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Stewart vs. Cramer and Real Estate Update

March 19, 2009

You couldn’t turn to a major network or listen to a major broadcast in the past week without hearing about the ongoing feud between the Daily Show’s Jon Stewart and Mad Money’s Jim Cramer. Due to all of the media attention, and considering that there were some very good points made, I felt like I would use this opportunity to share some of my opinions and insights on the matter. If you haven’t had a chance to watch the interview in full yet, please do.

By no means am I going to endorse either of the shows as being absolute and true journalism. Mr. Stewart even alludes to this by saying, ‘We are both snake oil salesmen to an extent…‘. This doesn’t mean, though, that individuals don’t look to both of these sources for information on what’s going on in the economy, financial markets, and world as a whole. The Daily Show appeals to a  younger segment of the population who enjoy the comedic appeal, and Mad Money appeals to do-it-yourself type investors who believe they have a shot at outsmarting the markets.

The main theme behind the entire interview is that Jon Stewart feels like networks such as CNBC should serve more as a reporting agency to the consumer rather than a ratings junkie appealing to the ‘wheeling dealing’ fast-paced side of Wall Street. He goes further to show some incriminating interviews done by Cramer in which he explains some of the schemes  of hedge-fund managers and tells how they are able to manipulate the system. Stewart then says, ‘I want the Jim Cramer on CNBC to protect me from the Jim Cramer in those interviews‘. His point being that the media who reports the news about these major corporations (Bear Stearns, AIG, Lehman Brothers, etc.) know about their risky business practices (excessive leveraging and creative valuations) but does not report on those topics.

Thus far, I completely agree with the things that Jon Stewart has said and the points that he has made. BUT, then he says something that I wish Jim Cramer would have had a better response to. Jon Stewart says, ‘ …but isn’t that part of the problem? Selling this idea that you don’t have to do anything, anytime you sell people the idea that, sit back and you’ll get 10-20% on your money, don’t ya always know that that’s going to be a lie? When are we going to realize in this country that our wealth is work? That we’re workers and by selling the idea of, ‘hey man, I’ll teach you how to be rich’, how is that different than an infomercial?

Mr. Cramer then preceded to continue to look like a deer in headlights and apologize some more. My response would have been this: ‘Jon, I completely agree that wealth in this country is created by workers. I would go so far as to say that the workers in this country are among the best in the world. However, it is possible to make your money work for you. You spend your working life earning dollars with your hands and back. All the while you earn these dollars, you save a portion. While you are using your hand and back to earn these dollars, the dollars you are saving are also working for you until, hopefully one day, your dollars can work enough for you that you no longer have to use your hands or back. I feel like this is very much a part of the American dream.’ But of course there are going to be some cynics. There are people reading this right now who are saying, ‘But the stock market doesn’t work anymore, that ship has sailed’.

The thing that those cynics are missing is that the stock market is tied to tangible assets. These companies (Apple, GE, Coca Cola, etc.) have value. They own buildings and products and services, and through the work provided by Americans (and yes, some abroad) these companies have been able to grow. As you listen to the show, I share some incredible numbers about how much these companies have actually grown. Listen for some of these:

General Electric
•    Revenue 1967 = $7.17 billion     Profit 1967 = $338 million
•    Revenue 2008 = $1.82 trillion    Profit 2008 = $17.4 billion

Procter & Gamble
•    Revenue 1967 = $2.24 billion     Profit 1967 = $149 million
•    Revenue 2008 = $83 billion        Profit 2008 = $12 billion

Texaco (Chevron)
•    Revenue 1967 = $4.43 billion     Profit 1967 = $710 million
•    Revenue 2008 = $273 billion     Profit 2008 = $23.9 billion

I don’t think that it is difficult to understand that if you would have invested in these companies (actually you would have invested in the growth of these companies) you could have experienced tremendous long-term returns. But rather than take my word for it, look at these numbers:

GE growth of stock price from 1/1/1970 to 12/31/2008 = 6,458%
PG growth of stock price from 1/1/1970 to 12/31/2008 = 10,484%
CVX growth of stock price from 1/1/1970 to 12/31/2008 = 9,063%

Please don’t misunderstand me and think that I am saying you don’t have to work to be wealthy. That is not what I am saying at all. What I am saying, and I believe the numbers above show it, is that you don’t have to work forever. Due to innovation, advances in technology, and growth of businesses and the economy as a whole, it is possible to make your money start working for you. It is possible to become financially independent through long-term growth in the equity markets. However, it is a process and it does take time.

Big things are happening with the Money-Guy show. We have found a consultant to help us build, remodel, and update our website. Just so you know, it’s going to be awesome. We are very excited about it and are very excited that this can become an unbelievable tool to help assist you in getting your financial house in order. We already have risk questionnaires you can take to evaluate your own personal financial personality. You can then take that profile and discover which asset allocation is best for you. The next step? Go look at your investment account, or your 401(k), or any other account and take the knowledge you have acquired and apply it in order to restore some order to your financial chaos. We’ve also got some incredible eye-opening research that I know you guys are going to love. Don’t worry, it’s not just numbers! Bo and I have designed some very powerful charts that we think are going to give you a unique insight into our economy as well as the history of our economy and the financial markets. We want to provide you with independent, unbiased research and let you form your own opinions. Then, hopefully, you will share your opinions with us and we can all learn from one another. Keep your eyes open in the coming weeks. We are getting close!

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