AOL Blackvoices.com Talks Money With Finance Expert Dr. Boyce Watkins

Smart Money Tips With Dr. Boyce Watkins
Posted Jan 27th 2009 6:34PM by Alexis Stodghill
Filed under: Money Talks

By Alexis Garrett Stodghill, BlackVoices.com

Dr. Boyce Watkins is a renowned scholar and speaker in the area of finance. As an African-American financial expert, Dr. Watkins has made it his personal mission to educate our community through writing books and essays, making media appearances, public speaking and more -- so that we may become more empowered with knowledge when it comes to the all-mighty dollar. BlackVoices.com asked the doctor to share his wisdom and advice for folks seeking tips to successfully navigate the current economic storm. According to Dr. Watkins, it's still possible to get your finances in order -- in fact, it's imperative.

As a black finance expert, what is the most common problem you see in the black community when it comes to personal finance management?

The most common problem is that historically, African Americans have been excluded from the opportunity to build wealth. Money was made from our labor, but we never got much of it. That led to a laborer mentality in African-Americans that taught us how to go out and get jobs rather than learning the art of CREATING jobs. This problem was further exacerbated by the fact that building a company requires capital, which we typically don't have. Most African-Americans have far lower inheritance levels than whites, and this impacts your economic opportunities in life. Also, when you've never had much money, you are usually not very good at managing it, so we are as bad as the rest of America when it comes to our spending, saving, investing and borrowing habits.

How would you suggest that someone with little knowledge of personal finance get started on the road to financial stability?

First, get educated. Empower yourself with financial literacy. The greatest university in the world is called Google.com. You can research any topic you want. Secondly, start small. You don't have to conquer the world in two steps. Just start by saving 10% of your income. You might say you don't have money to save, but you actually do. If your boss came into your office and gave you a 10% paycut, you'd find a way to survive. Find a way to learn to save. Finally, get a "side hustle." Challenge yourself to find small ways to supplement your income. The riskiest thing to do in this economy is to get all of your personal income from one source.

You have two college degrees, a master's degree and a PhD. What would you say is the relationship between level of education and income?

Education not only gives you many opportunities to earn more money, you usually earn more money with less work, doing a job that you might actually like. Personally, education was the difference for me between being financially well off and living a life of poverty. Education also provides job security, which is often overlooked. Autoworkers, for example, were always able to make high wages with little education. But once the Big Three started to buckle, they were stuck with unskilled labor opportunities. Everyone should get as much education as they can get, since education can be a path to both a wealthy bank account and a wealthy life.

Would you share some tips for sound money management in 2009?

Yes.
-First, keep investing, especially in the stock market. When the market is low, that's the best time to find cheap stocks. Then hold on to your investments in a well-diversified portfolio (meaning, keep your money spread out). Before you know it, the downturn will have put money in your pocket.

- Learn to adjust your financial habits. Part of the reason we are in this mess is because Americans were borrowing too much money and working hard to live paycheck to paycheck. Get out of that habit, because the government is not going to be able to save us for much longer.

- Cut the toxins out of your life. If you have any bad habits or bad people draining you of your resources (a relative, a friend, or even yourself), renegotiate that relationship from one that is financially destructive to one that can be productive. For example, you may have to cut the financial umbilical chord from a dependent child, or tell that brother that he can't borrow money from you anymore. Cut the toxic energy out of your life so you can rethink your way of seeing money.

You have written extensively on love and money issues. What is your advice for best blending marriage and finances?

In 'Financial Lovemaking,' I tell couples to "find a rhythm." Merging your money is the same as merging your body (ie. sex): No one can tell you how to do it, since we all enjoy different things. You find out what your partner needs, share your own needs and then find a way to make the process comfortable and fulfilling for both parties. If your partner is a saver, then you need to respect that. Given that there is usually a deeply psychological reason that your partner is a saver, you are in serious trouble if you have habits that create financial instability in your relationship. Also, MAKE SURE you know what you're getting into: Many couples focus solely on love, lust, and physical appearance and spend almost no time observing the financial disposition and habits of their partners before making this major commitment. That is a recipe for disaster.

Before you commit your life, your future, your children and your money to someone, remember that LOVING together means LIVING together. If someone is financially irresponsible or brings a set of (what I call) "financial venereal diseases" into your life, it is going to be hard to live with them. You should check the debt levels, income levels and credit score of anyone to whom you choose to commit. Make sure they don't have any financially destructive habits, like alcoholism, drug abuse, gambling, or even the shopaholic's disease. Make sure that your financial values are in line with your partner's: For example, don't marry a woman who needs a $40,000 engagement ring if you think that a $500 ring should do the trick.

If you don't ask the hard questions, you can be locked into something with someone who literally destroys your life later down the road.

What is your opinion of the current recession? What is the best way to weather it?

The current recession may very well be the tip of the iceberg. There are serious long-term problems with our economy, and the break down of our financial system is merely a symptom of bigger issues. Additionally, this recession has a deeper problem. It is occurring during a time in which our global financial markets are integrated unlike at any other time in world history. That means that we are dealing with a problem of historic proportions on a landscape on which we've never operated.

The best way to cope with the recession is, in part, through what the government is already doing: Utilizing massive fiscal stimulus plans and encouraging global cooperation. Two other things they could have done are a) to have not wasted 700 billion dollars persuading Americans that Wall Street Bankers need to be protected, and b) to have spent more time helping Americans adjust their expectations.

President Obama seems to be trying to manage expectations, but he has already set the bar very high with his long list of campaign promises. The economic problem for Obama is that it will be extremely difficult to boost our economy back to where it was before, particularly since much of our financial gains over the past 7 years were illusions created through easy access to credit and a poorly regulated financial system. It's similar to an athlete on steroids trying to get off the drugs and then regain old form. It's very difficult to do.

On an individual level, I encourage families to remember that the government may not be there to take care of you in retirement. If you are not saving for retirement, it is critical that you do so. You should also find ways to structure care for the elderly in your family so that they are going to be OK. Also, tighten your own belts and get out of the habit of living from paycheck to paycheck. This is not a secure economy, and seemingly financially stable companies are disappearing overnight. The riskiest thing you can do in this economy is to get all of your income from one source. Find a way to make money from multiple avenues.

What has inspired you to come this far with so much self-determination, as a black man who was born to a single teen mom, then becoming a teen parent yourself?

I wake up every single day with a purpose. Dr. King and Malcolm X died young, so I never knew how much time I will have. But I am absolutely determined not to waste a single day and do all I can to help reshape what it means to be a black scholar and black leader in America. When I get emails from young people telling me that I've inspired them to change their thinking, then I know I've done my work. I know that I am not going to be on this earth forever, but I love the idea that I can impact people in such a way that the spiritual influence can last for generations.

I realized that most black professors are scared into being quiet on social issues, due to heavy political ramifications for speaking up. I also realized that many of us would rather sit in the ivory tower than to take our knowledge to the world. I never wanted to do that, and I've always felt that the role of the Black scholar in America is to use his/her knowledge to enlighten the world and uplift his/her people. That is my mission, and it is something I will continue to do until the day I die.

I also learned that it is not enough to be intelligent. You must be courageous and also sure of who you are. If you seek your validation from your historical oppressors, you will always end up chasing your own tail. Additionally, there are a long list of problems that need to be solved within our community, and it's up to all of us to do whatever we can to try and solve them.

Are there any words of encouragement or wisdom that you would like to share with the BlackVoices.com audience?

I realized a few things long ago that carry me to this day:

1) Success doesn't happen by accident. You must be deliberate with your actions and think carefully about where you invest your life, your love, your energy and your time. Everything must be proactive.

2) Extraordinary outcomes only come through extraordinary efforts. In life, you get what you give. So, if you want more, you must sacrifice more. You must be willing to do things no one else is willing to do, if you want to have things that no one else has. Never waste one second choosing to be ordinary.

3) Education is everything. Get as much of it as you can. Don't just become a student, BE AN EXTRAORDINARY STUDENT. Never let anyone tell you what to think. Keep your mind liberated so you can find truth and meaning in your endeavors.

4) The best way to get "pimped" is to spend your life trying to work for somebody else. Even if you are the highest paid slave on the plantation, you're still a slave, and you're still on the plantation. Get off the plantation and find a way to true wealth and prosperity. But don't get into the habit of worshipping money. Your goal is to live a wealthy life instead.

5) Keep BS out of your life so you can focus on achieving your goals. Most of us don't do half of what we plan to do because we spend all our time on silly, wasteful activities. There are 8,760 hours in a year and 168 hours in a week. You should budget your time the way you budget your money and not let anybody waste it.

6) Never allow yourself to be without goals. It's not where you are that matters, it's where you're going that determines where you end up. Always be aware of where you are going, and what you need to do in order to get there.

Keep a life full of purpose, and that will make every day worth living.

Stop Living Your Life in Debt and Balance Your Money, says Dr. Watkins on Ed Lover Show Pt.3

Stop Living Your Life in Debt and Balance Your Money, says Dr. Watkins on Ed Lover Show Pt. 2

Stop Living Your Life in Debt and Balance Your Money, says Dr. Watkins on Ed Lover Show Pt.1

"Cut The BS" Said Black Money Expert on Mike & Juliet Morning Show

Finance Professor Boyce Watkins Speaks On The Scary Side of Our National Debt

Dr. Boyce Watkins
www.BoyceWatkins.com

Brought to you by The Great Black Speakers Bureau - The #1 Speakers Bureau in the world.

Hey Peeps,

I thought you guys might want to hear Barack Obama's latest pitch as he works to solve one of the greatest economic crises since The Great Depression. It is here if you'd like to take a look. I agree with the President that bold moves by our government are necessary. Where we differ is that I do not believe it to be reasonable to think that our economy, stock market, economic growth or employment numbers are going to reach prior levels any time soon. That's because much of our economy one year ago was an illusion....a mirage created by easy access to credit sparked by a poorly regulated financial system. We are effectively the great athlete trying to compete after his steroids have been taken away: The athlete might be good, but his natural talent will likely never match his performance when it has been enhanced by doping.

More importantly, it is critical that each of us seriously considers the long-term financial damage that has been done to our economy. Even worse than our financial system, our political system is one that promotes the kind of short-sighted behavior that will surely cause serious financial problems for our children and grand children. I apologize for sounding like an alarmist, but I must be blunt: Get your money together RIGHT NOW, or there may be hell to pay in the long-term. The data from my research show that this is simply the beginning of very serious long-term financial problems in our great nation.

Our money advice email list is here, feel free to join. If there is a way that my training in Finance can help you or your family overcome financial challenges, I'd be happy to share what I know.

Be well,
Dr Boyce
www.BoyceWatkins.com

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The Scary Side of Our National Debt
By Dr. Boyce Watkins
www.BoyceWatkins.com

As a finance professor, I become nervous when listening to the numbers being tossed around by our federal government. I hear “700 billion for this and 800 billion for that” mentioned as casually as a man tossing dollar bills at a strip club. Our government officials have been wasteful, incompetent and incredibly myopic in the way they’ve managed our money. Even conservative Republicans are spending like financially illiterate rap stars, and the Obama-mania train doesn’t seem interested in taking a different track.

Added to the $400 - $700 Billion that President Elect Obama wishes to spend on a stimulus package (not to mention bail-outs for automakers and other parts of the economy), the total amount of money our government has seriously considered allocating to solve the financial crisis has approached the $2 Trillion dollar mark. In case you’re wondering, that is A LOT of money, even for government officials who think that money grows on trees.

The truth is that, like the star quarterback who thinks his money will never run out, our country is going to wake up one morning, only to realize that we are no longer financially secure. We are going to be alarmed by the prospect that our government securities are no longer considered risk-free investments. Like the worried mother who notices she is one paycheck away from being homeless, we will see that we are one terrorist attack away from being stripped of our vast economic power.

To put the $2 Trillion dollar problem into context, consider this:

- Our government’s annual income (IRS receipts coming from money you and I pay in taxes) is about $2.5 Trillion dollars.
- Our national debt has reached the $10 Trillion dollar mark. That is like a man earning $250,000 per year, and sitting on a million dollars in debt, with full intention of obtaining more debt because he believes he is too rich to go broke.
- Roughly 42% of the Federal budget goes toward entitlements: Medicare, Medicaid and Social Security. Another 20% goes to making sure we can arbitrarily “liberate” other countries who happen to have plenty of oil (the military), and another 9 – 10% goes toward paying the interest on the national debt.
- Our population is aging – this implies that our productivity as a nation is going to drop over the next 30 years, and our real Gross National Product is likely to drop with it. In conjunction with our decline in productivity, our obligations for the "Big Government 3" (Medicare, Medicaid and Social Security) are going to grow. So, the guy I mentioned above with a million dollars in debt is also going to see his income decline, while watching his expenses go up.

Translation: our country is in serious financial trouble. Trickle down economics (as proposed by these bailout plans) almost never works. I am amazed that we live in a country in which the same irresponsible men who caused the crisis are the first to be rewarded with a government bailout. The next time someone attempts to argue that Black males or young single mothers lack personal responsibility, I am going to point to the bankers on Wall Street and our government officials as being far more damaging to our nation. The real welfare recipients live on Wall Street, Capitol Hill and in executive suites, as they beg and plead for government assistance that is being granted at will. All the while, I hear politicians (even the great Black man in the White House) tell Black males with nearly 50% unemployment that they just “need to be more responsible”.

What are the solutions to this problem? There really are no quick solutions, but this might be where President Elect Obama can start:

First, stop declaring expensive wars that don’t make any sense. The Iraq War costs our nation roughly $340 million dollars per day and a combined total of half a trillion dollars. That’s enough to send over 10 million kids to college or to pay a year’s worth of health insurance for 100 million people. You could also provide $100,000 dollars worth of mortgage relief to 5 million American families.

Second, stop electing incompetent people to the most challenging office in the land. Choosing President Bush to run our country means that we deserve whatever consequences come from allowing arrogant Ivy League privilege to override the importance of competence, intelligence and solid leadership. With all the bogus and racist claims that Black youth are crippled by anti-intellectualism, it’s funny that nearly 50% of our nation planned to elect a Vice President who doesn’t know that Africa is a continent.

Third, stop throwing our children’s futures into the garbage. Millions of powerful minds are being wasted each year by a horrible inner city educational system. The money spent on the war in Iraq could have saved the lives of these youth and turned them into productive Americans. Instead, many of them are only going to be prepared to milk the economy for more costly entitlements.

Fourth, stop incarcerating many of our most productive citizens. We pay roughly $23,000 per year to incarcerate criminals, plus an average of $24,000 per year/per inmate for community corrections officers and other supervisory officials. Spending that money to educate and rehabilitate these individuals would not only increase our nation’s productivity, it would further reduce reliance on government support given to those who’ve been marginalized or had their families destroyed by our barbaric system of incarceration. This doesn’t count the impact on health effects that would come by simply stopping the prevalence of prison rape and transmission of disease within many communities across America. All chickens eventually come home to roost, even when they’ve been given 25 to life. The incarceration of productive Americans is an inter-generational loss, since their ill-nurtured children then become society’s worst nightmares.

Finally, our elected officials must stop thinking that they have a blank check. Sorry Senators, but you don’t. Money is finite, and when you keep piling up debt like MC Hammer, you’ll find yourself broke after your next album. Around the world, massive wealth appears and disappears in a flash, and by continuing our irresponsibility, we are setting the stage for the twilight of our great nation. Our officials must be more responsible and the American people must demand limitations on the use of federal debt.

Every great empire has a sunset. Many successful individuals and entities are brought down by a crippling vice, addiction or series of poor choices. America's love of debt, arrogance in leadership and unwillingness to plan for the future may be the poisons it has picked to undermine our global prominence. Protect yourself and your family, for there are bumpy times ahead.

Dr. Boyce Watkins is a Finance Professor at Syracuse University. He does regular commentary in national media, including CNN, ESPN, BET and CBS Sports. For more information, please visit www.BoyceWatkins.com.

Our Money- Can We Trust The Government To Protect It

By Dr. Boyce Watkins
www.BoyceWatkins.com

Media reports show that many Americans are not quite sure of what to do with their money. Watching banks fail left and right, people are logically afraid of what might happen to their savings. This fear is justified, as we are seeing our accounts beaten and stomped by the global financial meltdown.

This grave concern is magnified by the fact that those we’ve trusted are the ones who’ve left us vulnerable. Our most cherished financial experts handled our retirement accounts like flashy vehicles on a Nascar speedway. Our elected officials allowed executives in the banking industry to run rampant like 3-year olds with dirty diapers. Then, when the crash came, a massive bailout package was created for those most responsible for the damage, while the rest of us were left holding the tax bill.

This begs the question: Why in the hell should we trust the government?

I recall that during the failure of Enron, one of the most respected companies in America at the time, the firm made several statements designed to create confidence in the company’s financial condition. Like captains of the Titanic, company leaders explained that there was nothing to worry about, even as they themselves were preparing their lifeboats. When the company failed, those who did not protect themselves reminded us of one grim and fundamental truth: when the “you know what” hits the fan, it’s every man for himself….and every woman too, in case you’re wondering.

In response to such sentiment, the American consumer has been working overtime to protect his/her resources: people have (against my advice) moved their money away from the frightening stock market, they are diversifying money into different banks, and some are taking their money out of banks altogether. All of these actions are occurring in spite of government calls for calm in a world on the verge of financial panic.

The honest to goodness truth is that I don’t blame Americans for being afraid. I don’t blame them for not trusting the government right now. Trust must be earned in any relationship, whether it is a tough marriage of the relationship between a government and its citizens. Our government must work to regain that trust through sound and efficient financial management. It will NOT regenerate the public trust through excessive spending on meaningless wars, selfish pork-filled bills being passed through Congress and budget deficits that strain the resources of Americans everywhere.

I can’t tell you if the government is lying to you, but I can tell you this: There was a time when government guarantees such as FDIC insurance were as pure as the driven snow. There was a time when the United States Federal Government had pockets and resources so deep that even God himself could be bailed out with our cash. The sad truth, however, is that no empire lasts forever, and there is destined to be a day in the future when we are no longer the unquestionable economic super power that we once were. A country that can’t even afford its social security obligations is hardly a nation that has risen beyond economic risk.

Another sad truth is that if the financial world really were coming to an end, the citizens would be the last to find out about any such crisis. We would, simultaneously, be the first ones asked to suffer the burden of irresponsible behavior by our leaders. If that doesn’t justify a bit of skepticism, I am not sure what does.

Dr. Boyce Watkins is a Finance Professor at Syracuse University. He does regular commentary in national media, including CNN, ESPN, CBS and BET. For more information, please visit www.BoyceWatkins.com.

What is Consumer Confidence? Dr Boyce Watkins Explains

Dr. Boyce Watkins
www.Boycewatkins.com

If you wish to see a video explaining consumer confidence, which is one of the driving issues behind the recent moves in the stock market, please click here.

This has been an interesting week, with auto execs showing up on private jets to request a bailout from the government and the Dow moving to below 8,000 points for the first time in 5 years. I still hold to the fact that this is a great time to get into the stock market if one has never done so before, especially if you are under the age of 50. By the way - please visit our sponsor, GreatBlackSpeakers.com if you are interested in hiring a top notch African American speaker or seeking to become one.

Take care!
Boyce Watkins
http://www.blogger.com/www.boycewatkins.com
Click here to join our money advice list.

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If you listen carefully to the words of Treasury Secretary Henry “Hank” Paulson and Ben “Big Ben” Bernanke (chairman of the Federal Reserve) you might notice a trend in their language. The word “confidence” is used a lot when they speak. Many of their monetary proposals are not necessarily valuable for their financial power, but also for their psychological power.

Some of you may wonder what confidence has to do with anything. After all, if you’re broke, confidence doesn’t exactly put money in your pocket. If you’re 100 pounds overweight, confidence won’t help you win the Olympic 100 meter dash. When you are flying on a crashing plane, confidence doesn’t keep the plane from slamming into the ground. But confidence is important to an economy, and one of the most significant drivers of economic growth. In fact, over confidence has driven US economic growth for the past 10 years. Here are some reasons that confidence matters in the minds of Hank and Big Ben:

1) Confident consumers spend money

If you think you might lose your job next year, are you going to max out your credit cards? I certainly hope not. If you are worried about being able to make ends meet, are you going to buy that big screen TV? Not unless you want your wife to leave you. So, even if it doesn’t hold any truth, the mere forecast of a weak economy is enough to make many Americans hold off on consumer spending, one of the great driving forces of the American financial system.

2) Confident companies invest money and hire workers

Investments involve risk. Your hunch may work out, and it may not. If you don’t believe the economy is getting better, you are not going to consider taking that risk. No one plans to go to the beach if the weather man says that it’s going to rain. When economic rain is in the forecast, companies pull out their umbrellas and hold off on new projects. This reduces the number of jobs in the economy, because nearly every job created in America is the result of someone making an investment.

3) Confident Americans do not take their money out of banks

In case you didn’t know, your bank does not have your money. Your money is part of a large base of financial capital that is loaned out to individuals and consumers seeking to get a good return on their investment. So, without investing, your bank would have no interest in paying you any interest at all. So if, say, 30% of all customers of the same bank decide to get their money out at the same time, the bank would have serious financial problems. It is a lack of confidence that could cause customers to “run” on their bank and take out their money.

4) Confident investors keep their money in the stock market

The stock market is a place where fortunes are made and lost. Some part of that fortune is psychological, given that no asset can have a value which exceeds that which someone is willing to pay for it. When investors lose confidence, they take their money out of the stock market, and reductions in demand for stocks lead to massive paper losses in the market. Additionally, most Americans are “momentum traders”, meaning that when the market goes up, they tend to buy more, and when it goes down, they tend to sell. History shows that it is actually the opposite approach that tends to work best.

5) Confident banks make loans

Banks have to keep a certain portion of their funds on hand at all times to meet federal requirements. If they are fearful that their customers might come and demand their cash, they hold onto their capital to ensure that it is available. If they are afraid that their borrowing customers will not be able to repay loans due to a weak economy, they also hold back on issuing new loans. The truth is that when economic forecasts are grim, conservative bankers become even more fearful than the rest of us.

The bottom line of this article is that confidence matters. So, the next time you hear Ben Bernanke give a speech, you can be confident that he is going to use language that makes you feel more secure. Whether you choose to believe those words is up to you.

Dr. Boyce Watkins is a Finance Professor at Syracuse University. He does regular commentary in national media, including CNN, BET, ESPN and CBS. For more information, please visit http://www.blogger.com/www.boycewatkins.com. To join our money list, please click here.

Black Financial Scholar Boyce Watkins Tips on Consumer Confidence

Should We Really Trust The Government? Thoughts of A Black Finance Professor

Keeping Your Cool During A Financial Meltdown

by Dr. Boyce Watkins
http://www.boycewatkins.com/

If you listen carefully to the words of Treasury Secretary Henry “Hank” Paulson and Ben “Big Ben” Bernanke (chairman of the Federal Reserve) you might notice a trend in their language. The word “confidence” is used a lot when they speak. Many of their monetary proposals are not necessarily valuable for their financial power, but also for their psychological power.

Some of you may wonder what confidence has to do with anything. After all, if you’re broke, confidence doesn’t exactly put money in your pocket. If you’re 100 pounds overweight, confidence won’t help you win the Olympic 100 meter dash. When you are flying on a crashing plane, confidence doesn’t keep the plane from slamming into the ground. But confidence is important to an economy, and one of the most significant drivers of economic growth. In fact, over confidence has driven US economic growth for the past 10 years. Here are some reasons that confidence matters in the minds of Hank and Big Ben:

1) Confident consumers spend money
If you think you might lose your job next year, are you going to max out your credit cards? I certainly hope not. If you are worried about being able to make ends meet, are you going to buy that big screen TV? Not unless you want your wife to leave you. So, even if it doesn’t hold any truth, the mere forecast of a weak economy is enough to make many Americans hold off on consumer spending, one of the great driving forces of the American financial system.

2) Confident companies invest money and hire workers
Investments involve risk. Your hunch may work out, and it may not. If you don’t believe the economy is getting better, you are not going to consider taking that risk. No one plans to go to the beach if the weather man says that it’s going to rain. When economic rain is in the forecast, companies pull out their umbrellas and hold off on new projects. This reduces the number of jobs in the economy, because nearly every job created in America is the result of someone making an investment.

3) Confident Americans do not take their money out of banks
In case you didn’t know, your bank does not have your money. Your money is part of a large base of financial capital that is loaned out to individuals and consumers seeking to get a good return on their investment. So, without investing, your bank would have no interest in paying you any interest at all. So if, say, 30% of all customers of the same bank decide to get their money out at the same time, the bank would have serious financial problems. It is a lack of confidence that could cause customers to “run” on their bank and take out their money.

4) Confident investors keep their money in the stock market
The stock market is a place where fortunes are made and lost. Some part of that fortune is psychological, given that no asset can have a value which exceeds that which someone is willing to pay for it. When investors lose confidence, they take their money out of the stock market, and reductions in demand for stocks lead to massive paper losses in the market. Additionally, most Americans are “momentum traders”, meaning that when the market goes up, they tend to buy more, and when it goes down, they tend to sell. History shows that it is actually the opposite approach that tends to work best.

5) Confident banks make loans
Banks have to keep a certain portion of their funds on hand at all times to meet federal requirements. If they are fearful that their customers might come and demand their cash, they hold onto their capital to ensure that it is available. If they are afraid that their borrowing customers will not be able to repay loans due to a weak economy, they also hold back on issuing new loans. The truth is that when economic forecasts are grim, conservative bankers become even more fearful than the rest of us.

The bottom line of this article is that confidence matters. So, the next time you hear Ben Bernanke give a speech, you can be confident that he is going to use language that makes you feel more secure. Whether you choose to believe those words is up to you.

Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of “Financial Lovemaking 101: Merging Assets with Your Partner in Ways that Feel Good”. For more information, please visit http://boycewatikns.com/

Boyce Watkins Advice For Dealing With The Financial Crisis

Syracuse Prof Boyce Watkins Talks About Barack Obama

I recall endorsing Barack Obama back when it was simply wishful thinking to hope for a Black President. During a CNN appearance over a year ago, I mentioned that his backing by Oprah Winfrey would change Obama from being “Hillary Clinton’s black baby brother” into a man who could run one of the most significant presidential campaigns in American history. This is one of the few times when I enjoy being able to say, “I told you so.”

President Obama is, quite simply, the Tiger Woods of American politics: another Black man of mixed heritage, who used the power of tremendous focus, creativity, intelligence and preparation to do the impossible. Like his counterpart Tiger Woods (who happens to be a Republican), Obama went into the domain of White males and dominated in ways that simply transcended his chosen field. Similar to the way that Tiger’s greatness attracted droves of fans that’d never cared much about golf, Obama brought in millions of voters who would never have cared much about a presidential election.

I am proud of Barack Obama for the way he ran his campaign. His choice of advisors and campaign strategy has changed the face of American politics for the next 100 years. He dismantled the “Death Star Clinton Regime” through the use of innovative, daring and powerful tactics, a sound choice of advisors and lots of good old fashioned intelligence.

I am proud of Barack Obama for liberating our minds. For the first time in quite a while, millions of Black boys had a chance to see an intelligent Black man consistently profiled in “mainstream” media. This man showed our kids that you can be a “balla” without dribbling a basketball and a major “playa” without being played. Greatness is not achieved with a football, a hand gun or a microphone; it is achieved with a textbook, a college diploma and a sound economic plan.
I was proud of Barack Obama long before he became our president. I don’t need validation from the rest of America to feel good about whom we are as a people. We were just as great, just as strong, and just as accomplished and just as meaningful on November 3 as we are right now. The presidential election is essentially a popularity contest which leads to uncomfortable tradeoffs and “deals with the devil” that reduce the glitter of addictive political gold. The respect I give Barack Obama for raising hundreds of millions of dollars to get access to the Whitehouse is matched by the respect I give Dr. Julianne Malveaux for raising tens of millions of dollars to educate young Black women at Bennett College. Being President of the United States is not what makes Barack Obama a great man: He is a great man because he is a great man.

I am proud of Barack Obama for marrying Michelle, who served as one of my primary reasons for trusting him. I have a hard time imagining a man who can sleep with Michelle Obama every night and not be influenced by her beautiful mind. Michelle Obama is not a “buppy” soccer mom, Stepford Wife, or wannabe Barbara Bush. Michelle is a super sharp and relentless “sister girl”, who demands the most of her African American husband. She makes the first family as beautiful as Barack Obama makes it strong.

I am proud of Barack Obama for his willingness to take his life and career into the lion’s den. He inherits a terrible economy, an unjust war, a sickening healthcare system and an educational system which cripples our children for life. Like the first Black football coaches in the NCAA, Obama has been granted the reigns of a team with a serious losing record. Furthermore, he must bend and twist to satisfy citizens of the same country that was naïve enough to consider mediocre characters like George Bush and Sarah Palin to possibly run our great nation. I sincerely wish Obama the best as he attacks these problems, and I hope that this brilliant Black man with the middle name “Hussein” can negotiate the balance between our quest for a better world and America’s consistent commitment to anti-intellectualism.

As proud as I am of President Obama, I am also proud of America for showing that it has the ability to choose the right person for the job, instead of the right WHITE person for the job. By choosing Obama, we have shown our capacity for fairness, and how much progress we’ve made to overcome some of our racial demons of the past. The easiest thing to do, however, is to think that having a Black president is going to change the lives of most Black people. The reality is that BLACK PEOPLE THEMSELVES is going to change the lives of Black people and if we do not embrace the power of financial independence and unity, we will simply remain perpetual socio-economic slaves in the domain of a new overseer. The same way America rolled back the political gains of the 1960s, the Washington-based rewards of the new millennium could be just as fleeting.

President Obama did his job, now it’s time for us to do ours. Good luck over the next 4 years.

Boyce Watkins on The Wendy Williams Experience

Dr Boyce Watkins
www.BoyceWatkins.com

I had a relatively awkward experience this weekend during a trip to New York. I was invited to appear with my friend Wendy Williams, host of The Wendy Williams Experience. You never know where the conversation is going when it comes to Wendy, so you have to be prepared for anything. She is, however, one of the most professional hosts I work with, and her 11 million listeners give her the right to call herself the Queen of Urban Radio. She asked me why I parted ways with my ex-fiance (an amazing woman for whom I have tremendous respect), the election of Barack Obama, my feud with the socio-political terrorist known as Bill O'Reilly, the financial crisis and everything else.

Most interesting was that she asked me about DL Hughley's new CNN show, which I've been quite vocal about lately. I don't hate DL, but I feel strongly that the nature and structure of his new CNN show are quite problematic. My disappointment with DL began 2 years ago during the Don Imus scandal, during which he agreed (on Jay Leno) that the educated women on the Rutgers University Basketball team really WERE a "pack of nappy headed hoes."

Sorry DL, but that's not cool.

What made the situation on Wendy's show funniest, however, was the fact that DL was scheduled to be the next guest on the show after me! Wendy joked, "Dr Boyce, we have to get you out of here because if DL sees you, he might want to punch you in the face." But apparently DL doesn't realize that I am actually the second cousin of Muhammad Ali! I was hoping we would not have to take it to the street!

I thought I would see DL in the lobby, but he was not there yet. It was probably best that way, since I stand by every word. Cooning is cooning, and we don't need an Obama presidency reduced to a minstrel show. I encourage DL to be more responsible.

Respect to everyone reading. If you wish to listen to the show, the link is above and also at my personal blog: www.drboycespeaks.blogspot.com. Also, thousands of you are choosing to "get your money in line for 2009" by joining the Dr. Boyce Finance group for money advice. Please feel free to share this with your friends.

Boyce
www.BoyceWatkins.com

Black Finance Professor Speaks Out Against “D.L. Hughley Breaks the News"

Dr. Boyce Watkins

www.BoyceWatkins.com

Hey peeps!

The response I received from you guys on the new CNN show, “DL Hughley Breaks the News” was overwhelming. Within 20 minutes of sending out the email statement, we had an entire inbox full of messages expressing extreme disappointment in CNN and this offensive new show.

This helped me realize that we need to do something about it.

Our goal is to present an intelligent, dignified and firm response to CNN, letting them know that programming based on racial stereotypes is not acceptable. Political satire can be quite funny, but it must be intelligent, balanced and conscientious. This is not the brand of humor presented in “DL Hughley Breaks the News”, which went back to the same degrading media stereotypes and disturbing images that scholars and consumers have been upset about for decades. Senator Obama opened the door for us to see ourselves as educated, enlightened and empowered, so the last thing we need is to be readmitted to the asylum of pimps, thugs, criminals and buffoons.
A sample letter you can use to contact CNN is presented below. You can get the contact information at this link. You can also forward this link and email to anyone you believe to share your sentiments regarding how our community should respond to this painful and disappointing new show. If you wish to hear my personal comments on the topic, please click here.

Finally, don’t forget that we are going to “Get our paper straight in 2008”, so if you wish to join our group for Dr. Boyce Financial Advice, please click here.

The sample letter is below. You can get contact information for key decision-makers at CNN by clicking here. Remember: Change won’t start with Obama or McCain. Meaningful change is going to start with US.

To CNN and its key decision-makers,

As a member of the Your Black World coalition, I am writing to inform you that I found your recently released show, “DL Hughley Breaks the News” to be a tremendous disappointment. While I certainly respect CNN’s effort to develop itself as “The most trusted name in news”, I did not find the new DL Hughley show to be consistent with the degree of trust that CNN has worked to obtain with the American public.

The 2008 Presidential campaign represents an amazing landmark for change within our country by allowing an African American male to present himself to the world as a dignified and educated member of our society, an image which lies in stark contrast to media representations confining Black men to being criminals, rappers, athletes and entertainers. I found it disheartening that this progress was reversed by CNN’s decision to create a show which relied on the very same stereotypes to build a consistent stream of laughs at the expense of African Americans everywhere. The show was also degrading to those in the broader community who support the candidacy of Senator Barack Obama, and who wish to see our great country move past the deep and painful wounds created by our nation’s legacy of racial inequality.

We ask that you discontinue the show, “DL Hughley Breaks the News”, and consider a brand of political humor that is respectful to all ethnicities and shows greater appreciation for the tremendous gains made in the 2008 Presidential election. Perhaps then, CNN can regain its status as “The most trusted name in news”.

Sincerely,

The Your Black World Coalition

Your Black Enterprise: Bill Collectors and More

One of the groups that was not bailed out during the recent financial crisis has been the American consumer. Congress took care of the firms on Wall Street, but they didn’t take care of the millions of Americans forced to confront the realities of bankruptcy, foreclosure and uncomfortable confrontations with menacing bill collectors. It appears, sadly, that every man and woman must find their own way through this financial tragedy.

Bill Collectors really want their money, like the rest of us. Some of them seem to feel that it’s O.K. to resort to flat out thuggish intimidation to get their money back. That might work on The Sopranos, but it shouldn't work in real life.

Part of the reason abusive bill collectors can have their way with the public is because many citizens do not know their rights. Bill collectors prey on the uninformed in a terrible way: They may threaten to have you arrested, harass your relatives, call all hours of the night, and engage in other types of atrocious behavior to get their money out of your hide.

One woman successfully sued a rogue bill collector after he called her repeatedly with threatening language. The woman, a senior citizen, was told by the man to "Stop with the sob stories and pay your god d*m bill!" This kind of behavior is not acceptable, and bill collector harassment doesn’t have to keep you up at night.

The Federal Trade Commission states that complaints against bill collectors are rising, reaching the highest level they've seen in the past 3 years. Most of the complaints focus on vulgar language, trying to collect more than the amount of the true debt, and extra fees, such as court costs.

You have rights that can protect you from bad and malicious bill collectors. You want to keep these in mind as you work yourself out of debt:

1) There is something called "The Fair Debt Collection Practices Act". If you are not familiar with this document, get familiar with it. You can read it by clicking here.

2) A bill collector cannot contact you at work if your employer does not approve of the contact. Let the bill collector know that this is the case and they must legally stop contacting you at your job.

3) Bill collectors cannot call you before 8 am or after 9 pm. The only exception is if you give them permission to do so.

4) A bill collector can only contact your friends and family if they are trying to find a way to get in touch with you. However, some of them may do this in order to harass or embarrass you. If that is the case, you may want to tell your friends to tell the bill collector, "She does not live here and I do not know how to get in touch with her. Please don't call here anymore." Then, get the bill collector's information from your friend and reach out to them when you can.

5) You can get bill collectors to stop contacting you altogether by sending them a letter telling them to stop. You still must pay the debt, but they won't be calling you during dinner.

6) The bill collector cannot curse at you or use foul language and they must tell the truth about how much you owe. They cannot threaten to sue unless they are serious about it, and they can't touch your 401k or IRA.

7) If the bill collectors call you, you can demand that they send you a written notice of the amount you owe and who you owe the money to. If you do not believe that the debt is yours, you can write a letter to them stating that this is not your debt. They must then send you proof that the debt is actually yours.

If you feel that a debt collector has violated any of these rules, you can contact the Federal Trade Commission at www.ftc.gov. Remember that you are not powerless in this situation.

Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of Financial Lovemaking 101: Merging Asset with Your Partner in Ways that Feel Good. He does regular commentary in national media, including CNN, CBS, NBC and BET. For more information, please visit www.BoyceWatkins.com. This information does not constitute legal advice. For legal advice, please consult your attorney.

Black Money: Americans Addicted to Debt

Black Money Advice: Financial Crisis Slideshow

I am not completely sure I agree with everything that's being said on this slideshow, but I thought I would share it. One of my students sent it to me, and I it was pretty funny.

You can view the slideshow by clicking here.

Black Money, Black News, Black Finance: The Crisis Breakdown

The Financial Crisis: A Finance Professor's perspective

by Dr. Boyce Watkins
www.BoyceWatkins.com

1) FDR had it partially right when he said that "We have nothing to fear but fear itself." While we have other worries as well, the greatest obstacle to economic progress is the HUGE psychological impact of Americans watching the stock market plummet right in front of their faces. This is going to cause consumer spending, lending, borrowing and investing to freeze like a deer in stadium lights. When people stop spending, economies start dying.

2) This crisis was a long time coming. De-regulation pushes down on the economic gas, but increases the chances of an economic crash. The dramatic growth of the past 8 years was a result of the same policies that are leading to the huge challenges we are faced with today.

3) Much of the impact of this crisis is a financial illusion. A large percentage of the devaluation in stock and home prices is driven by the fact that the original value was incorrect in the first place. When prices are out of whack, they must correct themselves. While a crisis may also be a correction, a correction is not necessarily a crisis.

4) Prepare for a period of "Financial McCarthyism" in America. Many baby boomers are closing in on retirement, and scared to death. To boot, many of these individuals have not properly prepared for retirement. When Americans get scared, politicians get nasty. We will likely see some of the most Draconian legislation in history.

5) What makes this crisis such a concern is that even before the meltdown, the economy was already quite fragile. With soaring gas and food prices, the economy was the #1 issue on the minds of most Americans. The decline of many financial services firms was, for the most part, a logical continuation of the fact that many homeowners were defaulting at the start of the year. This crisis is most certainly going to shift the political landscape and might give us our first Black president.
Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of the forthcoming book "Black American Money". He does regular work in national media, including CNN, ESPN, BET and CBS. For more information, please visit www.BoyceWatkins.com

Dr Boyce Watkins, Tom Joyner Talk Money

Dr. Boyce Watkins

www.BoyceWatkins.com

Hey peeps,

Tom Joyner and I are going to talk Personal Finance and Money on 10/13 at 6:30 AM EST. I was also invited to discuss the liquidity crisis on Rev. Jackson's show. I've been doing most of my commentary on NPR and non-black media, so I was very happy to have the chance to discuss the Black perspective on this important issue. In fact, the article below addresses something that I feel has been missed: How this crisis impacts Black America.

If you want to join our money group to receive regular commentary on money and finance, please click here.

Valencia Roner, a very talented radio show host, did a thought-provoking show with me on the liquidity crisis. You can listen to the interview by clicking here.

The Liquidity Crisis of 2008: What Black People Should Do Now

By Dr. Boyce Watkins

www.BoyceWatkins.com

Most of you have been watching politicians shuck and jive in predictable ways to try and manage the even more predictable liquidity crisis that has terrorized our financial markets. As a supporter of Senator Barack Obama, I am hopeful that this will serve as the final signal to America that a Harvard graduate with extensive Economics training might be a better choice than a mediocre student who claims to know nothing about the economy. I won’t even mention Sarah Palin, who now makes George Bush the runner-up in the “Unfit to Manage a Burger King” contest. I am not big on Obama-mania, but I tend to be big on common sense. It is also telling that many Americans would sacrifice our nation’s future in order to avoid the discomfort of seeing a Black man in the White House. OK, let me shut up before I say what I REALLY think.

This is not about the pale one called Palin or John McCain’s Black Extermination Plan for criminal justice. It is about USOBA. USOBA doesn’t stand for the “United States of Obama”, rather, it stands for the “United States of Black America”. This is about finding ways to manage, contextualize and internalize this crisis so we can figure out what to do right now. Neither McCain nor Obama is going to take care of you and your family, since politicians tend to take care of themselves (note Treasury Secretary Henry Paulson’s prior affiliation with Goldman Sachs will likely drive his desire to save his Wall Street buddies). The truth is that we are all Presidents of our own households, and as President, your job is to shield your household from the impact of FICA - The Financial Ignorance Crisis of America. Here are some quick thoughts:

1) The government bail-out doesn’t necessarily mean you should bail-out of the Stock Market: If you are invested in the Stock Market, I would strongly consider staying there, especially if you are under the age of 50. In fact, you might want to buy more stocks. Warren Buffett (a man who is sometimes wrong) had it absolutely right when he said that you should “be greedy when everyone else is cautious and cautious when everyone else is greedy.” Drops in the Stock Market can be the best times to invest because the historical data clearly shows that when the US Stock Market declines, it eventually comes back up. Personally, I plan to use this market decline as an opportunity to expand my portfolio. But I am not going to try and pick individual companies: I am going to buy into a diversified mutual fund that spreads my money around the entire global economy.

2) Paying off credit card debt is one of the best investments you can make: Which would you prefer? To possibly earn 10% interest in an investment in the Stock Market or to DEFINITELY save 18% per year on that high interest credit card in your purse? Remember that money SAVED is money EARNED. Get rid of the bulk of your high interest debt before you even consider investing in the Stock Market or anywhere else.

3) Change the game: With all of Barack Obama’s speeches about how Black men need to learn personal responsibility, he may have wanted to save that speech for the rest of America. The typical American consumer has been incredibly irresponsible with spending, saving, borrowing and investing habits over the past 20 years. I grow sick of seeing one article after another attempting to argue that African Americans have a monopoly on irresponsible financial behavior. Don’t believe the hype – ALL OF AMERICA has a problem with financial choices. The goal is not for you to emulate the behavior of the rest of America….it is to set a new standard. Black people can be quite good at saving money. Many of our grandmothers could support a household with two nickels and a hot dog bun. Perhaps we can tap into our natural survival instincts to get us through this mess.

4) This crisis might be the tip of the iceberg: I agree with my respected colleague Paul Krugman at Princeton, who is the only other commentator I’ve heard mention that recent financial problems may be nothing more than a symptom of more serious fundamental issues in the US economy. All I could say when I heard that was “Amen”. Without going into much detail, I can say that it is time to remember that old saying “Learn to save your money, so your money can save you.”

5) Don’t be “scuuuurred” (translation for the uppity among us: “Don’t be afraid”): This is NOT the end of the world. The financial systems are not going to melt down. This is not likely going to be the start of any kind of Great Depression. Truth be told, the Black community has been in a Great Depression for about 400 years! We have survived worse, and just because the economy struggles, that doesn’t mean you have to struggle along with it. Remember that our greatest challenges are usually our greatest opportunities for growth. Learn from this experience, grow from it, and we will continue to move forward.

Your financial liberation is part of your social and spiritual liberation. Let’s use the shake-up as an opportunity to shake ourselves off the plantation. I’m tired of someone else owning me.

Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of the forthcoming book “Black American Money”. For more information, please visit www.BoyceWatkins.com.

The Real Causes of the Financial Crisis

By Dr. Boyce Watkins

www.BoyceWatkins.com

I am no fan of President Bush. I made fun of the silly man long before it was popular to do so. However, in this case, I have to be one of the first to stand up and say that you can’t put all the blame for this financial crisis on his back. The War in Iraq? Yes. Hurricane Katrina? Absolutely. Damn near everything else? Sure, why not? But this financial mess should not, as our leading presidential candidates want you to believe, be slapped on the political tomb of Mr. Bush. That doesn’t mean he didn’t play a role, but Bush was more of a supporting actor in this horror story, not the star.

The horror story to which I am referring is that little news event surrounding a $700 Billion dollar bailout being sponsored by the Office Underwriting Corporate Hedonism (OUCH), also known as the Federal Reserve. Now, this is a different brand of corporate welfare, as taxpayer dollars are not being given away. At worst, taxpayer resources are being put at risk, as the Federal Reserve is making huge capital allocations to some of the nation’s most troubled financial institutions. As a lender of last resort, the Fed is responsible for investing money where the rest of us certainly would not.

To put it in layman’s terms, this is like using your savings account to loan money to an uncle who was fired for drinking on the job. Sure, he has been responsible in the past, and will likely be re-employed, but his recent behavior leaves you a little concerned. In the same light, taxpayer dollars in a financial crisis are like little soldiers being deployed to provide stability to the deadliest parts of the world. Many soldiers will come back home, while quite a few are going to be killed. Depletion of our government capital is quite likely in this scenario, for solving a global liquidity crisis with available reserves can be like using a kitchen sponge to soak up the ocean.

With that said, let’s discuss what this crisis is really all about. We must first understand the nature of our financial institutions. Banks and other entities providing credit to the consumer are a lot like drug dealers (both legal and illegal drug dealers are included in this example). Drug dealers give you something that you definitely want and even think you need. The drug (cash) is powerful, makes your problems go away and has a long-term consequence if you abuse it. That’s where the government steps in. The role of government is to regulate our financial drug dealers to ensure that they are not encouraging substance abuse from the users (American consumers), and to also ensure that consumers are relatively well-educated about the consequences of using the drugs (that’s where terms like “predatory lending” come from).

In order to make the economy appear strong, our financial drug dealers were allowed to run wild. Loans were being made to people who could not afford to pay them, causing the prices of homes to be bid out of control (it’s easier to bid a higher price on a home when your banker loans you all the money you need). Ultimately, consequences were felt when millions of Americans suddenly realized that they could not repay the amounts listed on the dotted line. This situation is not much different from what we are now seeing in the pharmaceutical industry, in which drug companies are using ads to encourage patients to walk into the doctor’s office and ask for whatever drug they saw on TV the night before (you hear that Rush Limbaugh?).

Now, before you go and burn down the nearest bank in your neighborhood, realize that it takes two to Tango. As Bill Cosby (perhaps naively) believes, “making good decisions makes everything ok.” We must remember that if all people made good decisions, drug dealers would have no customers. The truth of the matter is that in spite of the fact that our institutions and governmental authorities have failed us, one of the greatest culprits in this mess is the financial greed and myopia of the American consumer. We as Americans are among the most gluttonous and short-sighted consumers in the world. We borrow money to go on vacation without thinking twice, we don’t save for retirement, and we tend to do P Diddy/Paris Hilton imitations on every shopping trip. Money is our drug and we all rejoiced when there were more drug dealers in our neighborhoods.

So while Barack Obama and John McCain want to attack the clearly unqualified man in the White House over this mess, the truth is that we mostly have ourselves to blame. This crisis affects us all, and the corporate problems are nothing more than an aggregated manifestation of very bad individual decisions. Simultaneously, our legislators must be held accountable when ensuring that corporations are given incentives to engage in responsible lending. Perhaps a hybrid of the Cosby model is appropriate here: let’s get the drug dealers out of our neighborhoods, but let’s also make our neighborhoods a bad place to sell drugs.

Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of the forthcoming book “Black American Money”. He does regular commentary on CNN, CBS and NBC. For more information, please visit www.BoyceWatkins.com.

Your Black Money: The Fed is Wrong About Companies

By Syreeta L. McNeal, CPA, JD


Should the United States federal government bailout companies like Freddie Mac, Fannie Mae, Lehman Brothers, Merrill Lynch, and American International Group (AIG) or should some level of responsibility be given to the executive leadership of these companies?

Every time I view the latest news on our federal government's bailout of these companies, I wonder what mess is our government covering up on how they failed to regulate unethical business practices.

It appears that the Enron, Worldcom and Arthur Andersen saga of 2000 is happening all over again. In response to this prior fiasco, the federal government passed The Sarbanes-Oxley Act of 2002. This legislation was intended to establish standards for all U. S. public companies' board, management, and public accounting firms. The caveat is that this legislation does not apply to privately held companies. The legislation established the Public Company Accounting Oversight Board (PCAOB) overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies.

As recent news reports show that Balance Sheet manipulation occurred with the growing list of companies seeking bailout from federal government, bankruptcy protection or for companies to acquire them to stave off financial ruin, it is time for the federal government to finally advocate emphasis on a company's Statement of Cash Flows as the basis for investment and financial strength for companies.

Most accountants know that analysis of a company's Statement of Cash Flows is the only way to ensure financial stability. However, most companies and investment analysts want to emphasize the amount of revenue generated on the company's Income Statement or the amount and value of assets they have listed on their Balance Sheet. Generally, a company's Income Statement and Balance Sheet is where manipulation can occur by key executives and in my opinion, these financial instruments do not truly show the financial strength of a companies operating business.

If the federal government really wants to protect the tax payers from having to bailout faltering company's manipulation the public's confidence, it is time for the federal government to start emphasizing to companies and Wall Street that the Statement of Cash Flows will be the basis of analysis for investment purposes. But, will the federal government do this? I am not betting on it, but hopefully advocating for it. As tax payers, we should too.

Source: http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act


Legal Disclaimer: This site provides information about the law designed to keep readers informed of pertinent legal matters affecting the African-American community. But legal information is not the same as legal advice -- the application of law to an individual's specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer in your specific location if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation.

Government Bailouts and Financial Irresponsibility

Dr. Boyce Watkins
www.BoyceWatkins.net

FYI to the fam: I am going to be on the Mike Gallagher Show Friday morning at 10:30 am EST. I don't know much about this guy, but apparently, he is one of the top 10 hosts in the country. The show likely comes on in your city (whatever station the conservatives appear on, I don't listen to them). Monday, I am going to do some commentary for The History Channel on Black Leadership. I'll keep you posted on when that is going to come out.

As I work with my Finance students (you are welcome to hang out with us on our blog at www.DrBoyceFinance.wordpress.com), the economy has been on my mind this week. So, I have shared some thoughts on Financial Leadership in the article below. As I've communicated in the past, strong Financial Leadership in the Black community is the most efficient way for us to fulfill Dr. King's dream. Equality will not come from Capitol Hill....it will come when we have Capital to pay the Bills.


Crash and Burn 101: A Finance Professor’s Take on Our Economy
By Dr. Boyce Watkins

www.BoyceWatkins.com

The United States is respected throughout the world for its powerful economy. We are also, unfortunately, becoming known for our arrogance and financial irresponsibility. During my tenure as a Visiting Scholar with the Center for European Economic Research, one of my colleagues could not understand why American consumers earn more than Germans and pay less in taxes, but have savings rates less than 20% of the average German citizen. Basically, there is a degree of irrational overconfidence and financial carelessness that comes from never having to experience a deep recession first hand. This explains why most baby boomers are not ready for retirement, and why young people spend and borrow like drunken sailors.

American consumers aren’t the only pilots in our crashing economic airplane. U.S. Monetary policy, headed by Federal Reserve Chairman Ben Bernanke, is both art and science, and the apparent success of Alan Greenspan has forced any subsequent Fed Chairman to become a Financial Da Vinci. The saddest part of the Greenspan era, however, is that his choices in the 1990s caused major “speculative bubbles” (inflated asset values in homes and stocks) that have started to burst at the end of this decade. Our leaders create and dictate policies that impact the choices of companies and consumers. Financial leadership has taken the American consumer on a frightening ride, and this is only the beginning.

The US economy saw its financial chickens coming home to roost in 2008, as the recent recession and market downturns have been predicted for years. These “financial chickens” included excessive spending by American consumers, mixed with irresponsible borrowing and lending on the part of both individuals and banks. Personal responsibility is thrown out the window when discussing wealthy and so-called “mainstream” Americans, as financial leaders are called upon to bail out the banks, the consumers and everyone else.

The government bailout package for 2008 has, thus far, included a massive spending bill, one that featured tax refunds and support to help consumers keep their homes, even if they were the causes of their own demise. Another set of “financial steroids” being employed have been the strong and consistent cuts of the Federal Funds rate by Federal Reserve Chairman Ben Bernanke. Bernanke has become known as “Bold Ben” by members of the media, who are consistently stunned by the Chairman’s massive and powerful attempts to control the economic downturn. The latest moves have included the $85 Billion dollar bailout of AIG, an insurance company that has apparently been deemed “too large to fail”. If only our government had the same compassion for the thousands of small businesses across America struggling to find capital to meet short-term financing needs.

Republicans, known for being fiscally responsible, have created budget deficits our country has never seen. Between the Iraq War and the 2008 recession, spending continues to go up, even when tax revenues are expected to go down. The ready availability of additional government borrowing to support our massive spending bills has our financial leaders behaving like teenagers in possession of a “really awesome” American Express card. Like the “blinged out” athlete who thinks his wallet will never be empty, our country may wake up to a grave financial nightmare.

Continuously cutting interest rates may provide additional stimulation to the economy, but the problem is that cutting interest rates, allowing the value of the dollar to slide and frivolous government spending is a recipe for serious, horrific and uncontrollable inflation. Inflation is a Pandora’s Box that doesn’t close nearly as easily as it opens. You think the economy is bad now, you haven’t seen how bad it can get in the face of stagflation (a declining economy with out of control inflation). It’s hard not to feel that “Bold Ben” and “Big Bad Bush” aren’t gambling with our children’s futures and current taxpayer resources.

Sometimes, when you party too hard, you are forced to deal with the hangover. Americans have been blessed with a financial celebration that has lasted over a decade. For the past 15 years, we drank straight out of the liquor bottle and danced with lamp shades on our heads: not saving effectively, spending like crazy and borrowing to cover our financial insanity. But rather than simply allowing the party to end and letting everyone sober up, our financial leadership has taken on the irresponsible behavioral norms of American consumers. Their excessive rate cuts and spending increases have kept us pumped up on Financial Dope in order to avoid the impending crash.

This is not solid financial leadership, and something has GOT to give. Hopefully our leaders will get it.



Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of “Financial Lovemaking 101: Merging Assets with Your Partner in Ways that Feel Good.” He is a regular commentator in national media, including CNN, CBS, NBC, BET and ESPN. For more information, please visit www.BoyceWatkins.net or DrBoyceFinance.Wordpress.com.