Allstate, American Funds : Misleading Advertising

Even after all the current financial market and investment related issues that have swept the market, I keep encountering advertising and marketing propaganda from investing, insurance, banks, and related financial companies that are nothing short of misleading - if not plainly incorrect or impossible.

Allstate (Allstate Insurance Company - NYSE:ALL)
The first example of misleading advertising I want to point out is from Allstate Insurance Company / Allstate Life Insurance Company. I was reading the February 2008 issue of National Geographic, and noticed the Allstate advertisement that occupied the entire back cover of the magazine.

This advertisement was about women, and how the average woman spends 11 years out of the workforce taking care of family - and, how this left the average woman without enough retirement money, due to missed earnings and corresponding missed 401K contributions during the same time. I am OK with this argument in concept, but where it fails is the specific numbers that Allstate provides in the advertisement. I challenge them to show me some real statistical proof of this following statement they make:

"Unfortunately, those 11 years out of the workforce put a woman even further behind, costing her an average of $659,139 in earnings."

YEAH, RIGHT! What a ridiculous statement or assertion! So, Allstate, you are trying to tell me, and the rest of the population, that the average working woman is making $60,000 per year!? This is impossible. And this utterly false statement follows a sentence (of your own writing) where you state in the same ad: "Fact is, women are still earning less than me do...". So, by that same logic, Allstate is telling us that the average man obviously earns substantially more than $60,000 per year!? ABSOLUTE FABRICATION.

Let me at least cite a source for my own assertion that Allstate is utterly full of it with this misleading ad of theirs. How about information from the US Census Bureau:

In 2007, the median annual household income rose 1.3% to $50,233.00 according to the Census Bureau. The real median earnings of men who worked full time, year-round climbed between 2006 and 2007, from $43,460 to $45,113. For women, the corresponding increase was from $33,437 to $35,102.

Now, could it be that the primary distortion that Allstate is using to inflate their case for whatever product/services they are selling has to do with the use of AVERAGE vs. MEDIAN. Allstate is asserting that women, on average, make nearly twice as much per year as the MEDIAN earnings for women. But, if that is their game (using Average vs. Median), it is just that - a statistical abuse to mislead.

Fact is, if you throw Oprah's earnings, and those of a few other top 1%+ earners, the AVERAGE earnings are skewed substantially. But, the true likelihood that an "average" woman in America is missing out on making $66,000 per year is statistically incorrect. I guess Allstate did not feel that 11 years of missed earnings, times the median of $35,000 (for a total of $385,000) was shocking enough to sell their product. Sure sounds like a lot of money to me, but I guess that it sounds so much better to throw out a number twice that high instead.

This is quite typical of so many financial service advertisements in America. Abuse statistics, or use statistics misleadingly, all in hopes of selling more of your products. And you wonder why people lose faith in your companies and products, especially as of late, financial industry.

American Funds
Next, I was reading over the latest American Funds Investor magazine from Fall/Winter 2008. American Funds is generally a decent mutual fund company from what I can gather, but I take issue with the fact that they, in their attempts to sell people on their products and services and the concept of long-term investing in general, make rather optimistic assumptions to say the least - especially given the current stock market meltdown.

My particular issue with their latest magazine / pamphlet has to do with their little push for College-Savings plans (i.e., 529 college savings plans) and how to build up funds for your childrens' college education. They show a graph of how, if you contribute $100/month for 18 years during your kid's childhood, that it can grow to an amount between $39,000 and $48,000 by the end of that period (taxable vs. tax-free savings respectively).

OK, that all sounds great, UNTIL you read the bull @#$! below the graph about how "this example assumes an 8% annual rate of return (compounded monthly) for both investments". EIGHT PERCENT AVERAGE RETURN PER YEAR OVER 18 YEARS - GEE, THAT IS JUST A BIT AGGRESSIVE! Wake up American Funds! The stock market is FLAT over the past decade now. Where are you making an average of 8%? If you can GUARANTEE me such returns, I will have you manage all of my money.

This is not an OLD issue of the magazine... it is current... and yet it ignores that simple fact that there will not be such huge returns available anywhere for years to come, barring massive inflation to go with it, and/or devaluation of our currency embedded in such numbers. It just is not going to happen. And, it has not happened (past tense) either looking at the numbers for the past decade or more. Consider the Nasdaq, that was around 5000 points a decade ago, and now sits around 1500. And, you surely are not making 8% in government bonds, notes, T-Bills, or bank accounts.

Summary
I am so sick and tired of these ridiculous advertisements that make, via assumptions, the case that you will essentially realize some fantastic pile of cash after a set period of time by using interest-rates and rates-of-return that are essentially unachievable (certainly not realizable as an AVERAGE of any sort). This is not just an issue with Allstate or American Funds, but nearly ALL financial service companies - I see this abuse of statistics and math constantly.

I guess companies just can not sell their products by making the only clear and honest statement they can, which is: SAVE MONEY, AND YOU WILL BE IN BETTER FINANCIAL SHAPE THAN THOSE WHO DO NOT, BUT WE HAVE NO WAY TO TELL YOU HOW MUCH BETTER. That just doesn't sound good enough... people want that chart showing that, if they save, they will be "rich" or have a huge pile of cash in the future.

Forget that stuff people... just start saving, and once you have established a decent record of saving, then you can start focusing on average-returns and projections if you still feel the need. But, projections are nearly meaningless; it is your ability to save that matters most.

Microsoft Wireless Laser Mouse 7000 and Blinking Red LED / Battery Charging Issues

I just purchased a new MS Wireless Laser Mouse 7000 for my desktop computer. I used it for a couple weeks on the initial charge, and everything was fine and working wonderfully, but then it was due for a recharging and it just would not charge, and instead presented me with a blinking red LED while on the charging base after just a minute of green-LED status preceding that.

I was all ready to take the new Microsoft Mouse back to where I purchased it. But, I went hunting on the Internet to see if other people were complaining about the mouse recharge issues... YES! COMMON.

And the Microsoft Laser Mouse 7000 will not recharge for a RIDICULOUS REASON - which, I have to wonder how many batteries are pitched and/or mouses are returned because of, where MS needs to provide a SIMPLE FIX (due to a simple design flaw) by way of a new battery and/or workaround.

MS Wireless Mouse 7000 DESIGN FLAW; SIMPLE FIX!
I came across a solution someone figured out, which *appears* to be working now, as my Microsoft mouse, with its small rechargeable Nickel-Metal-Hydride (NiMH) battery, is recharged again finally.

Symptoms / Debugging:
If you try to charge your mouse without a battery inside, you will see a red blinking LED on the top of the mouse [like the symptom you are experiencing during recharging attempts for previously unknown reasons]. If there is a battery in the mouse, and everything is functioning properly, that LED should be slowly blinking GREEN until it is fully charged, and then it should be solid green light.

Why do you get a red blinking LED / Light indicator instead of a green one, even with your NEW Microsoft Laser Mouse 7000, which presumably has a NEW rechargeable and fully functional battery?

Well, it turns out that the mouse has an internal switch/button/sensor positioned under the battery (when battery is installed) that senses the presence of the battery in the battery compartment. Unfortunately, the standard NiMH battery shipped with the Microsoft Wireless Laser Mouse 7000 is too narrow of diameter and does not fully depress the battery-sensor switch, and the mouse acts as though no battery is present, even when it is.

Solution / Fixing Mouse Recharge Issues, Problem
The solution is to: 1) get a thicker battery (which, I have no idea where to find one) or more preferably, 2) wrap some paper and/or tape around the battery that came with the mouse - just enough to make the battery-diameter great enough to depress the switch under the battery.

I have taken the approach of rolling paper around the battery (2 or three turns around battery with normal letter paper I had cut into a strip the width of the battery) and taping the paper together on outside so as to prevent if from uncoiling itself. Then, I placed the battery back in the battery compartment an put the mouse on the base / recharger unit. Voila! It now charges.

Note: do not put so much paper around the battery as to make closing the battery holder compartment door impossible. My battery-cover door was a snug fit when I was done, but it worked.

Summary
I still can not help thinking how many of these otherwise-working mice are being thrown away and/or returned when Microsoft (or their designer, manufacturer, battery supplier, etc) made a rather simple design flaw error that has found its way into the market. Talk about LAME QUALITY CONTROL procedures! Simple test: assemble multiple Microsoft Mouse components, use, test, recharge, check for issues... BEFORE manufacturing and distributing a pile of mouse pointer devices that have an error that should be caught!

Well, so long as my Wireless Mouse 7000 Microsoft device is back to working and recharging consistently, I am OK with it. I generally like it otherwise. My ONLY other annoyance with it is the left-side navigation-buttons that are oddly small and positioned in a weird location for simple use (as compared to my older, and nearly perfect Microsoft wired Intellimouse Explorer 4.0 USB 5-button mouse). The ONLY reason I moved to the Laser Mouse 7000 was for the WIRELESS aspect, and if it recharges OK now, I will stick with it.

Cleveland Ohio Economy and Small Business Status

Here are some recent observations about the state of the economy, from the viewpoint of a small business owner (I have a few diverse small businesses) that has also been discussing business and sales trends with other small and medium business owners throughout the greater Cleveland, Ohio and Northeast Ohio region. The observations surely do not leave much room for optimism about the economy at present.

Example #1: Home Theater Business
A relative of mine owns a small business providing Cleveland area Home Theater, Audio, and Video installation, sales, and design services - and even though he has been in business for over 10 years, he has never seen business as slow as it is now. His is a business that serves a demographic that would clearly be described as "upper middle class" and/or "upper class".

The clientele that keep my relative's company busy have included coaches from professional sports teams, players from those same teams, doctors, executives, and other rather well compensated individuals. Much of his company business comes by word of mouth and personal referrals. He has never had to advertise in order to obtain more work than his company can handle. But, suddenly, WHAM, this current economic mess has even these rather "upper end" clients hesitating at committing dollars to upgrading or otherwise investing in their home theater, multimedia, and audio-visual needs.

And, if these people are not engaging my relative's business for things like product purchases, wiring and other installation services, design and implementation services, and the like, the "trickle down" effect is immediate: my relative can not afford to keep as many employees active and employed. Sure, his company still sells some home theater and HDTV / digital-television equipment (especially as people hurry to be ready for the February 2009 digital TV cut-over and transition away from analog TV), but when the volume drops to the lowest level he has ever seen, it really puts the pressure on the viability of his company.

Sure, he will make it through the slowdown, but it is not even clear if the business will turn much, if any, profit while trying to maintain employees to handle those jobs that do come through yet. This is what a typical small business in Northeast Ohio is feeling right now - and the rest of the country too I expect.

The market-wide panic, and lack of buying, ripples through causing others to cut back employment and buying, which ripples through... etc. etc. It all becomes a self-fulfilling downturn: people expect a downturn, they alter their expenditure and investment habits, and gee... a slowdown occurs as they expected.

Example #2: Cookbooks
My wife and I authored a Gluten-Free / Wheat-Free Recipes (Desserts) Cook Book that we sell almost exclusively via our online website. Over the past couple years of selling, I noticed this VERY strong inverse correlation between gas prices and my book sales: meaning, when gas prices went up, my sales would slow, and vice-versa.

But, after this last round of super high gas prices, and the precipitous fall to the lowest prices in years, that same pattern of book sales increases that normally accompany the fall in gas prices did not emerge. This was the first time ever that book sales did not increase when gas prices fell!

Fact is, this demonstrates a LOT about how much market panic there is, and how close to the edge everyone has been, and/or is, living - with regards to their finances. Credit cards are maxed out. People have little to zero cash. Credit limits are being cut, making "extra" credit or "excess / available" credit shrink quickly. The results on my book sales are immediate.

Further proof: even discounting our book heavily has made little difference in sales! In the past, if I ran a temporary discount or promotional sale, book sales increased dramatically and in direct response to that short-lived promotion. Now, even deep discounts have made little change to book sales volumes. People do not have, or are not willing to spend, any money - PERIOD. Even though my book can save them money by teaching them how to bake gluten-free items at home (which saves a fortune over pre-made GF diet foods), they STILL hesitate to spend even $20.00 on a book.

The ONLY exception to sales volume has been that our "scratch and dent books" (those with MINOR scratches or bends from banding of boxes on pallets during shipment, etc) have been selling as quickly as we find any in our inventory. Why? Simple: I sell them for under $10! THAT is the price threshold where people feel "OK" about spending I guess. Unreal.

Keep in mind that I performed an online survey a while back about the ideal target price for my book, and overwhelmingly people said it would be a "no brainer" purchase decision if I sold it around $20. Well, that sure changed quickly! More indication of what the economy, and fundamental mentality, is right now - and why this could lead to a full blown Depression if people do not start snapping out of this mood (it cascades everyone -- if purchases are not made for products and services, companies lay off people, and it spirals downward).

How we got here...
That is a long story, but not an overly complex one.

The idiotic move the government made last year by handing our "rebate checks" to people, while gas prices were already insanely high, allowed people to essentially bid gas prices even higher... and all those checks went to cover inflation due to bidding with more dollars for the SAME fixed supply of petroleum (which then rippled through to food, etc.) This worsened the downturn that was starting, but which remained somewhat hidden by massive debt-spending (credit-cards). Credit cards sealed our fate by allowing people to spend more than they really had, all bidding on the same commodities, causing massive commodity inflation, and the gov put the nail in the coffin with rebate checks. Home equity lines and the like, based on inflated home prices from cheap money adjustable-rate or teaser rate loans also contributed to this ability to bid things higher when they otherwise could not have been.

So, here we are post-gas-price-maximum-time after people essentially had their wallets, and bank accounts, sucked dry by the gas pumps under Bush's grand plan to bankrupt the country via insanely poor foreign policy and ludicrous energy policy (one which had us buying petroleum for the Strategic Oil Reserve at the highest prices ever, when supply was constrained like never before) - idiot! So, all of the American money handed out via rebate checks was transferred to President Bush's REAL employer (Saudi Arabia - not the US citizens).

Add on top of this the housing bubble that was created to get us out of our last stock market bubble. Pile on a burgeoning debt - all debt - public, private... it is out of control. But, we are a consumer ecomony, and our only solution to overspending (per politicians) is spend more.

Where things are headed...
Fact is, we have a HUGE problem.
I predict MASSIVE LAYOFFS in January 2009 and February 2009.

MASSIVE - especially if people do not take a chance and spend some money on products and services provided by small businesses. Small businesses employ over 1/2 the workforce. All we here about is businesses that are "too big to fail", but the fact is, widespread failure of small businesses will be catastrophic.

Large businesses will weather the storm just fine and do their usual mass layoffs regardless of their sales volumes. But, small businesses do not have the resources (in general) to keep all their employees on staff for any length of time if revenue streams suddenly dry up or are reduced to a trickle. The government (i.e., US!) is not going to bail US small businesses out... only our customers can by purchasing our products and services.

The observations from my vantage point in Cleveland Ohio are certain to be similar to observations elsewhere in the country. So, if you want to see your own local economy do well, try not to fall too far down the well of fear -- engage your local small businesses when possible, and help them maintain their employees/staffing through this economic mess. These are your friends and neighbors' jobs I am talking about.

As for large companies: I am sick of reading this stuff about companies laying off hundreds or thousands of workers were it costs them $50K, $100K, or MORE on a "per head" basis to lay people off. These unemployed workers will hesitate to spend, and further flood the market of workers seeking work.

I have a better idea for companies, like Adobe for example, to consider. When I hear how they will spend $80K/head (roughly 1yr average salary) to get rid of someone, I find it insane. Instead, tell your workers that, should things NOT improve in a year, they will be out of a job with only a month of severance pay starting ONE YEAR from now, but not immediate. During that year, while still employed, they can look for a job, but they can also focus on adding value to the company and improving efficiency, and if the end result is the company does better than expected, they will KEEP their job(s). And, since they are not part of the unemployment mess, overall market sediment will likely be more optimistic, thus creating a positive impact on the economy, including the company they work for.

I just do not get the whole thing about paying tons of money to get rid of someone - it is rather short-sighted, and furthers the downward economic pressures and overall negative sediment that looms large right now (especially employment fears).  Insane.

3D CAD Software Review - Free, Cheap, Affordable, and others

For a long time I have been fascinated by modern 3-dimensional modeling capabilities that 3D CAD Software makes possible, but at the same time I have been frustrated by the cost of such software.

I have had dreams of using CAD software to help me take the ideas I see in my mind, and put them into a visual model to share with others. I am always trying to invent some new product, design some variation or improvement on an existing product, and just apply creativite thinking to all sorts of mechanical design situations and opportunities. But, there is only so much you can do with just paper and pencil or pen.

Sure, a pad of paper and pen can help with getting that idea for a new invention down on paper, but... from my experience, something can APPEAR (on paper) to work, but can not be built. You just can not get a true feel for the 3D interaction of parts, especially in a complex mechanism or structure, using old-fashioned paper/pen techniques -- certainly not effectively or efficiently. The fact is, 2D design and 3D modeling software (aka, CAD - Computer Aided Design) is a HUGE improvement over hand-drawing, and 3D modeling is quite nice for working things out before building.

You can save a fortune by avoiding costly pre-manufacturing missteps by creating a detailed and accurate 3D model ahead of time, and you can even produce a nice bill of materials (BOM) and calculate the center-of-gravity from the CAD image too (in applications that include such a feature). Try doing that by hand! So, I decided it was time to make the leap and purchase a professional-quality full-featured CAD system for my own idea development, in hopes of bringing my inventions to reality.

My Findings and CAD Research Outcome

"Big name" CAD software like AutoDesk AutoCad, Solid, Pro/Engineer ("Pro/E") and the like are prohibitively expensive for the someone like me that wants to essentially experiment with 2D/3D design and modeling for developing some of my own product ideas in a visual manner. Some of those software packages are many thousands of dollars, which is far beyond the reach of hobbyist CAD pricing to say the least. And, I can get compatibility with those products at a much lower cost.

In fact, if you have been looking for affordable, relatively cheap, low cost, low price 3D CAD software that can fit a hobby budget or small business or startup business budget, you have surely encountered the same types of things I ran into: in general, there were two classes of CAD Software on the market; 1) full featured and expensive, and 2) cheaper, but lacking most features I consider a "requirement", including 3D solid modeling and extrusion from 2D surface drawings.

Thankfully, after evaluating a pile of CAD applications, I found one that fits my needs: VariCAD. But, in order to reach that conclusion and determine which was the best affordable 3D CAD software, I looked at a plethora of packages, including these just to name a few: Bryce CAD, QCAD, Google Sketchup Pro, IntelliCAD-based software like Bricsys, VariCAD (obviously) and quite a few others.

My criteria for CAD software evaluation was rather straight forward and simple:

• I weighed features against price to determine a price-to-performance ratio. I also pitched anything above a couple thousand dollars - that was just out of my price range, and certainly out of the range that would make a solution a fit for other hobbyist inventors and designers.
• I looked for active product development - and threw out a lot of otherwise prospective CAD/design software just because it appeared that companies were not keeping their product up-to-date or otherwise releasing bug-fixes and/or updates
• and, perhaps most important was my requirement that without any prior knowledge of the CAD software, and without reading any manual or help files, I would be able to quickly feel comfortable and productive uwing the CAD software UI (User Interface) and be able to draw and manipulate 2D and 3D objects.
• In summary: it had to be easy to learn, intuitive, full-featured, and reasonably priced CAD / CAM software to meet my criteria.

My Choice: VariCAD 2D/3D - and here is why.
So many of the CAD packages I tried were either not intuitive or lacking features. Some had really nifty and modern UI's, but lacked the professional features I needed. Others were perhaps exceptionally "powerful" and feature-rich, but so overly complex I could not make sense of them no matter how hard I tried.

I spent nearly two weeks installing software trials, testing them out for up to a few hours each (and, if they made my "consideration list", up to a full day of testing), and trying to "build" just a few simple 2D and 3D models. In the end, the clear winner was VariCAD. I had a second "runner up" of sorts that nearly matched VariCAD for features and usability, but it was nearly twice the price.

I liked the UI in VariCAD quite a bit. Sure, it has some room for improvement to fit "my perfect way" of doing things, but my way is no more likely to be "your way" than what VariCAD's UI offers by default. It does implement fancy Microsoft "ribbon-bar" or Vista-specific UI elements or such, and looks more like a traditional Windows-XP application (for good reason - this software runs cross platform on Windows and Linux).

I liked that I could quickly and easily, in 3-dimension mode, figure out how to size, scale, rotate, intersect, remove, etc. Here is a quick example of something I created after just a few minutes of practice.



This tiny little part I made used various features of VariCAD, where I had multiple 3-dimensional parts connected together. Then, I really liked how VariCAD had all these sorts of "tools" to use: drill, mill, groove, fillet, chamfer... .and, VariCAD also has all these pre-defined ANSI/ISO parts available for screws, nuts, bolts, etc. You can see how I chamfered the edges of my little test part, and then I made the holes by "virtually drilling" or whatever, and/or doing an intersection-removal of a predefined screw-shape. It was all EASY. And, this was a HUGE selling point for me.

And, as you can see, there is a neat screen-shot / display export. VariCAD makes saving an image easy to do (has high-res export of current view). Plus it can calculate a bill of material and center of gravity (has a list of all sorts of base-materials from pre-defined tubings, metals, plastics, etc that it "knows" all the information needed to calculate). There are dimensioning lines available in orthographic views too, making my drawings easy for an engineer to completely understand and build parts to exact specifications.

I like how VariCAD is a 3D/2D CAD system primarily intended for mechanical engineering design - since, it is my mental "visions" for products I needed to turn into true mathematical / visual representations that others can see and/or manufacture parts for - precisely. In addition to powerful tools for 3D modeling and 2D drafting and dimensioning, the CAD system provides libraries of standard mechanical parts (ANSI, DIN), calculations of standard mechanical components, and tools for working with bills of materials (BOM) and blocks.

BOTTOM LINE: If you have been looking for an affordable and inexpensive alternative to AutoDesk AutoCAD, SolidWorks, Pro/Engineer ("Pro/E") and the like, while maintaining a degree of compatibility with those expensive titles, VariCAD is perhaps just what you were looking for, with excellent 2d and 3d CAD Features in a Powerful yet Affordable Cross-Platform 2D and 3D CAD Software (Windows / Linux) in either 32-bit or 64-bit versions.

It is compatible with "the big name CAD packages too" via import/export of common CAD file formats like: DWG, DXF, IGES, STEP and STL. So, I feel quite comfortable that whatever I create, I can give my drawings to fabricators and designers to help me realize my inventions in physical form.

This affordable CAD software represents a rather unbelievable bargain for such a capable application.  It is a 3D CAD software with professional features at rock-bottom pricing  (well under $1,000, and if you catch a sale they run, it can be as little as ~$500 or so including a year of support and software updates. As such, VariCAD costs no more than many amateur-type productswhile providing full-featured professional CAD / CAM abilities.

Now, time to get busy inventing more products and put my CAD s/w to use! (actually, it IS FREE for 30-day trials if you want to check it out and confirm what I have written here - just go to Varicad.com and read more about it and find links to the Free Trial CAD Software Download and purchase information, etc.).

Credit Cards : Small Business = Personal Guarantee

Since I own a few small businesses, I receive a boat load of small business credit card applications. The mailers always say the same thing in GIANT BOLD PRINT: get your "BUSINESS CREDIT CARD".

Yeah, sure... "business" credit card, so long as you sign with a personal guarantee.

As I sit here watching the unraveling of the American debt-laden financial system in this current economic crisis, I can not help getting a bit upset about the sick irony that these bank credit card offers present. That is, if you are a large company, a public company, and/or have reached some magical "size" threshold where, as an incorporated entity alone, credit is issued and secured ONLY by the assets of the company (as opposed to requiring any sort of personal guarantee by corporate officers and the like).

So, as all these massive corporations default on their debt, file for bankruptcy, and so in... I can not help but find these "business credit card offers" (that require my personal guarantee of payment) all ironic, sickening, and disturbing. A small business entity with small amounts of credit must secure their credit personally, but yet a "large enough" business can borrow hoards of cash and default on payment (repeatedly in many cases -- where companies have been given many a chance, gone bankrupt repeatedly, etc - like airlines e.g.) and still not be required to offer any personal guarantees from corporate officers.

I really believe this is, in large part, why corporate management in this country is so terrible. There is little vested stake in the DOWN-SIDE of the business should anything go wrong. Contrast that to the fact that if I take out "business credit" in the name of one of my small businesses, that I am really taking out money that I PERSONALLY guarantee to repay. Who do you think has more incentive to PAY BACK THE LOANS?

So, while the biggest of the big companies can borrow with nearly no limit (especially in the day of government-backstopped borrowing), and repeatedly default - sticking banks and investors with huge losses and write-downs - the small borrower does not have such a luxury of non-repayment. Instead, we have to personally guarantee every last dollar borrowed with these "business credit cards" and "business loans" that are nothing more than personal credit cards and personal loans that happen to also include someone typing the name of our business on the application in addition to our personal information.

I am not saying that there should not be personal guarantees for credit on small business loans, especially if the small business has not been around for a long time or shown significant credit worthiness. Instead, I am saying that there needs to be more "risk" for large business borrowing - risk to these insanely over-compensated executive managers that can take millions or billions in compensation and stock options during the good times (heck, even during the bad!), but yet not be on the hook for a dime in personal losses when the company defaults on loans a mere year or two later... when, obviously some of that insane compensation should have went to paying down debt or avoiding debt in the first place.

There are rampant cases of this personal-profit, company-loss scenario among large companies, but yet they continue to obtain credit without personal guarantees. And, here I am getting my nearly daily mail about how to get my "business credit card" which I have to guarantee personally. So, a note to all you banks that send me these offers for "business credit": get lost!

I will take such an offer (perhaps) when the playing field is level and those "large companies" that continually stick banks with Billions of dollars in losses will have their own management personally guarantee some of those loans. I guarantee I am a better credit risk than GM, Ford, or Chyrsler, and I still do not see banks (or the US government) demanding PERSONAL GUARANTEES from those corporate executives!

JCPenny (NYSE:JCP) Merchandise Giveaway; Profits Lower

I had a very timely experience with what I call "sales plan insanity" at J.C. Penny recently, where JC Penny was essentially giving inventory away for nearly nothing (almost FREE). And, when I first encountered this sales strategy first hand, I knew for certain that JCPenny's earnings were going to suffer dramatically.

But, I guess the "analysts" that cover J.C. Penny Stock (NYSE:JCP), do not bother actually visiting the department store they are "analyzing". If they had, perhaps they would not so often be incorrect in their "analyst estimates" that seem to always miss the mark, as today's Bloomberg story on JC Penny earnings stated:

Nov. 14 (Bloomberg) -- J.C. Penney Co., the third-largest U.S. department-store company, forecast earnings that trailed analysts' estimates and posted its fifth straight quarterly profit decline as shoppers cut spending on home goods and jewelry.
[...]
Third-quarter net income decreased 52 percent to $124 million, or 56 cents a share, from $261 million, or $1.17 a share, a year earlier, the department-store chain said in a statement. Sales fell 8.7 percent to $4.32 billion from $4.73 billion.

Let me clue all you Wall Street analysts in as to how insane the management at various retailer in the United States is behaving: they are selling products for next to nothing, with obviously zero margin or, quite likely, negative margin.

This is not just conjecture, but rather fact that I will demonstrate with my recent sales receipt from J.C. Penny (click image to view larger size):



This is ridiculous! J.C. Penny has been sending (in the mail) these special Sales-Event Coupons for "$10 off $10 or more". First of all, that is just stupid! Every time they send one, I pick up more free or nearly-free items. Come on management: wake up and make it $10 off $20 at least (50% off is STILL darn good, and you may actually break even on the proposition). I realize you *hope* people will come in and buy much more than $10, but in this current economic environment, that is a bet I would not take.

The last time I got a coupon in the mail, I went looking around Pennys for kicks again, to see what I could perhaps use. I stumbled upon sales for 75% off on a few Polo shirts (and that was off existing markdowns or something). And, it gets better... they had yet another promo going where you could buy one get one (BOGO) too, and none of THESE promotions were excluded on that $10-of-$10 coupon.

Look at that receipt showing the proof of this SALES INSANITY: I purchased a total of 3 shirts that originally retailed for $104.00 for a grand-total, after Sales Tax, of $5.84. Give me a break! What moron management team came up with these incentives? I can not help thinking that they would have done better just to give the inventory to charity and write it off. How can you cover the cost of goods, let alone the cost of labor, advertising, floor-space, and so on by doing this?

Well, the bottom line is that this speaks volumes as to the state of the PANIC IN RETAIL right now. Retail stocks are all beaten down on the stock market, and for good reason -- the management of most retailers has decided that, in order to show any revenue production, they will have to engage in an insane race to the bottom along with all their competitors. As such, do not be TOO surprised if these stock market "analysts" continue to miss obvious indicators that earnings are going to be terrible for a long time to come.

Perhaps some bright spots will emerge in Retail yet (aside form WalMart), but it is a bit early to tell. Even though I am very cautious about investing in retail stocks, I have taken some "Mall walks" the past few weeks on various days of the week to see if any particular retailers seem to "stand out" consistently with regard to foot-traffic and, more importantly, purchases (I look to see what brand's bags are being carried around the Mall by people - if any one brand stands out).

I spotted a couple retailers that have my interest, like New York & Company (NYSE:NWY) being one I noticed decent store / Mall activity in, and a couple others. In the case of NWY, their stock is trading for around $2.00, so for the price I paid for my three uber-discount JC Penny shirts, I could purchase nearly 3 shares (or, at the original retail price of those shirts, I could purchase 50 shares). This puts the retail pricing strategy into perspective even more perhaps.

Stock Analysis: Nvidia (NASDAQ:NVDA) and Ford (NYSE:F) Company Performance

I just have to compare and contrast the operating results reported by two companies today (Nvidia and Ford Motors), and especially discuss a fundamental difference between these two companies' management philosophies and ability to adapt to changing markets. That difference is a large one, and an obvious one: market agility and anticipating the future - Nvidia does this well, Ford does not.

Both have faced similar challenges with regards to their products and markets lately: their markets have been challenged by competitors (for Nvidia, that mean AMD / ATI; for Ford, just think Toyota, Honda, etc.), consumers have been demanding different products (for Ford, that means higher mileage cars; for Nvidia, that means higher performing graphics processors and more and improved Notebook graphics chip functionality), and each company has seen their products caught in a period of transition.

But, where they differ dramatically is in how they reacted to these challenges, and how quickly they reacted to known changes as well as anticipating uncertainty.

Let me start by quickly presenting an excerpt from earnings reports for each company - first Ford, then Nvidia:

NEW YORK (CNNMoney.com) -- Ford Motor reported a $3 billion operating loss in the latest quarter, and said Friday it would reduce staff and capital spending in order to preserve its dwindling cash.

Ford said it would cut salaried employment costs by 10% - reducing compensation of its white collar workers by eliminating merit pay, bonuses and the company's matching contributions to their retirement accounts.

Now, Nvidiia's quarterly results release:

SAN FRANCISCO, Nov 6 (Reuters) - Graphics chipmaker Nvidia Corp reported quarterly results on Thursday that topped Wall Street's estimate, as the company held the line on expenses while sales fell, and shares surged 12 percent.

Nvidia (nasdaq: NVDA) said its fiscal third-quarter net earnings for the quarter ended Oct. 26 came in at $61.7 million, or 11 cents a share, down 74 percent from $235.7 million, or 38 cents a share, in the year-ago period.

But after excluding items related to the company's recently announced layoffs and other charges, Nvidia earned 20 cents a share, beating the average analyst estimate of 12 cents a share, according to Reuters Estimates.

Notice the key differences.

Nvidia

Nvidia has been profitable in the past, and REMAINED profitable by acting quickly to reduce costs in light of the fact that demand was slowing and product-mix changes were taking place. In September, the company announced plans to cut 6.5 percent of its workforce when it was obvious their market was changing, and this quick reaction has helped them avoid losses.

You can argue that a graphics chip maker is inherently more agile than a car company because of the product lead-time and engineering/manufacturing cycle brevity compared to building cars, but on the other hand, that same logic must be applied to *competitors* that can also move just as fast to change their lineup of graphics cards and GPU offerings. So, Nvidia deserves credit for having management that is willing to act quickly, and decisively, in order to keep products inline with consumer expectations while keeping costs down as sales volume deteriorates a bit during a macroeconomic slowdown.

In addition, Nvidia shows foresight for future demand and growth in the parallel computing field with their CUDA offerings (this CUDA parallel processing cores feature is in nearly all their current GeForce and Quadro product lineup). I have been watching more and more commercial applications target this particular Nvidia platform advantage (which, I consider to be VERY large), and have seen applications like the upcoming Adobe Creative Suite CS4 even marketed as being best-with-Nvidia cards (and, Nvidia has a nice new high-end Quadro video card marketed specifically to Adobe CS4 users). This is great product planning, and will give them sales for many quarters to come.

And, if this were not enough reason to consider Nvidia a company with great foresight and momentum, consider how Apple Computer has just started offering the Nvidia mobile GeForce chipsets / GPUs in their new notebook lineup. As soon as I heard that news, it was even more obvious that Nvidia is making moves to future-proof their sales and grow their markets.

Ford

Ford has been losing money for a long time, and even while losing money, their management consistently acts slowly to reduce costs in light of the fact that demand was slowing and competitors were eating them alive. Ford Motors seems destined to live up to the image of the American Auto in general: outdated and behind the competition. Their entrenched management (just like General Motors) is a bunch of overpaid executives whose only tangible "plan" to fix things of late is to borrow (or be handed) more money from the United States Government and taxpayers.

I won't get into how lame this whole "rewarding failure" concept is with giving incentives to companies that fail is (instead of rewarding those that succeed and produce profits and jobs!), but it is highly indicative of the underlying problem with Ford and GM. They still, even after massive multi-Billion dollar repetitive quarterly losses, fail to act BEFORE the crisis gets worse, and are never able (or willing) to get ahead of the curve and show that they have any sort of visionary management abilities.

It is not like they have no knowledge of where the consumer is headed, where the economy is heading, and how their products stack up against the competition in regards to quality, features, mileage, and the like (start by reading Consumer Reports guys!). Nvidia has the same knowledge of what their competitors are doing (AMD's ATI division especially), and they must act to counter such competition quickly - and they do!

Ford looks like a slug by comparison to Nvidia, and repeatedly fails to deliver REAL change, and by the time (if ever it occurs) their management makes the DEEP CUTS and GROUNDBREAKING CHANGES required, they will have burned all their cash and find themselves once again knocking on Uncle Sam's door in hopes of more easy money. This door-knocking must be ignored, as it only encourages a repeat of their lame decisions, and will reinforce poor management "vision" while essentially penalizing those auto companies that DO have good vision for their companies' futures (by essentially subsidizing inferior products from Ford or any other competitor that is using government funds to prop-up their business).

Summary
Well, I think it is time to let some of the Silicon Valley management have their shot at Ford Motors management - or at least some of their foresight needs to go into play in Detroit. Funny thing is, the one Silicon Valley motor company I really find interesting (Tesla Motors) has breakthrough forward-looking products (like fully Electric sports cars), is creating new Auto-industry jobs, but yet has to compete with Detroit's entrenched industry without the massive handouts and support packages from the US government.

Instead, Tesla must secure private funding at market rates, and actually produce a product people want and set a price-point for its products where it can stay in business and perhaps even post a product. Gee, what an idea! All the more reason Detroit's antiquated auto industry needs to be allowed to simply DIE if they can not do the same -- it is time to reward success, and not failure. And, with regards to today's stock analysis, I plan to reward Nvidia's success with further purchase of their products (I have a Quadro in mind for before EOY 2008 yet) and their stock; but, by contrast, there is ZERO chance I will be buying a Ford product or company stock!