Responding to my State Senator

Senator Schneider:

I am a Northern Iowa Accounting graduate who passed the CPA Exam and am a member of the American Institute of CPA's.  I'm also one of your constituents and voted for you.  Because of this, I feel led to reply to a recent update you posted to your website  schneiderforiowasenate.com

Below is the text of the relevant portion of your post:

Are Actuaries Evil? No, Just Their Estimates.

In the murky waters of life lurks an evil that has haunted man for ages:  estimates.

Financially speaking, estimates are everywhere and affect the consumer and investor alike.  Estimates affect everything from the complexities of pricing insurance and revenue recognition on long-term contracts to the simplicity of a grocery store ordering enough milk or company on the verge of hiring another employee.

There are some popular quotes about opinions being foul smelling.  But what's the difference between an opinion and estimate?  Most likely, a sick Excel spreadsheet.

Sales: Never Pitch on The First Date

Highlights of my sales career:

• Red Wheel Pizza Sales while fundraising for my 4-H Club
• Cashier at the local hardware and farm supply store during High School
• In college sold old, non-moving, space-intensive inventory on eBay for my technology impaired boss
• Having a date to prom both Junior and Senior year (a true sales job, I’m talking ketchup popsicles to white gloves)

This body of words below obviously does not come from a trained, professional sales person.  But I do consider myself a student of the sales experience.  I’ve been on the buyer’s side of the table both as an individual and in business to business for products/industries including group health insurance, P&C and liability insurance, IT, retirement plans, automobiles, livestock, housing and many more.  From big dollars to small dollars, I love the process of buying and selling things and thinking about why people buy and how people sell.  So from one young professional to another, use this insight for whatever it’s worth… even if that’s the “circular file,” I’m okay with that.

What's So Great About the Way We Farm?

Are there any industries, other than production agriculture, that buy inputs at retail price and sell goods at wholesale price?

A conventional farmer buys seed, fertilizer, chemicals, and equipment at full retail value from a manufacturer.  Farmers utilize those ingredients to grow large quantities of a commodity - corn, soybeans, or wheat among others – and sell their wares at wholesale prices to a manufacturer who will sell a product at retail price to a consumer.

Where I Belong

Am I really in the right job, am I using all my skills, am I challenging myself, am I working hard enough, am I working too hard?  Should I go back to school for a graduate degree, should I quit my job and become a missionary, should I go back to public accounting, should I start farming?  Should I learn how to write code for software programming, should I dedicate more time to write, do I spend too much time writing, does anyone ever read these things?  Would it be smart to sit tight until I find a wife before making a bold career move?  Or should I make the move and let relationships worry about themselves? Should I buy a new sexy pickup truck, should I buy a house, should I buy stock options that could pay off in multiples (or zero), or save it for a big shiny engagement ring in case I run into “Ms. Right?”  Or have I already run into her and I need to stop being ridiculous?

Tax Tips for Farmers: The Case for NOT Prepaying Expenses

Here's a piece I wrote for the Corn & Soybean Digest:

It’s standard practice for farmers, who are cash basis taxpayers, to accelerate expenses at year-end. Paying fertilizer, seed, and chemical bills prior to Dec. 31 can create a paper loss and reduce your current year taxable income to near zero or below. The sister practice is to defer income into the following year by holding a portion of your corn and soybean crop to be sold after Jan. 1.

Follow the link here to read the rest of Tax Tips for Farmers: The Case for NOT Prepaying Expenses

Effort Does Not Equal Value

I was watching Shark Tank yesterday and it struck me how often people over-value their effort.  Many people seem to think that the harder they work, the more their business is worth.

One woman in particular, had not received any offers from the Sharks – all five were out.  Then she welled up in tears and between sobs tried to explain how hard she’s worked over the past four years to bring her product to this point.

Watching this, I wanted to jump through my television screen and explain to this woman that how hard she worked was irrelevant.  Here’s why I believe this:

Obama's Poorly Hidden Secret About General Motors

My stomach churns every time I hear President Barack Obama tell me that he saved the auto industry.  And this week in the Vice Presidential Debate with Congressman Paul Ryan, Vice President Joe Biden made the following remarks when discussing how he and the President “helped” the economy:

We immediately went out and rescued General Motors. … when that occurred, what did Romney do? Romney said, “No, let Detroit go bankrupt.”  (The Washington Post Transcript)

Biden’s assertion is clearly that the Obama Administration saved GM from bankruptcy, when Mitt Romney wanted to supposedly usher it to the grave.

What the Obama/Biden ticket fails to accurately disclose is that General Motors did, in fact, utilize Chapter 11, Section 363 of the U.S. Bankruptcy Code to reduce its liabilities and get a fresh start.  But don’t take my word for it, read its own words from the General Motors' 2010 Annual Report (my emphasis):

Our company commenced operations on July 10, 2009 when we completed the acquisition of substantially all of the assets and assumption of certain liabilities of Old GM through a 363 Sale under the Bankruptcy Code. As a result of the 363 Sale and other recent restructuring and cost savings initiatives, we have improved our financial position and level of operational flexibility as compared to Old GM when it operated the business.

The annual report explains that as part of this 363 Sale a new entity named NGMCO, Inc. was formed and “acquired substantially all of the assets and assumed certain liabilities of General Motors Company.”  This entity then went so far as to change its name to – take a guess – General Motors Company.

The next step in the transaction was for the existing General Motors Company (“Old GM” according to the company’s own words) to change its name to “Motors Liquidation Company.”  Creative, huh?  The company formerly known as General Motors Corporation continued to exist until the remaining assets and liabilities could be liquidated, and from General Motors’ 2011 Annual Report we learn that, “On December 15, 2011 MLC was dissolved.”

Wait, wait, wait; walk that back again.  Biden puts Romney on blast for wanting to “let Detroit go bankrupt.”  Not the city of Detroit itself (although it could probably benefit from bankruptcy as well… I digress), but specifically General Motors.

So the genius alternative to bankruptcy that Obama/Biden are taking credit for is to let General Motors utilize provisions in Chapter 11 of the U.S. Bankruptcy Code to sell its assets to itself. 

Here it is again in Crayola:  Obama/Biden saved GM from bankruptcy, by letting it go through – say it with me now – BANKRUPTCY!

The only difference was that Obama’s version puts the American Taxpayers on the hook for 500 million shares of GM stock.  The break-even share price on our (the taxpayers’) investment is $53.00 per share.  What was the last closing price, you ask?  Get ready… you may want to sit down for this: $24.44.  A little public school math tells you that figures out to an unrealized loss of $14.28 Billion dollars.

OUCH!  No wonder Joe Biden was so angry the other night:

Photo Credit: Alex Wong/Getty Images via www.rollingstone.com

Motivation

I went for a bike ride this afternoon and on my way out, I passed this family of a mom, dad, and two boys maybe 8 and 4.  The youngest had training wheels, the dad seemed to spend most of his time at the front of the group stopped, looking behind at his crew, and the mom was in the back barking orders basically the entire time.  I saw this family early on my route and was surprised to see them still on the path on my way back home also.

When I came up to them the second time, I passed the Mom first (still yelling at everyone ahead of her), the youngest boy, then the oldest boy (looking bored, wanting to go faster), and the dad (stopped, turned around, listening for orders).  It wasn't until after I rode on past that their conversation sunk in and I realized what I had just heard.

The youngest boy slows and starts to get off his bike.  The mom screams, in one of the shrillest I'm-glad-my-mom-doesn't-scream-like-that voices, "keep going, Riley.  KEEP GOING!"

A Lesson on Enthusiasm

This kid is probably four or five, not yet in kindergarten and still in the "this many fingers" age range. He's rocking that deep summer tan and bleach blonde hair that only a kid can achieve, but don't let his cute appearance fool you.  No, you have to keep your guard up around this little guy.  He has a mouth like a sailor (in that oh my goodness, you have an unbelievably strong command of the four letter vocabulary kind of way) and he loves to deliver hay-makers to the baby-makers when you lose focus, if you know what I mean.  Which works out perfectly, because an average adult male's future children are about fist high for him.

You know how with most little kids you tease them little, poke them in the ribs and they laugh and think you're a little funny and one of the cool adults... that's not this kid.  If you even think about joshing with him a little he wants to literally knock you unconscious, laugh at you, and make out with your girlfriend... and then laugh at you again.  Maybe I'm embellishing a little bit, but only in the sense that it will be a couple more years before he starts making out with girls.  Mark my words that before he graduates high school he will have knocked a kid out with one punch and stolen someone's girlfriend.  I'll bet you five bucks and if both happen to the same dude you owe me double.