| LAGUNA BEACH FEBRUARY 17, 2009 VOLUME IX |
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News & Views
Debt Buyers & Sellers Resource
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Editor's Message
DBA Conference
This past week the annual Debt Buyer Conference was held by the DBA in Las Vegas and we were not able to attend. Our plans for the week were disrupted when, 3 weeks ago, our oldest son informed us he was getting married on the 13th of February. We might have still attended for a day or 2, if our other son who is in the Air Force, stationed on a tour of duty in Kuwait for the past 5 months, hadn't also called and said he was coming home midweek during the conference.
Sadly we missed the entire event, and knowing that there may be others who would love to hear about it, too, we thought that we would invite people who did attend, to share any significant experiences or even write a short article for the next edition of News & Views. One topic that was of particular interest to us was the proposed Debt Buyer Certification program and new legislation updates. Any other topics are also encouraged. Please contact Gary at gary@crescentbayfinancial.com if you would like to contribute.
In this Edition
In this edition, we have included an update on the progress of our PPM in "Update on Raising Money". We have also updated the recent credit card charge-off rates and in the broader economoy, a friend brought to our attention a very interesting web site called The Economic Collapse. We are sharing an article published last week on "It is Now Mathematically Impossible to Pay of the US Debt". In addition, we have added a new section called Green Pea Corner, with information for our newer Debt Buyers. This installment covers Seller Surveys.
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Several months ago, we provided our last update on the progress of our Private Placement Memorandum (PPM) as a vehicle in which we could legally raise money from investors for our Debt Buying business. We selected the PPM so that we would be in compliance with the Securities and Exchange Commission (SEC) regulations. There is much more to the PPM process than we are outlining here, but suffice it to say, that after the experience of having our Loan Proposal turned down by 134 banks, we wanted to be sure we were following all of the right legal steps.
We had talked to several firms that prepare the PPM document and selected one in Florida. Our consultant provided the boilerplate template for the disclosures at the beginning and the end of the document, which required editing. We also needed to revise our business plan and financial model. Fortunately, we had a strong business plan so the reformatting and changing of the entity structure was not too much of a problem, but the financial model really needed to be completely reworked. We revised all of our projections to reflect how the industry is actually performing now, jettisoning the decade-old projections which were provided at a debt buying seminar. At the end of November, we finally had a PPM that was compliant. Now the investors could begin beating a path to our door.
The primary reason that we selected our consultant, after interviewing four other candidates, was that they included a marketing campaign in the cost of the PPM preparation. By this time, it was clear that the right marketing is extremely important,and we felt that having someone with the right contacts might insure that, our PPM was seen by investors and, ultimately funded. We expected that the consultant would expose us to a huge network of qualified investors. We don't know to what degree that occurred, but we never received a contact of any kind from a single investor that was in the consultant's network. We did however receive from the consultant a several page power point presentation and a short document that described various marketing ideas for our PPM, most of which we had already done.
Prior to starting the PPM process, in addition to the 134 banks who rejected us, we had personally contacted well over 500 Private Equity Investors, Venture Firms, Angel Investor Networks as well as all of the capital raising firms we could find online, in addition to the non-profit and educational groups that help businesses raise capital. So when the marketing materials arrived from the consultant, we found that we had already contacted over 95% of the list of resources provided, and had been previously been turned down by many of these groups because of the type of business that we have. (Debt Buying is not in the same category as High-Tech or Bio-tech which are the types of industries most of the investors tend to favor). One more point that is important to note is that when we first started trying to raise investment capital, we did not clearly understand the rules relating to raising money. We ran some ads on Craig's List looking for investors and someone sent us an e-mail asking us if we knew about the SEC regulations for advertising. We decided that maybe we should call the SEC and find out what the big deal was. We had inadvertently turned ourselves in to the SEC.
Promoting Your PPM
With our brief experience with the SEC (they make the IRS look like the Tooth Fairy), we knew that is important to be compliant with their many regulations. One of the most effective networking sources that we have discovered for the business community is Linked-In. We are members of a number of Linked-In Groups for both the Debt Buying and Collections part of our business. We are also a member of a number of Linked-In Investor sites. There are many of these sites and when we place a posting on just the Investor / Venture Capital / Angel Investor sites, we can reach well over 250,000 Linked-In group members. Right after we first received our PPM, we ran several posts on Linked-In, and received a number of inquiries from interested "investors". Since we were members of the same groups, we believed that we were compliant. Interstingly, most of the responses we got were actually from consultants who wanted to show us how to "properly" market our PPM, Brokers who wanted to sell membership units for a commission, and a number of others who kept telling us that we could not raise money on Linked-In. This was surprising, as most of the postings on Linked-In investor sites are obviously about raising money, and some of these postings are for very large requests. Yet, we were still being told that we could not solicit for investors on Linked-In.
After considerable trial and error, incldcing sending out many copies of the PPM, and trying some different wording, we received more more responses telling us that we could not advertise for money, but also some requests for the document. Apparently the PPM doesn't satisfy the SEC advertising requirement. This past week, we took a different approach and placed a new posting on Linked-In, and have received a great number of new responses. We thought that many of these responses were very informative and worth sharing.
Linked-In Post
This was our most recent posting:
"We have a PPM, yet we cannot legally advertise to raise money. How do we find investors on Linked-In?"
These are some of the responses that were posted regarding our PPM. We have removed the Last names to protect the identity of the responders. The text in all cases is unedited except for the name and spelling corrections.
Date: 2/09/2010
Group: Startups and Entrepreneurs Get Funded
The people posting calls for investors are blissfully oblivious to the law. None of them raise any money here, so it's a moot point.
Start contacting angel networks in your area but do try to avoid paying fees to pitch them.
Peter
Date: 2/09/2010
Apologies if you already know all of this. A couple of thoughts that may be useful for your situation:
You can not advertise generally any investment security without registration, either with the SEC or with a State in certain limited circumstances. If you are selling the investment securities in a private offering, you need to avoid the general solicitation and also only offer the securities to accredited investors. One method to sell the investment may be to use a broker/dealer network. They have pre-existing relationships with accredited investors. Another method may be to pre-screen potential investors for accredited investor status prior to delivering the PPM and other investment offering materials. For example, some of my clients may use a generic website that describes their business. The website will invite investors with interest in knowing more to complete an accredited investor questionnaire for pre-screening prior to receiving the PPM.
Hope that helps. Let me know if you have any follow up questions.
Kind regards, Adam
Date: 2/09/2010
Hi Gary,
You are correct that you cannot legally distribute information to the general public in solicitation for securities. There are a tremendous amount of tools that are available to identify good investor targets. I don't believe that just posting on linked in is where investors go to look for deals. The consultants who contact you some might be worthwhile to work with and some might be a waste of time.
Bottom line the most effective way to raise capital is to be introduced by a trusted person to the investor source. This type of introduction can come from many parties such accountants, lawyers, business leaders, wealth managers, and trusted business advisors. Despite what you see on these linked in postings the most effective way to raise capital is still the old fashioned way of personal introductions and connections. People still do business with those who they know and trust. My suggestion is that you identify the sources of capital, who you want as your financial partners and determine potential connections to be introduced to those sources if you do not have the connections yourself. Raising capital in good times is difficult and these are not good times. Keep at it, do it right, and best of luck.
Regards, Rob
Date: 2/09/2010
Hi Gary,
linked in is really not the place to find investor, but you can make contacts and there are able to help you, even if you have a PPM like me! Please go to FindThatMoney.com or Go BIG Network, this two are very good in making contacts to investors in a serious way! Good luck for you and your business!
Posted by Jörg
Date: 2/10/2010
If your idea is real and makes money - no one will fry you no matter what you do.
However, even if your idea is real - if it loses money through bad management, bad production or customer support, bad markets (collapse) or vendors (supplies) or just bad luck - no matter how well you plan and how many lawyers you rent - your investors will fry you like bacon.
No Name
Date: 2/10/2010
Gary:
In order to rely on the "private placement" exemption from registration under state and federal securities laws, an issuer cannot engage in "general solicitation and advertising." I know that this requirement is commonly violated on Linked In, but doing so could create real problems for you and your company down the road, including giving investors a right to rescind their purchases.
You should either engage a licensed securities professional to solicit investors, or rely on informal networking to reach them. You can also make use of an unlicensed "finder" to get introductions, but you need to be real careful here, because many of these people either unethical or incompetent. Further, you cannot pay a finder "transaction based compensation" (i.e., a commission) for making introductions to prospective investors without running afoul of the securities laws.
As to building a network, anything as public and generally disseminated as a posting on Linked In is verboten, but there are angel networks and trade organizations that you can use to informally network and get introductions to investors. Although you can disseminate general information about your business on Linked In and other places, you can't directly solicit investors that way.
Hope this is of some help, Bill
Date: 2/10/2010
Gary--I am a securities attorney in Washington, D.C. and I assist companies in raising money. It is certainly correct that you cannot advertise, but you may legally make connections through contacts that you have. The important thing is that you follow state and federal securities laws. I would be glad to look at your PPM and advise you about proper compliance. I also may be able to help you find investor groups that may be interested. Check me out at www...........
Mark
Group: Private Equity Investment Group
In the past month I was on the phone with 2 SEC attorneys: one specifically contacted on this issue, the other involved in prosecuting a scam out of Orange County & that criminal is a member here-watch out for (....) The SEC prosecuting attorney & I were having a chuckle over (....) bungling. He tried to sting us. But the subject of the PPM & Private Equity ads, docs etc. came up.
Bottom line I heard-remember both SEC attorneys said "I am not giving you legal advice. You need an attorney that is a securities specialist." & I worked for attorneys, even a retired Federal Judge. In business what you need is a cool head, nerve & an honest, accurate offer. Lacking those three qualities, the best attorney or broker/dealer in the world won't save you.
1. If you violate the provisions of SEC 506 (or others related to this i.e. 144 etc.) & your offer/firm/partnership tanks, kiss your backside goodbye. You'll be sued & glued & may end up behind bars.
2. If you violate & your offer makes money, the odds of anyone complaining or the SEC doing a darn thing are slim to none. They're overworked with complaints from scams & honest people who had bad luck & had a partnership tank, but who violated the statutes & therefore, investors are nailing them to the wall.
In short: if it makes money, you're probably never going to hear from the SEC, unless (key point) an investor decides to play rough & slam you to the wall for - oooops - advertising in a public place, or some sentence in your offer such as GUARANTEED TO MAKE YOU MONEY etc. We always say (on every darn page) you could lose all your money, & then actually explain 2 or 3 ways they could. Then we always follow that with "here are the guarantees or strong points" & then close with NOTHING IS GUARANTEED & the old PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
All that back & forth disclaimer stuff aside, one thing you probably do NOT want to do is try to raise money from more than 10 or 20 people. Its a whole new set of laws & it can get ugly. Another big problem is failing to tell people about the 10% broker/dealers often take. You MUST disclose everything-who's skimming-& how much you're paying your CPA/attorney-everything. If you run a tight ship, tight books, good documentation & produce accurate reports w/ third-party audits by a good CPA etc., & publish accurate data, you're pretty safe.
The first SEC attorney said a golden key is establishing a prior relationship BEFORE you ask for an investment & said it can be as simple a exchanging business cards at a conference: yup-no kidding. I said "Wait a sec-I meet someone online who is an accredited investor, worth $50M or more, & I can't give them docs, but I eat a burger & drink a beer with a guy on a bar stool at a conference & bingo, I can hand them a PPM?"
Yup! - Kind of makes you wonder, eh?
So one thing we did to establish a relationship is produce a series of classes at our site. If I teach you a renewable energy concept - you are a student & having worked for a Federal Judge I am willing to press that one all the way to the Supreme Court: we have a relationship that is grossly superior to any burger/beer at a conference.
Got a book? Send it free: don't ask for money. Teach them something & make sure the book lacks a few points, forcing "students" to CALL YOU (the tutor) & get help. There you go: a relationship.
Once that's done you can send them darn near anything, but a key point I learned is you need to verify they are an accredited investor - $2M plus with $200K in income in the past 2 years. This avoids average Jane & Joe Citizen who are risking their 401K & its best to avoid the $5K - $100K investors anyway. If you want to work on obtaining capital at that low level, it's better to package up an offer for a LOAN / Promissory note, which we did in our first year & the SEC attorney said a loan is not a security & is legal: you can ask for that money darn near anywhere. Hope this helps.
Posted by, Craig M.
Group: Private Equity Investment Group
Hello Gary
May I suggest you locate a broker that deals specifically with PPM's. He / she should be able to utilize your PPM to raise the capital for a broker fee, which should be paid out as a percentage of the funds raised. Hope this helps. Wish you the best in your endeavors.
Freeman
Date:2/09/2010
Dear Gary,
How are you? My name is Brandon, just read your post to seek investors for your business. I'm interested to join the force, how much money your company is trying to raise? Can I have your PPM and business plan for the details?
Actually, I'm a broker working with some private investors for due diligence and facilitate funding request for businesses. For my day time job, I'm working with United Bank as Sr. Credit Analyst and manage the due diligence, credit analysis and underwriting processes for commercial lending requests.
Thanks, I look forward to hearing from you.
Best,
Brandon
Summary
In general, we received some very good input from a number of readers of the Linked-In posting and several more actually wanted to have copies of the PPM. One person in particular has expressed interest in doing an entirely new offering to raise far more capital than we had intended, and only for accredited investors, completely at their own cost. We will see how that turns out.
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Loan Buyers Group Update
The Loan Buyers Group has just purchased two new National files. This brings our total purchases so far this quarter to over $70 million in face value and represents almost 17,600 accounts with an average balance of a little less than $4,000.00. In addition to the detailed modeling that we perform on every portfolio, our members enjoy quality accounts from the best issuers, no brokers, and the lowest pricing. We also provide professional account management for the entire collection process. We track the performance of the accounts from the acquisition stage through the collections and provide weekly updates on the performance of the portfolios.
The Loan Buyers Group was formed to allow smaller Debt Buyers and Collection Agencies to work together to purchase National files of charged-off debt at discount prices. The Group purchases only National portfolios in very large volumes. We are not Brokers or Resellers, nor is this a Joint Venture, and, there are no fees to join the Loan Buyers Group. For more information on how we operate, what we do and how to join, visit www.loanbuyersgroup.com. Join us on Linked-In .com/Search Groups/"Loan Buyers Group: National Debt Buyers".
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Credit Card Charge-offs
2009 showed that the collection industry is not recession proof as most leading companies reported declining profits and lower liquidation rates. Impairment charges, which are write-downs of previously purchased debt, were also on the rise. 2010 may be more of the same as the industry follows the general economy. If the economy should rebound and customers find additional cash or find employment, many of the smarter agencies will be prepared.
Account placements should continue at high levels as the unemployment rate continues to hover at the 10% mark. In the second quarter, some are predicting an easing of the unemployment rate. While others believe that 2010 will be a difficult year for collectors, and that the predicted improvement to the nation's unemployment will not be realized this year. In fact some say it may get worse before it gets better.
There will probably be a lot more consolidation in the industry and collection firms are generally trying to work a lot smarter. Collectors are also trying to be more creative and collaborative with their customers to find other sources of income to satisfy their obligations.
Debt sales volume has decreased about 30% from the peak in 2007, where $125 billion of debt was sold. More creditors have been placing debt directly with agencies because of the lower debt prices and reduced liquidations. The charge-off rates have appeared to have leveled off for the past several months yet the delinquency rate continues to remain high which will keep charge-offs at an elevated level. The chart below includes the monthly charge-offs for the major issuers.
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Credit Card
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Bank of
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American
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Capital
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Discover
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JP Morgan
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Citigroup
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Wells
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Credit-card
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Unemp.
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Issuer
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America
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Express
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One
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Chase
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Fargo
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Industry
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Rate
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Feb-99
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4.4%
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Feb-07
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|
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|
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|
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4.51%
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4.5%
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Feb-08
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|
|
|
|
|
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5.59%
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4.8%
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Aug-08
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|
|
|
|
|
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6.82%
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6.2%
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Feb-09
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8.70%
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8.06%
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6.35%
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9.33%
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8.82%
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8.1%
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Mar-09
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9.31%
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8.80%
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9.33%
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7.39%
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7.13%
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9.66%
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9.68%
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9.30%
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8.5%
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Apr-09
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10.47%
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10.10%
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8.56%
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8.26%
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8.07%
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10.21%
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10.03%
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9.97%
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8.9%
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May-09
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12.50%
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10.40%
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9.41%
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8.91%
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8.36%
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10.50%
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10.62%
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9.4%
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Jun-09
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13.86%
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9.90%
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9.73%
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8.75%
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8.04%
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10.50%
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10.76%
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9.5%
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Jul-09
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13.81%
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8.92%
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9.83%
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8.43%
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7.92%
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10.03%
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10.52%
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9.4%
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Aug-09
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14.54%
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8.50%
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9.32%
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9.16%
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8.73%
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12.14%
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11.49%
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9.7%
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Sep-09
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14.25%
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8.40%
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9.77%
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8.69%
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8.12%
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10.15%
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10.72%
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9.8%
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Oct-09
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13.22%
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7.80%
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9.04%
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8.54%
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8.02%
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8.79%
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9.04%
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10.2%
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Nov-09
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13.00%
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7.60%
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9.60%
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8.98%
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8.81%
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10.29%
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10.56%
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10.0%
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Dec-09
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13.53%
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7.10%
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10.14%
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8.68%
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7.11%
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9.56%
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10.32%
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10.0%
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Jan-10
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13.25%
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7.00%
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10.41%
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8.58%
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10.91%
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9.80%
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9.7%
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Source: Moody's Investment Services, Reuters, Bureau of Labor Statistics
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It Is Now Mathematically Impossible To Pay Off the U.S. National Debt - Posted on www.theeconomiccollapseblog.com 2-8-10 - No author Listed
 A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything. And the U.S. government would still be massively in debt.
So why doesn't the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?
Well, for one very simple reason. That is not the way our system works. You see, for more dollars to enter the system, the U.S. government has to go into more debt. The U.S. government does not issue U.S. currency - the Federal Reserve does.
The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers. If you will pull a dollar bill out and take a look at it, you will notice that it says "Federal Reserve Note" at the top. It belongs to the Federal Reserve. The U.S. government cannot simply go out and create new money whenever it wants under our current system. Instead, it must get it from the Federal Reserve.
So, when the U.S. government needs to borrow more money (which happens a lot these days) it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes. The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days). So that is how the U.S. government gets more green pieces of paper called "U.S. dollars" to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on.
So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger. Are you starting to get the picture?
As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure. So how much money actually exists in the United States today? Well, there are several ways to measure this.
The "M0" money supply is the total of all physical bills and currency, plus the money on hand in bank vaults and all of the deposits those banks have at reserve banks. As of mid-2009, the Federal Reserve said that this amount was about 908 billion dollars.
The "M1" money supply includes all of the currency in the "M0" money supply, along with all of the money held in checking accounts and other checkable accounts at banks, as well as all money contained in travelers' checks. According to the Federal Reserve, this totaled approximately 1.7 trillion dollars in December 2009, but not all of this money actually "exists" as we will see in a moment.
The "M2" money supply includes everything in the "M1" money supply plus most other savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000). According to the Federal Reserve, this totaled approximately 8.5 trillion dollars in December 2009, but once again, not all of this money actually "exists" as we will see in a moment.
The "M3" money supply includes everything in the "M2" money supply plus all other CDs (large time deposits and institutional money market mutual fund balances) deposits of Eurodollars and repurchase agreements. The Federal Reserve does not keep track of M3 anymore, but according to
ShadowStats.com it is currently somewhere in the neighborhood of 14 trillion dollars. But again, not all of this "money" actually "exists" either.
So why doesn't it exist? It is because our financial system is based on something called fractional reserve banking.
When you go over to your local bank and deposit $100, they do not keep your $100 in the bank. Instead, they keep only a small fraction of your money there at the bank and they lend out the rest to someone else. Then, if that person deposits the money that was just borrowed at the same bank, that bank can loan out most of that money once again. In this way, the amount of "money" quickly gets multiplied. But in reality, only $100 actually exists. The system works because we do not all run down to the bank and demand all of our money at the same time.
According to the New York Federal Reserve Bank, fractional reserve banking can be explained this way.... "If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000)."
So much of the "money" out there today is basically made up out of thin air. In fact, most banks have no reserve requirements at all on savings deposits, CDs and certain kinds of money market accounts. Primarily, reserve requirements apply only to "transactions deposits" - essentially checking accounts. The truth is that banks are freer today to dramatically "multiply" the amounts deposited with them than ever before. But all of this "multiplied" money is only on paper - it doesn't actually exist.
The point is that the broadest measures of the money supply (M2 and M3) vastly overstate how much "real money" actually exists in the system.
So if the U.S. government went out today and demanded every single dollar from all banks, businesses and individuals in the United States it would not be able to collect 14 trillion dollars (M3) or even 8.5 trillion dollars (M2) because those amounts are based on fractional reserve banking.
So the bottom line is this....
#1) If all money owned by all American banks, businesses and individuals was gathered up today and sent to the U.S. government, there would not be enough to pay off the U.S. national debt.
#2) The only way to create more money is to go into even more debt which makes the problem even worse.
You see, this is what the whole Federal Reserve System was designed to do. It was designed to slowly drain the massive wealth of the American people and transfer it to the elite international bankers.
It is a game that is designed so that the U.S. government cannot win. As soon as they create more money by borrowing it, the U.S. government owes more than what was created because of interest. If you owe more money than ever was created you can never pay it back. That means perpetual debt for as long as the system exists. It is a system designed to force the U.S. government into ever-increasing amounts of debt because there is no escape.
We could solve this problem by shutting down the Federal Reserve and restoring the power to issue U.S. currency to the U.S. Congress (which is what the U.S. Constitution calls for). But the politicians in Washington D.C. are not about to do that.
So unless you are willing to fundamentally change the current system, you might as well quit complaining about the U.S. national debt because it is now mathematically impossible to pay it off.
***UPDATE***
It has been suggested that the same dollar can be used to pay off debt over and over - this is theoretically true as long as the dollar remains in the system.
For example, if the U.S. government gives China a dollar to pay off a debt, there is a good chance that the U.S. government will be able to acquire that dollar again and use it to pay off another debt.
However, this is not true when debt is retired with the Federal Reserve. In that case, money is actually removed from the system. In fact, because of the "money multiplier", when debt is retired with the Federal Reserve it can remove ten times that amount of money (and actually more, but let's not get too technical) from the system. You see, fractional reserve banking works both ways. When $100 is introduced into the system, it can theoretically create $1000 as the example in the article above demonstrates. However, when that $100 is removed, it can have the opposite impact.
And considering the fact that the Federal Reserve "purchased" the vast majority of new U.S. government debt last year, we have got a real mess on our hands. Even if a way could be figured out how to pay off all the debt we owe to foreign nations (such as China, Japan, etc.) it would still be mathematically impossible to pay off the debt that we owe to the Federal Reserve which is exploding so fast that it is hard to even keep track of.
Of course we could repudiate that debt and shut down the Federal Reserve, but very few in Washington D.C. have any interest in doing that.
It has also been suggested that instead of just using dollars to pay off the U.S. national debt, we could use the assets of the U.S. government to pay it off.
That is rather extreme, but let us consider that for a moment. That total value of all physical assets in the United States, both publicly and privately owned, is somewhere in the neighborhood of 45 to 50 trillion dollars. Of course the idea of the U.S. government "owning" every single asset of the American people is repugnant to our entire way of life, but let's assume that for a moment.
According to the 2008 Financial Report of the United States Government, which is an official United States government report, the total liabilities of the United States government, including future social security and Medicare payments that the U.S. government is already committed to pay out, now exceed 65 TRILLION dollars. This amount is more than the entire GDP of the whole world. In fact, there are other authors who have written that the actual figure for the future liabilities of the U.S. government should be much higher, but let's be conservative and go with 65 trillion for now.
So, if the U.S. government took control of all physical assets in the United States and sold them off, it could not even make enough money to pay for everything that the U.S. government is already on the hook for. Ouch.
If you have not read the 2008 Financial Report of the United States Government, you really should. Actually the 2009 report should be available very soon if it isn't already. If anyone knows if it is available, please let us know. The truth is that the U.S. government is in much bigger financial trouble than we have been led to believe.
For example, according to the report (which remember is an official U.S. government report) the real U.S. budget deficit for 2008 was not 455 billion dollars. It was actually 5.1 trillion dollars.
So why the difference? The CBO's 455 billion figure is based on cash accounting, while the 5.1 trillion figure in the 2008 Financial Report of the United States Government is based on GAAP accounting. GAAP accounting is what is used by all the major firms on Wall Street and it is regarded as a much more accurate reflection of financial reality. So needless to say, the United States is in a financial mess of unprecedented magnitude.
So what should we do? Does anyone have any suggestions?
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The Economy is So Bad...
...that if the bank returns your check marked "Insufficient Funds", you call an ask if they meant you or them.
...a truckload of Americans was caught sneaking into Mexico.
...Exxon-Mobil laid off 25 Congressmen.
...CEOs are now playing miniature golf.
...my ATM gave me an IOU.
...when applying for a loan my banker replied, 'What a coincidence. I was just about to ask you!'
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Green Pea Corner
Seller Surveys
We review a large number of files every week for the Loan Buyers Group. We ask for only two things from the seller before we review a portfolio for potential purchase. One is the data file. This is generally a very large spreadsheet with various data fields, with some of the information masked so that the accounts can not be identified. Some data files contain as few as six data fields, while other files can contain fifty or more. The more data we have the better, as far as we are concerned. The data file (spreadsheet) is what we rely on to determine many things about the portfolio, which will ultimately allow us to determine a value that we can pay for the files.
The Seller Survey on the other hand, is very seldom ever consistent between sellers. Some are one paragraph word document, others are a spreadsheet form, some are just like checklists, and there are some sellers who do not have a Seller Survey at all. These Surveys are intended to represent much of the history about the file including the previous collection placements, chain of title and the availability of media among other things. Many of the Surveys that we review never answer the questions, either by leaving the space blank on the form or by placing N/A in the box when we know the answer is defiantly applicable to the portfolio being reviewed.
But by far, one of the most important answers in the Seller Survey is the number of Agencies that have previously worked the file and how many Buyers are in the chain of title. Considering, that within a year of charge-off an aggressive collection process, could mean that the file was placed with at least three different agencies. Some of the larger buyers move their files every three months. So when a Seller Survey says one agency placement after 12 months we have to scratch our heads. We had a file this past week that came with an average charge-off date of May 2005, and the Seller Survey shows 2 agencies. Over 87% of the file was out of stature and it was being marketed as two agency paper. It does not make sense to us that Brokers and Resellers would represent a file in this way.
We place far more importance on the age of the files than what the sellers tell us about the file in the Survey. In fact, we received an e-mail recently, where newer Debt Buyers were being coached by a Reseller that a portfolio could be moved to a second or third agency without losing the resale value of the package. The e-mail went on to talk about the importance of not having their debt labeled 2nd and 3rd agency.
Most Buyers assume that if someone paid good money for an investment (a portfolio), they were going to try their hardest to get the best return possible and when an agency is not performing on a file, buyers move the accounts to another agency. Buyers don't just sit on their files. So when agency placement is obviously misstated, what other questions were also answered incorrectly? The Sellers Survey should be true representation of facts about the file. Tying the Seller Survey that you made your purchase decision on, to your purchase contract may help you get reimbursed from the Seller if the statements in the survey were incorrect. These files are like used cars and you better be a good mechanic if you rely only on the salesman.
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Business Funding Sources
Self Directed Retirement Accounts (Published in Volume III)
15 years ago BeneTrends was the first company to introduce the 401(k) self-reliant business funding program. With this IRS approved plan in place, you will have the ability to use your own retirement account start a business or grow your existing business with out incurring taxes, penalties or loan payments. (We have confirmed that your debt buying business is eligible) Contact BeneTrends.
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