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Ramsey sticks to his principles

Financial consultant talks about the economy, the oil spill, Fox and more

In the last decade, personal finance counselor and motivational speaker Dave Ramsey has grown from an afternoon radio host into a straight-talking money guru for the American middle-class. His low opinion of materialism, big government and the credit card industry has earned him friends and enemies from the water cooler to Wall Street.

After losing a net worth of more than $1 million in the 1980s, the real estate prodigy and his family found themselves under a mountain of debt. Their painful journey from bankruptcy to prosperity is told in the New York Times bestseller “Financial Peace.”

Today, as founder and president of Lampo Group Inc., Ramsey has written two more bestsellers and still gives advice to more than four million weekly listeners through his radio show. More than 700,000 have attended his live seminars and one million-plus families have “graduated” from his Financial Peace University.

He recently talked with MBJ reporter Stephen McDill.

How would you grade the recently passed Wall Street reform bill?

I haven’t read the entire bill. I’ve read some of the summaries that are out there. Basically its politics as usual… it’s politicians passing a “law” to try and act like they did something. Honestly, most of the things in this bill are things that have been done for years. So, I’m not impressed. I would give it an “F.” It looks like politicians were acting like they were trying to save the public when honestly we the public need to save ourselves by having a little bit more knowledge and thoughtfulness about what we do.

What’s your message to businesses coping with the BP oil spill in the Gulf?

The BP oil spill is a very scary thing. It’s just so sad and when you’re in a business in that situation it’s the equivalent of a hurricane that won’t quit coming ashore. It’s knocked them back on their heels in a lot of cases. If your business has been directly affected by that, I don’t know that I have any magic words for you other than to say, ‘Hey, if you can survive and get through this you can probably make it through just about anything else that’s gonna come your way.’ Be very careful not to go into debt. Be very careful to keep your expenses way, way down and obviously keep your revenues as high as you can. (BP CEO Tony Hayward) is obviously a PR disaster looking for a place to happen. Hopefully, their chairman of the board has managed to keep him away from a microphone for a while.

Where is the U.S. on the recession/recovery timeline? How long will a recovery take?

A recession is when the economy is receding rather than growing as measured by the gross domestic product. Six consecutive months of shrinkage in the economy is called a recession. We haven’t had (that) in some time so we seem to have turned a corner on the recession a while back. The thing that’s blowing everybody’s mind is… when the economy’s actually growing meaning that we are no longer in a recession, it didn’t bounce back to wild and crazy spending like it used to. So while we’re having growth, it’s a very slow, steady growth, which is not really — there’s not a lot of sex appeal to that. People aren’t really excited about that. I’d like to see it grow a little faster than it has personally, but I don’t really want us to go back to spending like we’re in Congress as a culture.

How have Mississippi and your home state of Tennessee survived recession?

By and large, the recession has been real estate-driven. The real estate market has been mostly hammered in Florida, California, Michigan and Las Vegas. If you take those statistics out, the real estate market’s not that bad. It’s downright good in some places. Not booming, but good. In that sense, those of us in the heartland in places like Mississippi and Tennessee have been a little bit exempt. Real estate is healing. It led us into this recession and it will lead us out. Jobs are another issue, jobs change depending on the more rural places and the metropolitan communities. The rural communities have been hit a lot harder and hurt more by the recession than some of the metro communities.

We talked to Steve Forbes earlier this year, and he kind of drew the analogy of it’s like “recovery, hit the wall, recovery, hit the wall.” At this point, how do we keep things going to where we’re not going to just slide back into another recession?

Well, we don’t go back to the ways we had of doing things. We don’t continue to borrow and we don’t run the economy based on consumer spending that can’t be sustained because the consumers spending more than they make. The economy doesn’t need to be based on that. That’s a house of cards and it did come tumbling down. And we don’t need to be spending hand over fist at the government level, which we are. That’s probably one of the things, frankly, that’s slowing the recovery down is the amount of dollars that the government is siphoning out of the economy. Their level of spending and deficit borrowing is just unbelievable. If they would be lean and mean things would probably pick up quicker.

How can local businesses help restore consumer confidence?

I don’t think businesses can restore consumer confidence. I think consumer confidence comes from the consumer looking into the future and seeing good things. If I think I’m stable in my job then I’m more likely to do my normal spending. There’s a lot of people that aren’t even doing their normal spending. They’re still hiding in caves, collecting lint and waiting for triple-coupon day to come out and it’s based on fear. The only thing businesses can do to survive while they wait on the confidence to come back to the consumer is pricing models have to be adjusted, specials are offered. Some businesses won’t survive until the consumer confidence comes back and others will flourish in this environment. I’m watching a lot of stuff out there in the marketplace that’s very, very price sensitive. So companies that have understood that they can adjust price, they’re drawing the consumer out into the light again and that’s going to be fine.

Again, I don’t want the consumer confidence to be arrogance and that’s what it was before.

Are there any magic ways to recession-proof a business?

I can tell you that we’ve prospered during this recession. Our business has grown. I think that’s due to a couple of things. One is that we don’t have any debt. When you don’t have any debt you can hang on for a long, long time and wait for something to recover. The second thing we’ve done is we’ve maintained a cash position meaning we had the business equivalent of an emergency fund called retained earnings. And so, I’m sitting here very, very comfortable in a paid for office building, with a paid for business, making a profit during a recession. What that does is it puts me in the position to be able to, in a sense, take advantage of a recession. The third thing I’ve been investing in, other than real estate and the stock market, during these down times is- the best investment I’ve made is in the third and that’s people. Talent is on the street, it’s lost its job and I’m finding some quality people that are either not counting on their unstable corporation or they’ve already been booted out the door and bringing them on our team. So our business has grown because I’ve seen this a time to invest.

What was your opinion of the Troubled Asset Relief Program (TARP) of 2008, the so-called “bank bailout”?

I was pretty critical of everybody involved from George W. to Barack Obama and anybody else who thought about voting for that trash. People were panicking. There was a level of hysteria on Wall Street and certainly in Washington and it caused people to abandon what they had said were their personal philosophies of let the free market reign. It’s been said that if they hadn’t passed that, that the stock market would have crashed. There are a bunch of us that are out here that know something about that stuff that say that’s not true. But we’ll never know now. Now all we know is that we’ve got another trillion dollars in debt and absolutely nothing to freakin’ show for it.

What about the counter argument that, “We’ll never know how bad things could have gotten if they hadn’t passed TARP or even the more recent American Recovery and Reinvestment Act (ARRA).” What do you say to that?

It just comes down to what you believe. Do you believe that when the economy is struggling that the government needs to do increased deficit spending to stimulate the economy? If you do, then you believe in Keynesian economics (named for) John Maynard Keynes who coached Roosevelt on the New Deal. That was the beginning of the edges of socialism entering our world because John Maynard Keynes was a socialist. If you believe as a capitalist, like I do, that the markets are there to punish those who misbehave by trimming the tree- that’s what happens in the economy. If you run a restaurant and you run it poorly you deserve to go broke. I’m sorry, you don’t deserve anything else. You didn’t serve the marketplace. If you run a bank and you run it poorly because you make a lot of crummy loans to people, you deserve to go broke. And I’m okay with those people going broke and I don’t think it’s going to completely collapse us, and we end up with “The Book of Eli” with scorched earth or something.

How would you grade Treasury Secretary Timothy Geitner and Federal Reserve Chairman Ben Bernanke’s performance?

They are continuing on that same trek of extreme levels of debt in order to put up the façade that the government is responsible for the speed of economic growth in the U.S. Truthfully, when you look at the numbers, the size of the U.S. economy versus the size of the money they spend- they’re like a bunch of Oompa-Loompas running around the edge of a forest fire with squirt guns. It’s a joke. I don’t think they’re dumb guys and I don’t think that they’re guys that have evil content. But I’ll tell you what, they’re in the process of creating a huge mess that’s going to take decades to uncover and dig out of.

Are there seven steps to getting the United States closer to financial peace?

I don’t know that there are seven steps but the philosophies by which personal finance work, work in business, they work at the city level, they work at the state level, and they work at the national level. The philosophy to start with is have a plan and execute that plan efficiently. At home, we’d call that a budget. At work we’d call that a budget- by the way, in government we’d call that a budget. But it’s not executed efficiently and it’s not stuck to. They come up with the paperwork and then go do whatever they want. It’s like your little brother has a spending problem with credit cards so you’re family stays out of balance all the time. Living on less than you make, having a plan, staying out of debt, causes prosperity. It will at the national level as well as at home.

Cable TV is rife with commercials urging people to invest in gold. Bad idea?

Gold is just not a good investment. It’s being sold on midnight cable, that ought to give you a clue right there. When you look at the track record of gold, over the last 50 years, it’s horrible as far as the rate of return that is provided. Gold has made a bunch of money in the last seven years. If you take that seven years out- there’s not- you could go back a hundred years and gold hasn’t been a good investment. Gold is being driven up right now by fears and the sense of instability due to the federal government’s overspending. Think about a few months back when oil went to $140 a barrel. Aren’t you glad you’re not into oil at a $140 a barrel now? What was that driven on? It was driven on fear and fear is never a good investment.

What are better commodity investment alternatives?

I’m not an investor in commodities because they’re so volatile. I just don’t like that play. I do very simple, very common investments. I guess if you consider real estate a commodity, that’s a great investment. I buy a lot of real estate. Right now’s a good time to buy real estate because there’s still some deals out there. Other than that, growth stock mutual funds with long track records- all of our wealth is in real estate and in that.

How does your faith intersect with your career as a financial advisor?

One of the things we figured out about personal finance years ago is that it’s about 80 percent behavior. The problem with money is our behavior. It’s not knowledge. The knowledge needed to become wealthy is only sixth-grade math. There’s just not that much to it. When you start realizing that behavior is what needs to change- relationships affect behavior, emotions, my mental health. What else affects behavior? My spiritual walk. To leave the spiritual out of any discussion that is intelligent and thorough about behavior modification is very naïve. To me, it is a natural thing for my faith to enter into the discussion. Now, as my listeners know, I don’t spend all my time quoting Bible verses (wouldn’t be ashamed to) but I don’t my time doing that. That’s not our purpose, we’re not a “Christian” program, we’re a program done by a Christian. And so my faith enters into my answers but- and I think that makes the answers more intelligent and complete personally but they’re not the only answer. The answer to every question on “The Dave Ramsey Show” is not a Bible verse. We just try to keep it balanced and keep it where it’s attractive to people of any faith.

How many speaking engagements do you usually do in one year?

The EntreLeadership one days, I’ll probably do four or five in a year and the big Total Money Makeover Live events I guess we’ll do about ten this year and then we do two of the EntreLeadership Master Series events which are in a resort location like Cancun or something. That makes up our year.

You writing anymore books?

In the middle of writing “EntreLeadership” right now. We’re taking these business principles that we’ve used to grow this business from a card table in my living room to where it is now over the last twenty years and we’re writing up those lessons that we teach in these classes into a book. I’ve got a deadline of December to have it turned in to Simon & Schuster, we just did a very large two book deal with them… and we’ll launch it sometime next fall (2011).

What can you tell me about the Fox Business Network’s decision to cancel your TV show?

We had an absolutely fun run. I learned so much from the folks at Fox Business Network. They taught us a ton and we had a three-year deal with and we completed two and a half years of that and their ratings were skewing towards an older audience. The majority of their ratings were coming from 55 and above and honestly the Dave Ramsey material does not draw anybody 55 and above much, not percentage wise. Most of our audience is in their 30s. They made the decision to go after that demographic so our show didn’t fit with that decision. I gotta tell you, Kevin Magee, who is president of the place, he and I are good friends- we’ll do some other stuff with them. I continue to be on “Fox and Friends” every Wednesday morning and I was on Neil Cavuto this afternoon again. Neil and I are planning on doing some other stuff together.

Would you go anywhere else if you were invited?

We have several networks that have approached us immediately as soon as that was gone. They’re after our demographic. You’ll probably see my ugly face stick up on the tube someday pretty soon but we haven’t got it all figured out yet.

Would you ever run for office? You’ve got the charisma.

No. I don’t have the filter. You need to be able to work with people better than I can. I’m always right and that doesn’t work right in the political world. I would start a war. I don’t care much for politicians of any ilk, to be honest with you. They’re some of them that more represent how I believe than others, and there’s a few of them that are good folks, but a lot of them are just twerps regardless of which party they are in.

You’ve publicly endorsed U.S. congressman Zach Wamp’s bid for governor of Tennessee. Tell me about him and what attracted you to him?

One of my good friends is big in the Republican Party in Tennessee… he told me Zach’s a good guy you need to meet with him. I’m like, “Yeah, right,” but anyway, we went and had breakfast and he is a good guy. I was kinda shocked, honestly. He’s a strong man of faith and he lines up with conservative fiscal values. We have some good men running for governor in Tennessee, we’ve got a good selection. Sometimes we only have scallywags but I know most of these guys and they’re all good men. Zach is just more closely aligned with my beliefs. State governments are under the attack of the federal government mandates. It’s gonna be very tough for states to balance their budgets given the required federal spending that is coming down- that is being stuffed down our throats by Washington- in both parties. States rights, state sovereignty are gonna require some very strong, backboned governors, like we’ve got over in Arizona, to be able to fight back against the federal government and maintain some sense of dignity. Zach has that and by being in Washington, he knows all the tricks of the trade and knows their game and probably be best equipped to hold them off we hope.

George Erdel, a Democrat running for the 6th Congressional District in Tennessee, said he would take a bunch of Dave Ramsey books to Washington for his colleagues. What’s your reaction to that?

I’ll always send books to Washington. Can they read?

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