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Dr. Kalinda Rose Stevenson
Make Money Formula: Entrepreneurs…Do You Know The One Essential Ingredient The Bankers Left Out?
Welcome back!
The “make money” formula is really very simple, yet some of the biggest banks in the world got it wrong because they left out one essential ingredient.
What is the formula and what essential element did the failed and bailed out banks leave out? Read more
Tags: banking crisis, banks, financial crisis, make money, making money, mortgages, securitization, valueRelated posts
Financial Crisis Silver Lining: The Money-Making Mindset Entrepreneurs Can Learn From Bankers
The global financial crisis has a money-making silver lining for entrepreneurs.
The idea of a “silver lining” comes from the old proverb, “Every cloud has a silver lining.” The proverb looks for some unexpected good outcome following some bad event.
For many entrepreneurs, business owners, real estate investors, and wage earners, the financial crisis is all too real, leaving millions with devastating losses.
What is the silver lining in all of this? Read more
Tags: bank meltdown, bankers, banks, entrepreneur, financial crisis, make money, making moneyRelated posts
Banking Crisis: Why The Banks Went Broke Making Money From Mortgage Loans
The banking crisis raises many questions.
Do you wonder how banks that claimed to hold billions of dollars in real estate mortgage assets could go broke?
And most importantly, how did a banking crisis involving mortgages turn into a global financial crisis that affects all of us? Read more
Tags: bank crisis, banking, banking crisis, economic crisis, financial crisis, make money, money making, mortgage loan, mortgage loans, no doc, no doc mortgage, no docs, subprime, subprime mortgageRelated posts
House votes to restrict Wall Street pay: Congress acts to end million dollar bonuses paid with bailout money
The United States House of Representatives passed a bill that restricts bonuses to bank executives.
Nothing has enraged ordinary people more than the idea that the biggest banks used bailout money to pay huge bonuses to their executives.
The House voted Friday to slap restrictions on how Wall Street executives are paid after nine banks that took government bailout money rewarded thousands of their employees with bonuses topping $1 million each. House Votes
In the same year the banks were failing, and taking billions of dollars in bailout money, the banks were paying their executives million dollar bonuses.
The core of the problem is the connection between reward and risk. Safe investments tend to be low paying investments. Often, the greater the risk, the greater the profit.
One of the reasons that the economic system got so out of whack is because the biggest banks found ways to make greater profit with riskier loans after the Glass-Steagall Acts were rescinded in 1999.
The Glass-Steagall Acts were passed in 1932-33 to prevent another Great Depression.
I wrote a report, “Why Banks Went Broke Making Money: The Money-Making Magic That Triggered The Global Recession.” In this report, I explain why the ability of banks to make more and more money with risky loans that violated every standard of responsible banking practices led to the financial crisis of 2008.
The real estate boom years coincided with successful political efforts to de-regulate the banking system. Based on the idea that government regulations limited free-market capitalism, Congress passed laws to set the banks free from all kinds of restrictions about what different types of banks could do, and significantly reduced oversight of banking.
Those who believed that “the best government is no government” argued that these restrictions and regulations were impeding free market capitalism. “The most notable results of this effort to set the banks free from government regulation were the repeal of the “Glass-Steagall Acts” of 1932 and 1933, and the enactment of the “Gramm-Leach-Bliley Act” of 1999.
“Glass-Steagall” required a clear distinction between investment banks and commercial banks, to separate risky ventures from ordinary banking services. “Gramm-Leach-Bliley” removed these restrictions. This Act allowed commercial banks to engage in speculative investment banking.
With new-found freedom from all kinds of post-Great Depression era regulations, the biggest banks threw caution to the wind, and created a dazzling array of paper instruments which allowed them to make massive profits. Kalinda Rose Stevenson, Why Banks Went Broke Making Money,
Without these restrictions, the biggest banks had great incentive to engage in risky banking. The riskier the banking, the greater the potential profit.
As the banks took greater risks, their actions also had the potential to create great harm to the economy. The “mortgage meltdown” and the bank bailouts are all the direct result of increased risks by banks.
According to Barney Frank, the banks realized that they would make great profits only if they took great risks.
Rep. Barney Frank, D-Mass., who sponsored the bill, said the extra regulation is necessary to ensure bankers and traders aren’t rewarded only if they take big risks. Under the provision banning risky incentive-based pay, regulators would be given nine months to dictate precise guidelines.
If a bet goes wrong, “the company loses money and the economy may suffer, but the decision makers do not,” he said. House votes
As the banks took greater risks, their actions also had the potential to create great harm to the economy. The “mortgage meltdown” and the bank bailouts are all the direct result of increased risks by banks.
The practice that has enraged ordinary people more than anything else has been the extremely generous executive bonuses paid to bankers who were running their banks and the economy into the ground.
It’s one thing to realize that the banks have been paying millions of dollars in bonuses to executives who were making such bad banking decisions. People were angry enough about that. What turned anger into outrage is the realization that the banks were continuing to pay generous bonuses after they received government bailout money.
At its core, the financial crisis is a banking crisis, brought about by risky behavior by banks and lack of regulation by government agencies. This action by the House is an effort to change the risk to reward ratio, so that bad banking is not so rewarding to the people who made the bad banking decisions.
Dr. Kalinda Rose Stevenson
Tags: bank bailout, banks, Barney Frank, executive bonuses, financial crisis, Glass-Steagall, House of Representatives, make money, recession, Wall StreetRelated posts
Money Making Blind Spot. Why Economists Couldn’t See The Financial Crisis Before It Happened.
Money Making Blind Spot. One of the most disturbing elements of the current financial crisis is that so few people saw it coming. This is especially true of people who spend their entire lives studying economics and financial markets.
This is why a statement, such as the one by the former Chairman of the Federal Reserve, Alan Greenspan, is such an astonishing admission. In testimony before the House Oversight Committee in October 2008, Greenspan admitted that that he was shocked at the economic crisis. He never saw it coming,
The 82-year-old Mr. Greenspan said he made “a mistake” in his hands-off regulatory philosophy, which many now blame in part for sparking the global economic troubles. He quoted something he had written in March: “Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief.”
He conceded that he has “found a flaw” in his ideology and said he was “distressed by that.” Yet Mr. Greenspan maintained that no regulator was smart enough to foresee the “once-in-a-century credit tsunami.” Greenspan Admits Errors to Hostile House Panel
Why would people who devote their lifetimes to studying economics and finances be so blindsided by what has happened recently?
Robert J, Samuelson raises the question about why economists simply didn’t see these problems coming.
One intriguing subplot of the economic crisis is the failure of most economists to predict it. Here we have the most spectacular economic and financial crisis in decades—possibly since the Great Depression—and the one group that spends most of its waking hours analyzing the economy basically missed it. Oh, a few economists can legitimately claim some foresight. But they are a handful. Most were as surprised as the rest of us.
Economists Out to Lunch
Samuelson finds the answer to his question in Niall Ferguson’s upcoming PBS documentary, “The Ascent of Money.”
The most significant part of this explanation concerns money itself.
The creation of money was a seminal historic event; so was the subsequent invention of finance—the saving and investing of money. Without them, we could never have moved beyond barter to a modern economy based on specialization and building for the future. But these advances came interwoven with bubbles, crashes, swindles and hyperinflations. Finance has been a wellspring of both progress and instability. Economists Out to Lunch
The point of the article is that money itself is the root of the financial crisis, but very few economists have paid enough attention to money itself, and so never saw the problems coming.
The crisis originated in financial markets (the markets for stocks, bonds and many complex securities), and yet finance occupies a peripheral position in mainstream economics.
Economists Out to Lunch
This is the blindspot that lies behind the crisis. We want to make money, but we don’t think enough about what those words mean. What does it actually mean to “make money?”
The people who created the financial crisis understood all too well how to make money. One of the most basic causes for the financial crises that have wracked the world is that economists let money-makers make money without any limits.
The real secret to making money is to understand what the words, “make money,” really mean.
Find out what it means to make money at
http://www.makemoneyinsight.com/
“The greatest limit to money is the belief that money is limited.”
For your abundant success,
Kalinda
Dr. Kalinda Rose Stevenson
Author of: No Money Limits For Real Estate Investors:
Discover The Money-Making Secret In The Real Estate Game
That Transforms Your Money Struggles Into Financial
Abundance.
Award Winner of National Best Books Award
Business: Real Estate Category
And Finalist in Business: Personal Finance
Category
Kalinda@nomoneylimits.com
http://www.nomoneylimits.com/
http://www.makemoneyinsight.com/
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Money Making Secret: Napoleon Hill’s Dirty Little Trick In Think And Grow Rich
A money making secret is the primary topic of Think and Grow Rich, by Napoleon Hill.
Think And Grow Rich is probably the most influential self-help book of all time. Many extremely wealthy people claim that this book was the catalyst for their success.
In his book, Napoleon Hill claims that one secret about making money is what separates the successful from the struggling.
This is what he claims in the Preface of the book. The book reveals “the money-making secret that has created fortunes for hundreds of exceedingly wealthy men.”
But what does Hill do with this money-making secret? Does he reveal it directly?
No.
He makes you figure it out.
This is what he says about the secret.
“The secret to which I refer has been mentioned no fewer than a hundred times throughout this book. It has not been directly named, for it seems to work more successfully when it’s merely uncovered and left in sight, where those who are ready and searching for it may pick it up.”
I don’t know about you, but every time I read these words, I am both annoyed and unconvinced.
If an author writes a book and promises to reveal a big secret, it seems like a dirty trick to keep the secret a secret.
Why tease people when you know something that would make such a big difference in people’s lives.
Certainly, many people have figured out the money-making secret “uncovered in sight” in Think and Grow Rich. But as a teacher, I wonder how many people have not figured it out.
How many people read the book, and continue to struggle because they don’t figure out the secret?
Or how many people think they figured out the secret, but didn’t understand exactly what Hill intended. If you read a little about “the secret uncovered in sight” in Think And Grow Rich, you’ll discover various interpretations.
That is problem with making readers guess what you mean. People guess. And with no definitive answer from the person asking the question, there is no way to know for certain if you guessed correctly.
The fact is, there is a secret to making money. And it has to do with money itself.
- If you are struggling for money.
- If you never can quite figure out what you are doing wrong.
- If you don’t know what you are missing.
The natural tendency is to blame yourself. There must be something wrong with you.
But before you decide that your money struggles are the result of something wrong with you, you might consider a second possibility.
Maybe you are struggling with money because there is something about money itself that you don’t understand.
The real secret to making money is to understand what the words, “make money,” really mean.
If you want to know this money-making secret, without having to guess, go to
http://www.makemoneyinsight.com/
“The greatest limit to money is the belief that money is limited.”
For your abundant success,
Kalinda
Dr. Kalinda Rose Stevenson
Author of: No Money Limits For Real Estate Investors:
Discover The Money-Making Secret In The Real Estate Game
That Transforms Your Money Struggles Into Financial
Abundance.
Award Winner of National Best Books Award
Business: Real Estate Category
And Finalist in Business: Personal Finance
Category
Kalinda@nomoneylimits.com
http://www.nomoneylimits.com/
http://www.makemoneyinsight.com/
Related posts
Free Report: Is Your Money Making Money For You Or Your Bank?
Here is a question for you. If you put your money into a savings account in the bank, who makes money from your saved money?
I have just completed a free report, “Who Is Your Money Working For? You Or Your Bank?”
The goal of the report is not to bash the banks, but to identify what happens to money itself when you save it, and how “saving” money limits your ability to “make” money.
The report is available for immediate download at Free Report
For Your Abundant Success,
Kalinda Rose Stevenson, Ph.D.
kalinda@NoMoneyLimits.com
www.NoMoneyLimits.com
PS. Do you understand how the current economic crisis is directly related to what bankers understand about the nature of money? Find out how the banks made money out of thin air, in “No Money Limits For Real Estate Investors.”
Award Winner of National Best Books 2007 Awards
Business: Real Estate Category And Finalist in
Business: Personal Finance Category
Related posts
If You Are Thinking About Buying Foreclosures, Ask Yourself This Question
Are you thinking about buying foreclosed properties? If you are thinking about this, know that you are not alone. Anyone who has even the slightest interest in real estate investing is probably thinking the same thoughts.
All across the United States, and in other places around the world, property owners are losing their properties to foreclosure. Blame it on corrupt mortgage brokers, greedy bankers, and unqualified, irresponsible buyers, if you want. Whatever happened to cause foreclosure for any particular property owner, the harsh reality is that one person’s loss can be another person’s gain.
As foreclosed properties lie empty across the land, thousands of people see the potential for wealth in buying foreclosed properties.
And so, you are right to recognize that this is a time of tremendous opportunity to lay the foundation for wealth creation by buying foreclosures.
If you get out your calculator, you can get excited about the possibilities as you crunch your numbers. If you can buy some of these foreclosed properties at a fraction of their market value only a year or two ago, just think of how much money you will make when the market rebounds and prices go up—as they surely will, sooner or later.
While so many other potential buyers are too afraid or too broke to buy, or they can’t get credit to buy, you can scoop up prime properties at bargain basement prices.
How do you do this? If you have the cash, or if you have excellent credit , and if you can get a mortgage, or if you can get private funding, this is the ultimate buyer’s market. If you can hold the properties, while so many other owners are losing their properties to foreclosure, and if you can rent them to responsible tenants who pay the rent on time, you can use the rents to pay off your mortgages in a record time. By the time the markets rebound, and the market value of your properties climbs up again, in the next real estate boom, you can be the landlord of an empire of real estate holdings.
This vision is certainly possible, and will very probably turn into reality for at least some of the real estate investors who see the potential of thousands upon thousands of foreclosed properties.
But….before you begin to calculate your future profits, there is more to consider. Before you seriously consider buying any foreclosed property, ask yourself this question:
What are you going to do with any property after you buy it?
Expressed another way, the question is: What is your strategy for foreclosure properties?
A strategy is a plan to accomplish a particular result. Strategy always looks at the intended outcome.
Especially now, when there are so many foreclosed properties available in the marketplace, it is especially critical to understand clearly that a decision to buy property is never a complete plan. It is a tactic, rather than a strategy.
Consider the difference between a tactic and a strategy.
Tactics are about what to do, and how to do it. Strategy begins with the question: Why? Why are you going to do something?
When it comes to real estate investing, buying property is a tactic. It is never a complete strategy, because you have not clearly defined “why” you are buying the property. Buying real estate becomes more than a tactic and becomes part of a strategic plan when you know “why” you are buying the property, and what you intend to do with the property after you buy it.
In the boom years of real estate investing, much emphasis was placed on buying property. In my chapter on “No Money Limits Selling,” in my book, No Money Limits For Real Estate Investors, I made this observation.
One of the greatest deficiencies of real estate training targeted toward beginners is the emphasis on buying without equal attention to selling. I have heard too many gurus exhorting their students to go out and make a deal. And so people rush out, determined to make a deal—any deal—and end up making bad deals. No Money Limits for Real Estate Investors, page 74.
The common wisdom of the real estate boom era was: “You make your money when you buy.” Because market values were climbing so fast, and credit was so easy to get, investors often made a lot of money by buying property without having a clear plan of what they were going to do with the property after they bought it. In those heady days, investors could buy property and then decide if they wanted to use tactics such as “flipping,” “rehabbing,” and “lease options.” Even without clear strategies when they bought, many investors did very well.
These are different times. You can buy property well below prior market value, but that doesn’t mean you can easily turn around and make a profit using the same tactics that worked so well during the boom times.
The reason lies in one simple word, “if.” Did you notice all the “ifs” in this paragraph?
If you have the cash, or if you have excellent credit, and if you can get a mortgage, or if you can get private funding, this is the ultimate buyer’s market. If you can hold the properties, while so many other owners are losing their properties to foreclosure, and if you can rent them to responsible tenants who pay the rent on time, you can use the rents to pay off your mortgages in a record time. By the time the markets rebound, and the market value of your properties climbs up again, in the next real estate boom, you can be the landlord of an empire of real estate holdings.
But the list of “ifs”—and this isn’t even a complete list of “ifs”—is formidable at a time when mortgage lenders are doling out mortgages only to borrowers with excellent credit and substantial down payments. This is also a time when people who might buy or rent from you are not only losing their homes, they are also losing their jobs.
Even if you have the cash, credit, or financial partners to buy the property, this doesn’t mean that potential buyers or renters will be able to buy or rent your property. In addition, you will need to hold the property long enough for the market to turn around, which can be months or years. You will also need to be able to pay taxes, insurance, and maintenance. If you can’t do all of these things, you could very quickly find yourself in a position where you are facing foreclosure of your investment properties.
In all of this, I don’t mean to throw cold water on anyone’s plan to seize the wealth creation opportunity created by the foreclosure epidemic. My goal is to encourage you to start at a different place than the idea of buying foreclosures at bargain prices. Make sure that you have a strategic plan that includes both how you will buy the properties and what you intend to do with them after you buy them.
Dr. Kalinda Rose Stevenson
Discover the secret of making money in No Money Limits For Real Estate Investors, 2007 Best Books Award Winner in Business: Real Estate Category
Tags: buying foreclosures, foreclosed properties, foreclosure, No Money Limits, real estate, real estate investing, strategy, tacticsRelated posts
The Lending Game Gone Bad: The Money Reason Why Banks And Corporate Giants Are In Trouble
One of the factors creating turmoil in the economy is the blurring of financial roles.
In the Monopoly Game®, the rules are clear. The players have a clear set of rules, which determine what they can and cannot do with money. The banker also has a clear set of rules, which allows the banker to use money differently than the players do.
This distinction between the money rules for players and the money rules for bankers is a critical element in No Money Limits.
In the real economic world, we have experienced significant blurring of roles among various institutions, as the rules have changed and evolved over time.
Banks are a prime example. It used to be that the lines between different types of banks were clearly defined. In broadest terms, commercial banks served businesses, thrifts served consumers by taking deposits and originating home mortgages, and investment banks help businesses acquire capital. In recent years, through a series of legal changes, these lines have become so blurred that most of us have only the vaguest idea of the difference between various types of banks.
During the same period of time, there has also been significant blurring of the lines between bankers, non-banking companies, and private lenders related to lending.
One particular example concerns large companies that have become both sellers and lenders.
Analysts point to two key reasons why some of the nation’s largest companies have unraveled in the current downturn. One is that they had come to rely on providing financing to their customers, lending money for sales of their own products. When the credit markets ground to a halt in mid-September, it set off chain reaction of pain, hurting consumers and manufacturers alike. Corporate America’s Giants Crumbling
As we analyze what went wrong with the economy, to lead us to this state of economic crisis, one theme keeps recurring. The economic crisis originated with lending practices gone bad.
Lending money can be extremely profitable. To get in on the profits, various types of banks kept expanding their services and their capacity to make loans. At the same time, big corporations realized that they could increase their profits if they became lenders for consumers who wanted to buy their products.
In the process, bankers made risky mortgages to people who could never repay them, because the lending process itself was highly profitable. Meanwhile, big companies set up their own lending divisions. Instead of sending car buyers to the bank to get car loans, why not provide financing directly to your customers? As a result, a company such as General Motors became both the maker of cars and financer of cars through its financing arm, GMAC.
In retrospect, [Ed] Yardeni said, the business model was essentially flawed. When companies like GM and GE financed customers, the loans must have been cheaper than what the customers could get elsewhere and must have meant that the risk of lending to them wasn’t being reflected in the loan rates. Corporate America’s Giants Crumbling
Self-financing by big companies led to the same trap that ensnared the banks that got caught up in making subprime mortgages.
“Self-financing is inherently a dangerous game,” Yardeni said. “You’re biased. You want to convince yourself that the borrower is good for it, and you want to make the sale. You’re not going to be an objective lender. That may be one of the problems here.” Corporate America’s Giants Crumbling
The driving force behind the expansion of their traditional roles—both for banks and large companies involved in self-financing—is the intention to create profit by increasing transactions. This is the essential goal of any business.
Ultimately, the nature of money made all of this possible. Money is not a commodity in limited supply. Money is created in transactions. By creating more transactions, banks and self-financing companies could make more money. The more transactions they made, the more money they would make.
The primary insight of No Money Limits is that the only limit to money is the belief that money is limited. What we are seeing in the current economic crisis is the result of people who took this insight too far.
In the desire to increase profits, banks and self-financing companies made more and more bad loans, throwing prudent lending practices out of the window, until the whole financial structure teetered on the edge of collapse.
Dr. Kalinda Rose Stevenson
Tags: bad loans, banks, lending, Monopoly, No Money Limits, recession, self-financingRelated posts
When Creative Financing By Banks Gets Out Of Control
What is the basic cause of the financial crisis? It is the process called creative financing, because creative financing creates money. Creating money is different from mining for gold or drilling for oil. Mining and drilling seek to find something that already exists. But money cannot be discovered the way that gold or oil can be discovered. Money is an idea of value and is created in transactions.
The Monopoly Game involves players and a banker. The rules of game state that the banker cannot go broke. The significance of this rule is a critical element in No Money Limits. Yet, one of the dominating experiences of recent months has been the spectacle of banks going broke. We have seen banks receive billions of dollars in “bailouts” or “rescue” packages, and still go broke.
At its core, the economic crisis began with the banks, as they multiplied techniques to use creative financing to fund the real estate boom. The reason banks have gone broke is that the banks stopping playing the kind of role the banker plays in the Monopoly Game.
In Monopoly, the banker serves the players as a utility. The banker provides a useful function to collect and distribute cash, to allow the players to play a real estate trading game. In the real world of the real estate boom, the banks were no longer content to be utilities. Instead, the banks began to be drivers of the economy. The banks used increasingly creative financing techniques because they understood that money is not found. Money is created.
The root cause of the financial crisis is that people who understand the essential nature of money carried creative financing too far. They became ingenious in their methods to create money on paper, with a variety of clever techniques.
The bankers on Wall Street created an array of techniques, such as mortgage securitization, credit swaps, and derivatives. All of these creative techniques created more and more paper assets, until the whole system was revealed as so much mumbo-jumbo, and collapsed like a giant soufflé.
In the Disney classic “Fantasia,” one of the most memorable episodes is the “Sorcerer’s Apprentice.” The young sorcerer taps into magic he cannot control. Watch the ”The Sorcerer’s Apprentice.”
This is one of the best illustrations of what went wrong with the banking system during the real estate boom. The bankers tapped into the magical power to create money by using creative financing techniques and the whole process quickly got out of control.
[This is the second post in a series about how creative financing techniques, which created money out of thin air, led to economic crises around the world.]
Dr. Kalinda Rose Stevenson
Find out more about the nature of money and how money is created out of thin air in No Money Limits For Real Estate Investors: Discover The Money-Making Secret In The Real Estate Game That Transforms Your Money Struggles Into Financial Abundance, National Best Books 2007 Awards Winner in Business: Real Estate Category and Finalist in Business: Personal Finance Category.
Tags: bailout, banks, banks create money out of thin air, creative financing, financial crisis, money, real estateRelated posts
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