It’s A New Year, And A New Age For America.


January 2009
Vol 32 No 4


At the beginning of the new millennium just 9 years ago Americans had managed to survive the Y2K meltdown of civilization and eagerly looked forward to another century of progress as leaders of the free world.  Then we seemingly lost our way.  How?  Despite having braved what was widely forecast as a world wide meltdown, 9/11 made us fear the terror that an unseen enemy might bring.

The first attack on the American mainland in almost 200 years completely unnerved us, and our government was quick to seize on this to instill fear at every opportunity.  It invoked the unseen boogey man that frightens every child in a darkened room by warning that terrorists could be lurking in every dark corner; ready to pounce on us with sneak attacks and “weapons of mass destruction”.  As a result, during the past 8 years, Americans have ceded back to the government more of their hard won personal freedoms than they had ever done before in our history; including the dark days following Pearl Harbor; or even the Great Depression.

You older folks might remember when you could open a bank checking account without giving up your Social Security number, and withdraw your money without leaving a thumb print.  Remember when at the last minute you could spontaneously buy an airplane ticket for cash to take a quick vacation without being reported to federal authorities.  Once upon a time, you could check your luggage and climb aboard a plane or ship — or enter a government office building – without removing your shoes, going through a metal detector, and having your possessions X-Rayed.  You weren’t required to report transactions with your fellow citizens by filing Form 1099s and 1098s.  Your stock, bond, and real estate transactions were a private matter between you and your broker.  Medical examinations could be performed and your teeth could be filled without your Social Security number.  Bear in mind that the losses of personal privacy and liberty started long before there was even a hint of the 9/11 attack; and they had the enthusiastic support of the American people.

As this brave new year dawns, our vaunted free enterprise system built on free-market principals of capitalism is threatened by whiners who are yelping for increasingly higher and higher government bailouts.  They don’t want to hunker down and take their economic lumps while they try to do a better job of producing goods and services the world would be willing to pay fair prices for.  Instead of looking for a way to build a better mousetrap, they are busy inventing excuses and looking for scapegoats.  These include illegal immigrants who unfairly took unwanted jobs away from Americans by earning a day’s pay for a day’s work; unfair foreign competition; predatory lending; short selling of stocks; bankers who, as a result of Congressional mandates, lured borrowers with easy mortgage loans that enabled many to buy their first home; entrepreneurs who made a lot of money buying, fixing, and selling houses; the capricious and unreliable stock market and the real estate bubble that robbed us of all that easy money we had made without any effort at all.

The only way that government can save all those victims from their own avarice and ignorance is by taking money away from those who still have some.  In            today’s “no fault” society, it seems to have become the duty of all those who didn’t risk their savings to use them to bail out those who gambled away theirs.  That’s nothing new in America.  Republicans have traditionally raised money to bail out those who couldn’t cope or compete by borrowing from former enemies even while cutting taxes.  In the process of protecting America from all threats, external and internal, Bush turned a $395 billion budget surplus into two additional trillion dollars of national debt.  Democrats don’t like debt.  They’d far prefer to inflate to make everyone rich, then tax the inflated dollars up to 70% ala Carter.  This approach also has the added benefit of allowing us to defraud those who loaned us money by paying them back in depreciated dollars.  Of course, they might become disgruntled and raise the price of things they sell us; such as $4+ per gallon gas.


Even though over the past 8 years we bartered our liberty for security, at least we got something for it.  There’s no point in anyone standing aloof as if we aren’t all guilty as charged.  Who of us can honestly say that they didn’t benefit financially under Bush?  Be honest, haven’t we “entrepreneurs” all gotten a lot richer?  And didn’t many a generation earlier become wealthy under Carter?  If every dollar we brave entrepreneurs made that came directly or indirectly from government stained our hands, we would all have purple fingers.  We rent to HUD tenants and others who derive their income from government.  We use HUD, FHA and VA financing to cash out houses and mobile homes we’ve fixed up for sale.  Our lenders could not have made loans to our buyers without being able to sell them to Fannie and Freddie.  We deposit our profits in FDIC-insured bank accounts or Money Market Funds that invest in Government Bonds.  None of us can blame others for our economic plight.

Despite all this, I think we represent a different breed of Americans; primarily because we support our families and build future financial security without a safety net.  The nation anguished over the loss of homes that the owners had invested very little of their own money in; and government responded with myriad bailout programs.  Corporate America ran its businesses into the ground, and billions of our future tax dollars were rushed in to save it.  But nobody wept for that sturdy individual who risked years to buy rental houses then went broke because of rising costs of credit, taxes, gas, or insurance.  Not a dime has been offered by government to help all of the countless small businesses that have gone out of business in the last year or so.  What about the millions lost by developers and builders who were delayed by regulations that caused them to lose their markets?

There’s a message here: Government is more enemy than friend to the entrepreneurs who invent new products, create new jobs, and employ 85% of all American workers.  Prosperity is created by entrepreneurs with a vision of how things can be improved rather than by those who use handouts to cling to the status quo.  Government doesn’t set out to wipe out entrepreneurs.  It does it by default when bureaucrats vigorously enforce their rules and regulations without having any grasp on how devastating this can be on entrepreneurs or the businesses they create.
How many fortunes have been lost and millions squandered because of arbitrary EPA, FEMA, and ADA regulations that could be waived with little harm to the public?

To wedge our way into the competitive housing market, we must find ways to overcome economic factors over which we have no control.  We do this by finding better ways to attract new customers to whom we can offer more bang for their buck.  We fix up our houses a little better than others and sell them for a little less.  We lure tenants away from posh apartments and ghettos alike by offering more value for the rents we charge.  We lend money in risky ventures that no self-respecting banker would touch.  On the average, we work 60 hours a week instead of 40 and have no paid vacations, holidays, or weekends we can call our own (I’m writing this on a Sunday).  We have no safety net, nor Social Security, nor guaranteed retirement pay.

With apologies to Dean Alfange, whose “My Creed” I paraphrased, my Entrepreneurs Creed encapsulates the entrepreneurial attitude and values that I hope to convey in this letter.  I call my version The Entrepreneur’s Creed.  Here goes:

“I do not choose to be a common man.  It is my right to be uncommon if I can.  I seek opportunity, not security.  I do not wish to be a kept citizen, humbled and dulled by having the State look after me.  I want to take the calculated risk; to dream and to build, to fail and to succeed.  I refuse to barter incentive for a dole.  I prefer the challenges of life to the guaranteed existence; the thrill of fulfillment to the calm of Utopia.  I will not exchange my freedom for beneficence, nor my dignity for a handout.  I will never cower before any master, nor bend to any threat.  It is my heritage to stand erect, proud and unafraid; to think and act for myself, to enjoy the benefit of my creations, and to face the world boldly and say; this, with God’s help, I have done.  All this is what it means to be an Entrepreneur.”


For some strange reason, rather than to focus on the present with all its opportunities we continually fret about future calamities, regardless how dimly we see them.  In the process, we become our own worst enemy.  Calvin Coolege, who was President during the roaring 20s, was fond of saying that 99% of all the things that could happen never do; so it doesn’t make much sense to worry about them.  If I can tack on my own observation, it’s that when something bad does happen it is often completely unforeseen; because we’re so focused on what probably won’t happen.  I speak with some authority on this subject.  For more details you might want to refer to my Y2K predictions and projections of 1999.

In 1982, a mini recession came out of nowhere and surprised even the most sophisticated economic forecasting models.  In 1986, Reagan signed TRA-86 in order to quell the stampede into real estate tax shelters.  The unforeseen result was a real estate crash that virtually wiped out the S&L industry.  The Resolution Trust Corporation that was created to salvage the situation with government forced mergers and liquidations of weakened lenders wound up costing the American Taxpayers half a Billion dollars while driving the national debt under Reagan above one trillion dollars for the first time in our history.

Nobody in government foresaw how the combination of low inflation, low interest rates, and the SEC ruling that mortgage-backed securities could be sold on the stock exchange would create the biggest housing boom in history and make millionaires of all those who bought, sold, or speculated in pre-construction condos.  Nor did Congress foresee that political tinkering with Fannie and Freddie to pressure them to buy loans made to unqualified borrowers would eventually cause the world-wide collapse of credit markets and what could eventually be a serious banking crisis and, with a little more political interference, a depression.

Notice that, when I switched from my historical perspective to a future projection, it wasn’t that things were going to get better, it was that things could get a lot worse.  For some reason, when we can’t see the future clearly, we tend to see things as becoming worse rather than better.  Look at all those movies that are cast in future centuries; they always portray bleak worlds devoid of optimism and hope.  That’s a phenomenon that began to manifest itself around the time of the Viet Nam war.  Prior to that, almost from the initial founding of this country, people saw the future as being much brighter; and indeed these predictions have been much more accurate.  Think of all the advances in medicine, science and technology, personal wealth and lifestyle, transportation, leisure, comfort and privilege that we now enjoy.  The people who brought all this about were those with an optimistic vision of how good things could be, not those who were worried about how bad things might be.

The optimistic attitude that gave us the world we now live in is what is needed to take advantage of the fantastic opportunities all the despair and market uncertainty is generating today.  It but remains for entrepreneurs to go back to basics: Wealth is created when you can sell something for more than you paid for it, and rent it for more than your holding costs.  This isn’t easy to do when everything doing well; primarily because sellers have no real incentive to sell at bargain prices, and buyers are willing to pay them more.  But when we are in a period of national malaise and when the media only shares bad news and pessimism, we can buy really nice REO houses at very low prices at foreclosure sales and from motivated lenders everywhere; and we can sell them swiftly at prices far below the retail market to people who can qualify for loans at their low prices-to-appraisal values.

Hanson’s “Good Debt, Bad Debt” points out that nobody can truly see into the future.  The past only exists in memory (unless you still owe for it).  The present is all we can be sure of, and today fine houses can be bought at pre-Y2K prices and sold swiftly for huge profits.  When you consider the state of the stock market and banking industry, paying fire-sale prices for fine homes to hold or resell should be a no-brainer.  All you’ve got to do is to decide to do it.


With credit markets crumbling, stocks and Bonds heading South, shoppers deserting the consumer market in droves, unemployment on the rise, and housing prices continuing to drop, it seems you have two choices:  You can sit and wait, like the most players in market are doing, until government rushes in to prop up the corporate whiners and save the jobs that would have been lost as they cut back on jobs.  Assuming that government finds some way to pay for this, those who wait will wind up competing with millions of others who have been doing the same thing.  There will be fewer opportunities in the euphoric stampede back into the game that ensues.

Alternatively, you can exploit the current climate of despair and apathy by redoubling your efforts to take fullest advantage of it.  How?  By going to work while others wait for aid.  Here’s a Baker’s dozen productive New Year’s Resolutions for you to make and keep.  They’ll put you miles ahead when the market breaks loose:

Make one formal written offer every day to buy, sell, lease, Option, or finance a house.  If only one in twenty five is accepted, you’ll do 14 good deals in 2009.

Identify what you need to know; then learn it by self-study, going to seminars, signing up for the new, networking, and apprenticing to others.

Learn enough about computers, cell phones, FAXes, the Internet, and virtual office staffs to be able to slash marketing and operating costs working out of your home.

Stop wasting time and money traveling to look at property that you can preview by remote means; either via the Internet, or by having others check it out for you.

Begin sharing future profit with others in return for cash, labor, talent, or skills you might need.  Find reliable Real Estate and Mortgage Brokers, Title Officers, Contractors, Attorneys, Accountants, etc. who will wait to be paid until settlement.

Substitute “Equity Financing” for “Debt Financing” to buy deeply discounted houses at Foreclosure and Bankruptcy sales, via Short Sales, or directly from REO Lenders.

Identify bona fide house investors, new and experienced. Find out what they are looking for, and if they’d rather pay you cash now or in a piece of the deal later.

Let Qualified Exchange Intermediaries in your area know that you can provide their clients with bargain-priced houses that you will Sandwich Lease for cash flow.

Tie up good deals even if you don’t have the cash to close.  Then shop your contract to investors and entrepreneurs who will share a piece of the profit-pie with you.

Form and cultivate your own private group of like-minded ethical entrepreneurs whom you can support, and who will support you in finding profitable opportunities.

Investors: If you want to buy and hold houses, find a seasoned property Manager who will sandwich lease them for cash flow; or waive fees for a piece of the action.

Managers: Offer to lease houses for cash flow; or a share of the equity; or for no fee at all if they’ll give you a zero interest loan to buy other property with.

Lenders: Don’t be too quick to foreclose good borrowers with long histories of on-time payments.  Add what they owe to their loans and adjust terms so they can pay.

Let long standing good tenants who are trying to find jobs work for their rents.  A vacant house is a target for every kind of mischief; better to keep tenants in it.


Online seminar or Home Study course. Money Matters – Making Money Without Money

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