Giving Your Addicted Child An Allowance

"Mom, dad, can I have another sixteen billion dollars?"

"Hmmmmm, well honey, what did you do with the thirteen billion we just gave you?"

"Uh, spent it?"

"Spent it? On what?"

"Things...."

Well, you get the idea. GM is addicted to doing business the same old way it has always done business. It hasn't developed new products that consumers are actually looking for. It hasn't opened its eyes to the resource problem we and the rest of the world are having with oil. It hasn't, in the face of failure, shown an ability to get off its addiction to antiquated thinking and given anyone the least bit of assurance that it can, in fact, change.

Aside from the fact that General Motors can't seem to manage its business. It's definately not carrying through on its brand promise for being an innovative, forward thinking company. Instead, it's showing itself as a tired, old company, set in its ways, and groaning about how bad things are. Hmmmmm, would you buy a tired old man on a porch?

Perhaps I'm being overly harsh on this. After all, they did just shed Hummer. Okay, not quite forward thinking, but it's a step. And they did create the Saturn concept. Which while admittedly was innovative in the 80s, their decision to hide it in the closet in the 90s, leads me to think more of a [once again] tired old man too embarassed when his kid dyed her hair green and started listening to Kurt Cobain.

So even if they do survive, what will their brand be remembered for? Have they already tarnished it so badly with their management [or lack thereof]? Or do they have to hire someone under 50 who can truly reinvent the company.

Hmmmmm, wait a minute, isn't that what we're doing with Barack Obama and the United States?

Well, perhaps both brands can be saved after all. It will be an interesting year...

Just glad we could help you live out the recession in ease....

Speaking at the FBR Capital Markets conference in New York in December, Walter M. Pressey, president of Boston Private Wealth Management, a healthy bank with a mostly affluent clientele, said there were no immediate plans to do much with the $154 million it received from the Treasury.

“With that capital in hand, not only do we feel comfortable that we can ride out the recession,” he said, “but we also feel that we’ll be in a position to take advantage of opportunities that present themselves once this recession is sorted out.”

Well, ain't that wonderful? I mean, it must be nice to have all these kind people help you out, and ensure you could ride out the storm in comfort.

And don't think he's alone. At the Palm Beach Ritz-Carlton last November, John C. Hope III, the chairman of Whitney National Bank in New Orleans, stood before a ballroom full of Wall Street analysts and explained how his bank intended to use its $300 million in federal bailout money.

“Make more loans?” Mr. Hope said. “We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”

I truly can't even comment on these two statements - on a human level, on a brand level, or on a "never in a million years...." level.

I ask, if We the people can give the money away, can't we call the loan in early? Why not put it up for vote?

When The U.S. Government Gives Kickbacks...

Well, I you were ever wondering how Washington really works, this $700 Billion bailout bill is an education in what really goes on to turn a bill into a law.

We start with an innocuous bill that taxpayers will fund to the tune of $700 Billion to pay to keep our economy shored up. It seems to me very simple. However, in order to get the money meant to bail out the Wall Street Wizards to the Wall Street Wizards, our elected officials had to be incentivized to vote for it. Some could call it a bribe, some could call it a kickback, but I think the official term is money being "earmarked" to a specific cause. Hence the reason for all the extras being added to what one would assume is a very simple, straightforward bill.

Imagine if you will a conversation like this:

Senator #1 – “Senator – will you vote for this bill meant to help keep America's financial system afloat and keep us out of another great depression?”
Senator #2 – “I don’t think so.”
Senator #1 – “What if we added on a little something for your home constituents?”
Senator #2 – “Well I’m liking it more and more now. What exactly are we talking about?”
Senator #1 – “Hmmmmmmm, well, would that wooden arrow manufacturer who helped pay for your campaign last year like some money?”
Senator #2 – “Where do I sign Senator?”

Lo and behold, the bill gets passed. How else do you explain what has been added to the bailout bill:

- $2 million tax benefit for makers of wooden arrows for children

- $100 million tax break to benefit auto racetrack owners

- $192 million in rebates on excise taxes for the Puerto Rican/Virgin Islands rum industry

- $148 million in tax relief for U.S. wool fabric producers

- $49 million tax benefit for plaintiffs who sued over the 1989 tanker Exxon Valdez spill.

All of which you are paying for.

It’s a little different than how School House Rock explained it when I was a kid, but welcome to Washington…

Expense or Investment

Same cost, same dollar amount, but how someone views a particular expenditure can make all the difference when you're selling it. Whether you're talking to a company about spending on a particular project, or talking to a spouse about buying a shirt, dress, or a particular item for the home, determining if it an expense or an investment will make the difference as to whether the check will be signed and approved.

Let's start from the beginning. An expense is a sacrifice. Once an expense is paid, the money is gone forever. There is nothing coming back. The purchase of a suit for a special event could be an example of an expense. It makes the wearer happy, but wouln't return any real value other than the happiness of the wearer. On the other hand, an investment is spent in the hopes of getting a return - i.e., a Return on the Investment [ROI]. The purchase of a business suit could pay for itself by improving the wearer's appearance, helping them look more professional, and helping him or her close more deals.

For the most part, people don't mind investing if they are fairly confident they will see a return. In today's market they are more cautious and less willing to take risks, but they are still willing to make an investment where they are not so willing to incur an expense.

So, how you describe a specific cost, and how it is presented to the person writing the check is as important, if not more so, than the actual cost itself. How you present yourself is a huge factor in that mix. Are you trustworthy? Are you someone who is responsible enough to manage the money and provide a return on the investment? Or are you someone who's just going to take the money and throw a huge party? Either way, it all comes back to what kind of a return the person writing the checks expect.

$700 billion in bailout? I originally thought of it as an investment in America's future. Something that would help the homeowners stablize their finances and the banks support them. Until I started hearing about $2 million going to an arrow company in the Pacific Northwest, or how the banks were really just hording the money and not using it to open up more loans. Now, it's just an expense. Why? Because the people managing the money are either uneducated in basic finance, idiots or dishonest. Or possible, a mix of all three.

So the next time you're asking for money, either from a partner, spouse or business associate, think ahead in terms of what can be delivered and what ROI you can carry through on. The results will brand you forever....

If that's not clear enough, just think of how the original investments given to B. Madoff quickly turned into a hugh expense. Also think about what kind of new investors he'll be able to attract on his next time around....