Saturday, January 21, 2017

Why Small Investers Screw Themselves

Why do small investors screw themselves most of the time?

Small investors often screw themselves out of most, if not all of their money.   Why this is, isn't hard to figure out.   They are not sophisticated and they don't have investment smarts.   They are also more prone to greed and fear.   And they are in denial about reality most of the time - which is why they are small investors in the first place.

One of the mantras of my blog is to act rationally in an irrational world.   If you perceive reality as it is, rather than what you'd like it to be, you will come out ahead.   People who make fantastic amounts of money in this world are merely those who perceive reality correctly most of the time.

Warren Buffet isn't some genius inventor (those never make money) or some stock whiz with a new system for making dough.   He merely is a person who can more accurately perceive where value lies while others see only risk.   He invests in things that others eschew, and usually comes out ahead.   While the great unwashed go after the latest IPO, he is doing "dumb" things like investing in hometown newspapers or airline stocks.  And sometimes he gets it right, sometimes wrong.

Small investors, on the other hand, are often disassociated from reality.  They watch television and think it is real.  They believe whatever convenient thing they want to believe - like urban legends and fake news.   They have no real grasp on reality, and thus reality to them seems like a harsh mistress.

And they make a number of mistakes.  Here are a few:

1.  Starting a Business:  The single largest mistake small investors make is trying to start or run a business.   The media hypes the "be your own boss!" nonsense, and every television show aimed at the working class depicts them starting a business - sometimes with accurate results.   Archie buys a bar, Rosanne opens a cafe, while her husband opens a bike shop (which in the series is accurately depicted as failing).

Why is running your own business such a bad idea?   Well, first of all, about 90% of small businesses fail in the first year, so the risk factor is high.   The capital needed to run such a business is steep, and when the business fails, it generally takes you out financially, leaving you broke and bankrupt - without even retirement savings.   If you were foolish enough to borrow money from employee's withholding, you may in fact end up in jail.

The second thing is most of us are shitty businessmen.   When I started my law practice, I had the legal part pretty much locked up.   I was able to set up an office and efficiently docket my cases and write applications and amendments and whatnot.   The skill part was not the issue - the business part was.

You may be a great chef and can cook amazing meals and get crowds to come to your restaurant - but if you can't balance the books, it will all be for naught.   I had to learn bookkeeping, billing, and hundreds, if not thousands of skills that it takes to run a successful business.   Like most amateurs, I spent more on overhead that I should have ("wouldn't it be nice to have....?").   I also had no skills in hiring and managing people, which is key to running a business.

Worst of all, I still harbored naive ideas from my days as a salary drone.   I was not going to be like my stingy mean bosses, but instead be nice to people!   Not only was this a horrific business plan, I ended up not being nice to people, as people don't want "nice" in an employment scenario, they want a structured environment with stated expectations and performance goals.

It worked out for me because I pulled the plug fairly early on, before I went into debt.   I also had a fairly good cash-flow business, although I wish I had more of that cash at this point in my life!   Other businesses, more marginal with higher overheads, can hemorrhage cash very quickly.   Restaurants are the worst, and once people stop coming, things can go South in a real hurry.

2.  IPO stocks:  Greed is the biggest fault of the small investor.  It is one reason they want to run a business of their own - convinced that others are "raking in the dough" instead of barely hanging on or going bust - as most small businesses are.

IPO stocks are the next-best-thing to starting a business of their own, for the small investor.   There is going to be a new product or company that is going to hit it big!  And if you are in on the ground floor, you will be the next Paul Allen (who was an original investor in Microsoft).   

The problem is, spotting the next big thing! is damn hard to do, and even if you can spot that, spotting the right company to invest in is even harder to do.   Motley Fool hyped 3-D printing as the next big thing! but it turned out only to be a thing and not a game-changer of anything.  Not only that, some 3-D printing companies have already gone bankrupt as it turned out to be a competitive industry and no one company could corner the market.

Compounding this is the nature of the modern IPO.   IPO's used to be about raising capital to found a company.  Today, they are all about "going public" so the founders can cash-out of their founding shares and get suckers - I mean investors - to buy these shares from them.

I have invested in one and only one new company, and that was a bank some friends of mine were starting.   And I invested for four reasons.   First, they were all investing their life savings in the bank which was a good sign they would make it work.   Second, they knew what they were doing and had a good business model - commercial banking in the DC area is a pretty solid business, and they even survived the mortgage meltdown without much difficulty.   Third, as a real estate investor, it helps to own stock in a bank - they had indicated that they could loan me money for my investments, which made owning stock in the bank a good idea.   Fourth, I didn't invest much, and I could afford to lose what I invested.   I put in $10,000 which I borrowed on my life insurance to get (I was cash-poor at the time, stupidly).   I made over $50,000 on that investment.

Such opportunities are hard to come by.  They are rare.  And in retrospect, of course, I wish I had cashed in my 401(k) to invest in it.   Or in that AVIS stock that went up 7000%.   But not having a working time machine, I cannot do either.   The best we can do is diversify and make a little money here and there.

Both of those "high yield" investments could have gone horribly wrong, too.   My banker friends could have over-invested in residential mortgages just as the market crashed.  AVIS could have gone bankrupt.  It never pays to invest a lot in risky things - you could lose it all.

But one way to avoid risky bets is just to walk away from IPOs entirely - it is almost a sure thing you will lose out.  At best, you might make back a little money.  Few provide spectacular results.

3.  Crowdfunding Nonsense:  This is the latest form of "fun" investing and for the life of me, I don't understand it one bit.   You give someone money, either just for the hell of it, or because they promise to pay you back somehow, with free products or something later on.   Like most small businesses, these sorts of places go belly-up in short order leaving people with nothing to show for their "investment".

What irks me about crowdfunding is that it is not taking investment seriously.   If you really want to invest in the next big thing! then you should get more out of the deal than a poorly made prototype in the end.   You should have stock in this.   When did investors just give up entirely on equity?

The same is true for thee Elio "deposits" - you are gambling money for not a lot - a chance to buy a car later on that may or may not be made.   Of course, in that case, actually buying stock isn't a good deal either

4.  Political Investing:  Some folks think they should "vote with their money" and invest only in politically correct things.   For example, there are funds for companies that are "sustainable" or "women-owned" or "cruelty-free" or whatever.   Some of these funds do well, some do not  in an expanding market, nearly all funds do well, of course.   Some folks invest in companies that they think are doing social good or changing the world - again the Elio "investors".

What this sort of "investing" loses track of, is the bottom line.  In addition, the idea that somehow by investing in certain things these things will succeed, is somewhat flawed.  You can throw your life savings at the Elio, for example, but that doesn't make the product or business model viable.

Similarly, withdrawing your money from cigarette stocks or oil stocks isn't going to change these industries one bit.   Some pension funds have made big deals about liquidating "politically incorrect" investments to great fanfare, which might make people feel good, but doesn't curb America's appetite for oil or the world's appetite for cigarettes.   The decline in demand for these products will come from the supply side not the investor side.   

These are not start-up companies looking for capital, but established companies paying out dividends.  If liquidating from these investments depresses the stock price (and there is no evidence it does) it just makes the dividend ratio that much more attractive for other investors.

Like me, for example.  Yes, I have minor holdings in Exxon and Altria.  Both pay a nice dividend, thank you very much.   And no, I have no trouble sleeping at night.   We all burn fossil fuels, and if that is going to change, it won't be because the stock price of Exxon went down a dollar.   And people smoke by choice, worldwide.   What will kill off tobacco is the supply-side.   In America, we've made smoking a white-trash endeavor - to the point people are embarrassed to do it.  And no, vaping just makes you look like a hipster jerk.   Cigarettes will die off - even the tobacco companies realize this.  Not investing in these companies isn't what will cause change, though.

Keep your politics and investing separate.   If you think a company is a shitty investment, that is a good reason not to invest in it.   But PC investing?   Probably a bad idea.  It will probably result in a lower rate of return on your investment, but also not really "change the world" one iota.   It may make you feel better about yourself, and maybe make yourself feel superior to others, but that is just self-delusion at work, not to mention huge ego stroking.

5.  Real Estate:  People are already forgetting about the Real Estate meltdown of 2008.   Many tell me the bubble of 1989 never happened.   And others, while acknowledging "problems" in the economy around late 2008 and early 2009, tell me (with a straight face) that these were caused by Bill Clinton and President Obama.

People live in denial.  They want to live in an alternate reality.  And those who fail to perceive reality end up screwed, every time.

The reality of the 2008 meltdown was that a lot of schmucks got into real estate just as I was getting out.  I perceived that real estate was far overpriced, as no one could buy a rental property and rent it out at a profit unless they paid cash for it - and even then, their rate of return would be paltry.   I did the math and sold.

A lot of small investors - friends of mine - did the opposite.  One bought condos and didn't bother renting them out, but instead assumed that like Elvis Collectible Plates or Beanie Babies he could just "hold on to them" and they would double in value in a matter of months.

Another had some luck with this buy-and-flip mentality, which illustrates the problem.   During a bubble, just like during early stages of a Ponzi scheme (same thing, really) the "early investors" cash out and make out big - which encourages others to invest.

When I sold out and told people how I was making money, they said, "Gee, I should get into this!" - not realizing it was too late.   Yes, I should have kept my mouth shut - I caused the bubble of 2008!

Amateurs get stung in Real Estate a lot.  And this starts with their principal residence which they think is an investment and not just a place to live.   A house is an expense, not an investment, and as I have noted before, it can be a good deal if you stay there a long time, don't over-improve it, and then cash out some day.   You may get back all the money you paid in over the years, nothing more.   Better than renting, but hardly a big "investment".

6.  Gold and Other Collectibles:   The lower classes love things like Elvis Plates, Beanie Babies, and Gold. Yes Gold - it is no different than Beanie babies.  You may think gold is special or in limited supply, but it is still subject to the laws of supply and demand.  When the price goes up, people start digging for it, in the ground and in your grandma's jewelry box.   Poor people get caught up in other sketchy "investments" that make no sense, such as pyramid schemes and BitCoin.   BitCoin may be a great way to launder your drug money, but as an "investment" it has a rocky, rocky history.

The problem for the plebes is that they tend to buy this crap after it has already gone up in value.   I received a 5-gallon  pail of ugly little bears from a friend who bought them as "collectibles" and then gave them away when the market crashed.  I sold them on eBay for a few dollars each - about what they were worth.  Collectibles in general are just crappy investments.  In fact, they are not "investments" but just junk you buy.  And you can't make money buying things, period.

And yes, this goes for collector cars, too.

Most of these sorts of things are not "investing" but gambling - gambling that someone else  will perceive the value of these things to increase, and thus pay you more for them.  The problem with this is twofold.  First, the values generally do not go up much.  Even when gold "shot up" during the recession, it really didn't do better than the stock market unless you timed your trades and bought gold low and sold high and then bought stocks low.   Without a working time machine, this is impossible.   You also have to hope that "a greater fool" than you will buy the thing in question, and the great fool shortage of 2008 showed how that can backfire.

The other problem is investments are things that actually make money.   I own stock in Exxon not because I think someone is collecting the stock certificates and someday they will be rare "collectibles" or that somehow the stock has an "inherent value" because of its rarity - that is the collectible mentality.
Rather, I realize that the company, using hundreds of thousands of employees and billions in assets, is pumping oil out of the ground, refining it into gasoline and selling it to the public.   They make a profit and create wealth by taking raw materials, invested capital (machinery) and labor to produce something worth more than the sum of its parts.   I use Exxon as an example - it applies to any profit-making venture.

Collectibles, Gold, and Bitcoin, on the other hand are merely things you hope increase in value based on perception - which is one reason people hype the snot out of these things to increase their perceived value.   They will never earn profits or pay dividends or even pay taxes or pay employees.   Do you see the difference between buying inert objects and investing in enterprises?  Most do not.

Now granted, there are people making money at these things - and making things.  The company making collectibles makes a profit and pays shareholders.  The people buying the product do not earn money.  The mining company makes a profit converting ore into gold (much as Exxon does, and yes, oil is considered a mineral).   The people running bitcoin exchanges make money converting currency and taking a percentage off the top.   The folks who hold bitcoins only make money if the perception of their value increases - again, something hype helps sell.

Merely buying and holding objects is rarely - very rarely - a profitable venture, and even then, only by happy accident.  Perception-based investing is not really investing at all.

* * *

So how does the "little guy" make money investing?   Well, if by "making money" you mean making millions overnight, that just ain't gonna happen.  Believe it or not, I get e-mails from young people (mostly young men) asking me how to make a lot of money in a short period of time.  They clearly don't read my blog.   They are convinced there is a "secret" or "system" out there to make wads of cash with no work, no labor, and no investment. 

If there was such a "secret" do you think I would ever tell them?  Of course not - it goes without saying that such secrets don't exist, and if they did, telling them would make them no longer secrets, and thus dilute their value down to nothing.   And once more than one person knows such a "secret", everyone would know, and thus that is why there are no such secrets.

And sadly, small investors fall for schemes and seminars selling "secrets to investing!" or prosperity theology, or how to buy ugly houses or timeshare seminars - or est.   The plebes think that life is just a series of "hacks" to learn, and you spend enough money, people will clue you in on the secrets of life.

It really isn't that simple - but actually simpler.  The secret is there is no secret.   Work hard, save money, invest it wisely, live within your means, accumulate wealth over time.  Bam.  That's the big secret, here for your, free of charge.

But since you didn't pay for it, you will not value it, and certainly, it can't be the right answer, can it?

Elio Motors Unwinds

It was never going to happen, but a lot of people apparently put down deposits and bought stock.  Was this a scam from the get-go or just someone's wet dream gone wrong?

It took years, but it seems that Elio motors is finally going bust - but not before taking tens of millions of dollars in deposits - some "refundable" and some "non-refundable" as well as selling tens of millions in stock over-the-counter, taking millions from investors, and borrowing millions more.

By the way, if you have a "refundable deposit" you might not get a refund if they go bankrupt.   You are a creditor, and if the company goes bankrupt, you have to stand in line behind a lot of other people.   With about $100,000 in the bank and millions in liabilities, the company is basically insolvent at this point, unless it can attract a whole lot more investment in a very short period of time.

As I noted before, it can take years and years for a failing company to go bust - leaving people to believe in the interim that the company is sound and solvent.   Radio Shack did a slow-motion keel-over that took nearly a decade.   Sears/K-Mart and J.C. Penny are going through it right now.  Sears isn't going to bounce back as the nation's next great retailer - everyone knows this because retail in general is dead, other than Wal-Mart.   Wal-Mart is where America shops today, not Sears.  And this isn't likely to change.  And unlike Sears, which abandoned its catalog at the dawn of online retailing, Wal-Mart is jumping in with both feet to take on Amazon and eBay.   Wal-Mart knows how to survive.

But getting back to Elio, the company has been in a slow-motion crash for years now.  You could do a lot of finger-pointing on this one.  The idea made no sense in a market where gas was cheap.  If three-wheeled cars are not popular in countries where gas is $5 to $10 a gallon, why would they be popular in the land of $2 gas?  It simply makes no sense whatsoever from an engineering or marketing standpoint. 
As I noted in an earlier posting, you can buy a nice used four-door Corolla with air conditioning, air bags, and a nice stereo and trunk for about the sticker price of the Elio - an unrealistic sticker price, by the way, that they never could have made manufacturing a niche product at low production levels.

Several odd decisions delayed the introduction of the car - perhaps intentionally.   Rather than purchasing an engine from an existing manufacturer, they decided to build their own - arguably the most difficult part of car manufacturing.   This gave them an excuse to say the project was delayed for yet another year - or more - but for no apparent real logical reason.   For a niche manufacturer, developing your own engine would be a ridiculous expense.  The engine was never produced in any volume - nor were any of the cars.

Was this a scam?  If so, who profited from it?   It is hard to say if it was a "scam" or just poor planning.  But a lot of people made money on this.  For starters, Mr. Elio.   He got paid for years and years as "CEO" of this company, making $250,000 a year, according to the annual report.   He and the other employees took in millions over the years in salaries, so it was a good ride for them.  Let's hope they banked some of it.

Speaking of annual reports, it was the most bizarre I have seen - reading more like a prospectus or promotional brochure than an annual report.  Most annual reports are columns upon columns of numbers.   This one is mostly text.

The latest filing with the SEC is very fascinating.  For a company that is hemorrhaging cash, has no product and no profit and should be developing its manufacturing base, it spends a lot on advertising and promotion:
For the nine months Ended September 30, 2016 Compared to September 30, 2015.  Operating expenses for the nine months ended September 30, 2016 increased by 289% over the comparable 2015 period.
Sales and marketing expenses increased $2.3 million or 67% as a result of: (1) a $1.814 million increase in social media, television and print advertisements; (2) a $234 thousand increase in press release fees; (3) a $117 thousand increase in credit card processing fees; and (4) a $120 thousand increase in promotion related expenses.
 $2.3 million to advertise a non-existent product.   Notice the amount spent on press releases - the only product Elio seems to churn out with any regularity.

They are actually doing TV buys, according to one YouTuber - buying expensive air time to sell a car that doesn't exist.   Oh, but you can put down a deposit!

Maybe media buys should wait until there is product in the pipeline?

They have been rapidly ramping up engineering expenses in the latter part of 2016, but the ratio of actual development dollars to promotion and advertising is somewhat alarming in my mind.
For the nine months Ended September 30, 2016 Compared to September 30, 2015.  Operating expenses for the nine months ended September 30, 2016 increased by 289% over the comparable 2015 period.
Engineering, research and development costs increased $16.9 million or 1609%.  This was a result of: (1) a $5.9 million increase soft tooling and expenses related to the prototype builds for testing and validation purposes; (2) a $10.2 million increase for ongoing engineering, design and development; and (3) a $525 thousand increase in payroll and payroll related expenses due to an increase in engineering and development staff.
One wonders why it took so long to ramp-up these engineering expenses.  If $16.9 million represents a 1609% increase in spending, it means they were spending very little before.   And this is just for building yet more prototypes and "soft tooling" - not for setting up a manufacturing assembly line.

Is this a "scam"?   Well, that is a hard word to parse.   Like with Tucker, so long as you have a product and a business model, you are a legitimate business.   If your business model sucks and your product is no good, it makes no difference - the investors, dealers, and people making deposits have to use their own judgement to determine whether or not to part with their hard-earned cash.

Bear in mind, you can file a prospectus with the SEC that states, in so many words, that "the goal of our company is to sell a lot of stock and then pay ourselves generous salaries and maybe, if we get around to it, sell some sort of product or service and maybe make a profit."   You could do that, and not get sued, because you disclosed this all ahead of time.   So no, Elio isn't a "scam" in that they have said out loud in their SEC filings, the extreme challenges they face, the debts they owe, and how much they are paying themselves.   Caveat Emptor.   People "investing" in Elio stock aren't investing at all, but dreaming - the subject for another posting.

A "scam" would be where they took money from people and had no real intention to build the car, just take the money and run - and did not disclose their financial condition to shareholders.   This can be hard to prove, as in the case of Tucker, as people can claim they were using "best efforts" to make the product, but that the market shifted or they merely misjudged the market.  All of that is perfectly legal, because that is how businesses work.  It is incumbent on the investor to fathom whether their business model makes sense.

So scam?  No, not that any other startup that goes belly-up leaving shareholders and creditors holding the bag while executive walk away with huge salaries is a "scam".   Was Solyndra a scam?   A lot of people made money there, in its brief existence.   They misjudged the market and didn't anticipate cheap solar from China.   That's the story, anyway - a story told on a daily basis in Silicon Valley.

What sets off red flags in my mind is that they are using unusual ways to raise money.   They used just about every way you could - private equity, loans, selling stock, and taking deposits.   This last one is troubling to me, as the people putting down deposits on cars that don't exist are not "investors" in the company, but people wanting to buy a product.   There is little oversight in this method of raising money - no prosectus or legal standards of disclosure to adhere to.  It was the same unorthodox method Tucker resorted to, which eventually landed him in court.

You would think they would have done an IPO - a real IPO - from the get-go and raise hundreds of millions in cash, rather than ask people for deposits.   The deposit thing is a real red-flag to me.   Never put down a deposit on something that doesn't exist.   Don't waste your time with "crowd-funding" either.

Do I feel sorry for anyone who put down a deposit or invested money in the stock or the company?  No, not at all.   I've read postings by die-hard "believers" online that somehow their lives will be changed forever if they had an Elio to drive.   I might suggest they just buy a Chevy Sonic or other small car instead, if they want to be punished every day on the way to work.   Religion and investing - or car-buying for that matter - simply don't mix.   You can't use political beliefs as an investment tool - again a subject for another posting.

You see, getting 84 miles per gallon - even if it could be done (and I am skeptical about that) doesn't save a ton of money.   At $2.50 a gallon, if you drive 15,000 miles a year, you'll spend $446.43 on fuel.  If you buy a regular small car getting 30 miles per gallon, you spend $1250 a year a savings of only $800 a year.   That might sound like a lot, but it is not really enough to justify the sacrifice of having a very limited-use car.  As gas mileage increases, the savings fall off, to the point where each increase in miles per gallon results in a smaller and smaller savings.

This Facebook Page is making the call that it is an out-and-out fraud - a pump-n-dump stock scheme.  One does have to wonder where all the money is going - tens of millions of dollars for "research" and advertising and all they have to show for it is a few prototypes, if in fact it is not just one car.   You can build a kit car for $20,000 - why is the Elio taking so long and costing so much to build?   Why has absolutely no work been done at the Louisiana factory where they are supposed to be built?

The problem is, as I noted in an earlier posting, the media loves a good press release with lots of eye-candy pictures and videos - and that is one product Elio has no trouble delivering.  Also, major media outlets don't like to say things like "lie" or "scam" or "fraud" for fear of being sued - they are deep pockets and attractive targets.  So they waffle and say things like "controversial" or "some people allege" and so forth, which takes the edge off reporting.

The faithful read this and think, "well the naysayers are a bunch of sourpusses, that's all!  I'm putting down a deposit today!"   Deposits of up to $1000 it appears.   According to one site tens of thousands of people have put down deposits.  Ten thousand times a thousand is ten million dollars.  That's a lot of money to make not selling a car.   Of course, we don't know how many put down deposits - this site says 40,000 people.  And it is not clear at what level their deposits were.  We are talking tens of millions of dollars here, potentially - in addition to the amount raised in the stock offering

From the SEC filing above:
Through September 30, 2016, we have $25,970,200 in reservations, an average of $577,116 per month.  Of this amount, $679,415 was held at September 30, 2016 by credit card processing companies as a percentage of non-refundable reservations.
In addition to this reservation money, the money raised through the stock offering, the money obtained from investors, the SEC filing shows millions in unpaid loans that have been deferred well into 2017.

The question I have is this:   Where the hell did all the money go?   By my counting, they have spent over $100 million dollars on a prototype that you could probably have a motorcycle shop throw together in a month or two.  If it takes this much to develop a prototype - which they hope will achieve significant "milestones" soon (not after eight years???) how much will it cost to develop tooling for the factory and to start production?   You can't do that on a shoestring - suppliers will want to be paid.

And of course, we don't know how many insiders have sold stock and cashed out of their investment, at the expense of new shareholders.

We won't know until it goes belly-up whether this was merely wild dreams gone wrong, an intentional scam on the part of the principals, or maybe a wild dreamer who was co-opted by a scammer, like the air-powered car guy was.

One thing is for sure.  Elio Motors has been around for eight years now - an entire product cycle in the automotive industry - with absolutely nothing to show for it but a Facebook page, a stack of press releases, a prototype or two, and a lease option on an old GM factory.

At what point do people finally break down and realize that "introduced next year!" is a phrase being used for several years now - and each year, the company burns through more money and gets no closer to production.

I think that point is coming soon.

Only then will some intrepid reporter comb though the wreckage and figure out where all the money went.   Only then will we know the real story.  My gut reaction is that it will be a fascinating story and people will say, "why didn't we see the warning signs sooner?"

If you want to buy a car, put down your money on a car you are standing next to, not someone's pipe dream!

Why Hillary Lost - Organzing, or Lack Thereof.

People are driving to Washington to protest a Presidency.   Where were they six months ago?

During the election, I was talking with some friends here on the island and said, "You know, we should have some sort of fund-raiser for Hillary - sent out invites, have a barbecue in the back yard, hand out t-shirts and hats and yard signs and bumper stickers and get people to donate to the campaign."

And when I said this, their eyes glazed over and they said, "yea, that would be nice" but nothing ever came of it.   Of course, some of these folks actually thought an aging socialist from Vermont was a better candidate.  Anyway, Hillary lost - she decide that getting "big donor" checks was better than organizing and getting smaller donors like Obama did.   And she decided to run on an anti-Trump platform not a pro-Hillary one.   And she lost.

She did prove two things.   First, big money isn't all that big as people suggest.   She outspent Trump by more than 2:1 and lost.   So much for Citizen's United.   Second, she proved that negative campaigning only works so far.   When you go too negative for too long, people associate your name with attacks, and not anything positive or any platform.   If you were to ask me for the fundamental planks in Hillary's campaign platform - even one - I could not tell you.   And this is someone I voted for!

You can't win elections by having people vote against the other fellow.   People will simply not vote which is what happened in several key places.

Anyway, these same friends who couldn't be bothered to organize for Hillary drove 12 hours to Washington to protest Trump - sound and fury signifying nothing.   Protests often don't accomplish a damn thing, other than to make your political position look ludicrous.   Think about the 1968 Democratic Convention and the accompanying protests and riots.   What did that accomplish other than to hand Nixon the Presidency?   The Democrats were divided and refused to compromise, because the younger generation wouldn't rally behind anyone whose political views aligned with theirs 100%.

And the same thing happened this time around.   Young people - God bless 'em - are idealistic and naive.   I hear often from young people that they refuse to vote for any candidate whose views do not mirror theirs 100%.   As a result, as a group, they tend not to vote and are not a political force to be reckoned with.   Old people vote, which is why they get Social Security and Medicare.   Young people don't, which is why they are stuck with student loans, a 21-year-old drinking age, and fighting in the nation's wars.

They didn't "get" that this division between Hillary and Bernie would cost them the election - and many of them pouted and said, "Fine!  If I can't have it my way, then America deserves Trump!"  An this echoed similar phrases than rang throughout history, when leftists divided themselves over fairly trivial issues and allowed fascists to win.  Like Wiemar Germany in the 1930's.

If Democrats want to win, they need to take a page from Uncle Joe Biden's playbook:
“My dad used to have an expression. He said, ‘I don’t expect the government to solve my problems. But I expect them to understand it,” Biden said.
“I believe that we were not letting an awful lot of people — high school-educated, mostly Caucasian, but also people of color — know that we understood their problems.”
There’s “a bit of elitism that’s crept in” to party thinking, he worries, setting up what he sees as the false impression that progressive values are inconsistent with working-class values.
“What are the arguments we’re hearing? ‘Well, we’ve got to be more progressive.’ I’m not saying we should be less progressive,” he said, adding that he would “stack my progressive credentials against anyone” in the party.
“We should be proud of where the hell we are, and not yield an inch. But,” he added, “in the meantime, you can’t eat equality. You know?”

He also distinguishes what he describes as the middle-class agenda that President Obama has put forth from the more populist, anti-Wall Street message that helped power Bernie Sanders’ rise in the Democratic primary.
“I like Bernie,” Biden said, adding he agrees with the Vermont senator on many issues. “But I don’t think 500 billionaires caused all our problems.”
It was election eve, and Biden had just concluded the last of 83 campaign events he would headline on Hillary Clinton’s behalf. Something once again didn’t feel right.
Stepping off the stage after an at-times sentimental appearance in northern Virginia with Sen. Tim Kaine, the man he hoped would succeed him, the vice president shared a nagging concern with aides: Any enthusiasm among the crowd of several thousand was not about the party’s presidential nominee.
“You didn’t see any Hillary signs,” Biden recalled. “Every time I talked about Hillary they listened. But …”
Joe gets it.   The Democratic party didn't need to go further to the Left, but rather needed to capture middle America - the "Joe Paycheck's" of the world.  The folks in the "flyover States" who feel no one is talking to them or about them.

As I noted in earlier postings, my stinking hippie brother used to blather on about Communism and "the workers" as if he understood what it was like to work in a factory - or indeed, even work.   I tried to explain to him that if he came down to the plant, the 'hardhats' would stomp his hippie ass into the ground.  They might want socialism in the form of union benefits, but they don't subscribe to Communism, which they viewed as the enemy.   And they certainly didn't view pot-smoking hippies as their allies.

This time around, the middle-of-the-road factory worker was turned off from the Democratic party largely due to the far-Left issues that the Democrats seemed to embrace and label themselves with.  Your typical working class guy isn't going to vote Democratic if he thinks it will make him gay, and I am quite serious about this.

Much ink was spilled and protests (again ineffectual) about Trump talking about "grabbing pussy" and how awful that was.   I have a clue for you - that's how men talk when women aren't around.   Guess what white men say when blacks aren't around?  Or the Jews?   You get the picture.   Men are pigs.   So when the "Trump Tapes" came out, most men might decry this in front of their wives, but high-fived each other when the womenfolk were absent.

The Democrats have to come up with a platform that is more centrist - that a vast majority of Americans can sign onto.  We can win elections by making all white men feel bad about themselves - it simply won't work.  And it is not that they have to abandon any segment of their constituency, just not feel so obligated to be politically correct by pandering to small minorities of it.

The fascinating thing about the gay-marriage issue was that a lot of centrist Republicans were relieved when the Supreme Court weighed in on it.   Since the Supreme Court took the flack, they could retreat and say "the court has spoken, move on".  Only the real right-wing nuts from Alabama continued the fight (and may still continue it).   No politician wants to get caught up in sticky social issues - you simply can't win no matter what you say.   Staying on the sidelines as much as possible is the best strategy - taking action only when it really counts.

Promoting more centrist issues is the first step - and maybe convincing the leftists voters that getting a candidate elected is better than losing elections is the step-and-a-half.   Although, in reality, it is quite possible to win elections without the Bernie contingent.  When you pander to the far-Left, you lose the center - guess where most Americans actually live?   Not Vermont.  

But the second part is just as important and related to the first - the Democrats have to do a better job of organizing on a block-by-block level, and not from 10 miles up in space using a telescope, but on the ground, with block captains, precinct captains, county organizers, State organizers, and so forth.   And all of this has to be in place years ahead of time not months in advance.

Hillary made a big deal about how her "ground game" was better than Trump's because she opened more offices in various States than Trump did.   But hiring a lot of political professionals and renting storefront space is not the same as organizing.   Hillary did not have much of a game in terms of going door-to-door to get out the vote.  There were no Hillary yard signs, no t-shirts, no bumper stickers, no hats, no pins, no nothing.   "Hillary for President" pins will be rare collectibles on e-Bay one day because they already are very scarce!

In the old days, they called this "the machine".   Harry Truman was elected to the Senate as a result of the "Pendergast Machine".     And while Pendergast was corrupt, maybe machine politics did serve the needs of constituents from time to time.   In machine politics, each County, City, and Precinct is divided up and organized on a block-by-block level.   The block captains make sure people get out to vote, but they also listened to the needs of the residents and passed this information upward, not only so that the Politicians would know which issues to address, but also to know when to intervene on behalf of the voters.   In a way, it worked like the old Mafia dons, who won the hearts and minds of their people by solving their problems and maintaining order.

Today, the machines are gone.   Instead, the parties use polling data and top-down management to solicit donations (mostly from large-pocket donors) and then hope to persuade us to vote using television commercials which an entire generation doesn't even watch.  It is all about strategy - what they can say that will get out the vote in a "swing state" and then just forget about all the other States and count them as "in the bag".   It was a strategy that maybe worked in the 1980's and 1990's, but started to fall apart in this age of the Internet.   Politics became impersonal and we were being sold candidates rather than elevating them ourselves.

Maybe this needs to be more of a ground-up movement, rather than a top-down one.  Maybe, if Democrats want to win elections, we each need to figure out who lives in our neighborhood and whether they are inclined to vote Democratic, and then go door-to-door polling people, handing out brochures and campaign swag, getting donations, and getting out the vote.   And no, results won't happen overnight, it could take years - even a decade.   But we need to build an organization from the bottom up, not top down.

Just a thought.  It won't happen, of course.   People only vote when they sense things are going horribly wrong, which is why our politics are so polarized and swing from Left to Right.

Friday, January 20, 2017

Why Urban Legends Affect You - Even If You Don't Believe Them!

When people believe in Chemtrails or a fake moon landing, we all suffer as a consequence.

Another beautiful day on retirement island.  We load up the buggy and go to the pavilion, light a charcoal fire and grill hamburgers.  The air is warm - 72 degrees, and the sky is bright blue, with contrails from jets overhead.

I mention to Mark that some young people today think these are "chemtrails" that the government is using to spray us with chemicals.   Mark says, "I hate that shit, don't bother me with it.  Who believes that crap?"

He assumes, wrongly, that because he doesn't read about this trend online and isn't sucked into it, it doesn't affect him at all.   But it does.

Of course, you have to ask yourself, who came up with this shit to begin with?   It is another aspect of our Cargo Cult mentality - some bored teen stoned on pot who made it up?   Or Russian troll farms trying to sow dissent and distrust of the government?   Obviously, this sort of nonsense works in their favor.

Or is it just some fat computer turd on 4-chan who wants to start an internet rumor and see how many people will believe it, just to make his sad, lonely life seem more relevant?   That is also possible.

The upshot is, though, that all of these urban legends do degrade our society in that they create a feeling of paranoia and depression in the populace.   If people grow up believing in conspiracy theories, they are not people who will be there to defend our country when it needs help.   In fact, they will be the ones actively trying to tear it down.

Fake news isn't funny or stupid.   It has a purpose - an evil purpose - to destroy.   Whether unintentional or designed by foreign powers, it makes no difference.   When people believe in irrational things, bad things can happen, as the last election illustrates.

I guess to me, what is sad is that there are people out there today dumb enough not to know what "dew point" is, or how condensation works.   Kids who never saw "12 O'Clock High" and realize that aircraft engines produce moisture in the combustion process - and that moisture in a sub-zero environment will condense into vapor trails.   And that this has been going on since aircraft first flew high enough to do so.

B-17's over Germany, leaving vapor trails.   These trails were like a giant arrow, pointing out aircraft to German anti-aircraft gunners and fighter pilots.  Sadly, they are an inevitable consequence of burning fossil fuels at high altitudes and cannot be turned on and off at will.

And while you might not believe in urban legends, chances are, you believe in similar idiotic things - we all do, you know.

Again, one reason people believe in urban legends is they are ignorant, and want to feel smarter and superior to people who are actually smarter and superior than us.  As I noted before, you can feel smarter than a rocket scientist, if you posit that rocket scientists don't exist and the moon landing was faked - or that rocket science was merely stolen alien technology (in which case, aliens have pretty primitive technology!).

In the financial sector, many people believe in similar types of legends.   They don't understand how the stock market works, so they say, "It's all rigged!" and then instead of investing, buy a new motorcycle.  They are using their urban legend as an excuse to justify poor financial behavior.

Or Joe Blow who can't get ahead at work, just gives up and says, "all corporations are evil and run by the Illuminati!"   It isn't his fault he is dumb, drunk, and shows up late for work.  It is all a conspiracy of those in-the-know and he will never be them, so he might as well not try.

You see how this works - weak thinking.   You come up with excuses in life for not trying, because it is convenient thinking.

Why bother learning all that "science stuff" when you read about chemtrails on the Internet?   Doctors don't know anything about medicine - I saw a documentary on YouTube about how vaccines cause Autism!  I can be the "smart Mom" now - who cares enough about her kids to let them get Polio!

Or take the survivalist or paranoid conspiracy theorist.   Are any of these people happy, successful, or wealthy?  Of course not! The Illuminati keep them down!   Well, that's their weak-thinking excuse anyway - an excuse that allows them to avoid examining their own lives and actions too closely.

Sure, you could argue these folks are nuts and are only harming themselves.  But when enough people just give up on life and start believing whatever is convenient to them, our society will inevitably fall apart.

When people believe they can vote themselves a raise, Democracy fails.

We need to shout down these urban legends and debunk conspiracy theories and let these folks, know, in no uncertain terms they are being idiots.   It is easier to just walk away and not say anything when someone blathers on about some conspiracy or urban legend.   But you are doing society a favor when you say, "That's a ton of bullshit and here's why...."

And if that doesn't work, just say, "I'm really sorry, but I don't hang with morons."

Because when you tolerate this sort of shit in your life, you enable it.  When you give it the mantle of "difference of opinion" you validate that it is in fact a valid workable opinion.   And that means you acquiesce to this nonsense, out of fear of making a scene or pissing someone off.

Walk away from nut-jobs.   If you can't change their mind, they will just drag you down.

And maybe if they lose enough friends, they might get the message!

You're So Brave! (Not Really)

"Rescuing" a dog from the shelter is not nearly as exciting as it sounds.

Our Greyhound was an amazing dog, and they do make excellent pets - very clean, easy to get along with, and loving.  It helps, of course, as with any dog, if you are home all the time.   Dogs of all sorts go a little nuts of left alone for hours a day.

A funny thing, though, when we'd meet people, they would say, "Oh, did you rescue her?" and I was never comfortable with that phrase.  I'd reply, "yes, we adopted her at the track" because that is what we did.   You go the track, pay $250 and they give you a dog.

"Rescue" implies some sort of Indiana Jones kind of deal, where you swing in on ropes and snatch up the dog from the clutches of evildoers.   It really wasn't that dramatic.

But people wouldn't just leave it at that, telling us what "heroes" we were for rescuing our dog and what a great thing we did, and so on and so forth.   And I get it, they are trying to be nice and all, but frankly, I don't think I deserve "hero" status for it. 

Being a hero is like when you dive on a live grenade to save your chums in combat.  That sort of thing.   Adopting a dog is a nice thing to do, it doesn't make you a saint.

Similarly, when we got married, we got a lot of well-meaning congratulations - again with the "you're so brave!  What a great thing to do!' as if we had split the atom.   And again, I hate to rain on well-wishers, but the only reason behind it was so that we would be recognized by the IRS, not by the ladies down at the Baptist Church.

With regard to the latter, I don't care what they think - and they are entitled to their wrong opinions, of course.   Like most Americans, I just want to be left the hell alone - by other people and by the IRS.  Bravery didn't enter into it.

This same sort of reaction accompanied Bruce Jenner and Bradley Manning when they decided to "come out" as transgender.   "He's so brave!" they'd say, or "She's so brave!" and laud someone for what was, is, and should remain, a highly personal decision in life.  And no, I don't think bravery is involved at all.

Bravery is not doing something that is easy, convenient, or beneficial to yourself, even if it may be somewhat difficult or society may oppose you.

And while it is nice that people are well-wishers, we should save the term "bravery" and "hero" for people who are really brave and do heroic things.

Transgender Hero?

If I was Bradley Chelsea Manning, I would be totally pissed that they used such a shitty picture of me - with 5 o'clock shadow no less!   Is someone who gave away top secret documents a "hero" for wanting a sex change?

There is a reason Donald Trump is President today.   Our country lurches from one extreme to another, and this time, it is the Republican's turn - although not with the candidate they really wanted (they didn't have many good choices, let's face it).

Every eight years or so, a Democrat gets elected President.   And the leaders  say, "Hey, let's be liberal!" and people say, "Yea!"   And then the leaders say, "Let's be really Liberal!" and the people say, "Well, OK, I guess so." And then the leaders say, "Let's get crazy Liberal!" and the people say, "enough already!" and elect a Republican.

The Republicans then say, "Let's be conservative!" and people say, "Yea!"  And then the Republicans say, "Let's get REALLY conservative!" and people say, "Well, maybe I guess so..." and you see how the pattern repeats again and again.  We are whipsawed between two extremes.

And one of the extremes of the Obama administration was their support of some very left-fringe issues that were certain to galvanize the Right.    And for some reason, "transgender" issues topped this list in the last year or so.  Under the Obama administration, sex-change operations were to be provided for under Obamacare and also provided to military personnel and even some prisoners.

Most Americans, myself included, don't really care one whit whether someone wants to get a sex-change, but has problems with our tax dollars or insurance dollars paying for it.   This is not a matter of bigotry, but money.   When elective surgery is paid for by the government, our insurance rates and taxes will increase.   There has to be a line drawn somewhere, and being transgender is not an "illness" that requires surgery.

I feel the same way about breast implants, or free Viagra, or the over-prescription of opiates, which is not only costing a lot of money but killing off 15,000 people a year.    Funny thing, you say you are against that, and people call you a "heartless bastard" because you have no sympathy for people in pain.   Go figure - people are dying in droves, and you are the insensitive one for saying maybe something should change.    The point is, we need to rein in medical costs, and not everything that it would be nice to do is affordable to do.

Nevertheless, this argument is shot down as "bigoted" without any discussion being allowed.

The issue didn't stop there.  President Obama, through the education department, mandated that secondary schools allow transgender students to use the bathrooms and locker rooms of their choice - addressing a burning issue that affected millions dozens of Americans today.   This did not play well in more conservative parts of the country and some folks asked whether it was appropriate that young children should be exploring gender roles at such early ages - or whether public schools were the place to be exploring "gender identity".

Again, we were told that discussion was not allowed and that we should be praising these kids for their "bravery" - and anyone who felt otherwise was a bigot.   This also caused some head-scratching.

The latest thing is the pardon of Bradley Manning, who has had his name legally changed to Chelsea Manning and has declared himself transgender.    I am not sure what being transgender has to do with his situation -  a situation he created by releasing hundreds of thousands of classified documents to Wikileaks.   By the way, that is a crime - a pretty serious crime, in fact a capital crime.

We are told that Manning had emotional problems related to his transgender issues and that was one motivation behind the release of these documents.    If you read the record, you see that it is one of someone who has had a troubled youth and adolescence, and was something of a loner - and in trouble with authorities before the release of the leaked material.

Sadly, this plays into the stereotype of transgender people as being mentally ill or unbalanced - a stereotype that I would think the transgender "community" would want to walk away from.   But instead, some are positing that Manning is a "hero" of some sort, which again, has a lot of heads scratching.

Some are claiming that the cables and videos released by Manning are a searing indictment of the Iraq war.   Unfortunately, the videos really prove nothing of the sort.  Wikileaks heavily edited one video (by selectively cutting out portions and then time-shift dubbing the audio track) to produce a "Collateral Murder" video that made it appear that US Soldiers were gleefully shooting children and innocent bystanders, when in fact they were attacking "insurgents" with a grenade launcher.   Some reporters foolishly decided to "embed" themselves with these insurgents, and some civilians foolishly decided to come to their aid - all things you really can't make out from a helicopter hovering a thousand feet away.

The balance of the material were State department cables which, while embarrassing, did not really prove much of anything, other than like with Podesta's e-mails, people say what they actually think of one another when no one is listening.   Act shocked.

So what's the big deal?   Why was he sent to jail?   Well, the problem is, top secret information is top secret information.   And if we leave it up to individual soldiers to decide what should be released or not, top secret quickly becomes meaningless.   The law is pretty clear on this, and there is no question it was broken.

Calling someone who commits such a crime a "transgender hero" will have a dirty halo effect for transgender people.   You have to choose your heroes carefully.   The fellow in Missouri who tried to wrestle a gun from a Police Officer was posited by BLM to be some sort of martyr.   But as it turned out, he was a thug, and the shooting was justified, and I know this because President Obama himself told me so.   It doesn't help the BLM movement to use him as an example of "police brutality" when he was assaulting the police.  You have to pick your heroes wisely.

Some would say, "What's the harm in this?  After all, the motivations for these things come from compassion!"   And maybe that is true, but some things done in the name of compassion or altruism, can end up being very evil - or at the very least, backfire in a big way.

What we are seeing today is the backlash to this - the push-back, and big time by the far-right.   America wasn't quite ready for gay marriage, and that was accepted only reluctantly.   Taking things to their logical extreme ended up pushing the envelope perhaps a little too far.  Democrats keep losing elections by trying to push too far to the Left.   And sadly, people like Bernie Sanders seem to be dominating the discussion in the Democratic Party - a party he is not even a member of!   Their narrative is the mistake they made was not going Left enough.   More head-scratching occurs.

It is hard to say how far back the GOP will try to push things.   Maybe we won't go back to the "good old days" of gay-bashing and closeted living.   But it seems that the advances made in the last few months will be wiped out in short order.  It also will end up hurting, not helping, transgender people in the long run.

And part of this is because some folks are claiming that someone convicted of espionage is a "Hero".

Sorry, but I don't buy it.

Thursday, January 19, 2017

Unsolicited Phone Calls From Microsoft Security

When somene calls you saying you have a problem with your computer, hang up.

Lately, I have been getting dozens of phone calls from various area codes, where the caller hangs up as soon as I answer.   I answer the phone "Bob Bell" and not "Hello" so I think their phone system doesn't recognize "hello" and hangs up, or they think they reached a business and hang up.

When I google the phone numbers, I find other people have gotten these calls as well.  Some are hang ups, but others get an Indian-sounding guy on the line claiming to be from Microsoft and that they have "detected a problem with your computer".

These phone numbers, of course, are just entry points in the grid, from VoIP connections (Voice over Internet Protocol) from India.   They set up a line and start dialing - hundreds of people in a boiler room calling thousands of numbers.   Since long-distance is free, the cost of the phone calls is nil.

These are a scam of the worst sort.   They get ignorant people to download a virus to their computer which allows them to control the computer.   The "technician" then encrypts the hard drive and then tells you that you have to pay a ransom to have it unencrypted.

Or, they tell you your computer has a virus problem, but for a fee, they will fix it.   Of course, the problem with your computer is the program you unwittingly downloaded from their website.

In other cases, they simply say you have a problem - which you don't - and ask for money to fix the problem, which they don't do, because you never had such a problem to begin with.

Many of these latter folks may never even realize they have been scammed.   After all, they gave the nice man their credit card number and he fixed their computer!

Sadly, the folks who need to read this blog entry are the ones least likely to read it.   These are folks who actually believe that Microsoft is monitoring their computer and can fix it over the phone.   They have no understanding how computers or the Internet works - the are primitives in a cargo cult.   And they will get fleeced no matter what.

Ignorance is an expensive hobby!  Gullibility is even more expensive.

Knowledge and skepticism, on the other hand, are profit-making traits.  Sad that more people don't invest in those things.

So long as people keep falling for these scams, people will keep doing them.   In many parts of the world, making even a few dollars a day is considered a good income.  So if you have to call several hundred people to make even one score, it is worthwhile.   Maybe you'll make enough money to save up for a three-wheeled car!   And from their perspective, we are impossibly rich and spoiled (and they are arguably right about that) and certainly won't miss a few dollars here and there - or a few hundred.

We live in a smaller world today.  You can gird the planet in less than a day by airplane.   Long-distance is free, with VoIP lines.  People from far across the planet can interact with you in real-time.   This was not the case not long ago.

The interesting thing is, these folks are very smart.  They figure out early on, who is a "mark" and who to hang up on.   They want unsophisticated, older, dumber people.   So they hang up the moment you voice suspicion, or if it seems like they called a business phone number - hence why they hang up on me.

And in this modern world, they likely will never go away, until phone calls themselves die out.   Already today, most people text or message - even e-mails mark you as a geezer.   No one actually talks to anyone.   And certainly young people never take a call from someone they don't know already.

So ironically, just by answering the phone, you passed the first level of filtration - you are a geezer by definition, as only geezers actually answer their phones anymore.   If they can keep you on the line for more than 30 seconds, they know they have a sucker.  As soon as you say anything contrary, they hang up.

And no, we can't track down or prosecute these people.   Yes, a few of the IRS scammers were shut down in India a few months back.   When interviewed, some of these call-center people marveled at how paranoid Americans were about the IRS - their own government.  In India, tax evasion is a national sport, which is why they recently changed the currency there, to get people to declare their stashes of ill-gotten un-taxed cash.   If you called someone in India and said you were from the tax authorities, they would likely say, "fuck you, come and get me!" and slam down the phone.

Maybe the solution isn't to go after call centers in India, but to change attitudes here in America.   People need to shed this irrational fear of the IRS - and irrational fears of their own computers!

It is "Elitist" to Say People Make Bad Choices in Life?

Does poverty force you to make bad choices or do bad choices force you into poverty?

One argument I get a lot in this blog is that, "Well, it's all very well and fine for your to denigrate the poor, but they have no choices in their lives!   You are being an elitist!"

Elitist is the catch-all phrase du jour for people who don't really have an argument to make, so they attack their opponent.    And in debates, that is the oldest and cheapest game in the book.   I can't counter your logical argument, so instead I will imply that your Mother is a prostitute.  I win.

And in the crazy Post-Trump Twitter world, these sort of "arguments" are winning, sadly.   People can no longer hold coherent thoughts.  No one reads.  Everyone just reads a headline and then goes off. 

But I digress...

The reason I am not being elitist is that I am not sitting in some ivory tower or in some mini-mansion on a golf course, opining about what "the little people" are like, having never met any of them, other than my housekeeper and gardener.  Yes, if I did that, that might be elitist.   But even then, folks with money are entitled to their opinions, and if they can perceive that their gardener is making a shitty choice by paying $25 to cash his paycheck, then maybe they are right, even if elitist.

My perspective about all of this comes not from witnessing this behavior from some far-off platform, but from examining my own behaviors when I was on the ground living in poor neighborhoods as a poor person.

Once I flunked out of college and went to work at a minimum-wage job ($4.75 an hour back then) I was poor, by definition.   I came from an upper-middle-class family (which was one generation removed from poverty) and I witnessed there how the middle-class and upper-middle-class squander huge amounts of money chasing status.   And later in life, when I became wealthier, I would make those same mistakes.   The rich don't take our money away from us, we willingly give it to them.

But what about the poor?  Certainly they don't chase status, do they?  They can't afford it, right?  Well, here's where the irony sets in.   A lot of people who may accuse you for being Elitist for saying things that are common-sense, really have no idea what it is like to be poor.   Many are academics studying poverty through a microscope in the lab.  Others are the "Limousine Liberals" who have an idea of what poverty is like, but no real clue.

The latter are convinced that people are starving to death in America, and thus will do silly things like volunteer at food banks or homeless kitchens.   They think of poverty in terms of starvation, when in reality, in America, the number one health problem among the poor is obesity.   And friends of mine who volunteered at these organizations will tell you that while there are a few "needy" people, a lot of folks will drive to the food bank in a spanking new SUV, or that the neighbors of the soup kitchen will stop by for lunch, simply because it is free - not that they need a free meal.

And people who volunteer with the homeless will tell you they are not all sainted poor (with magical powers, of course!) but rather sad people who have mental health and drug addiction issues who should be helped in an institution or shelter that can help them manage their lives.  Giving them $20 on a street corner, on the other hand, is akin to giving them a loaded handgun to kill themselves with.   Again, the real elitists in the world - limousine liberals who think they know what poverty is - think otherwise.   I was stuck at a traffic light just yesterday while a man in a $100,000 Porsche gave a homeless man $10.   He would have been far kinder giving $10 to a homeless shelter (which would have been tax deductible) and four more cars would have gone through that light (and a homeless man would have one less reason to live on the street and one more reason to seek help from an agency).

What prevents us from having a rational discussion about this, is the charges of elitism and the associated shaming that many on the Left like to use.  "How dare you criticize the homeless!" they say, "Don't you know they have magical powers?  Didn't you read that quote by Gandhi about how a country should be judged by how it treats its homeless?   You heartless bastard!  You Elitist!  I simply refuse to talk with you!"

We don't get much done that way.

A reader tells me of a recent article in The Atlantic that discusses check cashing stores and payday loans.  The fellow is trying to sell a book, and in that book, he makes the point that the poor are not stupid, but making the best choice in a bad situation by using payday loans and check cashing stores.   It is an interesting argument, but by and large, I don't buy it.

The argument the author makes is that it is "logical" for a poor person to use a check-cashing store to cash his paycheck, as he needs the cash right away to pay illegal laborers.   A bank would hold his check for several days before releasing the funds, and thus a check-cashing store is his only option.   There are, however, holes in this story:
"a construction worker who stopped by RightCheck frequently to have his checks cashed, handed over a check for $5,000 for cashing, which required a 1.95 percent fee—$97.50. Servon questions why Carlos would willingly pay such a large fee—plus the $10 tip he leaves Servon"
First, I might note they understate the check cashing charges.  My cleaning lady paid $15 to cash her paycheck, until I put a stop to it (and simply cashed the check for her myself).   That a $5000  check would incur only a $97.50 fee seems kind of low.   That someone would tip their banker is just ludicrous.   If you tried that at a regular bank, you would likely be shown the door.  Tipping a teller is probably illegal.

Second of all, if he is employing people and cashing $5000 checks, he certainly isn't "poor" by any means.   I think what he is doing here is trying not to leave a paper trail by depositing checks into a checking account.   He is living under-the-table and not reporting income, and of course, hiring illegal immigrants and not paying their withholding.   Pretty sweet deal, and the cost of doing business for him is the check cashing store.   And maybe the $10 tip is intended to keep the teller silent on the transaction, should the IRS come snooping.

So, yes, if you are running an illegal business than maybe a check-cashing store makes sense, and maybe that is why so many are in poor neighborhoods where people are operating off-the-books.   But others, like my cleaning lady are not necessarily doing anything illegal (although I strongly believe she under-reported income by not declaring cash payments) but simply do not have a bank account, either out of fear of banks or because they have horrific financial records.   In her case, it was unpaid credit card bills.

For me, as a young man, it was bounced checks, which I wrote to buy beer and get cash for pot, at the local convenience store.  I was making poor choices and a lot of these were due to ignorance, inability to control my own impulses, and of course drug and alcohol use.   The latter we don't talk about much when discussing the poor and homeless, but it factors in, big time.

There is also the matter of normative cues.   At the corner of "Community" and MLK boulevards in our town are a plethora of check-cashing stores, pawn shops, and title pawn loans.   People living in the area might be lead to believe that these are normal places to do banking, rather than the outrageously overpriced deals they are.

I wised up, at least a bit, when a friend suggested I use the local credit union instead.  I signed up, had automatic deposit for my paycheck, and could access my funds through an ATM or by writing a check - provided I did so responsibly.   It took a few years to figure this out - some never do.  

At the Patent Office Credit Union, you never wanted to go there on payday, as there would be a line out the door of people "cashing" their paychecks and then getting money orders.  A person working there explained to me that these GS-2 workers didn't trust automatic deposit, so they got their paychecks in paper form.   They were not allowed to have checking accounts, because in the past, they got them and just wrote checks until they ran out of checks.   So they had to stand in line and get money orders to pay the landlord, the utility bill, the phone bill, and so forth - paying a few dollars for each money order.

This is better than the check-cashing store, of course, but not by much.   What it comes down to is not that they have no other choices, but that they tried the other choices and screwed them up.   Banks want your business, if you have self-control.  They don't want the guy with $17 in his savings account who is overdrawing it all the time.

Yes, these institutions are their only choice only because they made poor choices in the past forcing them into these bad choices today.

The other argument made in the article, with regard to payday loans, was that these "borrowers" could use a lower-interest rate credit card they had (with 20% being lower than a payday loan!) but made the wise choice not to as they knew that a default on a payday loan would not be reported on their credit.

This is an odd and ridiculous argument on a number of levels.   First of all, borrowing money is never the answer to money problems - it just makes you poorer.  And the higher the interest rate you take out, the poorer you get.   And payday loans are a one-way trip to oblivion, or at least bankruptcy.

Second, intentionally taking out a loan knowing you will end up delinquent on it makes no sense at all.  This is simply a poor choice that makes you poor.

But getting back to elitism, the author really doesn't address why these poor people (cashing $5000 checks!) are so poor.  And again, it is not because they are starving to death.  They are not getting a payday loan to buy bread for starving babies.   They are borrowing money in many cases for status.

You see, on the same corner as the check cashing stores and whatnot, is the rent to own bling rim shop  and the rent to own furniture store and the buy-here-pay-here used car dealer.  Don't forget the tattoo parlor and piercing shop!  And no, they don't "need" a clapped-out monster SUV to "commute to work in" - they are merely making bad choices to obtain status among their peers.  They could choose to make different choices.  But they choose not to.

For me, after living a decade or so in marginal living quarters, just "getting by" on my income (but having a hobby car, nevertheless, and spending a lot on weed, beer, and junk!) I decided I wanted more.   I went back to school, sometimes working three jobs at the same time, and eventually moved away to a better place with better opportunities (not to mention lower taxes).   I made different choices and pulled myself out of poverty.   Others stay down.   But it is a choice, in most circumstances.

This does not mean it is an easy choice.   And as usual, there is a Science Fiction story which helps one to understand how people can get trapped in situations like this.

Robert A. Heinlein's Logic of Empire illustrates the problems facing the very poor.   In the story, two wealthy Earthmen argue as to whether laborers on Venus are indeed slave-laborers.  One argues that their condition is akin to slavery - they have no choice in the matter and cannot buy their way out of their onerous contracts.  The other argues that harsh contract terms are necessary to prevent them from quitting on a moment's notice.

They get drunk and place a bet, that they can go to Venus and find out for themselves what the deal is.  They sign on as contract laborers, and.... well, find out that in theory you can work your way out of poverty, but in reality, it is damn difficult to do.  The fact they all get addicted to narcotics within a week of landing there is part of the problem.

And that story reflects the reality of poverty in the United States.  Yes we all have choices in these matters, but actually making these choices is damn hard to do.   Having the wherewithal to give up on smoking pot and drinking beer - and walking away from friends and family members who did - was not an easy task.  For many, this emotional decision is hard to make.  When you are immersed in a culture where poverty is the norm, it is hard to visualize a situation so unlike your own.   So you assume that people who are rich are "nothing like you" and somehow lucked out by inheriting money or whatever.

Read that story (the link is to a free online copy of it).  It sort of illustrates the problems involved.

And the author of the Atlantic piece is partially right - we should offer better deals to the poor, so they are not exploited.   The problem with that argument is, who pays for these deals?  Banks did not walk away from serving the poor out of racism, spite, or fear.  They walked away because they lost money on poor customers - lots of money.

The upshot, however, is this - pining for a change in society's rules is fine and all, but not likely to happen overnight - if it happens at all.   If we paint ourselves as helpless victims, nothing ever changes.   If enough people stopped patronizing check cashing stores and payday loans, they would go away.

On an individual basis, you have to decide what your choices are in life.   It isn't easy, but walking that extra block to a real bank, and then managing your funds down to the penny will result in a far better outcome in your life.

It ain't easy, but rewards are there for people willing to do hard things.  And do we want to reward those who don't?