Are You Using VR In Your Real Estate Marketing? #485


Hey, everybody, it’s Aaron Norris
with The Norris Group. It is Friday, January 17th, and are you using these as part of your marketing? That and much more as we cover the biggest headlines in real estate. Up on the radio show and podcast, we’ve got Cary Pearce. He is in the mortgage industry and has been for 35 years. We talk about the state of lending, how it’s changed over the last couple of years, if it’s getting more risky, accessory dwelling unit financing and way more. So don’t miss that on the radio show and podcast this week. The Mortgage Bankers Association reported that the amount of available mortgage credit decreased in December by three point five percent. Mortgage delinquencies were at their lowest in 20 years in October with 3.7% of mortgages being in some stage of delinquency. They also reported a 3.2% increase in mortgage applications. And Freddie Mac says mortgage rates are now at 3.65% for 30-year and 15-year rates are at 3.09%. If you missed the newsletter, make sure to go on thenorrisgroup.com/turmoil. You’ll get a free look at our TNG economic newsletter, which is typically only for VIP subscribers. We go through county information, updates on iBuyers in several counties throughout California, and some of the things that we’re going to cover at Turmoil. So, thenorrisgroup.com/turmoil. It’s free. The video is up. Go check it out. A new report from ATTOM Data Solutions found that buying a medium-priced, three-bedroom home was more affordable than renting in 53 percent of the 855 counties analyzed across the U.S. In 36 of the 43 counties nationwide that had a population of one million or more, renting was more affordable than buying. This includes the nation’s largest cities like New York, Los Angeles, Chicago, Houston, and Phoenix. No surprise there. Cities where it was still cheaper to buy than rent include Detroit, Philadelphia, Cleveland and Pittsburgh. Additionally, three highly populated counties in Florida, including Miami-Dade, Broward and Hillsborough County, was on that list as well. With home prices rising in 67% of the U.S. markets, renting could become an even better option in the year ahead. Did you know there are currently 218 cities with one million dollar averages on a typical home? Yikes. Three more than at the end of 2018 and 74 more than there were five years ago. And did you know that more than half of these are in three metro areas? Bet you can’t guess what they are. Yep. L.A., New York and San Francisco. 46 in San Francisco, to be exact. 43 in New York, and 30 in Los Angeles. And in 2020, eleven more are expected to join the list. Five cities will lose their million-dollar status in 2020. They are – so I think it’s Kahlua, Hawaii, Milpitas, California, Harding Township in New Jersey, Daly City, California, and Fremont, California. Sorry about it. A story on Marie Claire this week says if you’re buying a home, you need to consider more than making your budget. Hidden costs can sneak up on you if you don’t pay attention. Of course, things like down payment and closing costs will hit you up front as far as things that you’re going to need in your budget. But second are the ongoing fees: interest, PMI, homeownership insurance, HOA, property taxes, and of course, renovations and overall maintenance. My favorite is air conditioners. Air conditioners do not like me. And whenever I buy a house, it invariably goes out in the first year or two. So you better be prepared for that. If you want to make sure you can afford your new dream home, you better follow these tips. 1. Save, save, save. 2. Improve your credit score. 3. And learn to negotiate, because you’re going to need that extra cash later. The future is here, and while it isn’t the future of my childhood cartoons and dreams like flying cars on the Jetsons, technology is allowing some really cool things in real estate. One of those is advances in 3D virtual reality tours. 2D photography has been used to make rooms appear larger than they actually are. 3D walkthroughs are designed to show people what it’s truly like in a home. They can see that from anywhere without having to be in the physical space. Show you the dimensions of a room, any angle in any view, has the freedom to look around. This is actually something we’re handing out. I guess this is the first time we’re announcing it. It’s actually virtual reality glasses. This is a Google Cardboard. So at the live event Turmoil, every guest will get one of these. You put your phone in it, and you’re going to be able to look
around the models in Florida, and I’m hoping to get a few accessory dwelling units, which should be really fun. So if you’re there, you’re going to get one of these. And it’s really interesting to see how a matter port – this is a matter port that we’re using in conjunction with this – how they’ve decided to include the virtual reality experience. I think virtual reality is going to have some very unique opportunities in the years ahead for marketing as well. I’d like to know if you’re including VR technology in your marketing. Love to hear what you got to say. What if I have a flip phone? Flip phone? You need a new phone. If you’re on YouTube, please leave your comments below the video, and don’t forget to like and subscribe to the channel. Hit that bell if you’d like to receive notifications when we have new videos come online. If you’re on Facebook or any other social media platform, please like and make sure to like the Norris Group page so you can find our content online whenever we produce it. Leave your comments below the video. Give us some love. And don’t forget to share. If we missed the story. Also, feel free to leave a link in the description below. We would love to see you out and about. Of course, February 1st we have Turmoil: The Coming Storm of Changes. We have been really excited to announce this last week that Chris Porter and Robert Kleinhenz is going to join our panel on profits in progress, while profits in politics is going to be featuring leadership in the governmental affairs and legislative industries around the builders, the Apartment Association, and the California Association of Realtors talking to us about what they got watered down in 2019 and what to expect in 2020. Turmoil is not all about a recession. Half the day is going to be on timing, and the other half is going to be where RISAs is going to pop up. That has nothing to do with the economy but could impact the economy. And that’s politics and change. So you won’t want to miss it, but we’re very excited to announce those. If you’re interested in signing up, go to thenorrisgroup.com/turmoil. February 10th: 6 Things to Succeed in 2020 with L.A. South REIA. March 19th is our Florida boot camp. So if you’re interested in attending, you’re gonna want to sign up early because you got some homework before we go. That is on our calendar. So you won’t want to miss that. April 1st: 6 Things to Succeed in 2020 with IVAR. All of our events you can find on thenorrisgroup.com under that Events tab under Live Events and Training. For hard money loans, including fix and flip, buy and hold, and new
construction, as well as accessory dwelling units, hit that hard money tab. And for passive investing with the Norris Group, hit that Invest tab. With that, have a fantastic weekend and we’ll see you next week.

Technology Is Frothy Even With A Marijuana Sunrise | Greg Schnell | Market Buzz


* music * Welcome to the next decade of Market Buzz.
I’m Greg Schnell the, Canadian Technician and the host of this unique show. We look
for long time fair trades on weekly charts. Please follow me on twitter at
@schnellinvestor, go check out my website at gregschnell.com, and hopefully
follow me on on StockCharts on the blog’s tab under your ChartWatchers,
Don’t Ignore this Chart and the Canadian Technician. So we still got ourselves a
bull market lots going on. I’ll be doing it a little bit of public speaking over
the next week so I just thought I’d let you know I am participating in the wealth365.com summit. There’s about 90 speakers for that one I think. I’ll be presenting
Tuesday morning at 9:00 a.m. it’s totally free and I don’t know if you can
see this on my screen but it’s summit.wealth365.com
and you can click on there and and find my name and register or just register
for the whole conference whatever you’d prefer. Anyway should be a great one lots
of good speakers there lots of ideas and it’s all free. And as well I’ll be on
that afternoon and I’ll be on with David Keller on The Final Bar and that will be
a 4:00 p.m. Eastern so just as the market closes that one’s kind of funny
because I used to do The Final Bar that used to be this you know I had at the
end of the day, so anyway it’ll be nice to be back. Should be exciting so looking
forward to that. And our agenda today is the technology XLK and XLC those two
groups, I know ones communications, are they
unstoppable and then we got a bounce in marijuana names today or or somebody
just lit up in marijuana and finally we got some something more than a spark.
So we’re gonna go through some of the marijuana names and just check them out.
I don’t think, don’t think you’ll be missing any rally by any stretch but if
you’re a trader that might be a place to hide. Go look for something so if the
overall market rolls over maybe these MJ names can’t continue to run. So we’re
gonna look at the confusion on the trade deal, you know, it’s been
so quiet as to what’s actually in this trade deal and I know there’s a couple
hundred people gathering in Washington today to talk about the signing of the
trade deal. I think the real question I have is why aren’t the charts kind of
confirming that? So there was a pickup in in some of the industrial names last
week some of the industrial metals but the industrial metals chart hasn’t moved
a whole bunch yet so we got a whole bunch to try and shoot through. So let’s
do that, we’re gonna jump in to the overall market here. Let’s just hit the
refresh and make sure. I look, I learned something new this morning one of the
things that happens is on on the market movers over here this OGI is a
marijuana name and it was up 20-some percent to start the day and it’s now up
38 percent but it was on the most active list but not on the percent up list and
that I did not understand and I found out the reason for that and one is that
the percent up list the stock has to have a price of at least five bucks
where is the most active it has to have a price of at least a dollar.
So anyway, learned something new just there’s a little bit of a parameter
setting there that that can change it. But if you notice just looking on the
homepage today so this is Aurora Cannabis, this is OrganiGram, this is
Hexo which is also a marijuana name, this is Aphria which is marijuana name,
that’s a Canadian bank, but this is Canopy Growth Corporation so in the U.S.,
the ticker symbols CGC, Charlie-Golf-Charlie. And two oil
companies and then another marijuana name here
Cronos. So lots of marijuana on the most active list and you know finally
somewhat of a heartbeat. I mean these names have been really beaten down. So
we’re gonna cover that in a bit. I want to go back and just talk briefly about
the indexes because I think it’s it’s at a remarkable stage and so we’ll just
cover that off. So first of all I’ve been highlighting on the PPO
how high this is getting. So this is the the run for the last 10-days and it’s
you know Nasdaq was 86.50 to 90.75 so it is that four hundred
and some points in just a a week or so. Anyway so what we could see is this PPO
on the daily levels, I’ll put a pretty high level up around two percent but on
a weekly level we’re up, way up here over four percent now we’re exceeding that
January spike high in 2018 and this is taken on a whole new level of surgency.
So with that the real question would be you know who’s going to add more money
into those big names at the top here and so far the index trackers are doing a
fine job of that. But if we go, I’m gonna just flip over to my other, whoops, not
that one, this one my other look for these stocks and I’m
gonna put up the XLK and what I want to show you here, these are the
technology names and this PPO is over five percent and as you can see in 2018
on that sudden surge, we didn’t get anywhere near that high and now if I
just unwind the tape, whatever we can go 20-years, what we’ll see here is that you
know getting over 5% is a pretty rare beast and we’ll just put a horizontal
line on that, whoops, did something wrong for some reason that’s not opening okay
there we go and I just want to take and go horizontal line, on the wrong line so
nothing there, the horizontal line on this one and you put in 5.0%, 5.0 to 3%
just to show you that this and we’ll pick red or something. Okay and now what
you see here is this red line and so coming off the ’09 lows that
significant surge off the ’09 lows we got to this
level same thing in 03-04 and briefly in 2012 touch that level also. So usually
I mean we’re at a I’ll call it a pretty healthy run rate, so the real interesting
question is, is this normal? Are we at the new normal, where these
stocks can just levitate or or is this a little bit overdone. And so I would just
say make sure that you’re aware of how flamboyant or how enthusiastic the
market is. This probably isn’t a place to add new positions into already run up
names. Ah, XLC, what we see on this one this chart not nearly as bullish. So we
still have that 5% line but this is only sitting at around 3% and so with that 3%
level, I think what what the important message here is the the communication
sector may not have run as much but let’s face it it was a relatively new
sector. There’s still lots of good stocks performing over there, but I think the
important thing to be aware of is just how much these top five names have
started to drive the bus. Now if we look just let’s go pick the new percentage
names today and and what’s getting beat up
I guess toys weren’t a very big seller this Hasbro chart looks particularly
hazardous as it’s starting to break down. On the other side I just want to go back
to this ChartList, what did I do there, sorry wrong tab, what I want to point out
here is you know this is how many stocks are in negative territory today and they
just continue to surge and so with that sort of price action, I mean I don’t
think you want to fight the tape, but you sure want to be careful with it because
we we are so extended. Now you know when we look at the big five so here’s Apple
and obviously we know it’s and running on a bit ,it’s up another
percent today, let’s go find Netflix on here, search, and the point I want to make
on Netflix is that when we look at this chart one thing to be careful of here is
the PPO is right around zero and if this rolls over that’s a pretty hazardous
condition. So, well everything else has been relatively enthusiastic and the
chart is starting to improve in SCTR ranking I think just be aware of how
sensitive we are, and and maybe I should explain that a little bit more, so what
happens is when when momentum goes below zero we call that the winter position
and the big thing about that winter position is obviously when that’s
breaking down that’s a relatively large hurdle. We have so much negative, we have
so much momentum ,or weakening momentum that it’s actually pushing down below
zero and just in here that was a pretty important place to be aware of, back in
July, that was a pretty important place to be aware of. And now here we sit in
January just barely above zero and we’re gonna have Netflix report sometime over
the next couple of weeks probably and and when they report I think the thing
we want to be most in tune with is how sensitive we are here. If this rolls over
right away that’s probably gonna be a major signal for Netflix so try and and
be careful there. If we go look for Microsoft it just keeps going. It’s
almost crazy how much how these big companies have rallied but this one’s up
another 1.46 percent this week and you can see the PPO way up here at five or
six percent that that is very lofty. Now it can stay up there for a long time as
it did in 2018 and and then remember 2018 was a pretty choppy market, we made
a big high and then went sideways and then broke down hard in the fourth
quarter. Microsoft broke down a little bit in the
fourth quarter from 113 to 92 so that’s about 20%, maybe 15%, but I think the
bigger thing to keep in mind is this is really heavy up here on the right
inside and just be aware of of where we’re at. Amazon is a different one. What
we see with Amazon is the PPO is rated 0 also and so I would just use that same
cautionary situation and again, I would not want to short Amazon, it’s a beautiful
stock. I’m just saying that the momentum can be fairly tepid here and if it’s
rolling over at 0 that’s probably a good place to pay attention and make sure
that you don’t get caught offside. So as much as my confidences is soaring for
what the company’s going to be doing in on-time delivery and all that kind of
stuff, the one-day delivery with drones and and that whole build out, I think
that’s probably going to be a great company. And all the warehouses they’ve
been building have a reason and that’s just to get closer. So anyway, just
careful with Amazon. I do want to show Skyworks because I think this stock is
a beautiful example of 5G and it’s been running up very very nicely and the only
thing I will say is that the momentum is starting to wane here, and again, if I was
gonna pick a 5G stock ,this is probably one of the ones I would like to be in.
If you get a pullback to the ten week or something like that that might be a
better entry and that would also line up with prior highs, so pullback to support
and then take off again. Anyway, some of these names look a little frothy and if
you had the chance to take a little bit off the table that would be a good idea.
So we’re gonna take a quick break here we’ll be right back and when we get back
we’ll jump into the MJ names. * music * Okay, so one of the things that’s
happened is just in the last few days the marijuana names have started to
surge and that’s obviously a nice thing. But you need to be ready for that and so
one of the things I’ve done is I have all of these ChartLists created under
different groups and so when something happens I can jump in and I can just go
specifically to that group. So here’s biotech and pharma and then here’s China
stocks we could go look in there and just see how they’re doing since we have
the trade deals being signed today. We got cloud sector and coal industry and
copper mining, whatever it is that you want, cyber security but by breaking them
down into groups the most important thing is that when something happens and
you you want to see if that is happening across the group the easy way to do that
is to have it already set up. And so in this case I have the marijuana names all
set up and very quickly you want to sort them based on the strongest stocks. So
what I’ve got here is SCTR ranking set up for these and you can see that,
you know, we have a few stocks with a SCTR ranking above ten and even
Canopy Growth after it’s big move this week is still 9.1 so it’s
still pretty suppressed or depressed. I think when you start to look across
these there’s a couple that are more interesting charts and how do you build
these names. One of the things you can do is you can Google whatever top ten
marijuana names, or you can Google top ten marijuana REITs or top ten
marijuana growers, or you know, follow, go into some of the ETF’s.
Seed is an ETF that has marijuana stocks in it so you could go in and just check
what they own. That’s kind of how I do it and so I’ve built it over time. So, as an
example, one of my friends on Twitter the other day was talking about this IIPR
which is a real estate company, industrial real estate and I think I
think it builds warehouses for marijuana. So anyway he mentioned it as a marijuana
name so I just put it in my list, doesn’t mean I’m gonna trade it, but it’s in here.
So I have about a hundred stocks in here and most of them don’t have a SCTR
ranking because they’re relatively new. And so that gives us a problem when we
try to sort them because what we’re also trying to find out is if some of these
names could be improving, right, but I’m not really gonna trade a penny stock, a
$0.14 stock, or whatever, so I want to stay on something that’s got a little
bit higher growth. So what I’ve done is I started off clicking on the volume, then
clicked on the close, and then clicked on the SCTR ranking, and by doing that, so
if I click on volume, then click on the close now I’m gonna get the highest
price first and then get the SCTR ranking. What happens is when I don’t
have a SCTR ranking then it will default by price. And so that gives me a
method of making sure that at least I’m looking at the companies that are you
know are trading much better than than a penny stock or whatever. So when I create
that sort, you can scroll down to the very bottom and you’re gonna hit “number
in sorted order”, I’ve already done that so they’re already sitting in the sort
order of either price or SCTR ranking. So now we’re going to go back to the top
and and if you have any questions about that I’ve done a lot of videos on
SCTR ranking sorts, a lot of the Market Buzz shows are on there but every
now and then I’ll jump in and actually start again at the beginning. But what I want to do today is just go look through some of these names and
StockCharts was having a little bit of trouble with some charts loading this
morning so if we get some blanks, we might have to hit some refresh, but we’ll
see. So here’s marijuana companies inverse ETF. So this was going up when
the marijuana names were falling and this is the top-ranked SCTR in the
area or in the the industry group, and what you see here is it’s rolling over
pretty hard. And that might suggest to me finally this is the first time it’s gone
below zero on the PPO, so this probably looks like, at least if you wanted to
trade in a space, this might be the place to look. So here’s Corvus Pharmaceuticals
and there’s a couple of things I like on here so let’s just go and, okay annotates
turned off, so I have to fix one thing here and what we do on this annotation a
couple of things I like to keep track of is just what is the big trend in
momentum well we can clearly see this has been breaking so that’s a something I
like and again if we wanted to put that on price, whatever it would match in here
with this relatively short trend line something like that, or we’ve got a long
trend line that’s just broken in the last week or so. Anyway the bottom line is
it’s starting to break out and that makes it much better. We’re starting to
get new three-month highs on relative strength. All of these are good sort of
basic scan ideas before trying to find new leaders, this one’s at four-month
highs getting on to five-month highs. RSI is getting up around 60
we’d like to it to get all the way back up to 70 to kind of confirm it but,
anyway this this Corvus Pharmaceuticals looks like a pretty nice chart and what
I like about that is it it’s starting to you know take nice shape.Now you know $4
to $6 it was only $9 high, there’s lots of charts that have been beaten up much
more than that. Here’s Scotts, and this is just the
basic fertilizer company, and you can see it hasn’t really pulled back but it is
spring and so lots of things, you know, you could have people adding plantings
and all that kind of stuff, so Scotts fertilizer could could take off to the
upside here and it wouldn’t take much to break through PPOs giving a buy signal
starting to turn up higher. This name has been choppy for a couple of years, ePlus, and
what you see here is, you know, it has the sudden thrusts and then nothing for a
long period of time so maybe it’s about due for its sudden thrust. The only thing
I would just say is it’s so spiky both ways it’s not really something I want to
trade. Here’s that Innovative Industrial Properties Tom Bruni pointed it out.
What you see here is a big downtrend and it’s starting to turn up PPO is starting
to give you a buy signal. I like it that this is at least four to six months, that
helps me I don’t like how straight down this is but you can see that this has
been a pretty good performing REIT and all of a sudden it’s starting to improve
pays out a 3% yield not bad. GW Pharmaceuticals this one’s clearly
gapping up but notice this already it’s already been up 10 bucks and back this
week. Starting to get a buy signal down here and, don’t get me wrong I mentioned
it earlier, but there’s only a few stocks that even have a SCTR ranking worth
looking at and I like them when they get above 30, so something sitting at 14 is
pretty weak and this one’s even in the U.S. so it’s it’s really weak. And then
here is Fire and Flower Holdings starting to turn up and as this one
starts to pick up in strength here, I think one of the things that’s more
interesting is it’s breaking through, you know, kind of an 8-week area of support.
PPO’s trying to cross up so perhaps there’s something there
full stochastic has just gone above 20 so that’s a bit nicer. The difference
between this chart, this gray background or graphite ChartStyle, is weekly and
then daily if it shows up with this brown frame usually. So what you see here
is we’re hanging right around the 200-day moving average for this Cardiol
Therapeutics don’t have a clue what they do, they’re in my marijuana list that’s all
I know, and up sloping is just starting to break
and it’s rolling over a bit here. Doesn’t mean I’d own it or wouldn’t own it,
I’m just suggesting it’s in the group. I do like the fact it’s finally broken the
downtrend but it it I peeled roughly a year ago we’ll see if it can bounce off
this 200 area and start to accelerate higher. So Canopy Growth is the one
that’s been in the news all week and it’s it was one of the bigger names out
there and Constellation Brands had taken a position in it. And on this chart we
see a couple of things and I mentioned this in Don’t Ignore This Chart article
this morning, that’s sitting on the StockCharts website and what you see here is
the relative strength is starting to break down in this name so that’s, that
was a problem and it’s now turned up here we’re at 3-month highs so that’s
your first step on a a bullish look. The full stochastic broke out here early
December, late November and started to push up and that’s looking
nice and it’s broken above the last two months or three months so, all of a sudden
where we’re at three-month highs in price in the stock is coming off a
pretty big base here. This is when the CEO left and, I think it’s when they left,
and and now the stock is starting to migrate higher. In terms of the PPO there’s
still a big long down term trend line that hasn’t been broken but I do like
the fact that this six-month one from June to December is now breaking and
starting to turn up so at least you’ve got some change in the weekly momentum
enough to to get you interested all of these names and I mentioned it in the
article this morning was you’re still dealing with stocks that are just having
one good week so let’s not get too excited I like the fact that the whole
group is trying to move up that is much more encouraging. The one thing I would
say is set your stops and if you get hit just let them go because these things
they still haven’t made a lot of money. Aphria popped yesterday and then today
was down, or popped two days ago and then yesterday was down. Like this still very
volatile space but volatility gives you upside and downside.
So here’s Pyrus International. This stock was over 50 bucks had a big super surge
and everybody thought it was well on its way to whatever and October 2017 was
what we called weed Wednesday in Canada when marijuana was legalized, but this
thing took off to the moon and then has never been there since so from 52
dollars back to 8 or 9, you know, it’s finally above the 10-week moving average
so that looks good and we’re starting to break this year long down trend, so a
little bit of hope for that. Aphria this one big down sloping
trend line in price, trying to finally break through here, again topped around
weed Wednesday and a two-year 18-month pullback, starting to turn up again
finally that would be a nice thing to see.So if you’re interested this you
know some of these names are here but again they’re going to report earnings.
All of these, check when their earnings dates are because they’re gonna be extremely
volatile through earnings and I think right now we have a lot of grow ops that
could more than supply the legal demand in Canada and the U.S. so, so just be
careful because they’re still an underground economy competing. Here’s
CLIQ.TO and you can see this one is a downtrend line here if that was to start
to break that one to be bullish, trying to bounce off their lows of four bucks.
This was all the way up at, you know, ten or eleven during the actual legalization
of that. So Cronos, big downtrend here, having a nice push this week up 25
percent and then you can see that this downtrend here starting in March and now
finishing in December. At least the stock has finally higher it’s moving above the
ten-week moving average for the first time since, really since, the downtrend
started. Wouldn’t mind waiting for a weekly close
to kind of get there. This is the Marijuana Life Sciences ETF and what you
see is a big downtrend here hiding under the ten-week moving average just using
that has been a pretty good force. So finally the average stock in the medical
marijuana is pushing this thing above above the ten-week moving average so
that’s quite comforting. PPO is finally changing and on a weekly chart it makes
it look to me like I’d be interested in trading in these names. But I remember
two years ago thinking you know gee these things are just starting to
repopulate and then they rolled over into January. So just be very aware of
the earnings dates coming up because I think you could get ripped both ways.
Canopy Rivers, this one super surge and then nothing. We’ll just leave that here.
SEED, another ETF, pretty much down trending and finally a little move above
it, somewhat hopeful on the daily. The PPO was it a big downtrend and starting to
try and break through that, so that’s a little bit of good news. CannTrust
Holdings, this one popped two weeks ago above the ten-week
and has migrated sideways and is now starting to follow on. Again this thing
was a thirteen dollar stock down to a buck thirty, yeah, you get the idea
ninety percent off so maybe there’s a bounce in there to three bucks and get
back to the 40-week moving average. Insys Theraceuticals big
downtrend here trying to push back up, again, penny stock. Charlotte’s Web
Holdings big downtrend you know SCTR ranking of 0.5 that
means 99.5% of the stocks are behaving better than that so if you’re if you’re
buying down here you’re definitely bottom fishing. I’ll call it the rotten
fruit at the grocery store and we’ll see if they can start to turn up again. If
you’re a trader these are pretty interesting places to look on the chart
if you’re not a trader I don’t think that they’re ready for long-term
stability. OrganiGram is up 43% this week but from, you know from a two-year
low and all of a sudden it reverses so the shorts covered you got a down
sloping trendline here. I get it it’s a nice move. I think the real question is
you know do you want to buy it after a 40 percent move already so that’s a hard
one. Hydropothecary, HEXO, a big downtrend
here starting to work its way higher again it’s not even above the 10-week
and we got a downslope PPO. If you can start to see all of these turning up I
think that’s helpful obviously an industry group is gonna give you the
most part of the biggest part of the move is when the whole thing is lifting.
So if that was the case you could either play it through the ETF or you could
play it through these individual names. Again, volatility huge. Make sure you know
what you’re doing on the stop side. I wouldn’t let them get too big. Canopy Growth
chart didn’t load, let’s just try that again, so this is the one I
wrote the article about in Don’t Ignore This Chart, so you can go there and see
that. Anyway all of these charts are trying to pop today or this week there
aren’t weekly closes yet so when that happens then you can kind of investigate
it but you’re not late to the party you’re very
early and again a little bit of volatility off the lows might help kick
it up. So thanks for taking the time to join me on Market Buzz. Market Buzz airs
Wednesdays and Fridays at 10:30 a.m. Eastern Time you can also see the
recordings on StockCharts TV YouTube page and you can also find my U.S. and
Canadian market information on the StockCharts YouTube page and lastly don’t
forget about the schedule where I’ll be presenting next Tuesday * music *

How to find Off Market Apartment Deals For Less than $5


alright guys let’s go ahead and look for
some off marque department deals and I’m gonna show you guys how to do it for
really really cheap, in fact, you’ll probably spend less than the dollar
looking for a deal and this is something that I did beginning early on when I
just got started you know I didn’t have hundreds of dollars of you know
the marketing budget for post cars and bandit signs and ads so what I’ve done
is I’m going to show you exactly what I did using a screen share so that you can
be able to dive in right with me to show I’m gonna show you exactly what I did to
look for off market apartment deals just using the internet a laptop and some you
know brainpower you’re gonna need some of that so stick around and I’ll show
you guys how it’s done all right guys so what you guys are
looking at is the screen of my laptop and you probably see me here as well
right on the upper right hand corner so I’m gonna assume a role of someone who’s
just getting started in this business don’t know pretty much anything other
than just hey I’m gonna go and look for some deals now this is a very very very
cheap way of doing very archaic way but it really works and it’s really
effective especially if you’re looking for a multi-family I don’t let me quite
see this working for single-family no you’ll see why so I think she’s really
really excited because I’m I’m gonna go ahead and actually look for a real deal
and show you guys how this works and by the way any information that I share are
gonna be off are gonna be available to the public anyway so I’m not gonna share
anything that’s private I’m not gonna go and disclose email addresses or phone
numbers I’m gonna do my best to make sure that any information that is being
shared is already on the public record so you guys something guys know I’m from
Chicago Chicagoland area and that’s nice that Google was telling exactly where
I’m at so for those uh want to stalk me down there right there I am but I’m
gonna go and look at completely different area so that I am NOT biased
because I know all the areas in Chicago that are that are hot and yeah places
look at but I want to go and look at somewhere else where say like
Indianapolis I actually know very little about Indianapolis
I’ve been there a couple times right for different events but I don’t I don’t
know particularly a whole lot about Indianapolis so I’m gonna go and assume
that I like I’m new to this market right I’m not I’m not sure what I’m looking at
so first thing I’m gonna do and this is Google Maps by the way I’m not using
some fancy schmancy software it’s just simple as going to maps google calm and
you’ll you’ll see this so first thing I do is I switch to satellite and some of
these smart cookies you already know what I’m doing here um so I’m looking at
Indianapolis and honestly Anna I don’t really know where to start but I’m just
gonna zoom in to where I can at least see the content of the streets so I’m
gonna look around this area now already I think I found something here so you
guys can see here that I’m it’s kind of obvious right so you you look after the
like mAb you and you’ll see rooflines and you’ll notice that some of these
roof lines like this one actually looks like an apartment now
oh this actually it might be a church or some sort of a industrial campus so if
you guys want to pan down this way to actually see I call this the FBI view
because you know I feel like the government agents I don’t know like I’m
like a satellite view but what you do for this and you guys are thinking well
how is he doing that so what you do is you hold that control key right the ctrl
key for those are what that is control key and click and drag so you’ll be able
to just pretty much drag and do one of these things it’s pretty cool I feel
like I’m in Mister Rogers neighborhood so this is really cool you can just go
around you know stuff like this this is pretty cool right so here’s something
ready it’s just a church another church this isn’t a part of building right it
appears so I’m gonna verify that it is yeah it looks like I’m partly clicking
apart building it’s right in front of a bus stop as you guys can see right here
Michigan Street and State Avenue so now the question is okay well how do I know
the address I’ve never been there well click right over the right click over
the building and click where it says what’s here click on that oh ho look at
that’s 504 with wood rough place West Drive Indianapolis Indiana right so I
know the address now right ok there it is boom might do a little Street View as
well see what it looks like cuz I again I’ve never been in this place so I I
cannot be biased it appears that there’s oh I see ok got it
that’s why it looks different ok so I was looking at the side of the building
instead of originally how I was the connect ok all right terrible neighborhood again I don’t know
this area so for those who are from Indianapolis
you might be thinking yeah this guy has no idea what he’s saying well yeah
because I don’t know this area and I’m looking at it as if I’m brand new to the
market but honestly this building doesn’t look too bad it’s you know brick
I can see there’s been some tough pointing done right and this was
captured in October 2017 so last year and it’s got a parking on the back nice
nice okay cool so here’s what I’m gonna do
guys I know where this is I know the really I just at least the address is
here’s what I do I want to find out who the owner is I want to make a contact of
the owner now we’re looking for off-market deals and this may not be
this may not turn into a deal right the owner just just might as well say I’m
not interested right they may give us a cold shoulder so this is just about any
like a marketing where in the beginning you’re gonna do a lot of hustling you
did a lot of work so let’s go and copy down the address okay there you go
control C which is copy for those tow know what that is there you go copy and
to do to find out who owns this public records says it all right so if we want
to find out who owns this baby we’re gonna go into the tax assessment so
county tax assessor sites so in Annapolis I’m gonna first find out what
county it is Indianapolis County there we go so it’s its Marion County wow it’s
pretty square so we’re gonna go to Marion County tax assessor there we go and go in dive in boom again
this is public record so I’m not doing anything fishy guys so one of the things
that we want to do is I want to I want to go into more the tax Treasury records
so let me see if I can do this and again I don’t do this a lot in Annapolis
search by address boom boom boom there you go so hit no results so what
we’re gonna do is we’re gonna try that there it is so if you guys are having a
hard time looking for or searching by address and nothing’s popping up it’s
because you added a little too much data so what you want to do is cut back right
and just leave the the street street name and street number so here we have
it right there we go final four would replace West Drive it’s owned by mr.
John Simmons right now again on the record we’re not exposing John here okay
he should have known better to put this on a trust if you wanted some privacy
right so we’re gonna generate the record card hey oh I don’t see if we do this so
it’s I mean having oh there it is okay so I have to download it got it kiss
it’s not a browser view somebody obvious I’ll download it okay here we go so this
is what the owner is seeing I believe if I can predict this right this is what
the tax though is so come on now yep there you go so this is what the owner
gets every year there we go John B Simmons and here’s all the
information okay now some of these information is gonna be you know it’s
gonna be important especially if you’re doing your due diligence but I don’t
need it right now what I really want is I need to know the sellers information
it’s all looking for it so the rest of the information can be useful and it
will be for sure in your due diligence period but what I’m really after is this
right mr. John B Simmons so I might go and look for the tax by the tax Treasury
so let’s this Marion County Tax treasurer there
we go so we’re gonna look going here a different Department of write the
Marion County so we can look at property taxes again I’m assuming the role of a
beginner so let’s see so obviously if you guys are from Marion County but you
guys may have done this thousands of times but I’m I’m assuming it all wrong
okay so I found the the view payer view bills which should give me the address
of the the person perfect there we go may have found something
so that was Woodruff place out here do the CAPTCHA okay oh we
could have done through owner’s name instead of the property street address
okay so we’re here all right so just go run with this okay so after a couple
minutes of waiting we’re finally here and we got the enquiries as you can see
there’s a lot of entries so there’s 300 entries and I’m sure it’s more than that
so what we’re gonna do and what this allows us to do is just hit property
addresses and we have it in order so let me see if I can find this baby which is
504 Woodruff let’s keep on going 0:01 so I’m gonna keep going and I mean
you would imagine this would be much easier right is I mean so alright we’re
getting close by 20
– 509 wow that’s interesting 503 and 505 so 504 is missing we have a ghost
property interesting hold on so let’s let’s see I might be wrong as far as okay so
5:04 does not exist maybe because let’s see if I can do this okay so it’s clear
that this guy it’s got one address now sometimes it can have multiple addresses
and if that’s the case and it’s probably a condo condos will obviously have
multiple addresses or multiple unit number but in this case I’m seeing I’m
seeing just one address and things like five oh five or nine is missing or 504
is missing so I am not sure of what is going on so yeah it’s it’s missing goes
to 509 502 503 504 505 for you guys obviously this isn’t telling us maybe
John Simmons living living him which I don’t know if that’s the case but let’s
go and look for a different property okay but you guys might already be
getting the idea here um that you look for the refine and if it looks like a
multi-family and you can confirm that it is alright you know you got yourself a
database without you even have to go out the door of your house right this is a
berry except you know quote-unquote lazy way of doing it but it is very effective
and it’s time time effective sure so here’s some couple of part of buildings
yeah what appears to be okay so senior community so obviously I had to do get
to take a look very closely but here’s something I think could be a potential
candidate let me go ahead and drop my okay yep
so we got a couple part buildings now not the best shape in the world but hey
if the figures work why not right so 202 for East 25th Street okay that’s what
we’re looking at so let’s see who owns this baby here we go so we’re looking at
fifth streets 202 for 25th Street so we’re gonna go ahead and put the CAPTCHA
in there and now we wait so obviously we can
always go back we can go into the the Assessor version of this right the
parcel numbers but let’s go and give it away
so you guys can see that actually I ended up finding this other site that
seems to be a little more easier and funny loaded finally waited but here if
we’re going to look at this but if you can’t find anything like this will
definitely go and look at this cuz it looks like this is the new government
government page apparently so we’re looking at 202 for
East so we may have to do a lot of searching here as well so you guys can
see here that to get to 2 or 2 for 2 or 2 for East and I’m not sure if you’re
gonna get much luck in this either yeah it’s it’s going up and uh oh
all that no yeah so this is obviously not the best you know organized thing in
the world as you guys can see here it’s just going off of everywhere so not the
biggest fan not the biggest fan of the way that this is this is structured so
what we’re gonna do I’m just gonna go and mess with this here search yeah this this seems better so I’m gonna
actually do control fine I can do that two and two four it’s not in this page
so we’re gonna go next to it to four in here maybe not okay so none of these have two two fours and go back to you so I’m gonna go back to looking at
proper cards just this is what we’ve seen earlier if you guys remember so
let’s go ahead and hand hit there we go so it’s actually owned by an LLC which
is good I actually like properties that are owned by LLC and I’ll show you why
as to why I like them better so here we go we got the property cards and they’re
this car carving in scar minions LLC so here’s what we do with the LLC name
because for right now all we want to do is contact the owner so we’re gonna go
ahead and actually do a indiana LLC lookup now let’s see you look up and
we’re gonna go ahead and hit yeah i’ve been i’ve been on this site before so
i’m gonna click on that and we’re gonna go ahead and search the LLC name
carbanions LLC and of course there you got to capture thing going so i gotta
click on capture ed search and we should have anyway there y’all boom so they’re
actually out of Illinois which is quite interesting or actually Indiana so there
it is they’ve owned that they have this LLC since 2008 so they’ve they’ve been
have been the game for a while and here’s the individual Paul or Watson is
that is a person who is the the owner of the LLC which obviously is all is the
owner of the property so what’s really cool is that you have an address and a
person’s name to which you can go and start sending out a letter now with the
letter I’ll show you guys how to do this in a very systematic format is you take
the name you copy it and put it in a spreadsheet ok and what I want you guys
to do is is separate the first name and the last name okay and go ahead
write the address down of the mailing address and what you also want to do is
you want to break this down to into state city zip code all of that now you
don’t have to do USA cuz you know that’s kind of apply so here it is and actually
add another roll above so owner first name I’m gonna do owner last name
mailing address mailing city mailing State mailing zip now those labels are
gonna be super important I share exactly why and okay so we got their info we got
that as your business address let me see if one second if I can verify something
okay sometimes you can google them and see if they have you know if they’re
public if they are great then you can contact them so here it is you got their
mailing address and you also have their the address for the property so we’re
gonna do property address it’s just what we’re interested in boom property city
which I know is Indianapolis same thing here this property state and property
zip so all right by the way this is Google
sheets so this is absolutely free if you don’t have Microsoft Office guys if
you’re using Gmail you know Google Apps comes in it’s free doesn’t cost anything
so there we go make it this make this a little bigger so here we have the data
right so the owner first name last name mailing address all public records I’m
not sharing something that can’t be found anywhere else right so here it is
so here’s what I’m gonna do okay and this is a super important now this is
where you know I’m going to take back with take that back with the Microsoft
Office but you can go to the library and dig out out Microsoft Office so you need
Microsoft Office for this one so I sorry guys I’ll I forgive me
so we got the data right here and go and download this as as an excel file okay
I’m just gonna throw in the desktop okay and what we’re gonna do is I’m going to
open up word there you go and we’re gonna go ahead
and then we’re gonna go ahead and we’re gonna do is go ahead and write a letter
and before we do that we’re gonna go ahead and click on mailing and select
recipients use existing list so the list that I that we downloaded guess what
comes from the excel sheet right so obviously the the proper way the more
effective and efficient way to do this is if you have a say twenty twenty eight
enquiries write list of twenty property owners that will be more effective so
I’m just giving you more of an example you know for sake of time so here’s a
non-title shift spreadsheet there we go and what was really cool and some of you
guys may already know this cuz you guys went through business you know classes
for those who haven’t here it is so we’re gonna do is going to insert merge
field on our first name on our last name now this is super useful if you’re
dealing with twenty different names you don’t wanna have to write twenty
different letters that will be lots of time you’re gonna it’s fine
so owner first name or last name mailing address city so what this is doing is in
place of this these codes that you’re seeing it’s gonna go and merge those
data for you so that you don’t have to write twenty different letters if you’re
dealing with twenty different owners okay so the preview results boom look at
that you see it goes right in there right and then I’m gonna make slow
prettier there you go and then go and put you know just as any
professional actually you want this first so I’m gonna do Sam Kwok where I
can put my LLC in there okay X Y Z you know I’m gonna do I don’t want you guys
know where I live okay Main Street Chicago Illinois there we go and then
going around your letter so dear again insert first name my name is Sam Kwok
I’m a real estate investor in the area I am writing to you to ask if you would be
interested in selling your property , and we’re gonna go and insert the
property address right there so that’s the property that we’re interested in
looking at and seeing if they’re interested in selling that property
right there we go I’m writing to you to ask if you would be interested in
selling your property right I may be able to help you potentially double your
your net now for those who are wondering why am I saying that can i really help
that person double their net yes I can I have a way there’s a strategy now
obviously you guys aren’t gonna write that down if you don’t know how my
students obviously for those are my trainees guys know exactly why I’m
writing that down so if you guys are interested in that I’m gonna go ahead
and leave that in the link this link description below if you guys are
interested in being one of our trainees and I’ll show exactly what I do I I just
I put that in and I actually help people pick up walk away with double internet
so here we go if you are interested in selling your property please give me a
call or email me at and go and put your email right XS x X Gmail comm and I’ve
just provide a phone number all right sincerely whatever your name is
alright same quacks so here we have pretty polish flutters right so what you
can do is you can go ahead and don’t go to click on prints on the upper right
hand corner what you’re gonna do is go to mailing and finish your merge and
then click on print documents that way if you have 20 owners on the list you’ll
be able to print 20 letters and each letter is gonna have all the data that
you’ve selected through the excel sheet pretty cool right so this is basic merge
this is virtually free if you don’t have Microsoft Office you can go to do this
in your local library fairly easy to do so go ahead and click
on print documents print everything now as far as the envelope I encourage you
guys to handwrite the envelope the reason being is that we want the seller
the the owner opening the envelope in the first place if it’s printed
professionally it’s more than likely that’s gonna go right into the trash can
so we obviously don’t want that so handwrite the envelopes if you don’t
want to do it have a family member if you have kids pay them to write it if
they have good handwriting that is I don’t want a four year old writing the
envelopes for you obviously so 10 write the envelopes because you want to make
sure that they open the letter if you want to make this even more effective
buy one of those gift card envelopes with colors like blue green or red and
actually handwrite those because they will be open and you you’ll notice how
effective those are if you want to increase your effectiveness
now obviously you have to pay postage which is 49 cents hence why I told you
guys in the beginning of this video it’s gonna cost you less than a dollar per
lead if you’re if that’s what if that’s your budget so if you’re doing 10 pleads
that that’s gonna cost you four dollars and ninety cents I mean if we’re gonna
really factor in paper ink you know all that I mean it’s gonna come down to five
bucks for 20 people that are gonna reach out to so based on my math and based on
what I’ve done in my track record you see every twenty to thirty direct
letters I send I usually get one coming back that says yeah I’m interested
so obviously this works it’s all about numbers and and hitting up the right
person really you don’t want to hit up everybody because you’re gonna waste a
lot of money on marketing but if you hit up hit up that certain people that you
want to target you’re gonna have success because you’re gonna have the results I
really want you’re not we start time on results I don’t why
you’re gonna spend time on the leads how you want to work with that you want to
buy properties with so here it is guys um so from the very beginning right
using Google Maps very archaic way very easy cheap you’re not paying for
database or anything like that all you’re doing is you’re scanning around
looking for rough lines to see if there any multi families in your area part of
buildings finding out what the addresses of that
property using that address to going to to go over to your county tax records
and tax assessor records and one thing that I’ll give you a disclaimer certain
states may not allow this certain states it’s not illegal to do this but certain
states won’t disclose certain information to you so some of you guys
may have a hard time doing this but if you guys can figure out a way a
different variation creative way to do this then yeah I think you guys are
gonna be coming at the top so from there we’re gonna look for who the owner is
with their addresses and then from there we send a letter using the method that
I’ve showed you which is very effective very efficient this shingle this should
cost you less than five dollars to send out twenty letters very effective so
guys I hope this helped and this is what exactly this is this step this right
here is literally the duplicate step of what I’ve done early on before I had
hundreds of dollars a marketing budget to spend on postcards right all those
things so guys utilize this tech I hope that you guys
took a lot of notes if you guys need a rewind pause rewatch you guys are more
than welcome and do that so again if you guys are interested in more info more
materials go and look down and in the link description box below because I got
a lot of goodies in there they can check out and download take advantage of all
absolutely for free it’s my gift to you guys you guys can download and have it
so guys I hope this helped and I might do another video just like this to show
you how to find deals in a different variation if you guys are working with
more budget I’ll show you how to properly use that budget so that you’re
not wasting money on you know silly marketing tactics that aren’t gonna
aren’t gonna work anyways so here it is guys cheapest way to look for off-market
apartment deals again if you guys have any questions gonna leave them down
below and I’ll be more than happy to answer those questions for you
all right guys take care well hello there you made it to the end of this
video congratulations and that probably means that you liked our video and you
loved what we did so be sure if you want to get more information more YouTube
videos from us about real estate investing be sure to subscribe to our
YouTube channel and hit the bio icon to make sure that you get notifications on
our future videos about real estate investing

How Does Shorting a Stock Work? And How is it Different than Buying Stock?


Dylan Lewis: Hi, I’m fool.com editor
Dylan Lewis, and on this episode of FAQ, we’re going to go through the long
and short of shorting stocks. When you buy a stock, you’re hoping that the
value will go up over time. When you’re shorting a stock, you’re expecting the opposite,
that the value of the company will go down in the future. Buying a stock is simple. You have
money in your account, you buy it, it’s yours. Shorting is a little more complicated.
When you’re short, you actually borrow the shares via your brokerage, and then immediately sell
them at market price. The proceeds from the sale get deposited into your account,
and you have an open short position. To close this position, you have to go out and buy
shares and return the same number of shares to the person you borrowed them from. 
A little example. You borrow one share at $10 and sell it. The $10 is deposited into
your margin account. Let’s walk through two different scenarios one month later. Shares
are at $7. You buy a share and return it to your brokerage and pocket the $3. Situation
two: shares are at $13. You’ll probably get a call from your brokerage asking you to put
more money in your margin account to cover the losses. You can either commit to the position
and put that money there or buy shares at market price, close out
the position, and eat the $3 loss. Shorting is a lot riskier than buying stocks,
and the main reason for that: the upside and downside are flipped. When you own a stock,
the worst case scenario is that you lose all of your money. In the example before,
you bought it for $10, the business fails, and shares go to $0, you lose your $10.
But on the flip side, if the business does well over time, the stock could double or triple, earning
you more than you originally invested. When you’re short, it’s the opposite. The most
you can gain is 100% of your money back, but you could lose more than you originally invested
because there’s no theoretical limit on the price of a stock. Say you were short,
and the stock tripled. You gained $10 by selling it after you borrowed it, but you now have
to go out there and buy it back for $30, meaning that you’re taking a $20 loss.
There are some other downsides to being short. You have to pay to watch your thesis
play out. Generally, there is a stock loan fee associated with shorting. It’s stated as a
percentage and you’re basically paying it daily, so every day that you have the
position open, it eats into your returns. You have massive downside with big earnings
surprises, M&A activity, or black swan type of events like Brexit and the U.S. election
results as well. When unexpected events like those happen, shares can spike as people that
are short panic to cover their positions, and this is called a short squeeze.
With shorting, you’re also betting against the general motion of the market. Historically,
the U.S. stock market has returned 6% to 7% annualized. Going short is a bet
against that general growth trend. Lastly, you’re on the hook for
dividends paid out while the shares are on loan. As a market tool, shorting is a good thing.
Allowing people to bet against companies creates an incentive for people to identify fraud,
and the shorts can also be a good check on irrational exuberance. But generally,
the average investor should stay away from shorting. It’s risky and complicated. Hopefully this
video made it a little less complicated. Thanks for watching, guys! If you enjoyed
this video, we have plenty more like it coming. Hit subscribe down in the bottom right and
give us a thumbs up. If you have any questions on things I hit in the video, drop them in
the comments section below. We love getting ideas for future episodes!

Betty Liu explains financial market impacts from global unrest | Money in :60 | GZERO Media


I’m Betty Liu, with your Money In 60 Seconds. Let’s get started. So geopolitical events do affect financial markets. And these events are everything from wars, civil unrest, natural disaster, terrorism. During those times, investors flock to safe haven assets. So, that can be gold, it can be defensive stocks that generally have stable earnings and dividends. As you saw back in 9/11, investors flocked to safe haven assets. So, Iran is in a region that accounts for about a third of the world’s oil. So, what you saw was oil prices spike to a seven year high to seventy dollars a barrel. There was concern at that time that basically, oil production would be disrupted. And so that’s why you saw investors flock to safe haven assets. That’s your Money In 60 Seconds.

The Budget That Pays You First | Reverse Budgeting For Beginners


Conventional wisdom says that if you’re trying
to save money you need to first limit what you spend in order to have something left
over to save. This is how most budget methods operate. They have you track all of your expenses and
figure out how much you need to put towards each category and then whatever is left over
after expenses is what you save. However not every budgeting method works like
that, and today we’re going to cover one of those budgets. Hey everyone Daniel here and welcome to Next
Level Life a channel where you can learn about Investing, debt, retirement, and many other
general financial education videos because the school’s aren’t going to do it for us. So if any of those topics sound interesting
to you or if you want to learn how to better handle your money and have more financial
freedom be sure to hit that subscribe button and the bell next to my name to be notified
every time I upload a video. And if you want to further support the growth
of this channel you can check out some of the links I’ve left down in the description
below which includes a 30-day free trial of Audible and a list of some books on money
I’d recommend checking out, or you can share this video with a friend, and leave a comment
below letting me know what topics you’d like me to cover in future videos. Today as you can no doubt tell from the title
we’re going to be discussing the reverse budget also sometimes known as the pay yourself first
budget. You’ll notice some similarities between this
budgeting method and some of the other ones I’ve covered on this channel because the principles
behind it are similar. The idea behind the reverse budget is to figure
out what you’re saving for first, make your savings automatic, and then blow the rest
that’s left over on whatever you feel like guilt free. This makes it a much more hands-off budget
than most other methods. And in today’s video, I’m going to walk you
through the three steps to set up a reverse budget as well as talk about some things to
keep in mind if you decide to use this budgeting method. Let’s get started. STEPS:
So the three steps to set up a reverse budget are as follows: first figure out what you’re
saving for, second figure out how much you need to save to meet your goals and then make
those savings automatic, and third spend whatever you have left over in your checking account
without feeling any guilt. Studies have repeatedly shown that saving
just for the sake of saving almost never works because without a purpose in mind for your
savings it’s very easy to justify using that money for something else. After all, as far as you knew at the time
it wasn’t really going towards anything more than a vague idea of a rainy day or something
similar. That is why figuring out what you’re saving for is
so important. You need that purpose. and you don’t want to just have titles such
as travel, that’s certainly better than nothing don’t get me wrong but it doesn’t really paint
a vivid picture. You want a dream and high-definition like
Chris Hogan always talks about. Where are some of the places you would want
to travel to? What experiences would you want to have in
those places? How much would doing that actually cost? The great thing about asking these questions
is not only does it often times get you excited about the possibility of doing what you’re
thinking about but it also gets you to start researching online and trying to find ways
to do what you want for less. You’d be amazed how much money you can save
especially on something like traveling the world if you do some research beforehand! There are tons of blogs out there that are
dedicated to just giving you ideas on how to save money when traveling and I can say
from personal experience they are very, very helpful! And for goodness sakes don’t just estimate
on that last question! I know so many people that have tried to estimate
how much their dream would actually cost and basically talk themselves out of trying to
reach their dream right there on the spot because they estimated without doing any research
and their estimate was way too high. Trust me do your due diligence, do your research,
you won’t regret it. I would also recommend breaking your goals
down into smaller bite-sized chunks if possible. In my experience doing this generally makes
the goals, especially the longer-term ones, seem less overwhelming. And at least for me that makes it a lot easier
to actually take action and start tackling them. One idea would be to break them down into
short-term, intermediate, and long-term goals. Short-term goals would be anything you want
to do in the next five years whether that be traveling to another country, buying a
new car, or whatever floats your boat so long as it’s within the next 5 years. Intermediate would be maybe 5 to 15 years
and longer-term goals will be anything over 15 years. This is obviously just one example to help
give you an idea what I’m talking about you can change the time periods to whatever you
want. Or even use an entirely different system that
would work better for you. The point is once you have those goals written
down it becomes much easier to figure out how much you need to save per month to be
able to achieve that goal when the time comes. Once you are satisfied with your list you
can automate your savings to make sure that you hit your goals. After that, you can spend whatever is left
over without worrying because you know you already have your future covered. As I said that’s kind of the upside to using
the reverse budget is it’s very low maintenance compared to some of the other budgeting methods
that I’ve covered such as the zero-based budgeting method. Since the reverse budget is mostly automatic
(or at least the important parts of the budget are automatic I.e. your savings), there shouldn’t
need to be a whole lot more than tweaks along the way as your priorities change. As you can tell the theory is very similar
to the automatic budget I covered earlier on this channel. The downside or possible downside to using
this budget similar to other more automated budgets that I’ve covered in the past is you
can either save too little or too much and put yourself in a position where you either
don’t have enough money when you reach retirement or that you aren’t able to meet your bills
in the present. Obviously, this is a little bit of a trial-and-error
situation if you’re just starting to use this budget and there’s nothing wrong with being
conservative when you’re starting out and then increasing the amount that you’re saving
to meet your goals as you go along. So that’s my big tip if you’re feeling a little
bit nervous about using this budget but want to give it a try. So that’s how the reverse budget works. As always if there are any other types of
budgets that you want me to cover let me know in the comments below. But that’ll do it for me today once again
if you enjoyed this video be sure to subscribe and hit that Bell next to my name so that
you’ll be notified of all my future uploads. I generally upload every single Monday, and
if you have a friend that would be interested in this kind of content be sure to share it
with them and let’s really get this information out there and start our own Financial revolution.

How Buybacks Have Warped the Stock Market & Boeing (w/ Dr. William Lazonick)


MAX WIETHE: Hello, everybody. Welcome to Real Vision’s Interviews. I’m Max Wiethe, sitting down with Dr. Bill
Lazonick of the Academic-Industry Research Network. As well, Bill has been an economics professor
at many different academic institutions over the course of his career. We’re here today to talk about your recent
book that you’re publishing, Predatory Value Extraction, and to understand how stock buybacks
and the warping of the stock market has really disrupted what is actually driving stock gains
over the past three to four decades. Thanks for coming in today, Bill. WILLIAM LAZONICK: Okay. My pleasure. MAX WIETHE: Why don’t we just start out with
what you do at this? It’s a nonprofit organization, which focuses
mostly on economic research, if I’m not mistaken. WILLIAM LAZONICK: Yeah. Basically, I’ve had a career as an academic,
been a professor at various universities, as you mentioned, and I set this nonprofit
up, this 501(c)(3) nonprofit up almost 10 years ago, to do research outside the university
for a variety of reasons, and I’ve been working with a number of people, now it’s about 15
people who I’m working with regularly who are in various parts of the world who have
worked with me, some for as long as 20 years to do research on how companies become innovative,
how they create products that people want to buy at prices that they are willing to
pay, and can compete on national and global markets. What happens once they actually become successful
to the profits that they make, so the profits are really outcome of some value creation
process. That makes these companies successful, which
I can get into how that works. Basically, once they are successful, there
is a huge pot of gold there in these companies, and if someone can say, that’s mine, and take
that money, they can become very rich. If it’s not theirs, someone’s got to talk
about that. That’s what I do. A lot of the changes that I talk about from
going from companies retaining their profits and reinvesting them in their organizations
to what I later, in the ’90s, called downsizing the companies and distributing cash to shareholders
not just as dividends, but stock buybacks, a lot of that transition took place in the
1980s when companies started articulating and imbibing this idea that company should
be run for shareholders. I was at Harvard Business School in the mid-1980s
when that ideology came in in 1984, no one was talking about that at Harvard Business
School. 1986, they were. There was an easy explanation for that. 1985, Harvard, went out of its way to hire
the guru of maximizing shareholder value, a guy named Michael Jensen. I came out of economics by that time. I had been in the Harvard Economics Department
for over a decade and a half, I was now at Harvard Business School. I saw that no, those aren’t the people are
creating value. Shareholders are just buying and selling shares
on the market. People have gone to work for these companies,
often for decades. They are the ones who create the value. We as taxpayers, have supported these companies
with the infrastructure and knowledge, we should get a decent tax rate back. This ideology is not an ideology that’s being
put forward or it’s being put forward as an ideology of value creation, but it’s actually
an ideology of value extraction. I started researching that and learning about
how that was going on and did that, within the university structure, often with collaborations
on people not just looking at the United States, but places like Japan, Korea, various countries
in Europe, then got into looking closely at China, India, and trying to understand basically,
what we’re talking about is capitalism. How countries get rich and what happens when
they get rich and whether there is a way in which we can explain, particularly what’s
going on in the United States, of this extreme concentration of income at the top and the
loss of middle class jobs, extreme income inequality. I started this organization outside the university
for various reasons. In, I think it was 2010, there is an organization
that started up which has its offices probably about a 10-minute walk from here, called the
Institute for New Economic Thinking which started it up and I’ve gotten through this
organization, the Academic-Industry Research Network. Various grants from them to do research, they’ve
been one of the one of the main funders of the research. I pulled together, this group of people, many
of them who are doing PhDs, now have academic jobs. Some of them are mid-career, who were in touch
with basically all the time. It’s almost a virtual organization but we
can write about things that have been going on historically, can write about things like,
let’s say, the Boeing crashes that have occurred more recently. We have a certain level of expertise that
I don’t think actually is things quite unique in terms of academics and really digging critically
into business and saying, not just the dark side, but the bright side. How businesses become successful. That’s what we’re mainly interested in, is
how you can understand the way the central institution in our economy, the business enterprise,
some which grow to be bigger than whole countries, small countries, how they actually can create
value, share the value with their employees, not just because they wanted to show the value
of in place, because it helps those employees get some incentives to be more productive. It’s the result of them being more productive,
how you get this positive dynamic going on in these companies, which we call retain and
reinvest and how we can all be better off as a result. Then critiquing a lot of what’s going on in
the last particularly last 30, 40 years, in people who have often very little role, if
any, to play in these companies claiming those profits of theirs, and even more being able
to lay off 5,000, 10,000 people and claim. The stock price goes up and they gain, how
that can happen. The book that just came out this past week,
which with a colleague of mine, Jang-Sup Shin, who is a professor of economics in Singapore,
he’s originally from Korea, it’s called Predatory Value Extraction as you mentioned. The subtitle summarizes the book, it’s How
the looting of the business corporation became the US norm, and how sustainable prosperity
can be restored. By sustainable prosperity, it’s a shorthand
for stable and equitable growth that we want. Growth, it’s stable employment, equitable
distribution of income, which we have neither of those. We want to get productivity growth, which
can support those things. Right now, we have sagging productivity growth
problems, real problems of many US companies competing in global competition, partly the
because of what I call the predatory value extraction, this looting of the business corporation. That has been something that we’ve been doing
a lot on this group of mine and getting a lot of visibility for that research through
various outlets because it strikes a chord with a lot of people who are saying, where’s
all this inequality coming from? MAX WIETHE: Well, that visibility, I came
across your New Yorker profile, and I got to read about some of the research you had
done and it really sounded like something that I felt would resonate with a lot of our
viewers here at Real Vision. We’ve covered buybacks, and we’re very interested
in what’s driving the stock market. You mentioned briefly before that you’re not
just looking at the bad, looking at the predatory value extraction, you are also looking at
what makes these companies good. That’s really how you started out your book,
was looking at the theory of the innovative enterprise, as you call it. I think that’s a great place for us to start. WILLIAM LAZONICK: Well, yeah. Trying to summarize in a 30-second something,
that’s going to be another book because there actually is a real problem if you’re trained
as an economist as I was. I’m a PhD economist, got my PhD at Harvard
early 1970s. Things have basically in this regard have
gotten worse since then. Economists generally, PhD economists, do not
understand how business enterprise operates. They see the states, they see the markets
and in fact, what is being taught in introductory economics courses every year and it’s been
taught to millions and millions of people since a guy named Paul Samuelson wrote his
introductory textbook in 1948 is– and I’m not going to get into this other than just
state it because as I stated, it’ll sound totally absurd– it’s actually being taught
that the most unproductive possible firm is the foundation of the most efficient economy. They call that perfect competition, of course,
then they say, well, that doesn’t really exist. Then the whole mindset of economists is that
oh, competition is imperfect so we have to move through policy, through business, what
business does and make it more perfect, so that we get rid of monopolies that we just
have lots of competitors out there who are all competing the same way, producing commodities. Now, if we actually had that state of affairs,
we’d be living in poverty. The reality is that well, first of all, that
building even a small business enterprise is in many ways, a heroic feat. I would tell students when I’m teaching students
if you can start a company and can keep people productively employed, pay them a decent wage,
let’s say for 10 years, that must mean you have something that people is buying, some
product that people out there are buying. You’re probably going to do quite well, you’re
going to do quite well for you, and they’re going to what? Profitable employees. How do you get to that point that actually
you can be around for 10 years? You can’t do it by doing what everybody else
is doing. You can’t do it just by saying, well, here
with the market says you should do in terms of technology prices, you have to make an
investment in learning. Now, obviously, in some companies that we
can see that on their financial statements, it’s called R&D. That’s not the only type of learning that
goes on. In fact, if you take the S&P 500 and you look
at how many of those companies is one of the 500 largest companies United States, only
about 210 of those do any R&D at all. About I think it’s something like 38 of those
companies do about 75% of all the R&Ds so it’s some pharma companies, aerospace companies
like Boeing, companies like technology like Apple, etc., but any organization, including
your little organization here, people are learning how to make the product, how to do
it better. If you’re going to survive, it’s because you
have might be a neat short, might be a mass production market, but you’re going to be
able to produce a higher quality product and you’re going to get a larger market share,
you’re going to then cover the costs of the people and which are often the fixed costs
that you’re investing in, not just buildings and get up competitive advantage. That’s what I basically study how companies
do that. It’s when you’re talking about companies that
grow to be 10,000, 20,000, 30,000, hundred thousand people, you’re talking about credibly
complex social organizations. When they work well, when they’re actually
over a sustained period of time, generating a high quality product that they can get economies
of scale and get the low unit costs, even as they’re paying their employees more, and
they’re giving them employment stability, you’re getting productivity growth, it has
a big impact on the economy, particularly if lots of companies are doing that. If we look at a time historically, when American
companies were really very good at this value creation, innovative enterprise, it was a
fast forward two decades, when there was much more set of norms that prevailed that once
you hired people, you kept them employed over their career, it wasn’t a contract, but it
was basically in practice, you could see it by defined benefit pensions that were not
partible that had to do with how long you stayed with the company. You could see it at the blue collar level
with collective bargaining and sometimes enforced by unions but this was so that you would get
a labor force that showed up every day and cooperated in mass production, but you also
saw it at the white collar level without any unions, that companies crane people, and they
want to retain them. We had that system, which actually made the
US the world leader in the international economy, the US got the challenge by that in the early
19, late in the ’70s and ’80s by the Japanese, but the Japanese actually did that, perfected
that system. Now, that system doesn’t work quite as well
anymore in any case, because we live in a much more open system environment, much more
global value chains. China’s not really competing with the same
thing as the Japanese system but this way in which you understand innovative enterprise,
not just the level of the enterprise, but the whole ecosystem that supports it is changing
all the time. We’re talking about a moving target. Just that part of the research and that part
of the documentation, that part of the argument that that’s a real challenge for anybody who
is looking at these things seriously, and we look at them seriously because we’re academics. We looked at seriously, as I do, coming out
of a training in economics where I know that most economists actually don’t have the slightest
idea how to do that research or were doing because they think the market should just
be allocating resources. I just thought at this point that just by
making one more comment, because one of the markets that of course is looked to allocate
resources to alternative uses, is a stock market. The fact is that historically the stock market,
that’s not been the role of the stock market in United States. The stock market has been the way for private
firms to allow their owner entrepreneurs or their venture backers, capitalists backers
or private equity backers, to exit from having the money tied up in the company. You do that by going public on the stock exchange. If the stock exchange is liquid enough, then
you have no problem capitalizing your investments, and that’s the main function of the stock
market. The other side of that, historically, is that
you can then use the stock markets to separate ownership control, you can break the link
between the original owners who build up a business and the ongoing management of the
business. Here, I’m very highly influenced by a business
historian who I got to know after I had done my PhD, he was at Harvard Business School,
named Alfred Chandler wrote a book called The Visible Hand, The Manager Revolution in
America Business, which was published in 1977, won the Pulitzer Prize in history, and really
ended at 1920 as a historical book and said, by 1920, or in the 1920s, you had people who
were not the founders of business running companies, they were managers. What made those companies strong is that those
people came up through the business through the stock market, the old owner entrepreneurs
got out of the way and now, you could move up to the company, to the top of the company
being an employee, which is basically this situation today, except now some companies
go public much quicker and the founder stay around. Basically, the stock market’s rule is really
fundamentally historically to separate ownership control, not to fund company. That’s one of the implications, or big implication
of the research we’ve done. MAX WIETHE: There was one exception that you
mentioned in your book, which I thought was just too interesting not to bring up here,
just in that late ’20s, where the companies that realized that the stock market had gone
too far, actually sold stock and it was one of the only occurrences ever that a company
had a secondary issue of stock on the market and they had a cash surplus that they were
able to weather the Great Depression with and it actually worked, but since then, you
don’t see it at all. WILLIAM LAZONICK: Well, you see it– because
we don’t get into much of the details of some of the research we do, you see them in biotech. Certainly companies are going public on the
stock market around where I live in Cambridge, Massachusetts. There’s a lot of them, we call them product
list IPOs. They do an IPO. They’re a research entity. They might have some investment from Big Pharma. What happens there is people make lots of
money in those companies they want, they never produce a product. It’s not that you can’t use the stock market
that way, although, and we saw it also in the internet boom of the late ’90s, the dot-coms,
often it’s very speculative. If companies are sound companies, they can
generally grow organically, not be exposed to the stock market until they actually have
that growth secured through their own profits and then can control their own growth because
they have as long as they can control the profits and reinvest them a significant amount. They can then leverage that with debt, by
the way, the world– I won’t get into this, but it also totally says throw up my Danny
Miller because debt and equity are not substitutes, debt is a compliment to the equity that you
retain in a company. What you’re referring to there is probably
the biggest period or a period of ’28, ’29 when companies actually sold shares on the
market is that all the speculators were out there, the companies that had become dominant
on the New York Stock Exchange in the 1920s now had a lot of profits. They were paying their workers better, but
they were just awash with cash. They actually started lending that money out
on the New York call market for 10% to 15% for people by their stocks on margin speculating
up, and then they sold the shares at the higher prices and paid off their debt. The Japanese did the same thing in the 1980s. It’s financial engineering, but it’s actually
to solidify the corporate Treasury to pay down debt or to just put money in the corporate
Treasury which then became very useful once you get slow demand in the Great Depression,
just to say right now, we have an article– hadn’t been published yet but it’s on debt
finance buybacks is just the opposite. You’re actually using debt to finance buybacks
that don’t– so now, not only do you not have productive investment that is going to generate
returns related to the buybacks, but you have debt on your books that you have to pay off. There was actually a very good article in
CNBC yesterday on Oracle and Larry Ellison and them getting into trouble. Actually, it’s an article that fits everything
we say about companies getting into trouble by just trying to boost their stock price
through buybacks and not investing in the products of the future. MAX WIETHE: Well, you mentioned a period of
time when we did have innovative enterprise, which was that that post-World War II era,
the decades following that we as America, we grew at an astronomical rate. What was different about that time that allowed
that innovation to occur that we haven’t seen today? WILLIAM LAZONICK: Yeah, well, so first of
all, I think it was the financial sector was highly regulated. They used to talk about 3-6-3 banking, 3%
was what you got if you put your money in the bank and let that out to its prime customers,
corporations at 6% and the other 3% was when the time of day when the bankers went to play
golf. That’s actually what prevailed into the 1970s. The ’70s changed a lot of this in terms of
the financial sector. In terms of the companies themselves, there
was a norm that set in that once you employed people, if you just started laying those people
off, you’re not going to get good people to join your company, that you are building this
company by investing a lot of vertically integrated activities. It could take decades to build a company you
would invest in research, if you’re a research oriented company, not just in research and
development of corporate research labs, very long term research that could result in products
in the future, but no one really knew when they were doing the research, even what closed
products will result in. In companies more generally, you just treated
your workers better because you wanted those workers to show up every day, give the customers
good service, and that became the norm. Companies that didn’t do that are not company
people would want to work for. Unfortunately, that was mainly a white man’s
world. Even up until the Civil Rights Act, companies
had marriage bars where they could tell women to leave quite legally from the company if
they got married. Harvard Business School didn’t admit women
to the MBA until 1964 when they saw the writing on the wall with the Civil Rights Act, that’s
now over 50 years old but that’s not that long ago. Also what– we have a book coming out on what’s
happened to African-American employment over the last 50 years. One of the things that happened in the 1960s
and 1970s, there’s still a big demand for blue collar labor in the US. This is just before the Japanese impact started
to occur. There’s expansion, particularly the automobile
industry of blue collar work. If you could get a semi-skilled blue collar
job, that meant you’re on the assembly line and you’re represented by union, you had very
good pay. Well, whites were the children of blue collar
whites were moving, going to university, often free tuition, or very low tuition and moving
into white collar work. Blacks who had been, of course, in a less
privileged position in the United States or much more disadvantaged position, there was
a big push helped by also by the setting up of Equal Employment Opportunity Commission,
to move those people up in the companies from unskilled jobs to semi-skilled jobs. That started to work. Unfortunately, I think one of the reasons
why the system was not maintained in the 1980s was because, in fact, as those jobs get challenged,
I think of it had been more still a white male society, the companies might have– there
might have been more of a consensus, but we need to retain and reinvest. It fed into it. Well, no, we can buy take responsibility for
people we don’t care about. I think in the end, we can see what’s happened
to the white blue collar worker now downward mobility, lower life expectancy, opioid crisis. It hurt everybody, but I think that that fed
into it. What I’m trying to get at here is there are
lot of social influences on what companies do and how they act and what the norms are. Those norms changed. Then they changed dramatically in the 1980s. As I said, what I saw at Harvard Business
School that Harvard Business School went away from this notion, which they really had retained
and reinvested and call it that, to yeah, it’s good to downsize and distribute. That’s what they started teaching the students. That’s what the students started getting jobs
on Wall Street and be able to make a lot of money by participating in that, as if it’s
all about value creation. That’s when things went from really changed. That’s when you went from having stable and
equitable growth coming out of the practice of these companies, these companies to contributing
to unstable employment in equitable incomes, and actually in the end, in many industries,
say in productivity growth, loss of international competitiveness. MAX WIETHE: You talked about the maximizing
shareholder value, but also it was coupled with changing regulations. You really think it was more of the changing
regulations or this new economic theory which really was the driver, or obviously, it was
a combination of both, but they’re both major factors. WILLIAM LAZONICK: Yeah. There was a lot of changes in the institutional
environment which are often regulatory that fed into this. The creation of NASDAQ in 1971, out of basically
the National Association of Security Dealers automated system, you had all these security
dealers around the country trying to sell small shares and small companies. There was no national market nor liquid market. The Security Exchange Commission in 1963 had
a special study of the potential of companies being able to go public more quickly if there
was a national market for more speculative companies. The impetus to that was that there were a
number of companies which were called glamour stocks, which they get on the market in the
late ’50s and ’60s coming out of military technology that started catching people’s
attention that you could use this for commercial purposes. Of course, then you had the rise of Silicon
Valley. Silicon Valley, actually got named that name
the same year that NASDAQ was started in 1971, where you had all these things startups going
and taking a lot of the technology. They’ve been done in corporate research labs,
and developing, in this case, semiconductor chips and people leaving one company to another
and then being able to get listed on the stock market, Intel, which was founded in 1968,
was listed in 1971. By comparison, Hewlett Packard, which was
founded in 1938 in Silicon Valley, the heart of Silicon Valley was really an old economy
company right into the ’90s. The HP way was you never laid people off. That’s how you got innovation. They didn’t go public until I think it was
a 1957. I think that one of the reasons they went
public in 1957 was precisely Hewlett Packard were now looking at not just being the only
people who control that company, brought managers up. There wasn’t so much finance at that point. They were still a very careful company in
terms of growth. You started getting this market where you
could put companies on Stock Market Watch more easily. That then meant that you could get things
like the dot-com boom, you could get things like these biotech startups that I’ve talked
about. MAX WIETHE: It changed the reason that people
own stocks. Was that owning stocks now– WILLIAM LAZONICK:
Yeah. Then the other thing was that if you held
stocks in the 1970s, you had a problem because there’s no inflation. Then people started saying, and also there
was global competition. There’s a question, can you pay dividends? The stock market was not doing very well throughout
the 1970s. There was the change into fixed commissions,
which was actually forced upon the New York Stock Exchange by– in 1975 by NASDAQ, there
was very important was the Employee Retirement Income Security Act, ERISA, which was 1974. Now, that was actually impetus to that was
a bankruptcy, and a particular case, Studebaker, the auto company got bankrupt in the ’60s,
their employers were left with their defined benefit pension so there was a movement for
defined benefit pensions to have some backup by the government. That was the impetus behind it. However, you had the other side of that, how
were the fund managers in this case, mainly the companies that ran the pensions like GE’s
pension. How are they going to get enough yield to
fund the pension when you have all this inflation? There was lobbying basically to clarify under
what was called the prudent man rule, which was part of a risk of what a fund manager
could invest in without being liable for if they lost money for being too risky. On July 23rd , 1979, the Department of Labor
which was overseeing ERISA clarified that you could put a certain proportion of your
pension fund into risky assets like venture capital, and not violate the prudent man rule
and not be held liable for taking undue risk with your– MAX WIETHE: Other people’s money. WILLIAM LAZONICK: Yeah, other people. From that moment, there has never been a shortage
of money for venture capitals in the United States. It’s always been a question of what are good
companies to invest in. We always find things like the dot-com boom,
it happened actually in the mid-1980s. They call it vulture capitalism, venture capital
just setting up companies just to go public in then not being worth much. You had a lot of that going on. The problem really has not been any lack of
money. The institutions made the money flow more
easily through the system. There’s certain amount of that that you want
money to be able to flow through the system but how it flows through the system is another
question. Now on that particular issue, because what
happened at that point, buybacks we’re not being done. If you are a company, you are paying out dividends. You were– the last speech by a guy named
Harold Williams, who was the head of the SEC when Ronald Reagan got elected and then he
resigned, he had some time to go in as the chair of the SEC was to security dealers,
this was called the corporation as a continuing enterprise. This was 1981. He said, corporations are paying up too much
dividends, they have to reinvest more. That was before stock buybacks became a problem. Now, companies have been doing stock buybacks,
which is something that I spent a lot of time researching over the last decade. There’s a major regulation that actually just
led to what I call the looting of the company, company tried to do stock buybacks. Sometimes they did through tender offers,
I’m not talking about it but sometimes, they just went to the open market and did repurchases. The Security Exchange Commission, their lawyers
said well, is that manipulation of the market? It looks like manipulation of the market to
me. There was a rule proposed that would have
tried to limit– not ban them, and they were never really illegal, but limit them. It was proposed three times, but never adopted. Then once the Security Exchange Commission
changed under Reagan, they put a guy named John Schad from Wall Street as the head of
the commission. He believed in Chicago economics, efficient
markets, the more markets sloshing around through this system, the better of what as
he stills says today, capital formation. That’s not capital formation, it’s the money
sloshing around through the system. They adopted really under the radar without
public comment in 1982, in November of 1982, a rule called Rule 10 B18, which was totally
obscure until some academics written about it, but until the research that we did say
this is when you allow buybacks to occur on a massive level, and we call rule 10 B18 a
license to loot basically. It now said you can do massive amounts of
stock buybacks with a safe harbor against being charged with manipulation. Even if you exceed that safe harbor, you won’t
necessarily be charged with violation. It turns out right to this day, the Security
Exchange Commission doesn’t know whether you’re ever exceeding it because they don’t collect
the data on the days of buybacks, but some people do. Then that was a regulation which basically
created a whole new instrument, on top of dividends. Not instead of dividends, because they haven’t
been instead of dividends, but on top of dividends, our data shows this to take money out of companies,
and it’s one that’s favored by people who want to go into the company, get the stock
price up, and then cash in because if they can time the buying and selling of shares,
they can make more money than they would otherwise. In the book, we have a framework for looking
at this looting, which, so it’s the core of the book after we get through the theory of
innovative enterprise, the critique of shareholder value and ideology, the role of the stock
market, not what people think it is. We get into how is this predatory value extraction
occurring? We have a framework where we talked about
one chapter is the value extracted insiders. There are the CEOs and top executives who
are motivated by the way they’re paid, stock based pay, stock options, stock awards, which
are structured in a way as a stock price goes up, you cash in. There’s a long history of stock based pay,
it goes back really to 1950 in the United States, that we’ve gone through that history. I won’t go into it now but then we talked
about it a bit in the book, where basically it was a capital gains tax dodge up until
it was eliminated in 1976. It really came back in the 1980s. Stock based pay, actually, not because of
the large corporations, but because of Silicon Valley startups that were now using stock
not simply to separate ownership control, but also to pay people as a mode of compensation
and not just people at the top, they were paying people down through the organization
and actually, what the reason they’re often paying people in stock was because they want
to lure them away from in the ’80s and even in the ’90s, from secured employment in the
old economy companies. MAX WIETHE: Like the HPs and IBMs– WILLIAM
LAZONICK: If you think of pharma, Big Pharma, one of the reasons Big Pharma started having
problems with their corporate research labs and doing really invest original research
and new drug development was not just shareholder value ideology, but a lot of their best people
now, there was an institutional framework for startups, for products that take billions
of dollars and 10, 20 years ago through, it wasn’t really appropriate but there’s a way
of just going to a startup, getting lots of money, making a lot of money, much more money
that you can make as a research scientist in, well, in the pharma or at Lou Center,
HP or IBM, etc. These companies started themselves trying
to change to that new model of stock based pay. This then, at the old economy companies often,
when they weren’t paying stock based paid down through the organization, this then led
them to adopt that as the main way in what they were paying top executive. Then one by one, these companies changed their
own internal ideology. Later, we’re going to talk a little bit about
Boeing, but Boeing did that in 1997 when it merged with McDonnell Douglas and brought
in a lot of people who were much more imbued with shareholder value ideology as a way of
running a company than the existing management of Boeing. It changed in different ways, different places. Hewlett Packard, it lasted the old economy
model into the late 1990s. Even though Hewlett and Packard who had founded
the companies were no longer active in managing it in the 1990s, David Packard, the year before
he died, published a book called The HP Way, which said, we don’t fire people here. We keep them employed, we find other work
for you. Then at the back of the book, he had looked
at all the innovations we did over the decades with this model. That then gave it some legitimacy until they
brought in a new CEO. Her name was Carly Fiorina in 1999. She went with the flow and turned it into
IFR company, a company that’s shareholder value oriented. You had these changes going on that. If you hadn’t had that change in the regulation
at the Security Exchange Commission in 1982, well, you would have had to have at some point,
but that’s when it occurred and what happened then is that the agency itself turned from
being a regulator of the stock market, in this case to being a promoter of the stock
market. It started being promoter of the stock market
by allowing companies to do something that was contrary to the original mandate, and
supposedly, the current mandate of this SEC, and that is to eliminate fraud and manipulation
in the stock market. Open market repurchases, I would argue are
nothing but a manipulation of the market and they’re legal. Hence the license the looting, legalized looting
of business corporation and they’re massive, which I could go into. MAX WIETHE: Well, we’ll get into that with
the example of Boeing later. I think it’s a fantastic example. It’s really visceral, especially with what’s
happened recently. I wanted to get into some of the accomplices
that these value extracting insiders have you bring up to, which are the value extracting
enablers, and then also the value extracting outsiders. I think both of them are equally implicit
in this process. Why don’t we start with these enablers? WILLIAM LAZONICK: Beyond the value extracting
insiders, then the framework of the book, we then look at the enabler. We put our money into securities to a certain
extent, increasingly not as individuals but indirectly through pension mutual funds, and
they hold about 60% or 65% of all the stocks outstanding, stocks still tend to be concentrated
among the top 10% of income earners in the population, not everybody holds stock, but
a lot of our stock is controlled by pension funds and mutual funds. Let’s say the case of pension funds, I would
argue if you’re running a pension fund, just from the point of view of those 2,000, 4,000
stocks or whatever you have in your portfolio, first of all, you’re not going to know what’s
going on with those shares, you can’t possibly know. What you should want in general is a set of
rules that say okay, when companies can afford to pay dividends, they should pay dividends
and then under the rules for savings that we have, they’ll accrue tax deferred until
people want to make use of that money, pull the money out if you have a pension that’s
accumulating through dividend payments coming into the pension. We don’t want buybacks because buybacks are
people who are timing the buying and selling of shares now, and what we want is them to
pay out a reasonable amount of dividends and reinvest in the company so that if and when
we sell the shares in the company at some future date, change our portfolio, those shares
are likely to be worth more rather than less. From an individual point of view, that should
be the same. If I have hundred thousand dollars and then
putting it into the stock market, I should put it in– unless I think I have some particular
insights on when companies are manipulating the market, I should put it into dividend
stocks and I should look at companies that are reinvesting and I should have a notion
of what an innovative enterprise looks like, which I’m not going to get from studying economics
generally, but from understanding the fact historically how businesses become successful
and put it into those companies. Now we could make mistakes, but I would say
if you had a portfolio of those shares, you would do better. Now, of course, one of the reasons we don’t
do it ourselves is because we can get diversification and expertise, etc. from the fund managers,
but that’s how fund managers should be behaving. In fact, what turns them into enablers is
the fact that they’re being judged by the yields that they can get. In here, you can say quarter to quarter, I
don’t think everything is quarter to quarter, but it often is in this world. If someone else is getting a higher yield,
and you’re not getting it, you might not be the fund manager for all. Everybody is looking to get those higher yields
so they start trying to figure out where are the companies that are going to get this price
boost and they stop thinking or even trying to understand of course, because of the way
they’re trained, not just now in economics department, particularly business schools,
they’re just going to be thinking about how you diversify, get a high yield, etc. They’ll just go with the flow. They become enablers. Now, here’s again regulation that made them
more powerful enablers is that in the 1980s, there was a movement in the name of shareholder
democracy, for shareholders to not only have votes but exercise more power in companies. Now, on some level, you might think that’s
a good idea but if shareholders are just people who buy and sell shares, it’s not such a good
idea from my point of view. In fact, at the time, the push really came
not because more and more people were holding shares, but because shareholding was becoming
concentrated among a few big asset managers, which has become quite extreme now. You then have the question, well, what do
those asset managers do with the proxy votes to those shares? Now, an argument can be made that they’re
just holding the shares for you, why should they get to vote the shares? Well, it was ruled basically, yeah, they get
the vote the share, but in 2003, the SEC sanctioned a rule that says not only they vote the shares,
they have to vote the shares. That gave rise to two companies that want
to exist, that ISS, [indiscernible] shared services, the other, Glass Lewis that divide
up the market in proxy advising and have very small number of people working for them and
advising on massive numbers of proxy votes and then shareholder proposals. They then became part of a system where if
you could get them to advise in a particular way, then you could actually with a very small
percentage of the shares of a company have an outsized influence on the shares, and that’s
where the outsiders come in. They’re the shareholder activists. The one we write about in the book is Carl
Icahn has been around since the late 1970s. People like Paul Singer, Nelson Peltz, William
Ackman, there’s about a dozen of them, and I wouldn’t say in every case, they go in and
do damage. There’s a few of them who tried to get into
companies and cooperate with the companies in investing for the future, but in general,
the way they’re going to make their money is by getting them to pump money out of the
company and figure out when to sell their shares. That doesn’t mean they’re going to hold on
just for a month or two. They might hold it as we show with the case
of Icahn on Apple for 30 months and took out $2 billion in 3.6 billion in just buying shares
on the market. In that period of time, Apple did the highest
amounts of buybacks of any company in history. This was in 2014-2015 when Icahn was holding
in the shares, 45 billion in one year, 36 billion the next year. Apple actually is far outstripped that since
then. That was a game changer because now you take
an iconic company that actually, we document in the stuff we wrote when Apple had previously
gone to this shareholder value mode which was between 1985 and 1997 when Steve Jobs
wasn’t there. They almost drove themselves into bankruptcy. Jobs came back, it was retain and reinvest. We know the story. Now they have lots of money. He died and Tim Cook became the CEO. Since 2013, they’ve done 288 billion in buybacks. Just in case anybody thought that Warren Buffett,
who built up Berkshire Hathaway by protecting all those companies from the stock market
is a patient capitalist, he’s not. He’s now is the biggest, by far biggest, about
10 times the stake that Icahn has and he’s just a rabid cheerleader for stock buybacks
to increase his stay. What that means is you’re not going to replace
an Apple. It means that Apple is not taking money. It’s 288 billion just in buybacks since 2013
and investing in the Tesla’s and other companies of the future that it could be investing and
this is even with someone like Al Gore on the board, one of the longest standing board
members since 2003 who is, of course, we all know, not just the former Vice President,
but one of the main advocates for climate change. What Apple have done with $288 billion in
saying, we have a company that can hire the best people, that has an iconic brand name
that can compete globally and can move into new technologies if it had gone into green
technology, if it had gone in that direction, which it could have, it hasn’t. That’s a lost opportunity and you don’t just
recreate those companies to be in that position to have all this money, to have the ability
to track people, all that learning that’s available. We then get to these outsiders who have become
much more powerful, and were made much more powerful by this rule in 2003, this proxy
voting system where you can hold a very tiny fraction of the shares, still a couple billion
dollars, maybe of a company like Nelson Peltz at GE with never more than .8% or 1% of the
shares but get that company just pump all kinds of money out of the company for the
sake of shareholder value, and cease to have any potential to be that it had to be the
innovative company. It’s in the case of GE, it’s we rely on GE
as US as it’s the main– the really the big company in energy. What damage does that do to its ability to
compete? Actually, it’s losing markets, even in the
United States, so a Danish company investors. That’s the thing we look at it and we see
it again and again but we see that there’s now this whole configuration of the insiders,
enablers, the outsiders all focused on getting stock price up. Buybacks are the tool in which they do that
and we’re saying, hey, let’s stop letting them do this. Let’s change the rules, so that we have a
system that doesn’t allow this predatory value extraction and allows the value creation,
sharing the gains with the employees, paying us as taxpayers who help support this infrastructure
of knowledge, a decent tax rate so we can not only get a return on that, but invest
in the next round of innovation without the government going more into debt to support
the companies in innovation. That’s the model we have and well, that’s
the model we put forward but it’s not the model we have. We have this model, which is really deeply
entrenched now in what we call predatory value extraction. MAX WIETHE: Well, and I thought, also a really
interesting transition you did was from Carl Icahn as the corporate raider where he’s taking
25% stakes and now he only has to take less than 1% stake and people would suppose maybe
that that’s because they’re afraid of him becoming the corporate raider, but really,
all the incentives are aligned. He doesn’t have to, it’s really that he doesn’t
have to, not that they’re afraid. WILLIAM LAZONICK: Yeah. It was because of him that the term green
mail got coined. It actually only looked at it, only that he
puts [indiscernible] around 1982, ’83 and he went after a small number of relatively
small companies in that were locally based. He started getting control and/or threatening
control. All he had to do was threaten and then they
would buy him out green mail. They were doing that even before it got turned
green mail. Now, what is fine? We’ve looked at a few of these cases is that
within those companies, there were some people, there was actually– should we try to fight
him off? Should we let him in? There are some people who said no, okay, let’s
do this, we’ll get our stock price up and offered then their own stocks. You start getting this aligning, but sometimes
it was called hostile takeovers at the time because often, it was seen as hostile. The people who are running the company do
not want these outsiders so they say, well, they’re incumbent, they’re just protecting
their own interests. It could be that those companies are not being
run properly, but it’s not going to help to have someone come in whose only purpose is
to get the stock price up and using the ideology of shareholder value as to legitimize this,
you have to understand the principles of innovative enterprise. I think good executives do understand that. The only one case that that occurred relatively
recently that everybody probably knows about is Whole Foods. Whole Foods was known as now owned by Amazon,
but known as being a really good employer, charging high prices, but it was getting–
yeah, people going there, shopping there. In the fall of 2015, I was asked, actually
by someone in one of the presidential Democratic presidential Bernie Sanders campaign actually,
someone asked me why is Whole Foods, because I’ve been saying Sanders should talk about
buybacks. Why is Whole Foods, they’ve done about a billion
of buybacks? Why did they do that? I looked at it, I saw that in fact, in September
of 2015, Whole Foods had laid off about 7% of its labor force, about 1400 people. The stated purpose was that so they could
charge somewhat lower prices to compete with Trader Joe’s other premium brand. I thought unreachable, that means the other
93% of the people are going to have to work harder and I then did a calculation of what
they did in terms of buybacks per laid off employee, it turned out $727,000 per employee. If they hadn’t done the buybacks, they could
have kept those people employed, what their benefits if they’re 60,000, which is probably
high, they could have kept those people employed, and they would have had plenty of money to
lower prices, and they wouldn’t have forced people to work harder, who are the main people
that would have been much more rational thing to do. The reason they didn’t do that was because
they were being attacked by hedge funds. Now, when just before or just after they sold
to Whole Foods, the CEO of Whole Foods who was on the record of saying, and it’s one
of the few times I’ve ever seen this, calling those activists, a bunch of bastards, a bunch
of just– hardly anybody will speak out against him, he actually did. The reason he sold to Amazon which what they
used to call a white knight, there was someone there who could at least protect the company
then there was a logic in their business model. We see that going on still to some extent. Now, the other thing that changed with someone
like Carl Icahn, although he was making lots of money, he actually– when he ended up having
to take run TWA because the green mail didn’t work. That was he lost a lot of money in that. The notion is you get in, you get out. The other thing that changes as he became
wealthier, he didn’t have to rely on other people’s money so in 2011, Icahn Enterprise
is just his own money basically. That gives them even more power too because
he doesn’t need to keep his own investors aligned with the raid or whatever he’s doing. He always, right from the late ’70s when he
started doing this, called this money is a war chest. The more he has, the more the value he extracts,
the more of a war he has, the more power he had. I think the other thing that’s going on is
that on the boards of companies first of all, I think there are a lot of people just believe
in shareholder value. A lot of people on boards who don’t have the
slightest idea what those companies are really doing in many cases. You often can, without a proxy fight, just
influence people on the board to say, yeah, back doing more buybacks, back pumping more
money out, back things that are– do a merger or do an acquisition but do the acquisition
so we can get control of the money in that company and pump the money out rather than
do the acquisition so we can spend a lot of money to build that company up. You don’t really know what’s going on, the
bearing point, it’s like I can talk about an era back then when it was more retain and
reinvest, that’s still going on in some companies now. I think this conflict is still going on now. We talked about a tension between innovation
financialization, and you don’t really know how it’s being played out until you look at
these companies, but there’s much more forces are aligned for being played out on the financialization
side than on the innovation side. MAX WIETHE: We touched on a few examples of
places where stock buybacks and insiders, outsiders enablers have allowed predatory
value extraction to take over the place of reinvest and innovation. I think one of the most the best examples
right now that you can see, because it’s one thing to say the company isn’t innovating
anymore, or they’re not making as much money as they could be, but Boeing people are actually
dying because of this process of the financialization of what was really an engineering company
for so long, and I actually had a conversation with my father. He said they kicked the engineers out of the
boardroom. You brought it up earlier, I think it was
1997, they had that merger with what was the company? WILLIAM LAZONICK: McDonnell Douglas. MAX WIETHE: McDonnell Douglas, and I think
really just starting with that, and moving forward, what happened at Boeing, and how
did we get where we are today? WILLIAM LAZONICK: Yeah. Boeing was founded in 1916. It was a beneficiary of a lot of government
subsidy, including the couple of acts from the postmaster general office at 1925, 1930
that created subsidies for airlines to buy more advanced planes– I’ve written about
this in Boeing Emerged Along with Douglas as the innovators in– it was integrated wing,
all-metal fuselage planes in the depths of the pressure between 1930, 1932. Actually Douglas ended up doing better as
a commercial company in the 1930s and beyond. Boeing was much more oriented towards the
military side. Boeing then with their jumbo jets, was able
to emerge as a stronger company. That was lucky, there was a few other companies
and was able to then consolidate as the main, really the only big aircraft manufacturer
in 1997 when it acquired McDonnell Douglas. At that point, you had Airbus which had been
created from a consortium of European companies to be a competitor to Boeing which was rising
as competitors. It’s well documented that there were a lot
of financially oriented people who came into Boeing with the merger, some of them had come
from General Electric and they started pushing shareholder value. That year actually, 1997, significant to other
ways. That was the year in which the Business Roundtable
declared that shareholder value would be the primary purpose of companies. This is an organization of which CEOs are
members of major companies. People might know, recently this few months
ago, they changed the tune on that. They said, now, we’re run for stakeholders,
but Boeing at that point actually turned to being a shareholder value company. The other thing that happened in 1997, it
was the first year that dividends– that buybacks surpassed dividends in the form of distribution
of shareholders and you had the stock market boom going on and many companies trying to
keep up with companies that had high flying stocks by doing buybacks. Let’s say Cisco, which ended up having the
highest market capitalization in the world in 2000, March of 2000, didn’t do buybacks. Other companies tried to keep up like Microsoft
and Intel by doing lots of buybacks, so this was increasing. Now, at Boeing by 2001, the top executives
said we don’t want to be too close to the engineers here in Seattle, which was the original
birthplace of Boeing and they have been for since 1916 so they moved their headquarters
to Chicago specifically to be away from the engineers and said, okay, you can do the hinge. Now, you started having lots of business. Their business is producing major aircraft,
their large aircraft under that time, there still is the case, or two companies capable
of doing it. The Chinese are on the horizon, maybe the
Japanese in the future. They needed a new long haul plane, they needed
new mid-range plane, and partly it’s because of advanced materials, avionics and fuel efficient
engines. They built the Dreamliner, which was what
they call a clean sheet, it was a wholly new plane really. It wasn’t even a replacement, it was just
a new plane. They had a number of problems with that in
terms of the outsourcing of stuff, they were doing a lot of outsourcing of the capabilities,
but they were doing that from the early 2000s. Then they knew they had to have a replacement
for the 737 and gee, and the 737 series was a single aisle narrow body plane for mid-range
flights, which they call the workhorse. This is the one who would be biggest selling
plane, and it would be one where they would be used for a lot of longer domestic flights,
some shorter international flights. They had this architecture from the 1960s
for the 737. It had been reengined two or three times. The last one was 1993, which was called at
737NG, reengine just meant they kept the same architecture and put in a new engine. Already with the NG which meant New Generation,
they, which was a big selling plane and their main competitor is the product in terms of
these narrow body mid-range plane, they had a problem because of the wing being too close
to the ground, which Airbus did not have, because they’re series 320 originally in the
1980s, when you were using the loading equipment and you built the wing higher up from the
ground, so you could put more of an engine, a bigger engine underneath. The fact is that the bigger the engine, the
higher the fan diameter– the longer the fan diameter, the higher the bypass ratio, the
more fuel efficiency, generally, all other things equal. This had already become a problem with the
NG, it’s actually doesn’t have a purely round shape. It’s flat at the bottom to give a bit of extra
space between the wing and the tarmac. The fact is when they were thinking of what
to do in the– probably about 2003, 2004, 2005, they actually had a project called the
Yellowstone Project One to think about what they were going to do to replace the 737NG. What they should have done, there’s no doubt
in my mind, what they should have done is done what they call is clean sheet replacement. They would have been enough to take advantage
of all the modern avionics, all the modern materials, and have plenty of space for the
most fuel efficient engine. That was on the books. Apparently, apparently, it was still a possibility
even up until the spring of 2000 or summer 2011 when they announced that they would do
a re-engine plane, the 737 Max. They did that also in reaction to the fact
that in December of 2010, Airbus had put out the 320neo using their company CFM, which
is a joint venture between GE and Saffron, a French company. Leap engines which were much more fuel efficient. Actually, the fan diameter on the leap engines
that Airbus uses are 78 inches. Now, this was a problem for Boeing because
they’re already had reached the limits. There was then a debate at Boeing which I’ve
been able to find out a little information about, of how big those engines could be. There was never even an issue that they could
possibly be 78 inches so it was a question. On the NG, they had been 61 inches the fan
diameter, they may be up to 68 inches, in the end, they put some extra height on the
front landing gear and they got it up to– well, first supposed to 68 inches, actually
69 inches so they reached the limit. If they hadn’t done that, they would have
been subject to a critique, as they were, in fact quite vocal from Airbus is that you
weren’t going to get the fuel efficiency on the Max to compete with the Neo. That would have been a big problem so they
were trying to figure out how to get these fuel efficient engines on there, given an
architecture where you had to reposition them more forward, more upward. Now, here’s something where a lot of people
have opinions but the investigations really haven’t been done to really say what’s going
on and that is that the opinion, there seemed to be a widespread opinion that that repositioning
of the engines created a tendency of the nose to pitch up during takeoff when– it’s on
manual before you get up to your cruising speed. If it peaked up too much, the plane could
enter a stall and so often, you want to get back to a safe what they call angle of attack. This is something that pilots to be aware
of and will be looking at readings from two sensors that are on the exterior of the fuselage. If they agree, then they just see what the
angle attack is. If they disagree, they would get a lightness
on the NG and say disagree and then they would just shut the system off, they would just
figure out how to get the angle of attack. They would– MAX WIETHE: Fly manual. WILLIAM LAZONICK: Yeah, but what was happening
here was that this, they put on a system which later became known as MCAS, maneuvering characteristics
augmentation system, that was doing this for them and they didn’t even know about it until
after the Lion Air crash which happened in October of 2018. The timeline is the planes launched in 2011,
the end of 2012, they have 2500 orders. It just before the second crash of the Ethiopian
Airline’s plane, that was in March 10th of this year, 2019, they had just over 5000 orders,
387 delivered. The plane had been certified in March of 2017. The first delivery in 2018. Now, a year and a half later, you have this
crash. Immediately, it’s well, suspected that it
was a faulty sensor. Then Boeing was forced to reveal when American
Airline’s pilots went after them, what’s going on here that they had this MCAS system on
there. They didn’t call it that at first, but then
it became known as that and they hadn’t put it into the flight manuals, and there’s all
kinds of issues that have been written about whether they let the FAA, the Federal Aviation
Administration know about the system or know how more powerful the system had become. There’s a whole lot of issues of concealment
that are there and still being investigated in Congress and an issue right now because
as of today, what’s today, December 6 th , 2019, those planes have not flown since last March
13th around the world and nobody knows when they’re going to fly. The issue is, are they going to fly? I wouldn’t know whether I should bet on this
because I don’t bet but I’d say the odds are, in my view, that they won’t ever fly again. That would be true if they have this structural
defect and there’s been more evidence that there is this defect, that it’s not just a
software fix, and it’s going to– the deal with it is not a software fix and now, pilots
know about it. If it was, you would think that plane would
be up in the air again. The other thing is, you would think that Boeing
would have come and rebutted the notion that it had this structural design flaw, because
obviously that’s out there, everybody’s talking about it. You just see it on the chat on an article,
people think of it as a structural design flaw. If that’s not the case, come out and say no,
that’s not the case. Now, obviously, if they– here’s the crux
of it, if they had built a plane they should never should have built back when they had
the choice 2011, when they launched the Max and they could have gone to the clean sheet
replacement, by some estimates, it would have cost them $7 billion more, maybe $8 billion
more to do that, rather than the re-engine plane, it might have taken a year or two longer,
but this is one of the greatest engineering companies in the world. There was every reason to do it in terms of
material avionics, fuel efficiency in the planes and they actually still have it on
their books that they’re going to do it, that they should have done it then, they didn’t. Why didn’t they do it? Well, we don’t know for sure. We have some possibilities. We do know that Southwest Airlines, which
was the biggest purchaser of 737 planes wanted a plane that would fly just like its previous
plane, so it didn’t have to retrain the pilots. The pilots were in an airport, they’re going
from an NG to a Max, it would be not going to a different type of plane. That might be a part of it, but they could
have paid a million dollars for pilot to retrain them or give him a- – they could have figured
that out financially. It may be it’s more speculative that they
already are having problems with the Dreamliner with all the outsourcing they had done, which
was part of their business model and they didn’t want to start that whole process anew
at the same time with the mid-range plane. That’s possible. Then there’s also possibility that’s where
the financialization comes in, but it’s not the only reason. The fact is the period when they should have
been thinking, how do we mobilize all our resources to build the planes of the future,
between 2004-2011 and on top of paying very ample dividend, they paid $11 billion out
in buybacks and so when you come to 2011, most companies stopped doing buybacks and
a lot of them in 2009 in particular, the financial crisis or a little reticent in 2010. MAX WIETHE: When you actually should have
done that. You ever actually should have done it. WILLIAM LAZONICK: When I was buying stock
with the high prices, but that money would have come in handy, that money plus interest
that if they had had it, we don’t know if there is. I think there really should be an investigation
into why they didn’t build a clean sheet replacement at that point. Once they went the route of the reengined
plane, if it’s true, and this, we don’t really know but there are congressional investigations
that could find out that this plane had a design flaw that made it inherently unsafe,
and they didn’t want their customers to know about this so they tried to fix it with the
MCAS, and they didn’t tell anybody about it. Oh, that’s pretty serious. Now, where does financialization come in beyond
that? They didn’t do much in the way of buybacks. I didn’t do buybacks up through 2012, but
in 2013, right at the beginning 2013, they started doing them. By that time, it was clear that in terms of
sales that the Max was a success. It’s the fastest selling plane they’ve had
in history. I think the NG might have sold more than they’ve
sold so far, but any case the fastest selling plane and this looked pretty good. Airbus was doing very well with its planes
so it wasn’t just that it was huge demand for planes, which also particularly why Lion
Air is one of the biggest purchasers, it means that you’re also getting huge demand for pilots. You’re not going to have every pilot being
trained as a military pilot so we need planes that we need competent people, pilots, but
when we get on a plane, we can’t assume that solly is on their [indiscernible]. Any case, at that point, we don’t really know
what they do, or they didn’t know but we do know that they started propping up the stock
price. Between January of 2013, and the week before
the Ethiopian Air crash, they did 43 billion in buybacks, including about a little over
9 billion in 2017, 9 billion in 2018. Less than two months after the Lion Air crash,
they increased the dividend by 20%. They authorized a new $20 billion buyback
program but it hadn’t been for the Ethiopian Air crash in March, they probably would still
be doing buybacks and another plane didn’t crash. We’re not sure, but I would have said they
probably would have done 12 billion this year or something like that. March 1st , 2019, which is when the new dividend
went into effect, they hit their all-time peak in stock price. The Ethiopian Air crash 10 days later. Now, here’s think that this might have occurred
if they hadn’t been focused on their stock price. You might have had, I use the example of like
Volkswagen with the diesel emissions, not a particularly financialized company coming
out of Germany but if you’re at the top of the company, and you’re trying to meet regulations,
and you can fake the data, and you can sell your cars, there might be some executives
who are tempted to do that. Actually, I think there’s some in jail now
because of that. It’s not that it’s only going to happen in
a company where you have all these buybacks going on and you’re focused on your stock
price, but it certainly supercharges the incentive to do this. If the public is buying into the notion that
a high stock price means a company is doing fine, then it creates a certain aura of success
of the company. That it’s got its high stock price, it must
be okay. Even what’s– the frightening thing is that
even after the Lion Air crash when they knew that this may have been– they started discovering
why this may have occurred, there was still an attempt by Boeing to blame it on the pilots
to say that one particular plane was not air worthy and they doubled down in a sense on
trying to get their stock price up. Meanwhile, the executives are doing very well
in this. McNerney who had been the CEO from 2005-2015,
I think we had something like $257 million went into his pocket, his actual pay, a large
percentage of it stock based and other related to higher profits, which of course come from
having all the order for the plane. For Muhlenberg, the current CEO, then now
stepped down as chairman, but he was between 2015, summer 2015 when he became CEO and the
end of ’18, for which you have the data, it was about $2 million a month falling into
his pocket. Now that’s a lot of money, even if you are
successful in producing a safe plane because it’s really the engineers– the whole, but
if in fact, you’re not doing what you basically should do is produce a safe plane, then it’s
a big problem. Now, one last thing I’ll say about this is
that a lot of the– and we have this an article in American prospect group published last
May, which talks about this, a lot of the notion, the ideology behind shareholder value
is traced back to an article by Milton Friedman, well known as Conservative Economist of Chicago
School in 1970 in the New York Times Magazine, where he said the only social responsibility
of a company increases profits. This was actually came out in direct response
to Naderism and Ralph Nader and the push for more fuel efficient and safer cars and in
fact, the context was that there something called Campaign GM that wanted to put three
public interest people on the board of General Motors to push for more fuel efficient and
safer cars. Friedman publishes articles solicited by an
editor at the New York Times and called this and it was repeated in some editorializing
opinion of that article by the editor. Pure unadulterated socialism. Now, we know the future of the auto industry. They should have had people on there who were
pushing for producing safer cars because that’s what went out in the auto industry. The only social responsibility of a company
is, you could say, is to produce fuel efficient safe cars. It’s not a social responsibility. It’s an innovative strategy so he was basically
telling people, saying there’s pure unadulterated socialism, don’t be an innovative company. It comes full circle back to what the start
of the book is about what the value creating company is, what innovation is, where it comes
from. It doesn’t come from saying we’re going to
increase our profits. It comes from producing a high quality product
that people want, in this case, fuel efficient cars, safe cars, in the case of Boeing plane,
first and foremost, obviously a safe plane and then getting a large market share to spread
out the fixed costs and get economies of scale and make it more affordable. That’s where we get productivity growth, that’s
where we get a basis for paying people higher wages, paying higher taxes. That’s where we get the posit of some scenario
in the economy as a whole. The Milton Friedman article was really putting
the cart before the horse and we say you want the profits, no, if you want the profits,
produce the product that the market needs. MAX WIETHE: They actually want. Well, I think you make a very strong case
and I was hoping today, we’d be able to get into your last five points. I don’t think we have the time so we’ll leave
it to everybody. If you want to hear Bill does lay out, he
doesn’t just lay out the problem, he also does give five points as to what he thinks
will be the way to fix this problem of the lack of innovation in major corporations in
America but also across the globe. Bill, I just want to say thank you for coming
in today. It was really fascinating. WILLIAM LAZONICK: Yeah. My pleasure. Thanks.

Pay Off Debt Or Save Money? How to Decide Which is Best For You!


Paying off debt and saving money are both
great things to do for your finances, but should you be doing one instead of the other? Today, we’re going to talk about which is
best for you. Hi, I’m Marissa with DollarSprout. Debt can really put a damper on your future. 80% of households report that they have some
type of debt from mortgages, car loans, credit cards, and student loans is sometimes may
feel that borrowing money is a necessity, but with so many Americans in debt, a major
question arises. Should you pay off debt or save? If you’re facing this question, the answer
isn’t a straight forward one. However, there are some good financial lessons
that you can apply to decide which is more important right now. But before we get into the video, don’t forget
to subscribe to the DollarSprout YouTube channel for more money videos. When it comes to making this decision, there
are two approaches, the mathematical approach and the emotional approach. The mathematical answer to whether to pay
off debt or save says that you should put your money wherever it will work hardest for
you. So if you’re debating on whether to pay down
student loans or put the excess cash into a retirement savings account, look at it this
way. If the student loan interest rate is lower
than the return from their retirement account, pay the minimum on the debt each month and
put the extra money into a retirement account. Conversely, if you have high interest debt
that’s costing more than you can make on the returns from investing extra money, you should
focus on paying off that debt before saving. The emotional approach to answering this question
is a little different. Many people have a negative emotional reaction
to being in debt. Therefore, they decide to tackle that first,
even if the numbers don’t necessarily support that decision. Focusing on paying off what you owe before
saving creates greater peace of mind for some. The truth is, money is about far more than
budgeting and simple math. All that to say it’s not necessary to choose
one or the other. It is possible to do both. That does, however, require that you have
a fair amount of extra income. While there’s not a right or wrong answer
to paying off debt or saving, we do have a step by step plan we would recommend for people
who have debt but want to start saving for the future. Step one, put your maximum matched savings
into a 401k. If you have an employer who matches your 401k
contribution, your first step is to put as much as they’re willing to match into that
account every single month. For example, if your employer matches up to
2%, then you get a 100% return on 2% of your salary. That’s free it money for your future. Right after my husband and I graduated college,
we got married and started our first real jobs. Our companies offered a great 401k match and
even though we were working on paying off $87,000 of student loans, we decided that
we didn’t want to miss out on this benefit. We estimated that it moved our debt free date
back only a month or two in the grand scheme of things. Step two, build an emergency fund of savings. If you’re wondering whether to pay off debt
or tackle your emergency fund first, the answer is to build an emergency fund. The last thing you want is to have to turn
to credit cards and take on more debt if you have some kind of emergency like a medical
bill or a car repair. That emergency fund amount will vary depending
on your situation, like if you rent or own a home, have kids or job security. If you rent and you’re just starting your
career, you can probably get by with a mini emergency fund of $1,500 to $3,000. If you own a home or have kids, you should
try to have three to six months worth of income in your emergency fund. Step three, focus on paying off debt with
high interest rates. Now that you’re contributing to your 401k
and have a small emergency fund, turn your attention and your excess income toward your
debt. Any debt you have with subprime interest rates
or rates higher than 9% is first to go. Interest rates this high will likely cost
you more money than you would make on most investments. So paying off these debts soon means you’ll
pay less in interest. Step four, decide your savings and debt priorities. At this point, your finances are in pretty
good shape. You have an emergency fund and you’ve wiped
out any high interest debt, so should you pay off debt or save more at this point? It’s up to you now. If your interest rate is below the average
rate of return for the stock market, roughly 7%, then it probably makes a more mathematical
sense to invest your money. Having low interest debt remaining isn’t necessarily
a bad thing. You could start working on that next or if
you have other financial priorities, start working towards those. It all depends on your debt tolerance and
financial priorities. Step five, stick to your spending plan and
keep building your savings. Personal finance is just that. It’s personal. You don’t have to dedicate all of your extra
income to paying off debt or saving. You can do both. Keep working at being debt free and contributing
to your retirement savings too. With this financial foundation you’ve built,
you should be able to pay down your remaining debt while continuing to plan for the future. At the end of the day, the decision to pay
off debt or save money is a personal choice. Everyone’s situation is different and you
have to do what is best for you. The key takeaway is to figure out what makes
mathematical sense for your situation, as well as what aligns with your savings goals
and values. And from there, you can make an informed decision
for your finances. That is all we have for you for today’s video. If you enjoyed it, don’t forget to give it
a thumbs up. And also don’t forget to subscribe to the
DollarSprout YouTube channel for more money videos. Leave us a comment and let us know whether
you plan to pay off debt or save first, and we’d love to hear your thoughts. And we’ll see you in the next video. Bye.

Amazon Pay is Growing Fast – Should PayPal and Apple Pay Be Worried?


Jason Moser: Let’s kick right
off here talking about Amazon. There are a few different
points to this discussion we want to get to. We’re talking primarily about Amazon’s effort
to gain more share in the payments space. That’s through Amazon Pay. We can couple this discussion also with the
fact that according to Adobe Analytics, Black Friday pulled in a record $6.22 billion in
online sales, which was up almost 24% from a year ago. It was the first day in history to see more
than $2 billion in sales stemming from smartphones. That’s where I really want
to pick this conversation up here. Not only are we living in an e-commerce world,
we’re certainly living in a mobile world, as well. For a lot of us, Amazon Pay probably isn’t
top of mind, yet we’re reading now that they’re really making efforts to gain share, it seems
like initially with companies that are not necessarily direct competitors,
like gas stations or restaurants or what have you. It does seem like they’re trying to take a
little bit more of that role in the transaction, much like we’ve seen Apple do to date
with Apple Pay. But it’s also not just Apple. There are all these payments companies out there,
trying to get a little piece of that transaction. Talk a little bit about your
experience with Amazon Pay. Give us a little bit of your perspective here
as to what the endgame is with Amazon. Matt Frankel: I was on
a certain retailer’s website. I can’t tell you what I bought, or who I bought
it from, because it was an anniversary gift for my wife, who listens to the show.
Moser: Oh, so you really can’t. I was going to say, “You can’t,
or you won’t?” But it’s both. Frankel: I really can’t. It was a small business, something you
would see featured on Shark Tank. It struck me as somewhere that gets most of
their sales from Amazon to begin with. This was directly on their website. I went to check out, they were
having a great Black Friday sale. I went to their website,
selected my products, and went to the checkout. And there were two buttons. There was
a PayPal button and an Amazon Pay button. I was curious, because I had never
seen that on a merchant’s website. Amazon really hasn’t
pushed it until recently. So, I clicked Amazon Pay, and it took me right
to my Amazon checkout, where I have my Amazon credit card already set up. It was just like
checking out for a normal Amazon purchase. It took me about two clicks. It was very easy. I was actually going to use PayPal,
and I like this alternative because it lets me keep all my purchases in one place. I’d say about 50% of what my wife and
I order is already through Amazon. It lets me organize my purchases
into one payment portal. I actually think PayPal might
have something to worry about here. Moser: That’s a good perspective there. I want to ask you, the initial thing that
comes to mind here where I think they may have a little bit of a challenge, we know
that to date, the U.S. consumer isn’t necessarily all that digital-wallet-focused yet. That’s still something that we’re in the very
nascent stages of, and I think it’s going to take a while for
that behavior to really change. You look at something like Apple Pay,
for example, as clever as that is, consumers still aren’t embracing that wholeheartedly. Whether it’s Apple Pay or Google Pay or Amazon Pay,
the digital wallet, there’s a big opportunity there. That explains why
Amazon is pursuing this. The one hang-up here I have with Amazon and
the process that you just described, it sounds like there’s a little bit more friction in
there vs. if I go somewhere, whatever website it may be, and I have the option to pay with Apple Pay.
When it says, “Do you want to use Apple Pay?” And you can just use your thumbprint to verify
the transaction, as opposed to having to go to another website and
verify that purchase. What I’m getting at here is ultimately,
it feels like Apple, and to a degree Google, have a hardware advantage
that Amazon doesn’t have to date. Does that make sense?
Frankel: Yes, but here’s my perspective on that. I don’t necessarily think this will steal
any market share from people who are already on Apple Pay or PayPal. Both of
those are, like you said, very easy portals. They both have hardware
advantages over Amazon. But there are a lot of people who are not
using digital wallets yet who are already comfortable with
Amazon’s checkout process. I don’t necessarily think they’re going to
steal market share or steal existing customers from any of the other ones, but I do think
it gives them an advantage recruiting new adopters to digital wallets.
Moser: Probably, you’re right. We talk about this all the time, this is not a zero-sum
game. It’s not as if one wins and everybody else loses. This is a massive opportunity out there. At the end
of the day, money is going everywhere. That’s what dictates everything, basically,
is money getting from point A to point B. Pursuing even just a small piece of that pie
makes a lot of sense, particularly in Amazon’s case, because really, you have to figure for
them, this is a very easy bet to make. The business certainly isn’t hinging on it.
At the most, they get a tiny scrape of that transaction. When Apple Pay is used, Apple gets a very,
very tiny scrape of that transaction. It’s not terribly meaningful. It becomes meaningful if you have a billion
people using it on a consistent basis. And obviously, we’re not to that point yet. But even beyond the financial implications,
I would imagine that a company like Amazon, as smart as they are about using data and
doing things with that data, just gleaning the data from transactions like these would
be seen as a reasonable pay-off. Frankel: Right, and that seems
to really be what they’re after here. I’ve actually read that Amazon is subsidizing
the swipe fees for merchants — not swipe fees, but whatever the
swipe-fee-equivalent of digital wallet fees are. They’re actually subsidizing the fees to get
retailers to put the Amazon Pay button on their website at a lower cost to them. It’s fair to say Amazon’s not making money
on this, but it’s expanding their reach. Anything that expands Amazon’s reach, data-wise,
customer-wise, merchant-wise, is good for the long-term business.
Moser: Makes sense to me. I don’t think Amazon’s going to ever going
to have a hardware advantage at least on the smartphone side.
They tried with the Fire phone. They were late to the game, tried to do something
a little bit different, but there was nothing terribly compelling to get someone to switch, particularly
if you’re already used to a certain operating system. I’m also skeptical when it comes to incorporating
things like voice assistant technology into actually paying for things.
With all that said, things change very quickly. Technology is evolving
seemingly on a daily basis. I’m going to be interested
to see where Amazon takes this. Amazon Pay has been around for a while,
they just haven’t done much with it. Perhaps we’re entering this stage now where
consumers are going to be a bit more open to adopting digital payments
and digital wallets and whatnot. If that’s the case, clearly we can see there’s
a lot of market share there to pick up. For Amazon to try to be
a part of that makes perfect sense. Frankel: To be perfectly clear, PayPal, Amazon Pay,
and Apple Pay all have tremendous growth runways. PayPal’s growth rate could go from 20% to 19%.
I’m not saying they’re going to really suffer. To be clear, I still love
PayPal on a long-term basis. Moser: Gotcha! We want to make sure we respond
to the inevitable e-mail we’re going to get. We’re not saying, “Short PayPal, long Amazon.”
You’re probably saying go long on both, right? It’s reasonable to just diversify your portfolio,
own shares in both companies. Frankel: Right. Both companies
are going to be winners. I could just see the tweetstorm going off
in my head when I was saying that. Moser: Well, we’ll get out in
front of it if that does happen.

Massive Student Loan Debt: $235k and I’ll Never Pay It Back | Money Makeovers | MONEY


I am doing the best that I can under the circumstances. You’re paying about 3 percent towards your debt. Yeah. I think you could do better. But why? Here I am at Simon’s apartment, excited to go upstairs and meet him. I’ve heard some numbers being tossed around, like $235,000 in student loan debt. That’s a lot but there’s always a way to pay debt off. So first I’m going to talk to him, then he’s going to meet Doug. All right, let’s go. My name is Simon Galperin. I’m 29 years old and my problem is that I have $235,000 worth of student debt from my public education that I see no way of paying off. This is the first year, last year, that I’ve made $65,000 in a year. The year before that I made $27,000. My partner and I have been together for over eleven years now. We just don’t know what marriage looks like with student debt. I don’t want to be focused on paying off my debt. I want to be focused on building a life for myself. I know that I’m facing some sort of decision in the next couple of years. We want to buy a house. We want to get married. So I need to get informed. All right. I am so curious to hear about your financial situation. How much have you paid off for your student loans? A negligible amount. OK. So right now are you paying the minimum payment each month. Yes I pay $35 dollars a month. How does that make you feel, $35 a month? My goal is to pay $35 a month until I die. You can’t begin to grapple with paying more. Why? If I began to think about what does it look like to pay down $235,000 in debt, knowing what that looked like for my parents when they bought their house 30 years ago. I need to make decisions about my life right now. So to me that means building a life for myself that doesn’t focus on paying down my debt. You could pay an extra 100 bucks a month, and you could cut that loan term down to 25 years. You could pay more and cut that loan term down to 16 years. Suddenly it becomes very manageable. And that’s just paying a little bit more. Now how do you do that? Obviously there’s two or three ways I call CEO: cut costs. Earn more. We can talk about that, you’ve already gone up 30k in a year which is amazing. And then optimize your spending. So there are certain areas that you are probably spending on right now that you could shave off 100 bucks a month, 200 bucks a month. I believe that if I chase an income, I’m not going to live a life that I think is worth living for me. I am really oriented on mission and making sure that my work has a positive impact. I’m not interested in seeking more income for the sake of seeking more income. And I’m I am taking back my power and I will not participate in that system. And maybe what that looks like is my parents passing and I do not want that to happen. It is a cost that I will bear that we immigrated from the Soviet Union and my parents bought a home and they lived their whole lives for their son. And then at the end of the day, he has to sell a house to a bank because he was intended to fulfill this dream that they had for him. I’m fulfilling the dream. My goal is not paying off debt to some company whose CEO can buy himself a private golf course. My goal is to change the world, leave it better than I found it, chasing income is not the way to do that. Simon, you only have three ways that you can approach this financially. If you want to pay your debt off, which is a big if, if you want to pay it off faster than 30 years, then there are three ways to do it. You can cut costs, which you told me you don’t want to do. Or it might not be possible. OK. You can earn more which you told me you don’t want to do. And you can optimize your expenses by calling up and negotiating 100 bucks here in there. So there’s no magic solutions here. All of those though would work very well and would allow you to cut that debt down dramatically. What is the benefit of me paying an extra $500 a month? What if your debt was paid off a year from now? What changes in your life? Not much. If you don’t see any change yet when your debt is paid off. If you haven’t internalized that then why — But what’s the change? Your parents will have to pay 600 bucks a month towards your debt. That’s true. And maybe the conversation with your girlfriend changes as well, and maybe the conversation about saving for a house, or whatever else you want to do, changes as well. If you don’t see that then it’s no surprise that this conversation is stuck. I want to make my life today not worry about what my life is going to look like 40 years from now. Listen, Simon I appreciate your time. I wish you the best. This is like useful though. I’m really grateful for your time. Simon, it’s good to see you. I heard you had a conversation with our friend Ramit. Has anything changed in your financial life since then? Sure, so since my conversation with Ramit I’ve gone to halftime at the company I was previously working full-time for. OK. So things that were previously difficult may be even more difficult right now? Certainly. Tell me a little bit about what your financial goals are. What I really think is important to me is a savings account of three to six months and beginning to save money to put a down payment on a mortgage on a home. So it sounds like these more short term goals are more important to you than perhaps paying off student loan debt or some longer term goals that you have. Yes I think so. OK. Tell me a little bit about how you’ve come to terms with the fact that there might be consequences to not paying back your debt. You know, it’s possible that I will die with debt, that I won’t be able to retire because of my debt. I know that all of these things are going to happen. So I’m playing my cards. Right. So you think you’re making a
calculated decision as to, okay, this is what I’m going to do because again, life is either too short or there are things I want to do today I’m not going to be, you know, denied. Now I still think you should pay back your debt. I still think that obligation needs to be paid. Yeah. But how you go about doing that might not be as conventional as people think it is. But still I’ll throw it out there. How much time is being spent doing things not related to work? Could you take on a job that maybe you don’t want to? The answer is yes, you’re choosing not to. But you know why it is you’re doing that. I think hands down one of most fascinating things about the conversation we had in the context of Money Makeovers is we typically look for that solution at the end of it, that easy answer and if there’s anything I can say here is there is no easy answer. There’s you, your life, and the decisions that you’re going to make. And I admire that you’re taking ownership over your situation, whatever that may bring you. So for that you have my respect and I wish you the best of luck with everything you do. Thank you, Doug. I appreciate it.