There is a God

And He has a sense of humor!

Friends:
I just heard more news on the radio this morning, one story about Cash for Clunkers, another about our military. The Cash for Clunkers (C4C) system has "mixed" results, I am not sure whether I should be rolling on the floor laughing, (for those who text, ROTF LMAO)or crying.

To begin, last week I was told that the C4C system was closed, but a day or two later, apparently under cover of night, the IRS, yes..... our friends the Feds, made an announcement that the $4500.00 "incentive" would be considered TAXABLE income!!

Amazing, I was almost speechless. Pity the poor person who financed their purchase. Now come next April, they will most likely owe another $1,000.00 or so, or simply not get a refund which they were anticipating. This is a VERY IMPORTANT lesson for all businessmen - CASH FLOW IS KING.

A good friend and mentor once told me this. You can finance your heart away, but if the cash flow dries up you are dead. Cash flow means more than margin or any other measure. This cash these folks will have to come up with will be technically after tax dollars , hopefully from savings - not- or they can just turn around and use their credit cards all over again to finance the IRS taxes due. Hey, what's the big deal about 18% interest between friends? This is a big deal because it is an unexpected hit to the projected cash flow of this person's monthly budget.

Of course you already know that many car dealers have not yet been paid on their promised C4C transactions. (remember our lesson on transaction cost - policing cost) One dealer today indicated that he was owed over $3 million, going on 6 weeks overdue accounts receivables. What's the big deal here?

You guessed it - cash flow. Many don't know this, but here is how an auto dealer works. They technically rent the cars from the manufacturer, paying a daily fee. They get that money from a bank which charges them interest. If they go over 30 days, most could be subjected to increased rates or penalties. Once they sell or trade a car, it is financially gone - on a daily basis.

But wait! It gets better. On the news this morning a woman called in who worked at a dealer. Better sit down now.

She said that she has seen cases where the C4C payments may be diverted from the dealer if the buyer had outstanding student loans or owed child support. D'oh! Now the dealer's cash flow is affected three ways - no or reduced payment, delayed payments over 30 days, and increased interest paid to the bank. We should all take a moment and feel very sad for these dealers, who, God Bless them, are businessmen just trying to make a living.

Let's contrast this story to one much closer to my heart - our wonderful US military. Apparently there is a transcript somewhere - A US pilot was flying his plane over Iraq when a voice came over the radio - "Unidentified aircraft you are flying in Iranian air space, depart immediately or we will send up a strike force....."

To which the pilot replied, " This is a US aircraft, we are flying in Iraqi airspace, not Iran..." The other controller again made the same threat and demand, leave or we will shoot you down.... etc. etc. The US pilot calmly replied, " This is a US Marine F18 hornet fighter jet, send them up, I'll wait." Semper Fi.