Post-Card From Google

The market is, literally, about to go to hell.

Recommendation: Sell through to the end times.

Adapted from Long or Short Capital by Mr Juggles

Black Friday Scorecard

As planned, I spent the better part of Black Friday morning at home. After catching up with the local news and determining that it was safe to venture out to the malls, I made my way to the shops hoping to buy cheap DVDs.

Top on my list were The pursuit of happyness and The good shepherd, which I had seen in the Best Buy adverts. Unlike any other Black Friday's, when I got to Best Buy, there was not a single DVD worth less than $9.99 in this particular store. Disappointed at missing out on the two movies, I made my way to the near-by Walmart store. At Walmart it was a different story. Even though they still had several shelves stocked with cheap movies, none of them appealed to me as they were the titles that Walmart sells throughout the year for $5 (plus tax). Circuit City was a bigger disappointment. Unlike last year when I purchased 3 DVDs for less than $15, most of their DVDs were priced higher than the movies in the other two stores. If anything, I could have bought the same movies for less at Walmart. Makes me wonder who bought DVDs at Circuit City.

Expecting to return home empty handed, I reluctantly made my way to Target. To my surprise, they had most of their advertised movies in stock. Unfortunately Will Smith's Pursuit Of Happyness was sold out as it seemed to have been one of the most sought after DVD. Among the titles that I bought at Target was Morgan Freeman's The Shawshank Redemption. For as long as I can remember, I have always wanted to own this movie on DVD as it is one of my favorite movies. Paying $3.98 (plus tax) instead of the usual $10 plus that it retails for made my trip worthwhile.

Black Friday Score Card

Store	Score
Walmart	C
Sam's Club	D
Best Buy	B
Target	B+
Circuit City	E
Home Depot	C+
Toys R Us	B

While at the stores, I had a chance to browse through and I thought that most of the items were not being sold at any discount. With the exception of the portable SatNav systems, there was nothing to write home about the Black Friday sales. In some instances, I thought the deals were priced much higher than normal. For example, Best Buy was selling the Cars movie for $19.99 while I bought at the same Best Buy store for $17 and change when it when it was released last year. Though I would never buy Borat, it was selling for anywhere between $4.99 to $15.99 depending on where you bought it. Just goes to show that the games retailers employ to trick shoppers into thinking that they are getting huge discounts.

It would shock me if Black Friday was a not a success because most shoppers seemed to leave the stores empty handed while the store fronts and car parks were not as littered as the previous years. This could be blamed on the overall macro-economic climate that has consumers worried but to some extent the manufacturers are also to blame. In all the stores that I visited, except for the touch screen iPod, there were hardly any new introductions this year. Even Microsoft's bulky 30 Gig Zune player has not been upgraded though the price has been reduced from $249 (plus tax) to $199 (plus tax). As it stands, the only new product cycle is the Mac OS which will mostly benefit Apple Inc.

If this years Black Friday is a preview of next year, then we can expect some downside in technology and retail stocks. With the exception of Apple who have revamped their products, every one else may be forced to slash their prices so as to move their inventory. Unlike last year when shoppers couldn't get enough of TMX Elmo, PlayStation 3, Nintendo Wii and a host of other products, there was nothing exciting in the stores this year.

Addendum; I have never seen so many shoppers drinking coffee. Almost 2 out of every 10 shoppers had a coffee cup in their hands as they made their way to the shops from their cars. Thanks to the freezing temperatures, Starbucks and it's competitors must have racked in a good amount of sales. Starbucks and McDonald's may benefit the most if this trend is to continue during this winter shopping season.

Masambu - Kayamba Africa Video

A Luhya folk song that is performed during happy occasions whereby the guests are treated to a story of one's tribulations and then asked to enjoy them.

I don't know of any other music group that captures the rich Kenyan heritage like Kayamba Africa. Several months later and I'm still enjoying their music. Funny thing is that my favorite songs keeps changing. Every time I listen to their music is like the first time I'm hearing them.

Kudo's to Juma Odemba, Moses Ekirapa and the rest of the Kayamba Africa crew. You guys are the pride of Kenya. Big-up to Suzanne and Gido Kibukosya for putting their songs together.

Rudieko kutoka juu. Ji-enjoy.

Sweating It Out At The Gym

The season of energy conservation is upon us. Beginning with the Halloween candy-fest then the Thanksgiving gluttony thereafter the end-of-year office parties followed by the Christmas feasting and then finally the New Year partying. Come the following year, many will have conserved a few pounds of blubber on their belly and they will be carrying around a tyre on their girths. Once again, people will make their ritual pledge to cut down on the flab and many will hit out to the gym circuit.

Hoping to capitalize on the new year weight loss resolutions is a new gym that will be opening up in my neighborhood. Unlike the Gold Gym franchise or the YMCA gyms that are a permanent feature of American suburbs, this new gym will boast a total of 145,000 square feet and will be operational all day and night every day of the week. According to the brochures that they've been mailing out, they aim to differentiate themselves from the other gyms in the vicinity with their luxurious design. Ranging at a membership cost between $59.95 to $119.95 a month for their single membership categories, they will offer a poolside bistro, an indoor and outdoor water park and a rock climbing cavern in addition to state-of-the-art child-care facilities. Individuals who sign up before to the end of the year will be exempted from paying the $109 enrollment fee.

Unlike other weight conscious individuals, I have no plans of joining this gym or any other monthly membership gym. Not now and not even in the future. Personally I consider joining a gym to be a waste of my hard-earned money. Only that I'm not going to tell that to anyone hoping to join this new gym as they will not be spending my money.

Growing up, one of the things I longed to have was my own in-house gym. And so over the years I've worked at making this a reality. With the cheapest gyms going for at least $20 a month in addition to the joining fee, I figured it would be cheaper over the long run if I buy my own fitness equipment and set up my own gym. You can imagine for the several years that I've had my own gym, I could have spent at least $2,000 dollars for membership had I signed up at the YMCA. Add my wife's subscription on to that amount and the sum can balloon to more than $3,000. In return, you may or not get the physique that you want.

Starting with the weight bench and the weights, I've worked my way into establishing my home gym. The best advantage about this is that I can work out at my own timing. I don't have to worry about gym opening hours, the drive to the gym, getting athlete's foot or time limits for using equipments. The other major advantage is that I can be with my kids while I work out because we've set up the fitness equipment together with their recreation room in the basement. In a span of less than 2 years we were able to buy everything that we wanted. All the big ticket equipments were purchased using 0% financing which is offered by most sports goods retailers. So I didn't have to worry about paying upfront for the equipments and thereby I spread out the payments over a couple of months.

The only down side to this arrangement is you need to have a lot of space to set up a home gym. It's not like you can set it up in a spare bedroom because fitness equipment tends to take a lot of space. For that reason, when we were shopping for a house I wanted one that comes with a finished basement which tend to be offer larger open spaces. The other advantage of setting a gym in the basement is that this is the coolest section in the house which makes it conducive for working-out. In the absence of the spacious basement, I would probably have settled for a Bowflex machine and an elliptical rather than buying several different types of fitness equipment.

Unlike my missus who mainly uses the tread mill for her early morning work-outs, I tend to use the weights, the slant board and the treadmill to exercise. I can't say I workout as much as I should, especially in the spring and autumn when I prefer to cycle because of the cooler weather. The summer and winter extreme temperatures usually drive me down to the gym as it's no joy cycling in the high humidity or battling with the freezing wind.

Financially, it makes more sense to own your fitness equipment rather than pay gym membership fees. Even though it requires forking out capital to buy the equipments, at the end of it all I still get to keep the equipments. So over the long run, buying the equipment pays for itself in addition to the convenience of working out at your own timing and pace. So we've probably 'saved' ourselves not less than $2,000 in form of gym membership and in another couple of years everything will have been 'paid' for. The only facility that we don't have is a swimming pool, though if we really wanted one we could have moved into a sub-division that comes with a communal pool.

In the new year I'll pay a visit to the new gym and if they offer me a one day complimentary pass I will probably sample out their water park, but I have no intentions of enrolling as a member.

Bill Gates Hangs Up On Ethanoil

Exactly two years ago Bill Gates paid $84 million for a stake in Pacific Ethanol, an ethanol producing upstart based in California. Cascade Investment LLC, which handles Bill Gates' investments, bought preferred stock convertible to 10.5 million common shares giving him and his wife a 27% ownership of the company at that point in time. In the months that followed, Pacific Ethanol's share price increased from $10 to a high of $40 during the month of May in 2006 when the price of ethanol soared to over $4 per gallon.

Since then, the price of ethanol has fallen to $1.87 per gallon despite the fact that oil prices are hoovering at an all time high price of over $90 per barrel. Unfortunately for Bill Gates and a horde of other ethanol enthusiasts including the famed Vinod Khosla, the gross margins have dropped to less than $0.80 per gallon of ethanol after taking into account the cost of corn and energy used in the production process. The added cost of labour, overhead and transportation costs led PEIX to post a loss in the just ended quarter. And with the continuing pressure on ethanol margins from rising corn and natural gas prices, the light at the end of the tunnel seems to be getting dimmer for ethanol producing companies. To add onto their woes, more than 50 ethanol producing plants are set open in the coming year resulting in the worsening of the already bloated ethanol supply.

As of today's Pacific Ethanol closing price of $4.43 per share, Bill Gates $84 million investment is down 45% not counting the depreciation of the US dollar. With the news of Bill Gates' exit from Pacific Ethanol in addition to the declining fortunes of ethanol producers, it is likely that the third most richest man will lose a few more million dollars. While losing $37 million may mean the end of the world for many investors, it represents a rounding error of Bill Gates $60 billion empire.

Unfortunately, the same can't be said of the majority of Pacific Ethanol shareholders who have seen the value of their investment plummet 70% from $15.40 since the beginning of the year. As I have said it before (here and here), the glory days of ethanol are now behind us until the day there will be a significant improvement in the production of ethanol. Luckily for me, ethanol stocks were my best performing investment last year bringing me more than 100% profits during the few months that I owned MGP Ingredients. In addition, I also made some modest gains in the 5 months that I owned Archer-Daniels-Midland in 2006 when it's share price rose from $28.80 to $39.60 when I finally sold it.

I have no intentions of jumping back into the ethanol bandwagon, but I am closely monitoring the ethanol producing technology. Until there is a breakthrough in the production and transportation of alcohol fuels, the future of ethanol looks bleak as the production costs continue to wreak havoc on the balance sheets of ethanol producers.

Black Friday Gameplan

As sure as the sun will rise from the east, so will a major blizzard hit the shopping malls in America this coming Friday. Black Friday, the day after Thanksgiving day, marks the beginning of the Christmas shopping. Armed with shopping lists, consumers will throng the malls in search of Christmas season bargains. For investors, Black Friday is often a barometer of the health of the US economy and by extension a measure of the level of consumer confidence. More than ever before, investors will be looking keenly for signs of any fallout from the $90-plus barrel of oil and the never-ending housing slowdown.

So you can imagine that the better part of this week, Americans will be looking out for Black Friday ads in a bid to spot the best bargains. Come Friday at 5 am, and the biggest traffic jams will be seen all over the country with shoppers fighting for parking space at the malls.

Unlike the multitudes, I do not intend to participate in the early morning scuffles caused shoppers scouring aisles in search of bargains. Instead, I'll take advantage of the day-off from work and sleep-in while the rest of the country goes into a mad frenzy. Depending on the time my kids wake me up from my slumber, I intend to stay indoors until after 10 o'clock when worn out shoppers start making their way from the malls. After which I will head out to the stores in search of the spoils.

As much as many shoppers would like to believe, retailers are not the dumbest people and they have to deliver profits to their Wall Street masters. So in a bid to attract the highest numbers of store traffic which in turn could translate in sales, they have to create a lot of buzz to attract shoppers. This means that they drop the prices of some of their items and sell them for a loss while hoping to make a kill from the rest of their wares. Among the items that are usually sold for a loss are lowly priced electronic accessories, movies, music, clothing accessories and children's toys.

It is these group of items that have always attracted my attention. So instead of buying electronics, shoes, clothes, sportswear and the likes, I will be looking to increase my DVD collection. With a limited budget of no more than $100, I'll spend the most of my time in the stores looking for bargain priced movies and music albums. Going by my past experiences, it is likely that I'll spend less than $60 as most of the movies that I buy are priced below $5. I don't have a list of movies or music that I would like to buy instead I go for items that I would like to add onto my collection. Therefore my shopping will be limited to stores such as Target, Best Buy, Walmart and Circuit City which are all located within the same strip mall at a shopping center nearby.

Depending on how much money the retailers rake in, Black Friday will set the pace for this year's Christmas shopping season. If the sales numbers are poor, retailers will be forced to cut prices further in the weeks leading to Christmas day in a bid to attract more shoppers.

Going by the appalling October same store sales numbers and the declining consumer confidence index, retailers have an uphill battle of getting consumers to open up their wallets during Black Friday.

My bet is that Apple will be the biggest beneficiary of this years Christmas shopping, as they have revamped the iPod and the iPhone market segment is still growing. And with the comeback of the Mac, I can also foresee a lot of people switching from PCs. It's no wonder that Steve Jobs, Apple’s CEO, was recently quoted as saying, “We’re looking forward to a strong December quarter as we enter the holiday season with Apple’s best products ever.”

Overcoming Lifestyle Inflation

While the Fed and the media are focused on the rising consumer inflation levels, it seems like consumers have turned a blind eye on another type of inflation that affects them much more than the general increase in prices of basic commodities. Lifestyle inflation, as it has been called, refers to the rising prices that consumers pay for products and services over the years due to the choice of their lifestyle. A good example of lifestyle inflation is the price of a 2 liter bottle of Coke. Depending on where you buy it, you will pay between $1 to $2 even if bought from shops on the same street. That is to say that a bottle of Coke would cost more in Whole Foods Market, a high cost grocer, as opposed to Walmart, which prides itself as a low cost supermarket.

So why would anyone want to pay almost $2 for 2 liter bottle of Coke from Whole Foods Market while they they can pay less for exactly the same product at a Target store a few hundred yards down the road?

Sample this. Paul is a full-time college student earning just above minimum wage and working his butt at a gas station just to pay for his up-keep. He drives a 8 year old 1981 Toyota Tercel that has crisscrossed the breadth of America ten times over that he bought for $150 from his mechanic after his previous jalopy died on him one cold winter night. With his short credit history, no lender wants to give him a credit card and has to get a co-signor for his apartment. Paul works his way out of college and into his first job. With a college diploma to his name, he gets himself a real job that pays $52,000 per year. As soon as he gets his first bi-weekly paycheck, he pops into the auto dealer and buys a new Toyota Camry that befits his new status. How else are people supposed to know that he is no longer the broke student that he used to be. In addition to getting a car note, he moves into a better apartment that not only comes with a gym but also an Olympic size swimming pool.

Fast forward 15 years later, and Paul has climbed up the corporate food chain. At work they now call him the boss and it would take a at least 5 college students working overtime to earn as much as he does. Apartments are a thing of the past, he'd rather be shot dead than be seen driving anything less his brand new Cadillac Escalade. If anything, he is thinking of trading in the one year old SUV for the latest Mercedes Benz S class. In addition, he's married with 3 kids, a Labrador and a drive way that leads to his 3 car garage McMansion.

Come every end of the month and the mail man has to deliver Paul's mail in a carton box. The high-end living means his bills can't fit in the regular mail box. With every promotion at work, he's refinanced his mortgage or moved into a bigger house. His tax refund is normally used to pay the deposit of either a new car or for the summer family vacation. When he gets a pay rise his first stop is his local Best Buy store where he buys the latest wide screen TV to add onto the several TVs that he owns. With the six figure salary, he is barely able to pay off his bills. Just like his students days, he is going through the same struggles of living from pay check to pay check and has a wad of credit cards to show for it.

A few offices away from Paul sits Charles whom he shared an apartment with during their student days. Chuck has also risen through the ranks and heads another department. He drives a Honda Civic that he bought when he was promoted to the position of a manager 7 years ago. He has lived in the same house, which located in a good school district, for the last nine years. Chuck knows where to find every item at his local Walmart store. He also knows most of the associates by name because he's been shopping in the same store ever since he moved into the neighborhood. He brown bags his lunch everyday and no one at work can remember the last time they saw him at the vending machine.

Even with the dot-com bubble, Chuck's 401k and IRA accounts hold more than half a million dollars and his stock broker calls him every month asking him to buy more stocks with the $100,000 in his non-retirement money market account. On the home front, Chuck is almost done paying off the mortgage on his first home, that he now rents, and in 8 years he'll be done paying the mortgage on his residence. His tax refund, usually in the range of $3,000, goes to his favorite charity that educates and supports orphaned children in Asia. When it comes to the annual family vacation, he saves for it instead of paying for it with a credit card. In addition, Chuck went back to grad school, took night classes and got himself a master's degree that was paid for by his employer's tuition reimbursement program.

In both cases, Paul and Chuck graduated together, joined the same company and rose to similar positions but Paul is in debt to his eyeballs while Chuck's only liabilities are the mortgages he has on the two properties. Unlike Paul, Chuck maintained his frugal lifestyle while his friend lived on the fast lane. While both individuals are by no means poor or lacking in anything in their life, one of them has more than he needs and he usually pays more for it than the other. The disparity in their lifestyle makes it hard for those who know both of them to believe that they are at the same management level at work and it is the norm for their friends to wonder what Chuck does with his income.

There is no secret as to how Paul spends his money. Every dime and increase in wages goes into his unaffordable lifestyle. His expenditure is always higher than his nett income. On the other hand, Chuck's expenditure trails his gross income and that gap continues to grow larger every year. He buys what he needs and keeps his assets for as long as possible to ensure he gets the full value of his money. He has kept his debt in check and makes it a point to pay-off his debts as fast as he can. In addition to living within his means, he saves as much money as he can and increases his savings target every year. Most of the difference between his paycheck and expenditure goes into his savings and he also re-invests any interest, dividend or rental incomes that he gets from his investments.

While some people may argue that Paul is enjoying life more than Chuck, I'd like see it differently. In my view, Paul is struggling to keep up with his lifestyle more than Chuck. If anything, Chuck is financially independent and has a greater peace of mind than his friend Paul. I would also like to believe that Chuck is facing the future with confidence and looking forward to his sunset years when he will he retire and comfortably enjoy life without having to worry about his financial affairs. He'll also probably give his kids a head start in life cause he can afford their college tuition and live them with a rich inheritance.

If you ask me, I'd rather be in Chuck's shoes than Paul's. Enjoying life does not consist of having material possessions. There is more to life than instant gratification which in turn comes with a high price tag attached to it. As much as I'd like to live comfortably, I wouldn't want to live like Paul even though once in a blue moon I find myself in the fast lane.

3G Money Making Machine

The launch of the iPhone this year signalled the end of the second phase of the internet revolution. During this phase, we saw the explosion of broadband technology which changed the way consumers use their computers. From social websites like MySpace and Facebook to audio downloads to watching media content online, consumers more than ever are turning on to the internet. And so begins the next phase of getting super fast mobile technology onto the hands of consumers.

By all indications it seems that the battle will be fought out over the 3G mobile technology turf rather than over the Wimax technology. This is because much of the infrastructure to support the 3G technology is already in place and therefore Wimax developers have the additional burden of setting up the necessary infrastructure.

Leading the charge over the 3G conquest is Qualcomm, of the Qualcomm Stadium fame which is home to the San Diego Chargers. Their CDMA (Code Division Multiple Access) technology standard offers mobile-phone users access to high quality audio, video and data at broadband speeds they are accustomed to. Most variations of the 3G technology are based on Qualcomms invention and therefore mobile handset manufacturers and software developers have to pay them royalties for use of their technology.

So far, only a minority (NMT 500 million) of the 3 billion mobile phone users are connected onto the 3G networks and the majority of these customers are not making full use of 3G's capabilities. For example in Kenya, Safaricom and Celtel, the two main wireless operators are yet to embrace the 3G technology and only recently did Safaricom acquire the licence from the country's telecommunications regulator. So far only smaller carriers, notably Telkom wireless, Flashcom and Popote wireless, employ Qualcomm's CDMA2000 technology in Kenya and you can be certain the usage of it's technology will explode once it gets rolled out by the mainstream carriers. Here in the US, their technology has been limited to Verizon Wireless and Sprint unlike in the UK where all the major wireless carriers have adopted WCDMA and HSDPA technologies.

As more mobile handset manufacturers and wireless operators dive into the deep end of the 3G technology, so will Qualcomm's multi-billion dollar revenues increase owing to the royalties they will receive from the use of their technology. And it's not like Qualcomm is resting on it's laurels. Every year they are ploughing more than $1 billion into research & development activities and have structured their business into two segments in a bid to entrench their lead in 3G wireless technology. Rather than compete with mobile phone manufacturers, they have decided to focus on wireless technology and chips.

That leaves out the other technology players to fight it out over the mobile operating system. My bet is that Microsoft will carry the day with their Windows Mobile operating system. Thanks to their success with Microsoft Windows operating system which is firmly entrenched by corporate customers and retail consumers, Windows CE is a natural choice for smart phone users as is the case with PC users. My bet is that Microsoft still has what it takes to make Windows CE a success.

Drive Thru Nation

Unless you have lived in America, it's hard to understand the significance of drive thru's in this country. Outside the US, most people associate drive thru's with fast food restaurants but here in America any type of business can have a drive thru. In a country where having a car is considered to be a basic necessity, it is no wonder that drive thru's play a big role in the way people shop.

With the exception of the big metropolitan cities in the East coast, drive thru's are a normal part of the American lifestyle especially in the middle states and could be considered as an extension of the roads. My guess is that they are popular because Americans are fat and lazy slobs of their convenience. Be it at the dry cleaners, pharmacies, ATM's, post offices, restaurants and even banks. You will find cars lining up to be served as they drive by a business to be served.

Drive thru activities tend to peak during the commute times. That is early in the morning, at midday and in the evening when most people are not at their places of work. So it is not uncommon to see a long line of cars lined up very early in the morning at a Starbucks as sleepy drivers get a fill of their favorite hot brew. Come lunch time and if there is a McDonald's in the vicinity you'll be able to identify it by the long line of cars driving thru to place and pick their orders. As if it has become the norm, many full service eateries are now beginning to offer curbside pick-up to their customers. All you do is ring up or place your order online and have it delivered to your car at the parking lot at the appointed time.

Want to mail a letter? Just drive to the post office and drop it off in the drive thru mailbox. Want to collect your meds at the pharmacy? Call in for your prescription re-fill or have your doctor's office fax your prescription to the pharmacy, where you can pick up your drugs from the drive thru. And you could also drop your DVDs at the movie rental store drive thru while you are at it.

How about if you want to have your flu vaccine? You guessed it right. For a couple of years now, you can get your flu shot during the winter season at a flu vaccine drive thru. Why bother walking into a doctor's surgery or hospital while you can drive in, roll up and drive out. In less than 15 minutes and in the comfort of your car, you simply drive up to the nurse and get served with your McFlu shot. You can call it silly but drive thru flu clinics seem to have caught on fast all over the US.

Want to get married on the go? No worries. Las Vegas has that taken care of that. Fly to Vegas, hop into a limo and by the time you are done touring the city you'll have tied the knot without getting out of the ride. And before you know it, you can be on your way to your honeymoon.

Not having grown up in the US, I've never fully understood the need for drive thru's. As such I never use drive thru's. Never. Not even when it is raining or if there is six feet of snow on the ground. Unless you are disabled or inconvenienced by getting out of the car, I fail to see the problem with walking into a business and being served over the counter. It's not like there is a shortage of parking spaces. To me, it almost seems like walking is a taboo. And what is it with people eating in the car? What happened to having meals in a sit-down restaurant? Doesn't eating in a car make it hard to clean it after you are done? I can understand eating ice cream or frozen custards in the car over a summer sunset but not eating greasy fast food while behind the wheels on the highway driving over the speed limit.

One thing that I am certain about is that having a drive thru brings in more revenue as it attracts car traffic in addition to pedestrian traffic into the business. If this was not the case then there would not be a proliferation of businesses with drive thru's. I haven't seen any data to support my thinking but how else can this phenomenon be explained? In addition, a business saves by minimizing the square footage especially if it were a restaurant. That way they get to sell take-outs and therefore save on the costs of providing sitting for their customers. It would be interesting to see what percentage of revenues are brought in via drive-thru's for fast food giants like McDonalds. If I were to guesstimate, I would say more than half of their orders are take-away and they have a higher profit margin than sit-in meals.

However, there is a wave of anti-drive thru measures sweeping across some cities in the US. In my municipal, only banks and pharmacies are allowed to operate drive thru's in their business premises. When the city was incorporated a decade ago, the then residents wanted to encourage people to walk to the shops. By law, property developers are compelled to build walk-ways in and around the sub-divisions. Because of this, we have long walk-ways from the sub-divisions that lead to the malls. However, very few people walk to the malls and instead the walkways are mostly used by residents to jog, take walks, walk their dogs or cycle. I'm not sure how long this anti-drive thru statute will last because it has discouraged fast food restaurants from opening up in the strip malls. Therefore you can be certain that at some point a disgruntled resident or fast food operator will call for a ballot measure to try and change this law.

As much as it makes economic sense for a business to operate a drive thru thereby increasing their sales and reducing their expenses, the toll of an unhealthy lifestyle negates the benefits of this minor convenience. As a consumer it is going to take me a couple of decades before I can embrace drive-thru's. For as long as I've got two legs and I'm able bodied there is no reason for me to use drive thru's. If anything, I think the short walks from the car park into a business premise are necessary owing to the sedentary lifestyle that we are accustomed to. Until when my limbs fail me, I'll just be happy to be served at the counter.

Open Source Innovation

In October 2006, Netflix offered a prize for a computer system that will accurately predict their customers preferences better than their current system. Netfilx, the largest online DVD rental service, is offering a tidy sum of $1 million for a 10% improvement over their system of predicting whether a customer will like a movie given their previous DVD selections. By the last count, the leading contender offered a 8.46% improvement over Netflix's system. With over 27,000 contestants in more than 22,000 teams spread across 163 different countries, Netfix has received 19,073 valid submissions from 2,636 different teams.

As an innovator, I can't over-emphasise the edge this country has over the rest of the world when it comes to innovation. Time's magazine 2007 innovation of the year, the iPhone, just goes to show the lead the US has over other nations. While the iPhone may seem like an obvious design for a cell phone, the electronic engineers at Apple are the ones who took the honours of developing such a revolutionary product. And then there is Boeing's dreamliner airplane which is sold-out and on back-order way before it's debut even though they are fallen back on delivery because of supply chain issues with their partners.

For this reason, the US will continue to dominate other countries in every aspect because of the edge that they have when it comes to technology which is the key driver of capital in today's world. It's no surprise therefore that there are organizations like Netflix and wealthy individuals like Sir Richard Branson who are offering cash rewards for innovative ideas. Call it a market place of ideas, if you will. More than ever, creative minds are being rewarded generously for offering workable solutions to the many problems that firms face.

One such place where you can find cash rewards in return for innovative ideas is InnoCentive. Instead of companies making an investment in researching solutions, they are now auctioning their problems in an open market place whereby skilled individuals can use their resources and time to come up with viable solutions. It is sort of like outsourcing of research and development without the loss of intellectual property by the firms. The InnoCentive concept seeks to bring together a community of engineers, scientists, inventors, and business people with expertise in life sciences, engineering, chemistry, math, computer science, and entrepreneurship to solve some of the world's toughest challenges.

In return, those who offer the winning solution get to pocket cash rewards ranging from $5,000 to as high as $1,000,000. The innovation market place is divided into six categories, namely: Physical Sciences, Engineering and Design, Chemistry, Math and Computer Science, Life Sciences and finally Business and Entrepreneurship. I've had a peek at some of the listings and I think I could attempt solving one or two but I will not because it will involve the use of resources at my place of work which will be in contravention to my terms of employment.

Browsing through some of the problems like the one seeking reduce the total sugar content in fillings for baked products shows that you do not have to have specialized training to participate. A reward of $40,000 awaits anyone who comes up with food ingredient(s) and/or processes capable of reducing total sugar content while maintaining taste and texture in sweet fillings. No offence, but I can see this problem being solved by a stay at home housewife who has good baking skills and not necessarily an experienced food technologist. Knowing how bad the cakes and candies are in America, I believe someone from outside the US holds the solution to this challenge.

Registration to the site is a prerequisite for those seeking to take on the many challenges posted in the website. I am yet to register but I am certain this is one website firms and learning institutions in the emerging world should be looking at with a view to winning some of the awards. The same is also applicable to students with access to resources in learning institutions whereby they can attempt to solve some of these challenges.

As someone who's bread is buttered by innovation, every year when I visit Kenya, I make a point of meeting professors and lecturers in Kenyan universities to discuss with them ways of partnering and provide a linkage to non-monetary resources from the US. To say that their overall response has been disappointing is an understatement. Instead they prefer to get handouts which they will misappropriate for their own personal use. This year I made a decision not to bother with them and instead to leave them to wallow in their own ignorance. I have since cancelled my plans of taking a sabbatical to Kenya because of the poor reception I have received. Surprisingly even the university students back home have the same attitude and out of the many students I have spoken to only one graduate student has contacted me seeking solutions for their research.

Like I have said before, the answers to our problems are neither debt cancellation, aid nor trade. Innovation is the key to our economic prosperity. Failure to do so, our other hope is the manufacturing sector. Only if we build, will we attract the capital that we yearn for. Until then, Vision 2030 is just but hot air coming from the rear ends of Kenyan politicians and their corrupt hanger-ons.

Easy Money Extreme Makeover

For some time we've intended on remodelling our house but with the housing slow down we decided now might be a good time as there is no shortage of builders. So we called in a few builders to come in and give as a quote of the remodelling. So the last few weeks I've been entertaining builders in the evenings after work as we go through the intended remodelling works.

We've gotten in all the remodelling quotes and settled for one of the contractors. The quotes ranged from as low as $16,000 to as high as $28,000. The company that offered us the highest quote also seems to also have told us the most bullshit. For one, even though they bill themselves as a high end luxury contractor, they seemed to be the most inflexible and their agent told us a pack of lies. Every time he opened his mouth I could literally smell cow dung from his breadth. We settled for the last builder even before he had completed his sales pitch. Not only was he forthright but he gave us a reasonably priced estimate of between $19,000 to $21,000 depending on the options we choose.

Now that we have shopped for the builder and settled on the design and price, the next step is seeking finance to fund the remodelling. As much as I would like to pay for the costs upfront, I am not able to foot this big undertaking as we had not specifically saved for it and we don't want to take a dip into our savings.

Regarding the financing, we have a few options, namely. Either a revolving type credit where you get a no interest/no payment deal till 2009 or go for the home equity financing. Undecided, we decided to apply for both. As expected we were approved for both loans within a few days. However, the bank is trying to force us to take a larger home equity loan than the $21,000 for the remodelling costs. Our plan was to pay the builder 20% of the cost and finance the balance of the amount. The bank instead wants to push us into cashing out a minimum of $25,000 in order to get the best interest rate of prime rate minus 1%. The other option they are offering is a Home Equity Loan for the exact amount that we want and for a fixed term but with a 1% prepayment penalty and at prime rate, which currently stands at 7.5%.

Therefore we have 3 financing options. Either we take a HELOC for up to 80% LTV ratio of our dwelling, or take the HEL for the exact amount that we want, or settle for the 12 months no interest/no payments revolving credit.

So what have we decided to do? We'll go with the revolving credit and at the same time open the Home Equity Line of Credit though we will not cash out any money out of it. Instead, we'll use this money to pay-off the 24% interest revolving credit at the end of 2008. That way, we'll have borrowed up to $17,000 interest free for one year and then switch to the interest deductible HELOC loan for the remaining of the unpaid balance.

Based on the state of the US economy and the health of the financial sector, it is unlikely that the Fed will raise interest rates in the near term. If anything, the financial markets are priced for further cuts. So we are not worried about rising interest rates and therefore we can wait until we are ready to cash out the exact pay-off amount in order to lock in the interest rate and the term of the loan. And should the rates fall further in 2009, we have the option of unlocking the loan and locking it in at a lower rate for a cost of $50.

My plan for the coming year is to pay down the revolving credit loan as much as possible. I will do this over the course of the year though I could hold onto the money till the end of next year and lump it together into the pay-off amount. If need be, we can forgo going on vacation next year as I don't want to clear off this loan as fast as I can even though I could get by just paying off the interest only on the HELOC. As it is, I never been keen on taking a home equity loan but this is a good time to update our home. As they say, only a fool does not change his mind. Its probably going to take at least 3 years to recoup this investment as the housing market is on a downtown. We've just had the real estate tax appraisal and if we sneak in some updates now it will be at least 2 years before the county comes back calling for an appraisal and even then they might not do a physical inspection as they have just done it.

One the other hand, we also want to take advantage of the low interest rate environment to spruce up our house. Now that banks are not lending to real estate investors and home buyers are shrinking, they are in a way desperate to get borrowers with stellar credit history's. Being of that type, I would never shy from squeezing money out of the banks. The 12 months interest free loan on on $17,000 in the current financial environment is a steal. And the creeping inflation makes this deal even more appealing than if we had saved for prior to undertaking the remodeling project.

PS. I'm done with ranting (here, here and here) about the Fed injecting money into the US economy. It is with great pleasure that I am going to borrow part of this money and make the most out of it.

Federal Reserve Bank Snackfest

Here, have a dollar
In fact, no, brotherman, here have two
Two dollars means a snack for me
But it means a big deal to you

- Mr Wendle, Arrested Development

One day after all but one of the FOMC members voted to cut the federal funds rate, the DJIA took a beating closing 362 points down. And what does the Fed do? Pumps more money into the economy. In total, the Fed unleashed the largest cash pile ever into the US financial system. $41 billion in total. That's $41,000,000,000! A sum equivalent to the GDP of oil rich Kuwait. Currently the US dollar is trading at a record low against most currencies and Oil prices are poised to breach the $100 dollar mark anytime now.

It seems the Fed is determined to ensure that consumer spending, which accounts for more than 60% of the US GDP, does not dip during the upcoming holiday season. All that remains to be seen is President Bush addressing the nation on TV calling on Americans to hit to the malls as was the case after twin towers attack.

So far Walmart has thrown in the towel and slashed prices of 15,000 items this week in an attempt to woe shoppers. As if this years 20% increase in discounted items is not enough, Walmart has promised to do more in the coming weeks.

All this is pointing a nasty end. When the bottom gives way, all the efforts by the Fed will only make it worse because of their insistence on prolonging the expansion cycle. Yesterdays release of the third quarter inflation driven 3.9% GDP estimate is a hard swallow for many investors. Should there be a sell-off of precious metals in the coming days, I'm definitely getting myself some Silver.