Dr. Boyce Watkins: How Does Prosperity Gospel Work Anyway?

by Dr. Boyce Watkins, Syracuse University, Your Black World 

Nearly every African American knows just how important the black church is to our community. We also know about "prosperity gospel," the act of preaching about God within the context of wealth building. I admit that this form of faith is a bit odd to me. I am a Finance Professor and I become confused when my pastor talks about money more than I do. The saddest truth is that it's hard to tell the difference between a pastor and a pimp: Most pastors aren't pimps, but any pimp could be a pastor. The same skill set is required in both professions.

My father is a preacher, but he almost never preaches about money. I've never heard him asking for money on the pulpit, or mentioning that giving money to him is one of the keys to gaining access to heaven. But I don't presume that my father is right about all things, and given that I write about money on a regular basis, I have gained an appreciation for what financial resources can do to enhance your life. Also, one must be aware of the pragmatic realities of running a church: You have the building fund, bills to pay every month and any community service initiatives that the church chooses to pursue. The proper use of money can certainly enhance your ability to do God's work.

 

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Fenorris Pearson: What Matters at the Top of the Corporate Ladder?

by Fenorris Pearson – CEO Global Consumer Innovation, Inc

Despite a growing number of women and minorities in the workplace, the directors of corporate boards remain mostly white and male, according to a new report on Fortune 100 companies. Women and minorities together account for less than a third of the directors on more than 60 percent of the boards examined, according to the report. African Americans represent 7% of all corporate board members.

In spite of these grim statistics, there is a great deal of hope for the possibility of women and minorities sitting in positions of authority. The more you perform and the higher you go up the corporate ladder, the less color matters. The truth is that corporations are seeking individuals who can enhance the bottom line. A good corporate manager doesn’t care if you are black or white, as long as you deliver the green.

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Dr. Wilmer Leon’s Remarks about the Pending Sale of Ebony Magazine

Quick comments from Dr. Wilmer Leon, Political Science Professor – Howard University 

 

In this challenging time for print media, the historic jewel of African American periodicals, Ebony (like so many of our ancestors) is on the auction block. What was once a staple in so many African American homes is now struggling for its survival as many question its relevance.

During segregation Ebony and Jet magazines were key sources of information for the African American community about the community. With integration, too many of us left our communities, churches, and culture behind in order to assimilate into the dominant culture. With that, for too many, Ebony no longer reflects the community they live in; aspire to live in or a lifestyle that they see as relevant.

I have always felt that Ebony needed to incorporate more relevant political/economic/business information, analysis, and content to appeal to the growing African American middle and upper class. Life style and entertainment is great but that needs to be supplemented with the relevant information to maintain that life style. It's a difficult mix to maintain but necessary.

Selling Ebony/Jet does not mean that those magazines will cease to exist but with ownership comes control. The sale of Ebony/Jet goes back to the question of who will be left to define and interpret the issues that are relevant to the African American community and who will control its imagery. I don't know that Viacom has that mission or interest.

John H. Johnson said that Ebony was founded to "project all dimensions of the Black personality in a world saturated with stereotypes. We wanted to give Blacks a new sense of somebodiness, a new sense of self-respect. We wanted to tell them who they were and what they could do. We believed then--and we believe now--that Blacks needed positive images to fulfill their potentialities." The world continues to be saturated with those stereotypes and the community still needs positive images in order to fulfill its potential.

Dr. Wilmer Leon is the host of the Sirius/XM Satellite Show “On with Leon.”  To contact Dr. Leon for media requests or speaking engagements, please click here.

Dr Boyce Watkins: Don’t Kill Tavis Smiley Over Wells Fargo

 

by Dr. Boyce Watkins, Your Black World, AOL Black Voices 

When I read about the predatory lending allegations against Tavis Smiley and Wells Fargo, I wasn't surprised. Not because I feel that Tavis is some kind of crook, but because economic downturns are usually when everyone's dirty laundry gets aired out. The high flying 2000s were a decade of extravagance, overspending, easy money and troubled relationships. The party was bound to end. Smiley's party has ended with Wells Fargo, as the company has been accused of using Tavis Smiley and financial expert Kelvin Boston to convince African Americans to sign on to loans that turned out to be predatory. Neither Boston nor Smiley is willing to disclose the amount they were paid for the service, but I'm sure it wasn't chump change.
I've been open and honest in my critiques of Tavis Smiley in the past, but I give credit where it's due. I've always felt that Tavis Smiley is a man who works out of a sincere respect and appreciation for the black community. He is not out to hoodwink, swindle or hurt us, at least not deliberately. At worst, Smiley is guilty of being caught in a situation that he may not have fully understood.
Although I agree with the black community's decision to hold Tavis Smiley accountable for his actions, I want us to be cautious of going overboard in our judgments. Here are 5 things I want to say about Tavis Smiley:

Click to read.

The President Will Be Focusing on Auto Industry

President Obama has dropped the idea of appointing a single, powerful “car czar” to oversee the revamping of General Motors and Chrysler and will instead keep the politically delicate task in the hands of his most senior economic advisers, a top administration official said Sunday night.who insisted on anonymity.

The official also said that Ron Bloom, a restructuring expert who has advised the labor unions in the troubled steel and airline industries, would be named a senior adviser to Treasury on the auto crisis.

The unexpected shift comes as G.M. and Chrysler race to complete broad restructuring plans they must file with the Treasury by Tuesday. The companies’ plans are required to show progress in cutting long-term costs as a condition for keeping their loans.

The administration official said the president was reserving for himself any decision on the viability of G.M. and Chrysler, both of which came close to bankruptcy before receiving federal aid two months ago.

One of President Obama’s top advisers said Sunday that the administration had not ruled out a government-backed bankruptcy as a means to overhaul the automakers.

“We’re going to need a restructuring of these companies,” the adviser, David Axelrod, said on “Meet the Press” on NBC. He added that a turnaround of the companies would “require sacrifice not just from the auto workers but also from creditors, from shareholders and the executives who run the company.”

 

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Technorati Tags: president obama,barack obama,president barack obama,black news,african american news,black politics,african american politics

Black Wealth: Senate Finally Passes the Stimulus

The U.S. Senate gave final approval Friday to a $787 billion recovery package that President Obama hopes will help boost an economy in freefall with a combination of government spending and tax cuts and credits.

Sen. Sherrod Brown speaks to Senate Majority Leader Harry Reid at right on the Senate floor Friday.

Approved earlier by the House, the plan -- which went through multiple permutations as it bounced back and forth on Capitol Hill over the past week -- now goes to Obama's desk, where he plans to sign it into law by Presidents Day.

Spending in the package includes about $120 billion for infrastructure -- new projects repairing bridges, roads, government buildings and the like -- more than $100 billion for education and $30 billion on energy-related projects that Obama says will create "green jobs."

More than $212 billion goes to tax breaks for individuals and businesses, and another $267 billion is in direct spending like food stamps and unemployment benefits.

The Congressional Budget Office has predicted that the plan will create between 1 million and 3 million jobs.

Most individuals will get a $400 tax credit, and couples will get $800.

The vote by the Senate took several hours longer than a simple roll call of its 100 members generally would. Sen. Sherrod Brown, a Democrat from Ohio, attended a wake for his mother until about 8 p.m. Friday.

Voting began about 5:30 p.m. Then, the Senate chamber sat nearly empty until Brown arrived to vote about five hours later.

He was flown from Ohio to Washington on a plane provided by the White House, which said no commercial flights were available that would have allowed Brown to cast a vote and return to Ohio in time for his mother's funeral Saturday.

Click to read

 

Technorati Tags: black news,african american news,black wealth,african american wealth,barack obama,president obama,stimulus package

Big Test on Stimulus for Barack Obama

A contentious debate over a "Buy American" provision in the economic stimulus package poses an early test for President Obama on both domestic politics and foreign policy.

The Senate this week is considering an $885 billion bill designed to help mend the ailing economy, which requires all "manufactured goods" purchased with stimulus money to be made in the United States. The House already has approved a narrower bill mandating the use of domestic iron and steel.

To supporters, including labor unions that helped the Democrats retake the White House last year, a "Buy American" requirement is just common sense at a time of economic crisis and rising unemployment. Factories have been hemorrhaging jobs for years; manufacturing employment is now 12.9 million, down from 17.2 million at the end of 2000. If Congress doesn't insist upon the use of U.S.-made materials, taxpayer funds could line the pockets of European or Chinese workers rather than hard-hit Americans.

 

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Technorati Tags: african american money,african american wealth,black money,black wealth,barack obama

Minority Homeowners Lost $213B during SubPrime Lending Crisis

The social advocacy group United for a Fair Economy just released a study stating that the cost of the mortgage crisis has been $213 Billion to minority groups.  The cost was calculated over the 8 years of the Bush Administration.

"Millions of African Americans lost their homes as a result of predatory lending and complicated contracts," says Dr. Boyce Watkins, Finance Professor at Syracuse University.  "This was a double whammy for senior citizens, including my own grandfather."

The report was entitled "Foreclsure: State of the Dream".  In fact, the study concludes that the impact of the crisis on the Black community was "the most massive loss of wealth for African Americans in U.S. history."

 

Technorati Tags: black money,black wealth,black enterprise,african american money,african american wealth,black home ownership

Black Hair Is Not a Black Business

The Black Hair industry is a multi-billion dollar industry. This industry has created other revenue generating vessels such as, conferences, schools, distribution, competitions, marketing, and even research. With an industry that is so huge and driven by the black dollar, one would expect that this industry would be under the direct control of those that make it successful, the black race. However, it is not. Though blacks still control many of the hair salons and barbershops, there is still a major disparity in many of the other businesses within this industry. Plus, recent trends have begun to emerge in the marketplace that threatens the ownership of those two entities. There is a new business model for salons, Korean-Owned and Black-Operated. This new model is growing rapidly and becoming a success among the community. While customers can continue to receive services from a familiar black stylist, the dollar ultimately goes to the Korean community.

It’s absolutely not a bad thing that Koreans are becoming fierce competitors and business owners in this black industry, so standing on the sidelines boycotting these establishments or calling for them to discontinue is a way that further perpetuates the blacks’ “right to survivorship” thinking. Blacks should not expect to be able to merely sit on a golden egg that was handed to them and not expect others to want a piece of it. The golden egg must be protected and guarded like the lion guards its kill from the hyena. Since the system we live under a capitalist system, the way a person or group rises to great wealth and sustainability is through competitive edges. Is this true? The retail segment of the black hair business is another entity that works to cipher the dollar from black community and be sent elsewhere. After research of over 800 black served beauty supply stores, we uncovered an ownership base of less than 5%. Of these same stores during a 6-month evaluation we found more than 97% of black consumers.
Is this a huge snowballing problem that should be addressed? Do blacks have the resources and opportunities within their communities but are simply not harnessing these opportunities? The problem of a low number of retail stores does not begin there. It begins at the distribution level. There is still a significant amount of black manufacturers of products but once these products leave the black manufacturers, they are placed in the hands of Korean distributors then the problem begins. Once the Korean distributors get a hold of the products they do two things: 1. They selectively distribute the products to retailers and sometimes at different prices. 2. They study the black products and soon create prototypes and begin marketing these prototypes to their huge Korean retailer base. Lucky White, CEO of Kizure Products, has boasted this as being one of her major dilemmas in her business slowdown. She is not only being competed against by other equipment manufacturers, the distributors are acting as lobbyist for her competitor.

In an industry that resulted in billions due to pioneer, Madame C.J. Walker, a black woman born into poor conditions in the early 20th century, one would expect the blueprint to this industry to be studied and executed by blacks across America but sadly this has not been the case. Why? It is not as simple as setting up shop and waiting for high profits anymore. Retail storeowners are facing many competitive obstacles such as capital, a large selection of products, and pricing. In most cases, getting an account with a Korean distributor as a Black person means you face an uphill battle. First, the distributor must approve your location before agreeing to supply your store. If they agree, now payments must be made in cash upfront with no delayed terms of payment. This is perhaps the hugest obstacle a new black storeowner faces. Then, this is a rippling effect. If distributors are consuming the capital instantly, then there is less available for the new black owner to obtain an abundant variation of products. Lastly, the pricing advantage many Korean stores are able to provide for the black consumer keeps them coming back over and over again, showing very little regard to a black storeowner down the block. This pricing advantage is also a resource for the Koreans because of the relationship they have with the Korean distributors.

However, the nail has not yet been driven into the coffin of the black lockout of their stake in this industry. I am living proof. I emotionally entered into this industry when I was thrown out of a Korean-Owned beauty supply store while I was attempting to make a huge purchase for my salon. The owner felt uncomfortable with me browsing and being selective. His frustration grew to rage so he then threatened me with a golf club eventually throwing me out of his store. Like many black men, I didn’t know of the huge lockout that took place in this industry until I had already signed a $5,000 lease for a location. My uphill battle began as distributors wanted cash and many didn’t even return my phone calls. Little did many of them know my persistence is abnormal. I took daytrips on airlines to physically walk into locations in New York and Miami until I got what I wanted. My goal was to give our community options in shopping while receiving the respect they deserved. My one location turned into three in 18 short months. Trial and error was my ally. As I learned, I perfected. Here a few things that an aspiring owner can implement.

Communicate with other owners – Find other owners willing to communicate with you in your market and even throughout the country. They are more than willing to share valuable information with you and you should do the same.

Automate the Store – In this fast-paced era, do not rely on spreadsheets and manual inventory tracking. This can slowdown your customer fulfillment process and tie up valuable time that could be used elsewhere.

Be a competitive and creative owner – Do not do what the next guy is doing, do what he isn’t. Establish store niches.
Establish Non-Competitive Clauses – Secure your market share within your mall at the least. Do not leave the gate wide open.

Manage the Cash Effectively – From your gross, pre-allocate percentages for capital expenditures, marketing, taxes, procurement, payroll, etc and have different bank accounts for each one with the monies being deposited systematically. Do not rely on self to divvy up or disburse the funds as you receive revenue.

Form Alliances Outside the Black Hair Industry – I once went to a children’s theme park with my sons and discovered that a local pizza franchise provided the pizzas for the business at a discounted rate. These opportunities exist for beauty storeowners as well. I established plenty. One place is funeral homes.

Seek Consulting – Never think you know it all. I had two beauty storeowners that acted as my mentors for the first year. I compensated them for intense assistance but for quick advice they were glad to help. Expect nothing for free. Allocate funds for this too.
Location, Location, Location – Do not pick a convenient location for you, pick a convenient location for the customer. There are moneymaking opportunities even when there is an existing beauty store. Don’t be afraid of the competition. The way you operate may be the way the customers in that market prefer.

Though I have highlighted distribution as the component needed, it is not the way to launching strategic efforts, and neither is boycotting. Building up the amount of black-owned retail stores is the first step in a strategic plan like this. The demand must first be created if a black distribution plant is to be successful. The black hair business is a cash cow but in its current state the cow is jumping over the moon with the moneybag heading to other communities.

Devin Robinson is the author of Taking it Back: How to Become a Successful Black Beauty Supply Store Owner who resides in Atlanta, GA. Visit his website athttp://www.takingitbackblack.com/.

Technorati Tags: african american wealth,black business,black money,black wealth

Banks Take Heat for Using Fed Funds to Hire Foreign Workers

Banks collecting billions of dollars in federal bailout money sought government permission to bring thousands of foreign workers to the U.S. for high-paying jobs, according to an Associated Press review of visa applications.

The dozen banks receiving the biggest rescue packages, totaling more than $150 billion, requested visas for more than 21,800 foreign workers over the past six years for positions that included senior vice presidents, corporate lawyers, junior investment analysts and human resources specialists. The average annual salary for those jobs was $90,721, nearly twice the median income for all American households.

The figures are significant because they show that the bailed-out banks, being kept afloat with U.S. taxpayer money, actively sought to hire foreign workers instead of American workers. As the economic collapse worsened last year — with huge numbers of bank employees laid off — the numbers of visas sought by the dozen banks in AP's analysis increased by nearly one-third, from 3,258 in fiscal 2007 to 4,163 in fiscal 2008.

 

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Technorati Tags: black money,african american money,black wealth,african american wealth,black investing

The Financial State of the Middle Class: President Obama Speaks

Technorati Tags: barack obama,black men in america,african american men

Finance Guru Dr. Watkins Says Economic Downturn Could Be A Good Thing

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

I hate being the doctor who has to tell the patient he has cancer, but the truth usually sets you free (or so my mother told me): We are in the midst of an economic bloodbath. It’s tough to argue that an economy which shrinks by an annualized rate of 5% is still healthy. It’s hard to tell someone that 7.2% unemployment, with the most job losses since 1945, is a good thing. A 4,000 point drop in the Dow is nothing to sneeze at, even if you have plenty of tissue. Times are tough, we know that.

But if we focus hard enough, we might be able to find a few bright sides to all this. With hopes that no one chooses to kill the messenger, I am going to give it a shot.

1) It could always be much worse.
The United States has, according to some, the strongest economy in the world. Our economy could shrink like Rush Limbaugh’s body on drugs and still be disgustingly rich compared to the rest of the world. Don’t believe me? Consider the “fast-growing” Chinese economy, the one that everyone thinks is going to outpace the United States in the next few years. Our annual tax revenues are nearly 4 times greater than China’s ($2.5 Trillion vs. $670 Billion) and they have over 4 times more people than we do (300 million vs. 1.3 Billion). In other words, our per capita tax receipts are over 16 times greater than China’s. So, we’re far better off than most of the world, even when we’re broke.

2) If there were ever an argument for getting out of Iraq, this might be it.
It’s hard to declare war on random countries if you don’t have the money to do it. War is big business and attacking other countries is a huge financial investment. If you don’t think war is about money, then you may want to take a couple of Political Science and History classes. Perhaps these troubles at home will keep us from creating trouble abroad, since Americans have lost patience with irresponsible, arrogant war-mongering. The Obama stimulus plan is asking for over $800 Billion dollars to boost our economy. We’ve already spent nearly $600 Billion in Iraq. Rather than declaring War on Terror, President Obama has declared War on the Recession, which seems to be a far better investment.

3) If you want to buy cheap stocks or real estate, this is the time to do it.
When the market rises, everyone wants to buy stocks. People forget that you shouldn’t buy stocks when prices are high, you buy when the prices are low. Companies with plenty of cash are grabbing investment and real estate bargains that were hardly available a year ago. You should be doing the same if you can afford to do it. Investors who purchases stocks after major market declines tend to do much better than those who buy during booms. You hear me Warren Buffet?

4) Struggle makes us FOCUSED.
Although I tend to be a hardcore capitalist, a part of me misses the activism of the 1960s, when people cared about more than making a dollar. OK, I wasn’t around in the 1960s, but I’ve watched enough old movies. Going through tough times not only teaches one to pursue a higher purpose in life, it also leads individuals to more carefully scrutinize the state of affairs in our government. In fact, I dare to argue that the financial crisis was just what Barack Obama needed to secure his election over John McCain. Economic prosperity allows us the luxury of choosing our politicians based on silly issues, like gay marriage (as we did in 2004). When we are worried about putting food on the table, we look beyond the silliness and choose the most qualified and most intelligent person for the job (after ensuring that he knows Africa really is a continent). Finally, tough economic times make you more responsible in your own money management, as the threat of financial insecurity keeps us all on high alert.

Those are my points, so again, please don’t kill the messenger. I certainly do not celebrate a weak economy, but I am a firm believer that focusing too much on the door that shuts keeps us from appreciating the ones that just opened. There’s always light at the end of the tunnel, a pot of gold at the end of every rainbow, and….well, you get the point. It’s the toughness of tough times that make the good times good. Keep hanging in there, it’ll be ok.
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://www.boycewatkins.com/.

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


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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.