Marc Sussman's Money Message Blog

The Bush Legacy

Marc Sussman — Mon, 15 Dec 2008 10:40:36 -0500

Cause and effect. It is amazing how disconnected we can be from the cause of our problems - we are so focused on the effects. It is the reason that little is learned from history. One thing is certain--Barack Obama is not the cause of our problems.

In the coming year, we’ll see a continuation of our economic decline. The housing market collapse will continue along with an epidemic of corporate consolidations and bankruptcies. The future of the auto industry is in doubt. Credit markets will continue to remain tight. 2009 sizes up to be an historically bad year. Eventually we'll see inflation, reminiscent of late 70's early 80's. We won't see our way clear until the beginning of 2011. We'll be smaller, simpler, and better.

Socially Responsible Investment? Bah, Humbug!

Marc Sussman — Tue, 09 Dec 2008 05:34:07 -0500

It has always been termed socially responsible investment – and I’ve always had a non-specific aversion to this description. The issue - so compelling - reduced to that word. Responsible. Yuck. It sounded like the castor oil of the investment world.
Not only did it not identify the problems, it took all the excitement and energy out of the possibilities. For me, It wasn’t about being responsible – it was about being human, connected and more importantly, courageous.

Now, we enter the age of investment we will call ESG – Environmental, Social, Governance. All the issues are contained in the clarity of these three words, these three letters. As the financial tragedy we are living through unfolds, these words will become part of our common lexicon.

The Obama administration will bring with it a groundswell of environmental activism. The financial disaster we’ve created has set the stage for different priorities, slowed us down. Extravagance is taboo. Authentic is what we will admire.

There will be difficult challenges. Barack Obama’s support of clean coal technology was easy, a political maneuver necessary for him to carry certain states. It’s easy to support a technology that doesn’t exist, because it is so easy to abandon it. The coal industry is perceptive in mounting one of the great public relations campaigns supporting the future of what they call “clean coal”. Coal is an industry on the verge of extinction. Carbon sequestration and capture, the theoretical process of injecting CO2 into the ground, is no more a reality than Santa Claus (sorry kids). We are decades away from anything resembling such a technology, and we just don’t have the time.

America in Recovery: The Bottom Approaches

Marc Sussman — Thu, 16 Oct 2008 01:19:40 -0400

As not to downplay the importance of the upcoming election, let me say that if you don't kmow who to vote for at this point, I will pray for you. Moving on.

Some time ago, I began writing a series of articles called America in Recovery. I did this because addiction is very easily identified – if you’re an addict. Let me be direct about what I see. I have been there.

We’ve all known family members who seem to be able to hold it together, to keep jobs, have relationships, to function in spite of something so destructive really going on.This is exactly what has been developing in our country for decades, and now accelerates in our financial system. Our financial infrastructure is crumbling, despite the frantic efforts being made to shore it up. America is fast approaching its bottom, (the addict bottom- not the market one) and our financial problems though seemingly insurmountable are not our biggest problem - but more on that later.

Now, I have never made the short list of those considered for the Nobel Prize for Economics. In the past I’ve needed an interpreter to understand the comments of then Fed Chairman Alan Greenspan. My financial credentials and background do not include MIT, Princeton or any of the many impressive think tanks that have produced so many of the “smartest guys in the room”. It’s not investing acumen that caused me to begin to reallocate client money to CD’s 2 years ago. I just know an addict when I see one. Most of the finance world trusted, blinded by our “apparent” success, but forgot that good ideas are nothing without good intentions.

The Grift

Marc Sussman — Thu, 02 Oct 2008 02:21:47 -0400

A trillion here, a trillion there, pretty soon you’re talkin’ about real money.

Ladies and gentleman, we’re seeing the greatest grift in our history. If you look up a grift in the dictionary, its defined as a swindle - a confidence game.

We’re told by regulators, bankers, politicians, that they didn’t know that deregulating the banking industry would lead to problems. They didn’t know that if you bypassed the process of actually qualifying for residential loans you’d have problems later on. If your breath could fog a mirror - you qualified.

In other words, the people lending the money were not concerned about how it would be repaid. We should have asked why. It was simple - they sold the loan the minute the loan closed. Other institutions bought these questionable loans. Again, we should have asked why.

They say they didn’t know that the loans were questionable. That’s one big pile of cowchips, boy. These are the smartest guys in the room.

They packaged these risky loans into investments called CDO’s. Collateralized Debt Obligations. Then they sold them back to us. As the loans were becoming worthless, they sold them to us.

This is what is called a grift.

And so, in the twilight of their careers - at just the right moment - many, many Chief Executives at financial firms cashed out to the tune of hundreds of millions of dollars in phony profits. Are these grifters going to jail? No. Are we getting any of this money back? If we are, I haven’t heard about it.

No, instead we’re signing a promissory note to the tune of $850 billion dollars for starters.

It’s the greatest travesty of social and economic justice in our history. Before its over, every dollar that baby boomers were going to inherit from their parents will be used to stop the bleeding. No inheritance, no property values, nothing.

Marching in Place

Marc Sussman — Wed, 27 Aug 2008 02:06:35 -0400

You had to be impressed with Hillary Clinton last night. She did what had to be done. She asked her troops - why were they in this fight? Was it for the America, or was it for her? It was the pivotal question of this Democratic Convention. She was powerful, and although we may not have a woman in the White House yet, Hillary has certainly paved the way.

Perhaps it was because Labor Day approaches, but I heard the theme woven throughout her speech - the fight for the rights of working men and women.

My father was a garment worker, a pattern maker, a man who left for work in the dark, came home in the dark. A member of the International Ladies Garment Workers Union. Growing up I saw what it was like, to work for people who refused to treat you with common human decency. I met many listeners on the Air America Cruise who had family in the Labor movement. Union organizers who were beaten, some lost their lives fighting for workers rights. Today, management still treats workers as a cost of doing business. If you want to where the gap is, there it is. Nothing really trickles down.

I was shocked last year when there was no Labor Day Parade. Union leaders just shrugged. This year the parade is back. Maybe that’s a message, a sign - one that we should pay attention to.

Without progress, without respect, we’ll never be able to march proudly on Labor Day. Until we can, we should call it what it is - marching in place.

Observations from the Edge

Marc Sussman — Mon, 18 Aug 2008 06:35:26 -0400

Marc Sussman is an investment professional for the past 30 years. He asks that you forgive him.

In 2005, for no apparent reason, he launched a radio show on the Air America network called the Money Message.

Please keep it under your hat that this individual has been allowed to join The Climate Project, Al Gore’s army that presents a Powerpoint for the ages.

“If they think the story of our environmental impact is An Inconvenient Truth, wait until they get a loada me.”

Observations from the Edge

If I have any talent of merit, it is that I can plagiarize with the best of them. Read on.

A lack of investment acumen has turned out to be a valuable asset - I can focus on what is real, leave the frustration to others trying to know what cannot be known.

We’re finding out that good ideas are less important than good intentions. Some very smart people have brought us to the brink.

Two days after the Fannie/Freddie revelation, the shot not heard round the world, financial shows were in party mode.

I realize that I‘ve got some attributes that are unconventional. If you want to know whether I’m a trusted advisor, take a look at my office plants now. They’re thriving. Its unlikely that I would allow anything less for my clients.

These are times of subjective value. There is really nothing that you can recommend on its investment merits alone. You begin to see that there is only one thing left that jumps off a client’s statement. We can fall back on purpose - we call it socially responsible investment. A Purpose Driven Portfolio.

Socially responsible investment needs the marketing department in a hurry. Money for its own sake is one-dimensional - the how much. SRI is three-dimensional - the whole enchilada.

I never realized why my pro-bono work has been transformative. Now I might want a maximum account limit, not a minimum account size.

All That Glitters is Not Gold

Marc Sussman — Mon, 18 Aug 2008 06:09:26 -0400

All that Glitters is Not Gold

If you want know the real story of the Beijing Olympics, you have to look more closely..

First, there’s the USA Men’s Basketball team. These are guys who have more money than Davey Crockett, nova-like star-power, and have been transformed. Just consider Kobe Bryant.

In Beijing, only Yao Ming gets ovations that are comparable to those reserved for Kobe. Here, he doesn’t understand the adulation- back home he expects it. If you watch the interviews, you see a remarkably different guy. Quiet, respectful, reserved, so proud to have the opportunity to represent his country. And if you followed his well-publicized problems, it would be hard to imagine that this is the same guy.

More remarkable is the team. They have become one. They sit on the bench respectfully, there’s no bravado. They are proud, happy, but not demonstrative. They do not challenge the referees. When Kobe charges and fouls his defender, bowls him over, he pulls him up, cups his head in a caring way, pats him on the back.

As I watch now, they are playing a talented Spanish team. Young. A 17 year old Spanish point guard is a coveted NBA prospect. He’s part Antonio Banderas, part Bob Cousy. There are others, just as remarkable.

But they are no match for this American team now. The Americans have always had the physical superiority, now they have emerged spiritually. They have become one, not Kobe, and Carmelo, and all the others that have checkered NBA and personal histories- but a team- a force to be reckoned with. They run over the talented Spanish team, by 30+ points. In their last meeting, the Americans lost. That team had “stars”, just like this one.

Back Off John Edwards!

Marc Sussman — Sun, 10 Aug 2008 06:20:09 -0400

We need to discredit our political leaders. It is an indictment of our misguided society.

A ratings hungry media represents the public’s “right to know”, when that is hardly its objective. Human decency - nowhere to be found. We’re experts in righteous indignation. I’m sure some responses to this blog will reflect.

This year, there have been names added to the list of those forever branded sleaze.
Elliot Spitzer, John Edwards. Spitzer’s callgirl, the financial details of his sexual exploits, was newscopy for months. Spitzer’s real problem was that he got too many noses out of joint. A tough character.

Teary-eyed press conferences with dutiful spouses were tragic.

Elliot Spitzer may be a man in need of a recovery program. It doesn’t appear to be an indiscretion. Should that be true, he would hardly be unique. Bill Clinton’s history is even clearer. Let me tell you, you have friends and family that don’t want to be held to this standard.

Now we have John Edwards. His wife, stricken with cancer, stands up for him. Now this.

The public service records of these men will take a back seat, but not for me. That Elliot Spitzer was a tough SOB was a real benefit when he was Attorney General of New York. He did more to clean up the securities industry than anyone of memory.

On the first incarnation of the Air America Cruise, one of the questions asked of the audience, was how many had originally been John Edwards supporters. Almost unanimous response. I wonder how many hands would go up now. His ideas were adopted by both Hillary and Barack Obama.

I’m sure you remember Jimmy Carter’s “lust in my heart” comment. His crime was that he told the truth. A lust-free male is a rare commodity. If you fit that description, then you know women assume an ulterior motive when you talk to them. They have good reason.

A Message for Senator John McCain

Marc Sussman — Sun, 03 Aug 2008 20:46:15 -0400

An Invitation to Senator John McCain
….an opportunity you may never have considered - historic and unprecedented.

Senator McCain, this is a personal message to you - every word of it sincere. It will take just five minutes of your time.

You know that there are very few people in government today that the American people respect. Approval ratings on every level speak for them. You are respected, and undeniably a war hero – and that you’ve been reduced to a bumbling fool by your own people, must have you outraged. Perhaps you will be ready for what I will ask of you.

You said nothing to George Stephanopolous that was anything but completely honest. We’re broke. Historically broke. We’ll be climbing out of this hole for decades, and we remember “read my lips - no new taxes”.

Your campaign is in desperation phase and it’s sad. Your people can’t share the excitement that Americans should feel, as they watch 200,000 Germans cheer the first authentic American President in a very long time. Republicans of conscience being considered as Obama running mates, is nothing more than empirical proof that something radically different is happening.

Now, you have an opportunity that you may never have considered - historic and unprecedented.

Drop out of the race. Do not concede. Reject. Reject the ugliness of campaign, all of those that have come before, all those to come. Drop out, not for health reasons, or some other managed spin. Fire the sociopaths that work for you. Reject their slanderous and divisive and outright silly campaign. Turn your back on them.

Trickle Down Revisited...

Marc Sussman — Mon, 21 Jul 2008 11:48:46 -0400

Trickle down economics. A theory, of course, but its called exactly what it is – a trickle for most Americans.

Jim Hightower describes it as tinkle-down economics and though the visual might be objectionable, the essence is right on target.

Supporters of trickle down fondly remember the Reagan era (any administration would be fondly remembered at this point) but tricklers, like Larry Kudlow, can quote statistics. Well, there are lies, damn lies, and statistics. Many of us remember how hard the Reagan era was – its just true.

But trickle down’s time is now. Support banking; support Fannie, Freddie and foreclosure for millions of Americans. Support business and finance and eventually the “trickle” will get there – it’s a theory that has never trickled and never will.

The Fannie & Freddie Follies

Marc Sussman — Mon, 21 Jul 2008 11:39:41 -0400

As we see low interest loans and bailouts for banking and finance, we get empty words from the Paulsen/Bernanke road show. Don’t lose hope, we know what we need:

1. A moratorium on foreclosures.
2. Regulation to stop speculation in the in the oil futures markets.

Read the Sunday NY Times article about Fannie Mae and Freddie Mac, the influence they wield with Wall Street, how entrenched they are in our political machinery whose denizens continue to give them every thing they need. Freddie and Fannie own or guarantee half of our $12 trillion in mortgage debt, and now they’ve got us in big trouble.

I watched a seemingly tranquilized Jim Cramer trying to calm the markets; I couldn’t bear watching his American Dream special – mad money indeed.

An important letter went out from the Chief Executives of the major airlines to their frequent fliers about the impact of this outrageous oil speculation. A barrel of oil can be sold as many as 20 times prior to being taken for delivery. There may be $60 in the current cost of a barrel of oil due to nothing more than speculation.

Go to my website www.MarcSussman.com, we’ll be putting up the letter. If you want action, you have to take action. The airlines are asking for your help. They’re fighting for their lives, and so are we. It’s MarcSussman.com; help stop oil speculation – It’s an action you can take.

Repo, Ahoy!

Marc Sussman — Tue, 27 May 2008 12:08:47 -0400

Repo Ahoy, Matey!

There are some jobs that must be tough on the old self-image.

Lately, I’ve had a hard time with the army of meter maids spreading joy on every street corner in New York. Its an alternative congestion pricing plan. There are other more objectionable lines of work, of course. There’s always the bails bondmen, ropin’ em up, and bringin’ em. But now, more prevalent than ever, is the repo man.

These days its not only the family car that we’re seeing hauled away in the wee hours, for non-payment. Its another casualty of the
free-wheeling lending spirit that is now a faded memory. Its our “Jersey Girl”, or “Aquaholic”, or “A Wave from it All”. Aye, captain. It’s the family boat.

The refinancing craze drove the recreational boating industry, and we saw a 40% rise in luxury cruisers, miniyachts and sailboats from 2000 – 2006. The average loan tripled to $141,000. Now, these “Chickens of the Sea” have come home to roost. Home equity has fallen off a cliff, boat sales with it. Gas prices pour fuel on the fire. Boats make Hummers look energy efficient.

And so these are the salad days for the repo men. Economic downturns always are, but this one especially. The leverage was unlike anything ever seen. Repo operators have expanded, some have grown to double or triple in size. I can’t wait until the boat
foreclosure ads start hitting late night TV.

The stories offer tragic human interest, riveting reality TV content for those of us who relate. Misery loves company, ya know. Some of the fools among us learn the hard way. Some repo men have actually repossessed the same boat, from the same owner, 3-4 times.

The Fifth Element

Marc Sussman — Mon, 28 Apr 2008 11:32:25 -0400

We were so encouraged in 2007. Al Gore was the 2007 Nobel Peace Prize winner, we had the momentum generated by a new awareness.

There was the recognition that this is a war over resources, an energy war, that has quickly become a water war, a food war. The explanation by the Nobel Committee regarding this award was simple, and perhaps flew under the radar. Paraphrasing, the Nobel Committee stated, correctly, that global warming will lead to shortages of resources, and those shortages will lead to migration of peoples, and also to conflicts over resources. War. Access to resources, brings power and control over money.

We have seen the enemy, and it is us.

Last week, in close proximity, three distinctly separate news stories broke.

E-Har-money

Marc Sussman — Thu, 17 Apr 2008 11:53:38 -0400

Check out Marc Sussman's Money Message every Saturday on Air America

There’s a great amount of research being done on the emotional and psychological impact that money has in our lives. Any day now, Barnes & Noble will announce their “Money & Happiness” section. We’ll see the different ways that we are affected, but first let’s get some basic facts out of the way.

Investor psychology

Fed Up?

Marc Sussman — Sun, 30 Mar 2008 21:14:16 -0400

Quote: “We can’t solve problems with the same kind of thinking that
created them.” -Albert Einstein

Maybe it’s time to shake the cobwebs out, order another espresso (make it a
double), and get to work. Historic changes are occurring right before
our eyes.

Last week, the Federal Reserve Bank in an unprecedented move, offered JP Morgan
a $30 billion credit line, to allow the investment banking firm to
take over Bear Stearns, which had become insolvent almost overnight.
The precedent established is something few of us can fully
appreciate.

But in connection with this situation is a development with even more
serious implications. The Fed “discount window” which
previously provided liquidity only under extraordinary circumstances,
and only to commercial banks, would now be made available to
investment banks.

The Fed action in the JP Morgan/Bear Stearns deal, and others that will
undoubtedly follow was probably necessary to head off a meltdown in
the financial community. But a permanent policy change allowing the
Federal Reserve to provide liquidity to these largely unregulated
firms, well, that’s another story. It appears that this action
is being considered an opportunity. These and other changes require
our immediate attention.

Yes, immediate. As we speak, a battle for control and direction is
developing. The Senate, as well as the Treasury Department, scramble
to propose legislation to reform a system no longer capable of
dealing with financial services firms that cannot be restrained. This
is what makes the recent Fed actions/bailouts alarming. It tells us
what the next dropped shoe is likely to look like.

Recent related developments point in a similar direction:

Answers from the Money Messenger: Marc Sussman

Marc Sussman — Sun, 30 Mar 2008 17:54:40 -0400

Q. How scared should I be?
I’m not sure scared is the right term. Concerned, yes. Aware, yes. Taking precautionary measures, yes. Scared, well no.

Our economy, our financial system, is certainly in disarray. We have a falling dollar, and a slowing economy… but we’ve had these before.

The recent actions of the Federal Reserve Board may have been necessary to restore equilibrium to the financial system. Hopefully, this is not a precedent, but a learning experience.

Instead of reacting in fear, realize that there are things that you do control. These are the actions that will change your outlook completely.

Go back to the drawing board.

Here are eight steps to take back control.
1. Review your budget
  Add up your basic monthly expenses. Rent or mortgage payment, utilities, phone and cable services, loan repayments, food budget. All the basics.
2. Establish your emergency fund
  Make sure that you have sufficient emergency cash in a savings account at your local bank to carry you for 6 months. Step one to feeling more in control.
3. Be aggressive with your spending and saving
  One way to offset declining investments is to save more money. The dry cleaner becomes your enemy. You’ll find that what you have
  in mini-storage could easily fit in the attic. Cancel the health club membership; get outside for a run instead. Take your lunch. Subways, not cabs.
4. Secure your excess cash
  If you’ve got substantial cash in a money market account, you may want to move it to a short-term CD. You may think your money market account is FDIC Insured. It’s not.
5. Take a defensive position
  In your IRA and 401K accounts, you may want to take a more
  conservative position for now. Have a financial professional look at your
  allocation and suggest changes for you to consider (Our office can do this for
  you.).