February 2006 Newsletter
Issue Two, Volume Seven

IMMIGRANTS AND HARD WORKING AMERICANS

By Mike Gasior

Let me begin by first mentioning all the terrific notes I received after last month's issue where I started down the path of debunking a couple of my favorite economic myths. It has always amazed me how much traction some of these continue to get among the general population, as well as get perpetuated by the media (although the media isn't dominated by an army of MENSA members and it shows). This month I want to knock off another extremely popular one, which hopefully includes some decent anecdotes you can repeat to others and appear knowledgeable and witty at your next happy hour. The subject of immigration in many countries is often a touchy subject; there is constant banter in the U.S. media and among politicians about how legal and illegal immigrants are coming into the country and stealing jobs away from "hard working Americans".

My favorite quote of all time regarding the public attitude about immigration in general is one I heard in the musical stage production of "Shenandoah". Although I don't remember the character's name, there was an older, southern Colonel type, sitting on the front porch, lamenting immigrants in general. I'm paraphrasing here, but his comments were something of the nature of: "Those damn immigrants are nothing but trouble and cause nothing but trouble. And they've been nothing but trouble ever since my family came to this country." I suspect you can already tell the direction my newsletter is heading this month.

Before I roll, let me first take care of a little business.

VIDEO COMMENTARY IS ON THE WEBSITE

In keeping with the theme we established last year, I continue to work my way through an assortment of security types, and this month we tackle "structured securities". I focus on a simple CMO's (collateralized mortgage obligations) but also try to make the ideas applicable to the other structures many of you see everyday, like CBO's, CDO's, CLO's and CMBS. The first CMO ever issued was back in June 1983, and in the past 23 years the structured securities marketplace has become vast and increasingly complicated.

So visit the video commentary page and take a ride with me as I discuss these very popular investment vehicles.

http://www.afs-seminars.com/v-commentary.html

PEOPLE ARE LOVING MY NEW GLOSSARY

I know I already mentioned this in last month's newsletter, but I have gotten some extremely glowing emails thanking me for the updated investment glossary we added to the website this year. If you haven't taken a peek yet please stop by. I personally think it's the best listing of terms and definitions regarding the universe of finance anywhere on the Internet, and more up-to-date than many of the hard-copy books you might have sitting on the shelf in your office.

So please utilize this terrific tool and bookmark the page for future reference. Plus, you most certainly can't beat the price.

http://www.afs-seminars.com/glossary.html

OFFSHORE SESSIONS FOR 2006

Finally, I am so excited about the slate of programs I will be presenting this year in both Bermuda and Grand Cayman and wanted to remind everyone of the offerings. It is easily the widest range of topics that we've offered in years, and oddly are timed to coincide with the beginning and end of the hurricane season. Okay, I'm kidding about the hurricane season, but I'm not kidding about the impressive array of very timely sessions. The list and dates of these courses are as follows:

Providing Services to the Hedge Fund Industry
BERMUDA - September 18, 19 & 20, 2006
GRAND CAYMAN - October 23, 24 & 25, 2006
http://www.afs-seminars.com/services-hedge-fund.html

Securities Operations, Processing & Accounting
BERMUDA - September 21 & 22, 2006
GRAND CAYMAN - October 26 & 27, 2006
http://www.afs-seminars.com/securities-operations_offshore.html

Mortgage & Asset Backed Securities
BERMUDA - June 20 & 21, 2006
GRAND CAYMAN - May 23 & 24, 2006
http://www.afs-seminars.com/mortgage_offshore.html

Derivatives
BERMUDA - June 22 & 23, 2006
GRAND CAYMAN - May 25 & 26, 2006
http://www.afs-seminars.com/derivatives_offshore.html

Due to the limits of the meeting rooms we were able to secure in both Bermuda and Grand Cayman, the number of attendees is unfortunately capped at both locations. We will take registrations on a "first come, first served" basis and will try our best to accommodate everyone. Please register via the website, or by calling my offices at (860)347-6568 and I look forward to seeing you there.

I HATE TO SAY, "I TOLD YOU SO"

But I did. I did tell you.

Almost exactly 12 months ago I wrote a newsletter with the title "Real Estate is Over", which resulted in a flood of "you suck" email and also with my comments getting picked up by a variety of media outlets.

Clearly, there seems to be statistics coming out on nearly a daily basis that confirm that real estate is most definitely slipping, but no real feel so far on how severe the slide will be. Freddie Mac reported a day ago that the 30-year mortgage rate just rose to a three year high.

The report that causes me to be a bit of a "braggadocios snot" was one released on March 9th, 2006 that told the story of how foreclosures for January 2006 were already running 45% higher than January 2005. And that some areas of the country were much uglier than the national average.

Atlanta, Georgia for example had an 88% increase in homeowners losing their homes with an astounding one out of every 422 households in Georgia currently in some stage of foreclosure.

One of the hottest real estate markets during this recent boom has been Nevada, but they suffered a 250% increase in foreclosures with one out of every 483 households having a sheriff visit their door.

Third place on this dubious list was Colorado with only a 36% increase from the same period in 2005. An impressive one out of 488 households were on their way out of their homes.

As I've discussed in past editions, there was an enormous movement to adjustable rate, interest only and no-money-down mortgages during the past few years and sometime in 2006 there will be about half a trillion dollars of such mortgages "adjusting" their interest rate. One needn't be an economist to envision the vast number of homeowners, who could barely afford their mortgage when rates were historically low, getting their doors completely blown in when this adjustment takes place. It is only reasonable to assume that the foreclosure and default rate is only going to climb almost every single month of 2006.

So while many of you might be thinking this is a buying opportunity unfolding, I caution you to keep your powder dry. This downward cycle in real estate is only getting underway right now and any actual "bottom" is likely to be two or even three years away. Patience will be your virtue in this marketplace.

Now on to our economic myth of the month.

ILLEGAL AND LEGAL IMMIGRANTS ARE STEALING JOBS FROM HARDWORKING AMERICANS

This is one of my favorite myths, although it's kind of a touchy subject due to all the political and media attention given to it.

Number one, it simply isn't true, especially the way it gets conveyed. Whether one wants to speak of immigrants coming into the U.S. to "steal jobs", or U.S. corporations outsourcing jobs to other countries, American workers are more often losing out to better educated and better trained workers more than anything else. Sure, there is also a cost savings when the wages of the other country are vastly lower than that of the United States, but more often than not, this is not the true reason.

Let's start with some background information before we get into the notion of immigrants coming into the U.S. and stealing anybody's job. I'd like to focus for a moment on what has happened to the earning power of lesser-educated and lesser skilled American workers during the period between 1979 and 2002, which are the most recent years that statistics are available for. The numbers I am about to give you have all been adjusted for any inflation during this time.

Between 1979 and 2002, American men with college degrees have had their median weekly wages increase their purchasing power by 20%. Not too bad.

American women with college degree did even better than the men, with their purchasing power up 34%.

Now let's look at those men who didn't even finish high school and see how they did with regard to their paychecks during the same period. For some sense of drama I'll pose this to you as a quiz. How do YOU think these high school dropouts fared?

a. Up 10 percent. Only half as much as the college graduates got, but still not too shabby.
b. Up one percent, or basically flat. This means that men who dropped out of high school have not had any improvement to their standard of living in almost a quarter of a century.
c. Down nine percent. This would make their standard of living nearly 10% worse than it was for their contemporaries of a generation ago.
d. Down 27%. This would mean that during one of the most impressive economic expansions in history that took place during the past 23 years, this group has lost more than a quarter of their purchasing power and enjoys a much worse standard of living than their peers of 1979.

I suspect many of you saw this coming, but the answer to my little quiz there is "d". Women who dropped out of high school did better than their male counterparts, but still saw their net purchasing power decrease by 7%.

So we now circle back to who exactly is taking the jobs away from these lower skilled workers who we now know are increasingly finding their financial situation eroding as the years go by. I'll tell you exactly who's taking their jobs.

Nobody.

That was not an attempt at sarcasm and I need you to clear your mind and consider what has taken place in society during those previous 23 years. For the purposes of telling you a pretty cool story, but also illustrate several important points, let me detail a fairly typical 48 hours in the life of Mike Gasior, which actually occurred late last year.

I got a call one morning from a client who asked if there was any chance I could come down the very next day to give a presentation to their Board of Directors. My schedule was open and I told them I could.

I immediately got on the Internet and booked myself both an airline ticket and a rental car in the city I was traveling to. It was not yet 9:30 a.m.

While I was already on the Internet I paid a visit to Mapquest and printed myself directions and a map to get me to the client's location from the airport and back. Gosh, I love these color printers.

My daughter wondered if I might take her to the movies, and feeling a bit guilty about leaving the next day, I agreed. I told her we'd need to run a few errands first.

First stop was to get some gas. I'm one of those people who never seems to know he needs gas until that reserve light is flashing on my dashboard. We pull up to the pump, swipe the old credit card, fill the tank and we're outta there in three or four minutes. I'm thinking I should maybe be considering a career in a NASCAR pit crew.

On the way toward the theater it also dawns on me that I'm pretty low on cash and I'll definitely be needing a jumbo-sized box of Dots for the movie, so a trip through the drive-up ATM is next on the agenda. Now that I've got a fistful of dollars it's off to the multiplex.

We walk up to the automated kiosk in the lobby and it almost instantly tells me what percentage of tickets have been sold for the matinee show we're there to see. I'm pleased to see a pretty low number. I pump a crisp new $20 bill into the kiosk, which then promptly spits back our two tickets and dispenses my change. The movie is pretty mediocre, but the kid likes it and Dad's a hero. We're outta there.

It's up before dawn for me the next morning since I'm on one of the first flights of the day out of the Hartford/Springfield airport. I'm only on the road at this sort of hour (5:00ish a.m.) a few times a year, but I always marvel at how many people are out on the road too and wonder where in the hell everybody is going at such an outrageous time of day. I suppose this is what happens to people like myself without an actual, "real" job.

I really like the new indoor parking garage at my home airport and use it pretty much all the time. I pull up to the entry gate and the machine instructs me to "Please push the button for a parking ticket", which I do and make some filthy suggestions to the machine as I pull away with my ticket. Perhaps I'm weird, but I just don't like it when machines talk to me so my usual response is normally some fairly explicit "dirty talk". I'm always hoping nobody is recording me in the elevators, parking garages and other places this occurs since it's certain that some of my suggestions to these animated voices would be considered illegal in many states and countries. I park the car and head for check-in.

This is a pretty rare kind of trip for me since I'm not lugging my usual "traveling circus" of luggage, but only a small carry-on. Since I'm not checking anything I decide I'll use one of the self-serve kiosks where I manage to swing an upgrade to First Class and secure my preferable isle seat.

On my way to the gate I make a quickie stop at a Coke machine since Mikey's feeling the need for caffeine and 20 ounces of Diet Coke should get my motor running at least a little bit. Although the Coke machine hasn't spoken to me, I still have a couple of profane comments for it over having to pay two bucks for my soda, but it's icy cold and hits the spot.

Upon arrival at my destination city, I hustle to the curb outside to wait for the National Car Rental shuttle (enjoying the rare occasion where I don't have to wait at the baggage carousel) and grab a ride to the National lot.

I've been a member of the Emerald Aisle with National for 17 years, but I still marvel at how cool it is that the bus just drops you off in the middle of the lot and you can just get into any car you want and drive off. Without even having to go inside, which is worth more than you can imagine to guys who travel as much as I do.

I'm now off to the client where I do a killer job for them and then grab my flight home to Connecticut.

While I was flying back there were some documents on my laptop that I'd wanted to burn onto a CD, only to realize I had no more blank CD's to use. Since I was getting back at a reasonable hour I knew I'd be able to hit the Wal-Mart that's on my way home and get some.

I jump in the car and race to the payment booths and swing up to one of the self-serve lanes. I'm instructed by the machine to "Insert my ticket magnetic stripe up...", which of course results in me suggesting several other insertion ideas along with my ticket and credit card. Within 90 seconds I'm pulling away and heading for I-91 and Wal-Mart.

Since this is now turning into a pretty darn long day, I hustle straight to the electronics department to just find what I came for and split, but unfortunately the blank CD media is only two aisles away from the music and DVD department so I just have to take a look. I see the brand new DVD release of "Cream at Royal Albert Hall" and I've just got to buy that too. It's a great show by the way, and I definitely recommend the DVD whether you are a Cream fan or not. The only observation I'll make though, is that Ginger Baker and Jack Bruce are beginning to look as though they could have been in the movie "Cocoon", if you get my drift. Still a terrific concert many of you might enjoy.

Now I'm hauling toward the front of the store with my blank CD's and DVD and find all the self-serve registers empty. Like most men I marvel at all these lasers, buttons and security equipment, but I scan my two items, bag them, pump some cash into the machine, get my change and receipt and leave. Total time in the store, less than 10 minutes. Man, I really AM fast.

Although it's getting kinda late by the time I arrive home, I still can't help but watch more than half the concert before finally surrendering to sleep.

So at this point I've appreciated your indulgence, and I hope you find a day in my life as cool as I find a day in my life, but I don't suspect much of what I had to share with you was particularly earth shattering or different than things you also do everyday. Well think again. Or better still, try to think back to 1979 if you're old enough to remember back that far (I can) and think how different my 48 hours might have looked had they occurred 23 years ago.

--First things first, I would have had to call my travel agent and had her book my airline flight and make me a rental car reservation. Then either I would have had to drive down to pick up my paperwork, or she would have had to bring it to me, with the prior being most probable.

--Since I'll be doing my presentation at a location that's new to me I dial 411 and get the phone number for that particular building. This is followed by a second phone call to that location to get directions from the airport and some fairly crude map drawing by yours truly. These long distance phone charges are probably going to be brutal too.

--Self serve gas in 1979? No such thing. I would have had to wait for the attendant to pump my gas for me, and if I were really going to pay with a credit card instead of cash, it would have doubled the length of my visit.

--Now I'm at the bank, and after parking and locking my car, I'm waiting in this horrible teller line wanting to make a simple withdrawal from my savings account. Why is it always Social Security check day whenever I need to use the bank?

--Here I am in line once more at the movie theater waiting for the pimply-faced kid in the booth to take care of the 20 people in front of me for tickets. I'm wondering if he can move any slower as I mutter under my breath, trying to not let my daughter learn any phrases more suitable for Navy personnel.

--The next morning I unfortunately arrive at the parking garage during a shift change and there is only one attendant open to hand out the time stamped tickets. It's only 5:45 a.m. and there are actually 4 cars in front of me.

--Once inside the airport the situation is even worse since the line for checking in for flights looks like something I'd seen in the Soviet Union. I thank God that I'm always at least an hour early to the airport since I'm going to need it today.

--I sure might need a Diet Coke, but none of the damn stores are yet open in the airport at this early hour. I guess I'm SOL on my caffeine needs.

--The lobby at the rental car place looks like a refugee camp and I take my place in the line with all the other miserable people. It's funny that no matter how long the line, I'll always feel better the moment a few people are in line behind me. Misery truly does love company and I'm comforted the fact that there are other people now worse off than I am.

--It's just my luck when I arrive back at the airport in Connecticut that it seems three flights have all landed at almost the same time. There are only two booths manned at the parking garage exit, the line is a mile long and everybody in front of me seems to be paying with three-party, out-of-state checks.

--Since CD's and DVD's aren't invented yet in 1979, and there isn't a Wal-Mart north of Tennessee, I decide to stop by the local K-mart and grab that brand new Donna Summer album. Not too many registers open unfortunately, and of course the album I grabbed doesn't have a price tag on it. The forthcoming "price check" will hopefully take only 10 or 15 minutes.

It will clearly strike you that I'm trying to be somewhat of a smartalec, but I think you are vividly seeing my point in all this silliness. Consider all the humans that were eliminated between my 2006 day and my 1979 day, and also consider that nearly every job that's been eliminated might very well been populated by one of our high school dropouts, or perhaps a high school graduate, but most certainly not a college graduate:

--Travel Agent
--Information Operator at the Phone Company
--Gas Station Attendant
--Bank Teller
--Ticket Seller
--Parking Lot Attendant
--Airline Ticket Agent
--Sundry Store Clerk
--Rental Car Desk Staff
--Cash Register Operator

My point is simple. These people were not eliminated by an immigrant or a human being of any kind. They were all eliminated from my day by technology and none of their jobs are coming back. Ever. And frankly, I'm quite glad to be rid of almost all of them.

Obviously, there are still people who populate every single one of these types of jobs here in 2006, but their numbers are dwindling and many of them face probable extinction. For that reason, the economic future for anyone in this segment of the population is as grim as the previous 23 years have been.

I don't want to steer into any political debate here, but I will state what I think is apparent and that is there doesn't seem to be the political will to turn around the educational system sufficiently to alter this situation anytime soon. Politicians rant, rave and wave their arms about the state of the American educational system, but the truth is nobody from either side of the spectrum is actually doing anything to change things, much less do something substantial.

The other angle the politicians take is to talk about "the working poor", and suggest that what is needed is to raise the minimum wage to "a working wage". Well I can promise you: NO, guarantee you, that if the minimum wage were to get raised to $9.00 per hour (this is one of the proposals I've studied) that every movie theater, supermarket, parking garage, etc, will be investing in more and more and more of these automated kiosks I've grown so fond of. Speaking as a business owner, I can assure you that before I pay $9.00 an hour, Social Security, Medicare, worker's compensation insurance and all the other associated expenses of employing a potential individual (who will be calling in sick on a regular basis, quit on me when I really need them, among an assortment of other hassles that ruin my day) I will have a building FILLED with these automated machines that eliminate me hiring as many people as possible.

And best of all, me buying all this automation is terrific for the U.S. economy. It's terrific for the companies producing such wonderful equipment, the highly skilled people who designed and built it, and finally the investors who helped finance the companies and get them off the ground. Can you see the vicious cycle that is occurring here, and you will only watch it get worse and worse.

I'm not claiming that all of this is so simple and so perfect, or that there aren't a million problems being caused by illegal immigration. All I want people to consider before they begrudge some Vietnamese family of eight who came to this country with $20 in their pocket, couldn't speak the language, slept in a one bedroom apartment for five years while the adults worked like dogs 12 hours a day and got their kids to study hard so they could get into a good college. Yes. That family does have a nice house now, owns their own restaurant and the oldest daughter just got accepted to Harvard. But you know what? It wasn't luck. There was no other possible outcome for them given the path they choose for themselves. I just get upset when an American looks at that family and becomes angry as if the family stole something from them personally, when in fact the family took advantage of the privilege and opportunity the American was born into.

I will admit that some people do truly suffer from bad luck, bad circumstances and bad situations. Other people should stop blaming others for their place in life and get off their lazy asses.

JUST AN OBSERVATION ON THE UNITED ARAB EMIRATES PORT DEAL

This whole thing was a travesty that I can sum up with the ONLY two motivations the can possibly be at work to explain what occurred.

Racism.

Fear Mongering.

What people don't seem to conceive is the job that was to be given to the British company, which has been acquired by the United Arab Emirates, was to facilitate the unloading of ships in six U.S. ports.

They were not being hired to operate security operations at the ports.

They were not being hired to replace the U.S. Customs Service, the F.B.I., the C.I.A. or the T.S.A.

They were being hired to unload boats.

To watch politicians who I thought possessed amazing skills like Harold Ford Jr. of Tennessee rush to the Port of Baltimore to film an inflammatory commercial suggesting that two of the 9/11 highjackers were from the U.A.E. is purely disgusting and only fuels the racism at work here. As an African-American male, I can only hope Congressman Ford remembers his commercial the next time he thinks he's been "profiled" when stopped by a Tennessee State Trooper even though he's done nothing wrong.

I remind you now that Timothy McViegh was from New York and Terry Nichols was from Michigan. These two men were probably the most destructive, homegrown terrorists in American history. If we apply the same wisdom, one would expect that we shouldn't award any more Federal contracts to companies located in New York or Michigan since these locations are clearly hotbeds for terrorist activities.

Americans should reminds themselves, and appreciate, is what a consistent and staunch ally the United Arab Emirates has been for many, many years in a neighborhood where we can't claim to have all that many friends.

Americans should also remind themselves the next time they're filling their cars with gas about how much of the money they are spending is going to wind up outside the United States. Better still, how much of it is going to wind up in the Middle East.

The fact is that many U.S. ports could use a massive infusion of cash to upgrade the equipment and operations of the facilities, and the U.A.E. was planning to do precisely that. Now, since the U.A.E. has politely bowed out, and the government is planning to now give these contracts to a U.S. based company, I can only imagine that taxpayers may very well get stuck with that bill.

Our friends in the U.A.E., and the other nations in that region who aren't quite our friends, may now seek to take all those dollars they've gleaned from the pockets of so many Americans at the gas pumps and invest those dollars in a more friendly, welcoming environment.

I hear China is looking to really expand their infrastructure and I think I already hear their phone ringing.

YOUR FEBRUARY BRAINTEASER

I was visiting a client in Boston a week or so ago to present a seminar and a gentleman who was in the session (as well as prior ones) presented a possible brainteaser to me for inclusion in an upcoming newsletter. The interesting thing for me was that the question supposedly has three answers and my friend in Boston has only been able to figure out two of the answers and is dying to know if someone out there knows the third. Truth be known, there might actually be more than three answers, and given that this newsletter circulates among more than 300,000 extremely intelligent people, I am hopeful we solve this one together.

The puzzle is simply this:

"Using parts of the human body, there are three sets of anagrams where using the same exact letters, you can spell out the names of two different body parts. What are the three sets, or six body parts?"

One simple (and unacceptable) answer would be eye and eye. Dog and God. I think you get my drift here.

My friend had two of the answers, which you will find at the following link when you can't stand it anymore. PLEASE email me any other combinations of body parts that you can think of and I will most definitely include all of them in next month's edition. following link:

http://www.afs-seminars.com/brainteaser_Feb2006.html

Copyright 2006, Michael Gasior. All Rights Reserved

http://www.afs-seminars.com

Copyright 2006, Michael Gasior. All Rights Reserved.

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