Dreams of Avarice

Mitt Romney claims that we ordinary folk someday hope to 'make it big'.  Without some sort of concrete plan, though, making it big is just a pipe dream.

The other day in Florida, Mitt Romney made an interesting argument about "class warfare."  He said that from the Democratic point of view, people who drive through a rich neighborhood and see all the fancy houses are resentful of other people's success.  But from his (Republican) point of view, the poor folks who drive through those neighborhoods think, "Hey, those folks are successful, and some day, I'd like to have a shot at that as well!"

Or something to that effect.  His view of the middle-class and the poor is that we are strivers who all want to be like him someday, run a Vulture Capital operation like Bain, and wear funny Mormon underwear.

Scary thing is, he's right.  Well, except the underwear part.  Many folks who are middle-class or poor, secretly harbor dreams of avarice - that someday, they will "strike it rich" and become as wealthy as Mormons.  How this is supposed to happen, of course, is a little vague.

You see this all the time in the Media, from way back - even the old movies of the early days had story lines where folks dreamed about striking it rich.  Heck, this even goes back to Dickens.  But at the dawn of the modern era, we saw this story line repeated again and again.  For example, in the Honeymooners, where Ralph Cramden tried one "get-rich-quick" scheme after another, to no avail.  The idea that he could save his salary as a bus driver (and have a very cushy pension) and invest it and end up comfortable after 30 years of work, was, of course, not on the table.  It was fabulous wealth, or abject poverty, and nothing in-between.  Sort of the Casino mentality at work.

And that is a real problem for the average working American.  We all have vague ideas about being "rich" someday, but don't really have a clue as to how to execute these ideas.  No clue whatsoever.  But in our heart of hearts, we all think that someday we will get a lucky break and come into money.  Someday, but never today.

The reality is, sudden riches ain't likely gonna happen to any of us.  It just doesn't work that way. And even a comfortable amount of wealth ain't gonna happen unless you have a plan from the get-go.

When I was a youth, I sort of harbored these fantasies of wealth.  I was working in the heavy machinery laboratories at United Technologies Carrier and making a good salary and going to night school at Syracuse to complete my Electrical Engineering degree (UTX paid my tuition, too. Thanks UTX! Their stock has been doing pretty good as well, and paying a dividend).

I wasn't saving money at the time - in fact, I spent every penny and borrowed more.  But, I figured, I was young and life was long, and "someday" I would get my degree, get a job as an Engineer and be making the fantastic salary of $30,000 a year - which was like, well, rich beyond my dreams!  Once that happened, I would never worry about money for the rest of my life, right?

Well, the reality was (and is) that Engineers don't make a lot of money, really, and the big demand for EE's in Silicon Valley was for people with semiconductor skills, not control theory skills, and while I got job offers from Air Conditioning companies, the future wasn't so bright that I needed to wear shades.

So I got into the Patent Business.  Back then, they were hiring like mad, and before long I was making $50,000 a year, which was a ton of money, right?  Well, it would be, if I didn't spend it as fast as I made it.  And I was just a law clerk.  I would graduate from school soon and be making the fabled $100,000 a year - and THAT was surely a lot of money and I would be rich beyond my dreams!  (Some school teachers make that much these days, it is NOT a lot of money, particularly if you spend it all).

And so on and so on.  Success and riches were always something that would happen "eventually" and I failed to realize that all during this process I was in fact making good money - at each level I was at - but failing to save any of it.

If I could have spent, say, 10% less than I did, and end up with a surplus left over, instead of spending MORE than I made and borrowing more and more - I could have accumulated a lot of money in not a very long period of time.  Perhaps not Mormon-rich, but well off nevertheless.  But like so many Americans, it seemed that we had to have "things" in our lives, and buying a lot of stuff seemed more important than saving.

The reality of the story arc of your life - and there is a story arc, with a beginning, middle, and an END - is that you are likely to make some good money over time, and maybe peak out at age 50 or so, and then decline.  You may find yourself LAID OFF at age 55, as your health insurance costs skyrocket and your job skills become obsolete and your salary is not competitive with younger people.

That's the reality.  No winning the lottery.  No inventing the "next big thing."  No winning "America's Idol."  No winning big at the track, the slots, or whatever.  No inheritance from a long-lost Uncle.  You life is pretty much predictable, and follows a pattern of about 330 Million other people in this country.  Maybe 3 million end up really rich.  You and I can best hope for middle class.

This is not such a bad thing, really, though.  Compared to the lives of most people on the planet, we are rich and not only that, have the chance to be "wealthy" in a very real way.  Our life expectancies are huge, compared to most people on the planet - and yet most of us squander this on bad food an no exercise.  Our incomes, on a planetary scale, are huge as well - but again most of us squander this on poor bargains and bad deals.  We buy new cars in series, and pay 3-5 times as much as we need to, to own a car.  We spend money on electronic junk and clothes we don't need.  And then we buy huge houses to hold all our precious "stuff" - convinced that having things is better than having money.

Our recent housing meltdown is a case in point.  A lot of people got into the housing market, hoping to "buy and flip" expensive homes and make a lot of money in a short period of time.  And like Ralph Cramden, they got creamed.  But the story doesn't end there.  These same folks are now "investing" in Gold and hoping to get rich.  But that doesn't look to be in the cards.  Or they day-trade stocks, hoping to get rich.  Or they buy "dot com" IPO stocks hoping to get rich.  They watch the financial channels and listen to the financial gurus, looking for the clues to wealth and fortune.  There has to be a trick, after all!

And yet, the trick is that there is no trick.   Real wealth is already in their hands, they just cannot see it.  They would rather have a new iPhone than $1500 a year more in the bank.  They rather would have designer coffees that $1800 a year in the bank.  They would rather lease a new car than put $25,000 in the bank.

I am fortunate that I saw what I was doing and stopped it before it was too late.  I managed to make good money and saved some of it.  But I didn't save as much as I could.  And I squandered a lot on things that really didn't pan out the way I thought they did.  I could have had the same amount of fun, for a lot less money, but chose other paths instead.

Eventually, you reach this point in life - where the "game is over" and you have to think seriously about retirement and your remaining years on the planet.  And for most folks, this is a decision that is thrust upon them suddenly, not one that occurs after years of careful planning.  Most folks reach retirement age sooner than expected, and then try to put together a retirement plan from the wreckage of their lives - whatever little savings they have, an inheritance perhaps (better be nice to Mom!), sale of a home with equity, and hopefully, social security.

Often, this ends up a nightmare scenario, particularly today.  There are no savings.  The home has no equity (and has a huge mortgage), and there is no inheritance - or greedy siblings have already picked Mom and Dad clean.  And Social Security?  Our Mormon friend promises to put a "needs test" on that!   He really doesn't care about the very poor, does he?

You CAN get rich in America, but not though lottery tickets or vague plans of avarice.  And cutting coupons or getting cash-back bonus miles ain't the way, either.  You cannot eat your way to slimness.  You cannot spend your way to wealth.

You can, however, decide you don't need a lot of junk in your life and put that money aside to build real wealth.  The earlier in life you decide to do this, the better off you will be down the road, as wealth accumulates and multiplies thanks to the miracle of compound interest.  Just learn to live within your means, stop borrowing money, and save a little bit.  It is not a huge sacrifice, either, just a 5-10% adjustment in your life.

Yet so few of us do it!

BOA making a comeback?

Is BOA poised to make a comeback?

Bank of America is hammered a lot in the news, and it is a popular sport to bash the bank.  Losers who bounce checks go on websites and complain, "They charged me a bounced check fee!" as if it was something unique to BoA.

But if you are solvent, they are an excellent bank, in terms of service and the ubiquitousness of their branches and ATMs.  No matter where you are in the States, chances are a BoA ATM is within 20 miles, and you can withdraw cash or make a deposit without incurring roaming fees.

And that is the bank's strength in the long-term.

And by the way, BoA charges no fees for a checking account so long as you transfer $25 to savings every month - and you can set that up automatically using billpay.  And you can take the money right back out again.  Pretty sweet deal.   And bill pay?  Why pay for stamps when BoA will pay for them for you?  I don't get people who write checks and lick stamps - not in this day and age.

Now a lot of other people like to bash the bank because they bought Countrywide Mortgage, and Countrywide got itself in a lot of trouble and nearly brought down BoA.  But this is akin to blaming Dow Chemical for the Bhophl disaster, when that was Union Carbide that did that.  Dow merely bought Union Carbide years later, and now is saddled with the legacy of that bad deed.

So blaming Bank of America for the deeds of Countrywide is sort of silly.   Moreover, all Countrywide did was what every other lender was doing - lending money to people who shouldn't have been borrowing in the first place.

And this is where Americans are schizophrenic.  If banks refuse your loan because you are a bad risk, people complain they are being "mean" to them and "unfair".  If the banks loan money to everyone, regardless of risk, and bring down the economy, they are chastised for being "reckless".

Pick one, you can't have both.

Today, banks are back to lending money in strict terms, and not surprisingly, people are whining that the banks are being "mean" and "unfair" in not allowing them to refinance their upside-down house at 3.9% even though their credit rating is in the trash.

Again, pick one, you can't have both.  Responsible lending or reckless lending?

And here's the deal - given the fallout of reckless lending, expect lenders to be pretty tight with credit requirements in the coming years.

But all that aside, the recent settlement with the States Attorney Generals regarding the so-called "robo-signing controversy" should put a lot that unknown risk to bed.   And some borrowers may be allowed to refinance (if the government will grant the banks waivers from new strict lending requirements) and even modest mortgage balance adjustments (which is only fair to people like me who cut their losses and paid off their mortgages and learned to live on less, right?  No, it ain't and I'm pissed, yes).

And no, no one got tossed out of their house over "robo-signing" who wasn't in fact in default.  No one.  So what that was all about is utter bullshit - people nitpicking at details and not seeing the bigger picture - that 1/3 of the country is upside-down on mortgages and a staggering number are in default and insolvent, and that the best thing to do is foreclose, sell the home and start over.

Unless you want to reward people - in a very arbitrary and inconsistent manner - for being radically irresponsible.

That seems to be what people want to do, alas.

But the Real Estate Market will recover, over time.  The Countrywide losses will be written off, and slowly the bank will claw its way back from the abyss.

I bought BoA at $12 a share and it is trading now at $8 a share, up from five.  Should I have sold my stock?  Well, no, and let me tell you why.

Most people see a stock go down in value and they panic and sell.  And then they see a stock go up in value and they get greedy and buy.  It is called "Buy High, Sell Low" and it is the worst way to invest.  In fact, you really can't call it investing at all - just squandering money wholesale.

If I sold my BoA stock back in December and took a huge loss, what would have I bought?  Well, let's see, what's a good bank stock that is severely undervalued and poised to make a comeback in 2012?

Yes, that's right, BoA.  Unless you feel a company is going bankrupt (like GM did) and you are going to lose your whole investment, selling out makes no sense.  You'd just be buying right back in.  But I don't think BoA is going to go bankrupt, at least not soon.  And my stake in it is small enough that I can take that risk.

Other stocks, I am not so sure.   I got out of alternative energies, as they are all starting to fold in a wave of bankruptcies.  Solar panels are fine and all, but they are cheaper from China.  LEDs are the wave of the future, but made in America?  Not competitive.    Alternative fuels are drowning in a sea of oil sands oil - and even at today's high oil prices are still not competitive.

The only downside to BoA is the huge amount of brick and mortar it owns - major bank buildings in nearly every town and city.  As more and more banking goes online (and BoA is very good at online banking, by the way) virtual banking may be the wave of the future.   And like licking stamps, the few people who "like to talk to a live person" are dwindling fast.

I prefer an ATM or banking online as it doesn't make mistakes and put my money in the wrong account.  I don't have to wait in line, and they are open 24 hours a day.  Who goes INTO banks anymore, other than to rob them?  (And the answer is, generally, poor people.  Look around the next time you are in a bank.  Rich folks ain't in there!).

So the only downside I see to BoA is their staggering amount of Real Estate - and many of their office buildings are half-empty already.

But the underlying banking business is robust, and if they can shake off the Countrywide problem, I think they can manage a turnaround.

Revenue versus Profitability

The idiot media doesn't understand the difference between revenue and profitablity.

In this article on MSNBC, they lament "Companies that are shrinking" in terms of sales.  It is an idiotic article, and reflects the kind of thinking that gets people (and companies) into trouble.

Gross sales receipts - revenues - are not a sign of the health of a company.  Profitability is.  Indeed, when GM was going bankrupt, it had lots of sales of cars and trucks.  Problem was, its overhead was so high, it was losing money.  But according to MSNBC, those were the "good old days".

GM is leaner and meaner today - and more profitable.  They are better off selling fewer cars of higher quality at a higher profit than to keep all those factories running (per UAW contract) and cranking out cheaply made de-contented cars at marginal profit margins.

In fact, they used to tell us at GM, "if we could sell a million cars and make $1000 apiece on them, it would be the same as selling one car and making a billion dollars" - never confuse market share with profitability.

The MSNBC article lists all these companies that had drops in overall revenues, but fails to list their profitability in the corresponding time periods.  Yes, GM has lost market share, but it has increased profitability during the same time period.   Which is more important to the overall long-term survival of the company?

Companies that chase market share "at any cost" often end up bankrupt.  I recall one Silicon Valley company that got excited that it was almost a "Billion dollar a year company" in terms of total revenues.  So to get to that benchmark the next year, they focused on gross sales and not on net profits.  You can guess what happened.  They are nowhere near a Billion dollars in gross revenues anymore.

Volkswagen actually announced their corporate goal was to become the world's largest automaker - have the largest market share in the world.  And to do this, they took a good product - the Jetta and Passat, and de-contented them.  They installed cheap plastic dashboards, crappy twist-beam suspensions that would be more at home in a 1982 Citation, and a raspy 5-cylinder engine that I suspect is a refugee from the ill-fated Brazilian VW Fox (remember THOSE?).  Result?  A $15,000 car that tarnishes the image of "German Engineering" for good.

They might make that market share goal, but not for long.  Eventually, people will say, "What a crappy piece of shit this car is, I'll never buy one again!"  And they will tell their neighbors, and well, that is what happened to GM.

But more importantly, idiot stories like this really skew financial perceptions.  If you read this story, you'd think all of these companies were in deep financial trouble.  Some are, some aren't.  Most got out of financial trouble by reducing revenue and boosting profit.  This comment is typical:

These closures may have contributed to higher profitability, but they cut GM’s overall revenue. Lately, GM has begun to grow again. In its most recently announced quarterly results -- the third quarter of 2011 -- revenue increased to $36.7 billion from $34.1 billion in the same quarter of 2010.

This is not financial analysis or sound reporting.   It is just, well, bullshit.  Meaningless bullshit.  GM is profitable today, not in spite of decreased revenues, but because of it.  Saturn, Pontiac, Hummer, and Saab were not adding to the bottom line, but only detracting from it.  Yes, they increased market share and overall sales, but when you lose money on a vehicle, it ain't a plus for the company.

Use some common sense when reading articles like this.  And when you see a real boner article like this, consider whether you should take anything the news site says at face value at all....

Should You Own Your Home Free And Clear?

A home is something you should eventually own, not perpetually pay for. 

Many folks today think just the opposite.

The monthly payment mentality is strong in America.  We own nothing and make payments on everything, it seems.

And you read a lot of stories these days about people in their 60's taking out 30-year mortgages, in their retirement.  What is up with that?

Some are just broke - they have no money to buy a home, but might have a defined benefit pension and get a monthly stipend.  Their only choice is to rent and apartment or buy a home.  If they had been astute, they would have paid off a 30-year mortgage by now, however, and be living high on the hog.  As it is, they have to hope their pension doesn't go bust before they die.'

Others are conned into this "opportunity cost" argument by investment counselors.   They argue that they should invest their money and then get a mortgage, and make the mortgage payments using the income from their investments.  It is a horrible idea for an older person, because if the market tanks, you have no income to pay the mortgage and end up in foreclosure at age 70.

Which is sad, because only a few years earlier that had enough money to OWN their own home, free and clear, and they decided to gamble it on stocks.  At retirement age, you should be out of the gambling business.

This idea of being in perpetual debt, particularly in retirement, is a new one.  Not too many years ago, people worked hard, saved their money and paid off their mortgages.  A "mortgage burning party" was something everyone had at one time in their lives, at least.

When you retired, you knew you could retire on less, as your home was paid for.  And since it was paid for, it was also an asset that could be sold when you wanted to go into assisted living or downsize to an apartment.  It was a solid asset that was risk-free and you could liquidate to live on.

And paying off your mortgage is still a good idea and a good plan - over time.  Heck, you have 30 years, right?  Why not do it?

Well, the reason people don't is they want it all now.  They want to refinance their home over and over again to pay off other debts - car loans, credit cards, etc.   One lawyer cheerfully told me the other day that she is a "serial refinancer" - having refinanced their mini-mansion five times now.    In addition to the constant resetting of the 30-year term, AND the added principle added on to pay off car loans and credit cards, she is adding $5000 or more in closing costs each time - or about $25,000 so far.  Ouch!

Or, people keep buying and selling homes - often in the same town - so that they never get ahead of the game.  They want to "upgrade" to a larger home, so they sell a home that has 10 years remaining on its note (when the principle amounts really start to become a larger and larger part of the payments) and starts over with a new 30-year note on a larger home.  Higher mortgage payments, more debt, more time to pay off, it never ends.

Serial refinancing or serial buying also means that you are paying the most interest, over time.  The first  five years of a mortgage are almost all interest payments.  So if you refinance (or buy a new home) six times, every five years, you pay nothing but interest and have little or no equity.  The fellow who stays put owns a home outright - and he can retire if he wants to.

Get out of the idea that "I'll always have debt" or "I'll work until I'm 70!" or whatever, as these are really bad ideas.

And we are seeing the fallout from this trend already, and it will get much worse, over time.  Seniors who are working well into their 70's, not for the joy of it, but to survive.  And children having to probate their parent's estate, only to realize that it has a negative net worth - and they are left to clean up the messes and deal with the creditors in an insolvent estate.  They might not have to pay off the debts, but they have to do all the paperwork, and for not even a cent.  Gee, thanks folks!

* * *

Note that I am not saying everyone should own a home.  There are many people out there who like to rent and there is nothing wrong with that - provided they have allocated money in retirement to pay this rent and have it invested in safe harbors.

And owning a home doesn't mean having no housing costs.  Between insurance, taxes, utilities, maintenance and other fees, I estimate it costs me $10,000 a year to own my home with no mortgage.  Ten grand ain't free.   And when you consider that I can rent a similar home for about $1500 a month (or a smaller one for $750) the touted advantages of home ownership don't seem all that great.  In fact, for the delta in pricing, one wonders why people buy at all....

If you are going to BUY rather then RENT, however, the touted advantages of home ownership evaporate pretty quickly if you never pay off or pay down the mortgage.  And in fact, you may end up spending, over time, more than someone who rents, if your home is perpetually encumbered with a mortgage.

Stop Borrowing Money!

One of the big problems most folks have, is this obsession with borrowing money.  They act like a loan is a gift and doesn't have to be paid back, with interest.  But of course, it does.

In the movie Catch Me If You Can, Christopher Walken plays the part of  Frank Abagnale, Sr., the Father of the main character played by Leonardo DiCaprio.  In the movie, Walken gets into financial trouble with the IRS, as his stationary store is failing.  He tries to get a loan to "help him through this tough time" but of course, the banks aren't lending him any - he is insolvent.  He decries the banks and their "little club" that they won't let him in.  And you figure out pretty quickly from that, why he went broke.


Poor folks think poor.  And one example of poverty-think is the idea that financial difficulties can be "helped" with a loan, when in fact, it is just throwing gasoline on a fire.  You are better off facing financial difficulties head-on than trying to forestall them through yet more borrowing.


If you are a restaurateur and the restaurant is going bust, then close the doors.  Borrowing money to stay in business is just making things worse.  Borrowing from the Employee's Withholding funds is just suicidal.


If you are poor and facing financial difficulties, getting a payday loan is not "helping you through tough times" but rather is taking your financial difficulties and making them toxic.  No matter how broke you are,  a payday loan is going to make you 10 times as broke.


If you are middle class and facing a credit card problem, refinancing your home to pay it off is not "solving" the problem, but rather just taking on more debt - over a longer period of time - to pay off debt.  And usually, people who do this end up in more credit card trouble down the road.


Some folks say, "Well, that's easy for you to say, your rich!  I'm poor, I have no money, I have to borrow!" and that is idiotic on its face.  First of all, I am not rich - I make less money than you do.  I just stopped making stupid financial decisions.   If you are poor and you borrow money, you are even poorer.  How is borrowing money going to make you rich?  It ain't!  It just guarantees more poverty down the road. 


Debt is like a cancer on your finances, and yet many people take it on for frivolous reasons.  Or they think that getting a loan is an answer to their problems, when in fact, it just means they have to pay back their problems, plus interest.


Poor people think they are "lucky" to get a loan.  Get out of that mindset entirely.  Loans are onerous obligations, an no one is "lucky" to get one.

And taking on debt is not a treat - but a burden.   Who in their right mind cheerfully shoulders a burden?

No debt is the best way to be.  Less debt is almost as good.  Limit the debt in your life to one or two things that may actually be worthwhile - your education and your home.

And education CAN pay for itself, provided you don't major in advanced bullshit and get C's in it.  If you want to go to school (as opposed to your parents telling you to) student loans can be a way to help you get that degree.  But get as few as possible.  Many students live a comfortable life as a student, only to pay for it by living as paupers after they graduate.  Every dollars saved on a student loan is $5 saved down the road.

Buying a house CAN be a good deal, if the cost of home ownership is cheaper than renting - the overall cost, not just the monthly mortgage payment.  Factor in your utilities, insurance, and taxes, and deduct any possible tax deduction.  Buy the least amount of house for your needs, and resist the urge to "trade up" to a larger house, just because you make more money.  "Look at me" houses are just a recipe for middle-class bankruptcy.  If you have that available credit, an investment property is a better bet.

What else?  Nothing Else.


Home improvement loans, car loans, vacation loans (!), consumer credit loans, credit cards, and any other kind of debt should be unnecessary in your life.  There has never been a part in my life where I needed to borrow money to buy a car.  Rather, I chose to do so and convinced myself that my wants for a new (or newer) car were in fact needs.  Pay cash, for everything, whenever possible.

Really.  It can be done.  You can save up for things.

For example, I had a car that was paid-for.  It ran well and had about 80,000 miles on it.  It was a Toyota and would have gone 100,000 miles more, easily.  But, it needed a muffler and a brake job, and I wanted a shiny new car that was faster, so I borrowed money from my credit union to buy the new car.

In a few years, the new car was worth hardly anything.  And in the time it took me to pay off the new car loan, I could have saved up far more money than I paid for the new car, and kept driving the Toyota.  When the Toyota was ready for the junkyard, I could have gone out and paid cash and bought another secondhand car - in fact the same car I bought new (and borrowed money to get) for less than half the cost.

Total savings?  Tens of thousands of dollars. particularly when you throw in the insurance costs.

"But you don't get to drive a new car!" people say.  Big freaking deal.  New car smell and a window sticker - that lasts about 30 days, tops.  Then it is just another used car, period.

It is a choice, period.  And people choose to borrow money, over-spend, and then end up broke, rather than save money.

The message the media sends us, of course, is just the opposite.  They want you to obsess about your credit rating - game your score, so you can borrow more!  They want you to think of everything in life in terms of monthly payments, not in overall costs.  And they want you to remain powerless and in debt your whole life, because people with money are empowered, and no one in power wants that at all.

In fact, the first thing they want to do, if you get money, is separate you from it.  And that is why the Mitt Romney's of the world pay 15% Capital Gains taxes and you pay a 25% marginal rate.  You'll never be Mitt Romney.  Ever, ever.

But you can do better with what you have.  And the simplest way to do that is to borrow less and save more.

Get out of the mindset that borrowing money is the first option or first recourse to take in every financial decision in life.  Get out of the mindset that borrowing money is a privilege or treat.  Get out of the borrowing mindset, entirely.

Just because they offer you "90 days same as cash" doesn't mean you should take it.

NEVER Co-sign a Loan! Part Deux

Never co-sign a loan.  No ifs, ands, or buts!

In a previous posting, I mentioned that you should NEVER, EVER Co-sign a loan.  Ever, ever, ever, ever, ever!  Ever!

In response to that posting, I got a few inquiries, "Well, yet, but what about..."  NO.  Which part of NEVER did you not get?

And people who ASK YOU to co-sign are not your friends, but are the lowest sort of scum of the earth who want to take THEIR financial troubles and make them YOURS.  And they will, too, as your credit rating is destroyed - even if they pay back the loan.  And guess what?  They won't pay back the loan.  The bank already decided that - which is why they denied the loan without a co-signer.

When someone asks you to co-sign a loan, or if they ask to "borrow" money, just find new friends.  Once you turn a friendship into a financial transaction, the friendship is ruined for good.  Even if they pay it back (they rarely do) the balance of power is shifted.  And they will ask you, again and again, to be a bank.  Just walk away, you don't need friends like that!

If you really want to give someone a new car or a house, that is your business.  But don't think by "co-signing" you are just loaning them your signature.  YOU ARE LIABLE FOR THE FULL LOAN AMOUNT AND WILL LIKELY HAVE TO PAY IT OFF.

And I am not alone on this - just google "Never Co-Sign a Loan" and see:

Why you should never co-sign a loan - MSN Money

articles.moneycentral.msn.com/.../WhyYouShouldNeverCoSignALoa..."You should never co-sign a loan," says Lynn Brenner, a personal finance columnist. If the primary borrower gets behind in payments, "the bank will come after ... 

Why You Should Never, Ever Cosign a Loan for Anyone - Megan ... 

www.theatlantic.com/...never-ever-cosign-a-loan.../239775/by Spencer Kornhaber · More by Spencer KornhaberJun 1, 2011 – I mentioned in my last post that cosigning loans is risky. How risky? According to the FTC,… 

4 Reasons You Should Never Cosign A Loan | You Have More Than ... 

youhavemorethanyouthink.org/4-reasons-you-should-never-cosign-a...Aug 19, 2009 – Picture it. On a blistering cold evening in the winter of 2005, I received a frantic phone call from a family member whose loan application had .. 

Living Stingy: NEVER co-sign a Loan! 

livingstingy.blogspot.com/2009/04/never-co-sign-loan.htmlApr 6, 2011 – Never EVER co-sign a loan! It could bankrupt you! In my "Never Buy A Condo!" article, I noted that the title was a bit tongue-in-cheek, as there ... 

Never Co-Sign A Car Loan For Anyone 

www.moneycrashers.com/never-co-sign-a-car-loan-for-any...by Gyutae Park · More by Gyutae ParkThis particular story was a man who called in to tell about how he helped a friend from church get a loan on a car by co-signing for the loan. He neverthought ...

The Simple Dollar » Never Cosign a Loan Unless You Want to Pay It ... 

www.thesimpledollar.com/.../never-cosign-a-loan-unless-you-want-to...May 11, 2010 – NEVER EVER co-sign a loan. Don't do it out of love or money. There is a good reason why the bank won't give that person a loan without a ... 

McArdle Warns, 'Never, Ever Cosign A Loan' : NPR 

www.npr.org › News › Opinion  Jun 7, 2011 – Deciding whether to co-sign on a loan is a complicated mix of emotion, personal relations and money. Megan McArdle, business and ... 

Never co-sign a loan, especially for family members. 

www.trulia.com/.../never_co-sign_a_loan_especially_for_family_me...Oct 18, 2009 – Never co-sign a loan for someone, especially family Taking out a loan for yourself is bad enough, but co-signing a loan is just plain stupid. 

Should I Cosign For a Loan? - Faithful With A Few 

knsfinancial.com/should-i-cosign-for-a-loan/Apr 25, 2010 – In fact, many people will actually cosign for loans even when they donot feel comfortable doing it. It is usually due to not wanting to be the bad ... 

Suze Orman's Top Five Money Mistakes You Can't Afford To Make ... 

www.forbes.com/.../suze-orman-top-money-mistakes-private-student...6 days ago – “Never cosign a loan,” counsels Orman. “Once you have cosigned, you cannot get out of it–even on your deathbed.” Financially, there's nothing ...

Even the "Sooze" agrees with me on this one.... and she lists it as NUMBER ONE in her all-time TOP FIVE financial mistakes!  If you don't believe me, listen to the other folks above.

But why is asking someone to co-sign a loan so EVIL?  Because they don't really NEED the money (no, not really, ever, ever!) but are asking someone to risk ruining their credit rating and to eventually pay off their loan for them, so they can have a new car, or a house, or in one scenario provided by a reader, speculate in real estate.

The person asking you to co-sign is a greedy selfish person who wants it all now, even after they have already screwed up their finances.  And they have no compunction about taking you down with them.  A respectable person would not come to YOU with their financial problems, but instead man-up to their issues and figure it out on their own.

You are not their bank, their counselor, or savior.  But surprisingly, a lot of people like to "help others" and then nail themselves to the cross when it all goes horribly wrong.  They love the attention of being the "savior" of the person they are helping, and then being the "victim" later on.

And the "Well, but..." excuses go on and on, including an odious comment I got from one reader who said they had "a really good reason" why co-signing was a good idea, but "didn't have enough space here to explain why" - and then went on for five paragraphs flaming me.  The absence of real argument is the telling part.  They have no real excuse - or at least one that can't be pulled apart easily.  Here are some of the idiotic reasons I have heard people give to co-sign or to ask someone to co-sign.  All of them are pretty stupid:

• But what if they are a "really nice person?" who would never default?  It doesn't matter.   People don't default on loans to be mean, they do it because they can't make the payments - and the bank has already determined this will happen.  They will likely default on the loan, be too ashamed to tell you, and by the time you find out, your credit is ruined, as are your finances.  And "nice people" don't ask friends to co-sign loans!

• But what if they have a good credit report?   Then they don't need you to co-sign.  If they are asking you to co-sign, then they don't have good credit.

• But what if it is for a really good reason?  What reason would be good to borrow money?  None.  You should only borrow money for major things in life - like buying a home.  But if you can't afford a home, RENT ONE.  There is no "right" to home ownership, particularly for insolvent people.

• But what if they are "of good moral character?"  People with good moral character have good credit - and don't ask friends to co-sign loans.

• But what if they are "really good friends?"  Really good friends don't ask people to co-sign loans.

• But what if they are going through a bad time, financially?  Well, now YOU are going to be going through a really bad time financially.   Borrowing money isn't a way out of financial trouble, it is only pouring gasoline on the fire,

• What if they need a "second chance" in life or need to "build up their credit rating" ?  You are just risking your own financial security so they can  have a Camaro.  Who is going to bail YOUR ass out?

• What if they need a co-signer for a student loan? The only student loans that would need this are odious "private loans" that are usually touted by worthless "for profit" schools.  Walk away from these.  Federally guaranteed student loans do not require a co-signer.  Whenever you see this argument raised on the Internet, the person raising it is likely a shill for the lucrative for-profit college industry and/or private student loan companies.

• But what if they need a car to get to work (usually at a new job)?  Well, buy them an old beater.  Or give them your car and buy a new one for yourself.  But don't just buy them a new car, because that is what co-signing is.  And why do these sorts of odious parasitic scumbags always "Need" a brand-new car?  Oh, yea, it has to be "reliable."  Right.  Gotcha.  Not!

• I want to buy a house and I found a deal where I can buy a place, rent out part, make money and then flip it for a profit - but my credit is no good.  I need a co-signer.   Sorry, no sale again.  What you are proposing is a risk-taking financial venture - using someone else to take the risk at no cost to you but great risk to them.  Either go in as partners on the deal (titling the property jointly) and agreeing to a split of the proceeds (yes, providing your credit rating should be worth something!) or let them take the risks.  Otherwise you are a real selfish bastard.  Bear in mind that you are wiping out Granny's ability to borrow, as her debt/equity ratio will now be high.

• We are starting out and want to buy a house, but don't have credit.  Again, where does this "We have to OWN a home" bullshit come from?  And if your credit sucks, whose fault is that?  Rent for a few years - everyone does it when they are young.  Well, everyone with honor and dignity. Cheesy people ask their parents or grandparents to co-sign for them, and then wipe them out financially as a "thank you" gift.

• I want to sell our house to our son, but he doesn't qualify for a mortgage.  Well, hold the mortgage yourself, then, and have him pay you directly.  Your credit rating won't be destroyed, and you will get a steady source of income in retirement.  Or just keep the house and rent it to him.  Either way, you are guaranteed money, but don't have to worry about losing it all.  If you co-sign the mortgage for him, and he stops paying on the note, you all lose out.  And you can't even stop the bank from tossing him out on the street, unless you want to make a difficult mortgage payment.  If you are landlord or mortgage holder, you at least have the option of forgiving late payments for your child.  If you co-sign a mortgage and then invest the money (ouch!) you are letting the banks make huge profits at each end of the transaction and then losing all control of the situation, AND ruining your credit rating.  Sorry, no sale here, either!

• My friend has medical bills from a long illness - I want to help her out.  Well, now they are YOUR medical bills, and now YOU have to pay them.  And now, likely, BOTH OF YOU will end up in Bankruptcy court, instead of just her.  She could have discharged most of those medical debts in bankruptcy and started over.  Now both of you will have to start over, and likely you will no longer be friends.  Friends don't ask friends to do shit like that - borrow money or co-sign, or whatever.

You get the idea.   No matter what "good reason" you come up with, there is always an alternative - usually a better alternative - that doesn't involve you co-signing loans.  If a person is facing bankruptcy, let them face it.  Help them out if you can, but signing your life away isn't going to make it better for either of you.

Giving a young kid a brand new car is just irresponsible and teaches them only that the best things in life are truly free when grandma pays for them.  When you die, they will end up bitterly disappointed people after they burn through your inheritance and ends up destitute, as they never learned fiscal responsibility.  And you were the enabler of the whole deal.

So you co-signed a loan already.  What can you do?  Nothing really.  You are proper fucked, utterly, royally, and completely.  You can stay up nights for the remainder of the loan period (for a mortgage, that means forever) and worry about it.  This will lower your life expectancy by five years, easily.  You can hope the person who asked you will pay back the note.  The Federal Trade Commission says this is very unlikely - there is a 75% chance you will be stuck paying off the note.

There is nothing, repeat nothing, you can do at this point other than to hope the person who took out the loan has the cash to pay it back and the willingness to do so.  You have placed your entire financial life, your financial future, your retirement security - everything you have in life - in the hands of someone who every bank in the country thinks is fiscally irresponsible.  Brilliant move!

Do you see NOW why this is such an utterly, totally, bad idea?  Why I say NEVER and mean it?

If it was for a car, you can't repossess the car.  All you can do is pay off the loan - or default yourself and end up in your own financial trouble.  You just bought you friend, grandchild, or child a car, even though you can't afford one yourself.   If all you got dinged for was a $20,000 car and a destroyed credit rating, well, you got off lucky.  Maybe you can find some chump to co-sign for you?  Ha-ha.

If it was for a house, you can't toss them out of the house or force them to sell it.  All you can do is pay off the loan - or default yourself and end up bankrupt.  And since a mortgage is for 30 years and the amounts due can be in the hundreds of thousands of dollars (and since houses can go upside-down) you are going to be utterly screwed, as the mortgage company comes after you with a $50,000 judgement and then puts a lien on your house.

You can declare bankruptcy, but even then, the loan amount may be "worked out" and not written off. You may still have to make payments, even post-bankruptcy, for five years or so.  And you may lose a lot of your assets in the interim.

Suicide or changing your identity are really the only ways out of this mess.  Both are illegal and not recommended.

Do you start to see why this is such a bad idea?  When killing yourself is the only option out of a financial difficulty, it tells you volumes.

You see, as co-signer, you guaranteed the note.  This means you said you would pay for it.  And if the person who asked you to co-sign takes the car and drives off to Tijuana, then you are stuck paying for it.

What happens if you don't make the payments?  Same thing as if you had taken out the loan yourself, except since you don't have the collateral (car, house) you can't sell it to pay back the loan - and you can't force the other person to sell it, either.

So, they get a judgement against you - and they will, as there is no legal defense you can use (ignorance is not a defense, although some lawyer will take your money, represent you in court, and you will lose anyway).  They can then attach a lien to YOUR house or YOUR car.  How much fun will that be?  Living in a homeless shelter and taking a bus to work, driving by your friend's house and seeing them wax the car you paid for?

You're just fucked, period.  It is too late to say, "I'll never do THAT again!"  It is too late to stop playing the Hillbilly fucking financing game.  Your best friend just took you out, financially, and there is nothing, repeat nothing, you can do about it.

And this happens all the time.   Listen....

Billy was a college dropout and worked odd jobs.  He finally got a "good" job making $25,000 a year in construction.  He spent most of this on rent, beer, and pot.  He drove an old economy car, but dreamed of having a shiny new Camaro. 

One day, driving by the dealer, he stopped to look at his dream car.  There was no way he could afford it - it would cost a year's salary!  And he had not held his job very long.  And since he had screwed up badly with credit cards in college (and was in default on his student loans), his credit rating was in the trash.  He was a horrible credit risk and a very irresponsible person. 

The salesman shows Billy how he can "afford" the car if he can get a co-signer on the note, as, after running Billy's credit, he realizes that even the "buy here, pay here" people won't touch him. 

Billy was disappointed.  But Billy wanted to get laid.   And the waitress at the bar he frequented would surely go "all the way" with him if he had a cool car.  But before he could screw the waitress, however, he would have to screw his grandmother. 

His grandmother lived in a double-wide outside of town.  It was paid for, and  she got by on her meager savings and her husband's social security.  He had died years earlier of a lung ailment, probably related to all the junk he inhaled when he worked at the steel mill. 

She also had the tattered remnants of the pension plan her husband was supposed to get, but thanks to Bain Capital, was only 40 cents on the dollar.  And yea, she and her husband both voted Republican.  Thank God that Billy won't get Gay-Married!   Grandma isn't all that bright, I'm afraid.  Although she is a sweet lady. 

Billy goes out to Grandma's house to pitch co-signing the loan.  He visited Grandma frequently, and she liked the company of this handsome young man. The fact that he usually had some pitch for money when he came didn't disturb her too much.  But the check register of her checkbook contained a lot of entries to Billy for various amounts from $25 to $1000, every month, like clockwork, as Billy's sister would discover, to her horror, several years later, after Grandma died destitute. 

And let me just interject here that Billy is indeed a real person.  I knew this guy - and plenty like him (or her).  He is a low-life.  Scamming your Grandma or asking your parents for financial help, is sort of odious.  Doing it for wants and not needs is worse.  Doing it well into your 40's and 50's is just embarrassing.  But a lot of people do it.  Ick people, I call them.  They are so.... icky.

So, Billy arrives at the trailer and pitches the loan papers to Grandma.  She isn't loaning him money, just putting her name down, sort of like a character reference, he explains.  Grandma, already getting senile, goes along with the deal.  Billy also got Grandma to write a check for the down payment as well - with a little left over to buy weed!  Sweet! 

The arguments used by Billy are the usual ones.  "But, Grandma, I need a reliable car to get to work!"  Grandma is happy Billy is finally working, as he was a "troubled child" - actually just trouble.  And Grandma knows what it is like to have an unreliable car.  After all, when she and her husband got married, all they could afford were old jalopies that constantly broke down. 

Grandma fails to make the connection, though, that she and her husband did just fine, nevertheless, and didn't buy a brand-new car in their entire lifetime.  They struggled and saved and scrimped and worked hard.   And here she was handing a brand new car to a 22-year-old. 

Billy gets the car.  He might even get laid.  Who knows?  Who cares?  But the cost of insurance is staggering for a young kid with a new car - thousands of dollars a year.  And even though Grandma co-signed the loan, Billy has to make the payments - which are $400 a month. 

Billy gets a few tickets showing off.  He is young and immature, and there is a reason young kids should not have new cars.  He has a small accident and dents a fender, but is afraid to report it to the insurance company - his rates are staggering and he already is about to lose his license. 

Billy's bills are piling up. He is living the high life, drinking every night, smoking pot, trying to pick up girls.  Then he gets laid off from his job.  He showed up late and hung over - if he showed up at all.  Hey, he had a new Camaro, he didn't need those fools! 

But now he was broke, and the loan payments couldn't be made.  Pretty soon, debt collectors were calling his bewildered grandmother and demanding payment on the loan.  Billy didn't answer Grandma's calls. 

Grandma, barely getting by as it was, now finds herself strapped an additional $400 a month for another 48 months.  Billy has a sweet ride!  Grandma is eating cat food.

A far-fetched scenario?  No.  Three out of Four people who ask someone to co-sign end up defaulting on the loan.  You should make plans on how to make the payments before you co-sign, period.

But wait, it gets worse.  After Grandma eats Raman noodles for four years to pay for Billy's Camaro, Billy finally comes into some money - he gets a good job or inherits from his parents.  Will he pay back Grandma for the Camaro?

HELL NO, and she can't make him, either.  You see, co-signing the note is not a contract between Grandma and Billy, but Grandma and the finance company.  She has no right to go after Billy or his car. And even if Billy won the lottery, she couldn't get paid back.  And no, the Billys of the world rarely feel morally obligated to do so.  In fact, they never do.

People like Billy are evil, plain and simple.  And in addition to being a selfish low-life, he also is the worst sort of white-trash there is.  And co-signing is right up there with PayDay loans, pawn shops, and other trailer-trash Hillbilly financing schemes.

Co-signing is what poor people do, which is why they are poor.  If you want to stop being poor, stop doing poor things - and making poor choices.  Co-signing is a one-way trip to poverty.   Just...stop....doing...it!

And yet, some folks would say Grandma was being "selfish" if she refused to sign the note!  Some folks are truly evil!  Taking care of yourself is your first obligation.  NOT creating more "needy people" is the most important thing you can do.  Before you go out and try to save the world, save yourself.

And the worst sort of people on the earth are those who claim to be pious by "helping others" while placing themselves in perpetual peril.  Giving brand-new cars to your kids while bankrupting your own estate is not helping anyone.  It is just being idiotic.  And being around people like that is just depressing, as they moan on and on about how rotten life is, and how put-upon they are.  And yet, life is sweet and their problems are self-inflicted. 

And all it does to the person who gets the free car is teach them to be dependent - that if you want to borrow money, ask Grandma.  They never learn to live their own lives.  They are, well, icky! 

The reality is, there is NEVER, EVER a situation where co-signing makes any "sense" at all.   Get OUT of the mindset that borrowing money is a privilege - it ain't.  You have to pay it back.  And if you get a co-signer, they have to pay it back.

If your child gets into financial trouble, co-signing a loan for a new car is just rewarding them.  And it won't "repair" their credit rating.

Co-signing a loan won't "build up" a child's credit rating.

If your neighbor is broke and can't afford to live in their home, co-signing the note isn't going to "keep them in the home"  -  unless you want to make their mortgage payments for them.

We all face tough choices in life.  And sometimes, the best thing is to do without.  A child will be OK if they have to drive a used car, trust me.  They do not NEED a brand-new one.  In fact, it is a horrible proposition, just because of the insurance.

And co-signing a mortgage is just financial suicide.  If the person defaults, it could take out your whole financial estate.  Who will then bail YOU out?  Not the person who asked you to co-sign, that's for sure!

If you want to buy someone a house, at least make sure your name is on the DEED, so you can force them to sell the place, if they stop making the payments.  But few co-signers think to do that.

There is NO, repeat NO situation where a person's life can be improved by BORROWING money.  If someone comes to you and says they are desperate to borrow money, what they really need to do is learn to live on less.  Borrowing more - on your credit rating and your signature - is not going to make things better for them.

But it will surely make things worse for you! 

Losing Money Gambling

Nearly every town, city, and State has a gambling franchise these days.  Many are operating at or near bankruptcy.  I thought only the people IN the casinos lost money!  Turns out not to be the case.

The other day, while researching Bonds (a fascinating area, and one that is deceptively complex - never invest in something you don't understand!) I came across a bond listing for the Mohegan Sun Casino.  It was showing a staggering 240% rate of return.  I nearly fell out of my chair!

My neighbor goes there all the time, being a Nutmeg State resident (Google that!).  He doesn't gamble, but his brother-in-law does, and the brother-in-law loses tens of thousands of dollars gambling, so the casino "comps" all the rooms and meals for the whole family.  His wife comes back with buckets of "Mohegan Sun" napkins and room shampoos.  I haven't bought paper napkins in months.

Gambling is a really, really bad idea, as I have noted before - on a personal level.  And the idea that Casinos can "Create Wealth" is also specious.  And perhaps the chickens are coming home to roost - big time, in the gambling business.

But I had presumed the Mohegan Sun was a thriving business, being so close to New York City.   A little research online proved the opposite was the case.  Apparently, they are having troubles with trying to expand and then abandoning their expansion efforts.  They tried to build additional casinos and then ran into difficulties.  They tried to expand the existing casino, and then abandoned the effort.  Then they purchased a WNBA franchise.  They grew too quickly and now people are nervous they can't pay back their bonds.

I have a rule of thumb about investments - I never invest in anything I don't understand, and I just don't get this bond situation.  They mature in April at $1000 each, or a premium of 29.8% between now and then (they are selling for $770 right now).  This gives an annual rate of 240%.  It would be a short-term bet - you'd know in a month and a half if you go bust or not.

Since only Indians can own the casino, if the place does go bankrupt, the bond holders do not get stock.  Now you see why the return is so high....  I am not sure I recommend this risky bet!  It is like gambling at the slots there!

Mohegan Tribal Gaming Aut
Call 03/15/12@100 - Conditional Calls

Maturity 04/01/2012
Price 77
Yield 240
Credit Rating Ca/Cc

240% Yield!   Ouch!  Since this article was written, things must have changed for the worse!  This is a JUNK bond of the lowest rating.

According to a more recent local news article, apparently they are teetering on the brink at the moment!  They have nearly 1.6 Billion in debt and maybe $50 million in profits last quarter (up from a loss of $25 million same time last year).  Ouch.  If they can't get debt restructuring, well, ouch.

If we assume they can increase revenues (and proposed Casinos nearby do not siphon off more and more of their revenues) to, say, $250 million a year, then they could pay off this debt in ten years or so.  It might be do-able.

The key is whether the banks will loan them more money and restructure their debts.  And they need the money - quickly.  Why?  Well, these bonds are coming due!

Mohegan’s total debt as of Sept. 30 was $1.6 billion, the authority reported. Of that, $811.1 million comes due within the next 12 months, including $535 million that needs to be paid by March 9 and $250 million in 8 percent notes that mature on April 1. This debt will need to be refinanced before the due dates, the authority said Thursday.

So that's the deal with these 240% annualized yield bonds.  If you are willing to gamble that the Mohegan Sun will be able to restructure its debts by March 9 and pay back these bonds,  you can make $230 on every $770 you invest, in a little over a month's time.  If they can't restructure their debts and declare bankruptcy, well you lose $770.

This is not investing - it is gambling - like playing the slots, and gambling is never a smart thing to do with your retirement money.  And note that the disincentives to declare bankruptcy and stiff the creditors are few.  The same people will end up in control of the Casino, no doubt, but relieved of a ton of debt.  There are more "Why not declare bankruptcy?" arguments than there are "Don't do it, because" arguments.

Now, if you are astute, you will realize that the "interest rate" on these bonds is 8%.  How do they end up yielding 240%?  Again, bonds are traded like stocks.   Think of them as non-voting shares.  And when the price drops down, the effective yield goes up.  So far from being a safe investment, Corporate Bonds can swing all over the place.

And what this situation illustrates, is that a lot of players are nervous about their Mohegan Sun bonds, and would like to get $770 out of them now, rather than risk waiting a month and getting nothing.  Maybe they know something we don't.  Maybe they have insider information.   But if you Google "Casino bankrupt" on line, you will find some interesting hits.

Frankly, I think we have gone overboard with Casinos.  Every legislator in the country thinks they are a panacea to their economic woes - when in fact they may be creating more.


The problem is, there are too many casinos and not enough gamblers.  Everywhere you look, there is an Indian Reservation casino opening up (often based on a "tribe" of a half-dozen Indians of dubious ancestry).  You can gamble on river boats or boats offshore.  One leaves twice a day from a dock near my house - operating in bankruptcy, of course - which may be a telling trend.

(Actually if you Google "bankrupt casino cruise" you find a lot of these, including some of the ill-fated Sun Cruz ships.  There are a lot listed as "suspended operations indefinitely" or "Operations Ceased, 2009."  Gambling, as it turns out, isn't a recession-proof business!)

In 1962, all gambling was illegal.  Running numbers, betting on sports, betting on horses (off-track), selling Irish Sweepstakes tickets - you-name-it - it was all illegal except in Nevada.  And Vegas was a sleepy little town.  50 years later, not only can you gamble everywhere, the government runs the lotteries and promotes gambling as a solution to our tax problems.

Problem is, gambling attracts a lot of odious people.  In a recent incident, two "Businessmen" from an Indian Casino in New York assaulted a State Senator and his Wife, putting them both in the hospital.  The names of the "tribal Businessmen" were not released, but when I was in New York, it always amazed me how many of the operators of the casinos had distinctively non-Indian names  Act shocked.

Vegas keeps trying to reinvent itself to keep its business thriving.  It took a stab at being "Family Friendly" - but that backfired badly, when families came to visit and saw all the hookers on the strip.

When we were in Vegas in the 1990's, the hookers would put their business cards everywhere - stuffed in the seams of a phone booth or a newspaper box.  These were very glossy cards with photos, much like baseball player cards, with stats and everything.  We were pretty tipsy and started collecting these and before long had a dozen or so, and were saying to each other, "I'll trade you a Tiffany for two Ambers!" and laughing uproariously.  "No way, man!  Tiffany was rookie of the year!"

A family saw this and their 8-year-old daughter said, "Daddy, can I collect the cards with the pictures of the pretty ladies on them, too?"  Needless to say, that is one family that never came back to "Family Friendly" Vegas.

And if you went off the strip a block or two, you would see the underage teenage hookers, of both genders, plying their trade.  If you want to have sex with teen runaways, Vegas has your back.  And what goes on in Vegas, stays in Vegas, right?  That slogan is working out so much better for them than the "family friendly" marketing program.

Gambling seems to attract a lot of odious sorts.  It is an excellent venue for money laundering.  And prostitution and drugs seems to shadow it wherever it goes.  Where are we going with this?  And why do State Legislators buy into this?  Or more succinctly, how much does it cost to buy a State Legislator?

And now these Casinos, which promised their tribesmen so much money - and the States a share of the revenue - are conveniently showing losses and huge debts.  Is Mitt Romney involved?  Because it sounds like the same old deal - load up a company with debt, show an operating loss, declare bankruptcy, and then start over again, debt-free.   Where did the debt all go to?  Construction companies, for these abortive expansion efforts.  And we all know that construction companies are NEVER Mob-connected, right?

So we stiff the Indians (except the few tribal elders who are on salary and go along with this) and we stiff the "save the schools because I want low property taxes" fund, and we stiff the bondholders as well.  Repeat ad infinitium, as a number of casinos are going through this right now.

I am not saying this IS what is happening at Mohegan, but it COULD BE what is happening at a lot of these Casinos.  And you and I have no way of telling, do we?  No way at all.  Buying these bonds is just gambling at this point - and gambling in a game that might be fixed from the get-go, and you have no way of knowing.

One problem with our free-market system is that it is a free-market system - namely that people can run rogue all over the rules, if they want to, if indeed there are even rules.  Yes, there are some good investments out there still.  But others?  Who knows what you are buying into?

And who needs to go to a Connecticut casino, when they have one running in New York, every business day, on Wall Street?

But remember, it isn't Gambling - it's Gaming, right?  Talk about poor normative cues!

Note:  The debt situation this Casino is a moving target.  Here are some more recent articles on the subject:

http://dealbook.nytimes.com/2012/01/24/owners-of-mohegan-sun-seek-to-restructure-debt/

http://www.theday.com/article/20120106/BIZ02/301069950/1064/rss12

http://www.boston.com/Boston/businessupdates/2012/01/mohegan-sun-owners-outline-debt-refinancing-plan/yPP0qkRMFw0oPraVNcw2HK/index.html

This part of their restructuring plan is troubling:

The operator of the Indian-run casinos in Uncasville and Wilkes-Barre, Pa., also said it will offer to exchange $598 million in bonds for new notes with the same principal balance but with fewer restrictions. The gaming authority is asking holders of the old notes to accept amendments that would eliminate or waive restrictive covenants and eliminate certain default terms and modify or eliminate other provisions.

So if you buy this bond now, you may end up with just more bonds, which may be worth face value, but on the open market may be worth even less than you paid for the old bonds.

I'd rather cruise on the Coastal Concordia, I think.

This link describes their proposed debt refinancing in more detail:

http://www.marketwatch.com/story/mohegan-tribal-gaming-authority-commences-debt-refinancing-transactions-2012-01-24

If I read this right, this short-term investment could end up being a long-term one.  And when those notes come due, in 2016, do they pay you back (at 11%) or do they roll those over yet again?  Or what?

If you are bullish on the gaming industry, you might want to gamble.  But it is a gamble, plain and simple - and a long-term one at that.

Leave the Kids Alone!

Junior isn't doing well in school.  Is he dyslexic?  Does he have A.D.D.?  Or maybe he isn't all that bright.  There are worst things in life than not being all that bright. Over-diagnosing and over-medicating children is an epidemic in America.  Leave your kids alone!

I wrote in a previous entry about how many Women are bombarded by the media with poor normative cues.  And they are constantly made to worry about their kids.  Do they have some un-diagnosed rare disease?  Maybe they are causing trouble in school because of exposure to some toxic chemical?  Or is it A.D.D. and requires Ritalin?  Food allergies?  Chronic Fatigue?  Dyslexia?  We have all sorts of self-diagnoses today, and many folks are deciding their kids are "sick" or have "special needs."

Why is this?  Well it is like with pets.  Your dog or cat gets sick and you feel bad - after all, you are in charge of this small life, and they depend on you to take care of them.  You don't want to drop the ball!  So granny gets chemotherapy for her 18-year-old cat, not realizing that God was trying call Fluffy home and the best course of treatment was euthanasia.

Of course, the vet needed to make payments on his Porsche, so he is quick to slather on the guilt and suggest extreme treatments for animals with a very short life expectancy.

With kids, the problem is confounded 10-fold.  This is a human life we are talking about, and euthanasia isn't an option, of course.  So you want to make sure your kids are OK, and every sniffle and sneeze is looked after.

And the supermarket tabloids and women's magazines - as well as the daytime talk shows - are all too happy to suggest illnesses to nervous parents.  Does your child have A.D.D.?  Here is a simple 10-step test!  And so on.

So, Mothers drag kids to doctor after doctor until they find one who needs to make a Porsche payment and will agree that there is "something wrong" with the kid.  Sound far-fetched?  I lived through it.

Since then, I have seen this happen to friends of mine - convinced their children were "problematic" or had "special needs" or had some mystery illness, reaction to chemical, an imbalance, a condition, a syndrome, or whatever.  In reality, they were pretty normal kids.  They weren't missing limbs, they weren't blind or deaf (although the deaf are quick to point out that deafness is not a handicap, but just a different way of living - good for them for rejecting the "victim" label!).  These kids didn't have major illnesses or major mental problems, Down's syndrome, severe autism, whatever.

Yet the parents were insistent that there was "something wrong with the Beave" and that they needed a doctor or a special program - or worse yet, a pill - to sort it all out.

Sometimes kids are just normal, and within that normal is a whole range of behaviors, from creepy to clever, from dumb-as-cordwood to Einstein smart.  And sometimes you have to just accept that.

For example, take Suzie.  I knew Suzie and saw her kids grow up over 20 years.  She had two boys.  The younger was smart as a whip, and being younger was largely ignored.  The older boy just wasn't very bright - nothing wrong with that, of course.  He took after his Dad, who was a simple, honest, hardworking man who worked mostly with his hands.  What's wrong with that?

Today in America, plenty.  We are sold on this idea that everyone has to go to college to succeed and Suzie was convinced her firstborn was Harvard material.  He wasn't.

When his grades in school never materialized, she started looking for cures.  First it was some toxins in their environment - she was convinced some disease vector was present in their home and had singled out the one child, and not the other.

She moved onto allergies, even though he displayed no symptoms, other than the usual sneezing we all get in allergy season.

It was dyslexia next - he needed special reading glasses and special education - he was a "special needs student!"  So she demanded he get special training and sued the school district when they would not pay to send him to private school.  Needless to say, this made her popular with the PTA.

It was A.D.D. next - Attention Deficit Disorder.  And like most of these self-diagnoses, she came upon this after watching a television program about it. So off to yet another doctor and specialist and them home with a 'script for Ritalin.

Did any of this work?  Of course not.  The kid was just dumb.  Not a moron, but not a scholar, either.  Rather than thrusting college upon him, she should have been training him for a career in a trade - as his Father did - and he did well, running his own business.

As it was, all this attention made him feel bad - bad about himself and also bad as he was isolated from his schoolmates.  School should have been enjoyable for him, but it was one nightmare after another - and recrimination after recrimination as each "cure" his Mother presented failed to work as advertised, leaving only him to blame for his alleged failure.

He's 25 years old now, and turned out about as you'd expect - he has a job, a house, a wife and a kid, and works hard in sales job.  He is not rocket scientist, but he is no "Rain Man" either.  All the efforts of his Mother to make him into a Baby Einstein failed - and served only to scar him psychologically.

We are so quick to label kids today - to see something "wrong" with them and try to "fix" them like they are disobedient robots.  But people fall into a Bell Curve of behavior patterns, and expecting your kid to fall into a particular slot because you want him to is sure to cause you nothing but grief.

And I recall this sort of thing happening to me as well.  While I got good grades in school, at two points, they wanted to send me back a year - in Kindergarten and in 4th grade.  The Kindergarten teacher thought I was retarded, as I did things differently that the other kids.

In one test, we were presented with four items and asked to find the items that were alike.  The items were a fire truck, a dump truck, a car, and a tomato.  The answer they wanted was the three vehicles being grouped together.  However, I picked the fire truck and tomato, as both were red.  This may sound like unconventional thinking, but bear in mind that we were supposed to select the items using colored crayons, and so I naturally colored in the like items with my red crayon.  Was I retarded, or just answering a very ambiguous question in a different, but correct way?

In 4th grade, the teacher wanted to flunk me, because I could not memorize the multiplication tables.  The stupidest kids in school memorized these easily - memorization is not learning, but just monkey-work.  To this day, I have to sort out 7 x 6 in my head.  But that didn't stop me from taking three semesters of Calculus, Differential Equations, and Number Theory.  And I'll bet all you smart asses who say "well everyone knows that 7 x 6 is 42" don't even know what a Differential Equation is.  Rote knowledge and intelligence are two different things, and yet, this 4th grade teacher was all-too-quick to label me.

(And in a world of irony and Karma, a decade later, I would be taking Number Theory in College with one of my High School Math teachers as a fellow student.  She failed, I passed!  Who's the 'tard now?)

And who knows?  Today, they would have labeled away, no doubt saying I had Asberger Syndrome or some such nonsense (which would explain the whole special shoe fiasco).  And no doubt, drugs would be prescribed or some other effort to make me "normal" would be instituted.

Indeed, they say one reason the number of Autistic children in this country is on the rise is that the diagnosis of Autism has been expanded to include far more children, including so-called "Mild Autism."    When you go looking for trouble - or a label - you are likely to find it.  And since these labels are often so vague and hard to quantify, you can slap them on just about anyone, particularly if it makes a nervous parent happy and gets them out of your office, at last.

Fortunately, I escaped my childhood, or at least survived it - and withstood the attempts at "correction" that so many try to make.  And yea, they even sent me to Speech Therapy Lab in the first grade.  But despite all my alleged health problems and school problems, I managed to get an Electrical Engineering degree and a Law Degree.  Not bad for a retard who can't do his maths.

Oddly enough, oftentimes the things parents should be paying attention to are ignored - like diet.  Shirley has a rambunctious boy who tears the house apart and is a terror in school.  Surely there is something wrong with the lad - allegries?  Toxic chemicals?  A.D.D.?

As she regales me with the latest diagnosis, her boy slurps down yet another Coca-Cola - the fourth in 15 minutes.  He is dehydrated, and the only liquid in the house is loaded with 200 calories of sugar - or worse, high fructose corn syrup.  Worse yet, he has just drunk the equivalent of five cups of coffee!  Parents say stupid things like "No Coffee for the kids!  It's a grown-up beverage!" and then hand the kid an entire six-pack of Pepsi, or a 64-ounce jug of it.

For dinner that night?  Pizza or pasta, some meat, no vegetables.  The kid is jumping from one sugar high to another.

Could diet be a factor in his behavior?  Nah! she says, it has to be hormones or something.  The doctor has a pill for it.

Fast-forward 15 years and the boy has grown up pretty much OK.  He has calmed down a bit, to be sure, but the legacy of being a "troubled youth" throughout school does follow him around.  Maybe less Ritalin and more Broccoli would have been a better Rx.

Like I said, one can sort of understand this obsession, as you are charged with caring for another human life - and it seems daunting and you want to do the best job you can.  But sometimes, this spills over into something far darker and more dangerous - Munchhausen Syndrome by Proxy.

People get enamored of the process oftentimes - regardless of what the process is.  And if you have a "sick kid" that has to go to the doctor all the time, or a "special needs" child that needs special classes and glasses, then it does give a parent an identity and function in life.  They are like the friend with the perpetual problem.  "I can't stay for coffee!" one says, "Billy has an appointment with his specialist!"

Suddenly they are no longer a housewife, but a concerned Mother with a defined role to play.

Why is this sort of nonsense dangerous?  Well, it hurts the kids, to be sure.  Once you are labeled with a syndrome or problem or imagined illness, it is all too easy to lose self-esteem, or worse yet, learn to externalize your problems at an early age.  For the parent, these games are a time bandit as well as another ploy for victim-hood - and victims never really win at their games, they just end up bitter and disappointed. And of course the costs of all this can be staggering.

So how do you avoid this trap?  Stop listening to TeeVee shows that try to scare you into self-diagnosing your children.  Don't take the "simple 10-step test" in the Woman's magazine to see if your kid is A.D.D.  - just leave him alone.  If he gets in trouble at school, don't go looking for deep meanings - maybe he just had a bad day - or too much soda pop.  And if he isn't a straight-A student, maybe he isn't going to be the next Stephen Hawking.   Relax, there are worse thing that can happen in the world.

Just be happy that your kid has the requisite number of limbs, eyes, and toes (or a close approximation thereof) and let the rest of it slide.  They will grow up in spite of your best efforts and playing "Mommy Dearest" isn't going to make things better or easier for either of you.