AT&T
Yesterday, I spent a good hour on the phone with customer service. I had a great experience on my call with AT&T wireless. I called to dispute a $53 usage charge on what is already a very hefty iPhone wireless bill. The customer service agent I spoke with was excellent. She was helpful, pleasant and courteous. She knocked off the charge, and when she didn’t know something she didn’t pretend that she did. She was both willing to ask me and her coworkers questions. Obviously I’m biased because I was able to get my bill reduced, but I like to believe I would feel the same way even if I couldn’t get the reduction on my bill. Regrettably, I didn’t write down her name. I realize too often, myself included, we voice our complaints bur rarely lavish praise. Next time I will remember to get a name when I please with service so I can actually write a letter to give praise where praise is due.
Dishnetwork
After I got off my call with AT&T, I proceeded now to the next item on my list, a call to Dishnetwork. I’m looking at potentially upgrading to HD service. I have an HD Television, and it would be nice to take advantage of that. Dishnetwork will charge me $150 to upgrade my equipment and still lock me into a 2 year commitment ontop of the of monthely equipment lease. I’m not ready for a two year commitment, and I find it somewhat incredulous given that I’m off contract that I would be charged an upgrad fee. If anything it would be cheaper for me to cancel my service, and sign up anew. More importanly, I was once again underwhelmed by Dish Network’s customer service. Of all the utilities I deal with, and all my customer service calls almost always are related to a utility, Dishnetwork has consistently had the worst customer service. I don’t blame the actual agent but rather the company. I doubt the company pays very well, nor do I think they provide adequate training. At the end of the day Dishnetwork fails to empower it’s customer service agents to actually solve customer problems. While I’ve had my difficulties with Verizon, AT&T, Comcast, and NStar (electricity), I’ve generally found the customer service agents at least try to help or resolve issue even when they fail. The customer service agents at Dishnetwork make no such effort. It’s just not in their training or directive in my opinion.
I have been eerily silent on the current financial crisis, and a crisis it is. I’ve been mostly silent because I’ve been just too busy to write. I’ve also been reluctant to write because I’m still trying to get a good handle on the issues. The issues are complicated and complex.
The Bailout
Since the bailout/rescue was announced I’ve been a bregruding supporter. While we should question the specifics of the plan, and should be in no haste to spend the $700 billion to take on the riskier assets in the banking system, I also know the banking system needs major help. The message that is only now being vocalized is that this bailout is not for the banks but for all the companies and individuals that bank. This is all of us. It’s not just American Banks, but companies and individuals and ultimately everyone in the global economy.
It’s hard for individuals to understand the impact of the credit freeze. Most responsible Americans do not rely on a steady flow of credit to fund everyday spending. Companies, large ans small, often do rely on steady credit. Companies almost always use a combination of cash and borrowed monies to fund new projects. In addition on daily basis large companies borrow short term via commercial paper to meet constant obligations. The Fed’s recent and unprecented move to actually by commercial paper directly is the most recent sign of the credit freeze. Even when a company has a solid balance sheet of assets and cash, these assets are not always readily accesible. It’s impossible to sell a factory overnight, and it today’s market’s even money market funds are less than liquid. The judicious use of credit serves as a bridge as longer term plans are enacted. When the markets freeze up as they have done it disrupts long term planning. Companies are effectively unable to conduct any business other than the basic adily requirements. I do not believe the bailout will get the country out of the deep malaise is that about to grip the nation, but it will at least prevent us from starting from an even worse point.
The Economy
I believe we’re headed to the worst recession that I’ve seen in my adult lifetime. The recession of 91 and and 2001 were very mild my historical standards. The Asian financial crisis of 1997 was remarkably localized and shortived. Asian countries were able to export themselves out of long term spiral down. The 1987 Market crash was just that, a market crash, it was a market event that affected people’s net worths but not incomes. What we’re experiencing now is a global crisis at the intersection of the financial and real economy.
Root Causes
While at first blush it’s easy to blame the high flyers on wall street, and irresponsible borrowers on main street, the root problem is much deeper. The housing bubble, and it’s spawn of CDOs, MBSs, and CDSs, are the at the center of the crisis. People brought houses they couldn’t afford financed by a banking system that traded short term gains for long term profits and stability. The scheme worked as long as housing prices kept on rising much like a ponzi scheme. Once prices started falling as they inevitably would, the deck of cards began to collapse. Bubbles happen, and this was not the first housing bubble. The country has had it’s fair share of housing bubbles. The last one in the early 90s. In the past, the country and economy has survived. And we will survive again, but I believe the repercussions will be much more serious this time around.
Why are the repercussions going to be more serious? All debts must be paid someday. I believe that someday is today. Over the course of the last 30 years Americans - the Government, Individuals, and Corporations, have become enamored with debt. We are a nation of deficit spenders. The effects are two fold, but both tied to our lack of savings. Individually and as nation we have no reserves because we as nation have collectively decided to pay installments for a fancy new BMW instead of surviving with the old beater and putting savings into the bank. So when a crisis such as this surfaces we have no recourse. Even if there were buyers for the BMW we can’t really sell it because we don’t really own it. Not only does our lack of savings affect us personally, but it has indirectly driven banks to riskier profit opportunities as access to cheap money (savings deposits) becomes more limited. Banks are hardly in the business of funding real businesses, but have increasingly relied on financial engineering and further leverage to create profits by selling and reselling while investments into the real infrastructure of America has waned.
I missed last month’s update (August 2008) given that I’ve only managed about one post a week over the last few weeks. The last two months have been easily the most volatile I’ve ever experienced, and I’ve managed to have experienced some pretty volatile times in my short investing career. In last 30 days we have experienced over 10 days where the market has moved more than 3%. The only comparable periods with this much volatility are periods in October of 2002 and after the 87 Crash. The fall of 2002 was a time of rally’s rather than declines, and excepting the one day crash in 87, the market was not all that bad the rest of the year. We’re in an ugly market. My personal feeling is that there still much to get worked out of the economy. I think further declines are in store. However, i do think the worst is behind us. What I do not expect is however a quick recovery. Stocks are not only being battered because of the financial crisis, but the state of the economy. I expect the worst recession that I’ve yet to see in my adult lifetime which admittedly has been a time of very temperate economic conditions.
Below is my historical performance for the last 10 months.
Brokerage Accounts: Accounts in which I pick individual stocks and some mutual funds. My IRA account(s) are amongst these accounts.
Asset Account: Accounts in which I managed on basic asset allocation principles. These accounts accounts consist of my 401k and Vanguard accounts.
All Classes: Total from all accounts
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