Consider this as a bonus addendum to our previous extreme makeover post.

There is a tangible benefit for continuing education offered by many employers.

But you’d never know it from the scanty number of employees who tap into this honey pot.

Typically, the maximum allowance is $5,250 per year, which just happens to be the upper limit that employers can provide each year on a tax free basis. No law prevents them from giving more, so long as it is understood that any assistance above this threshold will be taxable income to the employee.

The Fortune 500 company profiled in our extreme makeover case did in fact provide $5,250 for undergraduate courses, but $7,500 for graduate level classes.

You may think that you don’t have the time or stamina to take on this extra load. If you’re stuck in class you may even miss “Dancing with the Stars.” It is always the few who are willing to do what the majority will not…so that they will reap the rewards, that the majority will not.

Your first instinct might be to enroll in an EMBA (executive MBA) program. But the schools have marked this item up considerably, in reflection of the highly increased demand. Elite Schools now charge up to $150,000 for such programs. Even $7500 will not put much of a dent in this tab.

Besides, I have my doubts about the value of the MBA.

(Even though I have one myself.)

Let’s remember that the financial geniuses who gave us the sub-prime loan debacle and two savage bear markets in the first decade of the new millennium most likely were MBAs.

Instead, talk it over with your boss. Find out what will make you more valuable in a tenuous job market. Not every course of study will be allowed. They want to guide you in the direction of being more effective and efficient in your field.

There are, as always a few strings attached.

Check out the requirements. Usually, a minimum GPA is mandated. There may also be a time limit to acquire the new degree, to screen out the dilettantes and slackers.

There is a world of difference between casually “taking a few classes” and buckling down to earn your masters.

Some companies will even insist that you pay for the classes out of pocket and later submit the grade for the completed course before reimbursement. These are the smart guys.

The other stipulation is the exit clause.

Usually, if you leave the employer immediately after bagging your new degree, you may have to repay most or even all of the advanced funds.

This is not the obstacle you think it is. If the next company is anxious to bring you aboard, you can negotiate to have them pay the reimbursement as part of your signing bonus. Don’t be shy about asking…this is how the game is played.

In today’s workplace, the bachelors degree is as common as crabgrass.

Take advantage of this unique benefit to elevate yourself above the competition.

I was astonished to learn that only about 2% of eligible employees draw down this benefit.

I still have the mindset that $5,250/$7,500 of free money every year is worth scooping up.

Never forget the motto of Faber College. Knowledge is good.

Put on your hard hat with the miner’s lamp. We’re going deep into the mine.

The data mine.

We’ve been fixated on the dismal domestic and international markets all year, and in the process we’ve missed out on a seldom reported phenomenon:

The wild swings in currency pairs as measured against the dollar.

The undisputed champ for 2008 is the Japanese Yen, up some 20% as compared to the dollar, year to date through the end of 2008.

This does not imply that the Japanese economy has outperformed by the same degree, but reflects massive yen buying by global speculators who are unwinding their leveraged bets.

The basic bet was known as the “carry” trade. Hedge funds and speculators borrowed Yen, due to it being the favorite reserve currency available at the lowest interest rate, and re-invested the proceeds in other markets to arbitrage the spread in interest rates.

Like any leveraged investment, it worked like a charm in up markets, but when the newly financed assets declined, there was a massive pile up as chastened borrowers bid up the spot yen rate to unwind their positions.

The other major currency that gained on the dollar this year was the Chinese Yuan, up about 6%.

Rather than a one off re-valuation reflecting this currency’s underlying strength, China has allowed a steady and gradual re-pegging. This may not continue if our imports from China continue to decline.

Most remarkable for the year are the out-sized gains the dollar made against the currency of our other global trading partners. Including:

• Brazil 32%
• Canada 23%
• Mexico 20%
• Australia 28%
• India 20%
• New Zealand 33%
• South Korea 37%
• Norway 29%
• Russia 15%
• England 33%
• South Africa 43%.

Even the vaunted Euro is still down 5%, after retracing most of it’s decline in the past month.

Which leads us to several conclusions.

1. We know why it was so easy to lose money on foreign funds this year. It wasn’t just the normal decline that results from a global slowdown. The drag from the currency conversion compounded the loss, as it was simply much too strong a headwind to overcome.
2. We will have a difficult time exporting to these countries, as our goods and services have become much more expensive in terms of their national currency.
3. There is no certainty in relative valuations, since the major reserve currencies were severed from gold convertibility. In the global economy, uncertainty increases when every factor in the equation is a variable, with no fixed lodestar.

Currencies are just another tradable commodity, like oil, soybeans or coffee.

We’d like to think our stronger dollar reflects favorably on our economic prowess.

More likely, it highlights the essential fragility of the global economy, and its secondary and tertiary powers.

It’s easier to be the bully on the beach, when everyone else is a 90 pound weekling.

“Life isn’t fair. It’s just fairer than death, that’s all.”
William Goldman, famed screenwriter

2009 promises to be yet another challenging year, but in no way a carbon copy of 2008.

That’s at the core of my disconnect with all the expert talking heads who have internalized the wreckage of the past year and project yet more of the same.

But like John McEnroe says…never trust anyone who doesn’t have an opinion.

So here goes.

1. I’m betting that the weekend fixes are now, for the most part, history.

You know the drill…where the Fed and the Treasury call you on the carpet some sunny Sunday to announce that they are pulling the plug and have arranged a shotgun merger. No need to go all dramatic - now that everyone knows money will be printed and warehoused to meet any contingency.

2. Consumers will learn to their amazement that half of the specialty retailers at the malls can be vaporized…

And you can still find exactly what you are looking for at one of the surviving chains. We have become ridiculously over-stored, and will now face life with a more sustainable level of outlets.

3. Congress will delve much deeper into micromanagement of our financial options.

Already there are laws on the books that will tax sugared soft drinks, while exempting diet sodas. Expect legislation that will simultaneously offer incentives for hybrid cars and punishing excise taxes on the big engine cars we love to buy.

4. The pressure to go green is ubiquitous and overwhelming, and sentiment will trump all objective scientific evidence.

We will attempt to satiate our demand for 24×7 energy with such fickle and sporadic sources as solar, wind, and grain-derived fuel. There will be no rational matching of costs and benefits.

And we will delay and dither rather than ramp up nuclear power plants, the only renewable fuel source where cost and benefit actually equilibrate.

5. Residential real estate will rebound once the crushing inventory overhead is worked down.

In our impatience to arrive at a naturally clearing market, expect a cluster of incentives to jump start the market, especially for first time buyers. Few lobbies are as powerful as the real estate lobby.

6. Government subsidies, loans and direct ownership will proliferate in 2009.

We’ve done banks, insurers and autos. Next will be State and Municipal governments, colleges and universities, and commercial real estate firms dedicated to Office, Hospitality, and Retail ownership.

The feeding frenzy will continue until public revulsion finally and inevitably sets in…and will be reflected in the 2010 midterm elections.

7. The awful realization will emerge that our public financial service companies were systematically and relentlessly looted by their senior executives in the decade just past.

I’m not talking about Bernie Madoff here…this is all about bloated and confiscatory compensation packages that have fully jumped the shark.

Now that the investment banks have been cycled through their own extinction event, and the commercial banks have been nationalized we will rub our eyes in amazement that CEOs and CFOs will take the job for a measly seven figures a year, and no prospect of a bonus.

It may even evolve to an understanding that failure is no longer rewarded with an obscene bag full of walk-away money.

We can only hope.

It may be too early to tell if the Fed’s dramatic rate cut to zero will help revive the markets.

But what is beyond debate is the collateral damage to money market fund yields.

We will soon witness major shrinkage in this sector, starting with the government-only funds. When short-term T-bills are auctioned off at zero percent, just to have the proper window dressing on year-end financials, there is no longer any business purpose in aggregating such low-yielding paper.

By the time you factor in even a nominal management fee, the yield will drop below zero…unless you can get Bernie Madoff’s accounting firm to give you a boost.

Next will be the prime money market funds, where yields are now trending below 1%. In order for something to trickle down to the investor, fund managers will again have to scale back their fees…and these guys are already hurting due to massive outflows at their managed equity offerings.

It’s time we get creative. Here are some alternatives that will allow you to earn 3-4% annualized returns.

1. Chances are your brokerage firm is now a one bank holding company, so start scouting out the far fringes of the home web page to see what the bank arm is offering.

We have a local bank that quietly offers 3% on its no-minimum, no-fee, FDIC-insured money market account, provided that you enroll online. As our brokerage sweep accounts earn just a fraction of this return, we simply need to “sweep the sweeps” periodically, and funnel excess funds to our local bank.

The banks are in a competitive spiral, bidding for “sticky” consumer deposits to help replenish their liability base. For those of you unfamiliar with bank balance sheets, it’s the loans that are considered “assets”, and the deposits are the liabilities.

The upshot is that they are willing and able to pay far higher rates than brokerage money market accounts.

2. You don’t have to invest locally. If you are willing to invest online, the top national rates go as high as 4%.

These accounts must be paired with your existing checking account, and be prepared for up to a two business day lag-time when transferring to and from the online bank to your local checking account.

These are FDIC-insured accounts, and they can offer the higher rates because they don’t have to invest in brick and mortar premises.

3. You can construct a virtual money market fund…

…by creating a six month or one year ladder of insured CDs. And you have choices here as well.

You could tap your local bank branch if their rates are competitive. Or you can go to bankrate.com to see what national lenders are offering. You either burn shoe leather or keyboard time in setting up the accounts.

Easiest of all is working with the major discount brokers who offer CDs in the secondary market. There are pros and cons. On the plus side is the sheer convenience of having multiple CDs aggregated in your single account, each with its own FDIC-insured allowance.

And in a pinch you can sell these brokered CDs into the aftermarket, as compared with bank-issued CDs which will nick you with a prepayment penalty for early surrender.

Like any fixed income security, the price you get when selling before maturity varies inversely with the direction of interest rates.

The negative is that you buy these CDs on a net basis, meaning that they will be marked up (resulting in lower yields) much like individual corporate or municipal bonds. This is the spread, and it’s how brokers earn their keep.

So, the question comes down to this. Is all this juggling worth it?

Absolutely. You hone your skills of observation and arbitrage and enhance your overall money consciousness.

You work hard for the money. Just ask Donna Summer.

It helps sometimes to hope for the best…but to plan for the worst.

Let’s imagine that your boss calls you into their office after the holiday break to have a little chat.

They start with the good news: You get to keep your job.

Then the bad news: Your salary has been cut from $85,000 to $48,000. Take it or leave it.

You have a choice. You could threaten to quit…but not likely in this job market. All the leverage is on the side of the employer.

Most likely, you’d immediately plan on a budget that would allow you to get by. Something is better than nothing….and $48,000 is far better than 26 weeks of unemployment compensation.

Now, hopefully, this conversation never happened…

But how about if you pretend that it did?

You still have the same job at the same salary. Only you now have carved out the option of investing the $37,000 you had mentally forgone to keep your job.

Recently I had the opportunity to review the employee benefits plan of a Fortune 500 employer with an employee who does, in fact, earn about $85,000 in salary and bonus.

Here are the savings options available. The key word being optional. This is an all-volunteer army.

1. The employer will contribute $700 to a Health Savings Account if the employee elects that option. The employee can then contribute another $2,300 in pretax dollars to this account, to max out the benefit for those under 55.This is the best tax advantaged account ever. Tax free dollars going in, compounding, and coming out for qualified health care expenses.
2. The employee qualifies for a Roth IRA, and has a funding limit of $5,000 (the under age 50 maximum). All it takes is a request to the payroll department to divert $417 per month from salary to dollar cost average into this account.There is no deduction up front, but all accumulated earnings and withdrawals are tax free if the ground rules are observed.
3. The employer offers an employee stock purchase plan. This allows for accumulation of the stock at a discount of 15% from its average price, computed semi-annually, and with no brokerage or transaction costs. The maximum contribution is 15% of salary, for a total of $12,750.This is good for the employer, to put stock in friendly hands and boost loyalty, and good for the employee who can dollar cost average into a stock that is down 50% from it’s peak late last year.
4. Finally, there is the 401k plan. The employer will match up to 6% of salary at 50%. This is $2,550 in absolutely free money. Better yet, the employee has an increased limit of $16,500 maximum salary reduction. More companies now offer the Roth option on the 401k, and those who want to boost their tax free holdings will choose this route.

What’s the entire tab if every account were funded to the absolute max?

The total salary reduction comes to $36,550. Plus the combined $3,250 Employer contribution towards the HSA and 401k. Grand total: $39,800.

You never spent it because you never even saw it. It was all diverted upstream.

If you could invest that annual income stream for 20 years at just 9%, you would end up with a cool $2,036,173.

I know its a big chunk of your earnings. 43% to be exact.

But if you could do it out of necessity, why couldn’t you also do it as an act of free will and choice?

“A ship in harbor is safe–but that is not what ships are built for”
John A. Shedd, Salt from My Attic, 1928

The least surprising news flash of the entire year ran in last Monday’s (12/22) Wall Street Journal, under the heading “Investors Lose Faith, Pull Out Record Amounts“.

No kidding. Now they tell us.

You can link back to the entire lengthy article if you wish, but the headline pretty much covers the topic.

Some have even credited the market’s slide that day to this piece, but I would think it was a morning-after reflection on the nationalization of the domestic auto industry.

You may have noticed the following pattern:

1. The government declares that extraordinary emergency powers are required to jump start the market. This causes stocks to swoon.
2. The government then patches together some Rube Goldberg type of stimulus, which causes the market to erupt into euphoria.
3. Then the realization sinks in the next trading day that we are yet a further step deeper into the dismantling of our market economy, and stocks sink once again.

Call it the Lucy Van Pelt syndrome.

You will recall the perennial fall dilemma in the “Peanuts” cartoon panel when Charlie Brown hesitated to place kick the football that Lucy was holding:

Charlie had learned from experience, that Lucy would swipe the football away just as Charlie ran to kick it, causing him to fall flat on his back.

Each year, he said never again. Each year, she reassured him that this time it would be different. Each year, the sad spectacle played out to its predictable conclusion.

Nothing ever changed, even as hope triumphed over experience.

That’s the market we’re in now.

Each step that further extinguishes arms-length market transactions and enhances the tightening grip of government control and regulation causes the market to regress…which causes restless regulators to dream up yet another such assault.

We suffered under eight continuous years of such idealistic experimentation from 1933 to 1941, until our economy was finally rescued by massive defense mobilization. Let’s hope the learning curve is tightened and shortened this time around.

As a contrarian, I take solace from the public’s predictable withdrawal from the equity markets.

As the herd stampedes, their collective instinct to buy high and sell low offers a clear bellweather signal to take the other side of their trade ticket.

For the 20% to profit disproportionately, it will require the cooperation of the 80% to panic and flee. History is a harsh teacher, but unerring in its predictive powers.

For some reason, I find it easier to act counter to group think when markets are down.

Like most everyone else, I have a hard time letting go at market tops, thinking the good times will go on forever. Not smart.

“The braver the bird….the fatter the cat”.

The mainstream media got it wrong. Again.

The December 19th capitulation by the President was not a rescue of the auto industry.

It was primarily a rescue of the United Auto Workers and the private hedge fund, Cerberus.

It might help to step back from this debacle and imagine you were going to start a manufacturing business from scratch.

• You decide to locate this business in Rust Belt northern venues, hostile to private capital and much more heavily taxed and regulated than both southern states and foreign climes.
• You negotiate with a labor cartel to enforce highly restrictive work rules, so that you lose all flexibility on cross training and initiative.
• Worst of all, you negotiate a labor package that works out to nearly $160,000 per year for unskilled labor in wages and benefits, more than twice what your competition will pay.
• And then you wait for Congress to tell you what kind of cars you can build, without regard to market demand.
• Congress of course will dictate that you manufacture cars guaranteed to lose money.

If you spot any flaws in this business model, than you will be as puzzled as I am as to why the taxpayer is being tasked to fund such a fiasco.

Now, take every flawed premise outlined above, and overlay it with ownership that is not derived from a broad cross section of investors, but sourced entirely from an elite hedge fund catering to the mega-rich.

Chrysler has had two chances to die a dignified death.

Once in 1979, before being rescued by the Feds. And last year, before Daimler found someone willing to take this dog off their hands.

How badly did Daimler want out? By the time you net out all of the post sale guarantees and commitments, Daimler paid out of pocket just to get this hot potato into someone else’s hands.

In their colossal hubris, Cerberus imagined that their vaunted financial engineering would compensate for their conspicuous lack of automotive engineering. This euphoria lasted for several weeks, until reality and gravity once again took hold.

Nothing wrong with that. Most hedge funds managed to lose money this past year. Then again, nobody sheds a tear when the uber-rich stumble and fall just like the rest of us.

Who would have thought that hedge funds would be able to queue up to go on the dole during hard times?

It just never occurred to them that Uncle Sugar would come to their rescue.

What do we call such a myopic and misguided policy? Compassionate Capitalism?

Let’s fight back in the only arena still available to us.

Just say no.

Don’t buy anything that GM or Chrysler makes.

Let the Feds shovel in money until these companies have totally flat-lined out, and remorse and regret finally force a change in policy.

If you have to buy domestic, buy from Ford, who did not get a handout.

It’s bad enough that the government is enabling such ignoble behavior.

We can only undo this madness by starving these miscreants out of the marketplace… into submission and ultimate oblivion.

On this day after Christmas, in the wake of the dramatic markdowns that will cap off the holiday shopping season, we explore yet another variation on a theme…that no good deed ever goes unpunished.

The good deed would be a nation of consumers that curtails its mindless and reckless consumption in favor of only necessary and sustainable consumer spending.

We have an economy that is 70% driven by consumer spending. But long-term growth is a function of investment in productivity and infrastructure, so some cutback in the consumer component is both desirable and inevitable.

The punishment is the collective slowdown in the economy should everyone else pursue this sensible policy. The decline in aggregate spending will throw sand in the gears of the economy as it grinds down, resulting, paradoxically, in a lower overall rate of societal savings as businesses close their doors and salaries are scaled back.

This is scary stuff. You would end up with a third-world emerging agrarian economy if such a pattern became pervasive and ingrained over time.

The famed economist John Maynard Keynes was the first to introduce and define this phenomenon.

It remains valid in theory, but in practice our spendthrift habits are so deeply ingrained that it is not likely to materialize.

I realize that this holiday shopping season is anemic compared to year’s past, but still…

Overall spending on Black Friday this year was up from 2007.

And with what tremendous zeal the consumer took up the challenge, trampling to death the unfortunate WalMart employee in New York. Not to mention the shoot-out at the ToysRUs in California, resulting in two fatalities.

I’m trying to imagine the scene of that crime. I’m thinking of the climactic scene in Reservoir Dogs, when all the bad buys, guns drawn and pointed at each other, simultaneously annihilate each other.

But not after a jewelry store heist gone bad. At a toy store.

No. Not much chance of family thrift overtaking overconsumption any time soon.

We’ve now raised several successive generations of mall rats, who wouldn’t have a clue about how to spend a weekend that did involve gorging on junk food at the food court while lugging to their cars bags of perishable and inconsequential swag and bling.

Not much chance they are regular readers of this blog.

The majority of shoppers have instincts that are unerring.

They ruthlessly cull out any asset that has any potential for price appreciation.

This at a time when both residential real estate and equities are the champion deep-discounted sales items…with sellers even more motivated than retailers.

No need to show up at 4 AM one day a year. This clearance sale has legs that will carry it forward for years to come.

The best way to measure your success and effectiveness as both an investor and consumer is to make absolutely sure that you are not doing what everyone else is doing.

Just keep marching to the different drummer that points you in the direction of savings and prudent diversification.

Thrift is no paradox for the minority who participate.