation rose at a 4.9 pct annualized pace in the last three months. Core inflation has risen at an 1.8 pct annualized pace in the past three months, slightly below the top of the Federal Reserve's 'comfort zone'.
Sure. Prices are going up at a rate less than 5% annually. If you believe that, you believe that George Bush will be judged an equal to our greatest presidents ever. You live in a fantasy world.

In a piece I wrote called, "....Damned Lies and Statistics", I stated,
Every single administration that has followed had gotten more and more "inventive" with this supposed statistic. Now, anything that is subject to price spikes can arbitrarily be removed from the CPI calculation. Wouldn't want to rock the boat now, would we?
The Feds essentially make this crap up to suit their own purposes. Their basis in reality is sketchy at best.
Energy prices rose 4.4 pct in May after no change in April because of the reported drop in gasoline prices last month. They fell 0.2 pct in the April CPI calculation because of a seasonal adjustment anomaly. May gas prices rose a faster-than-expected 5.7 pct.
I must have been in a coma in April because I missed the price drop. Gas prices have risen well over 10% since the beginning of May. Here in my neck of the woods, we went from just over $4 a gallon to $4.69 yesterday. For regular unleaded. That's 17.25% in a month and a half, equal to 138% when annualized.

Who do they think they're fooling with this garbage? There is not a single thing I purchase now that is cheaper than it was even a few months ago. And I'm not talking about fractions of a cent per month. EVERYTHING costs more. In most cases LOTS more. Yet they stick to their guns, blowing smoke up our skirts that prices, at the most, have risen only 5% on an annualized basis.

As Mr. Roarke used to say, "Welcome to Fantasy Island!"

If it's about economics, and it comes from Nanny, I simply do not believe it any more. Their process is self-serving, so their credibility is non-existent.

UPDATE: Oops. Just checked the gas prices. I was thinking Supreme gas, not regular when I stated it was $4.69 a gallon. It's actually only $4.49. So, that $0.49 increase in a month and a half equals a 12.25% increase, or a 98% annualized rate. My bad.... ;-)

BTW, the Supreme gas is now at $4.75 - an increase of $0.06 since Tuesday. Do the math.

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Thursday, June 12, 2008

Appropriate Nanny 

The trouble with government regulation of the market is that it prohibits capitalistic acts between consenting adults.
--Robert Nozick

This site, in large part, is focused on keeping government - The Nanny State - out of our lives. In general, I believe that less government is better government.

More often than not, our elected officials view their powers to regulate as the opportunity to operate. Instead of establishing standards of business practice, they invoke operational restraints.

Take, for instance, smoking in bars and restaurants. Any thinking adult knows that smoking is bad for you (remember, this is coming from a smoker). It is probably the most stupid activity in which I participate. Yet, I still choose to smoke. I've weighed the risks and rewards and I light 'em up.

Nanny has decided that I'm not smart enough to make that decision all by myself. If I want to smoke in public, I am harassed at every turn. No bars. No restaurants. Not within 20 feet of a door. Here in The People's Republic of California there are actually some public beaches where I can no longer smoke.

Nanny has forced her morality upon the private business owners. They can't just pass a law that requires a business to post a big sign that says,
"Smoking is allowed in this bar. Employees and patrons who enter the premises have an increased likelihood of getting cancer and dying prematurely. You've been warned! Enter at your own risk."
No, instead, Nanny must tell the business how to operate. NO SMOKING ALLOWED! Instead of letting consenting adults choose between smoking and non-smoking bars, Nanny makes the choice for you.

When Nanny gets a taste of power, she's a hungry beast. She now tells us we can't eat trans-fats. We can't buy the self-defense weapons of our choice. We must wear seat belts and motorcycle helmets. Pick a topic, and Nanny has figured out a way to control your actions.

As I said earlier, government's place is to regulate, not operate. Sometimes it's a fine line between the two. I think education of the public is a part of that appropriate regulation.

Government should tell you to meet minimum cleanliness standards for a restaurant, but not how to do it. When the health inspector checks out the restaurant, they should publish the findings on the front door. Let the public decide if the joint's clean enough for themselves.

Same thing with fuel efficiency standards. Nanny should say, "All of your models must get at least X miles per gallon, and your entire line must get at least Y miles per gallon." This is one of those that I think rubs up against telling a business how to operate. But, if the standards are enforced on any maker selling in America AND Nanny does not tell them how to reach those standards, that's OK in my books.

I like the fact that Nanny now requires all store-bought food to have health and nutrition information. I can check the ingredients and see if I want to put that in my body. The law is enforced equally on all food sellers so no one has an unfair advantage.

I actually like the fact that California is going to require restaurants to to post similar information on their menus.
The California and New York state legislatures are moving toward requiring restaurants to post calorie counts on their menu items, joining a movement that until now has gained traction mostly in cities and counties.
I don't think the proposed law goes far enough. I think it should include all of the health and nutrition information.

This information is incredibly easy to obtain. I'm in the process of writing a cookbook. The software I'm using - which cost me $50 - takes all of the ingredients in a recipe and gives me a per-serving nutritional and calorie break-down. Other than having to key the recipe into the program and print out the results one time, there is no additional work.

The consumer can now make an informed decision on what to eat all by themselves. If I choose to eat trans-fats or steer balls, I now will know what I'm getting.

Pass the hot sauce, please.

Nanny, as usual, will take this too far. She'll start regulating maximum protein or carbohydrate counts per serving. Somehow, this will get screwed up and become an undue burden upon the restaurants.

Hey Nanny! Maybe you could tax the restaurants based upon calorie counts. More calories, more taxes. It's a match made in heaven! That way, you could punish those bad, bad people that like flavor in their food. We can't have people actually enjoying themselves, can we?

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Wednesday, June 11, 2008

Societal Classes 

Democracy does not guarantee equality of conditions - it only guarantees equality of opportunity.
--Irving Kristol

I was reading an article about the education system in California. Quite depressing.

In it, the author discussed how state education officials have regularly lied to inflate their graduation rates.
For many years, the state Department of Education, relying on unverified reports from individual school districts, maintained the fiction that close to 90 percent of high schoolers were earning diplomas, even though outside researchers concluded that nearly a third of those who entered the ninth grade never made it through – not even counting those who didn't get to the ninth grade.

Eventually, it became impossible for the education bureaucracy to justify that fiction. Last year, the department officially calculated that just 67 percent of the state's high schoolers won diplomas in 2006, down sharply from 71 percent the previous year.
In the LA school district, the numbers are even worse. Fewer than 50% of ninth graders graduate. Good Lord. More than half the kids don't finish school...

What just drives me nuts is that the teacher's unions keep fighting things that are successful. Virtually without exception, Charter Schools produce results superior to general public schools.
On Tuesday, the California Charter Schools Association released comparisons of academic performance in traditional public and charter schools in Los Angeles, showing the latter do better and bolstering the organization's complaints that Los Angeles Unified officials are arbitrarily thwarting efforts to organize new charter schools. This is the same Los Angeles Unified in which more than half of ninth-graders never earn diplomas.
But the very idea of Charter Schools goes against the grain of the socialist dogma. They involve personal choice and responsibility. They brush up too closely to the dreaded school voucher idea. Giving parents the power to allocate tax dollars as they see fit could lead to the expectation of results. If expected results are not produced, the parent can take those tax dollars elsewhere and teachers might lose their jobs. That's just not acceptable to the teacher unions.

So the kids suffer.

More importantly, society as a whole suffers. Our current system has a failure rate - at a minimum - of thirty-three percent. One third of those entering the system come out unprepared to provide for themselves.

This pool of The Uneducated has virtually no possibility of advanced achievement. None. They will work a lifetime of menial jobs or be relegated to the welfare rolls or crime.

Our system of education - intended to give everyone an equal chance of success - is actually causing the economic class system it is supposed to prevent.

When parents do give a damn, they are thwarted at every turn. Send your kids to private school, and you are penalized by having to pay twice. Home school them, and the state hits you with restrictions and cuts you off from tax-funded public school activities. Try and establish Charter Schools, and the unions cry foul. Bring up vouchers, and you're tarred and feathered.

Play nice or we'll crush you.

One of the major problems with our current education system is that it assumes that everyone has the same abilities, interests and talents. That is, of course, patently absurd. But it fits in nicely with the socialist view of the world.

I strongly support taxpayer-funded schools. An educated populous is one that can grow and support itself. But the system needs to identify, develop and encourage the natural tendencies of the individual.

Every kid should be required to master the basics - reading, writing, math. Introduce them to "electives" such as history, art, sports, computers, music, science (all flavors) and "trades" through out the primary grades. When they reach high school allow them to choose what they want to study. A person that is able to focus on what interests them is much more likely to complete a course of study than a person forced to meet a generic curriculum.

I also think that a kid of 16 or so should be able to "test out" - take a basic reading, writing and math test. If they pass it, they can quit regular school and go straight to a specialized educational, craft or trade school. They can hone their skills or knowledge in something they love instead of wasting their time in class on a subject in which they have no interest.

It's a vicious circle right now. Teachers blame the failure rates on the parents for not giving a damn. Parents who want change are beaten down at every turn. The system is designed for failure.

There will always be people that are unsuccessful in any society. There will always be the "keepin' it real" crowd. Our challenge is to reduce that number. Design a system that encourages the individual kid to succeed regardless of the influence and pressures from their parents and peers.

Video games are a great example: Kids will play them regardless of what their parents say or do. If mom and dad won't allow them in their home, the kids will play them in the mall or at a friend's house. They'll find a way.

Allowing kids to find a path that is enjoyable, challenging and rewarding does not need to be so difficult. Education leaders and teacher's unions need to recognize that what we're doing is destructive in the short- and long-term.

I have no expectations whatsoever that they'll recognize their destructiveness and change their ways. The system is so ingrained and so many people have a stake in the status quo, that short of a complete collapse, we're stuck with what we've got.

How sad is it when you have to hope for a collapse?

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Monday, June 09, 2008

Maupin Time 

I got in around midnight yesterday. I am beat! GuyK had mentioned in the previous comments section that fly fishing is work. Indeed. We fished for 5 straight days - every day, except the first was for 6 to 8 hours. We hiked in a mile and a half, fished, walked, waded, then hiked out each day.

Saturday, in particular, was a great fishing day. The weather finally cooperated for most of the day. I learned how to nymph (wet flies you bounce along the bottom of the river) and got a ton of hook ups and landed a nice fish. When nymphing, you use this "indicator" on your line to show you when you get a strike. In actuality, it's just a type of fancy name for a float!

The best part, though, is the traditional dry fly fishing where you're whipping the line to get the fly to your spot. It's very addictive. As we were coming home, I would spot a body of water, and could picture myself using a certain style or technique to find the fish. I fear this hobby is gonna get expensive!

Bait versus lures versus flies.

Bait fishing is clearly the most relaxing. Bait up, watch your line, reel in. You need to know what your target species eats, but it's mostly wait-and-see fishing.

Fishing with lures - spoons, jigs and the like - is much closer to fly fishing. You have to understand what kind of bait is in the water and attempt to mimic it. Other than pitching spoons for spawning salmon on their way up the Sacramento river, I haven't liked lures. I tried my hand at large mouth bass, and just didn't enjoy myself. To be really successful, you need a boat. No thanks.

What I liked about fly fishing is that you really have to pay attention to what's going on in nature all around you. We'd get a big wind blow or rain down pour, and it would knock all of the stone flies or salmon flies into the water. You'd change up flies to match what was in the water at that moment. The caddis would start coming out of their larvae stage in the water right in front of you, so you'd either go to the fly that looked like the flying creature, or one that looked like it was still stuck in its shell. It's called, "matching the hatch". It was very cool.

I'm going to take a trip down to a couple of lakes in my area and check out the bugs. Lake fly fishing is a bit different because you use a fly line that sinks (I'm not sure why). I think I'll just pick up some cricket flies and stay on top.

I must say, though, that the fly fisherman are the most snobby group, even worse than bass fisherman. These guys look you up and down, making an assessment based upon the brand of your rod, reel, wader and vest.

The "holier-than-thou" attitude is very prevalent. I appreciate the dedication many of these guys have to refining their fishing skills, but it all boils down to getting fish in your hands. Does a $700 rod and $600 reel make you better than the guy with the $150 combo set?

As with most things in life, skill and education will bring more success than bright lights and bling. I think that goes for fly fishing as well.

It was funny as hell how the little town of Maupin, Oregon operated. Much more laid back than the SF Bay Area (not surprising!). As we were leaving on Sunday around 11am, we stopped in town to get gas at the only station in town. They were closed. We had MAYBE a half gallon in our tank, and it was 30 miles or so to the next town.

There was a sign on the door with three names and phone numbers for "emergency gas". With no other options, we called the first name, expecting to hear that it would be a $50 or $100 fee for someone to come out and fill us up.

As it turns out, the attendant was down the street at the Rainbow Bar. Every Sunday at 11am they have their big biscuits and gravy breakfast. He'd be back to fill us up just as soon as he was done! We went and got some coffee and a half hour later, he wandered up the street, filled us up, and we were on our way.

What is strange is, after a week in Maupin, I totally understood his perspective. As soon as we hit the outskirts of the Bay Area, we got stuck in traffic (this is around 9pm on a Sunday!). Living in a town without a stop light, and that shuts down for the biscuits and gravy at the Rainbow Bar is pretty appealing.



Friday, June 06, 2008

Dem Bugs 

The fishing has been a bit spotty because of the wind. From the left, from the right, then in your face. Makes casting a pain.

I'm really seeing my fly fishing rookie-ness come through. My buddy, who has been fly fishing for 15 years knows how to cut into the wind, or side arm cast or whatever. I end up un-doing knots!

We're having a great time, though. I had a bunch of hook-ups, but none landed. My buddy hooked into a monster, and did the whole, "A River Runs Through It" deal - walking the river to hold on to the beast. Sadly, it won in the end, but it jumped a couple of times, and it was a sweet fish.

Take a look at what we're trying to mimic. The first picture is of a Stone Fly. These things are everywhere.

They're about 1 1/2 inches long. They don't make any sound when they fly, so you never know when they're near. They just land on you and you'll feel them crawling on your neck. You grab it, and you have a handful of bug.

You get used to it though: I no longer scream like a little girl when I've got one on me. I'm now only pissing my waders!

This next picture is of the larger Salmon Fly. They too are stealthy. I've got my hand next to it to give some scale. From my fingertip to the second knuckle down is 2 1/2 inches.

We kept one of my buddies fish from yesterday to cut open its stomach to see what it's eating. Bunches of these two flies, plus a ton of larvae from the river bottom. We may try nymphing today (fishing the bottom). The river is very high and fast, so the fish may be sitting on the bottom near the shore where the flow isn't so fast. It's windy as hell today, so this may make some sense.

Here's one last picture of the stretch of river we fished yesterday. This place is stunning.

Two more days of fishing, then back home to work on my new business ideas.

I'll be back.



Wednesday, June 04, 2008

Life Is Good 

I was able to land a big Red Side Trout on our first day of fishing yesterday. It was horrible fishing weather - very VERY windy. It made casting little dry flies kind of tough. My buddy found us a nice little spot and I bagged this big boy. It fell between our 17" and 18" reference marks.

I was happy as a pig in slop!

The pressure's now off of both me and my buddy for me to get a fish. We can now relax and enjoy the trip!

The breeze is starting to pick up again, so we need to get on the water before another big blow come through.



Monday, June 02, 2008

Wireless In Maupin 

Posting will be quite light for the next week. Cell and Wi/Fi service are horrible. I'm stealing it right now from someone in the town of Maupin, OR.
Hermit, here's a glimpse of what you'll soon be seeing. We passed it on the way to Oregon.



Sunday, June 01, 2008

Fish ON! 

All the romance of trout fishing exists in the mind of the angler and is in no way shared by the fish.
--Harold F. Blaisdell, The Philosophical Fisherman, 1969

I'm wrapping up my preparations for my week-long fly fishing trip on the Deschutes River in Oregon. I have to leave at 3:30am Monday to get to my buddy's house by 5am, so we can get to our motel by 5pm. Tomorrow will be a long day...

I have read up on all of the Oregon gun laws, and I can legally bring a handgun in the car as long as it's not "readily accessible". I keep mine in a small, locked metal case that will be in the rear of our SUV. It appears as though Oregon also has an Open Carry law that allows a handgun to be carried as long as it's in a belt holster. I doubt I'll avail myself of that, but I'll bring a holster just in case.

Once we have our fishing licenses, we can carry concealed, on our person, as long as we are fishing, or going to-and-from fishing. Believe it or not, California has the exact same law. How did the gun-grabbers let that one slip through the cracks?

Has anyone out there ever worn chest waders? Clearly, these were designed for function, not style. At least everyone out there will look equally stupid!

I've got a pair made of neoprene. While they are great in the water, they are hot as hell. The weather where we're fishing has been cool and rainy, so perhaps it won't be so sweaty.

On Friday, they had a big rain storm up there, and it has washed out the river. They were expecting it to clear up in 3 or 4 days, so hopefully it will be cleared up by the time we're fishing on Tuesday.

All my crap is packed. Not too bad - 4 bags. One is dedicated just to fishing gear - waders, vest, rain jacket, hats, heavy socks, sun block. One for other clothes, my GHB (which will be trimmed down and carried daily on the river) and my laptop bag - I'll try and do updates when we finish fishing each day.

Oh wait - 5 bags. Well, number 5 is really more of a case. I'm bringing my porta-bar as well. Don't leave home without it!

My friend lent me one of his fly rods, and I've been practicing my technique. It doesn't seem as difficult as I thought. We'll see if the fish agree.

He told me that you can indeed keep up to 2 fish a day, as long as they fit in the slot limit. Watch out fish! I now have an incentive to catch your butts!

I am SO looking forward to this trip. It will mark the end of my "vacation" and my time will now be dedicated to finishing up my business plans, filing government papers, opening business banking accounts, taking care of as much medical stuff as I can while I still have insurance (teeth and new glasses come to mind...) and finalizing what my deliverables will be for my consulting and training gig.

Business cards. Stationary. Mailers. Marketing materials. Envelopes. Websites. Email. Ugh.

I'm pumped up!

Today is the 22nd anniversary of a beautiful young woman falling for my line of crap and agreeing to become my wife. Through thick and thin, she's always been there. I'm a blessed man.



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