My wife and I have been looking to downsize our house for the past year.  Our big problem is that we like the house we live in, but a ranch configuration would be better than the salt-box we have.  Of course the housing market stinks just now.  Selling our current digs would be difficult.

My wife, who keeps up with the housing market and home renovations as entertainment, suggested that we need to upgrade our house to make it more marketable.  I wasn’t that thrilled.  She said we should do it now so that we can enjoy the upgrades and be ready to sell when the market turns.  On top of that, upgrades would help hold the market value of the house.

Now, she has my interest.  Throw in the fact that home-equity interest rates are going down and we’re really talking.  So, that’s the plan.

Three things came up this weekend that do NOT bode well for the economy.   First, George Will mentioned tha the last time we had a large loss in capital similar to what we are seeing in the housing industry was the .com bust in the ’90’s.  Second, the New York Times does a review of the top 5 stories for the past week in their Sunday paper.  Four of the five were bad news about the housing sector.  The other was about the rising price of oil.  Third, the largest low end house builder in the Milwaukee is selling off large tracts of vacant land.

 Well, nuts.

Written by Jim Norton for b5media on smallbusinessboomers.com

The Saturday WSJ always has good things.  Thanks go to Eleanor Laise for pulling this info together on the front page of the Money & Investing section of today’s paper.

Seems over the past 2 months, there are some new tools out to rate mutual funds.  These tools are fairly similar to the Morningstar and Lipper services.  Fundgrades.com from Financeware and it’s free.  Can’t beat that.  It comes with a twist that I like in this age of funds that have a go-anywhere attitude.  You can compare a fund aganist any group of assets you pick.

On the ETF side check out etfguide.com/beta.  Though in “beta” it lists the ETF strategy the uses – the index it tracks.  Indexuniverse.com now has an ETF screener.

When it comes to comparing mutual funds and ETF’s Rydex Investments has a “trading expense calculator” under “investor resources”.

Most every Saturday morning I go a Methodist church to attend my advanced yoga class.  Someone once said to me that they heard that yoga relaxes you.  To which I replied, “Yes, the pain keeps you from thinking of anything else.”  And, it’s good for you, too.

Anyway, me and 3 to a dozen women pay a five-two, sixty year old, woman $10 a session to beat the carp out of us.  It’s wonderful.  I’m sure it’s part of the same psychology that keeps me going back to business start-ups.  I’ve been doing this for 11 years now, which means that the class I attend is an “advanced” yoga class.  This means to get what a beginner gets from 10 minutes and a few basic poses now takes me 90 and a half-dozen moves that have many of the women in the class saying “What the fuck?”

It is corny to say that yoga saved my life, but it did.  I see guys my age hobbling around and I know it’s because they have bad hamstrings.  I see much older people with walkers because their muscles have atrophied.  Yoga will prevent that sort of thing from happening.  I expect to do a yoga routine on the day I die.  It just makes my quality of life better.

I’m Catholic.  About two years ago I saw an article by some priest about how yoga was anti-Catholic because it added to the “cult of the body.”  Well, if you have a large enough group of people you get a few idiots.  To this guy, somehow taking good care of yourself was a sin.  Well, count me in, because if my body is in good shape I can contribute more to society.  I can be more productive.

Anyway, if your a boomer, or not, give yoga a try.   Now, you have to try it for 6 weeks straight before you can say if it’s for you or not.  Anything less and you’re just wimping out.

This is probably the most significant blog posting I have made to date.  It is in support of my philosophy of life.  It is too short to drink bad beer.  That is why I’m so unhappy to see that the major brewers of swill in the US have gotten into craft brewing.  Bud and Miller are all about hype and accounting.  Craft beers are all about taking care of the customer.

Question: would you let the resturant’s accountant cook your meal?

I’m upset because I understand the power of money, having seen GE roll over smaller players with impunity.  Miller and Bud will suck all the retail shelf-space from real craft brewers.  That will drive the people who do a great job brewing wonderful beer out of business.

As a boomer, if you were thinking of getting into the craft beer business, re-think your business plan.  Now may not be the time to invest lots of money, but it may be the time to learn.  Let’s face it anyone who makes one of the two top selling lite beers in the US will screw up with craft beers.  When they do you can be ready to recapture the craft brew market.

Written by Jim Norton for b5media on smallbusinessboomers.com

Collateralized Debt Offerings or CDO’s are investment vehicles which are a form of sub-prime mortgage bonds.  They suffer from the same sickness as bonds backed by sub-prime mortgages.  Nobody know what the real risk of default is on these financial instruments.  They have become a victim of their own success.

When CDOs were a rare commodity lenders and investors had time to sit down and investigate the pieces that makeup a single bond offering.  People were careful and got a good handle on the true risk associated with these financial packages.  Because the risk was known, the bonds could be properly priced in the market.  This led to liquidity for CDO buyers.  They knew what the proper price was and could buy or sell them as they saw fit.  But, a good thing always gets over played.

When demand went through the roof, CDO buyers assumed on the old model of known risk and proper pricing.  As my Sargent told me very early in my military career, “Assumption is the mother of all fuck-ups.”  The volume of deals meant that each deal did not get the risk review it needed.  The pieces that made the CDO became different then the original packages.  Everybody was buying, but nobody knew what they were buying. 

Then, the market said, “Enough.  I have enough of these instruments in my portfolio.  I don’t want any more.”  Like the sup-prime mortgage backed instruments, when the buyers left the market nobody had a good idea as to the real worth of the financial packages that backed the bonds. 

Something was going wrong at Merrill Lynch in 2006.  O’Neal, the CEO, “replaced the veteran risk managers with a younger, less-seasoned team.” (WSJ, 10/25/07 pp A17).  About the same time Merrill’s CDO guru left for a smaller client firm.  Two and a half weeks ago a new chief risk officer was appointed.  Someone at Merrill was ring the alarm bell over a year ago. 

What does it all mean?  Merrill Lynch has been preparing for the write-down since 2006.  They announced a number and then missed it by a whopping 75%.  Either they think that things are worse than they currently seam or they have a great potential to get worse.  Remember, though Merrill is the largest player in the CDO market, they are not the only large player.

Couple the CDO and sub-prime problems together and they mean that financial institutions are in a credit squeeze. 

What does that mean to you?  The US and world economy runs on the easy availability of money at reasonable rates.  CDO’s were one form of borrowing that provided easy availability for large borrowers.  That’s pretty much closed down for the moment.  Mortgage lenders have tightened the availability of credit.  Do you get the picture?

Written by Jim Norton, smallbusinessboomers.com

It’s a tradition in the Milwaukee area that you bring in treats for your birthday.  It’s my birthday.  I’m 62.  Seeing that this is my virtual workplace and you are all my virtual associates go and have yourself a piece of virtual tiramisu or creme bru le if you are so inclined.

At the end of WWII General Electric began a study to determine what in a company’s business practices, environment, personnel, strategy, and such were the key elements to success.  GE continued this for a number of years and then turned the project over to Harvard.  Each year the survey turned up the same answer.  It didn’t have anything to do with capital structure, education of management, scale of operations and that sort of thing.  The overwhelming driver of corporate success was being in the right market, at the right time, with the right products.  Because of the ever consistant answer, the survey was abandoned years ago.

The advent of motor car foreshadowed the demise of the buggy whip.  It’s happened over and over again.  The classic cases are what happened to big steel and the small farmer along with the manufacturers of the equipment they used.  Railroads and interstate trucking is another example.  You have to be in the right market to make money.  By the way, all these industries restructured and are making money, but nothing like they did in their prime.

This morning on NPR’s business report they had stories on Apple, Google and Chrysler and the UAW.  Apple and Google are making mountains of money.  Chrysler is asking the UAW for give-backs.  What more is there to say?

If you’ve never been a workaholic you ought to give it a try.  Certainly, someone starting up their own business has to want to work their ass off 24/7 for years to come.  It takes a certain amount of physical stamina and a great sense of humor.  Still, if you’ve never given yourself totally to something, you should give it a try.  Unquestioning commitment and mind numbing labor do bring on a certain spiritual quality.

I know you’re thinking, but I’m going to make it big and go live on the beach.  To that I say, only if your father built the business, handed it to you and you didn’t screw it up.  Yeah, but what about guys like Ben and Jerry?  They’re always smiling and green.  Sure but, they still worked their asses off.

People who like to live a cloistered monks or do single-handed around the world sailing races are good workaholics.  If you’re the kind of person who has a significant other you need to discuss this entire issue with them.  People who work all the time don’t get to see much of their spousal equivalents.

Before you start your own business, know the answer to the question. 

At one point I made 221 cold calls over the phone.  That was 15 years ago before voice mail was ubiquitous.  There is a $10 word I dislike, but it fits.  During that week I spoke with 27% of those people.  I actually got to say my piece to a human being before they made a decision.  I actually liked the spoken “No”, because I could ask “Why?”  I can turn no’s into yes’s if I can ask the question.

In those days, if I left a message, a human being wrote it down, usually on a little piece of pink paper.  That took some effort.  Today, they dump you into voice mail.

I never leave a voice mail message.  It’s a waste of time on a cold call, because you never get to counter the NO with your WHY.  All that happens is that someone hits the delete key when they determine that you left them a sales call.

My advice is skip the cold phone calls and find an idea that will prequalify a person.  You might try calling early and late.  That, actually works sometimes.  There are more efficient ways to dig up prospects than cold calling over the phone.  However you do it you need to get to no.