I just received the 2008 tax valuation from my county treasurer. It’s clear that my local housing industry is feeling the effects of the national housing “crisis”, as the appraised value of my house increased less than 1% this year. Compare this to last year where the increase was 4.9%, and the year before when the valuation increased 6%.

Truthfully I’m not terribly disappointed about this, nor am I shocked. Other areas around the country are seeing the value of homes actually decrease, so I’m counting my blessings that my area isn’t yet in that boat.

Looking around the real estate market, there are a ton of houses on the market, and the area is certainly overbuilt. Commercial real estate is even more so. There have been strip malls built that have been vacant for 6 months or more, but curiously this has not deterred builders from building more commercial space.

The current state of the local market makes it attractive to buy a house, but I’d hate to have to sell one right now.

How about your area? Are your valuations still positive?

We’re starting to see the consolidation in the airline industry that we’ve need so badly for the last 5 years or more. ATA Airlines, Aloha Airlines and Skybus (which I wrote about almost a year ago) all quit flying this past week.

I gave Skybus a 3 in 10 chance of surviving, and it looks as if I was right. Rising jet fuel costs and a slowing economic environment got the best of them after only one year. Of course, when you offer tickets for $10 per seat, it doesn’t take a financial analyst to figure out that you might not be in business for long.

That begs the question: if I could figure that out, why couldn’t the execs at Skybus?

Actually, it appears the CEO saw the writing on the wall. Less than two weeks ago, CEO Bill Diffenderffer resigned to pursue a book-writing career. A BOOK WRITING CAREER! Retired sports stars resign to go write books or become sports analysts. Movie stars and politicians resign to go write books. A no-name CEO dumps his company that he spoke so highly of less than a year ago to go write books!? Give me a break! This guy wasn’t even in it to begin with.

I digress.

From a personal standpoint, you never like to see companies go out of business. ATA had to lay off 2,000 employees, which only creates more downside pressure on the economy, and it’s never good when people get laid off. That is, unless you’re going to resign to go write books…

While it’s a personal tragedy to see this happen, consolidation is a key ingredient in a free market. You absolutely have to let the failures fail, and let the successes continue to let their chips ride.

For one, I’ve become tired of hearing airlines complain about rising fuel costs yet refuse to raise ticket prices over fear of dwindling market share. If my companies costs go up, you can bet that part of those costs are passed on to the customer. That’s how a good business works. You’re going to face a reduction in sales when prices go up, but you’re going to face a reduction in revenue if they don’t.

It’s too bad these airlines are going out of business. Now, as long as the government sits on it’s hands and lets the free market play out, the airline business will be healthier for it.

Failure is such a harsh word. I have to wonder why. After all, don’t we learn more from our failure than our successes?

Capitalism lives and breaths by failure and success, and the fact that you are given the opportunity to succeed is what makes America great.

For that, I’m sorry to say that I felt a little bit of relief to learn that the Senate today killed a bill that would have bestowed upon judges the power to cut interest rates and principal on troubled mortgages to help desperate borrowers trapped in sub-prime mortgages keep their homes.

The fact that naive people were taken advantage of on the front of our housing problem is frustrating, no doubt, and this will surely not be the last time you hear of that happening. But to think that those same people would gain more from this by allowing the government (and hence the all mighty tax payer) to come in and bail them out of bad decisions is a disservice to us all… in the name of capitalism.

To a certain degree, we all have a vested interest in the success of the free market. Your car, your toys, your house. Place upon an article a value and you will see the free market at work.

This period in time is teaching us all a very important lesson: no one should have a better understanding of your finances than you. Allowing people a get out of jail free card only white washes that lesson.

I’ve said it many times on this blog, especially when it pertains to our government, but most generally when it’s time to do “something”, it’s often more appropriate to do nothing at all.

I’m all for allowing people the opportunity to get ahead; to make of life whatever they want, by their own decision. Reinforcing the importance of your financial decisions is the job of the free market, not the government.

Eliminating failure from the equation will only bring the value of success to the same level.

Schering Plough (SGP: chart, web, Y!) just can’t win, and I’m happy I decided to sit on the sidelines to watch the show. The more they try to pump the Vytorin drug, the lower the stock sinks.

Last week the stock got ploughed after doctors revealed they wouldn’t recommend the drug to their patients. Ouch!

So now Schering has resorted to cutting jobs in order to save money. Not good. Not good at all.

This certainly doesn’t look like a good buy-it and forget-it stock.

Last Friday I had to meet with a benefits adviser from my company; we are switching benefits providers, and there was “some important information that had to be documented, such as beneficiary elections, etc”.

It turned out it was just an opportunity for the provider to try and sell their benefits one on one.

To be honest, I was really turned off by the benefits, or more specifically the number of benefits I was offered. Not that we don’t have enough benefits, that’s not the case at all. There were just too many benefit options above and beyond the standard health, vision, dental, and life insurance.

Among the others:

Voluntary short term disability
This was a strange one. I could elect to buy an additional policy to cover any time not covered by the primary short term disability policy. For just $2.50 out of each paycheck, I could extend the policy by six months. Note that this is not a part of the primary policy, this is a follow on policy. For just $4 more out of every paycheck, I could add my wife to this as well.

Voluntary long term disability
Naturally, the period of time not covered by the short term policy, or the “voluntary” short term policy, OR the primary long term policy. For just $1.50 more, you can extend the primary long term disability policy. Oh, and if you want to add your wife to this policy, it’s just $3.75 more out of every paycheck.

Cancer and Heart Attack Insurance
OK, so sign up for this one, and if you ever become diagnosed with cancer (and one in three men will!) we’ll pay you $5,000 once the official diagnosis is made. You don’t even need to apply the money towards treatment. You could even apply the money towards funeral costs should you end up dying from the cancer. Additionally, if you ever have a heart attack, kidney failure, or other seemingly fatal diagnosis, we’ll pay you an additional $5,000! All this for only $4.95 per paycheck; add your wife and it’s only $10.25.

Oh, and by the way, if you die and the autopsy reveals that you died of a heart attack, we’ll send the check to your beneficiary.

You can increase those numbers to $10,000 (or any other amount for that matter) if you want, but it will cost you!

Deductible policy
This is like a rider for your health insurance. You pay an additional $2.95 per paycheck and this policy will cover your co-pay, prosthetics, x-rays, cat scans, etc. Add your wife for only $3.95 per paycheck.

GIVE ME A BREAK!

It’s very difficult to turn down insurance. After all, it’s your health we’re talking about here! I started thinking about it pretty hard, so hard in fact that I almost started feeling guilty if it turned down the policy.

The gears in my head were turning so fast my hair felt hot. I added up all the additional premiums that would be subtracted from my paycheck, and they totaled somewhere north of $30 per pay period (twice a month).

During the entire spiel, the representative threw in quips that would help fuel my guilt if I turned down the policy. “You know, for just $2 per paycheck you could alleviate whatever additional bills may be associated with little Johnny’s incurable cancer treatment in 10 years…” Who could say no to that? I CAN!

After all, isn’t this what health insurance is for in the first place?

I felt a bit insulted that the rep would come in and try to sell me stuff I don’t need, and in the process make me feel guilty about turning it down.

Part of my aggravation relates to my general observation of the insurance industry. They love to take your money, but they really don’t want to pay out when you file a legitimate claim. They’ll find any excuse and loop hole to deny your claim, and then you have to spend even more money, time and aggravation to fight the fact that they’re not upholding their end of the bargain.

I can just see it now:

“Dear Grant, we’ve received your claim for the nearly fatal heart attack you suffered. However, since your heart attack occurred while you were sitting in a lazy boy watching football and eating Cheezy Puffs with high levels of trans-fats, we can not fulfill your claim at this time. Better luck on your next heart attack!”

What say you? Is there such a thing as having too much insurance?

Next week will reveal a lot about the state of our economy:

Institute for Supply Management data - April 1st.
The institutes’s data for March suggests a drop to 48.0 which would signal that the economy is close to falling into a recession.

Joint Economic Committee Meeting - April 2nd.
Ben Bernanke is set to testify before the congressional Joint Economic Committee on the out look of our economy. The committee will discuss whether our economy is already in a recession or heading into one.

Earnings: Best Buy and RIM - April 2nd.
Earnings reports for Best Buy (BBY: chart, web, Y!) and Research in Motion (RIMM: chart, web, Y!) are due out on Wednesday. Analysts expect an increase in Best Buy’s Q4 profits on the heals of 52% increase in Q3 profits. On top of that, earnings are expected to more than double.

Things aren’t as rosy for RIM. BlackBerry sales continue to struggle against the iPhone and Q3 results didn’t live up to expectations. EPS is expected to increase only slightly.

Why you should care? Well, Best Buy is a good indicator of consumer spending. After all, the store specializes in selling products related to discretionary spending (big screen TV’s, music, electronics… stuff we can all probably live without if times are tough). As for RIM, it’s a sign of continued pressure on Tech as a result of competition.

Non-farm payrolls report - April 4th
March non-farm payrolls are forecast to drop 30,000 and the unemployment rate is predicted to increase to 5% (still not bad). This information along with what ever rolls out of the congressional meeting on economics will help determine whether or not we’re really in a recession.

At this point in time, I’m not sure it really matters if we call this a “recession” or not, but perhaps if we can get the government to buy into the fact that we can finally call it a recession, we can move on with our lives.

There have been many terms tossed around lately stemming from the latest economic and financial news. One of the most popular has been the phrase “a run on the bank“.

What does that really mean?

A run on the bank is really a type of financial crisis that occurs when bank customers rush to withdraw their funds over fears that the bank may go under. Such as with Bear Stearns (BSC: chart, web, Y!), when word got out that they weren’t doing so hot, and you saw the mad rush to sell the stock, dropping the price per share from nearly $100 to under $2 in very short order (within a matter of months).

ON A SMALLER SCALE
Say for instance at your local bank down the street, the FDIC (essentially federal insurance guaranteeing your money) prevents a run on the bank. Think of it this way: your bank actually uses the funds they take in to lend to others. They pay you say 1% on your deposits, and turn around and lend your money to someone else for, say 5%. This is how banks make their money, and by in large, how larger public lending institutions make theirs as well.So if you no longer feel your money is safe in your bank, you with draw it. If all the customers of a bank do the same thing, the bank no longer has the funds to lend out, and hence no way to make that 5%.

ON A LARGER SCALE
Along those same lines, banks with a longer reach, as with publicly traded financial institutions (Bear Stearns for instance), a bank run can turn into a run away freight train if there is nothing to reassure customers their money is safe.In fact, if it is thought that the poor financial condition is not isolated to one institution, a bank run can spread to an entire sector. The down side of this is that the run can spark a recession, essentially because investors (or customers in a banks case) pull the very money out of a market that is used to actually stimulate that same market.

Oracle (ORCL: chart, web, Y!) posted disappointing quarterly software sales today and hinted that its customers had become more cautious, dispelling the notion that the software sector would be immune to the economic turmoil that has roiled the rest of the tech sector.

As I mentioned last weekend, I suspect Oracles report could serve as a template for future earnings reports to come in the next month for the tech sector. In short, profits may continue to climb, but worries about our economic condition and consumer spending will place a target on revenues and sales. If those numbers don’t meet or exceed the Street’s expectations, look out!

It will be interesting to see how Oracle trades tomorrow. I suspect that shares will fall like a home-sick anvil at the market open, but will rebound a bit towards mid-day, and still close down, but up moderately from the days lows.

I can’t say that I’d buy tech right now, but I’d keep some money at the ready to pick up some shares of solid industry players over the next couple months.

What do you think? Does Oracle serve as a sector indicator? 

Walgreen’s (WAG: chart, web, Y!) earnings came out today and they ended up beating Street estimates by 2 cents, and second quarter sales increased by 10.5% on comparable-store sales growth of 4.7%.

While the EPS was up, it didn’t match the sales growth, increasing just 6.5%.

So what’s the beef?

Walgreen’s earnings are commendable, but the fact that earnings aren’t out-growing sales leads me to believe margins are tightening. In fact, gross margins were down 14 basis points for a variety of reasons including mix shift and softer seasonal sales.

Expenses were up 11 basis points as a percentage of sales, however most of the expenses related to the opening of 121 new stores for the quarter.

I think there is still potential for Walgreen’s, but I think there is currently more downside risk than upside reward. There is a shift to generic drugs, with less margin still than the name-brand counterpart, and in these market conditions I think there are better opportunities waiting in the wings.

Walgreens reports earnings - March 24th
What a difference a day makes. Leap year is going to be particularly good to Walgreens (WAG: chart, web, Y!).

On Monday the drugstore chain reports second-quarter earnings, and those numbers garner help from one extra day’s worth of business in February. Same-store sales rose 8.3% in February, and analysts expect that February 29th sales will push the EPS up to 67 cents.

Oracle Insight - March 26th
Oracle (ORCL: chart, web, Y!) is scheduled to report fiscal third quarter earnings after the market closes on the 26th. Normally I don’t follow Oracle, but since their quarter ends a full month before the rest of the major tech companies, their numbers will give a sneak peak on how hard the economy is pounding the tech sector.

GDP Growth Numbers for Q407 - March 27th
The final fourth quarter, 2007 growth report is expected to show 0.7% economic growth, up from the 0.6% as expected in the preliminary GDP report. Economists are expecting export numbers to be revised to the upside due to the dwindling dollar.